G.R. No.
166715             August 14, 2008 and incentives invites corruption and undermines the constitutionally mandated duty of these officials
ABAKADA GURO PARTY LIST (formerly AASJS) 1 OFFICERS/MEMBERS SAMSON S.
ALCANTARA, ED VINCENT S. ALBANO, ROMEO R. ROBISO, RENE B. GOROSPE and EDWIN R.
SANDOVAL, petitioners,  and employees of the BIR and the BOC violates the constitutional guarantee of equal protection. There
vs.
HON. CESAR V. PURISIMA, in his capacity as Secretary of Finance, HON. GUILLERMO L.
PARAYNO, JR., in his capacity as Commissioner of the Bureau of Internal Revenue, and HON.
ALBERTO D. LINA, in his Capacity as Commissioner of Bureau of Customs, respondents.
DECISION
CORONA, J.:
This petition for prohibition1 seeks to prevent respondents from implementing and enforcing Republic
Act (RA) 93352(Attrition Act of 2005).
RA 9335 was enacted to optimize the revenue-generation capability and collection of the Bureau of
Internal Revenue (BIR) and the Bureau of Customs (BOC). The law intends to encourage BIR and BOC
officials and employees to exceed their revenue targets by providing a system of rewards and sanctions
through the creation of a Rewards and Incentives Fund (Fund) and a Revenue Performance Evaluation
Board (Board).3 It covers all officials and employees of the BIR and the BOC with at least six months of
service, regardless of employment status.4
The Fund is sourced from the collection of the BIR and the BOC in excess of their revenue targets for
the year, as determined by the Development Budget and Coordinating Committee (DBCC). Any
incentive or reward is taken from the fund and allocated to the BIR and the BOC in proportion to their
contribution in the excess collection of the targeted amount of tax revenue.5
The Boards in the BIR and the BOC are composed of the Secretary of the Department of Finance
(DOF) or his/her Undersecretary, the Secretary of the Department of Budget and Management (DBM)
or his/her Undersecretary, the Director General of the National Economic Development Authority
(NEDA) or his/her Deputy Director General, the Commissioners of the BIR and the BOC or their Deputy
Commissioners, two representatives from the rank-and-file employees and a representative from the
officials nominated by their recognized organization.6
Each Board has the duty to (1) prescribe the rules and guidelines for the allocation, distribution and
release of the Fund; (2) set criteria and procedures for removing from the service officials and
employees whose revenue collection falls short of the target; (3) terminate personnel in accordance
with the criteria adopted by the Board; (4) prescribe a system for performance evaluation; (5) perform
other functions, including the issuance of rules and regulations and (6) submit an annual report to
Congress.7
The DOF, DBM, NEDA, BIR, BOC and the Civil Service Commission (CSC) were tasked to promulgate
and issue the implementing rules and regulations of RA 9335,8 to be approved by a Joint Congressional
Oversight Committee created for such purpose.9
Petitioners, invoking their right as taxpayers filed this petition challenging the constitutionality of RA
9335, a tax reform legislation. They contend that, by establishing a system of rewards and incentives,
the law "transform[s] the officials and employees of the BIR and the BOC into mercenaries and bounty
hunters" as they will do their best only in consideration of such rewards. Thus, the system of rewards
and employees to serve the people with utmost responsibility, integrity, loyalty and efficiency.
Petitioners also claim that limiting the scope of the system of rewards and incentives only to officials
is no valid basis for classification or distinction as to why such a system should not apply to officials and
employees of all other government agencies.
In addition, petitioners assert that the law unduly delegates the power to fix revenue targets to the
President as it lacks a sufficient standard on that matter. While Section 7(b) and (c) of RA 9335
provides that BIR and BOC officials may be dismissed from the service if their revenue collections fall
short of the target by at least 7.5%, the law does not, however, fix the revenue targets to be achieved.
Instead, the fixing of revenue targets has been delegated to the President without sufficient standards.
It will therefore be easy for the President to fix an unrealistic and unattainable target in order to dismiss
BIR or BOC personnel.
Finally, petitioners assail the creation of a congressional oversight committee on the ground that it
violates the doctrine of separation of powers. While the legislative function is deemed accomplished
and completed upon the enactment and approval of the law, the creation of the congressional oversight
committee permits legislative participation in the implementation and enforcement of the law.
In their comment, respondents, through the Office of the Solicitor General, question the petition for
being premature as there is no actual case or controversy yet. Petitioners have not asserted any right
or claim that will necessitate the exercise of this Court’s jurisdiction. Nevertheless, respondents
acknowledge that public policy requires the resolution of the constitutional issues involved in this case.
They assert that the allegation that the reward system will breed mercenaries is mere speculation and
does not suffice to invalidate the law. Seen in conjunction with the declared objective of RA 9335, the
law validly classifies the BIR and the BOC because the functions they perform are distinct from those of
the other government agencies and instrumentalities. Moreover, the law provides a sufficient standard
that will guide the executive in the implementation of its provisions. Lastly, the creation of the
congressional oversight committee under the law enhances, rather than violates, separation of powers.
It ensures the fulfillment of the legislative policy and serves as a check to any over-accumulation of
power on the part of the executive and the implementing agencies.
After a careful consideration of the conflicting contentions of the parties, the Court finds that petitioners
have failed to overcome the presumption of constitutionality in favor of RA 9335, except as shall
hereafter be discussed.
Actual Case And Ripeness
An actual case or controversy involves a conflict of legal rights, an assertion of opposite legal claims
susceptible of judicial adjudication.10 A closely related requirement is ripeness, that is, the question
must be ripe for adjudication. And a constitutional question is ripe for adjudication when the
governmental act being challenged has a direct adverse effect on the individual challenging it.11 Thus,
to be ripe for judicial adjudication, the petitioner must show a personal stake in the outcome of the case
or an injury to himself that can be redressed by a favorable decision of the Court.12
In this case, aside from the general claim that the dispute has ripened into a judicial controversy by the
mere enactment of the law even without any further overt act,13 petitioners fail either to assert any
specific and concrete legal claim or to demonstrate any direct adverse effect of the law on them. They
are unable to show a personal stake in the outcome of this case or an injury to themselves. On this
account, their petition is procedurally infirm.
This notwithstanding, public interest requires the resolution of the constitutional issues raised by
petitioners. The grave nature of their allegations tends to cast a cloud on the presumption of
constitutionality in favor of the law. And where an action of the legislative branch is alleged to have
infringed the Constitution, it becomes not only the right but in fact the duty of the judiciary to settle the
dispute.14
Accountability of 
Public Officers
Section 1, Article 11 of the Constitution states:
Sec. 1. Public office is a public trust. Public officers and employees must at all times be
accountable to the people, serve them with utmost responsibility, integrity, loyalty, and
efficiency, act with patriotism, and justice, and lead modest lives.
Public office is a public trust. It must be discharged by its holder not for his own personal gain but for
the benefit of the public for whom he holds it in trust. By demanding accountability and service with
responsibility, integrity, loyalty, efficiency, patriotism and justice, all government officials and employees
have the duty to be responsive to the needs of the people they are called upon to serve.
Public officers enjoy the presumption of regularity in the performance of their duties. This presumption
necessarily obtains in favor of BIR and BOC officials and employees. RA 9335 operates on the basis
thereof and reinforces it by providing a system of rewards and sanctions for the purpose of encouraging
the officials and employees of the BIR and the BOC to exceed their revenue targets and optimize their
revenue-generation capability and collection.15
The presumption is disputable but proof to the contrary is required to rebut it. It cannot be overturned by
mere conjecture or denied in advance (as petitioners would have the Court do) specially in this case
where it is an underlying principle to advance a declared public policy.
Petitioners’ claim that the implementation of RA 9335 will turn BIR and BOC officials and employees
into "bounty hunters and mercenaries" is not only without any factual and legal basis; it is also purely
speculative.
A law enacted by Congress enjoys the strong presumption of constitutionality. To justify its nullification,
there must be a clear and unequivocal breach of the Constitution, not a doubtful and equivocal
one.16 To invalidate RA 9335 based on petitioners’ baseless supposition is an affront to the wisdom not
only of the legislature that passed it but also of the executive which approved it.
Public service is its own reward. Nevertheless, public officers may by law be rewarded for exemplary
and exceptional performance. A system of incentives for exceeding the set expectations of a public
office is not anathema to the concept of public accountability. In fact, it recognizes and reinforces
dedication to duty, industry, efficiency and loyalty to public service of deserving government personnel.
In United States v. Matthews,17 the U.S. Supreme Court validated a law which awards to officers of the
customs as well as other parties an amount not exceeding one-half of the net proceeds of forfeitures in
violation of the laws against smuggling. Citing Dorsheimer v. United States,18 the U.S. Supreme Court
said:
The offer of a portion of such penalties to the collectors is to stimulate and reward their zeal
and industry in detecting fraudulent attempts to evade payment of duties and taxes.
In the same vein, employees of the BIR and the BOC may by law be entitled to a reward when, as a
consequence of their zeal in the enforcement of tax and customs laws, they exceed their revenue
targets. In addition, RA 9335 establishes safeguards to ensure that the reward will not be claimed if it
will be either the fruit of "bounty hunting or mercenary activity" or the product of the irregular
performance of official duties. One of these precautionary measures is embodied in Section 8 of the
law:
SEC. 8. Liability of Officials, Examiners and Employees of the BIR and the BOC. – The
officials, examiners, and employees of the [BIR] and the [BOC] who violate this Act or who
are guilty of negligence, abuses or acts of malfeasance or misfeasance or fail to exercise
extraordinary diligence in the performance of their duties shall be held liable for any loss or
injury suffered by any business establishment or taxpayer as a result of such violation,
negligence, abuse, malfeasance, misfeasance or failure to exercise extraordinary diligence.
Equal Protection
Equality guaranteed under the equal protection clause is equality under the same conditions and
among persons similarly situated; it is equality among equals, not similarity of treatment of persons who
are classified based on substantial differences in relation to the object to be accomplished.19 When
things or persons are different in fact or circumstance, they may be treated in law differently.
In Victoriano v. Elizalde Rope Workers’ Union,20 this Court declared:
The guaranty of equal protection of the laws is not a guaranty of equality in the application of
the laws upon all citizens of the [S]tate. It is not, therefore, a requirement, in order to avoid
the constitutional prohibition against inequality, that every man, woman and child should be
affected alike by a statute. Equality of operation of statutes does not mean indiscriminate
operation on persons merely as such, but on persons according to the circumstances
surrounding them. It guarantees equality, not identity of rights. The Constitution does not
require that things which are different in fact be treated in law as though they were the
same. The equal protection clause does not forbid discrimination as to things that are
different. It does not prohibit legislation which is limited either in the object to which it
is directed or by the territory within which it is to operate.
The equal protection of the laws clause of the Constitution allows classification. Classification
in law, as in the other departments of knowledge or practice, is the grouping of things in
speculation or practice because they agree with one another in certain particulars. A law is
not invalid because of simple inequality. The very idea of classification is that of inequality, so
that it goes without saying that the mere fact of inequality in no manner determines the matter
of constitutionality. All that is required of a valid classification is that it be reasonable,
which means that the classification should be based on substantial distinctions which
make for real differences, that it must be germane to the purpose of the law; that it
must not be limited to existing conditions only; and that it must apply equally to each
member of the class. This Court has held that the standard is satisfied if the
classification or distinction is based on a reasonable foundation or rational basis and
is not palpably arbitrary.
In the exercise of its power to make classifications for the purpose of enacting laws over
matters within its jurisdiction, the state is recognized as enjoying a wide range of discretion. It
is not necessary that the classification be based on scientific or marked differences of things
or in their relation. Neither is it necessary that the classification be made with mathematical
nicety. Hence, legislative classification may in many cases properly rest on narrow
distinctions, for the equal protection guaranty does not preclude the legislature from
 recognizing degrees of evil or harm, and legislation is addressed to evils as they may (5) Supervise and control exports, imports, foreign mails and the clearance of vessels and
appear.21 (emphasis supplied) aircrafts in all ports of entry;

The equal protection clause recognizes a valid classification, that is, a classification that has a (6) Administer all legal requirements that are appropriate;
reasonable foundation or rational basis and not arbitrary.22 With respect to RA 9335, its expressed
public policy is the optimization of the revenue-generation capability and collection of the BIR and the
(7) Prevent and prosecute smuggling and other illegal activities in all ports under its
BOC.23 Since the subject of the law is the revenue- generation capability and collection of the BIR and
jurisdiction;
the BOC, the incentives and/or sanctions provided in the law should logically pertain to the said
agencies. Moreover, the law concerns only the BIR and the BOC because they have the common
distinct primary function of generating revenues for the national government through the collection of (8) Exercise supervision and control over its constituent units;
taxes, customs duties, fees and charges.
(9) Perform such other functions as may be provided by law.25
The BIR performs the following functions:
xxx       xxx       xxx (emphasis supplied)
Sec. 18. The Bureau of Internal Revenue. – The Bureau of Internal Revenue, which shall be
headed by and subject to the supervision and control of the Commissioner of Internal
Both the BIR and the BOC are bureaus under the DOF. They principally perform the special function of
Revenue, who shall be appointed by the President upon the recommendation of the
being the instrumentalities through which the State exercises one of its great inherent functions –
Secretary [of the DOF], shall have the following functions:
taxation. Indubitably, such substantial distinction is germane and intimately related to the purpose of the
law. Hence, the classification and treatment accorded to the BIR and the BOC under RA 9335 fully
(1) Assess and collect all taxes, fees and charges and account for all revenues satisfy the demands of equal protection.
collected;
Undue Delegation
(2) Exercise duly delegated police powers for the proper performance of its functions and
duties;
Two tests determine the validity of delegation of legislative power: (1) the completeness test and (2) the
sufficient standard test. A law is complete when it sets forth therein the policy to be executed, carried
(3) Prevent and prosecute tax evasions and all other illegal economic activities; out or implemented by the delegate.26 It lays down a sufficient standard when it provides adequate
guidelines or limitations in the law to map out the boundaries of the delegate’s authority and prevent the
delegation from running riot.27 To be sufficient, the standard must specify the limits of the delegate’s
(4) Exercise supervision and control over its constituent and subordinate units; and
authority, announce the legislative policy and identify the conditions under which it is to be
implemented.28
(5) Perform such other functions as may be provided by law.24
RA 9335 adequately states the policy and standards to guide the President in fixing revenue targets
xxx       xxx       xxx (emphasis supplied) and the implementing agencies in carrying out the provisions of the law. Section 2 spells out the policy
of the law:
On the other hand, the BOC has the following functions:
SEC. 2. Declaration of Policy. – It is the policy of the State to optimize the revenue-
generation capability and collection of the Bureau of Internal Revenue (BIR) and the Bureau
Sec. 23. The Bureau of Customs. – The Bureau of Customs which shall be headed and
of Customs (BOC) by providing for a system of rewards and sanctions through the creation of
subject to the management and control of the Commissioner of Customs, who shall be
a Rewards and Incentives Fund and a Revenue Performance Evaluation Board in the above
appointed by the President upon the recommendation of the Secretary[of the DOF] and
agencies for the purpose of encouraging their officials and employees to exceed their
hereinafter referred to as Commissioner, shall have the following functions:
revenue targets.

(1) Collect custom duties, taxes and the corresponding fees, charges and penalties;
Section 4 "canalized within banks that keep it from overflowing"29 the delegated power to the President
to fix revenue targets:
(2) Account for all customs revenues collected;
SEC. 4. Rewards and Incentives Fund. – A Rewards and Incentives Fund, hereinafter
(3) Exercise police authority for the enforcement of tariff and customs laws; referred to as the Fund, is hereby created, to be sourced from the collection of the BIR and
the BOC in excess of their respective revenue targets of the year, as determined by the
Development Budget and Coordinating Committee (DBCC), in the following percentages:
(4) Prevent and suppress smuggling, pilferage and all other economic frauds within all ports
of entry;
 Excess of Collection of the Excess the Percent (%) of the Excess Collection to Accrue to the (c) To terminate personnel in accordance with the criteria adopted in the preceding
Revenue Targets Fund paragraph: Provided, That such decision shall be immediately executory: Provided, further,
30% or below – 15% That the application of the criteria for the separation of an official or employee from
More than 30% – 15% of the first 30% plus 20% of the remaining excess service under this Act shall be without prejudice to the application of other relevant
laws on accountability of public officers and employees, such as the Code of Conduct
and Ethical Standards of Public Officers and Employees and the Anti-Graft and
The Fund shall be deemed automatically appropriated the year immediately following the Corrupt Practices Act;
year when the revenue collection target was exceeded and shall be released on the same
fiscal year.
xxx       xxx       xxx (emphasis supplied)

Revenue targets shall refer to the original estimated revenue collection expected of the
Clearly, RA 9335 in no way violates the security of tenure of officials and employees of the BIR and the
BIR and the BOC for a given fiscal year as stated in the Budget of Expenditures and
BOC. The guarantee of security of tenure only means that an employee cannot be dismissed from the
Sources of Financing (BESF) submitted by the President to Congress. The BIR and the
service for causes other than those provided by law and only after due process is accorded the
BOC shall submit to the DBCC the distribution of the agencies’ revenue targets as allocated
employee.31 In the case of RA 9335, it lays down a reasonable yardstick for removal (when the revenue
among its revenue districts in the case of the BIR, and the collection districts in the case of
collection falls short of the target by at least 7.5%) with due consideration of all relevant factors affecting
the BOC.
the level of collection. This standard is analogous to inefficiency and incompetence in the performance
of official duties, a ground for disciplinary action under civil service laws.32 The action for removal is also
xxx       xxx       xxx (emphasis supplied) subject to civil service laws, rules and regulations and compliance with substantive and procedural due
process.
Revenue targets are based on the original estimated revenue collection expected respectively of the
BIR and the BOC for a given fiscal year as approved by the DBCC and stated in the BESF submitted by At any rate, this Court has recognized the following as sufficient standards: "public interest," "justice
the President to Congress.30 Thus, the determination of revenue targets does not rest solely on the and equity," "public convenience and welfare" and "simplicity, economy and welfare."33 In this case, the
President as it also undergoes the scrutiny of the DBCC. declared policy of optimization of the revenue-generation capability and collection of the BIR and the
BOC is infused with public interest.
On the other hand, Section 7 specifies the limits of the Board’s authority and identifies the conditions
under which officials and employees whose revenue collection falls short of the target by at least 7.5% Separation Of Powers
may be removed from the service:
Section 12 of RA 9335 provides:
SEC. 7. Powers and Functions of the Board. – The Board in the agency shall have the
following powers and functions:
SEC. 12. Joint Congressional Oversight Committee. – There is hereby created a Joint
Congressional Oversight Committee composed of seven Members from the Senate and
xxx       xxx       xxx seven Members from the House of Representatives. The Members from the Senate shall be
appointed by the Senate President, with at least two senators representing the minority. The
Members from the House of Representatives shall be appointed by the Speaker with at least
(b) To set the criteria and procedures for removing from service officials and employees
two members representing the minority. After the Oversight Committee will have approved
whose revenue collection falls short of the target by at least seven and a half percent
the implementing rules and regulations (IRR) it shall thereafter become functus officio and
(7.5%), with due consideration of all relevant factors affecting the level of collection as
therefore cease to exist.
provided in the rules and regulations promulgated under this Act, subject to civil service
laws, rules and regulations and compliance with substantive and procedural due
process: Provided, That the following exemptions shall apply: The Joint Congressional Oversight Committee in RA 9335 was created for the purpose of approving the
implementing rules and regulations (IRR) formulated by the DOF, DBM, NEDA, BIR, BOC and CSC. On
May 22, 2006, it approved the said IRR. From then on, it became functus officio and ceased to exist.
1. Where the district or area of responsibility is newly-created, not exceeding two
Hence, the issue of its alleged encroachment on the executive function of implementing and enforcing
years in operation, as has no historical record of collection performance that can be
the law may be considered moot and academic.
used as basis for evaluation; and

This notwithstanding, this might be as good a time as any for the Court to confront the issue of the
2. Where the revenue or customs official or employee is a recent transferee in the
constitutionality of the Joint Congressional Oversight Committee created under RA 9335 (or other
middle of the period under consideration unless the transfer was due to
similar laws for that matter).
nonperformance of revenue targets or potential nonperformance of revenue
targets: Provided, however, That when the district or area of responsibility covered
by revenue or customs officials or employees has suffered from economic The scholarly discourse of Mr. Justice (now Chief Justice) Puno on the concept of congressional
difficulties brought about by natural calamities or force majeure or economic oversight in Macalintal v. Commission on Elections34 is illuminating:
causes as may be determined by the Board, termination shall be considered only
after careful and proper review by the Board.
Concept and bases of congressional oversight
Broadly defined, the power of oversight embraces all activities undertaken by Congress
to enhance its understanding of and influence over the implementation of legislation it
has enacted. Clearly, oversight concerns post-enactment measures undertaken by
Congress: (a) to monitor bureaucratic compliance with program objectives, (b) to
determine whether agencies are properly administered, (c) to eliminate executive
waste and dishonesty, (d) to prevent executive usurpation of legislative authority, and
(d) to assess executive conformity with the congressional perception of public
interest.
The power of oversight has been held to be intrinsic in the grant of legislative power itself and
integral to the checks and balances inherent in a democratic system of government. x x x x x
xxxx
Over the years, Congress has invoked its oversight power with increased frequency to check
the perceived "exponential accumulation of power" by the executive branch. By the beginning
of the 20th century, Congress has delegated an enormous amount of legislative authority to
the executive branch and the administrative agencies. Congress, thus, uses its oversight
power to make sure that the administrative agencies perform their functions within the
authority delegated to them. x x x x x x x x x
Categories of congressional oversight functions
The acts done by Congress purportedly in the exercise of its oversight powers may be
divided into three categories, namely: scrutiny, investigation and supervision.
a. Scrutiny
Congressional scrutiny implies a lesser intensity and continuity of attention to
administrative operations. Its primary purpose is to determine economy and
efficiency of the operation of government activities. In the exercise of legislative
scrutiny, Congress may request information and report from the other branches of
government. It can give recommendations or pass resolutions for consideration of
the agency involved.
xxx       xxx       xxx
b. Congressional investigation
While congressional scrutiny is regarded as a passive process of looking at the
facts that are readily available, congressional investigation involves a more intense
digging of facts. The power of Congress to conduct investigation is recognized by
the 1987 Constitution under section 21, Article VI, xxx       xxx       xxx
c. Legislative supervision
The third and most encompassing form by which Congress exercises its oversight power is
thru legislative supervision. "Supervision" connotes a continuing and informed awareness on
the part of a congressional committee regarding executive operations in a given
administrative area. While both congressional scrutiny and investigation involve inquiry
into past executive branch actions in order to influence future executive branch
performance, congressional supervision allows Congress to scrutinize the exercise of
delegated law-making authority, and permits Congress to retain part of that delegated
authority.
Congress exercises supervision over the executive agencies through its veto power. It
typically utilizes veto provisions when granting the President or an executive agency the
power to promulgate regulations with the force of law. These provisions require the President
or an agency to present the proposed regulations to Congress, which retains a "right" to
approve or disapprove any regulation before it takes effect. Such legislative veto provisions
usually provide that a proposed regulation will become a law after the expiration of a certain
period of time, only if Congress does not affirmatively disapprove of the regulation in the
meantime. Less frequently, the statute provides that a proposed regulation will become law if
Congress affirmatively approves it.
Supporters of legislative veto stress that it is necessary to maintain the balance of power
between the legislative and the executive branches of government as it offers lawmakers a
way to delegate vast power to the executive branch or to independent agencies while
retaining the option to cancel particular exercise of such power without having to pass new
legislation or to repeal existing law. They contend that this arrangement promotes democratic
accountability as it provides legislative check on the activities of unelected administrative
agencies. One proponent thus explains:
It is too late to debate the merits of this delegation policy: the policy is too deeply
embedded in our law and practice. It suffices to say that the complexities of
modern government have often led Congress-whether by actual or perceived
necessity- to legislate by declaring broad policy goals and general statutory
standards, leaving the choice of policy options to the discretion of an executive
officer. Congress articulates legislative aims, but leaves their implementation to the
judgment of parties who may or may not have participated in or agreed with the
development of those aims. Consequently, absent safeguards, in many instances
the reverse of our constitutional scheme could be effected: Congress proposes, the
Executive disposes. One safeguard, of course, is the legislative power to enact
new legislation or to change existing law. But without some means of overseeing
post enactment activities of the executive branch, Congress would be unable to
determine whether its policies have been implemented in accordance with
legislative intent and thus whether legislative intervention is appropriate.
Its opponents, however, criticize the legislative veto as undue encroachment upon the
executive prerogatives. They urge that any post-enactment measures undertaken by
the legislative branch should be limited to scrutiny and investigation; any measure
beyond that would undermine the separation of powers guaranteed by the
Constitution. They contend that legislative veto constitutes an impermissible evasion of the
President’s veto authority and intrusion into the powers vested in the executive or judicial
branches of government. Proponents counter that legislative veto enhances separation of
powers as it prevents the executive branch and independent agencies from accumulating too
much power. They submit that reporting requirements and congressional committee
investigations allow Congress to scrutinize only the exercise of delegated law-making
authority. They do not allow Congress to review executive proposals before they take effect
and they do not afford the opportunity for ongoing and binding expressions of congressional
intent. In contrast, legislative veto permits Congress to participate prospectively in the
approval or disapproval of "subordinate law" or those enacted by the executive branch
pursuant to a delegation of authority by Congress. They further argue that legislative veto "is
 a necessary response by Congress to the accretion of policy control by forces outside its
chambers." In an era of delegated authority, they point out that legislative veto "is the most
efficient means Congress has yet devised to retain control over the evolution and
implementation of its policy as declared by statute."
In Immigration and Naturalization Service v. Chadha, the U.S. Supreme Court resolved the
validity of legislative veto provisions. The case arose from the order of the immigration
judge suspending the deportation of Chadha pursuant to § 244(c)(1) of the Immigration and
Nationality Act. The United States House of Representatives passed a resolution vetoing the
suspension pursuant to § 244(c)(2) authorizing either House of Congress, by resolution, to
invalidate the decision of the executive branch to allow a particular deportable alien to remain
in the United States. The immigration judge reopened the deportation proceedings to
implement the House order and the alien was ordered deported. The Board of Immigration
Appeals dismissed the alien’s appeal, holding that it had no power to declare unconstitutional
an act of Congress. The United States Court of Appeals for Ninth Circuit held that the House
was without constitutional authority to order the alien’s deportation and that § 244(c)(2)
violated the constitutional doctrine on separation of powers.
On appeal, the U.S. Supreme Court declared § 244(c)(2) unconstitutional. But the Court
shied away from the issue of separation of powers and instead held that the provision
violates the presentment clause and bicameralism. It held that the one-house veto was
essentially legislative in purpose and effect. As such, it is subject to the procedures set out in
Article I of the Constitution requiring the passage by a majority of both Houses and
presentment to the President. x x x x x x x x x
Two weeks after the Chadha decision, the Court upheld, in memorandum decision, two lower
court decisions invalidating the legislative veto provisions in the Natural Gas Policy Act of
1978 and the Federal Trade Commission Improvement Act of 1980. Following this
precedence, lower courts invalidated statutes containing legislative veto provisions although
some of these provisions required the approval of both Houses of Congress and thus met the
bicameralism requirement of Article I. Indeed, some of these veto provisions were not even
exercised.35 (emphasis supplied)
In Macalintal, given the concept and configuration of the power of congressional oversight and
considering the nature and powers of a constitutional body like the Commission on Elections, the Court
struck down the provision in RA 9189 (The Overseas Absentee Voting Act of 2003) creating a Joint
Congressional Committee. The committee was tasked not only to monitor and evaluate the
implementation of the said law but also to review, revise, amend and approve the IRR promulgated by
the Commission on Elections. The Court held that these functions infringed on the constitutional
independence of the Commission on Elections.36
With this backdrop, it is clear that congressional oversight is not unconstitutional per se, meaning, it
neither necessarily constitutes an encroachment on the executive power to implement laws nor
undermines the constitutional separation of powers. Rather, it is integral to the checks and balances
inherent in a democratic system of government. It may in fact even enhance the separation of powers
as it prevents the over-accumulation of power in the executive branch.
However, to forestall the danger of congressional encroachment "beyond the legislative sphere," the
Constitution imposes two basic and related constraints on Congress.37 It may not vest itself, any of its
committees or its members with either executive or judicial power.38 And, when it exercises its
legislative power, it must follow the "single, finely wrought and exhaustively considered, procedures"
specified under the Constitution,39 including the procedure for enactment of laws and presentment.
Thus, any post-enactment congressional measure such as this should be limited to scrutiny and
investigation. In particular, congressional oversight must be confined to the following:
(1) scrutiny based primarily on Congress’ power of appropriation and the budget hearings
conducted in connection with it, its power to ask heads of departments to appear before and
be heard by either of its Houses on any matter pertaining to their departments and its power
of confirmation40 and
(2) investigation and monitoring41 of the implementation of laws pursuant to the power of
Congress to conduct inquiries in aid of legislation.42
Any action or step beyond that will undermine the separation of powers guaranteed by the Constitution.
Legislative vetoes fall in this class.
Legislative veto is a statutory provision requiring the President or an administrative agency to present
the proposed implementing rules and regulations of a law to Congress which, by itself or through a
committee formed by it, retains a "right" or "power" to approve or disapprove such regulations before
they take effect. As such, a legislative veto in the form of a congressional oversight committee is in the
form of an inward-turning delegation designed to attach a congressional leash (other than through
scrutiny and investigation) to an agency to which Congress has by law initially delegated broad
powers.43It radically changes the design or structure of the Constitution’s diagram of power as it
entrusts to Congress a direct role in enforcing, applying or implementing its own laws.44
Congress has two options when enacting legislation to define national policy within the broad horizons
of its legislative competence.45 It can itself formulate the details or it can assign to the executive branch
the responsibility for making necessary managerial decisions in conformity with those standards.46 In
the latter case, the law must be complete in all its essential terms and conditions when it leaves the
hands of the legislature.47 Thus, what is left for the executive branch or the concerned administrative
agency when it formulates rules and regulations implementing the law is to fill up details
(supplementary rule-making) or ascertain facts necessary to bring the law into actual operation
(contingent rule-making).48
Administrative regulations enacted by administrative agencies to implement and interpret the law which
they are entrusted to enforce have the force of law and are entitled to respect.49 Such rules and
regulations partake of the nature of a statute50and are just as binding as if they have been written in the
statute itself. As such, they have the force and effect of law and enjoy the presumption of
constitutionality and legality until they are set aside with finality in an appropriate case by a competent
court.51 Congress, in the guise of assuming the role of an overseer, may not pass upon their legality by
subjecting them to its stamp of approval without disturbing the calculated balance of powers established
by the Constitution. In exercising discretion to approve or disapprove the IRR based on a determination
of whether or not they conformed with the provisions of RA 9335, Congress arrogated judicial power
unto itself, a power exclusively vested in this Court by the Constitution.
Considered Opinion of 
Mr. Justice Dante O. Tinga
Moreover, the requirement that the implementing rules of a law be subjected to approval by Congress
as a condition for their effectivity violates the cardinal constitutional principles of bicameralism and the
rule on presentment.52
Section 1, Article VI of the Constitution states:
 Section 1. The legislative power shall be vested in the Congress of the Philippines
which shall consist of a Senate and a House of Representatives, except to the extent
reserved to the people by the provision on initiative and referendum. (emphasis supplied)
Legislative power (or the power to propose, enact, amend and repeal laws)53 is vested in Congress
which consists of two chambers, the Senate and the House of Representatives. A valid exercise of
legislative power requires the act of both chambers. Corrollarily, it can be exercised neither solely by
one of the two chambers nor by a committee of either or both chambers. Thus, assuming the validity of
a legislative veto, both a single-chamber legislative veto and a congressional committee legislative veto
are invalid.
Additionally, Section 27(1), Article VI of the Constitution provides:
Section 27. (1) Every bill passed by the Congress shall, before it becomes a law, be
presented to the President. If he approves the same, he shall sign it, otherwise, he shall
veto it and return the same with his objections to the House where it originated, which shall
enter the objections at large in its Journal and proceed to reconsider it. If, after such
reconsideration, two-thirds of all the Members of such House shall agree to pass the bill, it
shall be sent, together with the objections, to the other House by which it shall likewise be
reconsidered, and if approved by two-thirds of all the Members of that House, it shall become
a law. In all such cases, the votes of each House shall be determined by yeas or nays, and
the names of the members voting for or against shall be entered in its Journal. The President
shall communicate his veto of any bill to the House where it originated within thirty days after
the date of receipt thereof; otherwise, it shall become a law as if he had signed it. (emphasis
supplied)
Every bill passed by Congress must be presented to the President for approval or veto. In the absence
of presentment to the President, no bill passed by Congress can become a law. In this sense, law-
making under the Constitution is a joint act of the Legislature and of the Executive. Assuming that
legislative veto is a valid legislative act with the force of law, it cannot take effect without such
presentment even if approved by both chambers of Congress.
In sum, two steps are required before a bill becomes a law. First, it must be approved by both Houses
of Congress.54Second, it must be presented to and approved by the President.55 As summarized by
Justice Isagani Cruz56 and Fr. Joaquin G. Bernas, S.J.57, the following is the procedure for the approval
of bills:
A bill is introduced by any member of the House of Representatives or the Senate except for
some measures that must originate only in the former chamber.
The first reading involves only a reading of the number and title of the measure and its
referral by the Senate President or the Speaker to the proper committee for study.
The bill may be "killed" in the committee or it may be recommended for approval, with or
without amendments, sometimes after public hearings are first held thereon. If there are other
bills of the same nature or purpose, they may all be consolidated into one bill under common
authorship or as a committee bill.
Once reported out, the bill shall be calendared for second reading. It is at this stage that the
bill is read in its entirety, scrutinized, debated upon and amended when desired. The second
reading is the most important stage in the passage of a bill.
The bill as approved on second reading is printed in its final form and copies thereof are
distributed at least three days before the third reading. On the third reading, the members
merely register their votes and explain them if they are allowed by the rules. No further
debate is allowed.
Once the bill passes third reading, it is sent to the other chamber, where it will also undergo
the three readings. If there are differences between the versions approved by the two
chambers, a conference committee58 representing both Houses will draft a compromise
measure that if ratified by the Senate and the House of Representatives will then be
submitted to the President for his consideration.
The bill is enrolled when printed as finally approved by the Congress, thereafter authenticated
with the signatures of the Senate President, the Speaker, and the Secretaries of their
respective chambers…59
The President’s role in law-making.
The final step is submission to the President for approval. Once approved, it takes effect as
law after the required publication.60
Where Congress delegates the formulation of rules to implement the law it has enacted pursuant to
sufficient standards established in the said law, the law must be complete in all its essential terms and
conditions when it leaves the hands of the legislature. And it may be deemed to have left the hands of
the legislature when it becomes effective because it is only upon effectivity of the statute that legal
rights and obligations become available to those entitled by the language of the statute. Subject to the
indispensable requisite of publication under the due process clause,61 the determination as to when a
law takes effect is wholly the prerogative of Congress.62 As such, it is only upon its effectivity that a law
may be executed and the executive branch acquires the duties and powers to execute the said law.
Before that point, the role of the executive branch, particularly of the President, is limited to approving
or vetoing the law.63
From the moment the law becomes effective, any provision of law that empowers Congress or any of its
members to play any role in the implementation or enforcement of the law violates the principle of
separation of powers and is thus unconstitutional. Under this principle, a provision that requires
Congress or its members to approve the implementing rules of a law after it has already taken effect
shall be unconstitutional, as is a provision that allows Congress or its members to overturn any directive
or ruling made by the members of the executive branch charged with the implementation of the law.
Following this rationale, Section 12 of RA 9335 should be struck down as unconstitutional. While there
may be similar provisions of other laws that may be invalidated for failure to pass this standard, the
Court refrains from invalidating them wholesale but will do so at the proper time when an appropriate
case assailing those provisions is brought before us.64
The next question to be resolved is: what is the effect of the unconstitutionality of Section 12 of RA
9335 on the other provisions of the law? Will it render the entire law unconstitutional? No.
Section 13 of RA 9335 provides:
SEC. 13. Separability Clause. – If any provision of this Act is declared invalid by a competent
court, the remainder of this Act or any provision not affected by such declaration of invalidity
shall remain in force and effect.
In Tatad v. Secretary of the Department of Energy,65 the Court laid down the following rules:
The general rule is that where part of a statute is void as repugnant to the Constitution, while
another part is valid, the valid portion, if separable from the invalid, may stand and be
enforced. The presence of a separability clause in a statute creates the presumption that the
legislature intended separability, rather than complete nullity of the statute. To justify this
result, the valid portion must be so far independent of the invalid portion that it is fair to
presume that the legislature would have enacted it by itself if it had supposed that it could not
constitutionally enact the other. Enough must remain to make a complete, intelligible and
valid statute, which carries out the legislative intent. x x x
The exception to the general rule is that when the parts of a statute are so mutually
dependent and connected, as conditions, considerations, inducements, or compensations for
each other, as to warrant a belief that the legislature intended them as a whole, the nullity of
one part will vitiate the rest. In making the parts of the statute dependent, conditional, or
connected with one another, the legislature intended the statute to be carried out as a whole
and would not have enacted it if one part is void, in which case if some parts are
unconstitutional, all the other provisions thus dependent, conditional, or connected must fall
with them.
This is a Petition filed under Rule 45 of the 1997 Rules of Civil Procedure, praying for the reversal of the
Decision of the Court of Tax Appeals En Banc (CTA En Banc ) dated 22 September 2009 and its
subsequent Resolution dated 23 October 2009.1
Accenture, Inc. (Accenture) is a corporation engaged in the business of providing management
consulting, business strategies development, and selling and/or licensing of software.2 It is duly
registered with the Bureau of Internal Revenue (BIR) as a Value Added Tax (VAT) taxpayer or
enterprise in accordance with Section 236 of the National Internal Revenue Code (Tax Code).3
On 9 August 2002, Accenture filed its Monthly VAT Return for the period 1 July 2002 to 31 August 2002
(1st period). Its Quarterly VAT Return for the fourth quarter of 2002, which covers the 1st period, was
filed on 17 September 2002; and an Amended Quarterly VAT Return, on 21 June 2004.4 The following
are reflected in Accenture’s VAT Return for the fourth quarter of 2002:5
1âwphi1
Purchases Amount Input VAT
Domestic Purchases- Capital Goods ₱12,312,722.00 ₱1,231,272.20

Domestic Purchases- Goods other than capital

The separability clause of RA 9335 reveals the intention of the legislature to isolate and detach any ₱64,789,507.90 ₱6,478,950.79
Goods
invalid provision from the other provisions so that the latter may continue in force and effect. The valid
portions can stand independently of the invalid section. Without Section 12, the remaining provisions
Domestic Purchases- Services ₱16,455,868.10 ₱1,645,586.81
still constitute a complete, intelligible and valid law which carries out the legislative intent to optimize the
revenue-generation capability and collection of the BIR and the BOC by providing for a system of
Total Input Tax ₱9,355,809.80
rewards and sanctions through the Rewards and Incentives Fund and a Revenue Performance
Evaluation Board.
Zero-rated Sales ₱316,113,513.34

To be effective, administrative rules and regulations must be published in full if their purpose is to Total Sales ₱335,640,544.74
enforce or implement existing law pursuant to a valid delegation. The IRR of RA 9335 were published
on May 30, 2006 in two newspapers of general circulation66 and became effective 15 days
thereafter.67 Until and unless the contrary is shown, the IRR are presumed valid and effective even Accenture filed its Monthly VAT Return for the month of September 2002 on 24 October 2002; and that
without the approval of the Joint Congressional Oversight Committee. for October 2002, on 12 November 2002. These returns were amended on 9 January 2003.
Accenture’s Quarterly VAT Return for the first quarter of 2003, which included the period 1 September
2002 to 30 November 2002 (2nd period), was filed on 17 December 2002; and the Amended Quarterly
WHEREFORE, the petition is hereby PARTIALLY GRANTED. Section 12 of RA 9335 creating a Joint
VAT Return, on 18 June 2004. The latter contains the following information:6
Congressional Oversight Committee to approve the implementing rules and regulations of the law is
declared UNCONSTITUTIONAL and therefore NULL and VOID. The constitutionality of the remaining
provisions of RA 9335 is UPHELD. Pursuant to Section 13 of RA 9335, the rest of the provisions
remain in force and effect. Purchases Amount Input VAT

Domestic Purchases- Capital Goods ₱80,765,294.10 ₱8,076,529.41

SO ORDERED.
Domestic Purchases- Goods other than capital
₱132,820,541.70 ₱13,282,054.17
Goods
G.R. No. 190102               July 11, 2012
Domestic Purchases-Services ₱63,238,758.00 ₱6,323,875.80
ACCENTURE, INC., Petitioner, 
vs. Total Input Tax ₱27,682,459.38
COMMISSIONER OF INTERNAL REVENUE, Respondent.
Zero-rated Sales ₱545,686,639.18
DECISION
Total Sales ₱ ₱572,880,982.68

SERENO, J.:
The monthly and quarterly VAT returns of Accenture show that, notwithstanding its application of the
input VAT credits earned from its zero-rated transactions against its output VAT liabilities, it still had
excess or unutilized input VAT credits. These VAT credits are in the amounts of P9,355,809.80 for the
1st period and P27,682,459.38 for the 2nd period, or a total of P37,038,269.18.7
Out of the P37,038,269.18, only P35,178,844.21 pertained to the allocated input VAT on Accenture’s
"domestic purchases of taxable goods which cannot be directly attributed to its zero-rated sale of
services."8 This allocated input VAT was broken down to P8,811,301.66 for the 1st period and
P26,367,542.55 for the 2nd period.9
The excess input VAT was not applied to any output VAT that Accenture was liable for in the same
quarter when the amount was earned—or to any of the succeeding quarters. Instead, it was carried
forward to petitioner’s 2nd Quarterly VAT Return for 2003.10
Thus, on 1 July 2004, Accenture filed with the Department of Finance (DoF) an administrative claim for
the refund or the issuance of a Tax Credit Certificate (TCC). The DoF did not act on the claim of
Accenture. Hence, on 31 August 2004, the latter filed a Petition for Review with the First Division of the
Court of Tax Appeals (Division), praying for the issuance of a TCC in its favor in the amount of
P35,178,844.21.
The Commissioner of Internal Revenue (CIR), in its Answer,11 argued thus:
1. The sale by Accenture of goods and services to its clients are not zero-rated transactions.
2. Claims for refund are construed strictly against the claimant, and Accenture has failed to
prove that it is entitled to a refund, because its claim has not been fully substantiated or
documented.
In a 13 November 2008 Decision,12 the Division denied the Petition of Accenture for failing to prove
that the latter’s sale of services to the alleged foreign clients qualified for zero percent VAT.13
In resolving the sole issue of whether or not Accenture was entitled to a refund or an issuance of a TCC
in the amount of P35,178,844.21,14 the Division ruled that Accenture had failed to present evidence to
prove that the foreign clients to which the former rendered services did business outside the
Philippines.15 Ruling that Accenture’s services would qualify for zero-rating under the 1997 National
Internal Revenue Code of the Philippines (Tax Code) only if the recipient of the services was doing
business outside of the Philippines,16 the Division cited Commissioner of Internal Revenue v. Burmeister
and Wain Scandinavian Contractor Mindanao, Inc. (Burmeister)17 as basis.
Accenture appealed the Division’s Decision through a Motion for Reconsideration (MR).18 In its MR, it
argued that the reliance of the Division on Burmeister was misplaced19 for the following reasons:
1. The issue involved in Burmeister was the entitlement of the applicant to a refund, given
that the recipient of its service was doing business in the Philippines; it was not an issue of
failure of the applicant to present evidence to prove the fact that the recipient of its services
was a foreign corporation doing business outside the Philippines.20
2. Burmeister emphasized that, to qualify for zero-rating, the recipient of the services should
be doing business outside the Philippines, and Accenture had successfully established that.21
3. Having been promulgated on 22 January 2007 or after Accenture filed its Petition with the
Division, Burmeister cannot be made to apply to this case.22
Accenture also cited Commissioner of Internal Revenue v. American Express (Amex)23 in support of its
position. The MR was denied by the Division in its 12 March 2009 Resolution.24
Accenture appealed to the CTA En Banc. There it argued that prior to the amendment introduced by
Republic Act No. (R.A.) 9337, 25 there was no requirement that the services must be rendered to a
person engaged in business conducted outside the Philippines to qualify for zero-rating. The CTA En
Banc agreed that because the case pertained to the third and the fourth quarters of taxable year 2002,
the applicable law was the 1997 Tax Code, and not R.A. 9337.26 Still, it ruled that even though the
provision used in Burmeister was Section 102(b)(2) of the earlier 1977 Tax Code, the pronouncement
therein requiring recipients of services to be engaged in business outside the Philippines to qualify for
zero-rating was applicable to the case at bar, because Section 108(B)(2) of the 1997 Tax Code was a
mere reenactment of Section 102(b)(2) of the 1977 Tax Code.
The CTA En Banc concluded that Accenture failed to discharge the burden of proving the latter’s
allegation that its clients were foreign-based.27
Resolute, Accenture filed a Petition for Review with the CTA En Banc, but the latter affirmed the
Division’s Decision and Resolution.28 A subsequent MR was also denied in a Resolution dated 23
October 2009.
Hence, the present Petition for Review29 under Rule 45.
In a Joint Stipulation of Facts and Issues, the parties and the Division have agreed to submit the
following issues for resolution:
1. Whether or not Petitioner’s sales of goods and services are zero-rated for VAT purposes
under Section 108(B)(2)(3) of the 1997 Tax Code.
2. Whether or not petitioner’s claim for refund/tax credit in the amount of P35,178,884.21
represents unutilized input VAT paid on its domestic purchases of goods and services for the
period commencing from 1 July 2002 until 30 November 2002.
3. Whether or not Petitioner has carried over to the succeeding taxable quarter(s) or year(s)
the alleged unutilized input VAT paid on its domestic purchases of goods and services for the
period commencing from 1 July 2002 until 30 November 2002, and applied the same fully to
its output VAT liability for the said period.
4. Whether or not Petitioner is entitled to the refund of the amount of P35,178,884.21,
representing the unutilized input VAT on domestic purchases of goods and services for the
period commencing from 1 July 2002 until 30 November 2002, from its sales of services to
various foreign clients.
5. Whether or not Petitioner’s claim for refund/tax credit in the amount of P35,178,884.21, as
alleged unutilized input VAT on domestic purchases of goods and services for the period
covering 1 July 2002 until 30 November 2002 are duly substantiated by proper documents.30
For consideration in the present Petition are the following issues:
 1. Should the recipient of the services be "doing business outside the Philippines" for the acceptable foreign currency and accounted for in accordance with the rules and regulations
transaction to be zero-rated under Section 108(B)(2) of the 1997 Tax Code? of the Bangko Sentral ng Pilipinas (BSP).

2. Has Accenture successfully proven that its clients are entities doing business outside the "(2) Services other than those mentioned in the preceding sub-paragraph, the consideration
Philippines? for which is paid for in acceptable foreign currency and accounted for in accordance with the
rules and regulations of the Bangko Sentral ng Pilipinas (BSP)."
Recipient of services must be doing business outside the Philippines for the transactions to qualify as
zero-rated. Essentially, Section 102(b) of the 1977 Tax Code—as amended by P.D. 1994, E.O. 273, and R.A. 7716
—provides that if the consideration for the services provided by a VAT-registered person is in a foreign
currency, then this transaction shall be subjected to zero percent rate.
Accenture anchors its refund claim on Section 112(A) of the 1997 Tax Code, which allows the refund of
unutilized input VAT earned from zero-rated or effectively zero-rated sales. The provision reads:
The 1997 Tax Code reproduced Section 102(b) of the 1977 Tax Code in its Section 108(B), to wit:
SEC. 112. Refunds or Tax Credits of Input Tax. -
(B) Transactions Subject to Zero Percent (0%) Rate. - The following services performed in the
Philippines by VAT- registered persons shall be subject to zero percent (0%) rate.
(A) Zero-Rated or Effectively Zero-Rated Sales. - Any VAT-registered person, whose sales are zero-
rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when the
sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or (1) Processing, manufacturing or repacking goods for other persons doing business outside
paid attributable to such sales, except transitional input tax, to the extent that such input tax has not the Philippines which goods are subsequently exported, where the services are paid for in
been applied against output tax: Provided, however, That in the case of zero-rated sales under Section acceptable foreign currency and accounted for in accordance with the rules and regulations
106(A)(2)(a)(1), (2) and (B) and Section 108 (B)(1) and (2), the acceptable foreign currency exchange of the Bangko Sentral ng Pilipinas (BSP);
proceeds thereof had been duly accounted for in accordance with the rules and regulations of the
Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is engaged in zero-rated
(2) Services other than those mentioned in the preceding paragraph, the consideration for
or effectively zero-rated sale and also in taxable or exempt sale of goods of properties or services, and
which is paid for in acceptable foreign currency and accounted for in accordance with the
the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the
rules and regulations of the Bangko Sentral ng Pilipinas (BSP); x x x.
transactions, it shall be allocated proportionately on the basis of the volume of sales. Section 108(B)
referred to in the foregoing provision was first seen when Presidential Decree No. (P.D.)
199431 amended Title IV of P.D. 1158,32 which is also known as the National Internal Revenue Code of On 1 November 2005, Section 6 of R.A. 9337, which amended the foregoing provision, became
1977. Several Decisions have referred to this as the 1986 Tax Code, even though it merely amended effective. It reads:
Title IV of the 1977 Tax Code.
SEC. 6. Section 108 of the same Code, as amended, is hereby further amended to read as follows:
Two years thereafter, or on 1 January 1988, Executive Order No. (E.O.) 27333 further amended
provisions of Title IV. E.O. 273 by transferring the old Title IV provisions to Title VI and filling in the
"SEC. 108. Value-added Tax on Sale of Services and Use or Lease of
former title with new provisions that imposed a VAT.

Properties. -
The VAT system introduced in E.O. 273 was restructured through Republic Act No. (R.A.) 7716.34 This
law, which was approved on 5 May 1994, widened the tax base. Section 3 thereof reads:
(B) Transactions Subject to Zero Percent (0%) Rate. - The following services performed in the
Philippines by VAT-registered persons shall be subject to zero percent (0%) rate:
SECTION 3. Section 102 of the National Internal Revenue Code, as amended, is hereby further
amended to read as follows:
(1) Processing, manufacturing or repacking goods for other persons doing business outside
the Philippines which goods are subsequently exported, where the services are paid for in
"SEC. 102. Value-added tax on sale of services and use or lease of properties. x x x
acceptable foreign currency and accounted for in accordance with the rules and regulations
of the Bangko Sentral ng Pilipinas (BSP);
x x x           x x x          x x x
"(2) Services other than those mentioned in the preceding paragraph rendered to a person
"(b) Transactions subject to zero-rate. — The following services performed in the Philippines by VAT- engaged in business conducted outside the Philippines or to a nonresident person not
registered persons shall be subject to 0%: engaged in business who is outside the Philippines when the services are performed, the
consideration for which is paid for in acceptable foreign currency and accounted for in
accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); x x x."
"(1) Processing, manufacturing or repacking goods for other persons doing business outside
(Emphasis supplied)
the Philippines which goods are subsequently exported, where the services are paid for in
The meat of Accenture’s argument is that nowhere does Section 108(B) of the 1997 Tax Code state
that services, to be zero-rated, should be rendered to clients doing business outside the Philippines, the
requirement introduced by R.A. 9337.35 Required by Section 108(B), prior to the amendment, is that the
consideration for the services rendered be in foreign currency and in accordance with the rules of the
Bangko Sentral ng Pilipinas (BSP). Since Accenture has complied with all the conditions imposed in
Section 108(B), it is entitled to the refund prayed for.
In support of its claim, Accenture cites Amex, in which this Court supposedly ruled that Section 108(B)
reveals a clear intent on the part of the legislators not to impose the condition of being "consumed
abroad" in order for the services performed in the Philippines to be zero-rated.36
The Division ruled that this Court, in Amex and Burmeister, did not declare that the requirement—that
the client must be doing business outside the Philippines—can be disregarded, because this
requirement is expressly provided in Article 108(2) of the Tax Code.37
Accenture questions the Division’s application to this case of the pronouncements made in Burmeister.
According to petitioner, the provision applied to the present case was Section 102(b) of the 1977 Tax
Code, and not Section 108(B) of the 1997 Tax Code, which was the law effective when the subject
transactions were entered into and a refund was applied for.
In refuting Accenture’s theory, the CTA En Banc ruled that since Section 108(B) of the 1997 Tax Code
was a mere reproduction of Section 102(b) of the 1977 Tax Code, this Court’s interpretation of the latter
may be used in interpreting the former, viz:
In the Burmeister case, the Supreme Court harmonized both Sections 102(b)(1) and 102(b)(2) of the
1977 Tax Code, as amended, pertaining to zero-rated transactions. A parallel approach should be
accorded to the renumbered provisions of Sections 108(B)(2) and 108(B)(1) of the 1997 NIRC. This
means that Section 108(B)(2) must be read in conjunction with Section 108(B)(1). Section 108(B)(2)
requires as follows: a) services other than processing, manufacturing or repacking rendered by VAT
registered persons in the Philippines; and b) the transaction paid for in acceptable foreign currency duly
accounted for in accordance with BSP rules and regulations. The same provision made reference to
Section 108(B)(1) further imposing the requisite c) that the recipient of services must be performing
business outside of Philippines. Otherwise, if both the provider and recipient of service are doing
business in the Philippines, the sale transaction is subject to regular VAT as explained in the
Burmeister case x x x.
x x x           x x x          x x x
Clearly, the Supreme Court’s pronouncements in the Burmeister case requiring that the recipient of the
services must be doing business outside the Philippines as mandated by law govern the instant case.38
Assuming that the foregoing is true, Accenture still argues that the tax appeals courts cannot be
allowed to apply to Burmeister this Court’s interpretation of Section 102(b) of the 1977 Tax Code,
because the Petition of Accenture had already been filed before the case was even promulgated on 22
January 2007,39 to wit:
x x x. While the Burmeister case forms part of the legal system and assumes the same authority as the
statute itself, however, the same cannot be applied retroactively against the Petitioner because to do so
will be prejudicial to the latter.40
The CTA en banc is of the opinion that Accenture cannot invoke the non-retroactivity of the rulings of
the Supreme Court, whose interpretation of the law is part of that law as of the date of its enactment.41
We rule that the recipient of the service must be doing business outside the Philippines for the
transaction to qualify for zero-rating under Section 108(B) of the Tax Code.
This Court upholds the position of the CTA en banc that, because Section 108(B) of the 1997 Tax Code
is a verbatim copy of Section 102(b) of the 1977 Tax Code, any interpretation of the latter holds true for
the former.
Moreover, even though Accenture’s Petition was filed before Burmeister was promulgated, the
pronouncements made in that case may be applied to the present one without violating the rule against
retroactive application. When this Court decides a case, it does not pass a new law, but merely
interprets a preexisting one.42 When this Court interpreted Section 102(b) of the 1977 Tax Code in
Burmeister, this interpretation became part of the law from the moment it became effective. It is
elementary that the interpretation of a law by this Court constitutes part of that law from the date it was
originally passed, since this Court's construction merely establishes the contemporaneous legislative
intent that the interpreted law carried into effect.43
Accenture questions the CTA’s application of Burmeister, because the provision interpreted therein was
Section 102(b) of the 1977 Tax Code. In support of its position that Section 108 of the 1997 Tax Code
does not require that the services be rendered to an entity doing business outside the Philippines,
Accenture invokes this Court’s pronouncements in Amex. However, a reading of that case will readily
reveal that the provision applied was Section 102(b) of the 1977 Tax Code, and not Section 108 of the
1997 Tax Code. As previously mentioned, an interpretation of Section 102(b) of the 1977 Tax Code is
an interpretation of Section 108 of the 1997 Tax Code, the latter being a mere reproduction of the
former.
This Court further finds that Accenture’s reliance on Amex is misplaced.
We ruled in Amex that Section 102 of the 1977 Tax Code does not require that the services be
consumed abroad to be zero-rated. However, nowhere in that case did this Court discuss the
necessary qualification of the recipient of the service, as this matter was never put in question. In fact,
the recipient of the service in Amex is a nonresident foreign client.
The aforementioned case explains how the credit card system works. The issuance of a credit card
allows the holder thereof to obtain, on credit, goods and services from certain establishments. As proof
that this credit is extended by the establishment, a credit card draft is issued. Thereafter, the company
issuing the credit card will pay for the purchases of the credit card holders by redeeming the drafts. The
obligation to collect from the card holders and to bear the loss—in case they do not pay—rests on the
issuer of the credit card.
The service provided by respondent in Amex consisted of gathering the bills and credit card drafts from
establishments located in the Philippines and forwarding them to its parent company's regional
operating centers outside the country. It facilitated in the Philippines the collection and payment of
receivables belonging to its Hong Kong-based foreign client.
The Court explained how the services rendered in Amex were considered to have been performed and
consumed in the Philippines, to wit:
Consumption is "the use of a thing in a way that thereby exhausts it." Applied to services, the term
means the performance or "successful completion of a contractual duty, usually resulting in the
performer’s release from any past or future liability x x x." The services rendered by respondent are
performed or successfully completed upon its sending to its foreign client the drafts and bills it has
gathered from service establishments here. Its services, having been performed in the Philippines, are
therefore also consumed in the Philippines.44
The effect of the place of consumption on the zero-rating of the transaction was not the issue in
Burmeister.1âwphi1Instead, this Court addressed the squarely raised issue of whether the recipient of
services should be doing business outside the Philippines for the transaction to qualify for zero-rating.
We ruled that it should. Thus, another essential condition for qualification for zero-rating under Section
102(b)(2) of the 1977 Tax Code is that the recipient of the business be doing that business outside the
Philippines. In clarifying that there is no conflict between this pronouncement and that laid down in
Amex, we ruled thus:
x x x. As the Court held in Commissioner of Internal Revenue v. American Express International, Inc.
(Philippine Branch), the place of payment is immaterial, much less is the place where the output of the
service is ultimately used. An essential condition for entitlement to 0% VAT under Section 102 (b) (1)
and (2) is that the recipient of the services is a person doing business outside the Philippines. In this
case, the recipient of the services is the Consortium, which is doing business not outside, but within the
Philippines because it has a 15-year contract to operate and maintain NAPOCOR’s two 100-megawatt
power barges in Mindanao. (Emphasis in the original)45
Further, when the provider and recipient of services are both doing business in the Philippines, their
transaction falls squarely under Section 102 (a) governing domestic sale or exchange of services.
Indeed, this is a purely local sale or exchange of services subject to the regular VAT, unless of course
the transaction falls under the other provisions of Section 102 (b).
Thus, when Section 102 (b) (2) speaks of "services other than those mentioned in the preceding
subparagraph," the legislative intent is that only the services are different between subparagraphs 1
and 2. The requirements for zero-rating, including the essential condition that the recipient of services is
doing business outside the Philippines, remain the same under both subparagraphs. (Emphasis in the
original)46
Lastly, it is worth mentioning that prior to the promulgation of Burmeister, Congress had already
clarified the intent behind Sections 102(b)(2) of the 1977 Tax Code and 108(B)(2) of the 1997 Tax Code
amending the earlier provision. R.A. 9337 added the following phrase: "rendered to a person engaged
in business conducted outside the Philippines or to a nonresident person not engaged in business who
is outside the Philippines when the services are performed."
Accenture has failed to establish that the recipients of its services do business outside the Philippines.
Accenture argues that based on the documentary evidence it presented,47 it was able to establish the
following circumstances:

In Amex we ruled that the place of performance and/or consumption of the service is immaterial. In 1. The records of the Securities and Exchange Commission (SEC) show that Accenture’s
Burmeister, the Court found that, although the place of the consumption of the service does not affect clients have not established any branch office in which to do business in the Philippines.
the entitlement of a transaction to zero-rating, the place where the recipient conducts its business does.
2. For these services, Accenture bills another corporation, Accenture Participations B.V.
Amex does not conflict with Burmeister. In fact, to fully understand how Section 102(b)(2) of the 1977 (APB), which is likewise a foreign corporation with no "presence in the Philippines."
Tax Code—and consequently Section 108(B)(2) of the 1997 Tax Code—was intended to operate, the
two aforementioned cases should be taken together. The zero-rating of the services performed by
3. Only those not doing business in the Philippines can be required under BSP rules to pay in
respondent in Amex was affirmed by the Court, because although the services rendered were both
acceptable currency for their purchase of goods and services from the Philippines. Thus, in a
performed and consumed in the Philippines, the recipient of the service was still an entity doing
domestic transaction, where the provider and recipient of services are both doing business in
business outside the Philippines as required in Burmeister.
the Philippines, the BSP cannot require any party to make payment in foreign currency.48

That the recipient of the service should be doing business outside the Philippines to qualify for zero-
Accenture claims that these documentary pieces of evidence are supported by the Report of Emmanuel
rating is the only logical interpretation of Section 102(b)(2) of the 1977 Tax Code, as we explained in
Mendoza, the Court-commissioned Independent Certified Public Accountant. He ascertained that
Burmeister:
Accenture’s gross billings pertaining to zero-rated sales were all supported by zero-rated Official
Receipts and Billing Statements. These documents show that these zero-rated sales were paid in
This can only be the logical interpretation of Section 102 (b) (2). If the provider and recipient of the foreign exchange currency and duly accounted for in the rules and regulations of the BSP.49
"other services" are both doing business in the Philippines, the payment of foreign currency is
irrelevant. Otherwise, those subject to the regular VAT under Section 102 (a) can avoid paying the VAT
In the CTA’s opinion, however, the documents presented by Accenture merely substantiate the
by simply stipulating payment in foreign currency inwardly remitted by the recipient of services. To
existence of the sales, receipt of foreign currency payments, and inward remittance of the proceeds of
interpret Section 102 (b) (2) to apply to a payer-recipient of services doing business in the Philippines is
these sales duly accounted for in accordance with BSP rules. Petitioner presented no evidence
to make the payment of the regular VAT under Section 102 (a) dependent on the generosity of the
whatsoever that these clients were doing business outside the Philippines.50
taxpayer. The provider of services can choose to pay the regular VAT or avoid it by stipulating payment
in foreign currency inwardly remitted by the payer-recipient. Such interpretation removes Section 102
(a) as a tax measure in the Tax Code, an interpretation this Court cannot sanction. A tax is a mandatory Accenture insists, however, that it was able to establish that it had rendered services to foreign
exaction, not a voluntary contribution. corporations doing business outside the Philippines, unlike in Burmeister, which allegedly involved a
foreign corporation doing business in the Philippines.51
x x x           x x x          x x x
We deny Accenture’s Petition for a tax refund.
The evidence presented by Accenture may have established that its clients are foreign.1âwphi1 This
fact does not automatically mean, however, that these clients were doing business outside the
Philippines. After all, the Tax Code itself has provisions for a foreign corporation engaged in business
within the Philippines and vice versa, to wit:
SEC. 22. Definitions - When used in this Title:
x x x           x x x          x x x
(H) The term "resident foreign corporation" applies to a foreign corporation engaged in trade
or business within the Philippines.
(I) The term ‘nonresident foreign corporation’ applies to a foreign corporation not engaged in
trade or business within the Philippines. (Emphasis in the original)
Consequently, to come within the purview of Section 108(B)(2), it is not enough that the recipient of the
service be proven to be a foreign corporation; rather, it must be specifically proven to be a nonresident
foreign corporation.
There is no specific criterion as to what constitutes "doing" or "engaging in" or "transacting" business.
We ruled thus in Commissioner of Internal Revenue v. British Overseas Airways Corporation:52
x x x. There is no specific criterion as to what constitutes "doing" or "engaging in" or "transacting"
business. Each case must be judged in the light of its peculiar environmental circumstances. The term
implies a continuity of commercial dealings and arrangements, and contemplates, to that extent, the
performance of acts or works or the exercise of some of the functions normally incident to, and in
progressive prosecution of commercial gain or for the purpose and object of the business organization.
"In order that a foreign corporation may be regarded as doing business within a State, there must be
continuity of conduct and intention to establish a continuous business, such as the appointment of a
local agent, and not one of a temporary character."53
A taxpayer claiming a tax credit or refund has the burden of proof to establish the factual basis of that
claim.1âwphi1 Tax refunds, like tax exemptions, are construed strictly against the taxpayer.54
Accenture failed to discharge this burden. It alleged and presented evidence to prove only that its
clients were foreign entities. However, as found by both the CTA Division and the CTA En Banc, no
evidence was presented by Accenture to prove the fact that the foreign clients to whom petitioner
rendered its services were clients doing business outside the Philippines.
As ruled by the CTA En Banc, the Official Receipts, Intercompany Payment Requests, Billing
Statements, Memo Invoices-Receivable, Memo Invoices-Payable, and Bank Statements presented by
Accenture merely substantiated the existence of sales, receipt of foreign currency payments, and
inward remittance of the proceeds of such sales duly accounted for in accordance with BSP rules, all of
these were devoid of any evidence that the clients were doing business outside of the Philippines.55
WHEREFORE, the instant Petition is DENIED. The 22 September 2009 Decision and the 23 October
2009 Resolution of the Court of Tax Appeals En Banc in C.T.A. EB No. 477, dismissing the Petition for
the refund of the excess or unutilized input VAT credits of Accenture, Inc., are AFFIRMED.
SO ORDERED.
G.R. No. 183623               June 25, 2012
LETICIA B. AGBAYANI, Petitioner, 
vs.
COURT OF APPEALS, DEPARTMENT OF JUSTICE and LOIDA MARCELINA J.
GENABE, Respondents.
DECISION
REYES, J.:
On petition for review under Rule 45 of the 1997 Rules of Court is the Decision1 dated March 27, 2008
of the Court of Appeals (CA) dismissing the petition for certiorari and the Resolution2 dated July 3, 2008
denying the motion for reconsideration thereof in CA-G.R. SP No. 99626. Petitioner Leticia B. Agbayani
(Agbayani) assails the resolution of the Department of Justice (DOJ) which directed the withdrawal of
her complaint for grave oral defamation filed against respondent Loida Marcelina J. Genabe (Genabe).
Antecedent Facts
Agbayani and Genabe were both employees of the Regional Trial Court (RTC), Branch 275 of Las
Piñas City, working as Court Stenographer and Legal Researcher II, respectively. On December 29,
2006, Agbayani filed a criminal complaint for grave oral defamation against Genabe before the Office of
the City Prosecutor of Las Piñas City, docketed as I.S. No. 07-0013, for allegedly uttering against her,
in the presence of their fellow court employees and while she was going about her usual duties at work,
the following statements, to wit:
"ANG GALING MO LETY, SINABI MO NA TINAPOS MO YUNG MARVILLA CASE, ANG GALING MO.
FEELING LAWYER KA KASI, BAKIT DI KA MAGDUTY NA LANG, STENOGRAPHER KA MAGSTENO
KA NA LANG, ANG GALING MO, FEELING LAWYER KA TALAGA. NAGBEBENTA KA NG KASO,
TIRADOR KA NG JUDGE. SIGE HIGH BLOOD DIN KA, MAMATAY KA SANA SA HIGH BLOOD MO."3
In a Resolution4 rendered on February 12, 2007, the Office of the City Prosecutor of Las Piñas
City5 found probable cause for the filing of the Information for grave oral defamation against Genabe.
However, upon a petition for review filed by Genabe, the DOJ Undersecretary Ernesto L. Pineda
(Pineda) found that:
After careful evaluation and consideration of the evidence on record, we find merit in the instant
petition.
Contrary to the findings in the assailed resolution, we find that the subject utterances of respondent
constitute only slight oral defamation.
As alleged by the [petitioner] in paragraphs 2, 3 and 4 of her complaint-affidavit, respondent uttered the
remarks subject matter of the instant case in the heat of anger. This was also the tenor of the sworn
statements of the witnesses for complainant. The Supreme Court, in the case of Cruz vs. Court of
Appeals, G.R. Nos. L-56224-26, November 25, 1982, x x x held that although abusive remarks may
ordinarily be considered as serious defamation, under the environmental circumstances of the case,
there having been provocation on complainant’s part, and the utterances complained of having been
made in the heat of unrestrained anger and obfuscation, such utterances constitute only the crime of
slight oral defamation.
Notwithstanding the foregoing, we believe that the instant case should nonetheless be dismissed for
non-compliance with the provisions of Book III, Title I, Chapter 7 (Katarungang Pambarangay), of
Republic Act No. 7160 (The Local Government Code of 1991). As shown by the records, the parties
herein are residents of Las Piñas City. x x x
On March 27, 2008, the CA dismissed the petition after finding no grave abuse of discretion on the part
of the DOJ. Citing Punzalan v. Dela Peña,10 the CA stated that for grave abuse of discretion to exist, the
complained act must constitute a capricious and whimsical exercise of judgment as it is equivalent to
lack of jurisdiction, or when the power is exercised in an arbitrary or despotic manner by reason of
passion or personal hostility, and it must be so patent and gross as to amount to an evasion of positive
duty enjoined or to act at all in contemplation of law. It is not sufficient that a tribunal, in the exercise of
its power, abused its discretion; such abuse must be grave.

On motion for reconsideration by the petitioner, the CA denied the same in its Resolution11 dated July 3,
The complaint-affidavit, however, failed to show that the instant case was previously referred to the
2008. Hence, the instant petition.
barangay for conciliation in compliance with Sections 408 and 409, paragraph (d), of the Local
Government Code, which provides:
Assignment of Errors
Section 408. Subject Matter for Amicable Settlement; Exception Thereto. – The lupon of each barangay
shall have authority to bring together the parties actually residing in the same city or municipality for Maintaining her stance, Agbayani raised the following, to wit:
amicable settlement of all disputes except: xxx
I. RESPONDENT COURT GRAVELY ERRED IN HOLDING THAT THE RESPONDENT DOJ
Section 409. Venue. x x x (d) Those arising at the workplace where the contending parties are DID NOT ABUSE ITS DISCRETION WHEN THE LATTER REVERSED AND SET ASIDE
employed or xxx shall be brought in the barangay where such workplace or institution is located. THE RESOLUTION OF THE CITY PROSECUTOR OF LAS PIÑAS CITY.

The records of the case likewise show that the instant case is not one of the exceptions enumerated II. RESPONDENT COURT GRAVELY ERRED IN AFFIRMING RESPONDENT DOJ'S
under Section 408 of the Local Government Code. Hence, the dismissal of the instant petition is proper. FINDING THAT WHAT PRIVATE RESPONDENT COMMITTED WAS ONLY SLIGHT ORAL
DEFAMATION.
It is well-noted that the Supreme Court held that where the case is covered by P.D. 1508 (Katarungang
Pambarangay Law), the compulsory process of arbitration required therein is a pre-condition for filing a III. RESPONDENT COURT GRAVELY ERRED IN AFFIRMING RESPONDENT DOJ'S
complaint in court. Where the complaint (a) did not state that it is one of the excepted cases, or (b) it did DISMISSAL OF THE COMPLAINT DUE TO NON-COMPLIANCE WITH THE PROVISIONS
not allege prior availment of said conciliation process, or (c) did not have a certification that no OF THE LOCAL GOVERNMENT CODE OF 1991.
conciliation or settlement had been reached by the parties, the case should be dismissed x x x. While
the foregoing doctrine is handed down in civil cases, it is submitted that the same should apply to
IV. RESPONDENT COURT GRAVELY ERRED WHEN IT HELD THAT THE
criminal cases covered by, but filed without complying with, the provisions of P.D. 1508 x x x.6
REQUIREMENTS UNDER DOJ CIRCULAR NO. 70 (2000 NPS Rule on Appeal) ARE NOT
MANDATORY.12
Thus, in a Resolution7 dated May 17, 2007, the DOJ disposed, to wit:
Ruling and Discussions
WHEREFORE, premises considered, the assailed resolution is hereby REVERSED and SET ASIDE.
Accordingly, the City Prosecutor of Las Piñas City is directed to move for the withdrawal of the
The petition is bereft of merit.
information for grave oral defamation filed against respondent Loida Marcelina J. Genabe, and report
the action taken thereon within ten (10) days from receipt hereof.
We shall first tackle Agbayani's arguments on the first two issues raised in the instant petition.
SO ORDERED.8
1. Petitioner Agbayani alleged that Undersecretary Pineda unfairly heeded only to the
arguments interposed by respondent Genabe in her comment; and the CA, in turn, took his
The petitioner filed a motion for reconsideration, which was denied in a Resolution9 dated June 25,
findings and reasoning as gospel truth. Agbayani’s comment was completely disregarded and
2007.
suppressed in the records of the DOJ. Agbayani discovered this when she went to the DOJ to
examine the records, as soon as she received a copy of the DOJ Resolution of her motion for
Consequently, Agbayani filed a petition for certiorari with the CA alleging that the DOJ committed grave reconsideration.
abuse of discretion in setting aside the Resolution dated February 12, 2007 of the City Prosecutor of
Las Piñas City in I.S. Case No. 07-0013. She averred that the respondent’s petition for review filed with
2. Further, petitioner Agbayani maintained that respondent Genabe’s Petition for
the DOJ did not comply with Sections 5 and 6 of DOJ Circular No. 70, or the "2000 National
Review13 should have been dismissed outright, since it failed to state the name and address
Prosecution Service (NPS) Rules on Appeal," and maintained that her evidence supported a finding of
of the petitioner, nor did it show proof of service to her, pursuant to Sections 5 and 6 of DOJ
probable cause for grave oral defamation against respondent Genabe.
Circular No. 70. Also, the petition was not accompanied with the required attachments, i.e.
certified copies of the complaint, affidavits of witnesses, petitioner's reply to respondent's
counter-affidavit, and documentary evidences of petitioner. Thus, a grave irregularity was
 committed by the DOJ in allowing the surreptitious insertion of these and many other
documents in the records of the case, after the petition had been filed.
In particular, petitioner Agbayani alleged that when the petition was filed on March 22, 2007, only five
(5) documents were attached thereto, namely: (a) the Resolution of the City Prosecutor; (b) the
respondent's Counter-affidavit; (c) Letter of the staff dated January 2, 2005; (d) her Answer; and (e) the
Information filed against respondent Genabe with the Office of the City Prosecutor of Las Piñas City.
However, at the time the Resolution of the DOJ was issued, a total of forty-one (41) documents14 formed
part of the records of the petition. Besides, respondent Genabe's Motion to Defer Arraignment
(Document No. 40) and the court order relative to the granting of the same (Document No. 41) were
both dated March 23, 2007, or a day after the petition was filed. Agbayani asserted that these thirty-six
(36) documents were surreptitiously and illegally attached to the records of the case, an act constituting
extrinsic fraud and grave misconduct.15 At the very least, the DOJ should have required respondent
Genabe to formalize the "insertion" of the said documents.
Petitioner Agbayani reiterated that her version of the incident was corroborated by several witnesses
(officemates of Agbayani and Genabe), while that of Genabe was not. And since the crime committed
by respondent Genabe consisted of her exact utterances, the DOJ erred in downgrading the same to
slight oral defamation, completely disregarding the finding by the Investigating Prosecutor of probable
cause for the greater offense of grave oral defamation. She denied that she gave provocation to
respondent Genabe, insisting that the latter committed the offense with malice aforethought and not in
the heat of anger.
We find no merit in the above arguments.
It is well to be reminded, first of all, that the rules of procedure should be viewed as mere instruments
designed to facilitate the attainment of justice. They are not to be applied with severity and rigidity when
such application would clearly defeat the very rationale for their conception and existence. Even the
Rules of Court reflects this principle.16
Anent the charge of non-compliance with the rules on appeal, Sections 5 and 6 of the aforesaid DOJ
Circular provide:
SECTION 5. Contents of petition. - The petition shall contain or state: (a) the names and addresses of
the parties; (b) the Investigation Slip number (I.S. No.) and criminal case number, if any, and title of the
case, including the offense charged in the complaint; (c) the venue of the preliminary investigation; (d)
the specific material dates showing that it was filed on time; (e) a clear and concise statement of the
facts, the assignment of errors, and the reasons or arguments relied upon for the allowance of the
appeal; and (f) proof of service of a copy of the petition to the adverse party and the Prosecution Office
concerned.
The petition shall be accompanied by legible duplicate original or certified true copy of the resolution
appealed from together with legible true copies of the complaint, affidavits/sworn statements and other
evidence submitted by the parties during the preliminary investigation/ reinvestigation.
If an information has been filed in court pursuant to the appealed resolution, a copy of the motion to
defer proceedings filed in court must also accompany the petition.
The investigating/reviewing/approving prosecutor shall not be impleaded as party respondent in the
petition.1âwphi1 The party taking the appeal shall be referred to in the petition as either "Complainant-
Appellant" or "Respondent-Appellant."
SECTION 6. Effect of failure to comply with the requirements. – The failure of petitioner to comply
WITH ANY of the foregoing requirements shall constitute sufficient ground for the dismissal of the
petition.
Contrary to petitioner Agbayani's claim, there was substantial compliance with the rules. Respondent
Genabe actually mentioned on page 2 of her petition for review to the DOJ the name of the petitioner as
the private complainant, as well as indicated the latter’s address on the last page thereof as "RTC
Branch 275, Las Piñas City." The CA also noted that there was proper service of the petition as
required by the rules since the petitioner was able to file her comment thereon. A copy thereof, attached
as Annex "L" in the instant petition, bears a mark that the comment was duly received by the
Prosecution Staff, Docket Section of the DOJ. Moreover, a computer verification requested by the
petitioner showed that the prosecutor assigned to the case had received a copy of the petitioner’s
comment.17
As to the charge of extrinsic fraud, which consists of the alleged suppression of Agbayani's Comment
and the unauthorized insertion of documents in the records of the case with the DOJ, we agree with the
CA that this is a serious charge, especially if made against the Undersecretary of Justice; and in order
for it to prosper, it must be supported by clear and convincing evidence. However, petitioner Agbayani's
only proof is her bare claim that she personally checked the records and found that her Comment was
missing and 36 new documents had been inserted. This matter was readily brought to the attention of
Undersecretary Pineda by petitioner Agbayani in her motion for reconsideration, who however must
surely have found such contention without merit, and thus denied the motion.18
Section 5 of the 2000 NPS Rules on Appeal also provides that the petition for review must be
accompanied by a legible duplicate original or certified true copy of the resolution appealed from,
together with legible true copies of the complaint, affidavits or sworn statements and other evidence
submitted by the parties during the preliminary investigation or reinvestigation. Petitioner Agbayani
does not claim that she was never furnished, during the preliminary investigation, with copies of the
alleged inserted documents, or that any of these documents were fabricated. In fact, at least seven (7)
of these documents were copies of her own submissions to the investigating prosecutor.19 Presumably,
the DOJ required respondent Genabe to submit additional documents produced at the preliminary
investigation, along with Document Nos. 40 and 41, for a fuller consideration of her petition for review.
As for Document Nos. 40 and 41, which were dated a day after the filing of the petition, Section 5 of the
2000 NPS Rules on Appeal provides that if an Information has been filed in court pursuant to the
appealed resolution, a copy of the Motion to Defer Proceedings must also accompany the petition.
Section 3 of the above Rules states that an appeal to the DOJ must be taken within fifteen (15) days
from receipt of the resolution or of the denial of the motion for reconsideration. While it may be
presumed that the motion to defer arraignment accompanying the petition should also be filed within the
appeal period, respondent Genabe can not actually be faulted if the resolution thereof was made after
the lapse of the period to appeal.
In Guy vs. Asia United Bank,20 a motion for reconsideration from the resolution of the Secretary of
Justice, which was filed four (4) days beyond the "non-extendible period of ten (10) days", was allowed
under Section 13 of the 2000 NPS Rules on Appeal. The Supreme Court held that the authority of the
Secretary of Justice to review and order the withdrawal of an Information in instances where he finds
the absence of a prima facie case is not time-barred, albeit subject to the approval of the court, if its
jurisdiction over the accused has meanwhile attached.21 We further explained:
[I]t is not prudent or even permissible for a court to compel the Secretary of Justice or the fiscal, as the
case may be, to prosecute a proceeding originally initiated by him on an information, if he finds that the
evidence relied upon by him is insufficient for conviction. Now, then, if the Secretary of Justice
possesses sufficient latitude of discretion in his determination of what constitutes probable cause and
can legally order a reinvestigation even in those extreme instances where an information has already
been filed in court, is it not just logical and valid to assume that he can take cognizance of and
competently act on a motion for reconsideration, belatedly filed it might have been, dealing with
probable cause? And is it not a grievous error on the part of the CA if it virtually orders the filing of an
information, as here, despite a categorical statement from the Secretary of Justice about the lack of
evidence to proceed with the prosecution of the petitioner? The answer to both posers should be in the
affirmative. As we said in Santos v. Go:
"[C]ourts cannot interfere with the discretion of the public prosecutor in evaluating the offense charged.
He may dismiss the complaint forthwith, if he finds the charge insufficient in form or substance, or
without any ground. Or, he may proceed with the investigation if the complaint in his view is sufficient
and in proper form. The decision whether to dismiss a complaint or not, is dependent upon the sound
discretion of the prosecuting fiscal and, ultimately, that of the Secretary of Justice. Findings of the
Secretary of Justice are not subject to review unless made with grave abuse of discretion.
3. Coming now to the DOJ's finding that the complaint fails to state a cause of action, the CA held that
the DOJ committed no grave abuse of discretion in causing the dismissal thereof on the ground of non-
compliance with the provisions of the Local Government Code of 1991, on the Katarungang
Pambarangay conciliation procedure.
Undeniably, both petitioner Agbayani and respondent Genabe are residents of Las Piñas City and both
work at the RTC, and the incident which is the subject matter of the case happened in their
workplace.25 Agbayani’s complaint should have undergone the mandatory barangay conciliation for
possible amicable settlement with respondent Genabe, pursuant to Sections 408 and 409 of Republic
Act No. 7160 or the Local Government Code of 1991 which provide:
Sec. 408. Subject Matter for Amicable Settlement; Exception thereto. – The lupon of each barangay
shall have authority to bring together the parties actually residing in the same city or municipality for
amicable settlement of all disputes, except: x x x

xxx
Sec. 409. Venue. x x x (d) Those arising at the workplace where the contending parties are employed
or x x x shall be brought in the barangay where such workplace or institution is located.
[T]o strike down the April 20, 2006 DOJ Secretary's Resolution as absolutely void and without effect
whatsoever, as the assailed CA decision did, for having been issued after the Secretary had
Administrative Circular No. 14-93,26 issued by the Supreme Court on July 15, 1993 states that:
supposedly lost jurisdiction over the motion for reconsideration subject of the resolution may be reading
into the aforequoted provision a sense not intended. For, the irresistible thrust of the assailed CA
decision is that the DOJ Secretary is peremptorily barred from taking a second hard look at his decision xxx
and, in appropriate cases, reverse or modify the same unless and until a motion for reconsideration is
timely interposed and pursued. The Court cannot accord cogency to the posture assumed by the CA
I. All disputes are subject to Barangay conciliation pursuant to the Revised Katarungang Pambarangay
under the premises which, needless to stress, would deny the DOJ the authority to motu proprio
Law [formerly P.D. 1508, repealed and now replaced by Secs. 399-422, Chapter VII, Title I, Book III,
undertake a review of his own decision with the end in view of protecting, in line with his oath of office,
and Sec. 515, Title I, Book IV, R.A. 7160, otherwise known as the Local Government Code of 1991],
innocent persons from groundless, false or malicious prosecution. As the Court pointed out in Torres,
and prior recourse thereto is a pre-condition before filing a complaint in court or any government
Jr. v. Aguinaldo, the Secretary of Justice would be committing a serious dereliction of duty if he orders
offices, except in the following disputes:
or sanctions the filing of an information based upon a complaint where he is not convinced that the
evidence warrants the filing of the action in court.22 (Citations omitted and underscoring supplied)
[1] Where one party is the government, or any subdivision or instrumentality thereof;
The Court further stated in Guy that when the DOJ Secretary took cognizance of the petitioner's motion
for reconsideration, he "effectively excepted such motion from the operation of the aforequoted Section [2] Where one party is a public officer or employee and the dispute relates to the performance
13 of DOJ Circular No. 70, s. 2000. This show of liberality is, to us, within the competence of the DOJ of his official functions;
Secretary to make. The Court is not inclined to disturb the same absent compelling proof, that he acted
out of whim and that petitioner was out to delay the proceedings to the prejudice of respondent in filing
the motion for reconsideration."23 [3] Where the dispute involves real properties located in different cities and municipalities,
unless the parties thereto agree to submit their difference to amicable settlement by an
appropriate Lupon;
The case of First Women's Credit Corporation v. Perez,24 succinctly summarizes the general rules
relative to criminal prosecution: that criminal prosecution may not be restrained or stayed by injunction,
preliminary or final, albeit in extreme cases, exceptional circumstances have been recognized; that [4] Any complaint by or against corporations, partnerships or juridical entities, since only
courts follow the policy of non-interference in the conduct of preliminary investigations by the DOJ, and individuals shall be parties to Barangay conciliation proceedings either as complainants or
of leaving to the investigating prosecutor sufficient latitude of discretion in the determination of what respondents [Sec. 1, Rule VI, Katarungang Pambarangay Rules];
constitutes sufficient evidence as will establish probable cause for the filing of an information against a
supposed offender; and, that the court's duty in an appropriate case is confined to a determination of [5] Disputes involving parties who actually reside in barangays of different cities or
whether the assailed executive or judicial determination of probable cause was done without or in municipalities, except where such barangay units adjoin each other and the parties thereto
excess of jurisdiction or with grave abuse of discretion amounting to want of jurisdiction. agree to submit their differences to amicable settlement by an appropriate Lupon;

But while prosecutors are given sufficient latitude of discretion in the determination of probable cause, [6] Offenses for which the law prescribes a maximum penalty of imprisonment exceeding one
their findings are still subject to review by the Secretary of Justice. Surely, this power of the Secretary of [1] year or a fine of over five thousand pesos ([₱]5,000.00);
Justice to review includes the discretion to accept additional evidence from the investigating prosecutor
or from herein respondent Genabe, evidence which nonetheless appears to have already been
submitted to the investigating prosecutor but inadvertently omitted by her when she filed her petition. [7] Offenses where there is no private offended party;
 [8] Disputes where urgent legal action is necessary to prevent injustice from being committed
or further continued, specifically the following:
[a] Criminal cases where accused is under police custody or detention [See Sec.
412(b)(1), Revised Katarungang Pambarangay Law];
[b] Petitions for habeas corpus by a person illegally deprived of his rightful custody
over another or a person illegally deprived of or on acting in his behalf;
[c] Actions coupled with provisional remedies such as preliminary injunction,
attachment, delivery of personal property and support during the pendency of the
action; and
[d] Actions which may be barred by the Statute of Limitations.
[9] Any class of disputes which the President may determine in the interest of justice or upon
the recommendation of the Secretary of Justice;
[10] Where the dispute arises from the Comprehensive Agrarian Reform Law (CARL) [Secs.
46 & 47, R. A. 6657];
[11] Labor disputes or controversies arising from employer-employee relations [Montoya vs.
Escayo, 171 SCRA 442; Art. 226, Labor Code, as amended, which grants original and
exclusive jurisdiction over conciliation and mediation of disputes, grievances or problems to
certain offices of the Department of Labor and Employment];
[12] Actions to annul judgment upon a compromise which may be filed directly in court [See
Sanchez vs. [Judge] Tupaz, 158 SCRA 459]."
xxx
The compulsory process of arbitration is a pre-condition for the filing of the complaint in court. Where
the complaint (a) did not state that it is one of excepted cases, or (b) it did not allege prior availment of
said conciliation process, or (c) did not have a certification that no conciliation had been reached by the
parties, the case should be dismissed.27
Here, petitioner Agbayani failed to show that the instant case is not one of the exceptions enumerated
above. Neither has she shown that the oral defamation caused on her was so grave as to merit a
penalty of more than one year. Oral defamation under Article 358 of the Revised Penal Code, as
amended, is penalized as follows:
"Article 358. Slander. – Oral defamation shall be punished by arresto mayor in its maximum period
to prision correccional in its minimum period if it is of a serious and insulting nature; otherwise, the
penalty shall be arresto menor or a fine not exceeding 200 pesos."
Apparently, the DOJ found probable cause only for slight oral defamation. As defined in Villanueva v.
People,28 oral defamation or slander is the speaking of base and defamatory words which tend to
prejudice another in his reputation, office, trade, business or means of livelihood. It is grave slander
when it is of a serious and insulting nature. The gravity depends upon: (1) the expressions used; (2) the
personal relations of the accused and the offended party; and (3) the special circumstances of the case,
the antecedents or relationship between the offended party and the offender, which may tend to prove
the intention of the offender at the time. In particular, it is a rule that uttering defamatory words in the
heat of anger, with some provocation on the part of the offended party constitutes only a light felony.29
We recall that in the morning of December 27, 2006 when the alleged utterances were made, Genabe
was about to punch in her time in her card when she was informed that she had been suspended for
failing to meet her deadline in a case, and that it was Agbayani who informed the presiding judge that
she had missed her deadline when she left to attend a convention in Baguio City, leaving Agbayani to
finish the task herself. According to Undersecretary Pineda, the confluence of these circumstances was
the immediate cause of respondent Genabe's emotional and psychological distress. We rule that his
determination that the defamation was uttered while the respondent was in extreme excitement or in a
state of passion and obfuscation, rendering her offense of lesser gravity than if it had been made with
cold and calculating deliberation, is beyond the ambit of our review.30 The CA concurred that the
complained utterances constituted only slight oral defamation, having been said in the heat of anger
and with perceived provocation from Agbayani. Respondent Genabe was of a highly volatile personality
prone to throw fits (sumpongs), who thus shared a hostile working environment with her co-employees,
particularly with her superiors, Agbayani and Hon. Bonifacio Sanz Maceda, the Presiding Judge of
Branch 275, whom she claimed had committed against her "grievous acts that outrage moral and social
conduct." That there had been a long-standing animosity between Agbayani and Genabe is not denied.
4. Lastly, petitioner Agbayani insists that the DOJ should have dismissed respondent Genabe's petition
for review outright pursuant to Sections 5 and 6 of DOJ Circular No. 70. It is true that the general rule in
statutory construction is that the words "shall," "must," "ought," or "should" are words of mandatory
character in common parlance and in their in ordinary signification,31 yet, it is also well-recognized in law
and equity as a not absolute and inflexible criterion.32 Moreover, it is well to be reminded that DOJ
Circular No. 70 is a mere tool designed to facilitate, not obstruct, the attainment of justice through
appeals taken with the National Prosecution Service. Thus, technical rules of procedure like those
under Sections 5 and 6 thereof should be interpreted in such a way to promote, not frustrate, justice.
Besides, Sections 7 and 10 of DOJ Circular No. 70 clearly give the Secretary of Justice, or the
Undersecretary in his place, wide latitude of discretion whether or not to dismiss a petition. Section 6 of
DOJ Circular No. 70, invoked by petitioner Agbayani, is clearly encompassed within this authority, as
shown by a cursory reading of Sections 7 and 10, to wit:
SECTION 7. Action on the petition. The Secretary of Justice may dismiss the petition outright if he finds
the same to be patently without merit or manifestly intended for delay, or when the issues raised therein
are too unsubstantial to require consideration.
SECTION 12. Disposition of the appeal. The Secretary may reverse, affirm or modify the appealed
resolution. He may, motu proprio or upon motion, dismiss the petition for review on any of the following
grounds:
– That the petition was filed beyond the period prescribed in Section 3 hereof;
– That the procedure or any of the requirements herein provided has not been complied with;
– That there is no showing of any reversible error;
– That the appealed resolution is interlocutory in nature, except when it suspends the
proceedings based on the alleged existence of a prejudicial question;
 – That the accused had already been arraigned when the appeal was taken;
– That the offense has already prescribed; and
– That other legal or factual grounds exist to warrant a dismissal.
We reiterate what we have stated in Yao v. Court of Appeals33 that:
In the interest of substantial justice, procedural rules of the most mandatory character in terms of
compliance, may be relaxed.1âwphi1 In other words, if strict adherence to the letter of the law would
result in absurdity and manifest injustice, or where the merit of a party's cause is apparent and
outweighs consideration of non-compliance with certain formal requirements, procedural rules should
definitely be liberally construed. A party-litigant is to be given the fullest opportunity to establish the
merits of his complaint or defense rather than for him to lose life, liberty, honor or property on mere
technicalities.34 (Citations omitted)
All told, we find that the CA did not commit reversible error in upholding the Resolution dated May 17,
2007 of the DOJ as we, likewise, find the same to be in accordance with law and jurisprudence.
WHEREFORE, premises considered, the petition for review is hereby DENIED. Accordingly, the
Decision dated March 27, 2008 and the Resolution dated July 3, 2008 of the Court of Appeals in CA-
G.R. SP No. 99626 are AFFIRMED in toto.
SO ORDERED.
G.R. No. L-47745 April 15, 1988
JOSE S. AMADORA, LORETA A. AMADORA, JOSE A. AMADORA JR., NORMA A. YLAYA
PANTALEON A. AMADORA, JOSE A. AMADORA III, LUCY A. AMADORA, ROSALINDA A.
AMADORA, PERFECTO A. AMADORA, SERREC A. AMADORA, VICENTE A. AMADORA and
MARIA TISCALINA A. AMADORA, petitioners  because of an earlier incident which they claim underscores the negligence of the school and at least
vs.
HONORABLE COURT OF APPEALS, COLEGIO DE SAN JOSE-RECOLETOS, VICTOR LLUCH
SERGIO P. DLMASO JR., CELESTINO DICON, ANIANO ABELLANA, PABLITO DAFFON thru his
parents and natural guardians, MR. and MRS. NICANOR GUMBAN, and ROLANDO VALENCIA,
thru his guardian, A. FRANCISCO ALONSO, respondents.
Jose S. Amadora & Associates for petitioners.
Padilla Law Office for respondents.
CRUZ, J.:
Like any prospective graduate, Alfredo Amadora was looking forward to the commencement exercises
where he would ascend the stage and in the presence of his relatives and friends receive his high
school diploma. These ceremonies were scheduled on April 16, 1972. As it turned out, though, fate
would intervene and deny him that awaited experience. On April 13, 1972, while they were in the
auditorium of their school, the Colegio de San Jose-Recoletos, a classmate, Pablito Damon, fired a gun
that mortally hit Alfredo, ending all his expectations and his life as well. The victim was only seventeen
years old. 1
Daffon was convicted of homicide thru reckless imprudence . 2 Additionally, the herein petitioners, as
the victim's parents, filed a civil action for damages under Article 2180 of the Civil Code against the
Colegio de San Jose-Recoletos, its rector the high school principal, the dean of boys, and the physics
teacher, together with Daffon and two other students, through their respective parents. The complaint
against the students was later dropped. After trial, the Court of First Instance of Cebu held the
remaining defendants liable to the plaintiffs in the sum of P294,984.00, representing death
compensation, loss of earning capacity, costs of litigation, funeral expenses, moral damages,
exemplary damages, and attorney's fees .3 On appeal to the respondent court, however, the decision
was reversed and all the defendants were completely absolved .4
In its decision, which is now the subject of this petition for certiorari under Rule 45 of the Rules of Court,
the respondent court found that Article 2180 was not applicable as the Colegio de San Jose-Recoletos
was not a school of arts and trades but an academic institution of learning. It also held that the students
were not in the custody of the school at the time of the incident as the semester had already ended, that
there was no clear identification of the fatal gun and that in any event the defendant, had exercised the
necessary diligence in preventing the injury. 5
The basic undisputed facts are that Alfredo Amadora went to the San Jose-Recoletos on April 13, 1972,
and while in its auditorium was shot to death by Pablito Daffon, a classmate. On the implications and
consequences of these facts, the parties sharply disagree.
The petitioners contend that their son was in the school to show his physics experiment as a
prerequisite to his graduation; hence, he was then under the custody of the private respondents. The
private respondents submit that Alfredo Amadora had gone to the school only for the purpose of
submitting his physics report and that he was no longer in their custody because the semester had
already ended.
There is also the question of the identity of the gun used which the petitioners consider important
one of the private respondents. It is not denied by the respondents that on April 7, 1972, Sergio
Damaso, Jr., the dean of boys, confiscated from Jose Gumban an unlicensed pistol but later returned it
to him without making a report to the principal or taking any further action .6 As Gumban was one of the
companions of Daffon when the latter fired the gun that killed Alfredo, the petitioners contend that this
was the same pistol that had been confiscated from Gumban and that their son would not have been
killed if it had not been returned by Damaso. The respondents say, however, that there is no proof that
the gun was the same firearm that killed Alfredo.
Resolution of all these disagreements will depend on the interpretation of Article 2180 which, as it
happens, is invoked by both parties in support of their conflicting positions. The pertinent part of this
article reads as follows:
Lastly, teachers or heads of establishments of arts and trades shall be liable for
damages caused by their pupils and students or apprentices so long as they
remain in their custody.
Three cases have so far been decided by the Court in connection with the above-quoted provision, to
wit: Exconde v. Capuno 7 Mercado v. Court of Appeals, 8 and Palisoc v. Brillantes. 9 These will be briefly
reviewed in this opinion for a better resolution of the case at bar.
In the Exconde Case, Dante Capuno, a student of the Balintawak Elementary School and a Boy Scout,
attended a Rizal Day parade on instructions of the city school supervisor. After the parade, the boy
boarded a jeep, took over its wheel and drove it so recklessly that it turned turtle, resulting in the death
of two of its passengers. Dante was found guilty of double homicide with reckless imprudence. In the
separate civil action flied against them, his father was held solidarily liable with him in damages under
Article 1903 (now Article 2180) of the Civil Code for the tort committed by the 15-year old boy.
This decision, which was penned by Justice Bautista Angelo on June 29,1957, exculpated the school in
an obiter dictum (as it was not a party to the case) on the ground that it was riot a school of arts and
trades. Justice J.B.L. Reyes, with whom Justices Sabino Padilla and Alex Reyes concurred, dissented,
arguing that it was the school authorities who should be held liable Liability under this rule, he said, was
imposed on (1) teachers in general; and (2) heads of schools of arts and trades in particular. The
modifying clause "of establishments of arts and trades" should apply only to "heads" and not "teachers."
Exconde was reiterated in the Mercado Case, and with an elaboration. A student cut a classmate with a
razor blade during recess time at the Lourdes Catholic School in Quezon City, and the parents of the
victim sued the culprits parents for damages. Through Justice Labrador, the Court declared in another
obiter (as the school itself had also not been sued that the school was not liable because it was not an
establishment of arts and trades. Moreover, the custody requirement had not been proved as this
"contemplates a situation where the student lives and boards with the teacher, such that the control,
direction and influences on the pupil supersede those of the parents." Justice J.B.L. Reyes did not take
part but the other members of the court concurred in this decision promulgated on May 30, 1960.
In Palisoc vs. Brillantes, decided on October 4, 1971, a 16-year old student was killed by a classmate
with fist blows in the laboratory of the Manila Technical Institute. Although the wrongdoer — who was
already of age — was not boarding in the school, the head thereof and the teacher in charge were held
solidarily liable with him. The Court declared through Justice Teehankee:
The phrase used in the cited article — "so long as (the students) remain in their
custody" — means the protective and supervisory custody that the school and its
heads and teachers exercise over the pupils and students for as long as they are at
attendance in the school, including recess time. There is nothing in the law that
requires that for such liability to attach, the pupil or student who commits the
tortious act must live and board in the school, as erroneously held by the lower
court, and the dicta in Mercado (as well as in Exconde) on which it relied, must now
be deemed to have been set aside by the present decision.
This decision was concurred in by five other members, 10 including Justice J.B.L. Reyes, who stressed,
in answer to the dissenting opinion, that even students already of age were covered by the provision
since they were equally in the custody of the school and subject to its discipline. Dissenting with three
others,11 Justice Makalintal was for retaining the custody interpretation in Mercado and submitted that
the rule should apply only to torts committed by students not yet of age as the school would be acting
only in loco parentis.
In a footnote, Justice Teehankee said he agreed with Justice Reyes' dissent in the Exconde Case but
added that "since the school involved at bar is a non-academic school, the question as to the
applicability of the cited codal provision to academic institutions will have to await another case wherein
it may properly be raised."
This is the case.
Unlike in Exconde and Mercado, the Colegio de San Jose-Recoletos has been directly impleaded and
is sought to be held liable under Article 2180; and unlike in Palisoc, it is not a school of arts and trades
but an academic institution of learning. The parties herein have also directly raised the question of
whether or not Article 2180 covers even establishments which are technically not schools of arts and
trades, and, if so, when the offending student is supposed to be "in its custody."
After an exhaustive examination of the problem, the Court has come to the conclusion that the provision
in question should apply to all schools, academic as well as non-academic. Where the school is
academic rather than technical or vocational in nature, responsibility for the tort committed by the
student will attach to the teacher in charge of such student, following the first part of the provision. This
is the general rule. In the case of establishments of arts and trades, it is the head thereof, and only he,
who shall be held liable as an exception to the general rule. In other words, teachers in general shall be
liable for the acts of their students except where the school is technical in nature, in which case it is the
head thereof who shall be answerable. Following the canon of reddendo singula singulis"teachers"
should apply to the words "pupils and students" and "heads of establishments of arts and trades" to the
word "apprentices."
The Court thus conforms to the dissenting opinion expressed by Justice J.B.L. Reyes in Exconde where
he said in part:
I can see no sound reason for limiting Art. 1903 of the Old Civil Code to teachers of
arts and trades and not to academic ones. What substantial difference is there
between them insofar as concerns the proper supervision and vice over their
pupils? It cannot be seriously contended that an academic teacher is exempt from
the duty of watching that his pupils do not commit a tort to the detriment of third
Persons, so long as they are in a position to exercise authority and Supervision
over the pupil. In my opinion, in the phrase "teachers or heads of establishments of
arts and trades" used in Art. 1903 of the old Civil Code, the words "arts and trades"
does not qualify "teachers" but only "heads of establishments." The phrase is only
an updated version of the equivalent terms "preceptores y artesanos" used in the
Italian and French Civil Codes.
If, as conceded by all commentators, the basis of the presumption of negligence of
Art. 1903 in some culpa in vigilando that the parents, teachers, etc. are supposed
to have incurred in the exercise of their authority, it would seem clear that where
the parent places the child under the effective authority of the teacher, the latter,
and not the parent, should be the one answerable for the torts committed while
under his custody, for the very reason/that the parent is not supposed to interfere
with the discipline of the school nor with the authority and supervision of the
teacher while the child is under instruction. And if there is no authority, there can be
no responsibility.
There is really no substantial distinction between the academic and the non-academic schools insofar
as torts committed by their students are concerned. The same vigilance is expected from the teacher
over the students under his control and supervision, whatever the nature of the school where he is
teaching. The suggestion in the Exconde and Mercado Cases is that the provision would make the
teacher or even the head of the school of arts and trades liable for an injury caused by any student in its
custody but if that same tort were committed in an academic school, no liability would attach to the
teacher or the school head. All other circumstances being the same, the teacher or the head of the
academic school would be absolved whereas the teacher and the head of the non-academic school
would be held liable, and simply because the latter is a school of arts and trades.
The Court cannot see why different degrees of vigilance should be exercised by the school authorities
on the basis only of the nature of their respective schools. There does not seem to be any plausible
reason for relaxing that vigilance simply because the school is academic in nature and for increasing
such vigilance where the school is non-academic. Notably, the injury subject of liability is caused by the
student and not by the school itself nor is it a result of the operations of the school or its equipment. The
injury contemplated may be caused by any student regardless of the school where he is registered. The
teacher certainly should not be able to excuse himself by simply showing that he is teaching in an
academic school where, on the other hand, the head would be held liable if the school were non-
academic.
These questions, though, may be asked: If the teacher of the academic school is to be held answerable
for the torts committed by his students, why is it the head of the school only who is held liable where the
injury is caused in a school of arts and trades? And in the case of the academic or non- technical
school, why not apply the rule also to the head thereof instead of imposing the liability only on the
teacher?
The reason for the disparity can be traced to the fact that historically the head of the school of arts and
trades exercised a closer tutelage over his pupils than the head of the academic school. The old
schools of arts and trades were engaged in the training of artisans apprenticed to their master who
personally and directly instructed them on the technique and secrets of their craft. The head of the
school of arts and trades was such a master and so was personally involved in the task of teaching his
students, who usually even boarded with him and so came under his constant control, supervision and
influence. By contrast, the head of the academic school was not as involved with his students and
exercised only administrative duties over the teachers who were the persons directly dealing with the
students. The head of the academic school had then (as now) only a vicarious relationship with the
students. Consequently, while he could not be directly faulted for the acts of the students, the head of
the school of arts and trades, because of his closer ties with them, could be so blamed.
It is conceded that the distinction no longer obtains at present in view of the expansion of the schools of
arts and trades, the consequent increase in their enrollment, and the corresponding diminution of the
direct and personal contract of their heads with the students. Article 2180, however, remains
unchanged. In its present state, the provision must be interpreted by the Court according to its clear
and original mandate until the legislature, taking into account the charges in the situation subject to be
regulated, sees fit to enact the necessary amendment.
The other matter to be resolved is the duration of the responsibility of the teacher or the head of the
school of arts and trades over the students. Is such responsibility co-extensive with the period when the
student is actually undergoing studies during the school term, as contended by the respondents and
impliedly admitted by the petitioners themselves?
From a reading of the provision under examination, it is clear that while the custody requirement, to
repeat Palisoc v. Brillantes, does not mean that the student must be boarding with the school
authorities, it does signify that the student should be within the control and under the influence of the
school authorities at the time of the occurrence of the injury. This does not necessarily mean that such,
custody be co-terminous with the semester, beginning with the start of classes and ending upon the
close thereof, and excluding the time before or after such period, such as the period of registration, and
in the case of graduating students, the period before the commencement exercises. In the view of the
Court, the student is in the custody of the school authorities as long as he is under the control and
influence of the school and within its premises, whether the semester has not yet begun or has already
ended.
It is too tenuous to argue that the student comes under the discipline of the school only upon the start of
classes notwithstanding that before that day he has already registered and thus placed himself under
its rules. Neither should such discipline be deemed ended upon the last day of classes notwithstanding
that there may still be certain requisites to be satisfied for completion of the course, such as submission
of reports, term papers, clearances and the like. During such periods, the student is still subject to the
disciplinary authority of the school and cannot consider himself released altogether from observance of
its rules.
As long as it can be shown that the student is in the school premises in pursuance of a legitimate
student objective, in the exercise of a legitimate student right, and even in the enjoyment of a legitimate
student right, and even in the enjoyment of a legitimate student privilege, the responsibility of the school
authorities over the student continues. Indeed, even if the student should be doing nothing more than
relaxing in the campus in the company of his classmates and friends and enjoying the ambience and
atmosphere of the school, he is still within the custody and subject to the discipline of the school
authorities under the provisions of Article 2180.
During all these occasions, it is obviously the teacher-in-charge who must answer for his students' torts,
in practically the same way that the parents are responsible for the child when he is in their custody.
The teacher-in-charge is the one designated by the dean, principal, or other administrative superior to
exercise supervision over the pupils in the specific classes or sections to which they are assigned. It is
not necessary that at the time of the injury, the teacher be physically present and in a position to
prevent it. Custody does not connote immediate and actual physical control but refers more to the
influence exerted on the child and the discipline instilled in him as a result of such influence. Thus, for
the injuries caused by the student, the teacher and not the parent shag be held responsible if the tort
was committed within the premises of the school at any time when its authority could be validly
exercised over him.
In any event, it should be noted that the liability imposed by this article is supposed to fall directly on the
teacher or the head of the school of arts and trades and not on the school itself. If at all, the school,
whatever its nature, may be held to answer for the acts of its teachers or even of the head thereof
under the general principle of respondeat superior, but then it may exculpate itself from liability by proof
that it had exercised the diligence of a bonus paterfamilias.
Such defense is, of course, also available to the teacher or the head of the school of arts and trades
directly held to answer for the tort committed by the student. As long as the defendant can show that he
had taken the necessary precautions to prevent the injury complained of, he can exonerate himself
from the liability imposed by Article 2180, which also states that:
The responsibility treated of in this article shall cease when the Persons herein
mentioned prove that they observed all the diligence of a good father of a family to
prevent damages.
In this connection, it should be observed that the teacher will be held liable not only when he is acting
in loco parentis for the law does not require that the offending student be of minority age. Unlike the
parent, who wig be liable only if his child is still a minor, the teacher is held answerable by the law for
the act of the student under him regardless of the student's age. Thus, in the Palisoc Case, liability
attached to the teacher and the head of the technical school although the wrongdoer was already of
age. In this sense, Article 2180 treats the parent more favorably than the teacher.
The Court is not unmindful of the apprehensions expressed by Justice Makalintal in his dissenting
opinion in Palisoc that the school may be unduly exposed to liability under this article in view of the
increasing activism among the students that is likely to cause violence and resulting injuries in the
school premises. That is a valid fear, to be sure. Nevertheless, it should be repeated that, under the
present ruling, it is not the school that will be held directly liable. Moreover, the defense of due diligence
is available to it in case it is sought to be held answerable as principal for the acts or omission of its
head or the teacher in its employ.
The school can show that it exercised proper measures in selecting the head or its teachers and the
appropriate supervision over them in the custody and instruction of the pupils pursuant to its rules and
regulations for the maintenance of discipline among them. In almost all cases now, in fact, these
measures are effected through the assistance of an adequate security force to help the teacher
physically enforce those rules upon the students. Ms should bolster the claim of the school that it has
taken adequate steps to prevent any injury that may be committed by its students.
A fortiori, the teacher himself may invoke this defense as it would otherwise be unfair to hold him
directly answerable for the damage caused by his students as long as they are in the school premises
and presumably under his influence. In this respect, the Court is disposed not to expect from the
teacher the same measure of responsibility imposed on the parent for their influence over the child is
not equal in degree. Obviously, the parent can expect more obedience from the child because the
latter's dependence on him is greater than on the teacher. It need not be stressed that such
dependence includes the child's support and sustenance whereas submission to the teacher's
influence, besides being coterminous with the period of custody is usually enforced only because of the
students' desire to pass the course. The parent can instill more las discipline on the child than the
teacher and so should be held to a greater accountability than the teacher for the tort committed by the
child.
And if it is also considered that under the article in question, the teacher or the head of the school of
arts and trades is responsible for the damage caused by the student or apprentice even if he is already
of age — and therefore less tractable than the minor — then there should all the more be justification to
require from the school authorities less accountability as long as they can prove reasonable diligence in
preventing the injury. After all, if the parent himself is no longer liable for the student's acts because he
has reached majority age and so is no longer under the former's control, there is then all the more
reason for leniency in assessing the teacher's responsibility for the acts of the student.
Applying the foregoing considerations, the Court has arrived at the following conclusions:
1. At the time Alfredo Amadora was fatally shot, he was still in the custody of the authorities of Colegio
de San Jose-Recoletos notwithstanding that the fourth year classes had formally ended. It was
immaterial if he was in the school auditorium to finish his physics experiment or merely to submit his
physics report for what is important is that he was there for a legitimate purpose. As previously
observed, even the mere savoring of the company of his friends in the premises of the school is a
legitimate purpose that would have also brought him in the custody of the school authorities.
2. The rector, the high school principal and the dean of boys cannot be held liable because none of
them was the teacher-in-charge as previously defined. Each of them was exercising only a general
authority over the student body and not the direct control and influence exerted by the teacher placed in
charge of particular classes or sections and thus immediately involved in its discipline. The evidence of
the parties does not disclose who the teacher-in-charge of the offending student was. The mere fact
that Alfredo Amadora had gone to school that day in connection with his physics report did not
necessarily make the physics teacher, respondent Celestino Dicon, the teacher-in-charge of Alfredo's
killer.
3. At any rate, assuming that he was the teacher-in-charge, there is no showing that Dicon was
negligent in enforcing discipline upon Daffon or that he had waived observance of the rules and
regulations of the school or condoned their non-observance. His absence when the tragedy happened
cannot be considered against him because he was not supposed or required to report to school on that
day. And while it is true that the offending student was still in the custody of the teacher-in-charge even
if the latter was physically absent when the tort was committed, it has not been established that it was
caused by his laxness in enforcing discipline upon the student. On the contrary, the private respondents
have proved that they had exercised due diligence, through the enforcement of the school regulations,
in maintaining that discipline.
4. In the absence of a teacher-in-charge, it is probably the dean of boys who should be held liable
especially in view of the unrefuted evidence that he had earlier confiscated an unlicensed gun from one
of the students and returned the same later to him without taking disciplinary action or reporting the
matter to higher authorities. While this was clearly negligence on his part, for which he deserves
sanctions from the school, it does not necessarily link him to the shooting of Amador as it has not been
shown that he confiscated and returned pistol was the gun that killed the petitioners' son.
5. Finally, as previously observed, the Colegio de San Jose-Recoletos cannot be held directly liable
under the article because only the teacher or the head of the school of arts and trades is made
responsible for the damage caused by the student or apprentice. Neither can it be held to answer for
the tort committed by any of the other private respondents for none of them has been found to have
been charged with the custody of the offending student or has been remiss in the discharge of his
duties in connection with such custody.
In sum, the Court finds under the facts as disclosed by the record and in the light of the principles
herein announced that none of the respondents is liable for the injury inflicted by Pablito Damon on
Alfredo Amadora that resulted in the latter's death at the auditorium of the Colegio de San Jose-
Recoletos on April 13, 1972. While we deeply sympathize with the petitioners over the loss of their son
under the tragic circumstances here related, we nevertheless are unable to extend them the material
relief they seek, as a balm to their grief, under the law they have invoked.
WHEREFORE, the petition is DENIED, without any pronouncement as to costs. It is so ordered.
Yap, Narvasa, Paras, Feliciano, Gancayco, Bidin, Sarmiento, Cortes and Griño-Aquino, JJ., concur.
Fernan, Padilla and Teehankee, C.J., JJ, took no part.
Separate Opinions
MELENCIO-HERRERA, J., concurring and dissenting:
I concur, except with respect to the restricted meaning given the term "teacher" in Article 2180 of the
Civil Code as "teacher-in-charge." This would limit liability to occasions where there are classes under
the immediate charge of a teacher, which does not seem to be the intendment of the law.
As I understand it, the philosophy of the law is that whoever stands in loco parentis will have the same
duties and obligations as parents whenever in such a standing. Those persons are mandatorily held
liable for the tortious acts of pupils and students so long as the latter remain in their custody, meaning
their protective and supervisory custody.
Thus Article 349 of the Civil Code enumerates the persons who stand in loco parentis and thereby
exercise substitute parental authority:
Art. 349 The following persons shall exercise substitute parental authority:
 xxx xxx xxx
2) Teachers and professors
xxx xxx xxx
4) Directors of trade establishments, with regard to apprentices;'
Article 352 of the Civil Code further provides:
Art. 362. The relations between teacher and pupil, professor and student, are fixed
by government regulations and those of each school or institution....
But even such rules and regulations as may be fixed can not contravene the concept of substitute
parental authority.
The rationale of liability of school heads and teachers for the tortious acts of their pupils was explained
in Palisoc vs. Brillantes (41 SCRA 548), thus:
The protective custody of the school heads and teachers is mandatorily substituted
for that of the parents, and hence, it becomes their obligation as well as that of the
school itself to provide proper supervision of the students' activities during the
whole time that they are at attendance in the school, including recess time, as well
as to take the necessary precautions to protect the students in their custody from
dangers and hazards that would reasonably be anticipated, including injuries that
some students themselves may inflict wilfully or through negligence on their fellow
students. (Emphasis supplied)
Of course, as provided for in the same Article 2180, the responsibility treated of shall cease when the
persons mentioned prove that they observed all the diligence of a good father of a family to prevent
damage.
And while a school is, admittedly, not directly liable since Article 2180 speaks only of teachers and
schools heads, yet, by virtue of the same provision, the school, as their employer, may be held liable for
the failure of its teachers or school heads to perform their mandatory legal duties as substitute parents
(Sangco, Philippine Law on Torts & Damages, 1978 ed., p. 201). Again, the school may exculpate itself
from liability by proving that it had exercised the diligence of a good father of the family.
Art. 2180. x x x
Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even though the
former are not engaged in any business or industry.
xxx xxx xxx
Parenthetically, from the enumeration in Article 349 of the Civil Code, supra, it is apparent that the
Code Commission had already segregated the classification of "teachers and professors" vis-a-vis their
pupils, from "directors of trade establishments, with regard to their apprentices."
GUTIERREZ, JR., J., concurring:
I concur in the Court's opinion so carefully analyzed and crafted by Justice Isagani A. Cruz. However, I
would like to stress the need for a major amendment to, if not a complete scrapping of, Article 2180 of
the Civil Code insofar as it refers to teachers or heads of establishments of arts and trades in relation to
pupils and students or apprentices. The seventh paragraph of Art. 2180 is a relic of the past and
contemplates a situation long gone and out of date. In a Palisoc v. Brillantes (41 SCRA 548) situation, it
is bound to result in mischief and injustice.
First, we no longer have masters and apprentices toiling in schools of arts and trades. Students in
"technological" colleges and universities are no different from students in liberal arts or professional
schools. Apprentices now work in regular shops and factories and their relationship to the employer is
covered by laws governing the employment relationship and not by laws governing the teacher—
student relationship.
Second, except for kindergarten, elementary, and perhaps early high school students, teachers are
often no longer objects of veneration who are given the respect due to substitute parents. Many
students in their late teens or early adult years view some teachers as part of a bourgeois or
reactionary group whose advice on behaviour, deportment, and other non-academic matters is not only
resented but actively rejected. It ,seems most unfair to hold teachers liable on a presumption juris
tantum of negligence for acts of students even under circumstances where strictly speaking there could
be no in loco parentis relationship. Why do teachers have to prove the contrary of negligence to be
freed from solidary liability for the acts f bomb-throwing or pistol packing students who would just as
soon hurt them as they would other members of the so-called-establishment.
The ordinary rules on quasi-delicta should apply to teachers and schools of whatever nature insofar as
grown up students are concerned. The provision of Art. 2180 of the Civil Code involved in this case has
outlived its purpose. The Court cannot make law. It can only apply the law with its imperfections.
However, the Court can suggest that such a law should be amended or repealed.
Separate Opinions
MELENCIO-HERRERA, J., concurring and dissenting:
I concur, except with respect to the restricted meaning given the term "teacher" in Article 2180 of the
Civil Code as "teacher-in-charge." This would limit liability to occasions where there are classes under
the immediate charge of a teacher, which does not seem to be the intendment of the law.
As I understand it, the philosophy of the law is that whoever stands in loco parentis will have the same
duties and obligations as parents whenever in such a standing. Those persons are mandatorily held
liable for the tortious acts of pupils and students so long as the latter remain in their custody, meaning
their protective and supervisory custody.
Thus Article 349 of the Civil Code enumerates the persons who stand in loco parentis and thereby
exercise substitute parental authority:
Art. 349 The following persons shall exercise substitute parental authority:
xxx xxx xxx
 2) Teachers and professors
xxx xxx xxx
4) Directors of trade establishments, with regard to apprentices;'
Article 352 of the Civil Code further provides:
Art. 362. The relations between teacher and pupil, professor and student, are fixed
by government regulations and those of each school or institution....
But even such rules and regulations as may be fixed can not contravene the concept of substitute
parental authority.
The rationale of liability of school heads and teachers for the tortious acts of their pupils was explained
in Palisoc vs. Brillantes (41 SCRA 548), thus:
The protective custody of the school heads and teachers is mandatorily substituted
for that of the parents, and hence, it becomes their obligation as well as that of the
school itself to provide proper supervision of the students' activities during the
whole time that they are at attendance in the school, including recess time, as well
as to take the necessary precautions to protect the students in their custody from
dangers and hazards that would reasonably be anticipated, including injuries that
some students themselves may inflict wilfully or through negligence on their fellow
students. (Emphasis supplied)
Of course, as provided for in the same Article 2180, the responsibility treated of shall cease when the
persons mentioned prove that they observed all the diligence of a good father of a family to prevent
damage.
And while a school is, admittedly, not directly liable since Article 2180 speaks only of teachers and
schools heads, yet, by virtue of the same provision, the school, as their employer, may be held liable for
the failure of its teachers or school heads to perform their mandatory legal duties as substitute parents
(Sangco, Philippine Law on Torts & Damages, 1978 ed., p. 201). Again, the school may exculpate itself
from liability by proving that it had exercised the diligence of a good father of the family.
Art. 2180. x x x
Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even though the
former are not engaged in any business or industry.
x x x           x x x          x x x
Parenthetically, from the enumeration in Article 349 of the Civil Code, supra, it is apparent that the
Code Commission had already segregated the classification of "teachers and professors" vis-a-vis their
pupils, from "directors of trade establishments, with regard to their apprentices."
GUTIERREZ, JR., J., concurring:
I concur in the Court's opinion so carefully analyzed and crafted by Justice Isagani A. Cruz. However, I
would like to stress the need for a major amendment to, if not a complete scrapping of, Article 2180 of
the Civil Code insofar as it refers to teachers or heads of establishments of arts and trades in relation to
pupils and students or apprentices. The seventh paragraph of Art. 2180 is a relic of the past and
contemplates a situation long gone and out of date. In a Palisoc v. Brillantes (41 SCRA 548) situation, it
is bound to result in mischief and injustice.
First, we no longer have masters and apprentices toiling in schools of arts and trades. Students in
"technological" colleges and universities are no different from students in liberal arts or professional
schools. Apprentices now work in regular shops and factories and their relationship to the employer is
covered by laws governing the employment relationship and not by laws governing the teacher—
student relationship.
Second, except for kindergarten, elementary, and perhaps early high school students, teachers are
often no longer objects of veneration who are given the respect due to substitute parents. Many
students in their late teens or early adult years view some teachers as part of a bourgeois or
reactionary group whose advice on behaviour, deportment, and other non-academic matters is not only
resented but actively rejected. It ,seems most unfair to hold teachers liable on a presumption juris
tantum of negligence for acts of students even under circumstances where strictly speaking there could
be no in loco parentis relationship. Why do teachers have to prove the contrary of negligence to be
freed from solidary liability for the acts f bomb-throwing or pistol packing students who would just as
soon hurt them as they would other members of the so-called-establishment.
The ordinary rules on quasi-delicta should apply to teachers and schools of whatever nature insofar as
grown up students are concerned. The provision of Art. 2180 of the Civil Code involved in this case has
outlived its purpose. The Court cannot make law. It can only apply the law with its imperfections.
However, the Court can suggest that such a law should be amended or repealed.
G.R. No. 147589            June 26, 2001
ANG BAGONG BAYANI-OFW LABOR PARTY (under the acronym OFW), represented herein by its
secretary-general, MOHAMMAD OMAR FAJARDO, petitioner, 
vs.
ANG BAGONG BAYANI-OFW LABOR PARTY GO! GO! PHILIPPINES; THE TRUE MARCOS
LOYALIST ASSOCIATION OF THE PHILIPPINES; PHILIPPINE LOCAL AUTONOMY; CITIZENS
MOVEMENT FOR JUSTICE, ECONOMY, ENVIRONMENT AND PEACE; CHAMBER OF REAL
ESTATE BUILDERS ASSOCIATION; SPORTS & HEALTH ADVANCEMENT FOUNDATION, INC.;
ANG LAKAS NG OVERSEAS CONTRACT WORKERS (OCW); BAGONG BAYANI ORGANIZATION
and others under "Organizations/Coalitions" of Omnibus Resolution No. 3785; PARTIDO NG
MASANG PILIPINO; LAKAS NUCD-UMDP; NATIONALIST PEOPLE'S COALITION; LABAN NG
DEMOKRATIKONG PILIPINO; AKSYON DEMOKRATIKO; PDP-LABAN; LIBERAL PARTY;
NACIONALISTA PARTY; ANG BUHAY HAYAANG YUMABONG; and others under "Political
Parties" of Omnibus Resolution No. 3785. respondents.
x---------------------------------------------------------x
G.R. No. 147613 June 26, 2001
BAYAN MUNA, petitioner, 
vs.
COMMISSION ON ELECTIONS; NATIONALIST PEOPLE'S COALITION (NPC); LABAN NG
DEMOKRATIKONG PILIPINO (LDP); PARTIDO NG MASANG PILIPINO (PMP); LAKAS-NUCD-
UMDP; LIBERAL PARTY; MAMAMAYANG AYAW SA DROGA; CREBA; NATIONAL FEDERATION
OF SUGARCANE PLANTERS; JEEP; and BAGONG BAYANI ORGANIZATION, respondents.
PANGANIBAN, J.:
The party-list system is a social justice tool designed not only to give more law to the great masses of
our people who have less in life, but also to enable them to become veritable lawmakers themselves,
empowered to participate directly in the enactment of laws designed to benefit them. It intends to make
the marginalized and the underrepresented not merely passive recipients of the State's benevolence,
but active participants in the mainstream of representative democracy. Thus, allowing all individuals
and groups, including those which now dominate district elections, to have the same opportunity to
participate in party-list elections would desecrate this lofty objective and mongrelize the social justice
mechanism into an atrocious veneer for traditional politics.
The Case
"It will be noted that as defined, the 'party-list system' is a 'mechanism of proportional representation' in
the election of representatives to the House of Representatives from national, regional, and sectoral
parties or organizations or coalitions thereof registered with the Commission on Elections.
"However, in the course of our review of the matters at bar, we must recognize the fact that there is a
need to keep the number of sectoral parties, organizations and coalitions, down to a manageable level,
keeping only those who substantially comply with the rules and regulations and more importantly the
sufficiency of the Manifestations or evidence on the Motions for Reconsiderations or Oppositions." 3
On April 10, 2001, Akbayan Citizens Action Party filed before the Comelec a Petition praying that "the
names of [some of herein respondents] be deleted from the 'Certified List of Political Parties/Sectoral
Parties/Organizations/Coalitions Participating in the Party List System for the May 14, 2001 Elections'
and that said certified list be accordingly amended." It also asked, as an alternative, that the votes cast
for the said respondents not be counted or canvassed, and that the latter's nominees not be
proclaimed. 4 On April 11, 2001, Bayan Muna and Bayan Muna-Youth also filed a Petition for
Cancellation of Registration and Nomination against some of herein respondents. 5

Before us are two Petitions under Rule 65 of the Rules of Court, challenging Omnibus Resolution No.
On April 18, 2001, the Comelec required the respondents in the two disqualification cases to file
3785 1 issued by the Commission on Elections (Comelec) on March 26, 2001. This Resolution approved
Comments within three days from notice. It also set the date for hearing on April 26, 2001, 6 but
the participation of 154 organizations and parties, including those herein impleaded, in the 2001 party-
subsequently reset it to May 3, 2001.7 During the hearing, however, Commissioner Ralph C. Lantion
list elections. Petitioners seek the disqualification of private respondents, arguing mainly that the party-
merely directed the parties to submit their respective memoranda. 8
list system was intended to benefit the marginalized and underrepresented; not the mainstream political
parties, the non-marginalized or overrepresented.
Meanwhile, dissatisfied with the pace of the Comelec, Ang Bagong Bayani-OFW Labor Party filed a
Petition 9 before this Court on April 16, 2001. This Petition, docketed as GR No. 147589, assailed
The Factual Antecedents
Comelec Omnibus Resolution No. 3785. In its Resolution dated April 17, 2001, 10 the Court directed
respondents to comment on the Petition within a non-extendible period of five days from notice. 11
With the onset of the 2001 elections, the Comelec received several Petitions for registration filed by
sectoral parties, organizations and political parties. According to the Comelec, "[v]erifications were
On April 17, 2001, Petitioner Bayan Muna also filed before this Court a Petition, 12 docketed as GR No.
made as to the status and capacity of these parties and organizations and hearings were scheduled
147613, also challenging Comelec Omnibus Resolution No. 3785. In its Resolution dated May 9,
day and night until the last party w[as] heard. With the number of these petitions and the observance of
2001, 13 the Court ordered the consolidation of the two Petitions before it; directed respondents named
the legal and procedural requirements, review of these petitions as well as deliberations takes a longer
in the second Petition to file their respective Comments on or before noon of May 15, 2001; and called
process in order to arrive at a decision and as a result the two (2) divisions promulgated a separate
the parties to an Oral Argument on May 17, 2001. It added that the Comelec may proceed with the
Omnibus Resolution and individual resolution on political parties. These numerous petitions and
counting and canvassing of votes cast for the party-list elections, but barred the proclamation of any
processes observed in the disposition of these petition[s] hinder the early release of the Omnibus
winner therein, until further orders of the Court.
Resolutions of the Divisions which were promulgated only on 10 February 2001." 2

Thereafter, Comments 14 on the second Petition were received by the Court and, on May 17, 2001, the
Thereafter, before the February 12, 2001 deadline prescribed under Comelec Resolution No. 3426
Oral Argument was conducted as scheduled. In an Order given in open court, the parties were directed
dated December 22, 2000, the registered parties and organizations filed their respective Manifestations,
to submit their respective Memoranda simultaneously within a non-extendible period of five days. 15
stating their intention to participate in the party-list elections. Other sectoral and political parties and
organizations whose registrations were denied also filed Motions for Reconsideration, together with
Manifestations of their intent to participate in the party-list elections. Still other registered parties filed Issues:
their Manifestations beyond the deadline.
During the hearing on May 17, 2001, the Court directed the parties to address the following issues:
The Comelec gave due course or approved the Manifestations (or accreditations) of 154 parties and
organizations, but denied those of several others in its assailed March 26, 2001 Omnibus Resolution
"1. Whether or not recourse under Rule 65 is proper under the premises. More specifically, is
No. 3785, which we quote:
there no other plain, speedy or adequate remedy in the ordinary course of law?

"We carefully deliberated the foregoing matters, having in mind that this system of proportional
"2. Whether or not political parties may participate in the party-list elections.
representation scheme will encourage multi-partisan [sic] and enhance the inability of small, new or
sectoral parties or organization to directly participate in this electoral window.
"3. Whether or not the party-list system is exclusive to 'marginalized and underrepresented'
sectors and organizations.
 "4. Whether or not the Comelec committed grave abuse of discretion in promulgating
Omnibus Resolution No. 3785." 16
The Court's Ruling
The Petitions are partly meritorious. These cases should be remanded to the Comelec which will
determine, after summary evidentiary hearings, whether the 154 parties and organizations enumerated
in the assailed Omnibus Resolution satisfy the requirements of the Constitution and RA 7941, as
specified in this Decision.
First Issue:
Recourse Under Rule 65
Respondents contend that the recourse of both petitioners under Rule 65 is improper because there are
other plain, speedy and adequate remedies in the ordinary course of law. 17 The Office of the Solicitor
General argues that petitioners should have filed before the Comelec a petition either for
disqualification or for cancellation of registration, pursuant to Sections 19, 20, 21 and 22 of Comelec
Resolution No. 3307-A 18 dated November 9, 2000.19
We disagree. At bottom, petitioners attack the validity of Comelec Omnibus Resolution 3785 for having
been issued with grave abuse of discretion, insofar as it allowed respondents to participate in the party-
list elections of 2001. Indeed, under both the Constitution 20 and the Rules of Court, such challenge may
be brought before this Court in a verified petition for certiorari under Rule 65.
Moreover, the assailed Omnibus Resolution was promulgated by Respondent Commission en banc;
hence, no motion for reconsideration was possible, it being a prohibited pleading under Section 1 (d),
Rule 13 of the Comelec Rules of Procedure. 21
The Court also notes that Petitioner Bayan Muna had filed before the Comelec a Petition for
Cancellation of Registration and Nomination against some of herein respondents. 22 The Comelec,
however, did not act on that Petition. In view of the pendency of the elections, Petitioner Bayan Muna
sought succor from this Court, for there was no other adequate recourse at the time. Subsequent
events have proven the urgency of petitioner's action; to this date, the Comelec has not yet formally
resolved the Petition before it. But a resolution may just be a formality because the Comelec, through
the Office of the Solicitor General, has made its position on the matter quite clear.
In any event, this case presents an exception to the rule that certiorari shall lie only in the absence of
any other plain, speedy and adequate remedy. 23 It has been held that certiorari is available,
notwithstanding the presence of other remedies, "where the issue raised is one purely of law, where
public interest is involved, and in case of urgency." 24 Indeed, the instant case is indubitably imbued with
public interest and with extreme urgency, for it potentially involves the composition of 20 percent of the
House of Representatives.
Moreover, this case raises transcendental constitutional issues on the party-list system, which this
Court must urgently resolve, consistent with its duty to "formulate guiding and controlling constitutional
principles, precepts, doctrines, or rules." 25
Finally, procedural requirements "may be glossed over to prevent a miscarriage of justice, when the
issue involves the principle of social justice x x x when the decision sought to be set aside is a nullity, or
when the need for relief is extremely urgent and certiorari is the only adequate and speedy remedy
available." 26
Second Issue:
Participation of Political Parties
In its Petition, Ang Bagong Bayani-OFW Labor Party contends that "the inclusion of political parties in
the party-list system is the most objectionable portion of the questioned Resolution." 27 For its part,
Petitioner Bayan Muna objects to the participation of "major political parties." 28 On the other hand, the
Office of the Solicitor General, like the impleaded political parties, submits that the Constitution and RA
No. 7941 allow political parties to participate in the party-list elections. It argues that the party-list
system is, in fact, open to all "registered national, regional and sectoral parties or organizations." 29
We now rule on this issue. Under the Constitution and RA 7941, private respondents cannot be
disqualified from the party-list elections, merely on the ground that they are political parties. Section 5,
Article VI of the Constitution provides that members of the House of Representatives may "be elected
through a party-list system of registered national, regional, and sectoral parties or organizations."
Furthermore, under Sections 7 and 8, Article IX (C) of the Constitution, political parties may be
registered under the party-list system.
"Sec. 7. No votes cast in favor of a political party, organization, or coalition shall be valid,
except for those registered under the party-list system as provided in this Constitution.
"Sec. 8. Political parties, or organizations or coalitions registered under the party-list system,
shall not be represented in the voters' registration boards, boards of election inspectors,
boards of canvassers, or other similar bodies. However, they shall be entitled to appoint poll
watchers in accordance with law." 30
During the deliberations in the Constitutional Commission, Comm. Christian S. Monsod pointed out that
the participants in the party-list system may "be a regional party, a sectoral party, a national party,
UNIDO, 31Magsasaka, or a regional party in Mindanao." 32 This was also clear from the following
exchange between Comms. Jaime Tadeo and Blas Ople: 33
"MR. TADEO. Naniniwala ba kayo na ang party list ay pwedeng paghati-hatian ng UNIDO, PDP-Laban,
PNP, Liberal at Nacionalista?
MR. OPLE. Maaari yan sapagkat bukas ang party list system sa lahat ng mga partido."
Indeed, Commissioner Monsod stated that the purpose of the party-list provision was to open up the
system, in order to give a chance to parties that consistently place third or fourth in congressional
district elections to win a seat in Congress. 34 He explained: "The purpose of this is to open the system.
In the past elections, we found out that there were certain groups or parties that, if we count their votes
nationwide, have about 1,000,000 or 1,500,000 votes. But they were always third or fourth place in
each of the districts. So, they have no voice in the Assembly. But this way, they would have five or six
representatives in the Assembly even if they would not win individually in legislative districts. So, that is
essentially the mechanics, the purpose and objectives of the party-list system."
For its part, Section 2 of RA 7941 also provides for "a party-list system of registered national, regional
and sectoral parties or organizations or coalitions thereof, x x x." Section 3 expressly states that a
"party" is "either a political party or a sectoral party or a coalition of parties." More to the point, the law
defines "political party" as "an organized group of citizens advocating an ideology or platform, principles
and policies for the general conduct of government and which, as the most immediate means of
securing their adoption, regularly nominates and supports certain of its leaders and members as
candidates for public office."
Furthermore, Section 11 of RA 7941 leaves no doubt as to the participation of political parties in the
party-list system. We quote the pertinent provision below:
"x x x
"For purposes of the May 1998 elections, the first five (5) major political parties on the basis of party
representation in the House of Representatives at the start of the Tenth Congress of the Philippines
shall not be entitled to participate in the party-list system.
The foregoing provision on the party-list system is not self-executory. It is, in fact, interspersed with
phrases like "in accordance with law" or "as may be provided by law"; it was thus up to Congress to
sculpt in granite the lofty objective of the Constitution. Hence, RA 7941 was enacted. It laid out the
statutory policy in this wise:
"SEC. 2. Declaration of Policy. -- The State shall promote proportional representation in the election of
representatives to the House of Representatives through a party-list system of registered national,
regional and sectoral parties or organizations or coalitions thereof, which will enable Filipino citizens
belonging to marginalized and underrepresented sectors, organizations and parties, and who lack well-
defined political constituencies but who could contribute to the formulation and enactment of
appropriate legislation that will benefit the nation as a whole, to become members of the House of
Representatives. Towards this end, the State shall develop and guarantee a full, free and open party
system in order to attain the broadest possible representation of party, sectoral or group interests in the
House of Representatives by enhancing their chances to compete for and win seats in the legislature,
and shall provide the simplest scheme possible."
The Marginalized and Underrepresented to Become Lawmakers Themselves

x x x"
The foregoing provision mandates a state policy of promoting proportional representation by means of
the Filipino-style party-list system, which will "enable" the election to the House of Representatives of
Indubitably, therefore, political parties – even the major ones -- may participate in the party-list Filipino citizens,
elections.
1. who belong to marginalized and underrepresented sectors, organizations and parties; and
Third Issue:
2. who lack well-defined constituencies; but
Marginalized and Underrepresented
3. who could contribute to the formulation and enactment of appropriate legislation that will
That political parties may participate in the party-list elections does not mean, however, that any benefit the nation as a whole.
political party -- or any organization or group for that matter -- may do so. The requisite character of
these parties or organizations must be consistent with the purpose of the party-list system, as laid down
The key words in this policy are "proportional representation," "marginalized and underrepresented,"
in the Constitution and RA 7941. Section 5, Article VI of the Constitution, provides as follows:
and "lack ofwell-defined constituencies."

"(1) The House of Representatives shall be composed of not more than two hundred and fifty
"Proportional representation" here does not refer to the number of people in a particular district,
members, unless otherwise fixed by law, who shall be elected from legislative districts
because the party-list election is national in scope. Neither does it allude to numerical strength in a
apportioned among the provinces, cities, and the Metropolitan Manila area in accordance
distressed or oppressed group. Rather, it refers to the representation of the "marginalized and
with the number of their respective inhabitants, and on the basis of a uniform and progressive
underrepresented" as exemplified by the enumeration in Section 5 of the law; namely, "labor, peasant,
ratio, and those who, as provided by law, shall be elected through a party-list system of
fisherfolk, urban poor, indigenous cultural communities, elderly, handicapped, women, youth, veterans,
registered national, regional, and sectoral parties or organizations.
overseas workers, and professionals."

(2) The party-list representatives shall constitute twenty per centum of the total number of
However, it is not enough for the candidate to claim representation of the marginalized and
representatives including those under the party list. For three consecutive terms after the
underrepresented, because representation is easy to claim and to feign. The party-list organization or
ratification of this Constitution, one-half of the seats allocated to party-list representatives
party must factually and truly represent the marginalized and underrepresented constituencies
shall be filled, as provided by law, by selection or election from the labor, peasant, urban
mentioned in Section 5. 36 Concurrently, the persons nominated by the party-list candidate-organization
poor, indigenous cultural communities, women, youth, and such other sectors as may be
must be "Filipino citizens belonging to marginalized and underrepresented sectors, organizations and
provided by law, except the religious sector." (Emphasis supplied.)
parties."

Notwithstanding the sparse language of the provision, a distinguished member of the Constitutional
Finally, "lack of well-defined constituenc[y] " refers to the absence of a traditionally identifiable electoral
Commission declared that the purpose of the party-list provision was to give "genuine power to our
group, like voters of a congressional district or territorial unit of government. Rather, it points again to
people" in Congress. Hence, when the provision was discussed, he exultantly announced: "On this first
those with disparate interests identified with the "marginalized or underrepresented."
day of August 1986, we shall, hopefully, usher in a new chapter to our national history, by giving
genuine power to our people in the legislature." 35
In the end, the role of the Comelec is to see to it that only those Filipinos who are "marginalized and
underrepresented" become members of Congress under the party-list system, Filipino-style.
The intent of the Constitution is clear: to give genuine power to the people, not only by giving more law
to those who have less in life, but more so by enabling them to become veritable lawmakers
themselves. Consistent with this intent, the policy of the implementing law, we repeat, is likewise clear:
"to enable Filipino citizens belonging to marginalized and underrepresented sectors, organizations and
parties, x x x, to become members of the House of Representatives." Where the language of the law is
clear, it must be applied according to its express terms. 37
The marginalized and underrepresented sectors to be represented under the party-list system are
enumerated in Section 5 of RA 7941, which states:
"SEC. 5. Registration. -- Any organized group of persons may register as a party, organization or
coalition for purposes of the party-list system by filing with the COMELEC not later than ninety (90)
days before the election a petition verified by its president or secretary stating its desire to participate in
the party-list system as a national, regional or sectoral party or organization or a coalition of such
parties or organizations, attaching thereto its constitution, by-laws, platform or program of government,
list of officers, coalition agreement and other relevant information as the COMELEC may require:
Provided, that the sector shall include labor, peasant, fisherfolk, urban poor, indigenous cultural
communities, elderly, handicapped, women, youth, veterans, overseas workers, and professionals."
While the enumeration of marginalized and underrepresented sectors is not exclusive, it demonstrates
the clear intent of the law that not all sectors can be represented under the party-list system. It is a
fundamental principle of statutory construction that words employed in a statute are interpreted in
connection with, and their meaning is ascertained by reference to, the words and the phrases with
which they are associated or related. Thus, the meaning of a term in a statute may be limited, qualified
or specialized by those in immediate association. 38
The Party-List System Desecrated by the OSG Contentions
Notwithstanding the unmistakable statutory policy, the Office of the Solicitor General submits that RA
No. 7941 "does not limit the participation in the party-list system to the marginalized and
underrepresented sectors of society."39 In fact, it contends that any party or group that is not disqualified
under Section 6 40 of RA 7941 may participate in the elections. Hence, it admitted during the Oral
Argument that even an organization representing the super rich of Forbes Park or Dasmariñas Village
could participate in the party-list elections. 41
The declared policy of RA 7941 contravenes the position of the Office of the Solicitor General (OSG).
We stress that the party-list system seeks to enable certain Filipino citizens – specifically those
belonging to marginalized and underrepresented sectors, organizations and parties – to be elected to
the House of Representatives. The assertion of the OSG that the party-list system is not exclusive to
the marginalized and underrepresented disregards the clear statutory policy. Its claim that even the
super-rich and overrepresented can participate desecrates the spirit of the party-list system.
Indeed, the law crafted to address the peculiar disadvantages of Payatas hovel dwellers cannot be
appropriated by the mansion owners of Forbes Park. The interests of these two sectors are manifestly
disparate; hence, the OSG's position to treat them similarly defies reason and common sense. In
contrast, and with admirable candor, Atty. Lorna Patajo-Kapunan 42 admitted during the Oral Argument
that a group of bankers, industrialists and sugar planters could not join the party-list system as
representatives of their respective sectors. 43
While the business moguls and the mega-rich are, numerically speaking, a tiny minority, they are
neither marginalized nor underrepresented, for the stark reality is that their economic clout engenders
political power more awesome than their numerical limitation. Traditionally, political power does not
necessarily emanate from the size of one's constituency; indeed, it is likely to arise more directly from
the number and amount of one's bank accounts.
It is ironic, therefore, that the marginalized and underrepresented in our midst are the majority who
wallow in poverty, destitution and infirmity. It was for them that the party-list system was enacted -- to
give them not only genuine hope, but genuine power; to give them the opportunity to be elected and to
represent the specific concerns of their constituencies; and simply to give them a direct voice in
Congress and in the larger affairs of the State. In its noblest sense, the party-list system truly empowers
the masses and ushers a new hope for genuine change. Verily, it invites those marginalized and
underrepresented in the past – the farm hands, the fisher folk, the urban poor, even those in the
underground movement – to come out and participate, as indeed many of them came out and
participated during the last elections. The State cannot now disappoint and frustrate them by disabling
and desecrating this social justice vehicle.
Because the marginalized and underrepresented had not been able to win in the congressional district
elections normally dominated by traditional politicians and vested groups, 20 percent of the seats in the
House of Representatives were set aside for the party-list system. In arguing that even those sectors
who normally controlled 80 percent of the seats in the House could participate in the party-list elections
for the remaining 20 percent, the OSG and the Comelec disregard the fundamental difference between
the congressional district elections and the party-list elections.
As earlier noted, the purpose of the party-list provision was to open up the system, 44 in order to
enhance the chance of sectoral groups and organizations to gain representation in the House of
Representatives through the simplest scheme possible. 45 Logic shows that the system has been
opened to those who have never gotten a foothold within it -- those who cannot otherwise win in regular
elections and who therefore need the "simplest scheme possible" to do so. Conversely, it would be
illogical to open the system to those who have long been within it -- those privileged sectors that have
long dominated the congressional district elections.
The import of the open party-list system may be more vividly understood when compared to a student
dormitory "open house," which by its nature allows outsiders to enter the facilities. Obviously, the "open
house" is for the benefit of outsiders only, not the dormers themselves who can enter the dormitory
even without such special privilege. In the same vein, the open party-list system is only for the
"outsiders" who cannot get elected through regular elections otherwise; it is not for the non-
marginalized or overrepresented who already fill the ranks of Congress.
Verily, allowing the non-marginalized and overrepresented to vie for the remaining seats under the
party-list system would not only dilute, but also prejudice the chance of the marginalized and
underrepresented, contrary to the intention of the law to enhance it. The party-list system is a tool for
the benefit of the underprivileged; the law could not have given the same tool to others, to the prejudice
of the intended beneficiaries.
This Court, therefore, cannot allow the party-list system to be sullied and prostituted by those who are
neither marginalized nor underrepresented. It cannot let that flicker of hope be snuffed out. The clear
state policy must permeate every discussion of the qualification of political parties and other
organizations under the party-list system.
Refutation of the Separate Opinions
The Separate Opinions of our distinguished colleagues, Justices Jose C. Vitug and Vicente V.
Mendoza, are anchored mainly on the supposed intent of the framers of the Constitution as culled from
their deliberations.
The fundamental principle in constitutional construction, however, is that the primary source from which
to ascertain constitutional intent or purpose is the language of the provision itself. The presumption is
that the words in which the constitutional provisions are couched express the objective sought to be
attained. 46 In other words, verba legis still prevails. Only when the meaning of the words used is unclear
and equivocal should resort be made to extraneous aids of construction and interpretation, such as the
proceedings of the Constitutional Commission or Convention, in order to shed light on and ascertain the
true intent or purpose of the provision being construed. 47
Indeed, as cited in the Separate Opinion of Justice Mendoza, this Court stated in Civil Liberties Union v.
Executive Secretary 48 that "the debates and proceedings of the constitutional convention [may be
consulted] in order to arrive at the reason and purpose of the resulting Constitution x x x only when
other guides fail as said proceedings are powerless to vary the terms of the Constitution when the
meaning is clear. Debates in the constitutional convention 'are of value as showing the views of the
individual members, and as indicating the reason for their votes, but they give us no light as to the
views of the large majority who did not talk, much less of the mass or our fellow citizens whose votes at
the polls gave that instrument the force of fundamental law. We think it safer to construe the constitution
from what appears upon its face.' The proper interpretation therefore depends more on how it was
understood by the people adopting it than in the framers' understanding thereof."
Section 5, Article VI of the Constitution, relative to the party-list system, is couched in clear terms: the
mechanics of the system shall be provided by law. Pursuant thereto, Congress enacted RA 7941. In
understanding and implementing party-list representation, we should therefore look at the law first. Only
when we find its provisions ambiguous should the use of extraneous aids of construction be resorted to.
But, as discussed earlier, the intent of the law is obvious and clear from its plain words. Section 2
thereof unequivocally states that the party-list system of electing congressional representatives was
designed to "enable underrepresented sectors, organizations and parties, and who lack well-defined
political constituencies but who could contribute to the formulation and enactment of appropriate
legislation that will benefit the nation as a whole x x x." The criteria for participation is well defined.
Thus, there is no need for recourse to constitutional deliberations, not even to the proceedings of
Congress. In any event, the framers' deliberations merely express their individual opinions and are, at
best, only persuasive in construing the meaning and purpose of the constitution or statute.
Be it remembered that the constitutionality or validity of Sections 2 and 5 of RA 7941 is not an issue
here. Hence, they remain parts of the law, which must be applied plainly and simply.
Fourth Issue:
Grave Abuse of Discretion
From its assailed Omnibus Resolution, it is manifest that the Comelec failed to appreciate fully the clear
policy of the law and the Constitution. On the contrary, it seems to have ignored the facet of the party-
list system discussed above. The OSG as its counsel admitted before the Court that any group, even
the non-marginalized and overrepresented, could field candidates in the party-list elections.
When a lower court, or a quasi-judicial agency like the Commission on Elections, violates or ignores the
Constitution or the law, its action can be struck down by this Court on the ground of grave abuse of
discretion. 49 Indeed, the function of all judicial and quasi-judicial instrumentalities is to apply the law as
they find it, not to reinvent or second-guess it. 50
In its Memorandum, Petitioner Bayan Muna passionately pleads for the outright disqualification of the
major political parties – Respondents Lakas-NUCD, LDP, NPC, LP and PMP – on the ground that
under Comelec Resolution No. 4073, they have been accredited as the five (six, including PDP-Laban)
major political parties in the May 14, 2001 elections. It argues that because of this, they have the
"advantage of getting official Comelec Election Returns, Certificates of Canvass, preferred poll
watchers x x x." We note, however, that this accreditation does not refer to the party-list election, but,
inter alia, to the election of district representatives for the purpose of determining which parties would
be entitled to watchers under Section 26 of Republic Act No. 7166.
What is needed under the present circumstances, however, is a factual determination of whether
respondents herein and, for that matter, all the 154 previously approved groups, have the necessary
qualifications to participate in the party-list elections, pursuant to the Constitution and the law.
Bayan Muna also urges us to immediately rule out Respondent Mamamayan Ayaw sa Droga (MAD),
because "it is a government entity using government resources and privileges." This Court, however, is
not a trier of facts. 51 It is not equipped to receive evidence and determine the truth of such factual
allegations.
Basic rudiments of due process require that respondents should first be given an opportunity to show
that they qualify under the guidelines promulgated in this Decision, before they can be deprived of their
right to participate in and be elected under the party-list system.
Guidelines for Screening Party-List Participants
The Court, therefore, deems it proper to remand the case to the Comelec for the latter to determine,
after summary evidentiary hearings, whether the 154 parties and organizations allowed to participate in
the party-list elections comply with the requirements of the law. In this light, the Court finds it
appropriate to lay down the following guidelines, culled from the law and the Constitution, to assist the
Comelec in its work.
First, the political party, sector, organization or coalition must represent the marginalized and
underrepresented groups identified in Section 5 of RA 7941. In other words, it must show -- through its
constitution, articles of incorporation, bylaws, history, platform of government and track record -- that it
represents and seeks to uplift marginalized and underrepresented sectors. Verily, majority of its
membership should belong to the marginalized and underrepresented. And it must demonstrate that in
a conflict of interests, it has chosen or is likely to choose the interest of such sectors.
Second, while even major political parties are expressly allowed by RA 7941 and the Constitution to
participate in the party-list system, they must comply with the declared statutory policy of enabling
"Filipino citizens belonging to marginalized and underrepresented sectors x x x to be elected to the
House of Representatives." In other words, while they are not disqualified merely on the ground that
they are political parties, they must show, however, that they represent the interests of the marginalized
and underrepresented. The counsel of Aksyon Demokratiko and other similarly situated political parties
admitted as much during the Oral Argument, as the following quote shows:
"JUSTICE PANGANIBAN: I am not disputing that in my question. All I am saying is, the political party
must claim to represent the marginalized and underrepresented sectors?
ATTY. KAPUNAN: Yes, Your Honor, the answer is yes."52
Third, in view of the objections53 directed against the registration of Ang Buhay Hayaang Yumabong,
which is allegedly a religious group, the Court notes the express constitutional provision that the
religious sector may not be represented in the party-list system. The extent of the constitutional
proscription is demonstrated by the following discussion during the deliberations of the Constitutional
Commission:
"MR. OPLE. x x x
In the event that a certain religious sect with nationwide and even international networks of members
and supporters, in order to circumvent this prohibition, decides to form its own political party in
emulation of those parties I had mentioned earlier as deriving their inspiration and philosophies from
well-established religious faiths, will that also not fall within this prohibition?
MR. MONSOD. If the evidence shows that the intention is to go around the prohibition, then certainly
the Comelec can pierce through the legal fiction."54
The following discussion is also pertinent:
"MR. VILLACORTA. When the Commissioner proposed "EXCEPT RELIGIOUS GROUPS," he is not, of
course, prohibiting priests, imams or pastors who may be elected by, say, the indigenous community
sector to represent their group.
REV. RIGOS. Not at all, but I am objecting to anybody who represents the Iglesia ni Kristo, the Catholic
Church, the Protestant Church et cetera."55
Furthermore, the Constitution provides that "religious denominations and sects shall not be
registered."56 The prohibition was explained by a member57 of the Constitutional Commission in this
wise: "[T] he prohibition is on any religious organization registering as a political party. I do not see any
prohibition here against a priest running as a candidate. That is not prohibited here; it is the registration
of a religious sect as a political party."58
Fourth, a party or an organization must not be disqualified under Section 6 of RA 7941, which
enumerates the grounds for disqualification as follows:
"(1) It is a religious sect or denomination, organization or association organized for religious
purposes;
(2) It advocates violence or unlawful means to seek its goal;
(3) It is a foreign party or organization;
(4) It is receiving support from any foreign government, foreign political party, foundation,
organization, whether directly or through any of its officers or members or indirectly through
third parties for partisan election purposes;
(5) It violates or fails to comply with laws, rules or regulations relating to elections;
(6) It declares untruthful statements in its petition;
(7) It has ceased to exist for at least one (1) year; or
(8) It fails to participate in the last two (2) preceding elections or fails to obtain at least two per
centum (2%) of the votes cast under the party-list system in the two (2) preceding elections
for the constituency in which it has registered."59
Note should be taken of paragraph 5, which disqualifies a party or group for violation of or failure to
comply with election laws and regulations. These laws include Section 2 of RA 7941, which states that
the party-list system seeks to "enable Filipino citizens belonging to marginalized and underrepresented
sectors, organizations and parties x x x to become members of the House of Representatives." A party
or an organization, therefore, that does not comply with this policy must be disqualified.
Fifth, the party or organization must not be an adjunct of, or a project organized or an entity funded or
assisted by, the government. By the very nature of the party-list system, the party or organization must
be a group of citizens, organized by citizens and operated by citizens. It must be independent of the
government. The participation of the government or its officials in the affairs of a party-list candidate is
not only illegal60 and unfair to other parties, but also deleterious to the objective of the law: to enable
citizens belonging to marginalized and underrepresented sectors and organizations to be elected to the
House of Representatives.
Sixth, the party must not only comply with the requirements of the law; its nominees must likewise do
so. Section 9 of RA 7941 reads as follows:
"SEC. 9. Qualifications of Party-List Nominees. – No person shall be nominated as party-list
representative unless he is a natural-born citizen of the Philippines, a registered voter, a resident of the
Philippines for a period of not less than one (1) year immediately preceding the day of the election, able
to read and write, a bona fide member of the party or organization which he seeks to represent for at
least ninety (90) days preceding the day of the election, and is at least twenty-five (25) years of age on
the day of the election.
In case of a nominee of the youth sector, he must at least be twenty-five (25) but not more than thirty
(30) years of age on the day of the election. Any youth sectoral representative who attains the age of
thirty (30) during his term shall be allowed to continue in office until the expiration of his term."
Seventh, not only the candidate party or organization must represent marginalized and
underrepresented sectors; so also must its nominees. To repeat, under Section 2 of RA 7941, the
nominees must be Filipino citizens "who belong to marginalized and underrepresented sectors,
organizations and parties." Surely, the interests of the youth cannot be fully represented by a retiree;
neither can those of the urban poor or the working class, by an industrialist. To allow otherwise is to
betray the State policy to give genuine representation to the marginalized and underrepresented.
Eighth, as previously discussed, while lacking a well-defined political constituency, the nominee must
likewise be able to contribute to the formulation and enactment of appropriate legislation that will benefit
the nation as a whole. Senator Jose Lina explained during the bicameral committee proceedings that
"the nominee of a party, national or regional, is not going to represent a particular district x x x."61
Epilogue
The linchpin of this case is the clear and plain policy of the law: "to enable Filipino citizens belonging to
marginalized and underrepresented sectors, organizations and parties, and who lack well-defined
political constituencies but who could contribute to the formulation and enactment of appropriate
legislation that will benefit the nation as a whole, to become members of the House of
Representatives."
Crucial to the resolution of this case is the fundamental social justice principle that those who have less
in life should have more in law. The party-list system is one such tool intended to benefit those who
have less in life. It gives the great masses of our people genuine hope and genuine power. It is a
message to the destitute and the prejudiced, and even to those in the underground, that change is
possible. It is an invitation for them to come out of their limbo and seize the opportunity.
Clearly, therefore, the Court cannot accept the submissions of the Comelec and the other respondents
that the party-list system is, without any qualification, open to all. Such position does not only weaken
the electoral chances of the marginalized and underrepresented; it also prejudices them. It would gut
the substance of the party-list system. Instead of generating hope, it would create a mirage. Instead of
enabling the marginalized, it would further weaken them and aggravate their marginalization.
In effect, the Comelec would have us believe that the party-list provisions of the Constitution and RA
7941 are nothing more than a play on dubious words, a mockery of noble intentions, and an empty
offering on the altar of people empowerment. Surely, this could not have been the intention of the
framers of the Constitution and the makers of RA 7941.
WHEREFORE, this case is REMANDED to the Comelec, which is hereby DIRECTED to immediately
conduct summary evidentiary hearings on the qualifications of the party-list participants in the light of
the guidelines enunciated in this Decision. Considering the extreme urgency of determining the winners
in the last party-list elections, the Comelec is directed to begin its hearings for the parties and
organizations that appear to have garnered such number of votes as to qualify for seats in the House of
Representatives. The Comelec is further DIRECTED to submit to this Court its compliance report within
30 days from notice hereof.1âwphi1.nêt
The Resolution of this Court dated May 9, 2001, directing the Comelec "to refrain from proclaiming any
winner" during the last party-list election, shall remain in force until after the Comelec itself will have
complied and reported its compliance with the foregoing disposition.
This Decision is immediately executory upon the Commission on Elections' receipt thereof. No
pronouncement as to costs.
SO ORDERED.
G.R. No. 161081             May 10, 2005
RAMON M. ATIENZA, in his capacity as Vice-Governor of the Province of Occidental
Mindoro, petitioner, 
vs.
JOSE T. VILLAROSA, in his capacity as Governor of the Province of Occidental
Mindoro, respondent.
DECISION
CALLEJO, SR., J.:
Before the Court is the petition for review on certiorari filed by Ramon M. Atienza, in his capacity as
Vice-Governor of the Province of Occidental Mindoro, seeking to reverse and set aside the
Decision1 dated November 28, 2003 of the Court of Appeals in CA-G.R. SP No. 72069. The assailed
decision dismissed the petition for prohibition under Rule 65 of the Rules of Court filed by petitioner
Atienza which had sought to enjoin the implementation of the Memoranda dated June 25, 2002 and
July 1, 2002 issued by Jose T. Villarosa, Governor of the same province.
The present case arose from the following undisputed facts:
Petitioner Atienza and respondent Villarosa were the Vice-Governor and Governor, respectively, of the
Province of Occidental Mindoro. On June 26, 2002, the petitioner Vice-Governor received the
Memorandum dated June 25, 2002 issued by the respondent Governor concerning the "AUTHORITY
TO SIGN PURCHASE ORDERS OF SUPPLIES, MATERIALS, EQUIPMENT[S], INCLUDING FUEL,
REPAIRS AND MAINTENANCE OF THE SANGGUNIANG PANLALAWIGAN." The said memorandum
reads:
For proper coordination and to ensure efficient and effective local government administration
particularly on matters pertaining to supply and property management, effective immediately,
all Purchase Orders issued in connection with the procurement of supplies, materials and
equipment[s] including fuel, repairs and maintenance needed in the transaction of public
business or in the pursuit of any undertaking, project or activity of the Sangguniang
Panlalawigan, this province, shall be approved by the undersigned in his capacity as the local
chief executive of the province.
The provision of DILG Opinion No. 148-1993 which states that the authority to sign Purchase
Orders of supplies, materials and equipment[s] of the Sanggunian belongs to the local chief
executive, serves as basis of this memorandum.
For strict compliance.2
In reply to the above memorandum, the petitioner Vice-Governor wrote the respondent Governor
stating that:
We are of the opinion that … purchase orders for supplies, materials and equipment are
included under those as authorized for signature by the Vice-chief executive of the
Sanggunian on the basis of the DILG Opinion No. 96-1995 as affirmed by the COA Opinions
on June 28, April 11 and February 9, 1994 and coursing it to the Governor for his approval is
no longer necessary, the fact that [Secs.] 466 and 468, RA 7160 already provides for the
separation of powers between the executive and legislative. Such authority even include
everything necessary for the legislative research program of the Sanggunian.3
Unimpressed, the respondent Governor issued the Memorandum dated July 1, 2002 relating to the
"TERMINATION OF CONTRACT OF SERVICES OF CASUAL/JOB ORDER EMPLOYEES AND
REAPPOINTMENT OF THE RESPECTIVE RECOMMENDEES." The said memorandum reads:
For faithful and appropriate enforcement and execution of laws and issuances and to
promote efficiency in the government service, effective immediately, all existing contract of
employment – casual/job order basis and reappointment of the recommendees – entered into
by Vice-Governor Ramon M. Atienza are hereby terminated for being unauthorized.
 Aside from being signed by the unauthorized signatory, the following facts regarding the
appointments were considered:
1. The appointment of 28 clerks – on top of existing permanent employees – is a clear
manifestation of an excessive and bloated bureaucracy;
2. The appointment of an X-ray Technician detailed at the Provincial Health Office and some
clerks detailed at various offices in the province were not proper to be assigned by the Vice-
Governor;
3. The appointment of 30 messengers, utility workers and drivers ran counter to COA Opinion
as cited in the letter of the undersigned dated 28 June 2002, addressed to the Vice-Governor.
However, in order to accommodate the Vice-Governor and the members of the Sangguniang
Panlalawigan, the undersigned, in his capacity as the local chief executive of the province,
will allow four (4) casual/job order employees to be assigned to the Vice-Governor and one
(1) casual/job order employee to be assigned to each member of the Sangguniang
Panlalawigan.
The Vice-Governor and all the Sanggunian Members are hereby directed to submit
immediately the names of their recommendees to the undersigned for immediate approval of
their respective appointments.
Please be guided accordingly.4
On July 3, 2002, the respondent Governor issued another Memorandum regarding the
"ENFORCIBILITY (sic) OF PREVIOUS MEMORANDA ISSUED ON JUNE 20, 26 AND JULY 1, 2002."
It provides that:
Please be properly advised that the Memoranda dated June 20, 26 and July 1, 2002 issued
by the undersigned regarding the issuance of permit to travel and authority to sign Purchase
Orders of supplies, materials, equipment, including fuel, repairs and maintenance of the
Sangguniang Panlalawigan, is to be strictly adhered to for compliance.
Likewise for strict compliance is the Memorandum dated July 1, 2002 with reference to
the Cancellation of the Appointment of Casual/Job Order Employees of the Sangguniang
Panlalawigan Members/Office of the Vice-Governor previously signed by Vice-Governor
Ramon M. Atienza.
Please be guided accordingly.5
In his Letter dated July 9, 2002, the petitioner Vice-Governor invoked the principle of separation of
powers as applied to the local government units, i.e., the respondent, as the Governor, the head of the
executive branch, and the petitioner, as the Vice-Governor, the head of the legislative branch, which is
the Sangguniang Panlalawigan. The petitioner Vice-Governor reiterated his request for the respondent
to make a "deeper study" on the matter before implementing his memoranda. The request, however,
went unheeded as the respondent Governor insisted on obliging the department heads of the provincial
government to comply with the memoranda.
The petitioner Vice-Governor thus filed with the Court of Appeals the petition for prohibition assailing as
having been issued with grave abuse of discretion the respondent Governor's Memoranda dated June
25, 2002 and July 1, 2002. The petitioner Vice-Governor claimed that these memoranda excluded him
from the use and enjoyment of his office in violation of the pertinent provisions of Republic Act No.
7160, or the Local Government Code of 1991, and its implementing rules and regulations. It was prayed
that the respondent Governor be enjoined from implementing the assailed memoranda.
The appellate court, in its Decision dated November 28, 2003, dismissed the petition for prohibition.
Citing Section 3446 of Rep. Act No. 7160, the CA upheld the authority of the respondent Governor to
issue the Memorandum dated June 25, 2002 as it recognized his authority to approve the purchase
orders. The said provision provides in part that "approval of the disbursement voucher by the local chief
executive himself shall be required whenever local funds are disbursed."
The CA explained that Section 466(a)(1)7 of the same Code, relied upon by the petitioner Vice-
Governor, speaks of the authority of the Vice-Governor to sign "all warrants drawn on the public
treasury for all expenditures appropriated for the operation of the sangguniang panlalawigan." In
declaring this provision inapplicable, the CA reasoned that the approval of purchase orders is different
from the power of the Vice-Governor to sign warrants drawn against the public treasury.
Section 3618 was, likewise, held to be inapplicable ratiocinating, thus:
[R]equisitioning, which is provided under Section 361 of RA 7160, is the act of requiring that
something be furnished. In the procurement function, it is the submission of written requests
for supplies and materials and the like. It could be inferred that, in the scheme of things,
approval of purchase requests is different from approval of purchase orders. Thus, the
inapplicability of Section 361.
Anent the Memorandum dated July 1, 2002, the CA ruled that the issue on whether it could be enjoined
had already been rendered moot and academic. The CA pointed out that the subject of the said
memorandum could no longer be enjoined or restrained as the termination of the employees had
already been effected. It opined that where the act sought to be enjoined in the prohibition proceedings
had already been performed and there is nothing more to restrain, the case is already moot and
academic.
The petitioner Vice-Governor now seeks recourse to this Court alleging that the appellate court
committed reversible error in ruling that it is the Governor, and not the Vice-Governor, who has the
authority to sign purchase orders of supplies, materials, equipment, including fuel, repairs and
maintenance of the Sangguniang Panlalawigan. The petitioner Vice-Governor, likewise, takes exception
to the holding of the CA that the issue relating to the July 1, 2002 Memorandum had been rendered
moot and academic. He points out that the appointment of casual/job order employees is exercised by
the appointing authority every six months in the case of casual employees and per job order as to job
order employees. Thus, while the July 1, 2002 Memorandum had already been implemented, what is
being sought to be enjoined is the respondent Governor's continued usurpation of the petitioner Vice-
Governor's authority to appoint the employees of the Sangguniang Panlalawigan under the pertinent
provisions of Rep. Act No. 7160.
For his part, the respondent Governor maintains that his Memoranda dated June 25, 2002 and July 1,
2002 are valid. He asserts that the approval of purchase orders is different from the power of the Vice-
Governor to sign warrants drawn against the provincial treasury under Section 466(a)(1) of Rep. Act
No. 7160. Rather, he insists on the application of the last clause in Section 344 which states that the
approval of the disbursement by the local chief executive is required whenever local funds are
disbursed.
The respondent Governor likewise defends the validity of the Memorandum dated July 1, 2002 stating We hold that it is the Vice-Governor who has such authority.
that it was issued upon finding that the petitioner Vice-Governor appointed, among others, 28 clerks on
top of the existing permanent employees resulting in an excessive and bloated bureaucracy. He
Under Rep. Act No. 7160, local legislative power for the province is exercised by the Sangguniang
concedes the appointing power of the Vice-Governor but submits that this is limited to the employees of
Panlalawigan13and the Vice-Governor is its presiding officer.14 Being vested with legislative powers,
the Sangguniang Panlalawigan and that he is not authorized to appoint officials and employees of the
the Sangguniang Panlalawigan enacts ordinances, resolutions and appropriates funds for the general
Office of the Vice-Governor.
welfare of the province in accordance with the provisions of Rep. Act No. 7160.15 The same statute
vests upon the Vice-Governor the power to:
As correctly presented by the appellate court, the issues for resolution in this case are:
(1) Be the presiding officer of the sangguniang panlalawigan and sign all warrants drawn on
A. Who between the petitioner and the respondent is authorized to approve purchase orders the provincial treasury for all expenditures appropriated for the operation of the sangguniang
issued in connection with the procurement of supplies, materials, equipment, including fuel, panlalawigan. 16
repairs and maintenance of the Sangguniang Panlalawigan?
Further, Section 344 provides:
B. Does respondent Villarosa, as local chief executive, have the authority to terminate or
cancel the appointments of casual/job order employees of the Sangguniang Panlalawigan
Sec. 344. Certification on, and Approval of, Vouchers. – No money shall be disbursed unless
Members and the Office of the Vice-Governor?9
the local budget officer certifies to the existence of appropriation that has been legally made
for the purpose, the local accountant has obligated said appropriation, and the local treasurer
Before resolving the foregoing issues, it is noted that petitioner Atienza and respondent Villarosa had certifies to the availability of funds for the purpose. Vouchers and payrolls shall be certified to
ceased to be the Vice-Governor and Governor, respectively, of the Province of Occidental Mindoro and approved by the head of the department or office who has administrative control of the
effective June 30, 2004 when the newly-elected officials of the province took their oaths of offices. The fund concerned, as to validity, propriety and legality of the claim involved. Except in cases of
petitioner Vice-Governor did not run for re-election during the May 2004 elections while the respondent disbursements involving regularly recurring administrative expenses such as payrolls for
Governor did not succeed in his re-election bid. The expiration of their terms of offices has effectively regular or permanent employees, expenses for light, water, telephone and telegraph
rendered the case moot. However, even in cases where supervening events had made the cases moot, services, remittances to government creditor agencies such as the GSIS, SSS, LBP, DBP,
the Court did not hesitate to resolve the legal or constitutional issues raised to formulate controlling National Printing Office, Procurement Service of the DBM and others, approval of the
principles to guide the bench, bar and the public.10 In this case, there is compelling reason for the Court disbursement voucher by the local chief executive himself shall be required whenever local
to resolve the issues presented in order to clarify the scope of the respective powers of the Governor funds are disbursed.
and Vice-Governor under the pertinent provisions of the Local Government Code of 1991.
In cases of special or trust funds, disbursements shall be approved by the administrator of
To resolve the substantive issues presented in the instant case, it is well to recall that Rep. Act No. the fund.
7160 was enacted to give flesh to the constitutional mandate to "provide for a more responsive and
accountable local government structure instituted through a system of decentralization with effective
In case of temporary absence or incapacity of the department head or chief of office, the
mechanism of recall, initiative and referendum, allocate among the different local government units
officer next-in-rank shall automatically perform his function and he shall be fully responsible
their powers, responsibilities, and resources, and provide for the qualifications, election, appointment
therefor.
and removal, term, salaries, powers and functions and duties of local officials, and all matters relating to
the organization and operation of the local units."11
Reliance by the CA on the clause "approval of the disbursement voucher by the local chief executive
himself shall be required whenever local funds are disbursed" of the above section (Section 344) to rule
In this connection, the provisions of Rep. Act No. 7160 are anchored on principles that give effect to
that it is the Governor who has the authority to approve purchase orders for the supplies, materials or
decentralization. Among these principles are: [t]here shall be an effective allocation among the different
equipment for the operation of the Sangguniang Panlalawigan is misplaced. This clause cannot prevail
local government units of their respective powers, functions, responsibilities, and resources; [t]here
over the more specific clause of the same provision which provides that "vouchers and payrolls shall be
shall be established in every local government unit an accountable, efficient, and dynamic
certified to and approved by the head of the department or office who has administrative control of the
organizational structure and operating mechanism that will meet the priority needs and service
fund concerned." The Vice-Governor, as the presiding officer of the Sangguniang Panlalawigan, has
requirements of its communities; [p]rovinces with respect to component cities and municipalities, and
administrative control of the funds of the said body. Accordingly, it is the Vice-Governor who has the
cities and municipalities with respect to component barangays, shall ensure that the acts of their
authority to approve disbursement vouchers for expenditures appropriated for the operation of
component units are within the scope of their prescribed powers and functions; and [e]ffective
the Sangguniang Panlalawigan.
mechanisms for ensuring the accountability of local government units to their respective constituents
shall be strengthened in order to upgrade continually the quality of local leadership.12
On this point, Section 39 of the Manual on the New Government Accounting System for Local
Government Units, prepared by the Commission on Audit (COA), is instructive:
With these guideposts, the Court shall now address the issue on who between the Governor and Vice-
Governor is authorized to approve purchase orders issued in connection with the procurement of
supplies, materials, equipment, including fuel, repairs and maintenance of the Sangguniang Sec. 39. Approval of Disbursements. – Approval of disbursements by the Local Chief
Panlalawigan. Executive (LCE) himself shall be required whenever local funds are disbursed, except for
regularly recurring administrative expenses such as: payrolls for regular or permanent
employees, expenses for light, water, telephone and telegraph services, remittances to
 government creditor agencies such as GSIS, BIR, PHILHEALTH, LBP, DBP, NPO, PS of the
DBM and others, where the authority to approve may be delegated. Disbursement vouchers
for expenditures appropriated for the operation of the Sanggunian shall be approved by the
provincial Vice Governor, the city Vice-Mayor or the municipal Vice-Mayor, as the case may
be.17
While Rep. Act No. 7160 is silent as to the matter, the authority granted to the Vice-Governor to sign all
warrants drawn on the provincial treasury for all expenditures appropriated for the operation of
the Sangguniang Panlalawigan as well as to approve disbursement vouchers relating thereto
necessarily includes the authority to approve purchase orders covering the same applying the doctrine
of necessary implication. This doctrine is explained, thus:
No statute can be enacted that can provide all the details involved in its application. There is
always an omission that may not meet a particular situation. What is thought, at the time of
enactment, to be an all-embracing legislation may be inadequate to provide for the unfolding
of events of the future. So-called gaps in the law develop as the law is enforced. One of the
rules of statutory construction used to fill in the gap is the doctrine of necessary implication.
The doctrine states that what is implied in a statute is as much a part thereof as that which is
expressed. Every statute is understood, by implication, to contain all such provisions as may
be necessary to effectuate its object and purpose, or to make effective rights, powers,
privileges or jurisdiction which it grants, including all such collateral and subsidiary
consequences as may be fairly and logically inferred from its terms. Ex necessitate legis. And
every statutory grant of power, right or privilege is deemed to include all incidental power,
right or privilege. This is so because the greater includes the lesser, expressed in the
maxim, in eo plus sit, simper inest et minus.18
Warrants are "order[s] directing the treasurer of the municipality to pay money out of funds in city
treasury which are or may become available for purpose specified to designated person[s]."19 Warrants
of a municipal corporation are generally orders payable when funds are found. They are issued for the
payment of general municipal debts and expenses subject to the rule that they shall be paid in the order
of presentation.20
The ordinary meaning of "voucher" is a document which shows that services have been performed or
expenses incurred. It covers any acquittance or receipt discharging the person or evidencing payment
by him. When used in connection with disbursement of money, it implies some instrument that shows
on what account or by what authority a particular payment has been made, or that services have been
performed which entitle the party to whom it is issued to payment.21
Purchase order, on the other hand, is "an authorization by the issuing party for the recipient to provide
materials or services for which issuing party agrees to pay; it is an offer to buy which becomes binding
when those things ordered have been provided."22
When an authorized person approves a disbursement voucher, he certifies to the correctness of the
entries therein, among others: that the expenses incurred were necessary and lawful, the supporting
documents are complete and the availability of cash therefor. Further, the person who performed the
services or delivered the supplies, materials or equipment is entitled to payment.23 On the other hand,
the terms and conditions for the procurement of supplies, materials or equipment, in particular, are
contained in a purchase order. The tenor of a purchase order basically directs the supplier to deliver the
articles enumerated and subject to the terms and conditions specified therein.24Hence, the express
authority to approve disbursement vouchers and, in effect, authorize the payment of money claims for
supplies, materials or equipment, necessarily includes the authority to approve purchase orders to
cause the delivery of the said supplies, materials or equipment.
Since it is the Vice-Governor who approves disbursement vouchers and approves the payment for the
procurement of the supplies, materials and equipment needed for the operation of the Sangguniang
Panlalawigan, then he also has the authority to approve the purchase orders to cause the delivery of
the said supplies, materials or equipment.
Indeed, the authority granted to the Vice-Governor to sign all warrants drawn on the provincial treasury
for all expenditures appropriated for the operation of the Sangguniang Panlalawigan as well as to
approve disbursement vouchers relating thereto is greater and includes the authority to approve
purchase orders for the procurement of the supplies, materials and equipment necessary for the
operation of the Sangguniang Panlalawigan.
Anent the second issue, the appellate court likewise committed reversible error in holding that the
implementation of the Memorandum dated July 1, 2002 had rendered the petition moot and academic.
It is recognized that courts will decide a question otherwise moot and academic if it is "capable of
repetition yet evading review."25 Even if the employees whose contractual or job order employment had
been terminated by the implementation of the July 1, 2002 Memorandum may no longer be reinstated,
still, similar memoranda may be issued by other local chief executives. Hence, it behooves the Court to
resolve whether the Governor has the authority to terminate or cancel the appointments of casual/job
order employees of the Sangguniang Panlalawigan and the Office of the Vice-Governor.
We hold that the Governor, with respect to the appointment of the officials and employees of
the Sangguniang Panlalawigan, has no such authority.
Among the powers granted to the Governor under Section 465 of Rep. Act No. 7160 are:
Sec. 465. The Chief Executive: Powers, Duties, Functions and Compensation.– (a) The
provincial governor, as the chief executive of the provincial government, shall exercise such
powers and perform such duties and functions as provided by this Code and other laws.
(b) For efficient, effective and economical governance the purpose of which is the general
welfare of the province and its inhabitants pursuant to Section 16 of this Code, the provincial
governor shall:
…
(v) Appoint all officials and employees whose salaries and wages are wholly or
mainly paid out of provincial funds and whose appointments are not otherwise
provided for in this Code, as well as those he may be authorized by law to appoint.
On the other hand, Section 466 vests on the Vice-Governor the power to, among others:
(2) Subject to civil service law, rules and regulations, appoint all officials and employees of
the sangguniang panlalawigan, except those whose manner of appointment is specifically
provided in this Code.
Thus, while the Governor has the authority to appoint officials and employees whose salaries are paid
out of the provincial funds, this does not extend to the officials and employees of the Sangguniang
Panlalawigan because such authority is lodged with the Vice-Governor. In the same manner, the
authority to appoint casual and job order employees of the Sangguniang Panlalawigan belongs to the
Vice-Governor.
The authority of the Vice-Governor to appoint the officials and employees of the Sangguniang Mayor and vice versa and exercise their functions without any undue interference from one by the
Panlalawigan is anchored on the fact that the salaries of these employees are derived from the other."28
appropriation specifically for the said local legislative body. Indeed, the budget source of their salaries is
what sets the employees and officials of the Sangguniang Panlalawigan apart from the other
The avowed intent of Rep. Act. No. 7160, therefore, is to vest on the Sangguniang
employees and officials of the province. Accordingly, the appointing power of the Vice-Governor is
Panlalawigan independence in the exercise of its legislative functions vis-a-vis the discharge by the
limited to those employees of the Sangguniang Panlalawigan, as well as those of the Office of the Vice-
Governor of the executive functions. The Memoranda dated June 25, 2002 and July 1, 2002 of the
Governor, whose salaries are paid out of the funds appropriated for the Sangguniang Panlalawigan. As
respondent Governor, which effectively excluded the petitioner Vice-Governor, the presiding officer of
a corollary, if the salary of an employee or official is charged against the provincial funds, even if this
the Sangguniang Panlalawigan, from signing the purchase orders for the procurement of supplies,
employee reports to the Vice-Governor or is assigned to his office, the Governor retains the authority to
materials or equipment needed for the operation of the Sangguniang Panlalawiganas well as from
appoint the said employee pursuant to Section 465(b)(v) of Rep. Act No. 7160.
appointing its casual and job order employees, constituted undue interference with the latter's functions.
The assailed memoranda are clearly not in keeping with the intent of Rep. Act No. 7160 and their
However, in this case, it does not appear whether the contractual/job order employees, whose implementation should thus be permanently enjoined.
appointments were terminated or cancelled by the Memorandum dated July 1, 2002 issued by the
respondent Governor, were paid out of the provincial funds or the funds of the Sangguniang
WHEREFORE, the petition is GRANTED. The Memoranda dated June 25, 2002 and July 1, 2002
Panlalawigan. Nonetheless, the validity of the said memorandum cannot be upheld because it
issued by respondent Governor Jose T. Villarosa are NULL AND VOID.
absolutely prohibited the respondent Vice-Governor from exercising his authority to appoint the
employees, whether regular or contractual/job order, of the Sangguniang Panlalawigan and restricted
such authority to one of recommendatory nature only.26 This clearly constituted an encroachment on the SO ORDERED.
appointment power of the respondent Vice- Governor under Section 466(a)(2) of Rep. Act No. 7160.
G.R. No. 159471               January 26, 2011
At this juncture, it is well to note that under Batas Pambansa Blg. 337, the Local Government Code
prior to Rep. Act No. 7160, the Governor was the presiding officer of the Sangguniang Panlalawigan:
ATLAS CONSOLIDATED MINING AND DEVELOPMENT CORPORATION, Petitioner, 
vs.
Sec. 205. Composition. (1) Each provincial government shall have a provincial legislature COMMISSIONER OF INTERNAL REVENUE, Respondent.
hereinafter known as the sangguniang panlalawigan, upon which shall be vested the
provincial legislative power.
DECISION

(2) The sangguniang panlalawigan shall be composed of the governor, vice-governor,

PERALTA, J.:
elective members of the said sanggunian, and the presidents of the katipunang
panlalawigan and the kabataang barangayprovincial federation who shall be appointed by the
President of the Philippines. For this Court's resolution is the Petition for Review on Certiorari under Rule 45 of the Revised Rules of
Civil Procedure assailing the Decision1 dated April 19, 2001 and Resolution2 dated August 6, 2003 of
the Court of Appeals (CA).
…

The facts, as shown in the records, are the following:

Sec. 206. Sessions. –

Under Section 100 of the Tax Code of the Philippines, petitioner is a zero-rated Value Added Tax (VAT)
(3) The governor, who shall be the presiding officer of the sangguniang panlalawigan, shall
person for being an exporter of copper concentrates. According to petitioner, on January 20, 1994, it
not be entitled to vote except in case of a tie.
filed its VAT return for the fourth quarter of 1993, showing a total input tax of ₱863,556,963.74 and an
excess VAT credit of ₱842,336,291.60 and, on January 25, 1996, it applied for a tax refund or a tax
… credit certificate for the latter amount with respondent Commissioner of Internal Revenue (CIR). On the
same date, petitioner filed the same claim for refund with the Court of Tax Appeals (CTA), claiming that
the two-year prescriptive period provided for under Section 230 of the Tax Code for claiming a refund
With Rep. Act No. 7160, the union of legislative and executive powers in the office of the local chief
was about to expire. The CIR failed to file his answer with the CTA; thus, the former declared the latter
executive under the BP Blg. 337 has been disbanded, so that either department now comprises
in default.
different and non-intermingling official personalities with the end in view of ensuring a better delivery of
public service and provide a system of check and balance between the two.27
On August 24, 1998, the CTA rendered its Decision3 denying petitioner's claim for refund due to
petitioner's failure to comply with the documentary requirements prescribed under Section 16 of
Senator Aquilino Pimentel, the principal author of Rep. Act No. 7160, explained that "the Vice-Governor
Revenue Regulations No. 5-87, as amended by Revenue Regulations No. 3-88, dated April 7, 1988.
is now the presiding officer of the Sangguniang Panlalawigan. The City Vice-Mayor presides at
The dispositive portion of the Decision reads:
meetings of the Sangguniang Panlungsod and the Municipal Vice-Mayor at the sessions of
the Sangguniang Bayan. The idea is to distribute powers among elective local officials so that the
legislative, which is the Sanggunian, can properly check the executive, which is the Governor or the
WHEREFORE, in view of the foregoing, the instant Petition for Review is hereby DISMISSED for lack of
merit.
SO ORDERED.4
Petitioner filed a Motion for Reconsideration5 praying for the reopening of the case in order for it to
present the required documents, together with its proof of non-availment for prior and succeeding
quarters of the input VAT subject of petitioner's claim for refund. The CTA granted the motion in its
Resolution6 dated October 29, 1998. Thereafter, in a Resolution7 dated June 21, 2000, the CTA denied
petitioner's claim. It ruled that the action has already prescribed and that petitioner has failed to
substantiate its claim that it has not applied its alleged excess input taxes to any of its subsequent
quarter's output tax liability.
The CTA's Decision and Resolution were questioned in the CA. However, the CA affirmed in toto the
said Decision and Resolution, disposing the case as follows:
WHEREFORE, the petition is DISMISSED for lack of merit. The questioned Decision of the CTA dated
August 24, 1998 and the Resolution dated June 21, 2000 are AFFIRMED in toto.
SO ORDERED.8
Subsequently, petitioner's Motion for Reconsideration9 of the CA's Decision was denied in a
Resolution10 dated August 6, 2003.
Thus, the present petition.
Petitioner lists the following as grounds for his petition:
I principal place of business of the applicant is located or directly with the Commissioner, Attention: VAT
THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER'S CLAIM FOR
REFUND HAS PRESCRIBED, DESPITE FAILURE OF RESPONDENT AND THE COURT
OF TAX APPEALS TO RAISE THE ISSUE OF PRESCRIPTION IN RESPONDENT'S
ANSWER OR IN THE CTA'S ORIGINAL DECISION DATED 16 SEPTEMBER 1998.
II
THE COURT OF APPEALS ERRED IN UPHOLDING THE COURT OF TAX APPEALS'
FINDING IN ITS DECISION DATED 24 AUGUST 1998 THAT PETITIONER, IN NOT
SUBMITTING ITS EXPORT DOCUMENTS, FAILED TO PRESENT ADEQUATE PROOF
THAT ITS INPUT TAXES ARE DIRECTLY ATTRIBUTABLE TO ITS EXPORT SALES.
III
THE COURT OF APPEALS ERRED IN UPHOLDING THE COURT OF TAX APPEALS’
FINDING THAT PETITIONER FAILED TO PRESENT ADEQUATE PROOF THAT IT HAD
NOT APPLIED THE CLAIMED INPUT TAX TO ITS OUTPUT TAXES FROM PRIOR AND
SUCCEEDING QUARTERS.11
Petitioner herein had, in the past, similar petitions with this Court regarding the denial of its claims for
tax refund of the input VAT on its purchases of capital goods and on its zero-rated sales. In Atlas
Consolidated Mining and Development Corporation v. CIR,12 petitioner filed with the Bureau of Internal
Revenue (BIR) its VAT Return for the first quarter of 1992 and also alleged that it filed with the BIR the
corresponding application for the refund/credit of its input VAT on its purchases of capital goods and on
its zero-rated sales in the amount of ₱26,030,460.00. Its application for refund/credit remained having
been unresolved by the BIR, petitioner filed with the CTA, on April 20, 1994, a Petition for Review.
Claiming to be a "zero-rated VAT person," petitioner prayed that the CTA order the CIR to refund/credit
petitioner with the amount of ₱26,030,460.00, representing the input VAT it had paid for the first quarter
of 1992. Both, the CTA and the CA denied the claims of petitioner, ratiocinating that its claim has been
filed beyond the prescriptive period provided by law and that evidence presented was insufficient.
In the present case, petitioner is basically asking this Court to review the factual findings of the CTA
and the CA. Petitioner insists that it had presented the necessary documents or copies thereof with the
CTA that would prove that it is entitled to a tax refund. Again, citing the earlier case of Atlas
Consolidated Mining and Development Corporation v. CIR,13 this Court has expounded the nature and
bases of claiming tax refund, thus:
Applications for refund/credit of input VAT with the BIR must comply with the appropriate revenue
regulations. As this Court has already ruled, Revenue Regulations No. 2-88 is not relevant to the
applications for refund/credit of input VAT filed by petitioner corporation; nonetheless, the said
applications must have been in accordance with Revenue Regulations No. 3-88, amending Section 16
of Revenue Regulations No. 5-87, which provided as follows –
SECTION 16. Refunds or tax credits of input tax. –
xxxx
(c) Claims for tax credits/refunds. – Application for Tax Credit/Refund of Value-Added Tax Paid (BIR
Form No. 2552) shall be filed with the Revenue District Office of the city or municipality where the
Division.
A photocopy of the purchase invoice or receipt evidencing the value added tax paid shall be
submitted together with the application. The original copy of the said invoice/receipt, however, shall
be presented for cancellation prior to the issuance of the Tax Credit Certificate or refund. In addition,
the following documents shall be attached whenever applicable:
xxxx
3. Effectively zero-rated sale of goods and services.
i) photocopy of approved application for zero-rate if filing for the first time.
ii) sales invoice or receipt showing name of the person or entity to whom the sale of goods or services
were delivered, date of delivery, amount of consideration, and description of goods or services
delivered.
iii) evidence of actual receipt of goods or services.
4. Purchase of capital goods.
i) original copy of invoice or receipt showing the date of purchase, purchase price, amount of value-
added tax paid and description of the capital equipment locally purchased.
ii) with respect to capital equipment imported, the photocopy of import entry document for internal
revenue tax purposes and the confirmation receipt issued by the Bureau of Customs for the payment of
the value-added tax.
5. In applicable cases,
where the applicant’s zero-rated transactions are regulated by certain government agencies, a
statement therefrom showing the amount and description of sale of goods and services, name of
persons or entities (except in case of exports) to whom the goods or services were sold, and date of
transaction shall also be submitted.
In all cases, the amount of refund or tax credit that may be granted shall be limited to the amount of the
value-added tax (VAT) paid directly and entirely attributable to the zero-rated transaction during the
period covered by the application for credit or refund.
Where the applicant is engaged in zero-rated and other taxable and exempt sales of goods and
services, and the VAT paid (inputs) on purchases of goods and services cannot be directly attributed to
any of the aforementioned transactions, the following formula shall be used to determine the creditable
or refundable input tax for zero-rated sale:
Amount of Zero-rated Sale
Total Sales
x
Total Amount of Input Taxes
= Amount Creditable/Refundable
In case the application for refund/credit of input VAT was denied or remained unacted upon by the BIR,
and before the lapse of the two-year prescriptive period, the taxpayer-applicant may already file a
Petition for Review before the CTA. If the taxpayer’s claim is supported by voluminous documents, such
as receipts, invoices, vouchers or long accounts, their presentation before the CTA shall be governed
by CTA Circular No. 1-95, as amended, reproduced in full below –
In the interest of speedy administration of justice, the Court hereby promulgates the following rules
governing the presentation of voluminous documents and/or long accounts, such as receipts, invoices
and vouchers, as evidence to establish certain facts pursuant to Section 3(c), Rule 130 of the Rules of
Court and the doctrine enunciated in Compania Maritima vs. Allied Free Workers Union (77 SCRA 24),
as well as Section 8 of Republic Act No. 1125:
1. The party who desires to introduce as evidence such voluminous documents must, after motion and
approval by the Court, present:
(a) a Summary containing, among others, a chronological listing of the numbers, dates and amounts
covered by the invoices or receipts and the amount/s of tax paid; and (b) a Certification of an
independent Certified Public Accountant attesting to the correctness of the contents of the summary
after making an examination, evaluation and audit of the voluminous receipts and invoices. The name
of the accountant or partner of the firm in charge must be stated in the motion so that he/she can be
commissioned by the Court to conduct the audit and, thereafter, testify in Court relative to such
summary and certification pursuant to Rule 32 of the Rules of Court.
2. The method of individual presentation of each and every receipt, invoice or account for marking,
identification and comparison with the originals thereof need not be done before the Court or Clerk of
Court anymore after the introduction of the summary and CPA certification. It is enough that the
receipts, invoices, vouchers or other documents covering the said accounts or payments to be
introduced in evidence must be pre-marked by the party concerned and submitted to the Court in order
to be made accessible to the adverse party who desires to check and verify the correctness of the
summary and CPA certification. Likewise, the originals of the voluminous receipts, invoices or accounts
must be ready for verification and comparison in case doubt on the authenticity thereof is raised during
the hearing or resolution of the formal offer of evidence.14
As to the evidence that must be presented, the provisions of the pertinent laws provide:
Section 106, Tax Code
Refunds or tax credits of input tax. - (a) Any VAT-registered person, whose sales are zero-rated, may,
within two (2) years after the close of the taxable quarter when the sales were made, apply for the
issuance of a tax credit certificate or refund creditable input tax due or paid attributable to such sales,
except transitional input tax, to the extent that such input tax has not been applied against output tax:
Provided, however, That in case of zero-rated sales under Section 100 (a) (2) (A) (I), (ii) and (b) and
Section 102 (b) (1) and (2), the acceptable foreign currency exchange proceeds thereof have been duly
accounted for in accordance with the regulations of the Bangko Sentral ng Pilipinas (BSP): Provided,
further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in
taxable or exempt sale of goods or properties or services, and the amount of creditable input tax due or
paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated
proportionately on the basis of the volume of sales.
Section 16 of Revenue Regulations No. 5-87, as amended by Revenue Regulations No. 3-88, dated
April 7, 1988
A photocopy of the purchase invoice or receipt evidencing the value added tax paid shall be submitted
together with the application. The original copy of the said invoice/receipt, however, shall be presented
for cancellation prior to the issuance of the Tax Credit Certificate or refund. In addition, the following
documents shall be attached whenever applicable:
1. Export Sales
i) Photocopy of export document showing the amount of export, the date and destination of
the goods exported. With respect to foreign currency denominated sale, the photocopy of the
invoice or receipt evidencing the sale of the goods, as well as the name of the person to
whom the goods were delivered.
ii) Statement from the Central Bank or any of its accredited agent banks that the proceeds of
the sale in acceptable foreign currency has been inwardly remitted and accounted for in
accordance with applicable banking regulations.
xxxx
In all cases, the amount of refund or tax credit that may be granted shall be limited to the amount of
value-added tax (VAT) paid directly and entirely attributable to the zero-rated transaction during the
period covered by the application for credit or refund.
The CTA, applying the abovementioned rules, in its Decision dated August 24, 1998, came out with the
following factual findings:
The formal offer of evidence of the petitioner failed to include photocopy of its export documents, as
required. There is no way therefore, in determining the kind of goods and actual amount of export sales
it allegedly made during the quarter involved. This finding is very crucial when we try to relate it with the
requirement of the aforementioned regulations that the input tax being claimed for refund or tax credit
must be shown to be entirely attributable to the zero-rated transaction, in this case, export sales of
goods. Without the export documents, the purchase invoice/receipts submitted by the petitioner as
proof of its input taxes cannot be verified as being directly attributable to the goods so exported.
Lastly, We cannot grant petitioner's claim for credit or refund of input taxes due to its failure to show
convincingly that the same has not been applied to any of its output tax liability as provided under
Section 106 (a) of the Tax Code. There is no evidence to show that the amount herein claimed for
refund when applied for on January 25, 1996 has not been priorly or thereafter applied to its output tax
liability.15
The above factual findings of the CTA were even bolstered when it granted petitioner's motion for
reconsideration allowing petitioner to submit the necessary documents and other pieces of evidence, so
as to comply with the requirements provided for by law. However, despite such allowance, petitioner
still failed to comply. Thus, in its Resolution16 dated June 21, 2000, the CTA finally disposed the case by
ruling that:
The Court finds and so holds that Petitioner failed again to present proof that it has not applied the
alleged excess input taxes to any of its subsequent quarter's output tax liability. In this Court's decision
dated August 24, 1998, We already mentioned that petitioner failed to convince us that its input taxes
have not been applied to any of its output tax liability as provided under Section 106 (a). Now on its
second opportunity to substantiate its claim, Petitioner again failed to prove this particular allegation.
Petitioner merely presented in evidence the following documents to show that it has not applied the
amount of ₱4,534,933.74, subject of the claim, to its 1994 first quarter output tax liability, to wit:
Exhibits
1.) Output/Input VAT (Per Return) Listings T for the first quarter of 1994
2.) Schedule of Output Taxes for the month U, U-1 to U-2 of January 1994 U-3 to U-5
3.) Schedule of Materials and Supplies for V, V-1 to V-9 for the first quarter of 1994
4.) Schedule of Output Taxes for the month W, W-1 to W-4 of February 1994
Nowhere in all the documents submitted to this Court by the Petitioner can We find its 1994 first quarter
VAT return which, to Our mind and as repeatedly ruled in a litany of cases, is necessary for purposes of
determining with particular certainty whether or not the claimed input taxes were applied to any of its
output tax liability in the first quarter or in the succeeding quarters of 1994. And there is no reason at
this point for Us to digress from this ruling.17
The above factual findings were affirmed and accorded respect by the CA. Nevertheless, petitioner
insists that it has submitted documents and other pieces of evidence, except those required by law, that
would establish the existence of the input VAT for the fourth quarter of 1993 and that the excess input
VAT claimed for refund or tax credit has not been applied to its output tax liability for prior and
succeeding quarters.
The above argument, however, is flawed. It must be remembered that when claiming tax refund/credit,
the VAT-registered taxpayer must be able to establish that it does have refundable or creditable input
VAT, and the same has not been applied against its output VAT liabilities – information which are
supposed to be reflected in the taxpayer’s VAT returns. Thus, an application for tax refund/credit must
be accompanied by copies of the taxpayer’s VAT return/s for the taxable quarter/s concerned.18 The
CTA and the CA, based on their appreciation of the evidence presented, committed no error when they
declared that petitioner failed to prove that it is entitled to a tax refund and this Court, not being a trier of
facts, must defer to their findings. Again, as aptly ruled by this Court in Atlas:19
This Court is, therefore, bound by the foregoing facts, as found by the appellate court, for well-settled is
the general rule that the jurisdiction of this Court in cases brought before it from the Court of Appeals,
by way of a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, is limited to
reviewing or revising errors of law; findings of fact of the latter are conclusive. This Court is not a trier of
facts. It is not its function to review, examine and evaluate or weigh the probative value of the evidence
presented.
The distinction between a question of law and a question of fact is clear-cut.1âwphi1 It has been held
that "[t]here is a question of law in a given case when the doubt or difference arises as to what the law
is on a certain state of facts; there is a question of fact when the doubt or difference arises as to the
truth or falsehood of alleged facts."
Whether petitioner corporation actually made zero-rated sales; whether it paid input VAT on these sales
in the amount it had declared in its returns; whether all the input VAT subject of its applications for
refund/credit can be attributed to its zero-rated sales; and whether it had not previously applied the
input VAT against its output VAT liabilities, are all questions of fact which could only be answered after
reviewing, examining, evaluating, or weighing the probative value of the evidence it presented, and
which this Court does not have the jurisdiction to do in the present Petitions for Review
on Certiorari under Rule 45 of the Revised Rules of Court.
Granting that there are exceptions to the general rule, when this Court looked into questions of fact
under particular circumstances, none of these exist in the instant cases. The Court of Appeals, in both
cases, found a dearth of evidence to support the claims for refund/credit of the input VAT of petitioner
corporation, and the records bear out this finding. Petitioner corporation itself cannot dispute its non-
compliance with the requirements set forth in Revenue Regulations No. 3-88 and CTA Circular No. 1-
95, as amended. It concentrated its arguments on its assertion that the substantiation requirements
under Revenue Regulations No. 2-88 should not have applied to it, while being conspicuously silent on
the evidentiary requirements mandated by other relevant regulations.20
Taxation is a destructive power which interferes with the personal and property rights of the people and
takes from them a portion of their property for the support of the government. And, since taxes are what
we pay for civilized society, or are the lifeblood of the nation, the law frowns against exemptions from
taxation and statutes granting tax exemptions are thus construed strictissimi juris against the taxpayer
and liberally in favor of the taxing authority. A claim of refund or exemption from tax payments must be
clearly shown and be based on language in the law too plain to be mistaken. Elsewise stated, taxation
is the rule, exemption therefrom is the exception.21
Anent the issue of prescription, wherein petitioner questions the ruling of the CA that the former's claim 2003. BPI, on the other hand, filed its Pre-trial Brief11 with the RTC, and furnished Dando with a copy
for refund has prescribed, disregarding the failure of respondent Commissioner of Internal Revenue and thereof, only on 18 August 2003, the very day of the scheduled Pre-Trial Conference.
the CTA to raise the said issue in their answer and original decision, respectively, this Court finds the
same moot and academic. Although it may appear that the CTA only brought up the issue of
When the parties appeared before the RTC on 18 August 2003 for the scheduled Pre-Trial Conference,
prescription in its later resolution and not in its original decision, its ruling on the merits of the
Dando orally moved for the dismissal of Civil Case No. 03-281, citing Sections 5 and 6, Rule 18 of the
application for refund, could only imply that the issue of prescription was not the main consideration for
Rules of Court. The RTC, through an Order issued on the same day, required Dando to file a written
the denial of petitioner's claim for tax refund. Otherwise, the CTA would have just denied the application
motion within five days from the receipt of the said Order and BPI to file its comment and/or opposition
on the ground of prescription.
thereto. The RTC order reads:

WHEREFORE, the Petition is hereby DENIED for lack of merit. The Decision and Resolution of the
Court of Appeals, dated April 19, 2001 and August 6, 2003, respectively, are hereby AFFIRMED.
SO ORDERED
G.R. No. 177456               September 4, 2009
On calling this case for the pre-trial conference, counsel for both parties appeared and even
[respondent] Domingo R. Dando appeared. The attention of the Court was called by the counsel for the
[respondent Dando] that the counsel for the [petitioner BPI] only filed her Pre-Trial Brief today at 9:00
o’clock in the morning instead of at least three days before the pre-trial conference, as required by the
Rules. This prompted the counsel for the [respondent Dando] to ask for the dismissal of the case for
violation of Rule 18 of the Rules of Civil Procedure.

Counsel for the [respondent Dando] even claims that he has not received a copy of the pre-trial brief,
BANK OF THE PHILIPPINE ISLANDS, Petitioner, 
but then according to the counsel for the [petitioner BPI], a copy thereof was sent by registered mail to
vs.
counsel for the [respondent Dando] since (sic) August 18, 2003, and considering the nature of the
DOMINGO R. DANDO, Respondent.
motion of the counsel for the [respondent Dando], it is best that the [respondent Dando’s] counsel
reduce the same in writing within five days from today, furnishing personally a copy thereof the counsel
DECISION for the [petitioner BPI] who is hereby given five days from receipt thereof within which to file her
comment and/or opposition thereto, thereafter, the incident shall be considered submitted for
Resolution.
CHICO-NAZARIO, J.:

Meanwhile, no pre-trial conference shall be held until the motion is resolved.12

Before this Court is a Petition for Review under Rule 45 of the Rules of Court, filed by petitioner Bank of
the Philippine Islands (BPI), assailing (1) the Decision1 dated 20 November 2006 of the Court of
Appeals in CA-G.R. SP No. 82881, which granted the Petition for Certiorari under Rule 65 of the Rules On 25 August 2003, Dando filed with the RTC his written Motion to Dismiss Civil Case No. 03-281, for
of Court filed by herein respondent Domingo R. Dando (Dando); and (2) the Resolution dated 4 April violation of the mandatory rule on filing of pre-trial briefs.13 BPI filed an Opposition14 to Dando’s Motion,
2007 of the appellate court in the same case denying the Motion for Reconsideration of BPI. The Court arguing that its filing with the RTC of the Pre-Trial Brief on 18 August 2003 should be considered as
of Appeals, in its assailed Decision, annulled the Orders dated 13 January 2004 and 3 March 2004 of compliance with the rules of procedure given that the Pre-Trial Conference did not proceed as
the Regional Trial Court (RTC) of Makati City, Branch 149, setting Civil Case No. 03-281 for pre-trial scheduled on said date.
conference; and reinstated the earlier Order dated 10 October 2003 of the RTC dismissing Civil Case
No. 03-281 for failure of BPI to file its pre-trial brief.
In an Order dated 10 October 2003, the RTC granted Dando’s Motion to Dismiss Civil Case No. 03-
281, for the following reasons:
The instant Petition stemmed from a Complaint for Sum of Money and Damages2 filed on 13 March
2003 by BPI against Dando before the RTC, docketed as Civil Case No. 03-281. The Complaint alleged
In resolving this motion, this Court should be guided by the mandatory character of Section 6, Rule 18
that on or about 12 August 1994, Dando availed of a loan in the amount of ₱750,000.00 from Far East
of the Revised Rules of Court which: strictly mandates the parties to the case to file with the Court and
Bank and Trust Company (FEBTC), under a Privilege Cheque Credit Line Agreement.3 The parties
serve on the adverse party and SHALL ensure their receipt thereof at least three (3) days before the
agreed that Dando would pay FEBTC the principal amount of the loan, in lump sum, at the end of 90
date of the pre-trial, their respective pre-trial briefs but likewise imposed upon the parties the mandatory
days; and interest thereon every 30 days, the periods reckoned from the time of availment of the loan.
duty to seasonably file and serve on the adverse party their respective pre-trial briefs. The aforesaid
Dando defaulted in the payment of the principal amount of the loan, as well as the interest and
rule does not merely sanction the non-filing thereof of the parties’ respective pre-trial briefs but likewise
penalties thereon. Despite repeated demands, Dando refused and/or failed to pay his just and valid
imposed upon the parties the mandatory duty to seasonably file and serve on the adverse party their
obligation.4 In 2000, BPI and FEBTC merged, with the former as the surviving entity,5 thus, absorbing
respective pre-trial briefs. Pre-trial briefs are meant to serve as a device to clarify and narrow down the
the rights and obligations of the latter.6
basic issues between the parties so that at pre-trial, the proper parties may be able to obtain the fullest
possible knowledge of the issues and the facts before civil trials and this prevent said trials from being
After Dando filed with the RTC his Answer with Counterclaim,7 BPI filed its Motion to Set Case for Pre- carried in the dark.15
Trial. Acting on the said Motion, the RTC, through Acting Presiding Judge Oscar B. Pimentel (Judge
Pimentel), issued an Order8on 11 June 2003 setting Civil Case No. 03-281 for pre-trial conference on
Consequently, the RTC decreed:
18 August 2003. Judge Pimentel subsequently issued, on 16 June 2003, a Notice of Pre-Trial
Conference,9 which directed the parties to submit their respective pre-trial briefs at least three days
before the scheduled date of pre-trial. Dando submitted his Pre-trial Brief10 to the RTC on 11 August
WHEREFORE, premises considered, finding the [herein respondent Dando’s] motion to dismiss to be
impressed with merit the same is hereby GRANTED. Accordingly, the instant case is hereby dismissed
with prejudice.16
BPI filed a Motion for Reconsideration17 of the 10 October 2003 Order of the RTC, praying for the liberal
interpretation of the rules. Expectedly, Dando filed his Comment/Opposition thereto.18
interpretation of the rules. Clearly, public respondent ignored the mandatory wordings of Sections 5 and
6 of Rule 18. Under Section 6, the plaintiff’s failure to file the pre-trial brief at least three days before the
pre-trial shall have the same effect as failure to appear at the pre-trial. Under Section 5 of the same
Rule, failure by plaintiff to appear at the pre-trial shall be cause for dismissal of the action. There is
grave abuse of discretion when a lower court or tribunal violates or contravenes the Constitution, the
law or existing jurisprudence.24

The fallo of the Decision of the Court of Appeals reads:

On 13 January 2004, the RTC, now presided by Judge Cesar O. Untalan (Judge Untalan), issued an
Order resolving the Motion for Reconsideration of BPI as follows:
WHEREFORE, premises considered, the petition is GRANTED. The Orders dated January 13, 2004
and March 3, 2004, of the Regional Trial Court of Makati City, Branch 149, in Civil Case No. 03-281 are
The Court finds merit in plaintiff’s motion.
hereby ANNULLED and SET ASIDE. The October 10, 2003 Order is hereby REINSTATED.25

Considering that although reglementary periods under the Rules of Court are to be strictly observed to
The Court of Appeals, in a Resolution dated 4 April 2007,26 denied the Motion for Reconsideration of
prevent needless delays, jurisprudence nevertheless allows the relaxation of procedural rules. Since
BPI for lack of merit.
technicalities are not ends in themselves but exist to protect and promote substantive rights of litigants
[Sy vs. CA, et al., G.R. No. 127263, April 12, 2000; Adamo vs. IAC, 191 SCRA 195 (1990); Far East
Marble (Phils.), Inc. vs. CA, 225 SCRA 249, 258 (1993)], in the interest of substantial justice, and Hence, this Petition where BPI raises the following issues:
without giving premium to technicalities, the motion for reconsideration is hereby granted.19
A. IS THE HONORABLE COURT OF APPEALS, IN ISSUING THE DECISION AND
At the end of its 13 January 2004 Order, the RTC disposed: RESOLUTION, CORRECT WHEN IT STRICTLY APPLIED THE RULES OF PROCEDURE.

Wherefore, the Order dated October 10, 2003 is hereby reconsidered and set aside. B. IS THE HONORABLE COURT OF APPEALS CORRECT WHEN IT DECLARED THAT
THE HONORABLE TRIAL COURT COMMITTED A GRAVE ABUSE OF DISCRETION
WHEN THE LATTER RECONSIDERED AND SET ASIDE THE ORDER (ANNEX "H" TO
Let this case be set for pre-trial anew on February 13, 2004 at 8:30 in the morning. Notify both parties
THE PETITION) DISMISSING THE CASE, DESPITE THE HONORABLE TRIAL COURT’S
and their respective counsel of this setting.20
DISCRETION OR POWER TO RELAX COMPLIANCE WITH THE RULES OF
PROCEDURE.27
It was then Dando’s turn to file a Motion for Reconsideration,21 which the RTC addressed in its Order
dated 3 March 2004, thus:
Relevant herein are the following provisions of the Rules of Court on pre-trial:

Finding no new issue raised in defendant’s motion, as to warrant a reconsideration of the assailed
Rule 18
Order dated January 13, 2004, the instant motion is hereby denied.
PRE-TRIAL

The Pre-trial set on March 19, 2004 at 8:30 in the morning shall proceed accordingly.22
SEC. 6. Pre-trial brief. – The parties shall file with the court and serve on the adverse party, in such
manner as shall ensure their receipt thereof at least three (3) days before the date of the pre-trial, their
Dando sought recourse from the Court of Appeals by filing a Petition for Certiorari under Rule 65 of the respective pre-trial briefs which shall contain, among others:
Rules of Court, docketed as CA-G.R. SP No. 82881.23 Dando averred that RTC Judge Untalan
committed grave abuse of discretion, amounting to lack or excess of jurisdiction, in issuing its Order
xxxx
dated 13 January 2004. The Court of Appeals rendered a Decision on 20 November 2006 where it held
that:
Failure to file the pre-trial brief shall have the same effect as failure to appear at the pre-trial.
In this case, the BPI stated in its motion for reconsideration of the order dismissing its action that the
delay in the filing of the pre-trial brief was solely due to the heavy load of paper work of its counsel, not SEC. 5. Effect of failure to appear. – The failure of the plaintiff to appear when so required pursuant to
to mention the daily hearings the latter had to attend. We find this excuse too flimsy to justify the the next preceding section shall be cause for dismissal of the action. The dismissal shall be with
reversal of an earlier order dismissing the action. The BPI did not come forward with the most prejudice, unless otherwise ordered by the court. A similar failure on the part of the defendant shall be
convincing reason for the relaxation of the rules, or has not shown any persuasive reason why it should cause to allow the plaintiff to present his evidence ex parte and the court to render judgment on the
be exempt from abiding by the rules. We therefore find the public respondent to have gravely abused basis thereof. (Emphases ours.)
his discretion in considering and granting the BPI’s motion for reconsideration. The BPI failed to even
try to come up with a good reason for its failure to file its pre-trial brief on time in order to relax the
It is a basic legal construction that where words of command such as "shall," "must," or "ought" are
application of the procedural rules. Heavy work load and court hearings cannot even be considered an
employed, they are generally and ordinarily regarded as mandatory. Thus, where, as in Rule 18,
excuse. The trial court cannot just set aside the rules of procedure and simply rely on the liberal
Sections 5 and 6 of the Rules of Court, the word "shall" is used, a mandatory duty is imposed, which Wherefore, premises considered, the instant Petition is GRANTED. The Decision dated 20 November
the courts ought to enforce.281avvphi1 2006 and Resolution dated 4 April 2007 of the Court of Appeals in CA-G.R. SP No. 82881 are
REVERSED and SET ASIDE. The Orders dated 13 January 2004 and 3 March 2004 in Civil Case No.
03-281, insofar as they set aside the prior Order dated 10 October 2003 of the same trial court
The Court is fully aware that procedural rules are not to be belittled or simply disregarded for these
dismissing the Complaint of petitioner Bank of the Philippine Islands for failure of the latter to timely file
prescribed procedures insure an orderly and speedy administration of justice. However, it is equally true
its Pre-Trial Brief, is REINSTATED. The Regional Trial Court of Makati City, Branch 149, is DIRECTED
that litigation is not merely a game of technicalities. Law and jurisprudence grant to courts the
to continue with the hearing of Civil Case No. 03-281 with utmost dispatch, until its termination. No
prerogative to relax compliance with procedural rules of even the most mandatory character, mindful of
costs.
the duty to reconcile both the need to put an end to litigation speedily and the parties’ right to an
opportunity to be heard.29
SO ORDERED.
This is not to say that adherence to the Rules could be dispensed with. However, exigencies and
situations might occasionally demand flexibility in their application.30 In not a few instances, the Court G.R. No. 177508               August 7, 2009
relaxed the rigid application of the rules of procedure to afford the parties the opportunity to fully
ventilate their cases on the merit. This is in line with the time-honored principle that cases should be
BARANGAY ASSOCIATION FOR NATIONAL ADVANCEMENT AND TRANSPARENCY (BANAT)
decided only after giving all parties the chance to argue their causes and defenses. Technicality and
PARTY-LIST, represented by SALVADOR B. BRITANICO, Petitioner, 
procedural imperfection should, thus, not serve as basis of decisions. In that way, the ends of justice
vs.
would be better served. For, indeed, the general objective of procedure is to facilitate the application of
COMMISSION ON ELECTIONS, Respondent.
justice to the rival claims of contending parties, bearing always in mind that procedure is not to hinder
but to promote the administration of justice.31
DECISION
In Sanchez v. Court of Appeals,32 the Court restated the reasons that may provide justification for a
court to suspend a strict adherence to procedural rules, such as: (a) matters of life, liberty, honor or CARPIO, J.:
property; (b) the existence of special or compelling circumstances; (c) the merits of the case; (d) a
cause not entirely attributable to the fault or negligence of the party favored by the suspension of the
The Case
rules; (e) a lack of any showing that the review sought is merely frivolous and dilatory; and (f) the fact
that the other party will not be unjustly prejudiced thereby.33
Before the Court is a petition for prohibition1 with a prayer for the issuance of a temporary restraining
order or a writ of preliminary injunction2 filed by petitioner Barangay Association for National
Herein, BPI instituted Civil Case No. 03-281 before the RTC to recover the amount it had lent to Dando,
Advancement and Transparency (BANAT) Party List (petitioner) assailing the constitutionality of
plus interest and penalties thereon, clearly, a matter of property. The substantive right of BPI to recover
Republic Act No. 9369 (RA 9369)3 and enjoining respondent Commission on Elections (COMELEC)
a due and demandable obligation cannot be denied or diminished by a rule of procedure,34 more so,
from implementing the statute.
since Dando admits that he did avail himself of the credit line extended by FEBTC, the predecessor-in-
interest of BPI, and disputes only the amount of his outstanding liability to BPI.35 To dismiss Civil Case
No. 03-281 with prejudice and, thus, bar BPI from recovering the amount it had lent to Dando would be RA 9369 is a consolidation of Senate Bill No. 2231 and House Bill No. 5352 passed by the Senate on 7
to unjustly enrich Dando at the expense of BPI. December 2006 and the House of Representatives on 19 December 2006. On 23 January 2007, less
than four months before the 14 May 2007 local elections, the President signed RA 9369. Two
newspapers of general circulation, Malaya and Business Mirror, published RA 9369 on 26 January
The counsel of BPI invokes "heavy pressures of work" to explain his failure to file the Pre-Trial Brief with
2007. RA 9369 thus took effect on 10 February 2007.
the RTC and to serve a copy thereof to Dando at least three days prior to the scheduled Pre-Trial
Conference.36 True, in Olave v. Mistas,37 we did not find "heavy pressures of work" as sufficient
justification for the failure of therein respondents’ counsel to timely move for pre-trial. However, unlike On 7 May 2007, petitioner, a duly accredited multi-sectoral organization, filed this petition for prohibition
the respondents in Olave,38 the failure of BPI to file its Pre-Trial Brief with the RTC and provide Dando alleging that RA 9369 violated Section 26(1), Article VI of the Constitution.4 Petitioner also assails the
with a copy thereof within the prescribed period under Section 1, Rule 18 of the Rules of Court, was the constitutionality of Sections 34, 37, 38, and 43 of RA 9369. According to petitioner, these provisions are
first and, so far, only procedural lapse committed by the bank in Civil Case No. 03-281. BPI did not of questionable application and doubtful validity for failing to comply with the provisions of the
manifest an evident pattern or scheme to delay the disposition of the case or a wanton failure to Constitution.
observe a mandatory requirement of the Rules. In fact, BPI, for the most part, exhibited diligence and
reasonable dispatch in prosecuting its claim against Dando by immediately moving to set Civil Case No.
03-281 for Pre-Trial Conference after its receipt of Dando’s Answer to the Complaint; and in The COMELEC and the Office of the Solicitor General (OSG) filed their respective Comments. At the
instantaneously filing a Motion for Reconsideration of the 10 October 2003 Order of the RTC dismissing outset, both maintain that RA 9369 enjoys the presumption of constitutionality, save for the prayer of
Civil Case No. 03-281. the COMELEC to declare Section 43 as unconstitutional.

Accordingly, the ends of justice and fairness would be best served if the parties to Civil Case No. 03- The Assailed Provisions of RA 9369
281 are given the full opportunity to thresh out the real issues and litigate their claims in a full-blown
trial. Besides, Dando would not be prejudiced should the RTC proceed with the hearing of Civil Case Petitioner assails the following provisions of RA 9369:
No. 03-281, as he is not stripped of any affirmative defenses nor deprived of due process of law.39
1. Section 34 which provides:
SEC. 34. Sec. 26 of Republic Act No. 7166 is hereby amended to read as follows:
"SEC. 26. Official Watchers. - Every registered political party or coalition of political parties, and every
candidate shall each be entitled to one watcher in every polling place and canvassing center: Provided
That, candidates for the Sangguniang Panlalawigan, Sangguniang Panlunsod, or Sangguniang Bayan
belonging to the same slate or ticket shall collectively be entitled to only one watcher.
"The dominant majority party and dominant minority party, which the Commission shall determine in
accordance with law, shall each be entitled to one official watcher who shall be paid a fixed per diem of
four hundred pesos (400.00).
"There shall also recognized six principal watchers, representing the six accredited major political
parties excluding the dominant majority and minority parties, who shall be designated by the
Commission upon nomination of the said parties. These political parties shall be determined by the
Commission upon notice and hearing on the basis of the following circumstances:
"(a) The established record of the said parties, coalition of groups that now composed them,
taking into account, among other things, their showing in past election;
"(b) The number of incumbent elective officials belonging to them ninety (90) days before the
date of election;
"(c) Their identifiable political organizations and strengths as evidenced by their
organized/chapters;
"(d) The ability to fill a complete slate of candidates from the municipal level to the position of
President; and
"(e) Other analogous circumstances that may determine their relative organizations and
strengths."
2. Section 37 which provides:
SEC. 37. Section 30 of Republic Act No. 7166 is hereby amended to read as follows:
"SEC. 30. Congress as the National Board of Canvassers for the Election of President and Vice
President: The Commission en banc as the National Board of Canvassers for the election of senators:
Determination of Authenticity and Due Execution of Certificates of Canvass. – Congress and the
Commission en banc shall determine the authenticity and due execution of the certificate of canvass for
president and vice president and senators, respectively, as accomplished and transmitted to it by the
local boards of canvassers, on a showing that: (1) each certificate of canvass was executed, signed
and thumbmarked by the chairman and members of the board of canvassers and transmitted or caused
to be transmitted to Congress by them; (2) each certificate of canvass contains the names of all of the
candidates for president and vice president or senator, as the case may be, and their corresponding
votes in words and their corresponding votes in words and in figures; (3) there exits no discrepancy in
other authentic copies of the certificates of canvass or any of its supporting documents such as
statement of votes by city/municipality/by precinct or discrepancy in the votes of any candidate in words
and figures in the certificate; and (4) there exist no discrepancy in the votes of any candidate in words
and figures in the certificates of canvass against the aggregate number of votes appearing in the
election returns of precincts covered by the certificate of canvass: Provided, That certified print copies
of election returns or certificates of canvass may be used for the purpose of verifying the existence of
the discrepancy.
"When the certificate of canvass, duly certified by the board of canvassers of each province, city of
district, appears to be incomplete, the Senate President or the Chairman of the Commission, as the
case may be, shall require the board of canvassers concerned to transmit by personal delivery, the
election returns form polling places that were not included in the certificate of canvass and supporting
statements. Said election returns shall be submitted by personal delivery within two (2) days from
receipt of notice.
"When it appears that any certificate of canvass or supporting statement of votes by city/municipality or
by precinct bears erasures or alteration which may cast doubt as to the veracity of the number of votes
stated herein and may affect the result of the election, upon requested of the presidential, vice
presidential or senatorial candidate concerned or his party, Congress or the Commission en banc, as
the case may be shall, for the sole purpose of verifying the actual number of votes cast for president,
vice president or senator, count the votes as they appear in the copies of the election returns submitted
to it.
"In case of any discrepancy, incompleteness, erasure or alteration as mentioned above, the procedure
on pre-proclamation controversies shall be adopted and applied as provided in Section 17,18,19 and
20.
"Any person who present in evidence a simulated copy of an election return, certificate of canvass or
statement of votes, or a printed copy of an election return, certificate of canvass or statement of votes
bearing a simulated certification or a simulated image, shall be guilty of an election offense shall be
penalized in accordance with Batas Pambansa Blg. 881."
3. Section 38 which provides:
SEC. 38. Section 15 of Republic Act No. 7166 is hereby amended to read as follows:
"SEC. 15. Pre-proclamation Cases in Elections for President, Vice President, Senator, and Member of
the House of Representatives. - For purposes of the elections for president, vice president, senator,
and member of the House of Representatives, no pre-proclamation cases shall be allowed on matters
relating to the preparation, transmission, receipt, custody and appreciation of election returns or the
certificates of canvass, as the case may be, except as provided for in Section 30 hereof. However, this
does not preclude the authority of the appropriate canvassing body motu proprio or upon written
complaint of an interested person to correct manifest errors in the certificate of canvass or election
returns before it.
"Questions affecting the composition or proceedings of the board of canvassers may be initiated in the
board or directly with the Commission in accordance with Section 19 hereof.
"Any objection on the election returns before the city or municipal board of canvassers, or on the
municipal certificates of canvass before the provincial board of canvassers or district board of
canvassers in Metro Manila Area, shall be specifically noticed in the minutes of the respective
proceedings."
4. Section 43 which provides:
SEC. 43. Section 265 of Batas Pambansa Blg. 881 is hereby amended to read as follows:
"SEC. 265. Prosecution. – The Commission shall, through its duly authorized legal officers, have the
power, concurrent with the other prosecuting arms of the government, to conduct preliminary
investigation of all election offenses punishable under this Code, and to prosecute the same."
The Issues
Petitioner raises the following issues:
1. Whether RA 9369 violates Section 26(1), Article VI of the Constitution;
Whether Sections 37 and 38 violate Section 17, Article VI5 and Paragraph 7, Section 4, Article VII6 of
the Constitution;
Whether Section 43 violates Section 2(6), Article IX-C of the Constitution;7 and
Whether Section 34 violates Section 10, Article III of the Constitution.8
The Court’s Ruling
The petition has no merit.
is settled that every statute is presumed to be constitutional.9 The presumption is that the legislature
intended to enact a valid, sensible and just law. Those who petition the Court to declare a law
unconstitutional must show that there is a clear and unequivocal breach of the Constitution, not merely
a doubtful, speculative or argumentative one; otherwise, the petition must fail.10
In this case, petitioner failed to justify why RA 9369 and the assailed provisions should be declared
unconstitutional.
RA 9369 does not violate Section 26(1), Article VI of the Constitution
Petitioner alleges that the title of RA 9369 is misleading because it speaks of poll automation but
contains substantial provisions dealing with the manual canvassing of election returns. Petitioner also
alleges that Sections 34, 37, 38, and 43 are neither embraced in the title nor germane to the subject
matter of RA 9369.
Both the COMELEC and the OSG maintain that the title of RA 9369 is broad enough to encompass
topics which deal not only with the automation process but with everything related to its purpose
encouraging a transparent, credible, fair, and accurate elections.
The constitutional requirement that "every bill passed by the Congress shall embrace only one subject
which shall be expressed in the title thereof" has always been given a practical rather than a technical
construction.11 The requirement is satisfied if the title is comprehensive enough to include subjects
related to the general purpose which the statute seeks to achieve.12 The title of a law does not have to
be an index of its contents and will suffice if the matters embodied in the text are relevant to each other
and may be inferred from the title.13 Moreover, a title which declares a statute to be an act to amend a
specified code is sufficient and the precise nature of the amendatory act need not be further stated.14
RA 9369 is an amendatory act entitled "An Act Amending Republic Act No. 8436, Entitled ‘An Act
Authorizing the Commission on Elections to Use an Automated Election System in the May 11, 1998
National or Local Elections and in Subsequent National and Local Electoral Exercises, to Encourage
Transparency, Credibility, Fairness and Accuracy of Elections, Amending for the Purpose Batas
Pambansa Blg. 881, as Amended, Republic Act No. 7166 and Other Related Election Laws, Providing
Funds Therefor and For Other Purposes.’" Clearly, the subject matter of RA 9369 covers the
amendments to RA 8436, Batas Pambansa Blg. 881 (BP 881),15 Republic Act No. 7166 (RA
7166),16 and other related election laws to achieve its purpose of promoting transparency, credibility,
fairness, and accuracy in the elections. The provisions of RA 9369 assailed by petitioner deal with
amendments to specific provisions of RA 7166 and BP 881, specifically: (1) Sections 34, 37 and 38
amend Sections 26, 30 and 15 of RA 7166, respectively; and (2) Section 43 of RA 9369 amends
Section 265 of BP 881. Therefore, the assailed provisions are germane to the subject matter of RA
9369 which is to amend RA 7166 and BP 881, among others.
Sections 37 and 38 do not violate Section 17, Article VI and Paragraph 7, Section 4, Article VII of the
Constitution
Petitioner argues that Sections 37 and 38 violate the Constitution by impairing the powers of the
Presidential Electoral Tribunal (PET) and the Senate Electoral Tribunal (SET). According to petitioner,
under the amended provisions, Congress as the National Board of Canvassers for the election of
President and Vice President (Congress), and the COMELEC en banc as the National Board of
Canvassers (COMELEC en banc), for the election of Senators may now entertain pre-proclamation
cases in the election of the President, Vice President, and Senators. Petitioner concludes that in
entertaining pre-proclamation cases, Congress and the COMELEC en banc undermine the
independence and encroach upon the jurisdiction of the PET and the SET.
The COMELEC maintains that the amendments introduced by Section 37 pertain only to the adoption
and application of the procedures on pre-proclamation controversies in case of any discrepancy,
incompleteness, erasure or alteration in the certificates of canvass. The COMELEC adds that Section
37 does not provide that Congress and the COMELEC en banc may now entertain pre-proclamation
cases for national elective posts.1avvphi1
OSG argues that the Constitution does not prohibit pre-proclamation cases involving national elective
posts. According to the OSG,
only Section 15 of RA 716617 expressly disallows pre-proclamation cases involving national elective
posts but this provision was subsequently amended by Section 38 of RA 9369.
In Pimentel III v. COMELEC,18 we already discussed the implications of the amendments introduced by
Sections 37 and 38 to Sections 15 and 3019 of RA 7166, respectively and we declared:
Indeed, this Court recognizes that by virtue of the amendments introduced by Republic Act No. 9369 to
Sections 15 and 30 of Republic Act No. 7166, pre-proclamation cases involving the authenticity and
due execution of certificates of canvass are now allowed in elections for President, Vice-President, and
Senators. The intention of Congress to treat a case falling under Section 30 of Republic Act No. 7166,
as amended by Republic Act No. 9369, as a pre-proclamation case is apparent in the fourth paragraph
of the said provision which adopts and applies to such a case the same procedure provided under
Sections 17, 18, 19 and 20 of Republic Act No. 7166 on pre-proclamation controversies.
In sum, in [the] elections for President, Vice-President, Senators and Members of the House of
Representatives, the general rule is still that pre-proclamation cases on matters relating to the
preparation, transmission, receipt, custody and appreciation of election returns or certificates of
canvass are still prohibited. As with other general rules, there are recognized exceptions to the
prohibition, namely: (1) correction of manifest errors; (2) questions affecting the composition or
proceeding of the board of canvassers; and (3) determination of the authenticity and due execution of
certificates of canvass as provided in Section 30 of Republic Act No. 7166, as amended by Republic
Act No. 9369.20
In the present case, Congress and the COMELEC en banc do not encroach upon the jurisdiction
of the PET and the SET. There is no conflict of jurisdiction since the powers of Congress and
the COMELEC en banc, on one hand, and the PET and the SET, on the other, are exercised on
different occasions and for different purposes. The PET is the sole judge of all contests relating
to the election, returns and qualifications of the President or Vice President. The SET is the sole
judge of all contests relating to the election, returns, and qualifications of members of the
Senate. The jurisdiction of the PET and the SET can only be invoked once the winning
presidential, vice presidential or senatorial candidates have been proclaimed. On the other
hand, under Section 37, Congress and the COMELEC en banc shall determine only the
authenticity and due execution of the certificates of canvass. Congress and the COMELEC en
banc shall exercise this power before the proclamation of the winning presidential, vice
presidential, and senatorial candidates.
Section 43 does not violate Section 2(6), Article IX-C of the Constitution
Both petitioner and the COMELEC argue that the Constitution vests in the COMELEC the "exclusive
power" to investigate and prosecute cases of violations of election laws. Petitioner and the COMELEC
allege that Section 43 is unconstitutional because it gives the other prosecuting arms of the government
concurrent power with the COMELEC to investigate and prosecute election offenses.21
We do not agree with petitioner and the COMELEC that the Constitution gave the COMELEC the
"exclusive power" to investigate and prosecute cases of violations of election laws.
Section 2(6), Article IX-C of the Constitution vests in the COMELEC the power to "investigate and,
where appropriate, prosecute cases of violations of election laws, including acts or omissions
constituting election frauds, offenses, and malpractices." This was an important innovation introduced
by the Constitution because this provision was not in the 193522 or 197323 Constitutions.24 The phrase
"[w]here appropriate" leaves to the legislature the power to determine the kind of election offenses that
the COMELEC shall prosecute exclusively or concurrently with other prosecuting arms of the
government.
The grant of the "exclusive power" to the COMELEC can be found in Section 265 of BP 881, which
provides:
Sec. 265. Prosecution. - The Commission shall, through its duly authorized legal officers, have the
exclusive power to conduct preliminary investigation of all election offenses punishable under this
Code, and to prosecute the same. The Commission may avail of the assistance of other prosecuting
arms of the government: Provided, however, That in the event that the Commission fails to act on any
complaint within four months from his filing, the complainant may file the complaint with the office of the
fiscal or with the Ministry of Justice for proper investigation and prosecution, if warranted. (Emphasis
supplied)
This was also an innovation introduced by BP 881. The history of election laws shows that prior to BP
881, no such "exclusive power" was ever bestowed on the COMELEC.25
We also note that while Section 265 of BP 881 vests in the COMELEC the "exclusive power" to conduct
preliminary investigations and prosecute election offenses, it likewise authorizes the COMELEC to avail
itself of the assistance of other prosecuting arms of the government. In the 1993 COMELEC Rules of
Procedure, the authority of the COMELEC was subsequently qualified and explained.26 The 1993
COMELEC Rules of Procedure provides:
Rule 34 - Prosecution of Election Offenses
Sec. 1. Authority of the Commission to Prosecute Election Offenses. - The Commission shall
have the exclusive power to conduct preliminary investigation of all election offenses
punishable under the election laws and to prosecute the same, except as may otherwise be
provided by law. (Emphasis supplied)
It is clear that the grant of the "exclusive power" to investigate and prosecute election offenses to the
COMELEC was not by virtue of the Constitution but by BP 881, a legislative enactment. If the intention
of the framers of the Constitution were to give the COMELEC the "exclusive power" to investigate and
prosecute election offenses, the framers would have expressly so stated in the Constitution. They did
not.
In People v. Basilla,27 we acknowledged that without the assistance of provincial and city fiscals and
their assistants and staff members, and of the state prosecutors of the Department of Justice, the
prompt and fair investigation and prosecution of election offenses committed before or in the course of
nationwide elections would simply not be possible.28 In COMELEC v. Español,29 we also stated that
enfeebled by lack of funds and the magnitude of its workload, the COMELEC did not have a sufficient
number of legal officers to conduct such investigation and to prosecute such cases.30 The prompt
investigation, prosecution, and disposition of election offenses constitute an indispensable part of the
task of securing free, orderly, honest, peaceful, and credible elections.31 Thus, given the plenary power
of the legislature to amend or repeal laws, if Congress passes a law amending Section 265 of BP 881,
such law does not violate the Constitution.
Section 34 does not violate Section 10, Article III of the Constitution
assails the constitutionality of the provision which fixes the per diem of poll watchers of the dominant
majority and dominant minority parties at ₱on election day. Petitioner argues that this violates the
freedom of the parties to contract and their right to fix the terms and conditions of the contract they see
as fair, equitable and just. Petitioner adds that this is a purely private contract using private funds which
cannot be regulated by law.
The OSG argues that petitioner erroneously invoked the non-impairment clause because this only
applies to previously perfected contracts. In this case, there is no perfected contact and, therefore, no
obligation will be impaired.
Both the COMELEC and the OSG argue that the law is a proper exercise of police power and it will
prevail over a contract. According to the COMELEC, poll watching is not just an ordinary contract but is
an agreement with the solemn duty to ensure the sanctity of votes. The role of poll watchers is vested
with public interest which can be regulated by Congress in the exercise of its police power. The OSG
further argues that the assurance that the poll watchers will receive fair and equitable compensation
promotes the general welfare. The OSG also states that this was a reasonable regulation considering
that the dominant majority and minority parties will secure a copy of the election returns and are given
the right to assign poll watchers inside the polling precincts.
There is no violation of the non-impairment clause. First, the non- impairment clause is limited in
application to laws that derogate from prior acts or contracts by enlarging, abridging or in any manner
changing the intention of the parties.32 There is impairment if a subsequent law changes the terms of a
contract between the parties, imposes new conditions, dispenses with those agreed upon or withdraws
remedies for the enforcement of the rights of the parties.33
As observed by the OSG, there is no existing contract yet and, therefore, no enforceable right or
demandable obligation will be impaired. RA 9369 was enacted more than three months prior to the 14
May 2007 elections. Hence, when the dominant majority and minority parties hired their respective poll
watchers for the 14 May 2007 elections, they were deemed to have incorporated in their contracts all
the provisions of RA 9369.
Second, it is settled that police power is superior to the non-impairment clause.34 The constitutional
guaranty of non-impairment of contracts is limited by the exercise of the police power of the State, in
the interest of public health, safety, morals, and general welfare of the community.
Section 8 of COMELEC Resolution No. 140535 specifies the rights and duties of poll watchers:
The watchers shall have the right to stay in the space reserved for them inside the polling place. They
shall have the right to witness and inform themselves of the proceedings of the board; to take notes of
what they may see or hear, to take photographs of the proceedings and incidents, if any, during the
counting of votes, as well as the election returns, tally board and ballot boxes; to file a protest against
any irregularity or violation of law which they believe may have been committed by the board or by any
of its members or by any person; to obtain from the board a certificate as to the filing of such protest
and/or of the resolution thereon; to read the ballots after they shall have been read by the chairman, as
well as the election returns after they shall have been completed and signed by the members of the
board without touching them, but they shall not speak to any member of the board, or to any voter, or
among themselves, in such a manner as would disturb the proceedings of the board; and to be
furnished, upon request, with a certificate of votes for the candidates, duly signed and thumbmarked by
the chairman and all the members of the board of election inspectors.
Additionally, the poll watchers of the dominant majority and minority parties in a precinct shall, if
available, affix their signatures and thumbmarks on the election returns for that precinct.36 The dominant
majority and minority parties shall also be given a copy of the certificates of canvass37 and election
returns38 through their respective poll watchers. Clearly, poll watchers play an important role in the
elections.
Moreover, while the contracting parties may establish such stipulations, clauses, terms, and conditions
as they may deem convenient, such stipulations should not be contrary to law, morals, good customs,
public order, or public policy.39
In Beltran v. Secretary of Health,40 we said:
Furthermore, the freedom to contract is not absolute; all contracts and all rights are subject to the
police power of the State and not only may regulations which affect them be established by the State,
but all such regulations must be subject to change from time to time, as the general well-being of the
community may require, or as the circumstances may change, or as experience may demonstrate the
necessity.41 (Emphasis supplied)
Therefore, assuming there were existing contracts, Section 34 would still be constitutional because the
law was enacted in the exercise of the police power of the State to promote the general welfare of the
people. We agree with the COMELEC that the role of poll watchers is invested with public interest. In
fact, even petitioner concedes that poll watchers not only guard the votes of their respective candidates
or political parties but also ensure that all the votes are properly counted. Ultimately, poll watchers aid
in fair and honest elections. Poll watchers help ensure that the elections are transparent, credible, fair,
and accurate. The regulation of the per diem of the poll watchers of the dominant majority and minority
parties promotes the general welfare of the community and is a valid exercise of police power.
WHEREFORE, we DISMISS the petition for lack of merit.
SO ORDERED.
G.R. No. 138218             March 17, 2000
CLAUDIUS C. BARROSO, petitioner, 
vs.
HONORABLE FRANCISCO S. AMPIG, JR., in his capacity as Acting Judge of the RTC, Br. 24,
11th Judicial Region, Koronadal, South Cotabato, and DR. EMERICO V.
ESCOBILLO, respondents.
PUNO, J.:
Petitioner files this petition under Rule 65 of the 1997 Rules of Civil Procedure questioning the orders
dated November 23, 1998 and February 24, 1999 of the Regional Trial Court, Eleventh Judicial Region,
Branch 24, Koronadal, South Cotabato. Respondent trial court denied petitioner's motion to dismiss the
petition in an election contest filed by private respondent.
Petitioner Claudius G. Barroso and private respondent Emerico V. Escobilio were candidates for mayor
of the municipality of Tampakan, Cotabato in May 11, 1998 elections. Private respondent and filed with
the Commission on Elections (Comelec) several cases against petitioner. He filed SPC 98-009, a pre-
proclamation protest under Section 234 of the Omnibus Election Code alleging massive vote-buying,
bribery, terrorism by petitioner and opening of ballot boxes outside the precincts in at least thirteen (13)
of the sixty-three (63) precincts in the municipality. Private respondent also filed SPC 98-124, another
pre-proclamation case under Section 241 of the Omnibus Election Code. In addition, he filed SPA 98-
359 for petitioner's disqualification alleging election offenses committed by the latter. He likewise filed
two (2) criminal complaints against petitioner with the Law Department of the Comelec: Election
Offense Case No. 161 for illegal possession of firearm and violation of the gun ban, and Election
Offense Case. No. 177 for massive vote-buying.
On July 9, 1998, the Comelec First Division, issued a Resolution dismissing SPC 98-124. Private
respondent moved for reconsideration on June 26, 1998.
On July 14, 1998, the Comelec First Division, issued another Resolution dismissing SPC 98-009
without prejudice to the filing of a proper election protest. The dispositive portion of the Resolution
reads:
WHEREFORE, it being that the complaint alleges grounds which are not proper for a pre-
proclamation issue, the petition is hereby DISMISSED without prejudice to the petitioner's
action for relief in the proper election protest.1âwphi1.nêt
SO ORDERED.1
Private respondent moved for reconsideration of this Resolution.
On July 17, 1998, the Municipal Board of Canvassers of Tampakan proclaimed petitioner as the
winning mayoralty candidate.
On July 27, 1998, private respondent filed with the Regional Trial court, Branch 24, Koronadal, South
Cotabato a petition contesting petitioner's election. The election contest was docketed as E.C. Case
No. 15-24. Private respondent certified in his petition that SPA 98-359 and Election Offense Cases Nos.
161 and 177 were then pending.
Petitioner raised several affirmative defense in his answer, particularly, private respondent's failure to
disclose to the court the pendency of the two (2) pre-proclamation controversies — SPC 98-009 and
SPC 98-124. Petitioner thereafter filed a Motion for Preliminary Hearing on his affirmative defenses and
sought the dismissal of the petition for non-compliance with Supreme Court Administrative Circular No.
04-94 and Section 5, Rule 7 of the 1997 Rules on Civil Procedure. The motion was granted and the
parties were required to submit their respective memoranda.
On November 23, 1998, the trial court issued an order denying petitioner's motion to dismiss. Thus:
ACCORDINGLY, for lack of merit the protestee's affirmative and special defense of lack of
proper certification against forum shopping is denied.
SO ORDERED.2
Private respondent moved for reconsideration which was denied on February 24, 1999. Hence this
recourse.
This petition involves the sole issue of whether the election contest case, E.C. Case No. 15-24, should
be dismissed in view of private respondent's failure to declare in his certification against forum shopping
the existence of two pre-proclamation cases then pending with the Comelec.
The certification against forum shopping is required under Section 5, Rule 7 of the 1997 Rules of Civil
Procedure, viz:
Sec. 5. Certification against forum shopping. — The plaintiff or principal party shall certify
under oath in the complaint or other initiatory pleading asserting a claim for relief, or in a
sworn certification annexed thereto and simultaneously filed therewith: (a) that he has not
theretofore commenced any action or filed any claim involving the same issues in any court,
tribunal or quasi-judicial agency and, to the best of his knowledge, no such other action or
claim is pending therein; (b) if there is such other pending action or claim, a complete
statement of the present status thereof; and (c) if he should thereafter learn that the same or
similar action or claim has been filed or is pending, he shall report that fact within five (5)
days therefrom to the court wherein his aforesaid complaint or initiatory pleading has been
filed.
Failure to comply with the foregoing requirements shall not be curable by mere amendment
of the complaint or other initiatory pleading but shall be cause for the dismissal of the case
without prejudice, unless otherwise provided, upon motion and after hearing. The submission
of a false certification or non-compliance with any of the undertakings therein shall constitute
indirect contempt of court, without prejudice to the corresponding administrative and criminal
actions. If the acts of the party or his counsel clearly constitute willful and deliberate forum
shopping, the same shall be ground for summary dismissal with prejudice and shall constitute
direct contempt as well as a cause for administrative sanctions.
In a complaint or other pleading initiating an action in court, the plaintiff or principal party shall certify as
to three undertakings: (a) that he has not commenced any action or filed any claim involving the same
issues in any court, tribunal or quasi-judicial agency and, to the best of his knowledge, no such other
action or claim is pending therein; (b) if there is such other pending action or claim, he should make a
complete statement of the present status of said action or claim; and (c) if he should thereafter learn
that the same or similar action has been filed or is pending in any court, tribunal or quasi-judicial
agency, he shall report that, fact within five (5) days therefrom to the court where his complaint or
initiatory pleading has been filed. Failure to comply with these requirements shall be cause for dismissal
of the case without prejudice or with prejudice but only upon motion and after hearing. The submission
of a false certification or the non-compliance with any of the undertakings therein may subject the party
to indirect contempt of court as well as administrative and criminal actions. If the party's or his counsel's
acts constitute willful and deliberate forum shopping, the same shall be a ground for summary dismissal
of the case with prejudice, and the imposition of direct contempt and administrative sanctions.
The foregoing provision was taken with modification from Administrative Circular No. 04-94 issued by
the Supreme Court on February 8, 1994.3 This Circular complements Revised Circular No. 28-91
designed "to prevent the multiple filing of petitions or complaints involving the same issues in other
tribunals or agencies as a form of forum shopping."4
In the case at bar, the certification against forum shopping of private respondent declared the pendency
of SPA 98-359 and Election Offense Cases Nos. 161 and 177. No reference was made to SPC 98-009
and SPC 98-124, the two pre-proclamation controversies also pending before the Comelec. Petitioner
alleges that private respondent engaged in forum shopping by deliberately concealing from the trial
court the existence of these two cases.5 Private respondent, on the other hand, claims that there was no
need to mention the two cases because they were deemed abandoned and rendered moot and
academic upon the filing of the election contest.6
SPC 98-124 was terminated pursuant to the provisions of Section 16 of Republic Act (R.A.) No. 7166
and Comelec Omnibus Resolution No. 3049 on pending cases dated June 29, 1998. All pre-
proclamation cases pending before the Comelec in the May 11, 1998 elections were deemed
terminated at noon of June 30, 1998, the beginning of the term of office involved; and the rulings of the
board of canvassers concerned were deemed affirmed, without prejudice to the filing of a regular
election protest by the aggrieved party. SPC 98-124 before the Comelec was an appeal from the ruling
of the board of canvassers,7 hence, was deemed terminated by noon of June 30, 1998. When private
respondent filed the election contest on July 27, 1998, SPC 98-124 had already been terminated.
SPC 98-009 which was originally filed with the Comelec nevertheless continued pursuant to the same
R.A. 7166 and Comelec Omnibus Resolution 3049. On July 14, 1998, a Resolution was issued by the
Comelec, First Division, dismissing SPC 98-009. Private respondent forthwith moved for
reconsideration. It was during the pendency of this motion that private respondent filed E.C. Case No.
15-24. And yet he failed to mention the filing of both SPC 98-124 and SPC 98-009 and the pendency of
SPC 98-009 in the certification against forum shopping. This failure, however, does not mandate the
outright dismissal of E.C. Case No. 15-24.
E.C. Case No. 15-24 is not governed by the Rules of Civil Procedure.1âwphi1 The Rules of Civil
Procedure generally do not apply to election cases. They apply only by analogy or in a suppletory
character and whenever practicable and convenient.8 Election contests are subject to the Comelec
Rules of Procedure. Rule 35 thereof governs election contests involving elective municipal officials
before the Regional Trial Courts.9 Rule 35 does not require that the petition contesting the election of
any municipal official be accompanied by a certification or any statement against forum shopping.
Applying the Rules of Civil Procedure suppletorily, the failure to comply with the non-forum shopping
requirements of Section 5 of Rule 7 does not automatically warrant the dismissal of the case with
prejudice as petitioner insists. The Rule states that the dismissal is without prejudice. The dismissal
may be with prejudice but only upon motion and after hearing. Here, a motion was made by petitioner
and a hearing conducted by the trial court. The court found that there was a certificate against forum
shopping attached to the petition but the certificate did not completely state all the cases filed and
pending at the time of filing of the petition. There was no allegation that private respondent submitted a
false certification as to constitute contempt of court. Neither was there evidence that private respondent
and his counsels committed acts amounting to a willful and deliberate forum shopping as to warrant the
summary dismissal of the case and the imposition of direct contempt on them. Accordingly, the trial
court found it just and proper not to dismiss the case.
Private respondent has explained that despite the pendency of his motion for reconsideration in SPC
98-009, the pre-proclamation case, he was compelled to file the election contest as a result of
petitioner's proclamation by the Municipal Board of Canvassers. Under the Comelec Rules of
Procedure, a petition contesting the election of any municipal official must be filed within ten (10) days
following the date of proclamation of the results of the election. 10This period is mandatory and
jurisdictional. 11 When no action was taken by the Comelec in SPC 98-009, private respondent filed the
election contest on July 27, 1998, the tenth day after petitioner's proclamation on July 17, 1998. It was
only on January 19, 1999, six (6) months later, that the Comelec en banc rendered a Resolution
denying private respondent's motion for reconsideration and affirming the July 4, 1998 Resolution of the
Comelec, First Division. 12
Private respondent alleges that when he filed the election contest, he automatically abandoned SPC
98-009. His acts, however, show otherwise. At the time the trial court rendered its questioned order of
November 23, 1998, it had no knowledge that private respondent had already abandoned SPC 98-009.
The trial court itself urged in said order that private respondent "would do well to make a definite choice
of his remedy." 13 In addition, there is petitioner's allegation that after the filing of the election contest,
the Comelec, First Division, issued an order giving due course to private respondent's motion for
reconsideration and at the same time certifying SPC 98-009 to the Comelec en banc. Private
respondent received a copy of this order on August 5, 1998. He failed to report this Order to the trial
court within five (5) days from its receipt, in violation of one of the undertakings in the certificate against
forum shopping.14 This allegation has not been rebutted by private respondent.
Be that as it may, in dismissing SPC 98-009, the Comelec First Division, itself noted that the issues
raised therein were not proper for a pre-proclamation case, but should be made in an election protests,
E.C. Case No. 15-24 is precisely the election protest.1âwphi1.nêt
The strict application of non-forum shopping rule in the case at bar would not work to the best interest
of the parties and the electorate. An election contest, unlike an ordinary civil action, is clothed with a
public interest. The purpose of an election protest ascertain whether the candidate proclaimed by the
board of canvassers is the lawful choice of the people. What is sought is the correction of the canvass
of votes, which was the basis of proclamation of the winning candidate. 15 An election contest therefore
involves not only the adjudication of private and pecuniary interests of rival candidates but paramount to
their claims is the deep public concern involved and the need of dispelling the uncertainty over the real
choice of the electorate. And the court has the corresponding duty to ascertain by all means within its
command who is the real candidate elected by the people. 16
Moreover, the Comelec Rules of Procedure are subject to a liberal construction. This liberality is for the
purpose of promoting the effective and efficient implementation of the objectives of ensuring the holding
of free, orderly, honest, peaceful and credible elections and for achieving just, expeditious and
inexpensive determination and disposition of every action and proceeding brought before the
Comelec. 17 Thus we have declared:
It has been frequently decided, and it may be stated as a general rule recognized by all
courts, that statutes providing for election contests are to be liberally construed to the end
that the will of the people in the choice of public officers may not be defeated by mere
technical objections. An election contest, unlike an ordinary action, is imbued with public
interest since it involves not only the adjudication of the private interests of rival candidates
but also the paramount need of dispelling the uncertainty which beclouds the real choice of
the electorate with respect to who shall discharge the prerogatives of the office within their
gift. Moreover, it is neither fair nor just to keep in office for an uncertain period one whose
right to it is under suspicion. It is imperative that his claim be immediately cleared not only for
the benefit of the winner but for the sake of public interest, which can only be achieved by
brushing aside technicalities of procedure which protract and delay the trial of an ordinary
action. 18
Similarly, the Rules of Civil Procedure on forum shopping should be applied with liberality. In the instant
case, the revision of ballots has already started in ten (10) precincts. The right of the people of
Tampakan to freely express their choice of representative through a free and honest election should not
be smothered by a strict adherence to technical rules of procedure.
IN VIEW WHEREOF, the petition is dismissed.
SO ORDERED.
G.R. No. 91649             May 14, 1991
ATTORNEYS HUMBERTO BASCO, EDILBERTO BALCE, SOCRATES MARANAN AND LORENZO
SANCHEZ,petitioners, 
vs.
PHILIPPINE AMUSEMENTS AND GAMING CORPORATION (PAGCOR), respondent.
H.B. Basco & Associates for petitioners.
Valmonte Law Offices collaborating counsel for petitioners.
Aguirre, Laborte and Capule for respondent PAGCOR.
PARAS, J.:
A TV ad proudly announces:
"The new PAGCOR — responding through responsible gaming."
But the petitioners think otherwise, that is why, they filed the instant petition seeking to annul the
Philippine Amusement and Gaming Corporation (PAGCOR) Charter — PD 1869, because it is allegedly
contrary to morals, public policy and order, and because —
A. It constitutes a waiver of a right prejudicial to a third person with a right recognized by law.
It waived the Manila City government's right to impose taxes and license fees, which is
recognized by law;
 B. For the same reason stated in the immediately preceding paragraph, the law has intruded
into the local government's right to impose local taxes and license fees. This, in contravention
of the constitutionally enshrined principle of local autonomy;
C. It violates the equal protection clause of the constitution in that it legalizes PAGCOR —
conducted gambling, while most other forms of gambling are outlawed, together with
prostitution, drug trafficking and other vices;
D. It violates the avowed trend of the Cory government away from monopolistic and crony
economy, and toward free enterprise and privatization. (p. 2, Amended Petition; p. 7, Rollo)
In their Second Amended Petition, petitioners also claim that PD 1869 is contrary to the declared
national policy of the "new restored democracy" and the people's will as expressed in the 1987
Constitution. The decree is said to have a "gambling objective" and therefore is contrary to Sections 11,
12 and 13 of Article II, Sec. 1 of Article VIII and Section 3 (2) of Article XIV, of the present Constitution
(p. 3, Second Amended Petition; p. 21, Rollo).
The procedural issue is whether petitioners, as taxpayers and practicing lawyers (petitioner Basco
being also the Chairman of the Committee on Laws of the City Council of Manila), can question and
seek the annulment of PD 1869 on the alleged grounds mentioned above.
The Philippine Amusements and Gaming Corporation (PAGCOR) was created by virtue of P.D. 1067-A
dated January 1, 1977 and was granted a franchise under P.D. 1067-B also dated January 1, 1977 "to
establish, operate and maintain gambling casinos on land or water within the territorial jurisdiction of the
Philippines." Its operation was originally conducted in the well known floating casino "Philippine
Tourist." The operation was considered a success for it proved to be a potential source of revenue to
fund infrastructure and socio-economic projects, thus, P.D. 1399 was passed on June 2, 1978 for
PAGCOR to fully attain this objective.
Subsequently, on July 11, 1983, PAGCOR was created under P.D. 1869 to enable the Government to
regulate and centralize all games of chance authorized by existing franchise or permitted by law, under
the following declared policy —
Sec. 1. Declaration of Policy. — It is hereby declared to be the policy of the State to
centralize and integrate all games of chance not heretofore authorized by existing franchises
or permitted by law in order to attain the following objectives:
(a) To centralize and integrate the right and authority to operate and conduct games of
chance into one corporate entity to be controlled, administered and supervised by the
Government.
(b) To establish and operate clubs and casinos, for amusement and recreation, including
sports gaming pools, (basketball, football, lotteries, etc.) and such other forms of amusement
and recreation including games of chance, which may be allowed by law within the territorial
jurisdiction of the Philippines and which will: (1) generate sources of additional revenue to
fund infrastructure and socio-civic projects, such as flood control programs, beautification,
sewerage and sewage projects, Tulungan ng Bayan Centers, Nutritional Programs,
Population Control and such other essential public services; (2) create recreation and
integrated facilities which will expand and improve the country's existing tourist attractions;
and (3) minimize, if not totally eradicate, all the evils, malpractices and corruptions that are
normally prevalent on the conduct and operation of gambling clubs and casinos without direct
government involvement. (Section 1, P.D. 1869)
To attain these objectives PAGCOR is given territorial jurisdiction all over the Philippines. Under its
Charter's repealing clause, all laws, decrees, executive orders, rules and regulations, inconsistent
therewith, are accordingly repealed, amended or modified.
It is reported that PAGCOR is the third largest source of government revenue, next to the Bureau of
Internal Revenue and the Bureau of Customs. In 1989 alone, PAGCOR earned P3.43 Billion, and
directly remitted to the National Government a total of P2.5 Billion in form of franchise tax, government's
income share, the President's Social Fund and Host Cities' share. In addition, PAGCOR sponsored
other socio-cultural and charitable projects on its own or in cooperation with various governmental
agencies, and other private associations and organizations. In its 3 1/2 years of operation under the
present administration, PAGCOR remitted to the government a total of P6.2 Billion. As of December 31,
1989, PAGCOR was employing 4,494 employees in its nine (9) casinos nationwide, directly supporting
the livelihood of Four Thousand Four Hundred Ninety-Four (4,494) families.
But the petitioners, are questioning the validity of P.D. No. 1869. They allege that the same is "null and
void" for being "contrary to morals, public policy and public order," monopolistic and tends toward
"crony economy", and is violative of the equal protection clause and local autonomy as well as for
running counter to the state policies enunciated in Sections 11 (Personal Dignity and Human Rights),
12 (Family) and 13 (Role of Youth) of Article II, Section 1 (Social Justice) of Article XIII and Section 2
(Educational Values) of Article XIV of the 1987 Constitution.
This challenge to P.D. No. 1869 deserves a searching and thorough scrutiny and the most deliberate
consideration by the Court, involving as it does the exercise of what has been described as "the highest
and most delicate function which belongs to the judicial department of the government." (State v.
Manuel, 20 N.C. 144; Lozano v. Martinez, 146 SCRA 323).
As We enter upon the task of passing on the validity of an act of a co-equal and coordinate branch of
the government We need not be reminded of the time-honored principle, deeply ingrained in our
jurisprudence, that a statute is presumed to be valid. Every presumption must be indulged in favor of its
constitutionality. This is not to say that We approach Our task with diffidence or timidity. Where it is
clear that the legislature or the executive for that matter, has over-stepped the limits of its authority
under the constitution, We should not hesitate to wield the axe and let it fall heavily, as fall it must, on
the offending statute (Lozano v. Martinez, supra).
In Victoriano v. Elizalde Rope Workers' Union, et al, 59 SCRA 54, the Court thru Mr. Justice Zaldivar
underscored the —
. . . thoroughly established principle which must be followed in all cases where questions of
constitutionality as obtain in the instant cases are involved. All presumptions are indulged in
favor of constitutionality; one who attacks a statute alleging unconstitutionality must prove its
invalidity beyond a reasonable doubt; that a law may work hardship does not render it
unconstitutional; that if any reasonable basis may be conceived which supports the statute, it
will be upheld and the challenger must negate all possible basis; that the courts are not
concerned with the wisdom, justice, policy or expediency of a statute and that a liberal
interpretation of the constitution in favor of the constitutionality of legislation should be
adopted. (Danner v. Hass, 194 N.W. 2nd534, 539; Spurbeck v. Statton, 106 N.W. 2nd 660,
663; 59 SCRA 66; see also e.g. Salas v. Jarencio, 46 SCRA 734, 739 [1970]; Peralta v.
Commission on Elections, 82 SCRA 30, 55 [1978]; and Heirs of Ordona v. Reyes, 125 SCRA
220, 241-242 [1983] cited in Citizens Alliance for Consumer Protection v. Energy Regulatory
Board, 162 SCRA 521, 540)
Of course, there is first, the procedural issue. The respondents are questioning the legal personality of
petitioners to file the instant petition.
Considering however the importance to the public of the case at bar, and in keeping with the Court's
duty, under the 1987 Constitution, to determine whether or not the other branches of government have
kept themselves within the limits of the Constitution and the laws and that they have not abused the
discretion given to them, the Court has brushed aside technicalities of procedure and has taken
cognizance of this petition. (Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas Inc. v. Tan, 163
SCRA 371)
With particular regard to the requirement of proper party as applied in the cases before us,
We hold that the same is satisfied by the petitioners and intervenors because each of them
has sustained or is in danger of sustaining an immediate injury as a result of the acts or
measures complained of. And even if, strictly speaking they are not covered by the definition,
it is still within the wide discretion of the Court to waive the requirement and so remove the
impediment to its addressing and resolving the serious constitutional questions raised.
In the first Emergency Powers Cases, ordinary citizens and taxpayers were allowed to
question the constitutionality of several executive orders issued by President Quirino
although they were involving only an indirect and general interest shared in common with the
public. The Court dismissed the objection that they were not proper parties and ruled that "the
transcendental importance to the public of these cases demands that they be settled
promptly and definitely, brushing aside, if we must technicalities of procedure." We have
since then applied the exception in many other cases. (Association of Small Landowners in
the Philippines, Inc. v. Sec. of Agrarian Reform, 175 SCRA 343).
Having disposed of the procedural issue, We will now discuss the substantive issues raised.
Gambling in all its forms, unless allowed by law, is generally prohibited. But the prohibition of gambling
does not mean that the Government cannot regulate it in the exercise of its police power.
The concept of police power is well-established in this jurisdiction. It has been defined as the "state
authority to enact legislation that may interfere with personal liberty or property in order to promote the
general welfare." (Edu v. Ericta, 35 SCRA 481, 487) As defined, it consists of (1) an imposition or
restraint upon liberty or property, (2) in order to foster the common good. It is not capable of an exact
definition but has been, purposely, veiled in general terms to underscore its all-comprehensive
embrace. (Philippine Association of Service Exporters, Inc. v. Drilon, 163 SCRA 386).
Its scope, ever-expanding to meet the exigencies of the times, even to anticipate the future where it
could be done, provides enough room for an efficient and flexible response to conditions and
circumstances thus assuming the greatest benefits. (Edu v. Ericta, supra)
It finds no specific Constitutional grant for the plain reason that it does not owe its origin to the charter.
Along with the taxing power and eminent domain, it is inborn in the very fact of statehood and
sovereignty. It is a fundamental attribute of government that has enabled it to perform the most vital
functions of governance. Marshall, to whom the expression has been credited, refers to it succinctly as
the plenary power of the state "to govern its citizens". (Tribe, American Constitutional Law, 323, 1978).
The police power of the State is a power co-extensive with self-protection and is most aptly termed the
"law of overwhelming necessity." (Rubi v. Provincial Board of Mindoro, 39 Phil. 660, 708) It is "the most
essential, insistent, and illimitable of powers." (Smith Bell & Co. v. National, 40 Phil. 136) It is a dynamic
force that enables the state to meet the agencies of the winds of change.
What was the reason behind the enactment of P.D. 1869?
P.D. 1869 was enacted pursuant to the policy of the government to "regulate and centralize thru an
appropriate institution all games of chance authorized by existing franchise or permitted by law" (1st
whereas clause, PD 1869). As was subsequently proved, regulating and centralizing gambling
operations in one corporate entity — the PAGCOR, was beneficial not just to the Government but to
society in general. It is a reliable source of much needed revenue for the cash strapped Government. It
provided funds for social impact projects and subjected gambling to "close scrutiny, regulation,
supervision and control of the Government" (4th Whereas Clause, PD 1869). With the creation of
PAGCOR and the direct intervention of the Government, the evil practices and corruptions that go with
gambling will be minimized if not totally eradicated. Public welfare, then, lies at the bottom of the
enactment of PD 1896.
Petitioners contend that P.D. 1869 constitutes a waiver of the right of the City of Manila to impose taxes
and legal fees; that the exemption clause in P.D. 1869 is violative of the principle of local autonomy.
They must be referring to Section 13 par. (2) of P.D. 1869 which exempts PAGCOR, as the franchise
holder from paying any "tax of any kind or form, income or otherwise, as well as fees, charges or levies
of whatever nature, whether National or Local."
(2) Income and other taxes. — a) Franchise Holder: No tax of any kind or form, income or
otherwise as well as fees, charges or levies of whatever nature, whether National or Local,
shall be assessed and collected under this franchise from the Corporation; nor shall any form
or tax or charge attach in any way to the earnings of the Corporation, except a franchise tax
of five (5%) percent of the gross revenues or earnings derived by the Corporation from its
operations under this franchise. Such tax shall be due and payable quarterly to the National
Government and shall be in lieu of all kinds of taxes, levies, fees or assessments of any kind,
nature or description, levied, established or collected by any municipal, provincial or national
government authority (Section 13 [2]).
Their contention stated hereinabove is without merit for the following reasons:
(a) The City of Manila, being a mere Municipal corporation has no inherent right to impose taxes (Icard
v. City of Baguio, 83 Phil. 870; City of Iloilo v. Villanueva, 105 Phil. 337; Santos v. Municipality of
Caloocan, 7 SCRA 643). Thus, "the Charter or statute must plainly show an intent to confer that power
or the municipality cannot assume it" (Medina v. City of Baguio, 12 SCRA 62). Its "power to tax"
therefore must always yield to a legislative act which is superior having been passed upon by the state
itself which has the "inherent power to tax" (Bernas, the Revised [1973] Philippine Constitution, Vol. 1,
1983 ed. p. 445).
(b) The Charter of the City of Manila is subject to control by Congress. It should be stressed that
"municipal corporations are mere creatures of Congress" (Unson v. Lacson, G.R. No. 7909, January
18, 1957) which has the power to "create and abolish municipal corporations" due to its "general
legislative powers" (Asuncion v. Yriantes, 28 Phil. 67; Merdanillo v. Orandia, 5 SCRA 541). Congress,
therefore, has the power of control over Local governments (Hebron v. Reyes, G.R. No. 9124, July 2,
1950). And if Congress can grant the City of Manila the power to tax certain matters, it can also provide
for exemptions or even take back the power.
(c) The City of Manila's power to impose license fees on gambling, has long been revoked. As early as
1975, the power of local governments to regulate gambling thru the grant of "franchise, licenses or
permits" was withdrawn by P.D. No. 771 and was vested exclusively on the National Government, thus:
Sec. 1. Any provision of law to the contrary notwithstanding, the authority of chartered cities
and other local governments to issue license, permit or other form of franchise to operate,
maintain and establish horse and dog race tracks, jai-alai and other forms of gambling is
hereby revoked.
 Sec. 2. Hereafter, all permits or franchises to operate, maintain and establish, horse and dog
race tracks, jai-alai and other forms of gambling shall be issued by the national government
upon proper application and verification of the qualification of the applicant . . .
Therefore, only the National Government has the power to issue "licenses or permits" for the operation
of gambling. Necessarily, the power to demand or collect license fees which is a consequence of the
issuance of "licenses or permits" is no longer vested in the City of Manila.
(d) Local governments have no power to tax instrumentalities of the National Government. PAGCOR is
a government owned or controlled corporation with an original charter, PD 1869. All of its shares of
stocks are owned by the National Government. In addition to its corporate powers (Sec. 3, Title II, PD
1869) it also exercises regulatory powers thus:
Sec. 9. Regulatory Power. — The Corporation shall maintain a Registry of the affiliated
entities, and shall exercise all the powers, authority and the responsibilities vested in the
Securities and Exchange Commission over such affiliating entities mentioned under the
preceding section, including, but not limited to amendments of Articles of Incorporation and
By-Laws, changes in corporate term, structure, capitalization and other matters concerning
the operation of the affiliated entities, the provisions of the Corporation Code of the
Philippines to the contrary notwithstanding, except only with respect to original incorporation.
PAGCOR has a dual role, to operate and to regulate gambling casinos. The latter role is governmental,
which places it in the category of an agency or instrumentality of the Government. Being an
instrumentality of the Government, PAGCOR should be and actually is exempt from local taxes.
Otherwise, its operation might be burdened, impeded or subjected to control by a mere Local
government.
The states have no power by taxation or otherwise, to retard, impede, burden or in any
manner control the operation of constitutional laws enacted by Congress to carry into
execution the powers vested in the federal government. (MC Culloch v. Marland, 4 Wheat
316, 4 L Ed. 579)
This doctrine emanates from the "supremacy" of the National Government over local governments.
Justice Holmes, speaking for the Supreme Court, made reference to the entire absence of
power on the part of the States to touch, in that way (taxation) at least, the instrumentalities of
the United States (Johnson v. Maryland, 254 US 51) and it can be agreed that no state or
political subdivision can regulate a federal instrumentality in such a way as to prevent it from
consummating its federal responsibilities, or even to seriously burden it in the
accomplishment of them. (Antieau, Modern Constitutional Law, Vol. 2, p. 140, emphasis
supplied)
Otherwise, mere creatures of the State can defeat National policies thru extermination of what local
authorities may perceive to be undesirable activities or enterprise using the power to tax as "a tool for
regulation" (U.S. v. Sanchez, 340 US 42).
The power to tax which was called by Justice Marshall as the "power to destroy" (Mc Culloch v.
Maryland, supra) cannot be allowed to defeat an instrumentality or creation of the very entity which has
the inherent power to wield it.
(e) Petitioners also argue that the Local Autonomy Clause of the Constitution will be violated by P.D.
1869. This is a pointless argument. Article X of the 1987 Constitution (on Local Autonomy) provides:
Sec. 5. Each local government unit shall have the power to create its own source of revenue
and to levy taxes, fees, and other charges subject to such guidelines and limitation as the
congress may provide, consistent with the basic policy on local autonomy. Such taxes, fees
and charges shall accrue exclusively to the local government. (emphasis supplied)
The power of local government to "impose taxes and fees" is always subject to "limitations" which
Congress may provide by law. Since PD 1869 remains an "operative" law until "amended, repealed or
revoked" (Sec. 3, Art. XVIII, 1987 Constitution), its "exemption clause" remains as an exception to the
exercise of the power of local governments to impose taxes and fees. It cannot therefore be violative
but rather is consistent with the principle of local autonomy.
Besides, the principle of local autonomy under the 1987 Constitution simply means "decentralization"
(III Records of the 1987 Constitutional Commission, pp. 435-436, as cited in Bernas, The Constitution
of the Republic of the Philippines, Vol. II, First Ed., 1988, p. 374). It does not make local governments
sovereign within the state or an "imperium in imperio."
Local Government has been described as a political subdivision of a nation or state which is
constituted by law and has substantial control of local affairs. In a unitary system of
government, such as the government under the Philippine Constitution, local governments
can only be an intra sovereign subdivision of one sovereign nation, it cannot be
an imperium in imperio. Local government in such a system can only mean a measure of
decentralization of the function of government. (emphasis supplied)
As to what state powers should be "decentralized" and what may be delegated to local government
units remains a matter of policy, which concerns wisdom. It is therefore a political question. (Citizens
Alliance for Consumer Protection v. Energy Regulatory Board, 162 SCRA 539).
What is settled is that the matter of regulating, taxing or otherwise dealing with gambling is a State
concern and hence, it is the sole prerogative of the State to retain it or delegate it to local governments.
As gambling is usually an offense against the State, legislative grant or express charter
power is generally necessary to empower the local corporation to deal with the subject. . . . In
the absence of express grant of power to enact, ordinance provisions on this subject which
are inconsistent with the state laws are void. (Ligan v. Gadsden, Ala App. 107 So. 733 Ex-
Parte Solomon, 9, Cals. 440, 27 PAC 757 following in re Ah You, 88 Cal. 99, 25 PAC 974, 22
Am St. Rep. 280, 11 LRA 480, as cited in Mc Quinllan Vol. 3 Ibid, p. 548, emphasis supplied)
Petitioners next contend that P.D. 1869 violates the equal protection clause of the Constitution,
because "it legalized PAGCOR — conducted gambling, while most gambling are outlawed together with
prostitution, drug trafficking and other vices" (p. 82, Rollo).
We, likewise, find no valid ground to sustain this contention. The petitioners' posture ignores the well-
accepted meaning of the clause "equal protection of the laws." The clause does not preclude
classification of individuals who may be accorded different treatment under the law as long as the
classification is not unreasonable or arbitrary (Itchong v. Hernandez, 101 Phil. 1155). A law does not
have to operate in equal force on all persons or things to be conformable to Article III, Section 1 of the
Constitution (DECS v. San Diego, G.R. No. 89572, December 21, 1989).
The "equal protection clause" does not prohibit the Legislature from establishing classes of individuals
or objects upon which different rules shall operate (Laurel v. Misa, 43 O.G. 2847). The Constitution
does not require situations which are different in fact or opinion to be treated in law as though they were
the same (Gomez v. Palomar, 25 SCRA 827).
Just how P.D. 1869 in legalizing gambling conducted by PAGCOR is violative of the equal protection is
not clearly explained in the petition. The mere fact that some gambling activities like cockfighting (P.D
449) horse racing (R.A. 306 as amended by RA 983), sweepstakes, lotteries and races (RA 1169 as
amended by B.P. 42) are legalized under certain conditions, while others are prohibited, does not
render the applicable laws, P.D. 1869 for one, unconstitutional.
If the law presumably hits the evil where it is most felt, it is not to be overthrown because
there are other instances to which it might have been applied. (Gomez v. Palomar, 25 SCRA
827)
The equal protection clause of the 14th Amendment does not mean that all occupations
called by the same name must be treated the same way; the state may do what it can to
prevent which is deemed as evil and stop short of those cases in which harm to the few
concerned is not less than the harm to the public that would insure if the rule laid down were
made mathematically exact. (Dominican Hotel v. Arizona, 249 US 2651).
Anent petitioners' claim that PD 1869 is contrary to the "avowed trend of the Cory Government away
from monopolies and crony economy and toward free enterprise and privatization" suffice it to state that
this is not a ground for this Court to nullify P.D. 1869. If, indeed, PD 1869 runs counter to the
government's policies then it is for the Executive Department to recommend to Congress its repeal or
amendment.
The judiciary does not settle policy issues. The Court can only declare what the law is and
not what the law should be.1âwphi1 Under our system of government, policy issues are
within the domain of the political branches of government and of the people themselves as
the repository of all state power. (Valmonte v. Belmonte, Jr., 170 SCRA 256).
On the issue of "monopoly," however, the Constitution provides that:
Sec. 19. The State shall regulate or prohibit monopolies when public interest so requires. No
combinations in restraint of trade or unfair competition shall be allowed. (Art. XII, National
Economy and Patrimony)
It should be noted that, as the provision is worded, monopolies are not necessarily prohibited by the
Constitution. The state must still decide whether public interest demands that monopolies be regulated
or prohibited. Again, this is a matter of policy for the Legislature to decide.
On petitioners' allegation that P.D. 1869 violates Sections 11 (Personality Dignity) 12 (Family) and 13
(Role of Youth) of Article II; Section 13 (Social Justice) of Article XIII and Section 2 (Educational
Values) of Article XIV of the 1987 Constitution, suffice it to state also that these are merely statements
of principles and, policies. As such, they are basically not self-executing, meaning a law should be
passed by Congress to clearly define and effectuate such principles.
In general, therefore, the 1935 provisions were not intended to be self-executing principles
ready for enforcement through the courts. They were rather directives addressed to the
executive and the legislature. If the executive and the legislature failed to heed the directives
of the articles the available remedy was not judicial or political. The electorate could express
their displeasure with the failure of the executive and the legislature through the language of
the ballot. (Bernas, Vol. II, p. 2)
Every law has in its favor the presumption of constitutionality (Yu Cong Eng v. Trinidad, 47 Phil. 387;
Salas v. Jarencio, 48 SCRA 734; Peralta v. Comelec, 82 SCRA 30; Abbas v. Comelec, 179 SCRA
287). Therefore, for PD 1869 to be nullified, it must be shown that there is a clear and unequivocal
breach of the Constitution, not merely a doubtful and equivocal one. In other words, the grounds for
nullity must be clear and beyond reasonable doubt. (Peralta v. Comelec, supra) Those who petition this
Court to declare a law, or parts thereof, unconstitutional must clearly establish the basis for such a
declaration. Otherwise, their petition must fail. Based on the grounds raised by petitioners to challenge
the constitutionality of P.D. 1869, the Court finds that petitioners have failed to overcome the
presumption. The dismissal of this petition is therefore, inevitable. But as to whether P.D. 1869 remains
a wise legislation considering the issues of "morality, monopoly, trend to free enterprise, privatization as
well as the state principles on social justice, role of youth and educational values" being raised, is up for
Congress to determine.
As this Court held in Citizens' Alliance for Consumer Protection v. Energy Regulatory Board, 162 SCRA
521 —
Presidential Decree No. 1956, as amended by Executive Order No. 137 has, in any case, in
its favor the presumption of validity and constitutionality which petitioners Valmonte and the
KMU have not overturned. Petitioners have not undertaken to identify the provisions in the
Constitution which they claim to have been violated by that statute. This Court, however, is
not compelled to speculate and to imagine how the assailed legislation may possibly offend
some provision of the Constitution. The Court notes, further, in this respect that petitioners
have in the main put in question the wisdom, justice and expediency of the establishment of
the OPSF, issues which are not properly addressed to this Court and which this Court may
not constitutionally pass upon. Those issues should be addressed rather to the political
departments of government: the President and the Congress.
Parenthetically, We wish to state that gambling is generally immoral, and this is precisely so when the
gambling resorted to is excessive. This excessiveness necessarily depends not only on the financial
resources of the gambler and his family but also on his mental, social, and spiritual outlook on life.
However, the mere fact that some persons may have lost their material fortunes, mental control,
physical health, or even their lives does not necessarily mean that the same are directly attributable to
gambling. Gambling may have been the antecedent, but certainly not necessarily the cause. For the
same consequences could have been preceded by an overdose of food, drink, exercise, work, and
even sex.
WHEREFORE, the petition is DISMISSED for lack of merit.
SO ORDERED.
G.R. No. 208566               November 19, 2013
GRECO ANTONIOUS BEDA B. BELGICA JOSE M. VILLEGAS JR. JOSE L. GONZALEZ REUBEN
M. ABANTE and QUINTIN PAREDES SAN DIEGO, Petitioners, 
vs.
HONORABLE EXECUTIVE SECRETARY PAQUITO N. OCHOA JR. SECRETARY OF BUDGET AND
MANAGEMENT FLORENCIO B. ABAD, NATIONAL TREASURER ROSALIA V. DE LEON SENATE
OF THE PHILIPPINES represented by FRANKLIN M. DRILON m his capacity as SENATE
PRESIDENT and HOUSE OF REPRESENTATIVES represented by FELICIANO S. BELMONTE, JR.
in his capacity as SPEAKER OF THE HOUSE, Respondents.
x-----------------------x
G.R. No. 208493
SOCIAL JUSTICE SOCIETY (SJS) PRESIDENT SAMSON S. ALCANTARA, Petitioner, 
vs.
HONORABLE FRANKLIN M. DRILON in his capacity as SENATE PRESIDENT and HONORABLE
FELICIANO S. BELMONTE, JR., in his capacity as SPEAKER OF THE HOUSE OF
REPRESENTATIVES, Respondents.
x-----------------------x
G.R. No. 209251
PEDRITO M. NEPOMUCENO, Former Mayor-Boac, Marinduque Former Provincial Board Member
-Province of Marinduque, Petitioner,  Communications."14 Also, in the area of fund realignment, the same section
vs.
PRESIDENT BENIGNO SIMEON C. AQUINO III* and SECRETARY FLORENCIO BUTCH ABAD,
DEPARTMENT OF BUDGET AND MANAGEMENT, Respondents.
DECISION
PERLAS-BERNABE, J.:
"Experience is the oracle of truth."1
-James Madison
Before the Court are consolidated petitions2 taken under Rule 65 of the Rules of Court, all of which
assail the constitutionality of the Pork Barrel System. Due to the complexity of the subject matter, the
Court shall heretofore discuss the system‘s conceptual underpinnings before detailing the particulars of
the constitutional challenge.
The Facts
I. Pork Barrel: General Concept.
"Pork Barrel" is political parlance of American -English origin.3 Historically, its usage may be
traced to the degrading ritual of rolling out a barrel stuffed with pork to a multitude of black
slaves who would cast their famished bodies into the porcine feast to assuage their hunger
with morsels coming from the generosity of their well-fed master.4 This practice was later
compared to the actions of American legislators in trying to direct federal budgets in favor of
their districts.5 While the advent of refrigeration has made the actual pork barrel obsolete, it
persists in reference to political bills that "bring home the bacon" to a legislator‘s district and
constituents.6 In a more technical sense, "Pork Barrel" refers to an appropriation of
government spending meant for localized projects and secured solely or primarily to bring
money to a representative's district.7Some scholars on the subject further use it to refer to
legislative control of local appropriations.8
In the Philippines, "Pork Barrel" has been commonly referred to as lump-sum, discretionary
funds of Members of the Legislature,9 although, as will be later discussed, its usage would
evolve in reference to certain funds of the Executive.
II. History of Congressional Pork Barrel in the Philippines.
A. Pre-Martial Law Era (1922-1972).
Act 3044,10 or the Public Works Act of 1922, is considered11 as the earliest form of
"Congressional Pork Barrel" in the Philippines since the utilization of the funds
appropriated therein were subjected to post-enactment legislator approval.
Particularly, in the area of fund release, Section 312 provides that the sums
appropriated for certain public works projects13 "shall be distributed x x x subject to
the approval of a joint committee elected by the Senate and the House of
Representatives. "The committee from each House may also authorize one of its
members to approve the distribution made by the Secretary of Commerce and
provides that the said secretary, "with the approval of said joint committee, or of the
authorized members thereof, may, for the purposes of said distribution, transfer
unexpended portions of any item of appropriation under this Act to any other item
hereunder."
In 1950, it has been documented15 that post-enactment legislator participation
broadened from the areas of fund release and realignment to the area of project
identification. During that year, the mechanics of the public works act was modified
to the extent that the discretion of choosing projects was transferred from the
Secretary of Commerce and Communications to legislators. "For the first time, the
law carried a list of projects selected by Members of Congress, they ‘being the
representatives of the people, either on their own account or by consultation with
local officials or civil leaders.‘"16 During this period, the pork barrel process
commenced with local government councils, civil groups, and individuals appealing
to Congressmen or Senators for projects. Petitions that were accommodated
formed part of a legislator‘s allocation, and the amount each legislator would
eventually get is determined in a caucus convened by the majority. The amount
was then integrated into the administration bill prepared by the Department of
Public Works and Communications. Thereafter, the Senate and the House of
Representatives added their own provisions to the bill until it was signed into law by
the President – the Public Works Act.17 In the 1960‘s, however, pork barrel
legislation reportedly ceased in view of the stalemate between the House of
Representatives and the Senate.18
B. Martial Law Era (1972-1986).
While the previous" Congressional Pork Barrel" was apparently discontinued in
1972 after Martial Law was declared, an era when "one man controlled the
legislature,"19 the reprieve was only temporary. By 1982, the Batasang Pambansa
had already introduced a new item in the General Appropriations Act (GAA) called
the" Support for Local Development Projects" (SLDP) under the article on "National
Aid to Local Government Units". Based on reports,20 it was under the SLDP that the
practice of giving lump-sum allocations to individual legislators began, with each
 assemblyman receiving ₱500,000.00. Thereafter, assemblymen would
communicate their project preferences to the Ministry of Budget and Management
for approval. Then, the said ministry would release the allocation papers to the
Ministry of Local Governments, which would, in turn, issue the checks to the city or
municipal treasurers in the assemblyman‘s locality. It has been further reported that
"Congressional Pork Barrel" projects under the SLDP also began to cover not only
public works projects, or so- called "hard projects", but also "soft projects",21 or non-
public works projects such as those which would fall under the categories of,
among others, education, health and livelihood.22
C. Post-Martial Law Era:
Corazon Cojuangco Aquino Administration (1986-1992).
After the EDSA People Power Revolution in 1986 and the restoration of Philippine
democracy, "Congressional Pork Barrel" was revived in the form of the "Mindanao
Development Fund" and the "Visayas Development Fund" which were created with
lump-sum appropriations of ₱480 Million and ₱240 Million, respectively, for the
funding of development projects in the Mindanao and Visayas areas in 1989. It has
been documented23 that the clamor raised by the Senators and the Luzon
legislators for a similar funding, prompted the creation of the "Countrywide
Development Fund" (CDF) which was integrated into the 1990 GAA24 with an initial
funding of ₱2.3 Billion to cover "small local infrastructure and other priority
community projects."
Under the GAAs for the years 1991 and 1992,25 CDF funds were, with the approval
of the President, to be released directly to the implementing agencies but "subject
to the submission of the required list of projects and activities."Although the GAAs
from 1990 to 1992 were silent as to the amounts of allocations of the individual
legislators, as well as their participation in the identification of projects, it has been
reported26 that by 1992, Representatives were receiving ₱12.5 Million each in CDF
E. Joseph Ejercito Estrada (Estrada) Administration (1998-2001).
funds, while Senators were receiving ₱18 Million each, without any limitation or
qualification, and that they could identify any kind of project, from hard or
infrastructure projects such as roads, bridges, and buildings to "soft projects" such
as textbooks, medicines, and scholarships.27
D. Fidel Valdez Ramos (Ramos) Administration (1992-1998).
The following year, or in 1993,28 the GAA explicitly stated that the release of CDF
funds was to be made upon the submission of the list of projects and activities
identified by, among others, individual legislators. For the first time, the 1993 CDF
Article included an allocation for the Vice-President.29 As such, Representatives
were allocated ₱12.5 Million each in CDF funds, Senators, ₱18 Million each, and
the Vice-President, ₱20 Million.
In 1994,30 1995,31 and 1996,32 the GAAs contained the same provisions on project
identification and fund release as found in the 1993 CDF Article. In addition,
however, the Department of Budget and Management (DBM) was directed to
F. Gloria Macapagal-Arroyo (Arroyo) Administration (2001-2010).
submit reports to the Senate Committee on Finance and the House Committee on
Appropriations on the releases made from the funds.33
Under the 199734 CDF Article, Members of Congress and the Vice-President, in
consultation with the implementing agency concerned, were directed to submit to
the DBM the list of 50% of projects to be funded from their respective CDF
allocations which shall be duly endorsed by (a) the Senate President and the
Chairman of the Committee on Finance, in the case of the Senate, and (b) the
Speaker of the House of Representatives and the Chairman of the Committee on
Appropriations, in the case of the House of Representatives; while the list for the
remaining 50% was to be submitted within six (6) months thereafter. The same
article also stated that the project list, which would be published by the
DBM,35 "shall be the basis for the release of funds" and that "no funds appropriated
herein shall be disbursed for projects not included in the list herein required."
The following year, or in 1998,36 the foregoing provisions regarding the required
lists and endorsements were reproduced, except that the publication of the project
list was no longer required as the list itself sufficed for the release of CDF Funds.
The CDF was not, however, the lone form of "Congressional Pork Barrel" at that
time. Other forms of "Congressional Pork Barrel" were reportedly fashioned and
inserted into the GAA (called "Congressional Insertions" or "CIs") in order to
perpetuate the ad ministration‘s political agenda.37 It has been articulated that since
CIs "formed part and parcel of the budgets of executive departments, they were not
easily identifiable and were thus harder to monitor." Nonetheless, the lawmakers
themselves as well as the finance and budget officials of the implementing
agencies, as well as the DBM, purportedly knew about the insertions.38 Examples
of these CIs are the Department of Education (DepEd) School Building Fund, the
Congressional Initiative Allocations, the Public Works Fund, the El Niño Fund, and
the Poverty Alleviation Fund.39 The allocations for the School Building Fund,
particularly, ―shall be made upon prior consultation with the representative of the
legislative district concerned.”40 Similarly, the legislators had the power to direct
how, where and when these appropriations were to be spent.41
In 1999,42 the CDF was removed in the GAA and replaced by three (3) separate
forms of CIs, namely, the "Food Security Program Fund,"43 the "Lingap Para Sa
Mahihirap Program Fund,"44and the "Rural/Urban Development Infrastructure
Program Fund,"45 all of which contained a special provision requiring "prior
consultation" with the Member s of Congress for the release of the funds.
It was in the year 200046 that the "Priority Development Assistance Fund" (PDAF)
appeared in the GAA. The requirement of "prior consultation with the respective
Representative of the District" before PDAF funds were directly released to the
implementing agency concerned was explicitly stated in the 2000 PDAF Article.
Moreover, realignment of funds to any expense category was expressly allowed,
with the sole condition that no amount shall be used to fund personal services and
other personnel benefits.47 The succeeding PDAF provisions remained the same in
view of the re-enactment48 of the 2000 GAA for the year 2001.
The 200249 PDAF Article was brief and straightforward as it merely contained a
single special provision ordering the release of the funds directly to the
implementing agency or local government unit concerned, without further
 qualifications. The following year, 2003,50 the same single provision was present,
with simply an expansion of purpose and express authority to realign.
Nevertheless, the provisions in the 2003 budgets of the Department of Public
Works and Highways51 (DPWH) and the DepEd52 required prior consultation with
Members of Congress on the aspects of implementation delegation and project list
submission, respectively. In 2004, the 2003 GAA was re-enacted.53
In 2005,54 the PDAF Article provided that the PDAF shall be used "to fund priority
programs and projects under the ten point agenda of the national government and
shall be released directly to the implementing agencies." It also introduced the
program menu concept,55 which is essentially a list of general programs and
implementing agencies from which a particular PDAF project may be subsequently
chosen by the identifying authority. The 2005 GAA was re-enacted56 in 2006 and
hence, operated on the same bases. In similar regard, the program menu concept
was consistently integrated into the 2007,57 2008,58 2009,59 and 201060 GAAs.
Textually, the PDAF Articles from 2002 to 2010 were silent with respect to the
specific amounts allocated for the individual legislators, as well as their
participation in the proposal and identification of PDAF projects to be funded. In
contrast to the PDAF Articles, however, the provisions under the DepEd School
Building Program and the DPWH budget, similar to its predecessors, explicitly
required prior consultation with the concerned Member of Congress61anent certain
aspects of project implementation.
Significantly, it was during this era that provisions which allowed formal
participation of non-governmental organizations (NGO) in the implementation of
government projects were introduced. In the Supplemental Budget for 2006, with
respect to the appropriation for school buildings, NGOs were, by law, encouraged
to participate. For such purpose, the law stated that "the amount of at least ₱250
Million of the ₱500 Million allotted for the construction and completion of school
buildings shall be made available to NGOs including the Federation of Filipino-
Chinese Chambers of Commerce and Industry, Inc. for its "Operation Barrio
School" program, with capability and proven track records in the construction of
public school buildings x x x."62 The same allocation was made available to NGOs
in the 2007 and 2009 GAAs under the DepEd Budget.63 Also, it was in 2007 that
the Government Procurement Policy Board64 (GPPB) issued Resolution No. 12-
2007 dated June 29, 2007 (GPPB Resolution 12-2007), amending the
implementing rules and regulations65 of RA 9184,66 the Government Procurement
Reform Act, to include, as a form of negotiated procurement,67 the procedure
whereby the Procuring Entity68(the implementing agency) may enter into a
memorandum of agreement with an NGO, provided that "an appropriation law or
ordinance earmarks an amount to be specifically contracted out to NGOs."69
G. Present Administration (2010-Present).
Differing from previous PDAF Articles but similar to the CDF Articles, the
201170 PDAF Article included an express statement on lump-sum amounts
allocated for individual legislators and the Vice-President: Representatives were
given ₱70 Million each, broken down into ₱40 Million for "hard projects" and ₱30
Million for "soft projects"; while ₱200 Million was given to each Senator as well as
the Vice-President, with a ₱100 Million allocation each for "hard" and "soft
projects." Likewise, a provision on realignment of funds was included, but with the
qualification that it may be allowed only once. The same provision also allowed the
Secretaries of Education, Health, Social Welfare and Development, Interior and
Local Government, Environment and Natural Resources, Energy, and Public
Works and Highways to realign PDAF Funds, with the further conditions that: (a)
realignment is within the same implementing unit and same project category as the
original project, for infrastructure projects; (b) allotment released has not yet been
obligated for the original scope of work, and (c) the request for realignment is with
the concurrence of the legislator concerned.71
In the 201272 and 201373 PDAF Articles, it is stated that the "identification of
projects and/or designation of beneficiaries shall conform to the priority list,
standard or design prepared by each implementing agency (priority list
requirement) x x x." However, as practiced, it would still be the individual legislator
who would choose and identify the project from the said priority list.74
Provisions on legislator allocations75 as well as fund realignment76 were included in
the 2012 and 2013 PDAF Articles; but the allocation for the Vice-President, which
was pegged at ₱200 Million in the 2011 GAA, had been deleted. In addition, the
2013 PDAF Article now allowed LGUs to be identified as implementing agencies if
they have the technical capability to implement the projects.77 Legislators were also
allowed to identify programs/projects, except for assistance to indigent patients and
scholarships, outside of his legislative district provided that he secures the written
concurrence of the legislator of the intended outside-district, endorsed by the
Speaker of the House.78 Finally, any realignment of PDAF funds, modification and
revision of project identification, as well as requests for release of funds, were all
required to be favorably endorsed by the House Committee on Appropriations and
the Senate Committee on Finance, as the case may be.79
III. History of Presidential Pork Barrel in the Philippines.
While the term "Pork Barrel" has been typically associated with lump-sum, discretionary funds
of Members of Congress, the present cases and the recent controversies on the matter have,
however, shown that the term‘s usage has expanded to include certain funds of the President
such as the Malampaya Funds and the Presidential Social Fund.
On the one hand, the Malampaya Funds was created as a special fund under Section 880 of
Presidential Decree No. (PD) 910,81 issued by then President Ferdinand E. Marcos (Marcos)
on March 22, 1976. In enacting the said law, Marcos recognized the need to set up a special
fund to help intensify, strengthen, and consolidate government efforts relating to the
exploration, exploitation, and development of indigenous energy resources vital to economic
growth.82 Due to the energy-related activities of the government in the Malampaya natural gas
field in Palawan, or the "Malampaya Deep Water Gas-to-Power Project",83 the special fund
created under PD 910 has been currently labeled as Malampaya Funds.
On the other hand the Presidential Social Fund was created under Section 12, Title IV84 of PD
1869,85 or the Charter of the Philippine Amusement and Gaming Corporation (PAGCOR). PD
1869 was similarly issued by Marcos on July 11, 1983. More than two (2) years after, he
amended PD 1869 and accordingly issued PD 1993 on October 31, 1985,86 amending
Section 1287 of the former law. As it stands, the Presidential Social Fund has been described
as a special funding facility managed and administered by the Presidential Management Staff
through which the President provides direct assistance to priority programs and projects not
funded under the regular budget. It is sourced from the share of the government in the
aggregate gross earnings of PAGCOR.88
IV. Controversies in the Philippines.
Over the decades, "pork" funds in the Philippines have increased tremendously,89 owing in no
small part to previous Presidents who reportedly used the "Pork Barrel" in order to gain
congressional support.90 It was in 1996 when the first controversy surrounding the "Pork
Barrel" erupted. Former Marikina City Representative Romeo Candazo (Candazo), then an
anonymous source, "blew the lid on the huge sums of government money that regularly went
into the pockets of legislators in the form of kickbacks."91 He said that "the kickbacks were
‘SOP‘ (standard operating procedure) among legislators and ranged from a low 19 percent to
a high 52 percent of the cost of each project, which could be anything from dredging, rip
rapping, sphalting, concreting, and construction of school buildings."92 "Other sources of
kickbacks that Candazo identified were public funds intended for medicines and textbooks. A
few days later, the tale of the money trail became the banner story of the Philippine Daily
Inquirer issue of August 13, 1996, accompanied by an illustration of a roasted pig."93 "The
publication of the stories, including those about congressional initiative allocations of certain
lawmakers, including ₱3.6 Billion for a Congressman, sparked public outrage."94
Thereafter, or in 2004, several concerned citizens sought the nullification of the PDAF as
enacted in the 2004 GAA for being unconstitutional. Unfortunately, for lack of "any pertinent
evidentiary support that illegal misuse of PDAF in the form of kickbacks has become a
common exercise of unscrupulous Members of Congress," the petition was dismissed.95
Recently, or in July of the present year, the National Bureau of Investigation (NBI) began its
probe into allegations that "the government has been defrauded of some ₱10 Billion over the
past 10 years by a syndicate using funds from the pork barrel of lawmakers and various
government agencies for scores of ghost projects."96 The investigation was spawned by
sworn affidavits of six (6) whistle-blowers who declared that JLN Corporation – "JLN"
standing for Janet Lim Napoles (Napoles) – had swindled billions of pesos from the public
coffers for "ghost projects" using no fewer than 20 dummy NGOs for an entire decade. While
the NGOs were supposedly the ultimate recipients of PDAF funds, the whistle-blowers
declared that the money was diverted into Napoles‘ private accounts.97 Thus, after its
investigation on the Napoles controversy, criminal complaints were filed before the Office of
the Ombudsman, charging five (5) lawmakers for Plunder, and three (3) other lawmakers for
Malversation, Direct Bribery, and Violation of the Anti-Graft and Corrupt Practices Act. Also
recommended to be charged in the complaints are some of the lawmakers‘ chiefs -of-staff or
representatives, the heads and other officials of three (3) implementing agencies, and the
several presidents of the NGOs set up by Napoles.98
On August 16, 2013, the Commission on Audit (CoA) released the results of a three-year
audit investigation99covering the use of legislators' PDAF from 2007 to 2009, or during the
last three (3) years of the Arroyo administration. The purpose of the audit was to determine
the propriety of releases of funds under PDAF and the Various Infrastructures including Local
Projects (VILP)100 by the DBM, the application of these funds and the implementation of
projects by the appropriate implementing agencies and several government-owned-and-
controlled corporations (GOCCs).101 The total releases covered by the audit amounted to
₱8.374 Billion in PDAF and ₱32.664 Billion in VILP, representing 58% and 32%, respectively,
of the total PDAF and VILP releases that were found to have been made nationwide during
the audit period.102 Accordingly, the Co A‘s findings contained in its Report No. 2012-03 (CoA
Report), entitled "Priority Development Assistance Fund (PDAF) and Various Infrastructures
including Local Projects (VILP)," were made public, the highlights of which are as follows:103
● Amounts released for projects identified by a considerable number of legislators
significantly exceeded their respective allocations.
● Amounts were released for projects outside of legislative districts of sponsoring
members of the Lower House.
● Total VILP releases for the period exceeded the total amount appropriated under
the 2007 to 2009 GAAs.
● Infrastructure projects were constructed on private lots without these having been
turned over to the government.
● Significant amounts were released to implementing agencies without the latter‘s
endorsement and without considering their mandated functions, administrative and
technical capabilities to implement projects.
● Implementation of most livelihood projects was not undertaken by the
implementing agencies themselves but by NGOs endorsed by the proponent
legislators to which the Funds were transferred.
● The funds were transferred to the NGOs in spite of the absence of any
appropriation law or ordinance.
● Selection of the NGOs were not compliant with law and regulations.
● Eighty-Two (82) NGOs entrusted with implementation of seven hundred seventy
two (772) projects amount to ₱6.156 Billion were either found questionable, or
submitted questionable/spurious documents, or failed to liquidate in whole or in
part their utilization of the Funds.
● Procurement by the NGOs, as well as some implementing agencies, of goods
and services reportedly used in the projects were not compliant with law.
As for the "Presidential Pork Barrel", whistle-blowers alleged that" at least ₱900 Million from
royalties in the operation of the Malampaya gas project off Palawan province intended for
agrarian reform beneficiaries has gone into a dummy NGO."104 According to incumbent CoA
Chairperson Maria Gracia Pulido Tan (CoA Chairperson), the CoA is, as of this writing, in the
process of preparing "one consolidated report" on the Malampaya Funds.105
V. The Procedural Antecedents.
Spurred in large part by the findings contained in the CoA Report and the Napoles
controversy, several petitions were lodged before the Court similarly seeking that the "Pork
Barrel System" be declared unconstitutional. To recount, the relevant procedural antecedents
in these cases are as follows:
On August 28, 2013, petitioner Samson S. Alcantara (Alcantara), President of the Social Justice
Society, filed a Petition for Prohibition of even date under Rule 65 of the Rules of Court (Alcantara
Petition), seeking that the "Pork Barrel System" be declared unconstitutional, and a writ of prohibition
be issued permanently restraining respondents Franklin M. Drilon and Feliciano S. Belmonte, Jr., in
their respective capacities as the incumbent Senate President and Speaker of the House of
Representatives, from further taking any steps to enact legislation appropriating funds for the "Pork
Barrel System," in whatever form and by whatever name it may be called, and from approving further
releases pursuant thereto.106 The Alcantara Petition was docketed as G.R. No. 208493.
On September 3, 2013, petitioners Greco Antonious Beda B. Belgica, Jose L. Gonzalez, Reuben M.
Abante, Quintin Paredes San Diego (Belgica, et al.), and Jose M. Villegas, Jr. (Villegas) filed an Urgent
Petition For Certiorari and Prohibition With Prayer For The Immediate Issuance of Temporary
Restraining Order (TRO) and/or Writ of Preliminary Injunction dated August 27, 2013 under Rule 65 of
the Rules of Court (Belgica Petition), seeking that the annual "Pork Barrel System," presently embodied
in the provisions of the GAA of 2013 which provided for the 2013 PDAF, and the Executive‘s lump-sum,
discretionary funds, such as the Malampaya Funds and the Presidential Social Fund,107 be declared
unconstitutional and null and void for being acts constituting grave abuse of discretion. Also, they pray
that the Court issue a TRO against respondents Paquito N. Ochoa, Jr., Florencio B. Abad (Secretary
Abad) and Rosalia V. De Leon, in their respective capacities as the incumbent Executive Secretary,
Secretary of the Department of Budget and Management (DBM), and National Treasurer, or their
agents, for them to immediately cease any expenditure under the aforesaid funds. Further, they pray
that the Court order the foregoing respondents to release to the CoA and to the public: (a) "the
complete schedule/list of legislators who have availed of their PDAF and VILP from the years 2003 to
2013, specifying the use of the funds, the project or activity and the recipient entities or individuals, and
all pertinent data thereto"; and (b) "the use of the Executive‘s lump-sum, discretionary funds, including
the proceeds from the x x x Malampaya Funds and remittances from the PAGCOR x x x from 2003 to
2013, specifying the x x x project or activity and the recipient entities or individuals, and all pertinent
data thereto."108 Also, they pray for the "inclusion in budgetary deliberations with the Congress of all
presently off-budget, lump-sum, discretionary funds including, but not limited to, proceeds from the
Malampaya Funds and remittances from the PAGCOR."109 The Belgica Petition was docketed as G.R.
No. 208566.110
Lastly, on September 5, 2013, petitioner Pedrito M. Nepomuceno (Nepomuceno), filed a Petition dated
August 23, 2012 (Nepomuceno Petition), seeking that the PDAF be declared unconstitutional, and a
cease and desist order be issued restraining President Benigno Simeon S. Aquino III (President
Aquino) and Secretary Abad from releasing such funds to Members of Congress and, instead, allow
their release to fund priority projects identified and approved by the Local Development Councils in
consultation with the executive departments, such as the DPWH, the Department of Tourism, the
Department of Health, the Department of Transportation, and Communication and the National
Economic Development Authority.111 The Nepomuceno Petition was docketed as UDK-14951.112
On September 10, 2013, the Court issued a Resolution of even date (a) consolidating all cases; (b)
requiring public respondents to comment on the consolidated petitions; (c) issuing a TRO (September
10, 2013 TRO) enjoining the DBM, National Treasurer, the Executive Secretary, or any of the persons
acting under their authority from releasing (1) the remaining PDAF allocated to Members of Congress
under the GAA of 2013, and (2) Malampaya Funds under the phrase "for such other purposes as may
be hereafter directed by the President" pursuant to Section 8 of PD 910 but not for the purpose of
"financing energy resource development and exploitation programs and projects of the government‖
under the same provision; and (d) setting the consolidated cases for Oral Arguments on October 8,
2013.
On September 23, 2013, the Office of the Solicitor General (OSG) filed a Consolidated Comment
(Comment) of even date before the Court, seeking the lifting, or in the alternative, the partial lifting with
respect to educational and medical assistance purposes, of the Court‘s September 10, 2013 TRO, and
that the consolidated petitions be dismissed for lack of merit.113
On September 24, 2013, the Court issued a Resolution of even date directing petitioners to reply to the
Comment.
Petitioners, with the exception of Nepomuceno, filed their respective replies to the Comment: (a) on
September 30, 2013, Villegas filed a separate Reply dated September 27, 2013 (Villegas Reply); (b) on
October 1, 2013, Belgica, et al. filed a Reply dated September 30, 2013 (Belgica Reply); and (c) on
October 2, 2013, Alcantara filed a Reply dated October 1, 2013.
On October 1, 2013, the Court issued an Advisory providing for the guidelines to be observed by the
parties for the Oral Arguments scheduled on October 8, 2013. In view of the technicality of the issues
material to the present cases, incumbent Solicitor General Francis H. Jardeleza (Solicitor General) was
directed to bring with him during the Oral Arguments representative/s from the DBM and Congress who
would be able to competently and completely answer questions related to, among others, the budgeting
process and its implementation. Further, the CoA Chairperson was appointed as amicus curiae and
thereby requested to appear before the Court during the Oral Arguments.
On October 8 and 10, 2013, the Oral Arguments were conducted. Thereafter, the Court directed the
parties to submit their respective memoranda within a period of seven (7) days, or until October 17,
2013, which the parties subsequently did.
The Issues Before the Court
Based on the pleadings, and as refined during the Oral Arguments, the following are the main issues for
the Court‘s resolution:
I. Procedural Issues.
Whether or not (a) the issues raised in the consolidated petitions involve an actual and justiciable
controversy; (b) the issues raised in the consolidated petitions are matters of policy not subject to
judicial review; (c) petitioners have legal standing to sue; and (d) the Court‘s Decision dated August 19,
1994 in G.R. Nos. 113105, 113174, 113766, and 113888, entitled "Philippine Constitution Association
v. Enriquez"114 (Philconsa) and Decision dated April 24, 2012 in G.R. No. 164987, entitled "Lawyers
Against Monopoly and Poverty v. Secretary of Budget and Management"115 (LAMP) bar the re-litigatio n
of the issue of constitutionality of the "Pork Barrel System" under the principles of res judicata and stare
decisis.
II. Substantive Issues on the "Congressional Pork Barrel."
Whether or not the 2013 PDAF Article and all other Congressional Pork Barrel Laws similar thereto are
unconstitutional considering that they violate the principles of/constitutional provisions on (a) separation
of powers; (b) non-delegability of legislative power; (c) checks and balances; (d) accountability; (e)
political dynasties; and (f) local autonomy.
III. Substantive Issues on the "Presidential Pork Barrel."
Whether or not the phrases (a) "and for such other purposes as may be hereafter directed by the
President" under Section 8 of PD 910,116 relating to the Malampaya Funds, and (b) "to finance the
priority infrastructure development projects and to finance the restoration of damaged or destroyed
facilities due to calamities, as may be directed and authorized by the Office of the President of the
Philippines" under Section 12 of PD 1869, as amended by PD 1993, relating to the Presidential Social
Fund, are unconstitutional insofar as they constitute undue delegations of legislative power.
These main issues shall be resolved in the order that they have been stated. In addition, the Court shall
also tackle certain ancillary issues as prompted by the present cases.
The Court’s Ruling
The petitions are partly granted.
I. Procedural Issues. Justice Carpio: The President has taken an oath to faithfully execute the law,127 correct? Solicitor
General Jardeleza: Yes, Your Honor.
The prevailing rule in constitutional litigation is that no question involving the constitutionality or validity
of a law or governmental act may be heard and decided by the Court unless there is compliance with Justice Carpio: And so the President cannot refuse to implement the General Appropriations Act,
the legal requisites for judicial inquiry,117 namely: (a) there must be an actual case or controversy calling correct?
for the exercise of judicial power; (b) the person challenging the act must have the standing to question
the validity of the subject act or issuance; (c) the question of constitutionality must be raised at the
Solicitor General Jardeleza: Well, that is our answer, Your Honor. In the case, for example of the PDAF,
earliest opportunity ; and (d) the issue of constitutionality must be the very lis mota of the case.118 Of
the President has a duty to execute the laws but in the face of the outrage over PDAF, the President
these requisites, case law states that the first two are the most important119and, therefore, shall be
was saying, "I am not sure that I will continue the release of the soft projects," and that started, Your
discussed forthwith.
Honor. Now, whether or not that … (interrupted)

A. Existence of an Actual Case or Controversy.

Justice Carpio: Yeah. I will grant the President if there are anomalies in the project, he has the power to
stop the releases in the meantime, to investigate, and that is Section 38 of Chapter 5 of Book 6 of the
By constitutional fiat, judicial power operates only when there is an actual case or controversy.120 This is Revised Administrative Code128 x x x. So at most the President can suspend, now if the President
embodied in Section 1, Article VIII of the 1987 Constitution which pertinently states that "judicial power believes that the PDAF is unconstitutional, can he just refuse to implement it?
includes the duty of the courts of justice to settle actual controversies involving rights which are legally
demandable and enforceable x x x." Jurisprudence provides that an actual case or controversy is one
Solicitor General Jardeleza: No, Your Honor, as we were trying to say in the specific case of the PDAF
which "involves a conflict of legal rights, an assertion of opposite legal claims, susceptible of judicial
because of the CoA Report, because of the reported irregularities and this Court can take judicial
resolution as distinguished from a hypothetical or abstract difference or dispute.121 In other words,
notice, even outside, outside of the COA Report, you have the report of the whistle-blowers, the
"there must be a contrariety of legal rights that can be interpreted and enforced on the basis of existing
President was just exercising precisely the duty ….
law and jurisprudence."122 Related to the requirement of an actual case or controversy is the
requirement of "ripeness," meaning that the questions raised for constitutional scrutiny are already ripe
for adjudication. "A question is ripe for adjudication when the act being challenged has had a direct xxxx
adverse effect on the individual challenging it. It is a prerequisite that something had then been
accomplished or performed by either branch before a court may come into the picture, and the
Justice Carpio: Yes, and that is correct. You‘ve seen the CoA Report, there are anomalies, you stop
petitioner must allege the existence of an immediate or threatened injury to itself as a result of the
and investigate, and prosecute, he has done that. But, does that mean that PDAF has been repealed?
challenged action."123 "Withal, courts will decline to pass upon constitutional issues through advisory
opinions, bereft as they are of authority to resolve hypothetical or moot questions."124
Solicitor General Jardeleza: No, Your Honor x x x.
Based on these principles, the Court finds that there exists an actual and justiciable controversy in
these cases. xxxx

The requirement of contrariety of legal rights is clearly satisfied by the antagonistic positions of the Justice Carpio: So that PDAF can be legally abolished only in two (2) cases. Congress passes a law to
parties on the constitutionality of the "Pork Barrel System." Also, the questions in these consolidated repeal it, or this Court declares it unconstitutional, correct?
cases are ripe for adjudication since the challenged funds and the provisions allowing for their utilization
– such as the 2013 GAA for the PDAF, PD 910 for the Malampaya Funds and PD 1869, as amended
by PD 1993, for the Presidential Social Fund – are currently existing and operational; hence, there Solictor General Jardeleza: Yes, Your Honor.
exists an immediate or threatened injury to petitioners as a result of the unconstitutional use of these
public funds. Justice Carpio: The President has no power to legally abolish PDAF. (Emphases supplied)

As for the PDAF, the Court must dispel the notion that the issues related thereto had been rendered
moot and academic by the reforms undertaken by respondents. A case becomes moot when there is no
more actual controversy between the parties or no useful purpose can be served in passing upon the
merits.125 Differing from this description, the Court observes that respondents‘ proposed line-item
budgeting scheme would not terminate the controversy nor diminish the useful purpose for its resolution
since said reform is geared towards the 2014 budget, and not the 2013 PDAF Article which, being a
distinct subject matter, remains legally effective and existing. Neither will the President‘s declaration
that he had already "abolished the PDAF" render the issues on PDAF moot precisely because the
Executive branch of government has no constitutional authority to nullify or annul its legal existence. By
constitutional design, the annulment or nullification of a law may be done either by Congress, through
the passage of a repealing law, or by the Court, through a declaration of unconstitutionality. Instructive
on this point is the following exchange between Associate Justice Antonio T. Carpio (Justice Carpio)
and the Solicitor General during the Oral Arguments:126
Even on the assumption of mootness, jurisprudence, nevertheless, dictates that "the moot and
academic‘ principle is not a magical formula that can automatically dissuade the Court in resolving a
case." The Court will decide cases, otherwise moot, if: first, there is a grave violation of the Constitution;
second, the exceptional character of the situation and the paramount public interest is involved; third,
when the constitutional issue raised requires formulation of controlling principles to guide the bench, the
bar, and the public; and fourth, the case is capable of repetition yet evading review.129
The applicability of the first exception is clear from the fundamental posture of petitioners – they
essentially allege grave violations of the Constitution with respect to, inter alia, the principles of
separation of powers, non-delegability of legislative power, checks and balances, accountability and
local autonomy.
The applicability of the second exception is also apparent from the nature of the interests involved
– the constitutionality of the very system within which significant amounts of public funds have been and
continue to be utilized and expended undoubtedly presents a situation of exceptional character as well
as a matter of paramount public interest. The present petitions, in fact, have been lodged at a time
when the system‘s flaws have never before been magnified. To the Court‘s mind, the coalescence of
the CoA Report, the accounts of numerous whistle-blowers, and the government‘s own recognition that
reforms are needed "to address the reported abuses of the PDAF"130 demonstrates a prima facie
pattern of abuse which only underscores the importance of the matter. It is also by this finding that the
Court finds petitioners‘ claims as not merely theorized, speculative or hypothetical. Of note is the weight
accorded by the Court to the findings made by the CoA which is the constitutionally-mandated audit
arm of the government. In Delos Santos v. CoA,131 a recent case wherein the Court upheld the CoA‘s
disallowance of irregularly disbursed PDAF funds, it was emphasized that:
The COA is endowed with enough latitude to determine, prevent, and disallow irregular, unnecessary,
excessive, extravagant or unconscionable expenditures of government funds. It is tasked to be vigilant
and conscientious in safeguarding the proper use of the government's, and ultimately the people's,
property. The exercise of its general audit power is among the constitutional mechanisms that gives life
to the check and balance system inherent in our form of government.
It is the general policy of the Court to sustain the decisions of administrative authorities, especially one
which is constitutionally-created, such as the CoA, not only on the basis of the doctrine of separation of
powers but also for their presumed expertise in the laws they are entrusted to enforce. Findings of
administrative agencies are accorded not only respect but also finality when the decision and order are
not tainted with unfairness or arbitrariness that would amount to grave abuse of discretion. It is only
when the CoA has acted without or in excess of jurisdiction, or with grave abuse of discretion
amounting to lack or excess of jurisdiction, that this Court entertains a petition questioning its rulings. x
x x. (Emphases supplied)
Thus, if only for the purpose of validating the existence of an actual and justiciable controversy in these
cases, the Court deems the findings under the CoA Report to be sufficient.
The Court also finds the third exception to be applicable largely due to the practical need for a definitive
ruling on the system‘s constitutionality. As disclosed during the Oral Arguments, the CoA Chairperson
estimates that thousands of notices of disallowances will be issued by her office in connection with the
findings made in the CoA Report. In this relation, Associate Justice Marvic Mario Victor F. Leonen
(Justice Leonen) pointed out that all of these would eventually find their way to the
courts.132 Accordingly, there is a compelling need to formulate controlling principles relative to the
issues raised herein in order to guide the bench, the bar, and the public, not just for the expeditious
resolution of the anticipated disallowance cases, but more importantly, so that the government may be
guided on how public funds should be utilized in accordance with constitutional principles.
Finally, the application of the fourth exception is called for by the recognition that the preparation and
passage of the national budget is, by constitutional imprimatur, an affair of annual occurrence.133 The
relevance of the issues before the Court does not cease with the passage of a "PDAF -free budget for
2014."134 The evolution of the "Pork Barrel System," by its multifarious iterations throughout the course
of history, lends a semblance of truth to petitioners‘ claim that "the same dog will just resurface wearing
a different collar."135 In Sanlakas v. Executive Secretary,136 the government had already backtracked on
a previous course of action yet the Court used the "capable of repetition but evading review" exception
in order "to prevent similar questions from re- emerging."137 The situation similarly holds true to these
cases. Indeed, the myriad of issues underlying the manner in which certain public funds are spent, if not
resolved at this most opportune time, are capable of repetition and hence, must not evade judicial
review.
B. Matters of Policy: the Political Question Doctrine.
The "limitation on the power of judicial review to actual cases and controversies‖ carries the assurance
that "the courts will not intrude into areas committed to the other branches of
government."138 Essentially, the foregoing limitation is a restatement of the political question doctrine
which, under the classic formulation of Baker v. Carr,139applies when there is found, among others, "a
textually demonstrable constitutional commitment of the issue to a coordinate political department," "a
lack of judicially discoverable and manageable standards for resolving it" or "the impossibility of
deciding without an initial policy determination of a kind clearly for non- judicial discretion." Cast against
this light, respondents submit that the "the political branches are in the best position not only to perform
budget-related reforms but also to do them in response to the specific demands of their constituents"
and, as such, "urge the Court not to impose a solution at this stage."140
The Court must deny respondents‘ submission.
Suffice it to state that the issues raised before the Court do not present political but legal questions
which are within its province to resolve. A political question refers to "those questions which, under the
Constitution, are to be decided by the people in their sovereign capacity, or in regard to which full
discretionary authority has been delegated to the Legislature or executive branch of the Government. It
is concerned with issues dependent upon the wisdom, not legality, of a particular measure."141 The
intrinsic constitutionality of the "Pork Barrel System" is not an issue dependent upon the wisdom of the
political branches of government but rather a legal one which the Constitution itself has commanded the
Court to act upon. Scrutinizing the contours of the system along constitutional lines is a task that the
political branches of government are incapable of rendering precisely because it is an exercise of
judicial power. More importantly, the present Constitution has not only vested the Judiciary the right to
exercise judicial power but essentially makes it a duty to proceed therewith. Section 1, Article VIII of the
1987 Constitution cannot be any clearer: "The judicial power shall be vested in one Supreme Court and
in such lower courts as may be established by law. It 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." In Estrada v. Desierto,142 the expanded
concept of judicial power under the 1987 Constitution and its effect on the political question doctrine
was explained as follows:143
To a great degree, the 1987 Constitution has narrowed the reach of the political question doctrine when
it expanded the power of judicial review of this court not only to settle actual controversies involving
rights which are legally demandable and enforceable but also 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 government. Heretofore, the judiciary has focused on the "thou shalt not's" of the
Constitution directed against the exercise of its jurisdiction. With the new provision, however, courts are
given a greater prerogative to determine what it can do to prevent grave abuse of discretion amounting
to lack or excess of jurisdiction on the part of any branch or instrumentality of government. Clearly, the
new provision did not just grant the Court power of doing nothing. x x x (Emphases supplied)
It must also be borne in mind that ― when the judiciary mediates to allocate constitutional boundaries,
it does not assert any superiority over the other departments; does not in reality nullify or invalidate an
act of the legislature or the executive, but only asserts the solemn and sacred obligation assigned to it
by the Constitution."144 To a great extent, the Court is laudably cognizant of the reforms undertaken by
its co-equal branches of government. But it is by constitutional force that the Court must faithfully
perform its duty. Ultimately, it is the Court‘s avowed intention that a resolution of these cases would not
arrest or in any manner impede the endeavors of the two other branches but, in fact, help ensure that
the pillars of change are erected on firm constitutional grounds. After all, it is in the best interest of the
people that each great branch of government, within its own sphere, contributes its share towards
achieving a holistic and genuine solution to the problems of society. For all these reasons, the Court
cannot heed respondents‘ plea for judicial restraint.
C. Locus Standi.
"The gist of the question of standing is whether a party alleges such personal stake in the outcome of
the controversy as to assure that concrete adverseness which sharpens the presentation of issues
upon which the court depends for illumination of difficult constitutional questions. Unless a person is
injuriously affected in any of his constitutional rights by the operation of statute or ordinance, he has no
standing."145
Petitioners have come before the Court in their respective capacities as citizen-taxpayers and
accordingly, assert that they "dutifully contribute to the coffers of the National Treasury."146 Clearly, as
taxpayers, they possess the requisite standing to question the validity of the existing "Pork Barrel
System" under which the taxes they pay have been and continue to be utilized. It is undeniable that
petitioners, as taxpayers, are bound to suffer from the unconstitutional usage of public funds, if the
Court so rules. Invariably, taxpayers have been allowed to sue where there is a claim that public funds
are illegally disbursed or that public money is being deflected to any improper purpose, or that public
funds are wasted through the enforcement of an invalid or unconstitutional law,147 as in these cases.
Moreover, as citizens, petitioners have equally fulfilled the standing requirement given that the issues
they have raised may be classified as matters "of transcendental importance, of overreaching
significance to society, or of paramount public interest."148 The CoA Chairperson‘s statement during the
Oral Arguments that the present controversy involves "not merely a systems failure" but a "complete
breakdown of controls"149 amplifies, in addition to the matters above-discussed, the seriousness of the
issues involved herein. Indeed, of greater import than the damage caused by the illegal expenditure of
public funds is the mortal wound inflicted upon the fundamental law by the enforcement of an invalid
statute.150 All told, petitioners have sufficient locus standi to file the instant cases.
D. Res Judicata and Stare Decisis.
Res judicata (which means a "matter adjudged") and stare decisis non quieta et movere (or simply,
stare decisis which means "follow past precedents and do not disturb what has been settled") are
general procedural law principles which both deal with the effects of previous but factually similar
dispositions to subsequent cases. For the cases at bar, the Court examines the applicability of these
principles in relation to its prior rulings in Philconsa and LAMP.
The focal point of res judicata is the judgment. The principle states that a judgment on the merits in a
previous case rendered by a court of competent jurisdiction would bind a subsequent case if, between
the first and second actions, there exists an identity of parties, of subject matter, and of causes of
action.151 This required identity is not, however, attendant hereto since Philconsa and LAMP,
respectively involved constitutional challenges against the 1994 CDF Article and 2004 PDAF Article,
whereas the cases at bar call for a broader constitutional scrutiny of the entire "Pork Barrel System."
Also, the ruling in LAMP is essentially a dismissal based on a procedural technicality – and, thus, hardly
a judgment on the merits – in that petitioners therein failed to present any "convincing proof x x x
showing that, indeed, there were direct releases of funds to the Members of Congress, who actually
spend them according to their sole discretion" or "pertinent evidentiary support to demonstrate the
illegal misuse of PDAF in the form of kickbacks and has become a common exercise of unscrupulous
Members of Congress." As such, the Court up held, in view of the presumption of constitutionality
accorded to every law, the 2004 PDAF Article, and saw "no need to review or reverse the standing
pronouncements in the said case." Hence, for the foregoing reasons, the res judicata principle, insofar
as the Philconsa and LAMP cases are concerned, cannot apply.
On the other hand, the focal point of stare decisis is the doctrine created. The principle, entrenched
under Article 8152 of the Civil Code, evokes the general rule that, for the sake of certainty, a conclusion
reached in one case should be doctrinally applied to those that follow if the facts are substantially the
same, even though the parties may be different. It proceeds from the first principle of justice that,
absent any powerful countervailing considerations, like cases ought to be decided alike. Thus, where
the same questions relating to the same event have been put forward by the parties similarly situated
as in a previous case litigated and decided by a competent court, the rule of stare decisis is a bar to any
attempt to re-litigate the same issue.153
Philconsa was the first case where a constitutional challenge against a Pork Barrel provision, i.e., the
1994 CDF Article, was resolved by the Court. To properly understand its context, petitioners‘ posturing
was that "the power given to the Members of Congress to propose and identify projects and activities to
be funded by the CDF is an encroachment by the legislature on executive power, since said power in
an appropriation act is in implementation of the law" and that "the proposal and identification of the
projects do not involve the making of laws or the repeal and amendment thereof, the only function given
to the Congress by the Constitution."154 In deference to the foregoing submissions, the Court reached
the following main conclusions: one, under the Constitution, the power of appropriation, or the "power of
the purse," belongs to Congress; two, the power of appropriation carries with it the power to specify the
project or activity to be funded under the appropriation law and it can be detailed and as broad as
Congress wants it to be; and, three, the proposals and identifications made by Members of Congress
are merely recommendatory. At once, it is apparent that the Philconsa resolution was a limited
response to a separation of powers problem, specifically on the propriety of conferring post-enactment
identification authority to Members of Congress. On the contrary, the present cases call for a more
holistic examination of (a) the inter-relation between the CDF and PDAF Articles with each other,
formative as they are of the entire "Pork Barrel System" as well as (b) the intra-relation of post-
enactment measures contained within a particular CDF or PDAF Article, including not only those related
to the area of project identification but also to the areas of fund release and realignment. The
complexity of the issues and the broader legal analyses herein warranted may be, therefore,
considered as a powerful countervailing reason against a wholesale application of the stare decisis
principle.
In addition, the Court observes that the Philconsa ruling was actually riddled with inherent constitutional
inconsistencies which similarly countervail against a full resort to stare decisis. As may be deduced
from the main conclusions of the case, Philconsa‘s fundamental premise in allowing Members of
Congress to propose and identify of projects would be that the said identification authority is but an
aspect of the power of appropriation which has been constitutionally lodged in Congress. From this
premise, the contradictions may be easily seen. If the authority to identify projects is an aspect of
appropriation and the power of appropriation is a form of legislative power thereby lodged in Congress,
then it follows that: (a) it is Congress which should exercise such authority, and not its individual
Members; (b) such authority must be exercised within the prescribed procedure of law passage and,
hence, should not be exercised after the GAA has already been passed; and (c) such authority, as
embodied in the GAA, has the force of law and, hence, cannot be merely recommendatory. Justice
Vitug‘s Concurring Opinion in the same case sums up the Philconsa quandary in this wise: "Neither
would it be objectionable for Congress, by law, to appropriate funds for such specific projects as it may
be minded; to give that authority, however, to the individual members of Congress in whatever guise, I
am afraid, would be constitutionally impermissible." As the Court now largely benefits from hindsight
and current findings on the matter, among others, the CoA Report, the Court must partially abandon its
previous ruling in Philconsa insofar as it validated the post-enactment identification authority of
Members of Congress on the guise that the same was merely recommendatory. This postulate raises
serious constitutional inconsistencies which cannot be simply excused on the ground that such
mechanism is "imaginative as it is innovative." Moreover, it must be pointed out that the recent case of
Abakada Guro Party List v. Purisima155(Abakada) has effectively overturned Philconsa‘s allowance of
post-enactment legislator participation in view of the separation of powers principle. These
constitutional inconsistencies and the Abakada rule will be discussed in greater detail in the ensuing
section of this Decision.
As for LAMP, suffice it to restate that the said case was dismissed on a procedural technicality and,
hence, has not set any controlling doctrine susceptible of current application to the substantive issues in
these cases. In fine, stare decisis would not apply.
II. Substantive Issues.
A. Definition of Terms.
Before the Court proceeds to resolve the substantive issues of these cases, it must first define the
terms "Pork Barrel System," "Congressional Pork Barrel," and "Presidential Pork Barrel" as they are
essential to the ensuing discourse.
Petitioners define the term "Pork Barrel System" as the "collusion between the Legislative and
Executive branches of government to accumulate lump-sum public funds in their offices with unchecked
discretionary powers to determine its distribution as political largesse."156 They assert that the following
elements make up the Pork Barrel System: (a) lump-sum funds are allocated through the appropriations
process to an individual officer; (b) the officer is given sole and broad discretion in determining how the
funds will be used or expended; (c) the guidelines on how to spend or use the funds in the appropriation
are either vague, overbroad or inexistent; and (d) projects funded are intended to benefit a definite
constituency in a particular part of the country and to help the political careers of the disbursing official
by yielding rich patronage benefits.157 They further state that the Pork Barrel System is comprised of two
(2) kinds of discretionary public funds: first, the Congressional (or Legislative) Pork Barrel, currently
known as the PDAF;158 and, second, the Presidential (or Executive) Pork Barrel, specifically, the
Malampaya Funds under PD 910 and the Presidential Social Fund under PD 1869, as amended by PD
1993.159
Considering petitioners‘ submission and in reference to its local concept and legal history, the Court
defines the Pork Barrel System as the collective body of rules and practices that govern the manner by
which lump-sum, discretionary funds, primarily intended for local projects, are utilized through the
respective participations of the Legislative and Executive branches of government, including its
members. The Pork Barrel System involves two (2) kinds of lump-sum discretionary funds:
First, there is the Congressional Pork Barrel which is herein defined as a kind of lump-sum,
discretionary fund wherein legislators, either individually or collectively organized into committees, are
able to effectively control certain aspects of the fund’s utilization through various post-enactment
measures and/or practices. In particular, petitioners consider the PDAF, as it appears under the 2013
GAA, as Congressional Pork Barrel since it is, inter alia, a post-enactment measure that allows
individual legislators to wield a collective power;160 and
Second, there is the Presidential Pork Barrel which is herein defined as a kind of lump-sum,
discretionary fund which allows the President to determine the manner of its utilization. For reasons
earlier stated,161 the Court shall delimit the use of such term to refer only to the Malampaya Funds and
the Presidential Social Fund.
With these definitions in mind, the Court shall now proceed to discuss the substantive issues of these
cases.
B. Substantive Issues on the Congressional Pork Barrel.
1. Separation of Powers.
a. Statement of Principle.
The principle of separation of powers refers to the constitutional demarcation of the three fundamental
powers of government. In the celebrated words of Justice Laurel in Angara v. Electoral
Commission,162 it means that the "Constitution has blocked out with deft strokes and in bold lines,
allotment of power to the executive, the legislative and the judicial departments of the
government."163 To the legislative branch of government, through Congress,164belongs the power to
make laws; to the executive branch of government, through the President,165 belongs the power to
enforce laws; and to the judicial branch of government, through the Court,166 belongs the power to
interpret laws. Because the three great powers have been, by constitutional design, ordained in this
respect, "each department of the government has exclusive cognizance of matters within its jurisdiction,
and is supreme within its own sphere."167 Thus, "the legislature has no authority to execute or construe
the law, the executive has no authority to make or construe the law, and the judiciary has no power to
make or execute the law."168 The principle of separation of powers and its concepts of autonomy and
independence stem from the notion that the powers of government must be divided to avoid
concentration of these powers in any one branch; the division, it is hoped, would avoid any single
branch from lording its power over the other branches or the citizenry.169 To achieve this purpose, the
divided power must be wielded by co-equal branches of government that are equally capable of
independent action in exercising their respective mandates. Lack of independence would result in the
inability of one branch of government to check the arbitrary or self-interest assertions of another or
others.170
Broadly speaking, there is a violation of the separation of powers principle when one branch of
government unduly encroaches on the domain of another. US Supreme Court decisions instruct that
the principle of separation of powers may be violated in two (2) ways: firstly, "one branch may interfere
impermissibly with the other’s performance of its constitutionally assigned function";171 and
"alternatively, the doctrine may be violated when one branch assumes a function that more properly is
entrusted to another."172 In other words, there is a violation of the principle when there is impermissible
(a) interference with and/or (b) assumption of another department‘s functions.
The enforcement of the national budget, as primarily contained in the GAA, is indisputably a function
both constitutionally assigned and properly entrusted to the Executive branch of government. In
Guingona, Jr. v. Hon. Carague173 (Guingona, Jr.), the Court explained that the phase of budget
execution "covers the various operational aspects of budgeting" and accordingly includes "the
evaluation of work and financial plans for individual activities," the "regulation and release of funds" as
well as all "other related activities" that comprise the budget execution cycle.174 This is rooted in the
principle that the allocation of power in the three principal branches of government is a grant of all
powers inherent in them.175 Thus, unless the Constitution provides otherwise, the Executive department
should exclusively exercise all roles and prerogatives which go into the implementation of the national
budget as provided under the GAA as well as any other appropriation law.
In view of the foregoing, the Legislative branch of government, much more any of its members, should
not cross over the field of implementing the national budget since, as earlier stated, the same is
properly the domain of the Executive. Again, in Guingona, Jr., the Court stated that "Congress enters
the picture when it deliberates or acts on the budget proposals of the President. Thereafter, Congress,
"in the exercise of its own judgment and wisdom, formulates an appropriation act precisely following the
process established by the Constitution, which specifies that no money may be paid from the Treasury
except in accordance with an appropriation made by law." Upon approval and passage of the GAA,
Congress‘ law -making role necessarily comes to an end and from there the Executive‘s role of
implementing the national budget begins. So as not to blur the constitutional boundaries between them,
Congress must "not concern it self with details for implementation by the Executive."176
The foregoing cardinal postulates were definitively enunciated in Abakada where the Court held that
"from the moment the law becomes effective, any provision of law that empowers Congress or any of its
members to play any role in the implementation or enforcement of the law violates the principle of
separation of powers and is thus unconstitutional."177 It must be clarified, however, that since the
restriction only pertains to "any role in the implementation or enforcement of the law," Congress may
still exercise its oversight function which is a mechanism of checks and balances that the Constitution
itself allows. But it must be made clear that Congress‘ role must be confined to mere oversight. Any
post-enactment-measure allowing legislator participation beyond oversight is bereft of any constitutional
basis and hence, tantamount to impermissible interference and/or assumption of executive functions.
As the Court ruled in Abakada:178
Any post-enactment congressional measure x x x should be limited to scrutiny and
investigation.1âwphi1 In particular, congressional oversight must be confined to the following:
(1) scrutiny based primarily on Congress‘ power of appropriation and the budget hearings
conducted in connection with it, its power to ask heads of departments to appear before and
be heard by either of its Houses on any matter pertaining to their departments and its power
of confirmation; and
(2) investigation and monitoring of the implementation of laws pursuant to the power of
Congress to conduct inquiries in aid of legislation.
Any action or step beyond that will undermine the separation of powers guaranteed by the Constitution.
(Emphases supplied)
b. Application.
In these cases, petitioners submit that the Congressional Pork Barrel – among others, the 2013 PDAF
Article – "wrecks the assignment of responsibilities between the political branches" as it is designed to
allow individual legislators to interfere "way past the time it should have ceased" or, particularly, "after
the GAA is passed."179 They state that the findings and recommendations in the CoA Report provide "an
illustration of how absolute and definitive the power of legislators wield over project implementation in
complete violation of the constitutional principle of separation of powers."180 Further, they point out that
the Court in the Philconsa case only allowed the CDF to exist on the condition that individual legislators
limited their role to recommending projects and not if they actually dictate their implementation.181
For their part, respondents counter that the separations of powers principle has not been violated since
the President maintains "ultimate authority to control the execution of the GAA‖ and that he "retains the
final discretion to reject" the legislators‘ proposals.182 They maintain that the Court, in Philconsa, "upheld
the constitutionality of the power of members of Congress to propose and identify projects so long as
such proposal and identification are recommendatory."183 As such, they claim that "everything in the
Special Provisions [of the 2013 PDAF Article follows the Philconsa framework, and hence, remains
constitutional."184
The Court rules in favor of petitioners.
As may be observed from its legal history, the defining feature of all forms of Congressional Pork Barrel
would be the authority of legislators to participate in the post-enactment phases of project
implementation.
At its core, legislators – may it be through project lists,185 prior consultations186 or program menus187 –
have been consistently accorded post-enactment authority to identify the projects they desire to be
funded through various Congressional Pork Barrel allocations. Under the 2013 PDAF Article, the
statutory authority of legislators to identify projects post-GAA may be construed from the import of
Special Provisions 1 to 3 as well as the second paragraph of Special Provision 4. To elucidate, Special
Provision 1 embodies the program menu feature which, as evinced from past PDAF Articles, allows
individual legislators to identify PDAF projects for as long as the identified project falls under a general
program listed in the said menu. Relatedly, Special Provision 2 provides that the implementing
agencies shall, within 90 days from the GAA is passed, submit to Congress a more detailed priority list,
standard or design prepared and submitted by implementing agencies from which the legislator may
make his choice. The same provision further authorizes legislators to identify PDAF projects outside his
district for as long as the representative of the district concerned concurs in writing. Meanwhile, Special
Provision 3 clarifies that PDAF projects refer to "projects to be identified by legislators"188 and
thereunder provides the allocation limit for the total amount of projects identified by each legislator.
Finally, paragraph 2 of Special Provision 4 requires that any modification and revision of the project
identification "shall be submitted to the House Committee on Appropriations and the Senate Committee
on Finance for favorable endorsement to the DBM or the implementing agency, as the case may be."
From the foregoing special provisions, it cannot be seriously doubted that legislators have been
accorded post-enactment authority to identify PDAF projects.
Aside from the area of project identification, legislators have also been accorded post-enactment
authority in the areas of fund release and realignment. Under the 2013 PDAF Article, the statutory
authority of legislators to participate in the area of fund release through congressional committees is
contained in Special Provision 5 which explicitly states that "all request for release of funds shall be
supported by the documents prescribed under Special Provision No. 1 and favorably endorsed by
House Committee on Appropriations and the Senate Committee on Finance, as the case may be";
while their statutory authority to participate in the area of fund realignment is contained in: first ,
paragraph 2, Special Provision 4189 which explicitly state s, among others, that "any realignment of
funds shall be submitted to the House Committee on Appropriations and the Senate Committee on
Finance for favorable endorsement to the DBM or the implementing agency, as the case may be‖ ; and,
second , paragraph 1, also of Special Provision 4 which authorizes the "Secretaries of Agriculture,
Education, Energy, Interior and Local Government, Labor and Employment, Public Works and
Highways, Social Welfare and Development and Trade and Industry190 x x x to approve realignment
from one project/scope to another within the allotment received from this Fund, subject to among others
(iii) the request is with the concurrence of the legislator concerned."
Clearly, these post-enactment measures which govern the areas of project identification, fund release
and fund realignment are not related to functions of congressional oversight and, hence, allow
legislators to intervene and/or assume duties that properly belong to the sphere of budget execution.
Indeed, by virtue of the foregoing, legislators have been, in one form or another, authorized to
participate in – as Guingona, Jr. puts it – "the various operational aspects of budgeting," including "the
evaluation of work and financial plans for individual activities" and the "regulation and release of funds"
in violation of the separation of powers principle. The fundamental rule, as categorically articulated in
Abakada, cannot be overstated – from the moment the law becomes effective, any provision of law that
empowers Congress or any of its members to play any role in the implementation or enforcement of the
law violates the principle of separation of powers and is thus unconstitutional.191 That the said authority
is treated as merely recommendatory in nature does not alter its unconstitutional tenor since the
prohibition, to repeat, covers any role in the implementation or enforcement of the law. Towards this
end, the Court must therefore abandon its ruling in Philconsa which sanctioned the conduct of legislator
identification on the guise that the same is merely recommendatory and, as such, respondents‘ reliance
on the same falters altogether.
Besides, it must be pointed out that respondents have nonetheless failed to substantiate their position
that the identification authority of legislators is only of recommendatory import. Quite the contrary,
respondents – through the statements of the Solicitor General during the Oral Arguments – have
admitted that the identification of the legislator constitutes a mandatory requirement before his PDAF
can be tapped as a funding source, thereby highlighting the indispensability of the said act to the entire
budget execution process:192
Justice Bernabe: Now, without the individual legislator’s identification of the project, can the PDAF of
the legislator be utilized?
Solicitor General Jardeleza: No, Your Honor.
Justice Bernabe: It cannot?
Solicitor General Jardeleza: It cannot… (interrupted)
Justice Bernabe: So meaning you should have the identification of the project by the individual
legislator?
Solicitor General Jardeleza: Yes, Your Honor.
xxxx
Justice Bernabe: In short, the act of identification is mandatory?
Solictor General Jardeleza: Yes, Your Honor. In the sense that if it is not done and then there is no
identification.
xxxx
Justice Bernabe: Now, would you know of specific instances when a project was implemented without
the identification by the individual legislator?
Solicitor General Jardeleza: I do not know, Your Honor; I do not think so but I have no specific
examples. I would doubt very much, Your Honor, because to implement, there is a need for a SARO
and the NCA. And the SARO and the NCA are triggered by an identification from the legislator.
xxxx
Solictor General Jardeleza: What we mean by mandatory, Your Honor, is we were replying to a
question, "How can a legislator make sure that he is able to get PDAF Funds?" It is mandatory in the
sense that he must identify, in that sense, Your Honor. Otherwise, if he does not identify, he cannot
avail of the PDAF Funds and his district would not be able to have PDAF Funds, only in that sense,
Your Honor. (Emphases supplied)
Thus, for all the foregoing reasons, the Court hereby declares the 2013 PDAF Article as well as all
other provisions of law which similarly allow legislators to wield any form of post-enactment authority in
the implementation or enforcement of the budget, unrelated to congressional oversight, as violative of
the separation of powers principle and thus unconstitutional. Corollary thereto, informal practices,
through which legislators have effectively intruded into the proper phases of budget execution, must be
deemed as acts of grave abuse of discretion amounting to lack or excess of jurisdiction and, hence,
accorded the same unconstitutional treatment. That such informal practices do exist and have, in fact,
been constantly observed throughout the years has not been substantially disputed here. As pointed
out by Chief Justice Maria Lourdes P.A. Sereno (Chief Justice Sereno) during the Oral Arguments of
these cases:193
Chief Justice Sereno:
Now, from the responses of the representative of both, the DBM and two (2) Houses of Congress, if we
enforces the initial thought that I have, after I had seen the extent of this research made by my staff,
that neither the Executive nor Congress frontally faced the question of constitutional compatibility of
how they were engineering the budget process. In fact, the words you have been using, as the three
lawyers of the DBM, and both Houses of Congress has also been using is surprise; surprised that all of
these things are now surfacing. In fact, I thought that what the 2013 PDAF provisions did was to codify
in one section all the past practice that had been done since 1991. In a certain sense, we should be
thankful that they are all now in the PDAF Special Provisions. x x x (Emphasis and underscoring
supplied)
Ultimately, legislators cannot exercise powers which they do not have, whether through formal
measures written into the law or informal practices institutionalized in government agencies, else the
Executive department be deprived of what the Constitution has vested as its own.
2. Non-delegability of Legislative Power.
a. Statement of Principle.
As an adjunct to the separation of powers principle,194 legislative power shall be exclusively exercised
by the body to which the Constitution has conferred the same. In particular, Section 1, Article VI of the
1987 Constitution states that such power shall be vested in the Congress of the Philippines which shall
consist of a Senate and a House of Representatives, except to the extent reserved to the people by the
provision on initiative and referendum.195 Based on this provision, it is clear that only Congress, acting
as a bicameral body, and the people, through the process of initiative and referendum, may
constitutionally wield legislative power and no other. This premise embodies the principle of non-
delegability of legislative power, and the only recognized exceptions thereto would be: (a) delegated
legislative power to local governments which, by immemorial practice, are allowed to legislate on purely
local matters;196 and (b) constitutionally-grafted exceptions such as the authority of the President to, by
law, exercise powers necessary and proper to carry out a declared national policy in times of war or
other national emergency,197or fix within specified limits, and subject to such limitations and restrictions
as Congress may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other
duties or imposts within the framework of the national development program of the Government.198
Notably, the principle of non-delegability should not be confused as a restriction to delegate rule-making
authority to implementing agencies for the limited purpose of either filling up the details of the law for its
enforcement (supplementary rule-making) or ascertaining facts to bring the law into actual operation
(contingent rule-making).199The conceptual treatment and limitations of delegated rule-making were
explained in the case of People v. Maceren200 as follows:
The grant of the rule-making power to administrative agencies is a relaxation of the principle of
separation of powers and is an exception to the nondelegation of legislative powers. Administrative
regulations or "subordinate legislation" calculated to promote the public interest are necessary because
of "the growing complexity of modern life, the multiplication of the subjects of governmental regulations,
and the increased difficulty of administering the law."
xxxx
Nevertheless, it must be emphasized that the rule-making power must be confined to details for
regulating the mode or proceeding to carry into effect the law as it has been enacted. The power cannot
be extended to amending or expanding the statutory requirements or to embrace matters not covered
by the statute. Rules that subvert the statute cannot be sanctioned. (Emphases supplied)
b. Application.
In the cases at bar, the Court observes that the 2013 PDAF Article, insofar as it confers post-enactment
identification authority to individual legislators, violates the principle of non-delegability since said
legislators are effectively allowed to individually exercise the power of appropriation, which – as settled
in Philconsa – is lodged in Congress.201 That the power to appropriate must be exercised only through
legislation is clear from Section 29(1), Article VI of the 1987 Constitution which states that: "No money
shall be paid out of the Treasury except in pursuance of an appropriation made by law." To understand
what constitutes an act of appropriation, the Court, in Bengzon v. Secretary of Justice and Insular
Auditor202 (Bengzon), held that the power of appropriation involves (a) the setting apart by law of a
certain sum from the public revenue for (b) a specified purpose. Essentially, under the 2013 PDAF
Article, individual legislators are given a personal lump-sum fund from which they are able to dictate (a)
how much from such fund would go to (b) a specific project or beneficiary that they themselves also
determine. As these two (2) acts comprise the exercise of the power of appropriation as described in
Bengzon, and given that the 2013 PDAF Article authorizes individual legislators to perform the same,
undoubtedly, said legislators have been conferred the power to legislate which the Constitution does
not, however, allow. Thus, keeping with the principle of non-delegability of legislative power, the Court
hereby declares the 2013 PDAF Article, as well as all other forms of Congressional Pork Barrel which
contain the similar legislative identification feature as herein discussed, as unconstitutional.
3. Checks and Balances.
a. Statement of Principle; Item-Veto Power.
The fact that the three great powers of government are intended to be kept separate and distinct does
not mean that they are absolutely unrestrained and independent of each other. The Constitution has
also provided for an elaborate system of checks and balances to secure coordination in the workings of
the various departments of the government.203
A prime example of a constitutional check and balance would be the President’s power to veto an item
written into an appropriation, revenue or tariff bill submitted to him by Congress for approval through a
process known as "bill presentment." The President‘s item-veto power is found in Section 27(2), Article
VI of the 1987 Constitution which reads as follows:
Sec. 27. x x x.
xxxx
(2) The President shall have the power to veto any particular item or items in an appropriation, revenue,
or tariff bill, but the veto shall not affect the item or items to which he does not object.
The presentment of appropriation, revenue or tariff bills to the President, wherein he may exercise his
power of item-veto, forms part of the "single, finely wrought and exhaustively considered, procedures"
for law-passage as specified under the Constitution.204 As stated in Abakada, the final step in the law-
making process is the "submission of the bill to the President for approval. Once approved, it takes
effect as law after the required publication."205
Elaborating on the President‘s item-veto power and its relevance as a check on the legislature, the
Court, in Bengzon, explained that:206
The former Organic Act and the present Constitution of the Philippines make the Chief Executive an
integral part of the law-making power. His disapproval of a bill, commonly known as a veto, is
essentially a legislative act. The questions presented to the mind of the Chief Executive are precisely
the same as those the legislature must determine in passing a bill, except that his will be a broader
point of view.
The Constitution is a limitation upon the power of the legislative department of the government, but in
this respect it is a grant of power to the executive department. The Legislature has the affirmative
power to enact laws; the Chief Executive has the negative power by the constitutional exercise of which
he may defeat the will of the Legislature. It follows that the Chief Executive must find his authority in the
Constitution. But in exercising that authority he may not be confined to rules of strict construction or
hampered by the unwise interference of the judiciary. The courts will indulge every intendment in favor
of the constitutionality of a veto in the same manner as they will presume the constitutionality of an act
as originally passed by the Legislature. (Emphases supplied)
The justification for the President‘s item-veto power rests on a variety of policy goals such as to prevent
log-rolling legislation,207 impose fiscal restrictions on the legislature, as well as to fortify the executive
branch‘s role in the budgetary process.208 In Immigration and Naturalization Service v. Chadha, the US
Supreme Court characterized the President‘s item-power as "a salutary check upon the legislative
body, calculated to guard the community against the effects of factions, precipitancy, or of any impulse
unfriendly to the public good, which may happen to influence a majority of that body"; phrased
differently, it is meant to "increase the chances in favor of the community against the passing of bad
laws, through haste, inadvertence, or design."209
For the President to exercise his item-veto power, it necessarily follows that there exists a proper "item"
which may be the object of the veto. An item, as defined in the field of appropriations, pertains to "the
particulars, the details, the distinct and severable parts of the appropriation or of the bill." In the case of
Bengzon v. Secretary of Justice of the Philippine Islands,210 the US Supreme Court characterized an
item of appropriation as follows:
An item of an appropriation bill obviously means an item which, in itself, is a specific appropriation of
money, not some general provision of law which happens to be put into an appropriation bill.
(Emphases supplied)
On this premise, it may be concluded that an appropriation bill, to ensure that the President may be
able to exercise his power of item veto, must contain "specific appropriations of money" and not only
"general provisions" which provide for parameters of appropriation.
Further, it is significant to point out that an item of appropriation must be an item characterized by
singular correspondence – meaning an allocation of a specified singular amount for a specified singular
purpose, otherwise known as a "line-item."211 This treatment not only allows the item to be consistent
with its definition as a "specific appropriation of money" but also ensures that the President may
discernibly veto the same. Based on the foregoing formulation, the existing Calamity Fund, Contingent
Fund and the Intelligence Fund, being appropriations which state a specified amount for a specific
purpose, would then be considered as "line- item" appropriations which are rightfully subject to item
veto. Likewise, it must be observed that an appropriation may be validly apportioned into component
percentages or values; however, it is crucial that each percentage or value must be allocated for its own
corresponding purpose for such component to be considered as a proper line-item. Moreover, as
Justice Carpio correctly pointed out, a valid appropriation may even have several related purposes that
are by accounting and budgeting practice considered as one purpose, e.g., MOOE (maintenance and
other operating expenses), in which case the related purposes shall be deemed sufficiently specific for
the exercise of the President‘s item veto power. Finally, special purpose funds and discretionary funds
would equally square with the constitutional mechanism of item-veto for as long as they follow the rule
on singular correspondence as herein discussed. Anent special purpose funds, it must be added that
Section 25(4), Article VI of the 1987 Constitution requires that the "special appropriations bill shall
specify the purpose for which it is intended, and shall be supported by funds actually available as
certified by the National Treasurer, or t o be raised by a corresponding revenue proposal therein."
Meanwhile, with respect to discretionary funds, Section 2 5(6), Article VI of the 1987 Constitution
requires that said funds "shall be disbursed only for public purposes to be supported by appropriate
vouchers and subject to such guidelines as may be prescribed by law."
In contrast, what beckons constitutional infirmity are appropriations which merely provide for a singular
lump-sum amount to be tapped as a source of funding for multiple purposes. Since such appropriation
type necessitates the further determination of both the actual amount to be expended and the actual
purpose of the appropriation which must still be chosen from the multiple purposes stated in the law, it
cannot be said that the appropriation law already indicates a "specific appropriation of money‖ and
hence, without a proper line-item which the President may veto. As a practical result, the President
would then be faced with the predicament of either vetoing the entire appropriation if he finds some of
its purposes wasteful or undesirable, or approving the entire appropriation so as not to hinder some of
its legitimate purposes. Finally, it may not be amiss to state that such arrangement also raises non-
delegability issues considering that the implementing authority would still have to determine, again, both
the actual amount to be expended and the actual purpose of the appropriation. Since the foregoing
determinations constitute the integral aspects of the power to appropriate, the implementing authority
would, in effect, be exercising legislative prerogatives in violation of the principle of non-delegability.
Moreover, even without its post-enactment legislative identification feature, the 2013 PDAF Article
would remain constitutionally flawed since it would then operate as a prohibited form of lump-sum
appropriation above-characterized. In particular, the lump-sum amount of ₱24.79 Billion would be
treated as a mere funding source allotted for multiple purposes of spending, i.e., scholarships, medical
missions, assistance to indigents, preservation of historical materials, construction of roads, flood
control, etc. This setup connotes that the appropriation law leaves the actual amounts and purposes of
the appropriation for further determination and, therefore, does not readily indicate a discernible item
which may be subject to the President‘s power of item veto.
In fact, on the accountability side, the same lump-sum budgeting scheme has, as the CoA Chairperson
relays, "limited state auditors from obtaining relevant data and information that would aid in more
stringently auditing the utilization of said Funds."216 Accordingly, she recommends the adoption of a
"line by line budget or amount per proposed program, activity or project, and per implementing
agency."217
Hence, in view of the reasons above-stated, the Court finds the 2013 PDAF Article, as well as all
Congressional Pork Barrel Laws of similar operation, to be unconstitutional. That such budgeting
system provides for a greater degree of flexibility to account for future contingencies cannot be an
excuse to defeat what the Constitution requires. Clearly, the first and essential truth of the matter is that
unconstitutional means do not justify even commendable ends.218

c. Accountability.
b. Application.

Petitioners further relate that the system under which various forms of Congressional Pork Barrel
In these cases, petitioners claim that "in the current x x x system where the PDAF is a lump-sum
operate defies public accountability as it renders Congress incapable of checking itself or its Members.
appropriation, the legislator‘s identification of the projects after the passage of the GAA denies the
In particular, they point out that the Congressional Pork Barrel "gives each legislator a direct, financial
President the chance to veto that item later on."212 Accordingly, they submit that the "item veto power of
interest in the smooth, speedy passing of the yearly budget" which turns them "from fiscalizers" into
the President mandates that appropriations bills adopt line-item budgeting" and that "Congress cannot
"financially-interested partners."219 They also claim that the system has an effect on re- election as "the
choose a mode of budgeting which effectively renders the constitutionally-given power of the President
PDAF excels in self-perpetuation of elective officials." Finally, they add that the "PDAF impairs the
useless."213
power of impeachment" as such "funds are indeed quite useful, ‘to well, accelerate the decisions of
senators.‘"220
On the other hand, respondents maintain that the text of the Constitution envisions a process which is
intended to meet the demands of a modernizing economy and, as such, lump-sum appropriations are
The Court agrees in part.
essential to financially address situations which are barely foreseen when a GAA is enacted. They
argue that the decision of the Congress to create some lump-sum appropriations is constitutionally
allowed and textually-grounded.214 The aphorism forged under Section 1, Article XI of the 1987 Constitution, which states that "public office
is a public trust," is an overarching reminder that every instrumentality of government should exercise
their official functions only in accordance with the principles of the Constitution which embodies the
The Court agrees with petitioners.
parameters of the people‘s trust. The notion of a public trust connotes accountability,221 hence, the
various mechanisms in the Constitution which are designed to exact accountability from public officers.
Under the 2013 PDAF Article, the amount of ₱24.79 Billion only appears as a collective allocation limit
since the said amount would be further divided among individual legislators who would then receive
Among others, an accountability mechanism with which the proper expenditure of public funds may be
personal lump-sum allocations and could, after the GAA is passed, effectively appropriate PDAF funds
checked is the power of congressional oversight. As mentioned in Abakada,222 congressional oversight
based on their own discretion. As these intermediate appropriations are made by legislators only after
may be performed either through: (a) scrutiny based primarily on Congress‘ power of appropriation and
the GAA is passed and hence, outside of the law, it necessarily means that the actual items of PDAF
the budget hearings conducted in connection with it, its power to ask heads of departments to appear
appropriation would not have been written into the General Appropriations Bill and thus effectuated
before and be heard by either of its Houses on any matter pertaining to their departments and its power
without veto consideration. This kind of lump-sum/post-enactment legislative identification budgeting
of confirmation;223 or (b) investigation and monitoring of the implementation of laws pursuant to the
system fosters the creation of a budget within a budget" which subverts the prescribed procedure of
power of Congress to conduct inquiries in aid of legislation.224
presentment and consequently impairs the President‘s power of item veto. As petitioners aptly point
out, the above-described system forces the President to decide between (a) accepting the entire
₱24.79 Billion PDAF allocation without knowing the specific projects of the legislators, which may or The Court agrees with petitioners that certain features embedded in some forms of Congressional Pork
may not be consistent with his national agenda and (b) rejecting the whole PDAF to the detriment of all Barrel, among others the 2013 PDAF Article, has an effect on congressional oversight. The fact that
other legislators with legitimate projects.215 individual legislators are given post-enactment roles in the implementation of the budget makes it
difficult for them to become disinterested "observers" when scrutinizing, investigating or monitoring the
implementation of the appropriation law. To a certain extent, the conduct of oversight would be tainted
as said legislators, who are vested with post-enactment authority, would, in effect, be checking on
activities in which they themselves participate. Also, it must be pointed out that this very same concept
of post-enactment authorization runs afoul of Section 14, Article VI of the 1987 Constitution which
provides that:
In any event, the Court finds the above-stated argument on this score to be largely speculative since it
has not been properly demonstrated how the Pork Barrel System would be able to propagate political
dynasties.
5. Local Autonomy.

Sec. 14. No Senator or Member of the House of Representatives may personally appear as counsel
The State‘s policy on local autonomy is principally stated in Section 25, Article II and Sections 2 and 3,
before any court of justice or before the Electoral Tribunals, or quasi-judicial and other administrative
Article X of the 1987 Constitution which read as follows:
bodies. Neither shall he, directly or indirectly, be interested financially in any contract with, or in any
franchise or special privilege granted by the Government, or any subdivision, agency, or instrumentality
thereof, including any government-owned or controlled corporation, or its subsidiary, during his term of ARTICLE II
office. He shall not intervene in any matter before any office of the Government for his pecuniary benefit
or where he may be called upon to act on account of his office. (Emphasis supplied)
Sec. 25. The State shall ensure the autonomy of local governments.

Clearly, allowing legislators to intervene in the various phases of project implementation – a matter
before another office of government – renders them susceptible to taking undue advantage of their own
office.
The Court, however, cannot completely agree that the same post-enactment authority and/or the
individual legislator‘s control of his PDAF per se would allow him to perpetuate himself in office. Indeed,
while the Congressional Pork Barrel and a legislator‘s use thereof may be linked to this area of interest,
the use of his PDAF for re-election purposes is a matter which must be analyzed based on particular
facts and on a case-to-case basis.
Finally, while the Court accounts for the possibility that the close operational proximity between
legislators and the Executive department, through the former‘s post-enactment participation, may affect
the process of impeachment, this matter largely borders on the domain of politics and does not strictly
concern the Pork Barrel System‘s intrinsic constitutionality. As such, it is an improper subject of judicial
assessment.
In sum, insofar as its post-enactment features dilute congressional oversight and violate Section 14,
Article VI of the 1987 Constitution, thus impairing public accountability, the 2013 PDAF Article and other
forms of Congressional Pork Barrel of similar nature are deemed as unconstitutional.
4. Political Dynasties.
ARTICLE X
Sec. 2. The territorial and political subdivisions shall enjoy local autonomy.
Sec. 3. The Congress shall enact a local government code which shall provide for a more responsive
and accountable local government structure instituted through a system of decentralization with
effective mechanisms of recall, initiative, and referendum, allocate among the different local
government units their powers, responsibilities, and resources, and provide for the qualifications,
election, appointment and removal, term, salaries, powers and functions and duties of local officials,
and all other matters relating to the organization and operation of the local units.
Pursuant thereto, Congress enacted RA 7160,227 otherwise known as the "Local Government Code of
1991" (LGC), wherein the policy on local autonomy had been more specifically explicated as follows:
Sec. 2. Declaration of Policy. – (a) It is hereby declared the policy of the State that the territorial and
political subdivisions of the State shall enjoy genuine and meaningful local autonomy to enable them to
attain their fullest development as self-reliant communities and make them more effective partners in
the attainment of national goals. Toward this end, the State shall provide for a more responsive and
accountable local government structure instituted through a system of decentralization whereby local
government units shall be given more powers, authority, responsibilities, and resources. The process of
decentralization shall proceed from the National Government to the local government units.

One of the petitioners submits that the Pork Barrel System enables politicians who are members of
xxxx
political dynasties to accumulate funds to perpetuate themselves in power, in contravention of Section
26, Article II of the 1987 Constitution225 which states that:
(c) It is likewise the policy of the State to require all national agencies and offices to conduct periodic
consultations with appropriate local government units, nongovernmental and people‘s organizations,
Sec. 26. The State shall guarantee equal access to opportunities for public service, and prohibit political
and other concerned sectors of the community before any project or program is implemented in their
dynasties as may be defined by law. (Emphasis and underscoring supplied)
respective jurisdictions. (Emphases and underscoring supplied)

At the outset, suffice it to state that the foregoing provision is considered as not self-executing due to
The above-quoted provisions of the Constitution and the LGC reveal the policy of the State to empower
the qualifying phrase "as may be defined by law." In this respect, said provision does not, by and of
local government units (LGUs) to develop and ultimately, become self-sustaining and effective
itself, provide a judicially enforceable constitutional right but merely specifies guideline for legislative or
contributors to the national economy. As explained by the Court in Philippine Gamefowl Commission v.
executive action.226 Therefore, since there appears to be no standing law which crystallizes the policy
Intermediate Appellate Court:228
on political dynasties for enforcement, the Court must defer from ruling on this issue.

This is as good an occasion as any to stress the commitment of the Constitution to the policy of local
autonomy which is intended to provide the needed impetus and encouragement to the development of
our local political subdivisions as "self - reliant communities." In the words of Jefferson, "Municipal
corporations are the small republics from which the great one derives its strength." The vitalization of Thus, insofar as individual legislators are authorized to intervene in purely local matters and thereby
local governments will enable their inhabitants to fully exploit their resources and more important, imbue subvert genuine local autonomy, the 2013 PDAF Article as well as all other similar forms of
them with a deepened sense of involvement in public affairs as members of the body politic. This Congressional Pork Barrel is deemed unconstitutional.
objective could be blunted by undue interference by the national government in purely local affairs
which are best resolved by the officials and inhabitants of such political units. The decision we reach
With this final issue on the Congressional Pork Barrel resolved, the Court now turns to the substantive
today conforms not only to the letter of the pertinent laws but also to the spirit of the
issues involving the Presidential Pork Barrel.
Constitution.229 (Emphases and underscoring supplied)

C. Substantive Issues on the Presidential Pork Barrel.

In the cases at bar, petitioners contend that the Congressional Pork Barrel goes against the
constitutional principles on local autonomy since it allows district representatives, who are national
officers, to substitute their judgments in utilizing public funds for local development.230 The Court agrees
with petitioners.
Philconsa described the 1994 CDF as an attempt "to make equal the unequal" and that "it is also a
recognition that individual members of Congress, far more than the President and their congressional
colleagues, are likely to be knowledgeable about the needs of their respective constituents and the
priority to be given each project."231 Drawing strength from this pronouncement, previous legislators
justified its existence by stating that "the relatively small projects implemented under the Congressional
Pork Barrel complement and link the national development goals to the countryside and grassroots as
well as to depressed areas which are overlooked by central agencies which are preoccupied with
mega-projects.232 Similarly, in his August 23, 2013 speech on the "abolition" of PDAF and budgetary
reforms, President Aquino mentioned that the Congressional Pork Barrel was originally established for
a worthy goal, which is to enable the representatives to identify projects for communities that the LGU
concerned cannot afford.233
1. Validity of Appropriation.
Petitioners preliminarily assail Section 8 of PD 910 and Section 12 of PD1869 (now, amended by PD
1993), which respectively provide for the Malampaya Funds and the Presidential Social Fund, as invalid
appropriations laws since they do not have the "primary and specific" purpose of authorizing the release
of public funds from the National Treasury. Petitioners submit that Section 8 of PD 910 is not an
appropriation law since the "primary and specific‖ purpose of PD 910 is the creation of an Energy
Development Board and Section 8 thereof only created a Special Fund incidental thereto.237 In similar
regard, petitioners argue that Section 12 of PD 1869 is neither a valid appropriations law since the
allocation of the Presidential Social Fund is merely incidental to the "primary and specific" purpose of
PD 1869 which is the amendment of the Franchise and Powers of PAGCOR.238 In view of the foregoing,
petitioners suppose that such funds are being used without any valid law allowing for their proper
appropriation in violation of Section 29(1), Article VI of the 1987 Constitution which states that: "No
money shall be paid out of the Treasury except in pursuance of an appropriation made by law."239

Notwithstanding these declarations, the Court, however, finds an inherent defect in the system which The Court disagrees.
actually belies the avowed intention of "making equal the unequal." In particular, the Court observes
that the gauge of PDAF and CDF allocation/division is based solely on the fact of office, without taking
"An appropriation made by law‖ under the contemplation of Section 29(1), Article VI of the 1987
into account the specific interests and peculiarities of the district the legislator represents. In this regard,
Constitution exists when a provision of law (a) sets apart a determinate or determinable240 amount of
the allocation/division limits are clearly not based on genuine parameters of equality, wherein economic
money and (b) allocates the same for a particular public purpose. These two minimum designations of
or geographic indicators have been taken into consideration. As a result, a district representative of a
amount and purpose stem from the very definition of the word "appropriation," which means "to allot,
highly-urbanized metropolis gets the same amount of funding as a district representative of a far-flung
assign, set apart or apply to a particular use or purpose," and hence, if written into the law, demonstrate
rural province which would be relatively "underdeveloped" compared to the former. To add, what rouses
that the legislative intent to appropriate exists. As the Constitution "does not provide or prescribe any
graver scrutiny is that even Senators and Party-List Representatives – and in some years, even the
particular form of words or religious recitals in which an authorization or appropriation by Congress shall
Vice-President – who do not represent any locality, receive funding from the Congressional Pork Barrel
be made, except that it be ‘made by law,‘" an appropriation law may – according to Philconsa – be
as well. These certainly are anathema to the Congressional Pork Barrel‘s original intent which is "to
"detailed and as broad as Congress wants it to be" for as long as the intent to appropriate may be
make equal the unequal." Ultimately, the PDAF and CDF had become personal funds under the
gleaned from the same. As held in the case of Guingona, Jr.:241
effective control of each legislator and given unto them on the sole account of their office.

There is no provision in our Constitution that provides or prescribes any particular form of words or
The Court also observes that this concept of legislator control underlying the CDF and PDAF conflicts
religious recitals in which an authorization or appropriation by Congress shall be made, except that it be
with the functions of the various Local Development Councils (LDCs) which are already legally
"made by law," such as precisely the authorization or appropriation under the questioned presidential
mandated to "assist the corresponding sanggunian in setting the direction of economic and social
decrees. In other words, in terms of time horizons, an appropriation may be made impliedly (as by past
development, and coordinating development efforts within its territorial jurisdiction."234 Considering that
but subsisting legislations) as well as expressly for the current fiscal year (as by enactment of laws by
LDCs are instrumentalities whose functions are essentially geared towards managing local
the present Congress), just as said appropriation may be made in general as well as in specific terms.
affairs,235 their programs, policies and resolutions should not be overridden nor duplicated by individual
The Congressional authorization may be embodied in annual laws, such as a general appropriations
legislators, who are national officers that have no law-making authority except only when acting as a
act or in special provisions of laws of general or special application which appropriate public funds for
body. The undermining effect on local autonomy caused by the post-enactment authority conferred to
specific public purposes, such as the questioned decrees. An appropriation measure is sufficient if the
the latter was succinctly put by petitioners in the following wise:236
legislative intention clearly and certainly appears from the language employed (In re Continuing
Appropriations, 32 P. 272), whether in the past or in the present. (Emphases and underscoring
With PDAF, a Congressman can simply bypass the local development council and initiate projects on supplied)
his own, and even take sole credit for its execution. Indeed, this type of personality-driven project
identification has not only contributed little to the overall development of the district, but has even
Likewise, as ruled by the US Supreme Court in State of Nevada v. La Grave:242
contributed to "further weakening infrastructure planning and coordination efforts of the government."
To constitute an appropriation there must be money placed in a fund applicable to the designated
purpose. The word appropriate means to allot, assign, set apart or apply to a particular use or purpose.
An appropriation in the sense of the constitution means the setting apart a portion of the public funds for
a public purpose. No particular form of words is necessary for the purpose, if the intention to
appropriate is plainly manifested. (Emphases supplied)
Thus, based on the foregoing, the Court cannot sustain the argument that the appropriation must be the
"primary and specific" purpose of the law in order for a valid appropriation law to exist. To reiterate, if a
legal provision designates a determinate or determinable amount of money and allocates the same for
a particular public purpose, then the legislative intent to appropriate becomes apparent and, hence,
already sufficient to satisfy the requirement of an "appropriation made by law" under contemplation of
the Constitution.
Section 8 of PD 910 pertinently provides:
Section 8. Appropriations. x x x
All fees, revenues and receipts of the Board from any and all sources including receipts from service
contracts and agreements such as application and processing fees, signature bonus, discovery bonus,
production bonus; all money collected from concessionaires, representing unspent work obligations,
fines and penalties under the Petroleum Act of 1949; as well as the government share representing
royalties, rentals, production share on service contracts and similar payments on the exploration,
development and exploitation of energy resources, shall form part of a Special Fund to be used to
finance energy resource development and exploitation programs and projects of the government and
for such other purposes as may be hereafter directed by the President. (Emphases supplied)
Whereas Section 12 of PD 1869, as amended by PD 1993, reads:
Sec. 12. Special Condition of Franchise. — After deducting five (5%) percent as Franchise Tax, the
Fifty (50%) percent share of the Government in the aggregate gross earnings of the Corporation from
this Franchise, or 60% if the aggregate gross earnings be less than ₱150,000,000.00 shall be set aside
and shall accrue to the General Fund to finance the priority infrastructure development projects and to
finance the restoration of damaged or destroyed facilities due to calamities, as may be directed and
authorized by the Office of the President of the Philippines. (Emphases supplied)
Analyzing the legal text vis-à-vis the above-mentioned principles, it may then be concluded that (a)
Section 8 of PD 910, which creates a Special Fund comprised of "all fees, revenues, and receipts of the
Energy Development Board from any and all sources" (a determinable amount) "to be used to finance
energy resource development and exploitation programs and projects of the government and for such
other purposes as may be hereafter directed by the President" (a specified public purpose), and (b)
Section 12 of PD 1869, as amended by PD 1993, which similarly sets aside, "after deducting five (5%)
percent as Franchise Tax, the Fifty (50%) percent share of the Government in the aggregate gross
earnings of PAGCOR, or 60%, if the aggregate gross earnings be less than ₱150,000,000.00" (also a
determinable amount) "to finance the priority infrastructure development projects and x x x the
restoration of damaged or destroyed facilities due to calamities, as may be directed and authorized by
the Office of the President of the Philippines" (also a specified public purpose), are legal appropriations
under Section 29(1), Article VI of the 1987 Constitution.
In this relation, it is apropos to note that the 2013 PDAF Article cannot be properly deemed as a legal
appropriation under the said constitutional provision precisely because, as earlier stated, it contains
post-enactment measures which effectively create a system of intermediate appropriations. These
intermediate appropriations are the actual appropriations meant for enforcement and since they are
made by individual legislators after the GAA is passed, they occur outside the law. As such, the Court
observes that the real appropriation made under the 2013 PDAF Article is not the ₱24.79 Billion
allocated for the entire PDAF, but rather the post-enactment determinations made by the individual
legislators which are, to repeat, occurrences outside of the law. Irrefragably, the 2013 PDAF Article
does not constitute an "appropriation made by law" since it, in its truest sense, only authorizes
individual legislators to appropriate in violation of the non-delegability principle as afore-discussed.
2. Undue Delegation.
On a related matter, petitioners contend that Section 8 of PD 910 constitutes an undue delegation of
legislative power since the phrase "and for such other purposes as may be hereafter directed by the
President" gives the President "unbridled discretion to determine for what purpose the funds will be
used."243 Respondents, on the other hand, urged the Court to apply the principle of ejusdem generis to
the same section and thus, construe the phrase "and for such other purposes as may be hereafter
directed by the President" to refer only to other purposes related "to energy resource development and
exploitation programs and projects of the government."244
The Court agrees with petitioners‘ submissions.
While the designation of a determinate or determinable amount for a particular public purpose is
sufficient for a legal appropriation to exist, the appropriation law must contain adequate legislative
guidelines if the same law delegates rule-making authority to the Executive245 either for the purpose of
(a) filling up the details of the law for its enforcement, known as supplementary rule-making, or (b)
ascertaining facts to bring the law into actual operation, referred to as contingent rule-making.246 There
are two (2) fundamental tests to ensure that the legislative guidelines for delegated rule-making are
indeed adequate. The first test is called the "completeness test." Case law states that a law is complete
when it sets forth therein the policy to be executed, carried out, or implemented by the delegate. On the
other hand, the second test is called the "sufficient standard test." Jurisprudence holds that a law lays
down a sufficient standard when it provides adequate guidelines or limitations in the law to map out the
boundaries of the delegate‘s authority and prevent the delegation from running riot.247 To be sufficient,
the standard must specify the limits of the delegate‘s authority, announce the legislative policy, and
identify the conditions under which it is to be implemented.248
In view of the foregoing, the Court agrees with petitioners that the phrase "and for such other purposes
as may be hereafter directed by the President" under Section 8 of PD 910 constitutes an undue
delegation of legislative power insofar as it does not lay down a sufficient standard to adequately
determine the limits of the President‘s authority with respect to the purpose for which the Malampaya
Funds may be used. As it reads, the said phrase gives the President wide latitude to use the
Malampaya Funds for any other purpose he may direct and, in effect, allows him to unilaterally
appropriate public funds beyond the purview of the law. That the subject phrase may be confined only
to "energy resource development and exploitation programs and projects of the government" under the
principle of ejusdem generis, meaning that the general word or phrase is to be construed to include – or
be restricted to – things akin to, resembling, or of the same kind or class as those specifically
mentioned,249 is belied by three (3) reasons: first, the phrase "energy resource development and
exploitation programs and projects of the government" states a singular and general class and hence,
cannot be treated as a statutory reference of specific things from which the general phrase "for such
other purposes" may be limited; second, the said phrase also exhausts the class it represents, namely
energy development programs of the government;250 and, third, the Executive department has, in fact,
used the Malampaya Funds for non-energy related purposes under the subject phrase, thereby
contradicting respondents‘ own position that it is limited only to "energy resource development and
exploitation programs and projects of the government."251 Thus, while Section 8 of PD 910 may have
passed the completeness test since the policy of energy development is clearly deducible from its text,
the phrase "and for such other purposes as may be hereafter directed by the President" under the
same provision of law should nonetheless be stricken down as unconstitutional as it lies independently
unfettered by any sufficient standard of the delegating law. This notwithstanding, it must be
underscored that the rest of Section 8, insofar as it allows for the use of the Malampaya Funds "to
finance energy resource development and exploitation programs and projects of the government,"
remains legally effective and subsisting. Truth be told, the declared unconstitutionality of the
aforementioned phrase is but an assurance that the Malampaya Funds would be used – as it should be
used – only in accordance with the avowed purpose and intention of PD 910.
As for the Presidential Social Fund, the Court takes judicial notice of the fact that Section 12 of PD 1869
has already been amended by PD 1993 which thus moots the parties‘ submissions on the
same.252 Nevertheless, since the amendatory provision may be readily examined under the current
parameters of discussion, the Court proceeds to resolve its constitutionality.
Primarily, Section 12 of PD 1869, as amended by PD 1993, indicates that the Presidential Social Fund
may be used "to first, finance the priority infrastructure development projects and second, to finance the
restoration of damaged or destroyed facilities due to calamities, as may be directed and authorized by
the Office of the President of the Philippines." The Court finds that while the second indicated purpose
adequately curtails the authority of the President to spend the Presidential Social Fund only for
restoration purposes which arise from calamities, the first indicated purpose, however, gives him carte
blanche authority to use the same fund for any infrastructure project he may so determine as a
"priority". Verily, the law does not supply a definition of "priority in frastructure development projects"
and hence, leaves the President without any guideline to construe the same. To note, the delimitation of
a project as one of "infrastructure" is too broad of a classification since the said term could pertain to
any kind of facility. This may be deduced from its lexicographic definition as follows: "the underlying
framework of a system, especially public services and facilities (such as highways, schools, bridges,
sewers, and water-systems) needed to support commerce as well as economic and residential
development."253 In fine, the phrase "to finance the priority infrastructure development projects" must be
stricken down as unconstitutional since – similar to the above-assailed provision under Section 8 of PD
910 – it lies independently unfettered by any sufficient standard of the delegating law. As they are
severable, all other provisions of Section 12 of PD 1869, as amended by PD 1993, remains legally
effective and subsisting.
D. Ancillary Prayers. 1.
Petitioners’ Prayer to be Furnished Lists and Detailed Reports.
Aside from seeking the Court to declare the Pork Barrel System unconstitutional – as the Court did so
in the context of its pronouncements made in this Decision – petitioners equally pray that the Executive
Secretary and/or the DBM be ordered to release to the CoA and to the public: (a) "the complete
schedule/list of legislators who have availed of their PDAF and VILP from the years 2003 to 2013,
specifying the use of the funds, the project or activity and the recipient entities or individuals, and all
pertinent data thereto" (PDAF Use Schedule/List);254 and (b) "the use of the Executive‘s lump-sum,
discretionary funds, including the proceeds from the x x x Malampaya Funds and remittances from the
PAGCOR x x x from 2003 to 2013, specifying the x x x project or activity and the recipient entities or
individuals, and all pertinent data thereto"255 (Presidential Pork Use Report). Petitioners‘ prayer is
grounded on Section 28, Article II and Section 7, Article III of the 1987 Constitution which read as
follows:
ARTICLE II
Sec. 28. Subject to reasonable conditions prescribed by law, the State adopts and implements a policy
of full public disclosure of all its transactions involving public interest.
ARTICLE III Sec. 7.
The right of the people to information on matters of public concern shall be recognized. Access to
official records, and to documents and papers pertaining to official acts, transactions, or decisions, as
well as to government research data used as basis for policy development, shall be afforded the citizen,
subject to such limitations as may be provided by law.
The Court denies petitioners‘ submission.
Case law instructs that the proper remedy to invoke the right to information is to file a petition for
mandamus. As explained in the case of Legaspi v. Civil Service Commission:256
While the manner of examining public records may be subject to reasonable regulation by the
government agency in custody thereof, the duty to disclose the information of public concern, and to
afford access to public records cannot be discretionary on the part of said agencies. Certainly, its
performance cannot be made contingent upon the discretion of such agencies. Otherwise, the
enjoyment of the constitutional right may be rendered nugatory by any whimsical exercise of agency
discretion. The constitutional duty, not being discretionary, its performance may be compelled by a writ
of mandamus in a proper case.
But what is a proper case for Mandamus to issue? In the case before Us, the public right to be enforced
and the concomitant duty of the State are unequivocably set forth in the Constitution.
The decisive question on the propriety of the issuance of the writ of mandamus in this case is, whether
the information sought by the petitioner is within the ambit of the constitutional guarantee. (Emphases
supplied)
Corollarily, in the case of Valmonte v. Belmonte Jr.257 (Valmonte), it has been clarified that the right to
information does not include the right to compel the preparation of "lists, abstracts, summaries and the
like." In the same case, it was stressed that it is essential that the "applicant has a well -defined, clear
and certain legal right to the thing demanded and that it is the imperative duty of defendant to perform
the act required." Hence, without the foregoing substantiations, the Court cannot grant a particular
request for information. The pertinent portions of Valmonte are hereunder quoted:258
Although citizens are afforded the right to information and, pursuant thereto, are entitled to "access to
official records," the Constitution does not accord them a right to compel custodians of official records to
prepare lists, abstracts, summaries and the like in their desire to acquire information on matters of
public concern.
It must be stressed that it is essential for a writ of mandamus to issue that the applicant has a well-
defined, clear and certain legal right to the thing demanded and that it is the imperative duty of
defendant to perform the act required. The corresponding duty of the respondent to perform the
required act must be clear and specific Lemi v. Valencia, G.R. No. L-20768, November 29,1968,126
SCRA 203; Ocampo v. Subido, G.R. No. L-28344, August 27, 1976, 72 SCRA 443.
The request of the petitioners fails to meet this standard, there being no duty on the part of respondent
to prepare the list requested. (Emphases supplied)
In these cases, aside from the fact that none of the petitions are in the nature of mandamus actions, the
Court finds that petitioners have failed to establish a "a well-defined, clear and certain legal right" to be
furnished by the Executive Secretary and/or the DBM of their requested PDAF Use Schedule/List and
Presidential Pork Use Report. Neither did petitioners assert any law or administrative issuance which
would form the bases of the latter‘s duty to furnish them with the documents requested. While
petitioners pray that said information be equally released to the CoA, it must be pointed out that the
CoA has not been impleaded as a party to these cases nor has it filed any petition before the Court to
be allowed access to or to compel the release of any official document relevant to the conduct of its
audit investigations. While the Court recognizes that the information requested is a matter of significant
public concern, however, if only to ensure that the parameters of disclosure are properly foisted and so
as not to unduly hamper the equally important interests of the government, it is constrained to deny
petitioners‘ prayer on this score, without prejudice to a proper mandamus case which they, or even the
CoA, may choose to pursue through a separate petition.
It bears clarification that the Court‘s denial herein should only cover petitioners‘ plea to be furnished
with such schedule/list and report and not in any way deny them, or the general public, access to official
documents which are already existing and of public record. Subject to reasonable regulation and absent
any valid statutory prohibition, access to these documents should not be proscribed. Thus, in Valmonte,
while the Court denied the application for mandamus towards the preparation of the list requested by
petitioners therein, it nonetheless allowed access to the documents sought for by the latter, subject,
however, to the custodian‘s reasonable regulations,viz.:259
In fine, petitioners are entitled to access to the documents evidencing loans granted by the GSIS,
subject to reasonable regulations that the latter may promulgate relating to the manner and hours of
examination, to the end that damage to or loss of the records may be avoided, that undue interference
with the duties of the custodian of the records may be prevented and that the right of other persons
entitled to inspect the records may be insured Legaspi v. Civil Service Commission, supra at p. 538,
quoting Subido v. Ozaeta, 80 Phil. 383, 387. The petition, as to the second and third alternative acts
sought to be done by petitioners, is meritorious.
However, the same cannot be said with regard to the first act sought by petitioners, i.e.,
"to furnish petitioners the list of the names of the Batasang Pambansa members belonging to the
UNIDO and PDP-Laban who were able to secure clean loans immediately before the February 7
election thru the intercession/marginal note of the then First Lady Imelda Marcos."
The Court, therefore, applies the same treatment here.
2. Petitioners’ Prayer to Include Matters in Congressional Deliberations.
Petitioners further seek that the Court "order the inclusion in budgetary deliberations with the Congress
of all presently, off-budget, lump sum, discretionary funds including but not limited to, proceeds from the
x x x Malampaya Fund, remittances from the PAGCOR and the PCSO or the Executive‘s Social
Funds."260
Suffice it to state that the above-stated relief sought by petitioners covers a matter which is generally
left to the prerogative of the political branches of government. Hence, lest the Court itself overreach, it
must equally deny their prayer on this score.
3. Respondents’ Prayer to Lift TRO; Consequential Effects of Decision.
The final issue to be resolved stems from the interpretation accorded by the DBM to the concept of
released funds. In response to the Court‘s September 10, 2013 TRO that enjoined the release of the
remaining PDAF allocated for the year 2013, the DBM issued Circular Letter No. 2013-8 dated
September 27, 2013 (DBM Circular 2013-8) which pertinently reads as follows:
3.0 Nonetheless, PDAF projects funded under the FY 2013 GAA, where a Special Allotment Release
Order (SARO) has been issued by the DBM and such SARO has been obligated by the implementing
agencies prior to the issuance of the TRO, may continually be implemented and disbursements thereto
effected by the agencies concerned.
Based on the text of the foregoing, the DBM authorized the continued implementation and
disbursement of PDAF funds as long as they are: first, covered by a SARO; and, second, that said
SARO had been obligated by the implementing agency concerned prior to the issuance of the Court‘s
September 10, 2013 TRO.
Petitioners take issue with the foregoing circular, arguing that "the issuance of the SARO does not yet
involve the release of funds under the PDAF, as release is only triggered by the issuance of a Notice of
Cash Allocation [(NCA)]."261 As such, PDAF disbursements, even if covered by an obligated SARO,
should remain enjoined.
For their part, respondents espouse that the subject TRO only covers "unreleased and unobligated
allotments." They explain that once a SARO has been issued and obligated by the implementing
agency concerned, the PDAF funds covered by the same are already "beyond the reach of the TRO
because they cannot be considered as ‘remaining PDAF.‘" They conclude that this is a reasonable
interpretation of the TRO by the DBM.262
The Court agrees with petitioners in part.
At the outset, it must be observed that the issue of whether or not the Court‘s September 10, 2013 TRO
should be lifted is a matter rendered moot by the present Decision. The unconstitutionality of the 2013
PDAF Article as declared herein has the consequential effect of converting the temporary injunction into
a permanent one. Hence, from the promulgation of this Decision, the release of the remaining PDAF
funds for 2013, among others, is now permanently enjoined.
The propriety of the DBM‘s interpretation of the concept of "release" must, nevertheless, be resolved as
it has a practical impact on the execution of the current Decision. In particular, the Court must resolve
the issue of whether or not PDAF funds covered by obligated SAROs, at the time this Decision is
promulgated, may still be disbursed following the DBM‘s interpretation in DBM Circular 2013-8.
On this score, the Court agrees with petitioners‘ posturing for the fundamental reason that funds
covered by an obligated SARO are yet to be "released" under legal contemplation. A SARO, as defined
by the DBM itself in its website, is "aspecific authority issued to identified agencies to incur obligations
not exceeding a given amount during a specified period for the purpose indicated. It shall cover
expenditures the release of which is subject to compliance with specific laws or regulations, or is
subject to separate approval or clearance by competent authority."263
Based on this definition, it may be gleaned that a SARO only evinces the existence of an obligation and
not the directive to pay. Practically speaking, the SARO does not have the direct and immediate effect
of placing public funds beyond the control of the disbursing authority. In fact, a SARO may even be
withdrawn under certain circumstances which will prevent the actual release of funds. On the other
hand, the actual release of funds is brought about by the issuance of the NCA,264 which is subsequent
to the issuance of a SARO. As may be determined from the statements of the DBM representative
during the Oral Arguments:265
Justice Bernabe: Is the notice of allocation issued simultaneously with the SARO?
xxxx
Atty. Ruiz: It comes after. The SARO, Your Honor, is only the go signal for the agencies to obligate or to
enter into commitments. The NCA, Your Honor, is already the go signal to the treasury for us to be able
to pay or to liquidate the amounts obligated in the SARO; so it comes after. x x x The NCA, Your Honor,
is the go signal for the MDS for the authorized government-disbursing banks to, therefore, pay the
payees depending on the projects or projects covered by the SARO and the NCA.
Justice Bernabe: Are there instances that SAROs are cancelled or revoked?
Atty. Ruiz: Your Honor, I would like to instead submit that there are instances that the SAROs issued
are withdrawn by the DBM.
Justice Bernabe: They are withdrawn?
Atty. Ruiz: Yes, Your Honor x x x. (Emphases and underscoring supplied)
Thus, unless an NCA has been issued, public funds should not be treated as funds which have been
"released." In this respect, therefore, the disbursement of 2013 PDAF funds which are only covered by
obligated SAROs, and without any corresponding NCAs issued, must, at the time of this Decision’s
promulgation, be enjoined and consequently reverted to the unappropriated surplus of the general fund.
Verily, in view of the declared unconstitutionality of the 2013 PDAF Article, the funds appropriated
pursuant thereto cannot be disbursed even though already obligated, else the Court sanctions the
dealing of funds coming from an unconstitutional source.
This same pronouncement must be equally applied to (a) the Malampaya Funds which have been
obligated but not released – meaning, those merely covered by a SARO – under the phrase "and for
such other purposes as may be hereafter directed by the President" pursuant to Section 8 of PD 910;
and (b) funds sourced from the Presidential Social Fund under the phrase "to finance the priority
infrastructure development projects" pursuant to Section 12 of PD 1869, as amended by PD 1993,
which were altogether declared by the Court as unconstitutional. However, these funds should not be
reverted to the general fund as afore-stated but instead, respectively remain under the Malampaya
Funds and the Presidential Social Fund to be utilized for their corresponding special purposes not
otherwise declared as unconstitutional.
E. Consequential Effects of Decision.
As a final point, it must be stressed that the Court‘s pronouncement anent the unconstitutionality of (a)
the 2013 PDAF Article and its Special Provisions, (b) all other Congressional Pork Barrel provisions
similar thereto, and (c) the phrases (1) "and for such other purposes as may be hereafter directed by
the President" under Section 8 of PD 910, and (2) "to finance the priority infrastructure development
projects" under Section 12 of PD 1869, as amended by PD 1993, must only be treated as prospective
in effect in view of the operative fact doctrine.
To explain, the operative fact doctrine exhorts the recognition that until the judiciary, in an appropriate
case, declares the invalidity of a certain legislative or executive act, such act is presumed constitutional
and thus, entitled to obedience and respect and should be properly enforced and complied with. As
explained in the recent case of Commissioner of Internal Revenue v. San Roque Power
Corporation,266 the doctrine merely "reflects awareness that precisely because the judiciary is the
governmental organ which has the final say on whether or not a legislative or executive measure is
valid, a period of time may have elapsed before it can exercise the power of judicial review that may
lead to a declaration of nullity. It would be to deprive the law of its quality of fairness and justice then, if
there be no recognition of what had transpired prior to such adjudication."267 "In the language of an
American Supreme Court decision: ‘The actual existence of a statute, prior to such a determination of
unconstitutionality, is an operative fact and may have consequences which cannot justly be ignored.‘"268
For these reasons, this Decision should be heretofore applied prospectively.
Conclusion
The Court renders this Decision to rectify an error which has persisted in the chronicles of our history.
In the final analysis, the Court must strike down the Pork Barrel System as unconstitutional in view of
the inherent defects in the rules within which it operates. To recount, insofar as it has allowed
legislators to wield, in varying gradations, non-oversight, post-enactment authority in vital areas of
budget execution, the system has violated the principle of separation of powers; insofar as it has
conferred unto legislators the power of appropriation by giving them personal, discretionary funds from
which they are able to fund specific projects which they themselves determine, it has similarly violated
the principle of non-delegability of legislative power ; insofar as it has created a system of budgeting
wherein items are not textualized into the appropriations bill, it has flouted the prescribed procedure of
presentment and, in the process, denied the President the power to veto items ; insofar as it has diluted
the effectiveness of congressional oversight by giving legislators a stake in the affairs of budget
execution, an aspect of governance which they may be called to monitor and scrutinize, the system has
equally impaired public accountability ; insofar as it has authorized legislators, who are national officers,
to intervene in affairs of purely local nature, despite the existence of capable local institutions, it has
likewise subverted genuine local autonomy ; and again, insofar as it has conferred to the President the
power to appropriate funds intended by law for energy-related purposes only to other purposes he may
deem fit as well as other public funds under the broad classification of "priority infrastructure
development projects," it has once more transgressed the principle of non-delegability.
For as long as this nation adheres to the rule of law, any of the multifarious unconstitutional methods
and mechanisms the Court has herein pointed out should never again be adopted in any system of
governance, by any name or form, by any semblance or similarity, by any influence or effect.
Disconcerting as it is to think that a system so constitutionally unsound has monumentally endured, the
Court urges the people and its co-stewards in government to look forward with the optimism of change
and the awareness of the past. At a time of great civic unrest and vociferous public debate, the Court
fervently hopes that its Decision today, while it may not purge all the wrongs of society nor bring back
what has been lost, guides this nation to the path forged by the Constitution so that no one may
heretofore detract from its cause nor stray from its course. After all, this is the Court‘s bounden duty and
no other‘s.
WHEREFORE, the petitions are PARTLY GRANTED. In view of the constitutional violations discussed
in this Decision, the Court hereby declares as UNCONSTITUTIONAL: (a) the entire 2013 PDAF Article;
(b) all legal provisions of past and present Congressional Pork Barrel Laws, such as the previous PDAF
and CDF Articles and the various Congressional Insertions, which authorize/d legislators – whether
individually or collectively organized into committees – to intervene, assume or participate in any of the
various post-enactment stages of the budget execution, such as but not limited to the areas of project
identification, modification and revision of project identification, fund release and/or fund realignment,
unrelated to the power of congressional oversight; (c) all legal provisions of past and present
Congressional Pork Barrel Laws, such as the previous PDAF and CDF Articles and the various
Congressional Insertions, which confer/red personal, lump-sum allocations to legislators from which
they are able to fund specific projects which they themselves determine; (d) all informal practices of
similar import and effect, which the Court similarly deems to be acts of grave abuse of discretion
amounting to lack or excess of jurisdiction; and (e) the phrases (1) "and for such other purposes as may
be hereafter directed by the President" under Section 8 of Presidential Decree No. 910 and (2) "to REP. EDCEL C. LAGMAN, REP. RODOLFO B. ALBANO, JR., REP. SIMEON A.
finance the priority infrastructure development projects" under Section 12 of Presidential Decree No. DATUMANONG, and REP. ORLANDO B. FUA, SR., Petitioners,
1869, as amended by Presidential Decree No. 1993, for both failing the sufficient standard test in vs.
violation of the principle of non-delegability of legislative power. EXECUTIVE SECRETARY PAQUITO N. OCHOA, JR. and DEPARTMENT OF BUDGET AND
MANAGEMENT SECRETARY FLORENCIO B. ABAD, Respondents.
Accordingly, the Court‘s temporary injunction dated September 10, 2013 is hereby declared to be
PERMANENT. Thus, the disbursement/release of the remaining PDAF funds allocated for the year DECISION
2013, as well as for all previous years, and the funds sourced from (1) the Malampaya Funds under the
phrase "and for such other purposes as may be hereafter directed by the President" pursuant to
MENDOZA, J.:
Section 8 of Presidential Decree No. 910, and (2) the Presidential Social Fund under the phrase "to
finance the priority infrastructure development projects" pursuant to Section 12 of Presidential Decree
No. 1869, as amended by Presidential Decree No. 1993, which are, at the time this Decision is When the judiciary mediates to allocate constitutional boundaries, it does not assert any superiority
promulgated, not covered by Notice of Cash Allocations (NCAs) but only by Special Allotment Release over the other departments; it does not in reality nullify or invalidate an act of the legislature, but only
Orders (SAROs), whether obligated or not, are hereby ENJOINED. The remaining PDAF funds covered asserts the solemn and sacred obligation assigned to it by the Constitution to determine conflicting
by this permanent injunction shall not be disbursed/released but instead reverted to the unappropriated claims of authority under the Constitution and to establish for the parties in an actual controversy the
surplus of the general fund, while the funds under the Malampaya Funds and the Presidential Social rights which that instrument secures and guarantees to them.
Fund shall remain therein to be utilized for their respective special purposes not otherwise declared as
unconstitutional.
— Justice Jose P. Laurel1

On the other hand, due to improper recourse and lack of proper substantiation, the Court hereby
The role of the Constitution cannot be overlooked. It is through the Constitution that the fundamental
DENIES petitioners‘ prayer seeking that the Executive Secretary and/or the Department of Budget and
powers of government are established, limited and defined, and by which these powers are distributed
Management be ordered to provide the public and the Commission on Audit complete lists/schedules or
among the several departments.2 The Constitution is the basic and paramount law to which all other
detailed reports related to the availments and utilization of the funds subject of these cases. Petitioners‘
laws must conform and to which all persons, including the highest officials of the land, must
access to official documents already available and of public record which are related to these funds
defer.3 Constitutional doctrines must remain steadfast no matter what may be the tides of time. It cannot
must, however, not be prohibited but merely subjected to the custodian‘s reasonable regulations or any
be simply made to sway and accommodate the call of situations and much more tailor itself to the
valid statutory prohibition on the same. This denial is without prejudice to a proper mandamus case
whims and caprices of government and the people who run it.4
which they or the Commission on Audit may choose to pursue through a separate petition.

For consideration before the Court are two consolidated cases5 both of which essentially assail the
The Court also DENIES petitioners prayer to order the inclusion of the funds subject of these cases in
validity and constitutionality of Executive Order No. 1, dated July 30, 2010, entitled “Creating the
the budgetary deliberations of Congress as the same is a matter left to the prerogative of the political
Philippine Truth Commission of 2010.”
branches of government.

The first case is G.R. No. 192935, a special civil action for prohibition instituted by petitioner Louis
Finally, the Court hereby DIRECTS all prosecutorial organs of the government to, within the bounds of
Biraogo (Biraogo) in his capacity as a citizen and taxpayer. Biraogo assails Executive Order No. 1 for
reasonable dispatch, investigate and accordingly prosecute all government officials and/or private
being violative of the legislative power of Congress under Section 1, Article VI of the Constitution 6 as it
individuals for possible criminal offenses related to the irregular, improper and/or unlawful
usurps the constitutional authority of the legislature to create a public office and to appropriate funds
disbursement/utilization of all funds under the Pork Barrel System.
therefor.7

This Decision is immediately executory but prospective in effect.

The second case, G.R. No. 193036, is a special civil action for certiorari and prohibition filed by
petitioners Edcel C. Lagman, Rodolfo B. Albano Jr., Simeon A. Datumanong, and Orlando B. Fua, Sr.
SO ORDERED. (petitioners-legislators) as incumbent members of the House of Representatives.

G.R. No. 192935               December 7, 2010 The genesis of the foregoing cases can be traced to the events prior to the historic May 2010 elections,
when then Senator Benigno Simeon Aquino III declared his staunch condemnation of graft and
corruption with his slogan, “Kung walang corrupt, walangmahirap.” The Filipino people, convinced of his
LOUIS “BAROK” C. BIRAOGO, Petitioner,
sincerity and of his ability to carry out this noble objective, catapulted the good senator to the
vs.
presidency.
THE PHILIPPINE TRUTH COMMISSION OF 2010, Respondent.

To transform his campaign slogan into reality, President Aquino found a need for a special body to
x – – – – – – – – – – – – – – – – – – – – – – -x
investigate reported cases of graft and corruption allegedly committed during the previous
administration.
G.R. No. 193036
Thus, at the dawn of his administration, the President on July 30, 2010, signed Executive Order No. 1
establishing the Philippine Truth Commission of 2010 (Truth Commission). Pertinent provisions of said
executive order read:
EXECUTIVE ORDER NO. 1
CREATING THE PHILIPPINE TRUTH COMMISSION OF 2010
WHEREAS, Article XI, Section 1 of the 1987 Constitution of the Philippines solemnly enshrines the
principle that a public office is a public trust and mandates that public officers and employees, who are
servants of the people, must at all times be accountable to the latter, serve them with utmost
responsibility, integrity, loyalty and efficiency, act with patriotism and justice, and lead modest lives;
WHEREAS, corruption is among the most despicable acts of defiance of this principle and notorious
violation of this mandate;
WHEREAS, corruption is an evil and scourge which seriously affects the political, economic, and social
life of a nation; in a very special way it inflicts untold misfortune and misery on the poor, the
marginalized and underprivileged sector of society;
WHEREAS, corruption in the Philippines has reached very alarming levels, and undermined the
people’s trust and confidence in the Government and its institutions;
WHEREAS, there is an urgent call for the determination of the truth regarding certain reports of large
scale graft and corruption in the government and to put a closure to them by the filing of the appropriate
cases against those involved, if warranted, and to deter others from committing the evil, restore the
people’s faith and confidence in the Government and in their public servants;
WHEREAS, the President’s battlecry during his campaign for the Presidency in the last elections “kung
walang corrupt, walangmahirap” expresses a solemn pledge that if elected, he would end corruption
and the evil it breeds;
WHEREAS, there is a need for a separate body dedicated solely to investigating and finding out the
truth concerning the reported cases of graft and corruption during the previous administration, and
which will recommend the prosecution of the offenders and secure justice for all;
WHEREAS, Book III, Chapter 10, Section 31 of Executive Order No. 292, otherwise known as the
Revised Administrative Code of the Philippines, gives the President the continuing authority to
reorganize the Office of the President.
NOW, THEREFORE, I, BENIGNO SIMEON AQUINO III, President of the Republic of the Philippines,
by virtue of the powers vested in me by law, do hereby order:
SECTION 1. Creation of a Commission. – There is hereby created the PHILIPPINETRUTH
COMMISSION, hereinafter referred to as the “COMMISSION,” which shall primarily seek and find the
truth on, and toward this end, investigate reports of graft and corruption of such scale and magnitude
that shock and offend the moral and ethical sensibilities of the people, committed by public officers and
employees, their co-principals, accomplices and accessories from the private sector, if any, during the
previous administration; and thereafter recommend the appropriate action or measure to be taken
thereon to ensure that the full measure of justice shall be served without fear or favor.
The Commission shall be composed of a Chairman and four (4) members who will act as an
independent collegial body.
SECTION 2. Powers and Functions. – The Commission, which shall have all the powers of an
investigative body under Section 37, Chapter 9, Book I of the Administrative Code of 1987, is primarily
tasked to conduct a thorough fact-finding investigation of reported cases of graft and corruption referred
to in Section 1, involving third level public officers and higher, their co-principals, accomplices and
accessories from the private sector, if any, during the previous administration and thereafter submit its
finding and recommendations to the President, Congress and the Ombudsman.
In particular, it shall:
a) Identify and determine the reported cases of such graft and corruption which it will investigate;
b) Collect, receive, review and evaluate evidence related to or regarding the cases of large scale
corruption which it has chosen to investigate, and to this end require any agency, official or employee of
the Executive Branch, including government-owned or controlled corporations, to produce documents,
books, records and other papers;
c) Upon proper request or representation, obtain information and documents from the Senate and the
House of Representatives records of investigations conducted by committees thereof relating to matters
or subjects being investigated by the Commission;
d) Upon proper request and representation, obtain information from the courts, including the
Sandiganbayan and the Office of the Court Administrator, information or documents in respect to
corruption cases filed with the Sandiganbayan or the regular courts, as the case may be;
e) Invite or subpoena witnesses and take their testimonies and for that purpose, administer oaths or
affirmations as the case may be;
f) Recommend, in cases where there is a need to utilize any person as a state witness to ensure that
the ends of justice be fully served, that such person who qualifies as a state witness under the Revised
Rules of Court of the Philippines be admitted for that purpose;
g) Turn over from time to time, for expeditious prosecution, to the appropriate prosecutorial authorities,
by means of a special or interim report and recommendation, all evidence on corruption of public
officers and employees and their private sector co-principals, accomplices or accessories, if any, when
in the course of its investigation the Commission finds that there is reasonable ground to believe that
they are liable for graft and corruption under pertinent applicable laws;
h) Call upon any government investigative or prosecutorial agency such as the Department of Justice or
any of the agencies under it, and the Presidential Anti-Graft Commission, for such assistance and
cooperation as it may require in the discharge of its functions and duties;
i) Engage or contract the services of resource persons, professionals and other personnel determined
by it as necessary to car  ry out its mandate;
j) Promulgate its rules and regulations or rules of procedure it deems necessary to effectively and
efficiently carry out the objectives of this Executive Order and to ensure the orderly conduct of its
investigations, proceedings and hearings, including the presentation of evidence;
k) Exercise such other acts incident to or are appropriate and necessary in connection with the
objectives and purposes of this Order.
SECTION 3. Staffing Requirements. – xxx.
SECTION 4. Detail of Employees. – xxx.
SECTION 5. Engagement of Experts. – xxx
SECTION 6. Conduct of Proceedings. – xxx.
SECTION 7. Right to Counsel of Witnesses/Resource Persons. – xxx.
SECTION 8. Protection of Witnesses/Resource Persons.– xxx.
SECTION 9. Refusal to Obey Subpoena, Take Oath or Give Testimony.– Any government official or
personnel who, without lawful excuse, fails to appear upon subpoena issued by the Commission or
who, appearing before the Commission refuses to take oath or affirmation, give testimony or produce
documents for inspection, when required, shall be subject to administrative disciplinary action. Any
private person who does the same may be dealt with in accordance with law.
SECTION 10. Duty to Extend Assistance to the Commission.– xxx.
SECTION 11. Budget for the Commission. – The Office of the President shall provide the necessary
funds for the Commission to ensure that it can exercise its powers, execute its functions, and perform
its duties and responsibilities as effectively, efficiently, and expeditiously as possible.
SECTION 12. Office. – xxx.
SECTION 13. Furniture/Equipment. – xxx.
SECTION 14. Term of the Commission. – The Commission shall accomplish its mission on or before
December 31, 2012.
SECTION 15. Publication of Final Report. – xxx.
SECTION 16. Transfer of Records and Facilities of the Commission. –xxx.
SECTION 17. Special Provision Concerning Mandate.If and when in the judgment of the President
there is a need to expand the mandate of the Commission as defined in Section 1 hereof to include the
investigation of cases and instances of graft and corruption during the prior administrations, such
mandate may be so extended accordingly by way of a supplemental Executive Order.
SECTION 18. Separability Clause. If any provision of this Order is declared unconstitutional, the same
shall not affect the validity and effectivity of the other provisions hereof.
SECTION 19. Effectivity. – This Executive Order shall take effect immediately.
DONE in the City of Manila, Philippines, this 30th day of July 2010.
(SGD.) BENIGNO S. AQUINO III
By the President:
(SGD.) PAQUITO N. OCHOA, JR.
Executive Secretary
Nature of the Truth Commission
As can be gleaned from the above-quoted provisions, the Philippine Truth Commission (PTC) is a mere
ad hoc body formed under the Office of the President with the primary task to investigate reports of
graft and corruption committed by third-level public officers and employees, their co-principals,
accomplices and accessories during the previous administration, and thereafter to submit its finding and
recommendations to the President, Congress and the Ombudsman. Though it has been described as
an “independent collegial body,” it is essentially an entity within the Office of the President Proper and
subject to his control. Doubtless, it constitutes a public office, as an ad hoc body is one.8
To accomplish its task, the PTC shall have all the powers of an investigative body under Section 37,
Chapter 9, Book I of the Administrative Code of 1987. It is not, however, a quasi-judicial body as it
cannot adjudicate, arbitrate, resolve, settle, or render awards in disputes between contending parties.
All it can do is gather, collect and assess evidence of graft and corruption and make recommendations.
It may have subpoena powers but it has no power to cite people in contempt, much less order their
arrest. Although it is a fact-finding body, it cannot determine from such facts if probable cause exists as
to warrant the filing of an information in our courts of law. Needless to state, it cannot impose criminal,
civil or administrative penalties or sanctions.
The PTC is different from the truth commissions in other countries which have been created as official,
transitory and non-judicial fact-finding bodies “to establish the facts and context of serious violations of
human rights or of international humanitarian law in a country’s past.”9 They are usually established by
states emerging from periods of internal unrest, civil strife or authoritarianism to serve as mechanisms
for transitional justice.
Truth commissions have been described as bodies that share the following characteristics: (1) they
examine only past events; (2) they investigate patterns of abuse committed over a period of time, as
opposed to a particular event; (3) they are temporary bodies that finish their work with the submission of
a report containing conclusions and recommendations; and (4) they are officially sanctioned, authorized
or empowered by the State.10 “Commission’s members are usually empowered to conduct research,
support victims, and propose policy recommendations to prevent recurrence of crimes. Through their
investigations, the commissions may aim to discover and learn more about past abuses, or formally
acknowledge them. They may aim to prepare the way for prosecutions and recommend institutional
reforms.”11
Thus, their main goals range from retribution to reconciliation. The Nuremburg and Tokyo war crime
tribunals are examples of a retributory or vindicatory body set up to try and punish those responsible for
crimes against humanity. A form of a reconciliatory tribunal is the Truth and Reconciliation Commission
of South Africa, the principal function of which was to heal the wounds of past violence and to prevent
future conflict by providing a cathartic experience for victims.
The PTC is a far cry from South Africa’s model. The latter placed more emphasis on reconciliation than
on judicial retribution, while the marching order of the PTC is the identification and punishment of
perpetrators. As one writer12 puts it:
The order ruled out reconciliation. It translated the Draconian code spelled out by Aquino in his
inaugural speech: “To those who talk about reconciliation, if they mean that they would like us to simply
forget about the wrongs that they have committed in the past, we have this to say: There can be no
reconciliation without justice. When we allow crimes to go unpunished, we give consent to their
occurring over and over again.”
The Thrusts of the Petitions
Barely a month after the issuance of Executive Order No. 1, the petitioners asked the Court to declare it
unconstitutional and to enjoin the PTC from performing its functions. A perusal of the arguments of the
petitioners in both cases shows that they are essentially the same. The petitioners-legislators
summarized them in the following manner:
(a) E.O. No. 1 violates the separation of powers as it arrogates the power of the Congress to create a
public office and appropriate funds for its operation.
(b) The provision of Book III, Chapter 10, Section 31 of the Administrative Code of 1987 cannot
legitimize E.O. No. 1 because the delegated authority of the President to structurally reorganize the
Office of the President to achieve economy, simplicity and efficiency does not include the power to
create an entirely new public office which was hitherto inexistent like the “Truth Commission.”
(c) E.O. No. 1 illegally amended the Constitution and pertinent statutes when it vested the “Truth
Commission” with quasi-judicial powers duplicating, if not superseding, those of the Office of the
Ombudsman created under the 1987 Constitution and the Department of Justice created under the
Administrative Code of 1987.
(d) E.O. No. 1 violates the equal protection clause as it selectively targets for investigation and
prosecution officials and personnel of the previous administration as if corruption is their peculiar
species even as it excludes those of the other administrations, past and present, who may be
indictable.
(e) The creation of the “Philippine Truth Commission of 2010” violates the consistent and general
international practice of four decades wherein States constitute truth commissions to exclusively
investigate human rights violations, which customary practice forms part of the generally accepted
principles of international law which the Philippines is mandated to adhere to pursuant to the
Declaration of Principles enshrined in the Constitution.
(f) The creation of the “Truth Commission” is an exercise in futility, an adventure in partisan hostility, a
launching pad for trial/conviction by publicity and a mere populist propaganda to mistakenly impress the
people that widespread poverty will altogether vanish if corruption is eliminated without even addressing
the other major causes of poverty.
(g) The mere fact that previous commissions were not constitutionally challenged is of no moment
because neither laches nor estoppel can bar an eventual question on the constitutionality and validity of
an executive issuance or even a statute.”13
In their Consolidated Comment,14 the respondents, through the Office of the Solicitor
General (OSG), essentially questioned the legal standing of petitioners and defended the assailed
executive order with the following arguments:
1] E.O. No. 1 does not arrogate the powers of Congress to create a public office because the
President’s executive power and power of control necessarily include the inherent power to conduct
investigations to ensure that laws are faithfully executed and that, in any event, the Constitution,
Revised Administrative Code of 1987 (E.O. No. 292), 15Presidential Decree (P.D.) No. 1416 16 (as
amended by P.D. No. 1772), R.A. No. 9970, 17 and settled jurisprudence that authorize the President to
create or form such bodies.
2] E.O. No. 1 does not usurp the power of Congress to appropriate funds because there is no
appropriation but a mere allocation of funds already appropriated by Congress.
3] The Truth Commission does not duplicate or supersede the functions of the Office of the
Ombudsman (Ombudsman) and the Department of Justice (DOJ), because it is a fact-finding body and
not a quasi-judicial body and its functions do not duplicate, supplant or erode the latter’s jurisdiction.
4] The Truth Commission does not violate the equal protection clause because it was validly created for
laudable purposes.
The OSG then points to the continued existence and validity of other executive orders and presidential
issuances creating similar bodies to justify the creation of the PTC such as Presidential Complaint and
Action Commission (PCAC) by President Ramon B. Magsaysay, Presidential Committee on
Administrative Performance Efficiency (PCAPE) by President Carlos P. Garcia and Presidential Agency
on Reform and Government Operations (PARGO) by President Ferdinand E. Marcos.18
From the petitions, pleadings, transcripts, and memoranda, the following are the principal issues to be
resolved:
1. Whether or not the petitioners have the legal standing to file their respective petitions and question
Executive Order No. 1;
2. Whether or not Executive Order No. 1 violates the principle of separation of powers by usurping the
powers of Congress to create and to appropriate funds for public offices, agencies and commissions;
3. Whether or not Executive Order No. 1 supplants the powers of the Ombudsman and the DOJ;
4. Whether or not Executive Order No. 1 violates the equal protection clause; and
5. Whether or not petitioners are entitled to injunctive relief.
Essential requisites for judicial review
Before proceeding to resolve the issue of the constitutionality of Executive Order No. 1, the Court needs
to ascertain whether the requisites for a valid exercise of its power of judicial review are present.
Like almost all powers conferred by the Constitution, the power of judicial review is subject to
limitations, to wit: (1) there must be an actual case or controversy calling for the exercise of judicial
power; (2) the person challenging the act must have the standing to question the validity of the subject
act or issuance; otherwise stated, he must have a personal and substantial interest in the case such
that he has sustained, or will sustain, direct injury as a result of its enforcement; (3) the question of
constitutionality must be raised at the earliest opportunity; and (4) the issue of constitutionality must be
the very lismota of the case.19
Among all these limitations, only the legal standing of the petitioners has been put at issue.
Legal Standing of the Petitioners
The OSG attacks the legal personality of the petitioners-legislators to file their petition for failure to
demonstrate their personal stake in the outcome of the case. It argues that the petitioners have not
shown that they have sustained or are in danger of sustaining any personal injury attributable to the
creation of the PTC. Not claiming to be the subject of the commission’s investigations, petitioners will
not sustain injury in its creation or as a result of its proceedings.20
The Court disagrees with the OSG in questioning the legal standing of the petitioners-legislators to
assail Executive Order No. 1. Evidently, their petition primarily invokes usurpation of the power of the
Congress as a body to which they belong as members. This certainly justifies their resolve to take the
cudgels for Congress as an institution and present the complaints on the usurpation of their power and
rights as members of the legislature before the Court. As held in Philippine Constitution Association v.
Enriquez,21
To the extent the powers of Congress are impaired, so is the power of each member thereof, since his
office confers a right to participate in the exercise of the powers of that institution.
An act of the Executive which injures the institution of Congress causes a derivative but nonetheless
substantial injury, which can be questioned by a member of Congress. In such a case, any member of
Congress can have a resort to the courts.
Indeed, legislators have a legal standing to see to it that the prerogative, powers and privileges vested
by the Constitution in their office remain inviolate. Thus, they are allowed to question the validity of any
official action which, to their mind, infringes on their prerogatives as legislators.22
With regard to Biraogo, the OSG argues that, as a taxpayer, he has no standing to question the
creation of the PTC and the budget for its operations.23 It emphasizes that the funds to be used for the
creation and operation of the commission are to be taken from those funds already appropriated by
Congress. Thus, the allocation and disbursement of funds for the commission will not entail
congressional action but will simply be an exercise of the President’s power over contingent funds.
As correctly pointed out by the OSG, Biraogo has not shown that he sustained, or is in danger of
sustaining, any personal and direct injury attributable to the implementation of Executive Order No. 1.
Nowhere in his petition is an assertion of a clear right that may justify his clamor for the Court to
exercise judicial power and to wield the axe over presidential issuances in defense of the Constitution.
The case of David v. Arroyo24 explained the deep-seated rules on locus standi. Thus:
Locus standi is defined as “a right of appearance in a court of justice on a given question.” In private
suits, standing is governed by the “real-parties-in interest” rule as contained in Section 2, Rule 3 of the
1997 Rules of Civil Procedure, as amended. It provides that “every action must be prosecuted or
defended in the name of the real party in interest.” Accordingly, the “real-party-in interest” is “the
party who stands to be benefited or injured by the judgment in the suit or the party entitled to the avails
of the suit.” Succinctly put, the plaintiff’s standing is based on his own right to the relief sought.
The difficulty of determining locus standiarises in public suits. Here, the plaintiff who asserts a “public
right” in assailing an allegedly illegal official action, does so as a representative of the general public.
He may be a person who is affected no differently from any other person. He could be suing as a
“stranger,” or in the category of a “citizen,” or ‘taxpayer.” In either case, he has to adequately show that
he is entitled to seek judicial protection. In other words, he has to make out a sufficient interest in the
vindication of the public order and the securing of relief as a “citizen” or “taxpayer.
Case law in most jurisdictions now allows both “citizen” and “taxpayer” standing in public actions. The
distinction was first laid down in Beauchamp v. Silk, where it was held that the plaintiff in a taxpayer’s
suit is in a different category from the plaintiff in a citizen’s suit. In the former, the plaintiff is affected by
the expenditure of public funds, while in the latter, he is but the mere instrument of the public concern.
As held by the New York Supreme Court in People ex rel Case v. Collins: “In matter of mere public
right, however…the people are the real parties…It is at least the right, if not the duty, of every citizen to
interfere and see that a public offence be properly pursued and punished, and that a public grievance
be remedied.” With respect to taxpayer’s suits, Terr v. Jordan held that “the right of a citizen and a
taxpayer to maintain an action in courts to restrain the unlawful use of public funds to his injury cannot
be denied.”
However, to prevent just about any person from seeking judicial interference in any official policy or act
with which he disagreed with, and thus hinders the activities of governmental agencies engaged in
public service, the United State Supreme Court laid down the more stringent “direct injury” test in Ex
Parte Levitt, later reaffirmed in Tileston v. Ullman. The same Court ruled that for a private individual to
invoke the judicial power to determine the validity of an executive or legislative action, he must show
that he has sustained a direct injury as a result of that action, and it is not sufficient that he has
a general interest common to all members of the public.
This Court adopted the “direct injury” test in our jurisdiction. In People v. Vera, it held that the person
who impugns the validity of a statute must have “a personal and substantial interest in the case
such that he has sustained, or will sustain direct injury as a result.” The Vera doctrine was upheld
in a litany of cases, such as, Custodio v. President of the Senate, Manila Race Horse Trainers’
Association v. De la Fuente, Pascual v. Secretary of Public Works and Anti-Chinese League of the
Philippines v. Felix.[Emphases included. Citations omitted]
Notwithstanding, the Court leans on the doctrine that “the rule on standing is a matter of procedure,
hence, can be relaxed for nontraditional plaintiffs like ordinary citizens, taxpayers, and legislators when
the public interest so requires, such as when the matter is of transcendental importance, of
overreaching significance to society, or of paramount public interest.”25
Thus, in Coconut Oil Refiners Association, Inc. v. Torres,26 the Court held that in cases of paramount
importance where serious constitutional questions are involved, the standing requirements may be
relaxed and a suit may be allowed to prosper even where there is no direct injury to the party claiming
the right of judicial review. In the first Emergency Powers Cases, 27 ordinary citizens and taxpayers were
allowed to question the constitutionality of several executive orders although they had only an indirect
and general interest shared in common with the public.
The OSG claims that the determinants of transcendental importance 28 laid down in CREBA v. ERC and
Meralco29 are non-existent in this case. The Court, however, finds reason in Biraogo’s assertion that the
petition covers matters of transcendental importance to justify the exercise of jurisdiction by the Court.
There are constitutional issues in the petition which deserve the attention of this Court in view of their
seriousness, novelty and weight as precedents. Where the issues are of transcendental and paramount
importance not only to the public but also to the Bench and the Bar, they should be resolved for the
guidance of all.30 Undoubtedly, the Filipino people are more than interested to know the status of the
President’s first effort to bring about a promised change to the country. The Court takes cognizance of
the petition not due to overwhelming political undertones that clothe the issue in the eyes of the public,
but because the Court stands firm in its oath to perform its constitutional duty to settle legal
controversies with overreaching significance to society.
 Power of the President to Create the Truth Commission
In his memorandum in G.R. No. 192935, Biraogo asserts that the Truth Commission is a public office
and not merely an adjunct body of the Office of the President. 31 Thus, in order that the President may
create a public office he must be empowered by the Constitution, a statute or an authorization vested in
him by law. According to petitioner, such power cannot be presumed32 since there is no provision in the
Constitution or any specific law that authorizes the President to create a truth commission.33 He adds
that Section 31 of the Administrative Code of 1987, granting the President the continuing authority to
reorganize his office, cannot serve as basis for the creation of a truth commission considering the
aforesaid provision merely uses verbs such as “reorganize,” “transfer,” “consolidate,” “merge,” and
“abolish.”34 Insofar as it vests in the President the plenary power to reorganize the Office of the
President to the extent of creating a public office, Section 31 is inconsistent with the principle of
separation of powers enshrined in the Constitution and must be deemed repealed upon the effectivity
thereof.35
Similarly, in G.R. No. 193036, petitioners-legislators argue that the creation of a public office lies within
the province of Congress and not with the executive branch of government. They maintain that the
delegated authority of the President to reorganize under Section 31 of the Revised Administrative
Code: 1) does not permit the President to create a public office, much less a truth commission; 2) is
limited to the reorganization of the administrative structure of the Office of the President; 3) is limited to
the restructuring of the internal organs of the Office of the President Proper, transfer of functions and
transfer of agencies; and 4) only to achieve simplicity, economy and efficiency. 36 Such continuing
authority of the President to reorganize his office is limited, and by issuing Executive Order No. 1, the
President overstepped the limits of this delegated authority.
The OSG counters that there is nothing exclusively legislative about the creation by the President of a
fact-finding body such as a truth commission. Pointing to numerous offices created by past presidents,
it argues that the authority of the President to create public offices within the Office of the President
Proper has long been recognized. 37According to the OSG, the Executive, just like the other two
branches of government, possesses the inherent authority to create fact-finding committees to assist it
in the performance of its constitutionally mandated functions and in the exercise of its administrative
functions.38 This power, as the OSG explains it, is but an adjunct of the plenary powers wielded by the
President under Section 1 and his power of control under Section 17, both of Article VII of the
Constitution.39
It contends that the President is necessarily vested with the power to conduct fact-finding
investigations, pursuant to his duty to ensure that all laws are enforced by public officials and
employees of his department and in the exercise of his authority to assume directly the functions of the
executive department, bureau and office, or interfere with the discretion of his officials.40 The power of
the President to investigate is not limited to the exercise of his power of control over his subordinates in
the executive branch, but extends further in the exercise of his other powers, such as his power to
discipline subordinates,41 his power for rule making, adjudication and licensing purposes42 and in order
to be informed on matters which he is entitled to know.43
The OSG also cites the recent case of Banda v. Ermita,44 where it was held that the President has the
power to reorganize the offices and agencies in the executive department in line with his constitutionally
granted power of control and by virtue of a valid delegation of the legislative power to reorganize
executive offices under existing statutes.
Thus, the OSG concludes that the power of control necessarily includes the power to create offices. For
the OSG, the President may create the PTC in order to, among others, put a closure to the reported
large scale graft and corruption in the government.45
The question, therefore, before the Court is this: Does the creation of the PTC fall within the ambit of
the power to reorganize as expressed in Section 31 of the Revised Administrative Code? Section 31
contemplates “reorganization” as limited by the following functional and structural lines: (1) restructuring
the internal organization of the Office of the President Proper by abolishing, consolidating or merging
units thereof or transferring functions from one unit to another; (2) transferring any function under the
Office of the President to any other Department/Agency or vice versa; or (3) transferring any agency
under the Office of the President to any other Department/Agency or vice versa. Clearly, the provision
refers to reduction of personnel, consolidation of offices, or abolition thereof by reason of economy or
redundancy of functions. These point to situations where a body or an office is already existent but a
modification or alteration thereof has to be effected. The creation of an office is nowhere mentioned,
much less envisioned in said provision. Accordingly, the answer to the question is in the negative.
To say that the PTC is borne out of a restructuring of the Office of the President under Section 31 is a
misplaced supposition, even in the plainest meaning attributable to the term “restructure”—an
“alteration of an existing structure.” Evidently, the PTC was not part of the structure of the Office of the
President prior to the enactment of Executive Order No. 1. As held in BuklodngKawaning EIIB v. Hon.
Executive Secretary,46
But of course, the list of legal basis authorizing the President to reorganize any department or agency in
the executive branch does not have to end here. We must not lose sight of the very source of the power
—that which constitutes an express grant of power. Under Section 31, Book III of Executive Order No.
292 (otherwise known as the Administrative Code of 1987), “the President, subject to the policy in the
Executive Office and in order to achieve simplicity, economy and efficiency, shall have the continuing
authority to reorganize the administrative structure of the Office of the President.” For this purpose, he
may transfer the functions of other Departments or Agencies to the Office of the President. In
Canonizado v. Aguirre [323 SCRA 312 (2000)], we ruled that reorganization “involves the reduction of
personnel, consolidation of offices, or abolition thereof by reason of economy or redundancy of
functions.” It takes place when there is an alteration of the existing structure of government offices or
units therein, including the lines of control, authority and responsibility between them. The EIIB is a
bureau attached to the Department of Finance. It falls under the Office of the President. Hence, it is
subject to the President’s continuing authority to reorganize. [Emphasis Supplied]
In the same vein, the creation of the PTC is not justified by the President’s power of control. Control is
essentially the power to alter or modify or nullify or set aside what a subordinate officer had done in the
performance of his duties and to substitute the judgment of the former with that of the latter. 47 Clearly,
the power of control is entirely different from the power to create public offices. The former is inherent in
the Executive, while the latter finds basis from either a valid delegation from Congress, or his inherent
duty to faithfully execute the laws.
The question is this, is there a valid delegation of power from Congress, empowering the President to
create a public office?
According to the OSG, the power to create a truth commission pursuant to the above provision finds
statutory basis under P.D. 1416, as amended by P.D. No. 1772. 48 The said law granted the President
the continuing authority to reorganize the national government, including the power to group,
consolidate bureaus and agencies, to abolish offices, to transfer functions, to create and classify
functions, services and activities, transfer appropriations, and to standardize salaries and materials.
This decree, in relation to Section 20, Title I, Book III of E.O. 292 has been invoked in several cases
such as Larin v. Executive Secretary.49
The Court, however, declines to recognize P.D. No. 1416 as a justification for the President to create a
public office. Said decree is already stale, anachronistic and inoperable. P.D. No. 1416 was a
delegation to then President Marcos of the authority to reorganize the administrative structure of the
national government including the power to create offices and transfer appropriations pursuant to one of
the purposes of the decree, embodied in its last “Whereas” clause:
WHEREAS, the transition towards the parliamentary form of government will necessitate flexibility in
the organization of the national government.
Clearly, as it was only for the purpose of providing manageability and resiliency during the interim, P.D.
No. 1416, as amended by P.D. No. 1772, became functusoficio upon the convening of the First
Congress, as expressly provided in Section 6, Article XVIII of the 1987 Constitution. In fact, even the
Solicitor General agrees with this view. Thus:
ASSOCIATE JUSTICE CARPIO: Because P.D. 1416 was enacted was the last whereas clause of P.D.
1416 says “it was enacted to prepare the transition from presidential to parliamentary. Now, in a
parliamentary form of government, the legislative and executive powers are fused, correct?
SOLICITOR GENERAL CADIZ: Yes, Your Honor.
ASSOCIATE JUSTICE CARPIO: That is why, that P.D. 1416 was issued. Now would you agree with
me that P.D. 1416 should not be considered effective anymore upon the promulgation, adoption,
ratification of the 1987 Constitution.
SOLICITOR GENERAL CADIZ: Not the whole of P.D. [No.] 1416, Your Honor.
ASSOCIATE JUSTICE CARPIO: The power of the President to reorganize the entire National
Government is deemed repealed, at least, upon the adoption of the 1987 Constitution, correct.
SOLICITOR GENERAL CADIZ: Yes, Your Honor.50
While the power to create a truth commission cannot pass muster on the basis of P.D. No. 1416 as
amended by P.D. No. 1772, the creation of the PTC finds justification under Section 17, Article VII of
the Constitution, imposing upon the President the duty to ensure that the laws are faithfully executed.
Section 17 reads:
Section 17. The President shall have control of all the executive departments, bureaus, and offices. He
shall ensure that the laws be faithfully executed. (Emphasis supplied).
As correctly pointed out by the respondents, the allocation of power in the three principal branches of
government is a grant of all powers inherent in them. The President’s power to conduct investigations to
aid him in ensuring the faithful execution of laws—in this case, fundamental laws on public
accountability and transparency—is inherent in the President’s powers as the Chief Executive. That the
authority of the President to conduct investigations and to create bodies to execute this power is not
explicitly mentioned in the Constitution or in statutes does not mean that he is bereft of such
authority.51 As explained in the landmark case of Marcos v. Manglapus:52
xxx. The 1987 Constitution, however, brought back the presidential system of government and restored
the separation of legislative, executive and judicial powers by their actual distribution among three
distinct branches of government with provision for checks and balances.
It would not be accurate, however, to state that “executive power” is the power to enforce the laws, for
the President is head of state as well as head of government and whatever powers inhere in such
positions pertain to the office unless the Constitution itself withholds it. Furthermore, the Constitution
itself provides that the execution of the laws is only one of the powers of the President. It also grants
the President other powers that do not involve the execution of any provision of law, e.g., his power
over the country’s foreign relations.
On these premises, we hold the view that although the 1987 Constitution imposes limitations on the
exercise of specific powers of the President, it maintains intact what is traditionally considered as
within the scope of “executive power.” Corollarily, the powers of the President cannot be said to be
limited only to the specific powers enumerated in the Constitution. In other words, executive power is
more than the sum of specific powers so enumerated.
It has been advanced that whatever power inherent in the government that is neither legislative nor
judicial has to be executive. xxx.
Indeed, the Executive is given much leeway in ensuring that our laws are faithfully executed. As stated
above, the powers of the President are not limited to those specific powers under the
Constitution.53 One of the recognized powers of the President granted pursuant to this constitutionally-
mandated duty is the power to create ad hoc committees. This flows from the obvious need to ascertain
facts and determine if laws have been faithfully executed. Thus, in Department of Health v.
Camposano,54 the authority of the President to issue Administrative Order No. 298, creating an
investigative committee to look into the administrative charges filed against the employees of the
Department of Health for the anomalous purchase of medicines was upheld. In said case, it was ruled:
The Chief Executive’s power to create the Ad hoc Investigating Committee cannot be doubted.
Having been constitutionally granted full control of the Executive Department, to which respondents
belong, the President has the obligation to ensure that all executive officials and employees faithfully
comply with the law. With AO 298 as mandate, the legality of the investigation is sustained. Such
validity is not affected by the fact that the investigating team and the PCAGC had the same
composition, or that the former used the offices and facilities of the latter in conducting the inquiry.
[Emphasis supplied]
It should be stressed that the purpose of allowing ad hoc investigating bodies to exist is to allow an
inquiry into matters which the President is entitled to know so that he can be properly advised and
guided in the performance of his duties relative to the execution and enforcement of the laws of the
land. And if history is to be revisited, this was also the objective of the investigative bodies created in
the past like the PCAC, PCAPE, PARGO, the Feliciano Commission, the Melo Commission and the
Zenarosa Commission. There being no changes in the government structure, the Court is not inclined
to declare such executive power as non-existent just because the direction of the political winds have
changed.
On the charge that Executive Order No. 1 transgresses the power of Congress to appropriate funds for
the operation of a public office, suffice it to say that there will be no appropriation but only an allotment
or allocations of existing funds already appropriated. Accordingly, there is no usurpation on the part of
the Executive of the power of Congress to appropriate funds. Further, there is no need to specify the
amount to be earmarked for the operation of the commission because, in the words of the Solicitor
General, “whatever funds the Congress has provided for the Office of the President will be the very
source of the funds for the commission.”55 Moreover, since the amount that would be allocated to the
PTC shall be subject to existing auditing rules and regulations, there is no impropriety in the funding.
Power of the Truth Commission to Investigate
The President’s power to conduct investigations to ensure that laws are faithfully executed is well
recognized. It flows from the faithful-execution clause of the Constitution under Article VII, Section 17
thereof.56 As the Chief Executive, the president represents the government as a whole and sees to it
that all laws are enforced by the officials and employees of his department. He has the authority to
directly assume the functions of the executive department.57
Invoking this authority, the President constituted the PTC to primarily investigate reports of graft and
corruption and to recommend the appropriate action. As previously stated, no quasi-judicial powers
have been vested in the said body as it cannot adjudicate rights of persons who come before it. It has
been said that “Quasi-judicial powers involve the power to hear and determine questions of fact to
which the legislative policy is to apply and to decide in accordance with the standards laid down by law
itself in enforcing and administering the same law.”58 In simpler terms, judicial discretion is involved in
the exercise of these quasi-judicial power, such that it is exclusively vested in the judiciary and must be
clearly authorized by the legislature in the case of administrative agencies.
The distinction between the power to investigate and the power to adjudicate was delineated by the
Court in Cariño v. Commission on Human Rights.59 Thus:
“Investigate,” commonly understood, means to examine, explore, inquire or delve or probe into,
research on, study. The dictionary definition of “investigate” is “to observe or study closely: inquire into
systematically: “to search or inquire into: x x to subject to an official probe x x: to conduct an official
inquiry.” The purpose of investigation, of course, is to discover, to find out, to learn, obtain information.
Nowhere included or intimated is the notion of settling, deciding or resolving a controversy involved in
the facts inquired into by application of the law to the facts established by the inquiry.
The legal meaning of “investigate” is essentially the same: “(t)o follow up step by step by patient inquiry
or observation. To trace or track; to search into; to examine and inquire into with care and accuracy; to
find out by careful inquisition; examination; the taking of evidence; a legal inquiry;” “to inquire; to make
an investigation,” “investigation” being in turn described as “(a)n administrative function, the exercise of
which ordinarily does not require a hearing. 2 Am J2d Adm L Sec. 257; x x an inquiry, judicial or
otherwise, for the discovery and collection of facts concerning a certain matter or matters.”
“Adjudicate,” commonly or popularly understood, means to adjudge, arbitrate, judge, decide, determine,
resolve, rule on, settle. The dictionary defines the term as “to settle finally (the rights and duties of the
parties to a court case) on the merits of issues raised: x x to pass judgment on: settle judicially: x x act
as judge.” And “adjudge” means “to decide or rule upon as a judge or with judicial or quasi-judicial
powers: x x to award or grant judicially in a case of controversy x x.”
In the legal sense, “adjudicate” means: “To settle in the exercise of judicial authority. To determine
finally. Synonymous with adjudge in its strictest sense;” and “adjudge” means: “To pass on judicially, to
decide, settle or decree, or to sentence or condemn. xx. Implies a judicial determination of a fact, and
the entry of a judgment.” [Italics included. Citations Omitted]
Fact-finding is not adjudication and it cannot be likened to the judicial function of a court of justice, or
even a quasi-judicial agency or office. The function of receiving evidence and ascertaining therefrom
the facts of a controversy is not a judicial function. To be considered as such, the act of receiving
evidence and arriving at factual conclusions in a controversy must be accompanied by the authority of
applying the law to the factual conclusions to the end that the controversy may be decided or resolved
authoritatively, finally and definitively, subject to appeals or modes of review as may be provided by
law.60 Even respondents themselves admit that the commission is bereft of any quasi-judicial power.61
Contrary to petitioners’ apprehension, the PTC will not supplant the Ombudsman or the DOJ or erode
their respective powers. If at all, the investigative function of the commission will complement those of
the two offices. As pointed out by the Solicitor General, the recommendation to prosecute is but a
consequence of the overall task of the commission to conduct a fact-finding investigation.”62 The actual
prosecution of suspected offenders, much less adjudication on the merits of the charges against
them,63 is certainly not a function given to the commission. The phrase, “when in the course of its
investigation,” under Section 2(g), highlights this fact and gives credence to a contrary interpretation
from that of the petitioners. The function of determining probable cause for the filing of the appropriate
complaints before the courts remains to be with the DOJ and the Ombudsman.64
At any rate, the Ombudsman’s power to investigate under R.A. No. 6770 is not exclusive but is shared
with other similarly authorized government agencies. Thus, in the case of Ombudsman v. Galicia, 65 it
was written:
This power of investigation granted to the Ombudsman by the 1987 Constitution and The Ombudsman
Act is not exclusive but is shared with other similarly authorized government agencies such as the
PCGG and judges of municipal trial courts and municipal circuit trial courts. The power to conduct
preliminary investigation on charges against public employees and officials is likewise concurrently
shared with the Department of Justice. Despite the passage of the Local Government Code in 1991, the
Ombudsman retains concurrent jurisdiction with the Office of the President and the local Sanggunians
to investigate complaints against local elective officials. [Emphasis supplied].
Also, Executive Order No. 1 cannot contravene the power of the Ombudsman to investigate criminal
cases under Section 15 (1) of R.A. No. 6770, which states:
(1) Investigate and prosecute on its own or on complaint by any person, any act or omission of any
public officer or employee, office or agency, when such act or omission appears to be illegal, unjust,
improper or inefficient. It has primary jurisdiction over cases cognizable by the Sandiganbayan and, in
the exercise of its primary jurisdiction, it may take over, at any stage, from any investigatory agency of
government, the investigation of such cases. [Emphases supplied]
The act of investigation by the Ombudsman as enunciated above contemplates the conduct of a
preliminary investigation or the determination of the existence of probable cause. This is categorically
out of the PTC’s sphere of functions. Its power to investigate is limited to obtaining facts so that it can
advise and guide the President in the performance of his duties relative to the execution and
enforcement of the laws of the land. In this regard, the PTC commits no act of usurpation of the
Ombudsman’s primordial duties.
The same holds true with respect to the DOJ. Its authority under Section 3 (2), Chapter 1, Title III, Book
IV in the Revised Administrative Code is by no means exclusive and, thus, can be shared with a body
likewise tasked to investigate the commission of crimes.
Finally, nowhere in Executive Order No. 1 can it be inferred that the findings of the PTC are to be
accorded conclusiveness. Much like its predecessors, the Davide Commission, the Feliciano
Commission and the Zenarosa Commission, its findings would, at best, be recommendatory in nature.
And being so, the Ombudsman and the DOJ have a wider degree of latitude to decide whether or not to
reject the recommendation. These offices, therefore, are not deprived of their mandated duties but will
instead be aided by the reports of the PTC for possible indictments for violations of graft laws.
Violation of the Equal Protection Clause
Although the purpose of the Truth Commission falls within the investigative power of the President, the
Court finds difficulty in upholding the constitutionality of Executive Order No. 1 in view of its apparent
transgression of the equal protection clause enshrined in Section 1, Article III (Bill of Rights) of the 1987
Constitution. Section 1 reads:
Section 1. No person shall be deprived of life, liberty, or property without due process of law, nor shall
any person be denied the equal protection of the laws.
The petitioners assail Executive Order No. 1 because it is violative of this constitutional safeguard. They
contend that it does not apply equally to all members of the same class such that the intent of singling
out the “previous administration” as its sole object makes the PTC an “adventure in partisan
hostility.”66 Thus, in order to be accorded with validity, the commission must also cover reports of graft
and corruption in virtually all administrations previous to that of former President Arroyo.67
The petitioners argue that the search for truth behind the reported cases of graft and corruption must
encompass acts committed not only during the administration of former President Arroyo but also
during prior administrations where the “same magnitude of controversies and anomalies”68 were
reported to have been committed against the Filipino people. They assail the classification formulated
by the respondents as it does not fall under the recognized exceptions because first, “there is no
substantial distinction between the group of officials targeted for investigation by Executive Order No. 1
and other groups or persons who abused their public office for personal gain; and second, the selective
classification is not germane to the purpose of Executive Order No. 1 to end corruption.” 69 In order to
attain constitutional permission, the petitioners advocate that the commission should deal with “graft
and grafters prior and subsequent to the Arroyo administration with the strong arm of the law with equal
force.”70
Position of respondents
According to respondents, while Executive Order No. 1 identifies the “previous administration” as the
initial subject of the investigation, following Section 17 thereof, the PTC will not confine itself to cases of
large scale graft and corruption solely during the said administration. 71 Assuming arguendo that the
commission would confine its proceedings to officials of the previous administration, the petitioners
argue that no offense is committed against the equal protection clause for “the segregation of the
transactions of public officers during the previous administration as possible subjects of investigation is
a valid classification based on substantial distinctions and is germane to the evils which the Executive
Order seeks to correct.”72 To distinguish the Arroyo administration from past administrations, it recited
the following:
First. E.O. No. 1 was issued in view of widespread reports of large scale graft and corruption in the
previous administration which have eroded public confidence in public institutions. There is, therefore,
an urgent call for the determination of the truth regarding certain reports of large scale graft and
corruption in the government and to put a closure to them by the filing of the appropriate cases against
those involved, if warranted, and to deter others from committing the evil, restore the people’s faith and
confidence in the Government and in their public servants.
Second. The segregation of the preceding administration as the object of fact-finding is warranted by
the reality that unlike with administrations long gone, the current administration will most likely bear the
immediate consequence of the policies of the previous administration.
Third. The classification of the previous administration as a separate class for investigation lies in the
reality that the evidence of possible criminal activity, the evidence that could lead to recovery of public
monies illegally dissipated, the policy lessons to be learned to ensure that anti-corruption laws are
faithfully executed, are more easily establishedin the regime that immediately precede the current
administration.
Fourth. Many administrations subject the transactions of their predecessors to investigations to provide
closure to issues that are pivotal to national life or even as a routine measure of due diligence and good
housekeeping by a nascent administration like the Presidential Commission on Good Government
(PCGG), created by the late President Corazon C. Aquino under Executive Order No. 1 to pursue the
recovery of ill-gotten wealth of her predecessor former President Ferdinand Marcos and his cronies,
and the Saguisag Commission created by former President Joseph Estrada under Administrative Order
No, 53, to form an ad-hoc and independent citizens’ committee to investigate all the facts and
circumstances surrounding “Philippine Centennial projects” of his predecessor, former President Fidel
V. Ramos.73 [Emphases supplied]
Concept of the Equal Protection Clause
One of the basic principles on which this government was founded is that of the equality of right which
is embodied in Section 1, Article III of the 1987 Constitution. The equal protection of the laws is
embraced in the concept of due process, as every unfair discrimination offends the requirements of
justice and fair play. It has been embodied in a separate clause, however, to provide for a more specific
guaranty against any form of undue favoritism or hostility from the government. Arbitrariness in general
may be challenged on the basis of the due process clause. But if the particular act assailed partakes of
an unwarranted partiality or prejudice, the sharper weapon to cut it down is the equal protection
clause.74
“According to a long line of decisions, equal protection simply requires that all persons or things
similarly situated should be treated alike, both as to rights conferred and responsibilities imposed.” 75 It
requires public bodies and institutions to treat similarly situated individuals in a similar manner.” 76 “The
purpose of the equal protection clause is to secure every person within a state’s jurisdiction against
intentional and arbitrary discrimination, whether occasioned by the express terms of a statue or by its
improper execution through the state’s duly constituted authorities.”77 “In other words, the concept of
equal justice under the law requires the state to govern impartially, and it may not draw distinctions
between individuals solely on differences that are irrelevant to a legitimate governmental objective.”78
The equal protection clause is aimed at all official state actions, not just those of the legislature. 79 Its
inhibitions cover all the departments of the government including the political and executive
departments, and extend to all actions of a state denying equal protection of the laws, through whatever
agency or whatever guise is taken.80
It, however, does not require the universal application of the laws to all persons or things without
distinction. What it simply requires is equality among equals as determined according to a valid
classification. Indeed, the equal protection clause permits classification. Such classification, however, to
be valid must pass the test of reasonableness. The test has four requisites: (1) The classification rests
on substantial distinctions; (2) It is germane to the purpose of the law; (3) It is not limited to existing
conditions only; and
(4) It applies equally to all members of the same class. 81 “Superficial differences do not make for a valid
classification.”82
For a classification to meet the requirements of constitutionality, it must include or embrace all persons
who naturally belong to the class.83 “The classification will be regarded as invalid if all the members of
the class are not similarly treated, both as to rights conferred and obligations imposed. It is not
necessary that the classification be made with absolute symmetry, in the sense that the members of the
class should possess the same characteristics in equal degree. Substantial similarity will suffice; and as
long as this is achieved, all those covered by the classification are to be treated equally. The mere fact
that an individual belonging to a class differs from the other members, as long as that class is
substantially distinguishable from all others, does not justify the non-application of the law to him.”84
The classification must not be based on existing circumstances only, or so constituted as to preclude
addition to the number included in the class. It must be of such a nature as to embrace all those who
may thereafter be in similar circumstances and conditions. It must not leave out or “underinclude” those
that should otherwise fall into a certain classification. As elucidated in Victoriano v. Elizalde Rope
Workers’ Union85 and reiterated in a long line of cases,86
The guaranty of equal protection of the laws is not a guaranty of equality in the application of the laws
upon all citizens of the state. It is not, therefore, a requirement, in order to avoid the constitutional
prohibition against inequality, that every man, woman and child should be affected alike by a statute.
Equality of operation of statutes does not mean indiscriminate operation on persons merely as such,
but on persons according to the circumstances surrounding them. It guarantees equality, not identity of
rights. The Constitution does not require that things which are different in fact be treated in law as
though they were the same. The equal protection clause does not forbid discrimination as to things that
are different. It does not prohibit legislation which is limited either in the object to which it is directed or
by the territory within which it is to operate.
The equal protection of the laws clause of the Constitution allows classification. Classification in law, as
in the other departments of knowledge or practice, is the grouping of things in speculation or practice
because they agree with one another in certain particulars. A law is not invalid because of simple
inequality. The very idea of classification is that of inequality, so that it goes without saying that the
mere fact of inequality in no manner determines the matter of constitutionality. All that is required of a
valid classification is that it be reasonable, which means that the classification should be based on
substantial distinctions which make for real differences, that it must be germane to the purpose of the
law; that it must not be limited to existing conditions only; and that it must apply equally to each member
of the class. This Court has held that the standard is satisfied if the classification or distinction is based
on a reasonable foundation or rational basis and is not palpably arbitrary. [Citations omitted]
Applying these precepts to this case, Executive Order No. 1 should be struck down as violative of the
equal protection clause. The clear mandate of the envisioned truth commission is to investigate and find
out the truth “concerning the reported cases of graft and corruption during the previous
administration”87 only. The intent to single out the previous administration is plain, patent and manifest.
Mention of it has been made in at least three portions of the questioned executive order. Specifically,
these are:
WHEREAS, there is a need for a separate body dedicated solely to investigating and finding out the
truth concerning the reported cases of graft and corruption during the previous administration, and
which will recommend the prosecution of the offenders and secure justice for all;
SECTION 1. Creation of a Commission. – There is hereby created the PHILIPPINETRUTH
COMMISSION, hereinafter referred to as the “COMMISSION,” which shall primarily seek and find the
truth on, and toward this end, investigate reports of graft and corruption of such scale and magnitude
that shock and offend the moral and ethical sensibilities of the people, committed by public officers and
employees, their co-principals, accomplices and accessories from the private sector, if any, during the
previous administration; and thereafter recommend the appropriate action or measure to be taken
thereon to ensure that the full measure of justice shall be served without fear or favor.
SECTION 2. Powers and Functions. – The Commission, which shall have all the powers of an
investigative body under Section 37, Chapter 9, Book I of the Administrative Code of 1987, is primarily
tasked to conduct a thorough fact-finding investigation of reported cases of graft and corruption referred
to in Section 1, involving third level public officers and higher, their co-principals, accomplices and
accessories from the private sector, if any, during the previous administration and thereafter submit its
finding and recommendations to the President, Congress and the Ombudsman. [Emphases supplied]
In this regard, it must be borne in mind that the Arroyo administration is but just a member of a class,
that is, a class of past administrations. It is not a class of its own. Not to include past administrations
similarly situated constitutes arbitrariness which the equal protection clause cannot sanction. Such
discriminating differentiation clearly reverberates to label the commission as a vehicle for vindictiveness
and selective retribution.
Though the OSG enumerates several differences between the Arroyo administration and other past
administrations, these distinctions are not substantial enough to merit the restriction of the investigation
to the “previous administration” only. The reports of widespread corruption in the Arroyo administration
cannot be taken as basis for distinguishing said administration from earlier administrations which were
also blemished by similar widespread reports of impropriety. They are not inherent in, and do not inure
solely to, the Arroyo administration. As Justice Isagani Cruz put it, “Superficial differences do not make
for a valid classification.”88
The public needs to be enlightened why Executive Order No. 1 chooses to limit the scope of the
intended investigation to the previous administration only. The OSG ventures to opine that “to include
other past administrations, at this point, may unnecessarily overburden the commission and lead it to
lose its effectiveness.”89 The reason given is specious. It is without doubt irrelevant to the legitimate and
noble objective of the PTC to stamp out or “end corruption and the evil it breeds.”90
The probability that there would be difficulty in unearthing evidence or that the earlier reports involving
the earlier administrations were already inquired into is beside the point. Obviously, deceased
presidents and cases which have already prescribed can no longer be the subjects of inquiry by the
PTC. Neither is the PTC expected to conduct simultaneous investigations of previous administrations,
given the body’s limited time and resources. “The law does not require the impossible” (Lex non cogit
ad impossibilia).91
Given the foregoing physical and legal impossibility, the Court logically recognizes the unfeasibility of
investigating almost a century’s worth of graft cases. However, the fact remains that Executive Order
No. 1 suffers from arbitrary classification. The PTC, to be true to its mandate of searching for the truth,
must not exclude the other past administrations. The PTC must, at least, have the authority to
investigate all past administrations. While reasonable prioritization is permitted, it should not be
arbitrary lest it be struck down for being unconstitutional. In the often quoted language of YickWo v.
Hopkins,92
Though the law itself be fair on its face and impartial in appearance, yet, if applied and administered by
public authority with an evil eye and an unequal hand, so as practically to make unjust and illegal
discriminations between persons in similar circumstances, material to their rights, the denial of equal
justice is still within the prohibition of the constitution. [Emphasis supplied]
It could be argued that considering that the PTC is an ad hoc body, its scope is limited. The Court,
however, is of the considered view that although its focus is restricted, the constitutional guarantee of
equal protection under the laws should not in any way be circumvented. The Constitution is the
fundamental and paramount law of the nation to which all other laws must conform and in accordance
with which all private rights determined and all public authority administered. 93 Laws that do not conform
to the Constitution should be stricken down for being unconstitutional.94 While the thrust of the PTC is
specific, that is, for investigation of acts of graft and corruption, Executive Order No. 1, to survive, must
be read together with the provisions of the Constitution. To exclude the earlier administrations in the
guise of “substantial distinctions” would only confirm the petitioners’ lament that the subject executive conclusory statement was arrived at, the principal issue in said case being only the sufficiency of a
order is only an “adventure in partisan hostility.” In the case of US v. Cyprian,95 it was written: “A rather cause of action.
limited number of such classifications have routinely been held or assumed to be arbitrary; those
include: race, national origin, gender, political activity or membership in a political party, union activity or
A final word
membership in a labor union, or more generally the exercise of first amendment rights.”

The issue that seems to take center stage at present is – whether or not the Supreme Court, in the
To reiterate, in order for a classification to meet the requirements of constitutionality, it must include or
exercise of its constitutionally mandated power of Judicial Review with respect to recent initiatives of
embrace all persons who naturally belong to the class.96 “Such a classification must not be based on
the legislature and the executive department, is exercising undue interference. Is the Highest Tribunal,
existing circumstances only, or so constituted as to preclude additions to the number included within a
which is expected to be the protector of the Constitution, itself guilty of violating fundamental tenets like
class, but must be of such a nature as to embrace all those who may thereafter be in similar
the doctrine of separation of powers? Time and again, this issue has been addressed by the Court, but
circumstances and conditions. Furthermore, all who are in situations and circumstances which are
it seems that the present political situation calls for it to once again explain the legal basis of its action
relative to the discriminatory legislation and which are indistinguishable from those of the members of
lest it continually be accused of being a hindrance to the nation’s thrust to progress.
the class must be brought under the influence of the law and treated by it in the same way as are the
members of the class.”97
The Philippine Supreme Court, according to Article VIII, Section 1 of the 1987 Constitution, is vested
with Judicial Power that “includes the duty of the courts of justice to settle actual controversies involving
The Court is not unaware that “mere underinclusiveness is not fatal to the validity of a law under the
rights which are legally demandable and enforceable, and to determine whether or not there has been a
equal protection clause.” 98 “Legislation is not unconstitutional merely because it is not all-embracing and
grave of abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or
does not include all the evils within its reach.”99 It has been written that a regulation challenged under
instrumentality of the government.”
the equal protection clause is not devoid of a rational predicate simply because it happens to be
incomplete.100 In several instances, the underinclusiveness was not considered a valid reason to strike
down a law or regulation where the purpose can be attained in future legislations or regulations. These Furthermore, in Section 4(2) thereof, it is vested with the power of judicial review which is the power to
cases refer to the “step by step” process. 101 “With regard to equal protection claims, a legislature does declare a treaty, international or executive agreement, law, presidential decree, proclamation, order,
not run the risk of losing the entire remedial scheme simply because it fails, through inadvertence or instruction, ordinance, or regulation unconstitutional. This power also includes the duty to rule on the
otherwise, to cover every evil that might conceivably have been attacked.” 102 constitutionality of the application, or operation of presidential decrees, proclamations, orders,
instructions, ordinances, and other regulations. These provisions, however, have been fertile grounds of
conflict between the Supreme Court, on one hand, and the two co-equal bodies of government, on the
In Executive Order No. 1, however, there is no inadvertence. That the previous administration was
other. Many times the Court has been accused of asserting superiority over the other departments.
picked out was deliberate and intentional as can be gleaned from the fact that it was underscored at
least three times in the assailed executive order. It must be noted that Executive Order No. 1 does not
even mention any particular act, event or report to be focused on unlike the investigative commissions To answer this accusation, the words of Justice Laurel would be a good source of enlightenment, to wit:
created in the past. “The equal protection clause is violated by purposeful and intentional “And when the judiciary mediates to allocate constitutional boundaries, it does not assert any superiority
discrimination.”103 over the other departments; it does not in reality nullify or invalidate an act of the legislature, but only
asserts the solemn and sacred obligation assigned to it by the Constitution to determine conflicting
claims of authority under the Constitution and to establish for the parties in an actual controversy the
To disprove petitioners’ contention that there is deliberate discrimination, the OSG clarifies that the
rights which that instrument secures and guarantees to them.”107
commission does not only confine itself to cases of large scale graft and corruption committed during
the previous administration.104 The OSG points to Section 17 of Executive Order No. 1, which provides:
Thus, the Court, in exercising its power of judicial review, is not imposing its own will upon a co-equal
body but rather simply making sure that any act of government is done in consonance with the
SECTION 17. Special Provision Concerning Mandate. If and when in the judgment of the President
authorities and rights allocated to it by the Constitution. And, if after said review, the Court finds no
there is a need to expand the mandate of the Commission as defined in Section 1 hereof to include the
constitutional violations of any sort, then, it has no more authority of proscribing the actions under
investigation of cases and instances of graft and corruption during the prior administrations, such
review. Otherwise, the Court will not be deterred to pronounce said act as void and unconstitutional.
mandate may be so extended accordingly by way of a supplemental Executive Order.

It cannot be denied that most government actions are inspired with noble intentions, all geared towards
The Court is not convinced. Although Section 17 allows the President the discretion to expand the
the betterment of the nation and its people. But then again, it is important to remember this ethical
scope of investigations of the PTC so as to include the acts of graft and corruption committed in other
principle: “The end does not justify the means.” No matter how noble and worthy of admiration the
past administrations, it does not guarantee that they would be covered in the future. Such expanded
purpose of an act, but if the means to be employed in accomplishing it is simply irreconcilable with
mandate of the commission will still depend on the whim and caprice of the President. If he would
constitutional parameters, then it cannot still be allowed.108 The Court cannot just turn a blind eye and
decide not to include them, the section would then be meaningless. This will only fortify the fears of the
simply let it pass. It will continue to uphold the Constitution and its enshrined principles.
petitioners that the Executive Order No. 1 was “crafted to tailor-fit the prosecution of officials and
personalities of the Arroyo administration.”105
“The Constitution must ever remain supreme. All must bow to the mandate of this law. Expediency must
not be allowed to sap its strength nor greed for power debase its rectitude.”109
The Court tried to seek guidance from the pronouncement in the case of Virata v.
Sandiganbayan,106 that the “PCGG Charter (composed of Executive Orders Nos. 1, 2 and 14) does not
violate the equal protection clause.” The decision, however, was devoid of any discussion on how such Lest it be misunderstood, this is not the death knell for a truth commission as nobly envisioned by the
present administration. Perhaps a revision of the executive issuance so as to include the earlier past
administrations would allow it to pass the test of reasonableness and not be an affront to the
Constitution. Of all the branches of the government, it is the judiciary which is the most interested in
knowing the truth and so it will not allow itself to be a hindrance or obstacle to its attainment. It must,
however, be emphasized that the search for the truth must be within constitutional bounds for “ours is
still a government of laws and not of men.”110
WHEREFORE, the petitions are GRANTED. Executive Order No. 1 is hereby declared
UNCONSTITUTIONAL insofar as it is violative of the equal protection clause of the Constitution.
As also prayed for, the respondents are hereby ordered to cease and desist from carrying out the
provisions of Executive Order No. 1.
SO ORDERED.
G.R. No. 186400               October 20, 2010
CYNTHIA S. BOLOS, Petitioner, 
vs.
DANILO T. BOLOS, Respondent.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking a review of the
December 10, 2008 Decision1 of the Court of Appeals (CA) in an original action for certiorari under Rule
65 entitled "Danilo T. Bolos v. Hon. Lorifel Lacap Pahimna and Cynthia S. Bolos," docketed as CA-G.R.
SP. No. 97872, reversing the January 16, 2007 Order of the Regional Trial Court of Pasig City, Branch
69 (RTC), declaring its decision pronouncing the nullity of marriage between petitioner and respondent
final and executory.
On July 10, 2003, petitioner Cynthia Bolos (Cynthia) filed a petition for the declaration of nullity of her
marriage to respondent Danilo Bolos (Danilo) under Article 36 of the Family Code, docketed as JDRC
No. 6211.
After trial on the merits, the RTC granted the petition for annulment in a Decision, dated August 2,
2006, with the following disposition:
WHEREFORE, judgment is hereby rendered declaring the marriage between petitioner CYNTHIA S.
BOLOS and respondent DANILO T. BOLOS celebrated on February 14, 1980 as null and void ab
initio on the ground of psychological incapacity on the part of both petitioner and respondent under
Article 36 of the Family Code with all the legal consequences provided by law.
Furnish the Local Civil Registrar of San Juan as well as the National Statistics Office (NSO) copy of this
decision.
SO ORDERED.2
A copy of said decision was received by Danilo on August 25, 2006. He timely filed the Notice of Appeal
on September 11, 2006.
In an order dated September 19, 2006, the RTC denied due course to the appeal for Danilo’s failure to
file the required motion for reconsideration or new trial, in violation of Section 20 of the Rule on
Declaration of Absolute Nullity of Void Marriages and Annulment of Voidable Marriages.
On November 23, 2006, a motion to reconsider the denial of Danilo’s appeal was likewise denied.
On January 16, 2007, the RTC issued the order declaring its August 2, 2006 decision final and
executory and granting the Motion for Entry of Judgment filed by Cynthia.
Not in conformity, Danilo filed with the CA a petition for certiorari under Rule 65 seeking to annul the
orders of the RTC as they were rendered with grave abuse of discretion amounting to lack or in excess
of jurisdiction, to wit: 1) the September 19, 2006 Order which denied due course to Danilo’s appeal; 2)
the November 23, 2006 Order which denied the motion to reconsider the September 19, 2006 Order;
and 3) the January 16, 2007 Order which declared the August 2, 2006 decision as final and executory.
Danilo also prayed that he be declared psychologically capacitated to render the essential marital
obligations to Cynthia, who should be declared guilty of abandoning him, the family home and their
children.
As earlier stated, the CA granted the petition and reversed and set aside the assailed orders of the
RTC. The appellate court stated that the requirement of a motion for reconsideration as a prerequisite
to appeal under A.M. No. 02-11-10-SC did not apply in this case as the marriage between Cynthia and
Danilo was solemnized on February 14, 1980 before the Family Code took effect. It relied on the ruling
of this Court in Enrico v. Heirs of Sps. Medinaceli3 to the effect that the "coverage [of A.M. No. 02-11-
10-SC] extends only to those marriages entered into during the effectivity of the Family Code which
took effect on August 3, 1988."
Cynthia sought reconsideration of the ruling by filing her Manifestation with Motion for Extension of
Time to File Motion for Reconsideration and Motion for Partial Reconsideration [of the Honorable
Court’s Decision dated December 10, 2008]. The CA, however, in its February 11, 2009
Resolution,4 denied the motion for extension of time considering that the 15-day reglementary period to
file a motion for reconsideration is non-extendible, pursuant to Section 2, Rule 40, 1997 Rules on Civil
Procedure citing Habaluyas v. Japson, 142 SCRA 208. The motion for partial reconsideration was
likewise denied.
Hence, Cynthia interposes the present petition via Rule 45 of the Rules of Court raising the following
ISSUES
I
THE COURT OF APPEALS GRAVELY ERRED IN ISSUING THE QUESTIONED DECISION DATED
DECEMBER 10, 2008 CONSIDERING THAT:
A. THE PRONOUNCEMENT OF THE HONORABLE COURT IN ENRICO V. SPS.
MEDINACELI IS NOT APPLICABLE TO THE INSTANT CASE CONSIDERING THAT THE
FACTS AND THE ISSUE THEREIN ARE NOT SIMILAR TO THE INSTANT CASE.
 B. ASSUMING ARGUENDO THAT THE PRONOUNCEMENT OF THE HONORABLE supposedly "remiss," but not "incapacitated," to render marital obligations as required under Article 36
COURT IS APLLICABLE TO THE INSTANT CASE, ITS RULING IN ENRICO V. SPS. of the Family Code.
MEDINACELI IS PATENTLY ERRONEOUS BECAUSE THE PHRASE "UNDER THE
FAMILY CODE" IN A.M. NO. 02-11-10-SC PERTAINS TO THE WORD "PETITIONS"
The Court finds the petition devoid of merit.
RATHER THAN TO THE WORD "MARRIAGES."

Petitioner insists that A.M. No. 02-11-10-SC governs this case. Her stance is unavailing. The Rule on
C. FROM THE FOREGOING, A.M. NO. 02-11-10-SC ENTITLED "RULE ON
Declaration of Absolute Nullity of Void Marriages and Annulment of Voidable Marriages as contained in
DECLARATION OF ABSOLUTE NULLITY OF VOID MARRIAGES AND ANNULMENT OF
A.M. No. 02-11-10-SC which the Court promulgated on March 15, 2003, is explicit in its scope. Section
VOIDABLE MARRIAGES" IS APPLICABLE TO MARRIAGES SOLEMNIZED BEFORE
1 of the Rule, in fact, reads:
THE EFFECTIVITY OF THE FAMILY CODE. HENCE, A MOTION FOR
RECONSIDERATION IS A PRECONDITION FOR AN APPEAL BY HEREIN
RESPONDENT. Section 1. Scope – This Rule shall govern petitions for declaration of absolute nullity of void marriages
and annulment of voidable marriages under the Family Code of the Philippines.
D. CONSIDERING THAT HEREIN RESPONDENT REFUSED TO COMPLY WITH A
PRECONDITION FOR APPEAL, A RELAXATION OF THE RULES ON APPEAL IS NOT The Rules of Court shall apply suppletorily.
PROPER IN HIS CASE.
The categorical language of A.M. No. 02-11-10-SC leaves no room for doubt. The coverage extends
II only to those marriages entered into during the effectivity of the Family Code which took effect on
August 3, 1988.7 The rule sets a demarcation line between marriages covered by the Family Code and
those solemnized under the Civil Code.8
THE COURT OF APPEALS GRAVELY ERRED IN ISSUING THE QUESTIONED RESOLUTION
DATED FEBRUARY 11, 2009 CONSIDERING THE FOREGOING AND THE FACTUAL
CIRCUMSTANCES OF THIS CASE. The Court finds Itself unable to subscribe to petitioner’s interpretation that the phrase "under the Family
Code" in A.M. No. 02-11-10-SC refers to the word "petitions" rather than to the word "marriages."
III
A cardinal rule in statutory construction is that when the law is clear and free from any doubt or
ambiguity, there is no room for construction or interpretation. There is only room for application.9 As the
THE TENETS OF JUSTICE AND FAIR PLAY, THE NOVELTY AND IMPORTANCE OF THE ISSUE
statute is clear, plain, and free from ambiguity, it must be given its literal meaning and applied without
AND THE SPECIAL CIRCUMSTANCES IN THIS CASE JUSTIFY AND WARRANT A LIBERAL VIEW
attempted interpretation. This is what is known as the plain-meaning rule or verba legis. It is expressed
OF THE RULES IN FAVOR OF THE PETITIONER. MOREOVER, THE INSTANT PETITION IS
in the maxim, index animi sermo, or "speech is the index of intention." Furthermore, there is the
MERITORIOUS AND NOT INTENDED FOR DELAY. 5
maxim verba legis non est recedendum, or "from the words of a statute there should be no departure."10

From the arguments advanced by Cynthia, the principal question to be resolved is whether or not A.M.
There is no basis for petitioner’s assertion either that the tenets of substantial justice, the novelty and
No. 02-11-10-SC entitled "Rule on Declaration of Absolute Nullity of Void Marriages and Annulment of
importance of the issue and the meritorious nature of this case warrant a relaxation of the Rules in her
Voidable Marriages," is applicable to the case at bench.
favor. Time and again the Court has stressed that the rules of procedure must be faithfully complied
with and should not be discarded with the mere expediency of claiming substantial merit.11 As a
Petitioner argues that A.M. No. 02-11-10-SC is also applicable to marriages solemnized before the corollary, rules prescribing the time for doing specific acts or for taking certain proceedings are
effectivity of the Family Code. According to Cynthia, the CA erroneously anchored its decision to considered absolutely indispensable to prevent needless delays and to orderly and promptly discharge
an obiter dictum in the aforecited Enrico case, which did not even involve a marriage solemnized before judicial business. By their very nature, these rules are regarded as mandatory.12
the effectivity of the Family Code.
The appellate court was correct in denying petitioner’s motion for extension of time to file a motion for
She added that, even assuming arguendo that the pronouncement in the said case constituted a reconsideration considering that the reglementary period for filing the said motion for reconsideration is
decision on its merits, still the same cannot be applied because of the substantial disparity in the factual non-extendible. As pronounced in Apex Mining Co., Inc. v. Commissioner of Internal Revenue, 13
milieu of the Enrico case from this case. In the said case, both the marriages sought to be declared null
were solemnized, and the action for declaration of nullity was filed, after the effectivity of both the
The rule is and has been that the period for filing a motion for reconsideration is non-extendible. The
Family Code in 1988 and of A.M. No. 02-11-10-SC in 2003. In this case, the marriage was solemnized
Court has made this clear as early as 1986 in Habaluyas Enterprises vs. Japzon. Since then, the Court
before the effectivity of the Family Code and A.M. No. 02-11-10-SC while the action was filed and
has consistently and strictly adhered thereto.1avvphil
decided after the effectivity of both.

Given the above, we rule without hesitation that the appellate court’s denial of petitioner’s motion for
Danilo, in his Comment,6 counters that A.M. No. 02-11-10-SC is not applicable because his marriage
reconsideration is justified, precisely because petitioner’s earlier motion for extension of time did not
with Cynthia was solemnized on February 14, 1980, years before its effectivity. He further stresses the
suspend/toll the running of the 15-day reglementary period for filing a motion for reconsideration. Under
meritorious nature of his appeal from the decision of the RTC declaring their marriage as null and void
the circumstances, the CA decision has already attained finality when petitioner filed its motion for
due to his purported psychological incapacity and citing the mere "failure" of the parties who were
reconsideration. It follows that the same decision was already beyond the review jurisdiction of this
Court.
In fine, the CA committed no reversible error in setting aside the RTC decision which denied due course
to respondent’s appeal and denying petitioner’s motion for extension of time to file a motion for
reconsideration.
Appeal is an essential part of our judicial system. Its purpose is to bring up for review a final judgment
of the lower court. The courts should, thus, proceed with caution so as not to deprive a party of his right
to appeal.14 In the recent case of Almelor v. RTC of Las Pinas City, Br. 254,15 the Court reiterated: While
the right to appeal is a statutory, not a natural right, nonetheless it is an essential part of our judicial
system and courts should proceed with caution so as not to deprive a party of the right to appeal, but
rather, ensure that every party-litigant has the amplest opportunity for the proper and just disposition of
his cause, free from the constraints of technicalities.
In the case at bench, the respondent should be given the fullest opportunity to establish the merits of
his appeal considering that what is at stake is the sacrosanct institution of marriage.
No less than the 1987 Constitution recognizes marriage as an inviolable social institution. This
constitutional policy is echoed in our Family Code. Article 1 thereof emphasizes its permanence and
inviolability, thus:
Article 1. Marriage is a special contract of permanent union between a man and a woman entered into
in accordance with law for the establishment of conjugal and family life. It is the foundation of the family
and an inviolable social institution whose nature, consequences, and incidents are governed by law and
not subject to stipulation, except that marriage settlements may fix the property relations during the
marriage within the limits provided by this Code.
This Court is not unmindful of the constitutional policy to protect and strengthen the family as the basic
autonomous social institution and marriage as the foundation of the family.16
Our family law is based on the policy that marriage is not a mere contract, but a social institution in
which the State is vitally interested. The State finds no stronger anchor than on good, solid and happy
families. The break up of families weakens our social and moral fabric and, hence, their preservation is
not the concern alone of the family members.17
WHEREFORE, the petition is DENIED.
SO ORDERED.
G.R. No. L-16808             January 3, 1921
ANDRES BORROMEO, plaintiff,  McCormick vs. West Duluth [1891], 47 Minn., 272, 50 N.W., 128; Idaho Power & Light Co. vs.Blomquist
vs.
FERMIN MARIANO, defendant.
Fisher and DeWitt for plaintiff.
Attorney-General Feria for defendant.
MALCOLM, J.:
Quo warranto proceedings have been instituted in this court to determine the right of the plaintiff and of
the defendant to the office of Judge of the Court of First Instance of the Twenty-fourth Judicial District.
The only facts, and these are undisputed ones, which need be noticed, are the following: Andres
Borromeo was appointed and commissioned as Judge of the Twenty-fourth Judicial District, effective
July 1, 1914. He duly qualified and took possession of the office on that date. On February, 25, 1920,
he was appointed Judge of the Twenty-first Judicial District, and Fermin Mariano was appointed Judge
of the Twenty-fourth Judicial District. Judge Borromeo has since the latter date consistently refused to
accept appointment to the Twenty-first Judicial District.
Judges of First Instance are appointed by the Governor-General with the consent of the Philippine
Senate to serve until they reach the age of 65 years. (Adm. Code, secs. 65, 66, 148.) One Judge of
First Instance is commissioned for each judicial district, except the night. (Sec. 154.) The oath of office
of the judge is "filed with the clerk of the court to which the affiant pertains and shall be entered upon its
records." (Sec. 128.) Judges of First Instance may only be detailed by the Secretary of Justice to
temporary duty in a district other than their own for the purpose of trying land registration cases and for
vacation duty. (Sec. 155.) The concluding portion of section 155 of the Administrative Code, to which
particular attention is addressed by the Attorney-General, is, "but nothing herein shall be construed to
prevent a judge of first instance of one district from being appointed to be judge of another district." A
Judge of First Instance can be removed from office by the Governor-General only if in the judgment of
the Supreme Court sufficient cause shall exist involving serious misconduct or inefficiency in office.
(Sec. 173.)
The cardinal rule of statutory construction requires the court to give effect to the general legislative
intent if that can be discovered within the four corners of the Act. When the object intended to be
accomplished by the statute is once clearly ascertained, general words may be restrained to it and
those of narrower import may be expanded to embrace it, to effectuate the intent. Along with this
fundamental principle is another, equally well-established, that such a construction is, if possible, to be
adopted, as will give effect to all provision of the statute. (2 Lewis' Sutherland, Statutory Construction,
pp. 662, et seq.; In re Allen [1903], 2 Phil., 630; Code of Civil Procedure, sec. 287.)
Leaving out of consideration for the moment the last part of section 155 of the Administrative Code, the
provisions of the Judiciary Law are plain and unambiguous. Judges of First Instance are appointed
judges of the courts of first instance of the respective judicial districts of the Philippines Islands. They
are not appointed judges of first instance of the Philippine Islands. They hold these positions of judges
of first instance of definite districts until they resign, retire, or are removed through impeachment
proceedings. The intention of the law is to recognize separate and distinct judicial offices.
The concluding portion of section 155 of the Administrative Code, although not beginning with the usual
introductory word, "provided," is nevertheless, in the nature of a proviso, and should be construed as
such. The office of a proviso is to limit the application of the law. It is contrary to the nature of a proviso
to enlarge the operation of the law. It should not be construed so as to repeal or destroy the main
provisions of the statute. A proviso which is directly repugnant to the purview or body of an Act is
inoperative and void. (See generally, 25 R. C. L., pp. 984, et seq.; and specifically, the leading cases of
McKnight vs. Hodge [1909], 55 Wash., 289, 104 Pac., 504, 40 L. R. A. [N.S.], 1207;
[1916], 26 Idaho, 222; 141 Pac., 1083, Ann. Cas. [1916 E], p. 282, where these principles concerning
provisos are applied.)
To arrive at a correct decision with reference to the proviso before us, let it first be recalled that the law
is emphatic in its specification that, save when judges of first instance are detailed to try land
registration cases or when assigned to vacation duty, "no judge of first instance shall be required to do
duty in any other district than that for which he is commissioned." The keyword to the proviso which
follows is "appointed." This word should here be given its usual signification. Many of the decisions
follow the definition of "appoint" found in the Century Dictionary and Encyclopedia. "Appoint" is there
defined as "to allot, set apart, or designate; nominate or authoritatively assign, as far a use, or to a
position or office." All the authorities united in saying that the term "appoint" is well-known in law and
whether regarded in its legal or in its ordinary acceptation, is applied to the nomination or designation of
an individual. Appointment signifies no more than selection for public office. (4 C. J., 1402, 1404, citing
numerous decisions.)
The effect to be given to the word "appoint" is corroborated by the principles of the law of public
officers. Appointment and qualification to office are separate and distinct things. Appointment is the sole
act of those vested with the power to make it. Acceptance is the sole act of the appointee. Persons may
be chosen for office at pleasure; there is no power in these Islands which can compel a man to accept
the office. (22 R. C. L. 423.) If, therefore, anyone could refuse appointment as a judge of first instance
to a particular district, when once appointment to this district is accepted, he has exactly the same right
to refuse an appointment to another district. No other person could be placed in the position of this
Judge of First Instance since another rule of public officers is, that an appointment may not be made to
an office which is not vacant. (29 Cyc., 1373.) In our judgment, the language of the proviso to section
155 of the Administrative Code, interpreted with reference to the law of public officers, does not
empower the Governor-General to force upon the judge of one district an appointment to another
district against his will, thereby removing him from his district.
Returning again to the principle of statutory construction that a proviso should not be given a meaning
which would tend to render abortive the main portions of the law, it should further be recalled that
judges of first instance are removable only through a fixed procedure. Moreover, impeachment
proceedings, as conducted by the Supreme Court, may be in the nature of jurisdiction, conferred upon
the Supreme Court by ratification of the Congress of the United States, which, it has uniformly been
held, cannot be diminished. (We make no ruling on this point because unnecessary for the resolution of
the case.) But, certainly, if a judge could be transferred from one district of the Philippine Islands to
another, without his consent, it would require no great amount of imagination to conceive how this
power could be used to discipline the judge or as an indirect means of removal. A judge who had, by a
decision, incurred the ill-will of an attorney or official, could, by the insistence of the disgruntled party,
be removed from one district, demoted, and transferred to another district, at possibly a loss of salary,
all without the consent of the judicial officer. The only recourse of the judicial officer who should desire
to maintain his self-respect, would be to vacate the office and leave the service. Unless we wish to
nullify the impeachment section of the Administrative Code, and thus possibly to encroach upon the
jurisdiction conferred upon the Supreme Court by the Organic Law, section 155 must be interpreted so
as to make it consistent therewith.
What we have said is reinforced by the authorities most directly in point. In the early decision of
Marbury vs.Madison ([1803], 1 Cranch, 137), the Supreme Court of the United States, in unmistakable
terms, explained the powers of the Judiciary in enforcing the Constitution as the Supreme Law of the
Land and held that the President of the United States had no power to remove a justice of the peace of
the District of Columbia from office. Mr. Chief Justice Marshall said that "When the officer is not
removable at the will of the executive, the appointment is not revocable, and cannot be annulled: it has
conferred legal rights which cannot be resumed. The discretion of the executive is to be exercised, until
the appointment has been made. But having once made the appointment, his power over the office is
terminated, in all cases where, by law, the officer is not removable by him. The right to the office is then
in the person appointed, and he has the absolute unconditional power of accepting or rejecting it." The
great jurist further or observed that "It is, emphatically, the province and duty of the judicial department,
to say what the law is"
In State of Louisiana vs. Downes ([1869], 21 La. Ann., 490), the Supreme Court of Louisiana said that a
judge of a court could, under the Constitution of that State, only be removed from office by
impeachment, by address of the Legislature, or by proceeding under the intrusion act. It was held that
the appointment and commissioning by the Governor of the State of a party to an office which has
legally been filled, without the vacancy being first declared according to law, was an absolute nullity.
The Attorney-General brings to our notice an obsolete law which had escaped us, and which, if any
lingering doubts exist, would serve to remove that. This law is Act No. 396, enacted by the Philippine
Commission in 1902. Section 4 thereof, separate and distinct from the other provisions of the Act, and
not tacked on as a proviso, provided that "any judge of a Court of First Instance . . . may be transferred
from one judicial district to another by order of the Civil Governor, with the advice and consent of the
Commission. Any judge so transferred shall, upon such transfer, cease the performance of judicial
duties in the district to which he was originally appointed, and shall be the regular judge thereafter in the
judicial district to which he as been so assigned." But Act No. 396 was thrice repealed by the Philippine
Legislature; the first time, impliedly by the enactment of Act No. 2347, the Judiciary Reorganization Act,
and subsequently, expressly by the Administrative Code of 1916 and the Administrative Code of 1917.
Instead, also, of continuing the phraseology of section 4 of Act No. 396, the Legislature merely included
the proviso to which we have alluded. It cannot, therefore, admit of doubt that the members of the
Philippine Legislature had before them the Act of the Philippine Commission and preferred, not to
perpetuate the old law, but to insert language of their own. The purpose of the Philippine Legislature
was clearly to safeguard the interests of the judiciary, and this laudable purpose, it is for us now to
effectuate.
Far more convincing than precedent or argument are great and basic principles long inherent in popular
government intended to create an independent judiciary. A history of the struggle for a fearless and an
incorruptible judiciary prepared to follow the law and to administer it regardless of consequences, can
be perused with ever-recurring benefit. Since the early days of the Republic, the judicial system in the
United States, with certain exceptions which only served to demonstrate more fully the excellence of
the whole, has been viewed with pride, and confidently relied upon for justice by the American people.
The American people considered it necessary "that there should be a judiciary endowed with
substantial and independent powers and secure against all corrupting or perverting influences; secure,
also, against the arbitrary authority of the administrative heads of the government." (Woodrow Wilson,
Constitutional Government in the United States, pp. 17, 142.) It was such a conception of an
independent judiciary which was instituted in the Philippines by the American administration and which
has since served as one of the chief glories of the government and one of the most priceless heritages
of the Filipino people.
The Attorney-General in the argument in support of his motion for reconsideration, quotes the last
preceding sentence and says that he dissents therefrom. The number of authoritative replies to the
proposition advanced by the law officer of the government relative to the intention to establish an
independent judiciary in these Islands, is limited only by space in which to quote them. Possibly we can
do no better than to make our own the language of Mr. Justice Trent, speaking for a unanimous court,
in Severino vs. Governor-General and Provincial Board of Occidental Negro ([1910], 16 Phil., 366, 384),
when he said: "This governments in the United States, now possesses a complete governmental
organization, with executive legislative, and judicial departments, which are exercising functions as
independent of each other as the Federal or State governments." (For the legislative version of the
same idea, see Administrative Code, sec. 17.)
On occasion, the Supreme Court of the Philippine Islands has applied the accepted theory of the
division of powers, termed by the United States Supreme Court as "one of the chief merits of the
American system of written constitutional law" (Kilbourn vs. Thompson [1881], 13 Otto, 168), and has
unhesitatingly refused to interfere with the official acts of the Governor-General or to intrude on the
rights and privileges of the Philippine Legislature (In the Patterson [1902], 1 Phil., 93;
Severino vs. Governor-General and Provincial Board of Occidental Negros, supra; In re McCulloch Dick
[1918], 38 Phil., 41; U.S. vs. Bull [1910], 15 Phil., 7; U.S. vs. Ten Yu [1912], 24 Phil., 1;
Veloso vs.Boards of Canvassers of Leyte and Samar [1919], 39 Phil., 886.) As an instance of this class
of decisions, in Veloso vs. Boards of Canvassers of Leyte and Samar, supra, this court, in considering
the right of the Philippine Senate to be the judge of the elections, returns, and qualifications of its
elective members, said:
The grant of power to the Philippine Senate and the Philippine House of Representatives,
respectively is full, clear, and complete. . . . The judiciary, with its traditional and careful
regard for the balance of powers, must permit this exclusive privilege of the legislature to
remain where the sovereign authority has placed it. Since, therefore, the Philippine Senate is
made the sole judge of the elections, returns, and qualifications of its elective members, this
tribunal neither can, nor ought, to take jurisdiction of the case.
Although much more reluctantly, and also much more infrequently we are happy to add, the court has
had to defend the judiciary against legislative and executive encroachment. (Ocampo vs. Cabañgis
[1910], 15 Phil., 626; In re Guariña [1914], 24 Phil., 37; Barrameda vs. Moir [1913], 25 Phil., 44; and
Province of Tarlac vs. Gale [1913], 26 Phil., 338.) As an instance of the latter class of decisions, in
Province of Tarlac vs. Gale, supra, Mr. Justice Moreland, speaking for the court, said:
The judiciary is one of the coordinate branches of the Government. (Forbes vs. Chuoco
Tiaco, 16 Phil., 534; United States vs. Bull, 15 Phil., 7.) Its preservation in its integrity and
effectiveness is necessary to the present form of Government. . . . It is 
clear . . . that each department is bound to preserve its own existence if it live up to the duty
imposed upon it as one of the coordinate branches of the government. Whatever a person or
entity ought to do or must do in law, it has the power to do. This being true, the judiciary has
the power to maintain its existence; and whatever is reasonably necessary to that end, courts
may do or order done. But the right to live, if that is all there is of it, is a very small matter.
The mere right to breathe does not satisfy ambition or produce results. Therefore, courts
have not only the power to maintain their life, but they have also the power to make that
existence effective for the purpose for which the judiciary was created. They can, by
appropriate means, do all things necessary to preserve and maintain every quality needful to
make the judiciary an effective institution of Government. Courts have, therefore, inherent
power to preserve their integrity, maintain their dignity and to insure effectiveness in the
administration of justice. This is clear; for, if the judiciary may be deprived of any one of its
essential attributes, or if any one of them may be seriously weakened by the act of any
person or official, then independence disappears and subordination begins. The power to
interfere is the power to control, and the power to control is the power to abrogate. The
sovereign power has given life to the judiciary and nothing less than the sovereign power can
take it away or render it useless. The power to withhold from the courts anything really
essential for the administration of justice is the power to control and ultimately to destroy the
efficiency of the judiciary. Courts cannot, under their duty to their creator, the sovereign
power, permit themselves to be subordinated to any person or official to which their creator
did not itself subordinate them.
A stirring plea has been made by the learned representative of the Government for a decision which will
work for the public welfare. We agree that, under the peculiar conditions existing in the Philippines, it is
sometimes well for a judge not to remain indefinitely in a particular district. But it is a far cry from this
premise to the use of a method not sanctioned by existing law and savoring of military discipline. Our
conception of good judges has been, and is, of men who have a mastery of the principles of law, who
discharge their duties in accordance with law, who are permitted to perform the duties of the office
undeterred by outside influence, and who are independent and self-respecting human units in a judicial
system equal and coordinate to the other two departments of government. We are pleased to think of
judges as of the type of the erudite Coke who, three centuries ago, was removed from office because
when asked "if in the future he would delay a case at the King's order," replied: "I will do what becomes
me as a judge."
For the reasons given, we are of opinion that the reasonable force of the language used in the proviso
to section 155 of the Administrative Code taken in connection with the whole of the Judiciary Law, and
the accepted canons of interpretation, and the principles of the law of public officers, leave from for no
other construction than that a Judge of First Instance may be made a judge of another district only with
his consent.
It is our holding that the plaintiff Andres Borromeo is lawfully entitled to the possession of the office of
Judge of the Court of First Instance of the Twenty-Fourth Judicial District. It is our judgment that the
defendant Fermin Mariano shall be ousted from the office of Judge of the Twenty-fourth Judicial District,
and the plaintiff placed in possession of the same. The motion for reconsideration filed by the Attorney-
General is denied. No costs shall be allowed. Let this be entered as the order of the court. So ordered.
Araullo, Street and Avanceña, JJ., concur.
Johnson, J., signed the original decision, but was not present when the motion for reconsideration was
filed and when this decisions was promulgated.
Separate Opinions
VILLAMOR, J., dissenting:
I dissent. The interpretation, which the majority give to the last clause of section 155 of the
Administrative Code, in the sense that it requires the consent of a judge of the Court of First Instance in
order that he may be transferred from one judicial district to another, is an amendment of the law, an
act which should be done only by the legislative branch of the government. I am not unaware of the
possibility that the power of the Governor-General to effect such transfers of Judges of First Instance
with the consent of the Senate may produce as a result the resignation of the judge thus transferred if
he does not accept the transfer. However, this fact should be referred to the legislature in order that it
may amend the law if it sees fit to do so. The provisions of the law being clear, the court should apply it
in the manner and form in which it has been passed by the legislature, without attempting to attach
thereto a condition, as that of the consent of the judge transferred, which the legislature did not see fit
to require.
It is presented that the appointment to a specific position in the Government requires, among other
elements, the acceptance thereof, without which it would not produce any effect. However, with
reference to the transfer of judges a new appointment is made only to distinguish a permanent transfer
from a temporary assignment to sit in another district, which is forbidden by law, except for the
purposes of land registration cases; and a new oath is taken only to attest the fact that the transfer has
been effected and that the transferred judge has taken possession of the office in the new district for
the purposes of jurisdiction. But, in reality, in this case there is no new employee, there is not a different
office. The transferred judge continues being a judge as much as before his transfer, holds the same
office with all the attributes and powers thereto annexed, and enjoys the same privileges, with the sole
difference as to the place in which jurisdiction is exercised. In this case, according to the law, the prior
consent of the judge is not necessary in order that he may be transferred to another district, for the
good of the public service, which is the basis of the power to make such transfers, is over and above
the personal interests of every citizen.
It is also contended that the last clause of section 155 is a danger to the independence of the judiciary.
But if this legal provision is considered in relation to section 5 of the Administrative Code, which
presumes that administrative discretion is exercised for the good of the service and the benefit of the
public; and if it is furthermore considered that the executive power to effect transfers of judges is
subject to the approval of a restraining body, that is, the Senate, it seems, in my opinion, that this legal
provision is a prudent measure tending to protect the interest of good public service.
According to law, the Governor-General has the discretion to make transfers of judges from one district
to another, with the consent of the Senate. Therefore, to the Governor-General and to the Senate, and
not to the judges, is the power granted to determine how such discretion should be exercised. In the
case at bar there is not even a single allegation that such discretion has been abused in disregard of
the law, and therefore, there is no way by which this court may disapprove the transfer of the petitioner
deiced to be effected by the Governor-General in the exercise of the discretionary powers conferred
upon him by law.
If the consent of a judge is an essential requisite to his transfer to another district, it must also be an
essential requisite to his assignment to sit in another district to try land registration cases or as vacation
judge, for in both cases, the same reason exists, that is, the danger to the independence of the
judiciary, which is the foundation of the majority opinion. The result would be the complete repeal of
section 155 of the Administrative Code through the interpretation given by this court. And an
interpretation leading to such result should be discarded for it is contrary to the doctrines of statutory
construction cited in the majority opinion, to wit: that the court should give effect to the general intention
of the legislator, if it may be gathered from all the viewpoints from which the law is examined; and that,
if possible, that construction should be adopted which gives effect to all the provisions of the law (2
Lewis' Sutherland, Statutory Construction, page 662 et seq.; In re Allen [1903], 2 Phil., 630; sec. 207 of
the Administrative Code).
But what is the intention of the legislator in the legal provision now under consideration? The provisions
of the law are clear and it is not necessary either to stretch the imagination or resort to other
jurisdictions, to discover the intention of the legislator. Section 155 of the Administrative Code provides:
For the purpose of trying land registration cases only, a judge of first instance may, if the
public interests so require, be detailed by the Department Head to temporary duty in a district
other than his own. Save when so detailed or when assigned to vacation duty, no judge of
first instance shall be required to do duty in any other district than that for which he is
commissioned; but nothing herein shall be construed to prevent a judge of first instance of
one district from being appointed to be judge of another district.
It is admitted by the authorities on the subject that the object of a saving clause of proviso is (1) to
except something from the legal provision in question, or (2) to restrict the provisions thereof, or (3) to
exclude all possible reason for erroneously construing such provision so as to make it applicable to
cases which the legislature did not intend to include therein.
In whatever sense the proviso in question is interpreted, there is no reason for requiring the consent of
the judge for a temporary or permanent transfer to another district. The intention of the legislature, as
gathered from the provisions of the law, is that no judge shall be required to render services in another
district, except to try land registration cases or to act as vacation judge, but without prejudice to his
being appointed by the Governor-General as judge of another district.
That discharge is a different thing from transfer is a self-evident proposition requiring no proof. That a
judge appointed to another district may refuse to accept his transfer is not disputed by anyone. But if he
leaves the office by abandonment or resignation, such result is not a necessary effect of the transfer but
of his free will.
The majority decision tries to solve the proposition that if the remedy prayed for is not granted judges
would lose their judicial independence. But we should remember, in this connection what Judge Cooley,
one of the most eminent American jurists, in resolving the proposition that if it should be held that the
Governor cannot be compelled to fulfill purely ministerial duties, those in possession of legal rights
would, in many cases, be without remedy, said in the case of Sutherland vs. Governor (29 Mich., 329),
to wit:
Practically, there are a great many such cases, but theoretically, there are none at all. All
wrongs, certainly, are not redressed by the judicial department. A party may be deprived of a
right by a wrong verdict, or an erroneous ruling of a judge, and though the error may be
manifest to all others than those who are to decide upon his rights, he will be without redress.
A person lawfully chosen to the Legislature may have his seat given by the house to another,
and be thus wronged without remedy. A just claim against the State may be rejected by the
board of auditors, and neither the governor nor the courts can give relief. A convicted person
may conclusively demonstrate his innocence to the governor, and still be denied a pardon. In
which one of these cases could the denial of redress by the proper tribunal constitute any
ground for interference by any other authority? The law must leave the final decision upon
every claim and every controversy somewhere, and when that decision has been made, it
must be accepted as correct. The presumption is just as conclusive in favor of executive
action as in favor of judicial.
A case in which the court discussed the proposition that there can be no wrong whatever without any
remedy is that of People vs. Bissell (19 Ill., 229). In that case the court said:
It is urged upon us, that in a government of laws there must be an adequate remedy for every
wrong, and that where a clear right exists, there must be some mode of enforcing that right.
While human society is governed by so imperfect a being as man, this can be true only in
theory. If we are to compel the Governor or the legislature to right every wrong which may
arise from their omissions of duty, then surely they must, in order to make this Utopian
system perfect, have the power to compel us to do right in every case. May it not be as well
supposed that we will act perversely, and refuse to perform a duty imposed upon us, to the
injury of the citizen, as that the Governor will do so? In the formation of the government,
equal confidence was rightfully reposed in each department, to which appropriate and
independent duties were assigned.
The proceeding instituted in this case is entitled Quo Warranto, a proceeding for determining the right of
a Judge of First Instance to sit in a determined judicial district. But there can be no doubt that in this
question is involved the power of the Governor-General to appoint Judges of First Instance. While the
petition in this case does not include the Governor-General as party respondent, nevertheless, the
judgment of this court must in the same manner necessarily affect him who authorized the appointment
now in dispute and the appointee, now respondent Judge Fermin Mariano. This conclusion is inevitable
for the case deals with the appointment of a judge made by the Governor-General in the exercise of his
discretional powers. Indeed this court cannot decide this case by granting the prayer of the petitioner
without disapproving the manner in which this power of the Governor-General has been exercised. Has
the court jurisdiction to do this?
Section 26 of the Jones Act provides, among other things:
The Judges of the Courts of First Instance shall be appointed by the Governor-General, by
and with the advice and consent of the Philippine Senate.
In view of this legal provision and of section 155 of the Administrative Code, to maintain that a Judge of
First Instance may not be transferred to another district without his consent amounts to judicially
determining that the Governor-General cannot exercise the power conferred upon him by law to
transfer a judge from one district to another without the consent of the judge concerned.
The question whether courts possess or do not possess jurisdiction to control the official acts of the
Governor has been raised before many courts of the United States. And this Supreme Court, in the
case of Severino vs. Governor-General and Provincial Board of Occidental Negros (16 Phil., 366, 387,
400, 402), after examining the various cases in which this question was raised in the United States,
said:
We think that the weight of authority, based upon legal principles and sound reasoning,
supports the proposition that in the United States the supreme courts of the States do not
have jurisdiction to control the official acts of the governor. For better reasons we conclude
that this court has no jurisdiction, either by mandamus or injunction, to control the official acts
of the Governor-General, inasmuch as we have seen that his duties, powers, and
responsibilities are more comprehensive than those conferred upon any State Governor.
When the Philippine legislative body confers upon the Governor-General powers and duties,
it does so for the reason that he is in a better position to know the needs of the country than
any other member of the executive department, and with the full confidence that he will
perform such duties, under his official oath, as his best judgment dictates. If this had not been
the intention of the legislature, they could have placed the duty upon some other official of the
executive department. It no doubt is sometimes very necessary for the Governor-General to
perform certain important executive duties without delay, and should this court attempt to
distinguish between purely ministerial and discretionary duties, conferred upon him by law,
and attempt to determine in each case which are purely ministerial, which are political, or
which are discretionary, the Governor-General, to that extent would become subservient to
the judiciary. To avoid this is why the three great coordinate departments of the Government
were created and made independent of each other. President McKinley in creating civil
government in this country took into consideration these fundamental principles of separate
and independent departments, which have been demonstrated to be essential to a republican
form of government, and conferred upon the Governor-General, as the Executive of the
Philippine Islands, the power to execute the laws according to his best judgment, holding him
responsible to the President of the United States, without interference on the part of the
judiciary. In so doing he reposed in the Executive of this country great confidence, realizing
that he, the Executive, acting independently of the judiciary, would be in a better position to
carry out the great underlying principles of American institutions for the peace and happiness
of the inhabitants of this country. The President realized that the final decision of every
question in controversy must be left somewhere, and when such decision has been made it
must be accepted as correct. The presumption is just as conclusive in favor of executive
action, as to its correctness and justness, as it is in favor of judicial action.
In another part of this decision this court added:
Inasmuch as the three coordinated departments of the Government, the executive,
legislative, and judicial, have been established and are operating, as we have said, as
independently of each other as the same three coordinated branches created under the
constitution of the Federal and State governments are operating in the American Union, and
in view of the fact that there have been conferred upon the Chief Executive of these Islands
more extensive powers, duties, and responsibilities than have been conferred upon the
governors of the various States of the Union, we think the reason for the holdings of the
courts of the United States, which have passed upon this question are worthy of
consideration. We might here add that we have no doubt that the present incumbent of the
office of Governor-General, a man who is ready and willing at all times to render obedience to
the law, would follow the mandate of this court, but such willingness to be governed by the
order of this court would not of itself give us jurisdiction. Nor should he manifest (which he
has not done) his intention to not obey the mandate of this court, this would not be sufficient
reason for us to asbtain from requiring him to comply with such mandate in case we have
jurisdiction.
And in the dispositive part of the decision the court among other things said: "That we can not and
should not entertain a complaint which seeks to control or interfere with the official duties of the
Governor-General."
In the case of Forbes vs. Chuoco Tiaco and Crossfield (16 Phil., 534), this court, adhering to the same
principle announced in the case of Severino vs. Governor-General and Provincial Board of Occidental
Negros, supra, established the following doctrine:
In a government of separate and independent departments, executive, legislative, and
judicial, with separate and distinct functions, one department will not attempt to interfere with
the performance of the exclusive duties of another. To permit such an interference would
destroy the independence of the separate departments and would make one subject to the
control of the others. For the judiciary to interfere, for the purpose of questioning the manner
of exercising the legal and political duties of the chief executive head of the Government or to
control the action of the legislative department, would, in effect, destroy the independence of
the departments of the Government and would make all departments subject to the ultimate
control of the judicial. Such a conclusion or condition was never contemplated by the
organizers of the Government.
In deciding the present petition, ordering that the respondent judge Fermin Mariano should be ousted
from the office of Judge of the Twenty-fourth District and that possession thereof should be surrendered
to the petitioner Andres Borromeo, has not this court judicially determined that the appointment of the
former to said district and that of the latter to the twenty-first, both made by the Governor-General, with
the advice and consent of the Philippine Senate, are not well made and are contrary to the immovability
of judges and should therefore be annulled by this court? What does the decision of the majority mean
but that it is a real intrusion in the exercise of the powers conferred upon the executive and legislative
departments of the Government? And is this not openly contrary to the doctrines established in the
decisions cited of this Supreme Court itself, where the much-vaunted independence of the executive,
legislative, and judicial departments is proclaimed?
The petition is denied.
The motion for reconsideration should be granted.
G.R. No. 177131               June 7, 2011
BOY SCOUTS OF THE PHILIPPINES, Petitioner, 
vs.
COMMISSION ON AUDIT, Respondent.
DECISION
LEONARDO-DE CASTRO, J.:
The jurisdiction of the Commission on Audit (COA) over the Boy Scouts of the Philippines (BSP) is the
subject matter of this controversy that reached us via petition for prohibition1 filed by the BSP under
Rule 65 of the 1997 Rules of Court. In this petition, the BSP seeks that the COA be prohibited from
implementing its June 18, 2002 Decision,2 its February 21, 2007 Resolution,3 as well as all other
issuances arising therefrom, and that all of the foregoing be rendered null and void. 4
Antecedent Facts and Background of the Case
This case arose when the COA issued Resolution No. 99-0115 on August 19, 1999 ("the COA
Resolution"), with the subject "Defining the Commission’s policy with respect to the audit of the Boy
Scouts of the Philippines." In its whereas clauses, the COA Resolution stated that the BSP was created
as a public corporation under Commonwealth Act No. 111, as amended by Presidential Decree No. 460
and Republic Act No. 7278; that in Boy Scouts of the Philippines v. National Labor Relations
Commission,6 the Supreme Court ruled that the BSP, as constituted under its charter, was a
"government-controlled corporation within the meaning of Article IX(B)(2)(1) of the Constitution"; and
that "the BSP is appropriately regarded as a government instrumentality under the 1987 Administrative
Code."7 The COA Resolution also cited its constitutional mandate under Section 2(1), Article IX (D).
Finally, the COA Resolution reads:
NOW THEREFORE, in consideration of the foregoing premises, the COMMISSION PROPER HAS
RESOLVED, AS IT DOES HEREBY RESOLVE, to conduct an annual financial audit of the Boy Scouts
of the Philippines in accordance with generally accepted auditing standards, and express an opinion on
whether the financial statements which include the Balance Sheet, the Income Statement and the
Statement of Cash Flows present fairly its financial position and results of operations.
xxxx
BE IT RESOLVED FURTHERMORE, that for purposes of audit supervision, the Boy Scouts of the
Philippines shall be classified among the government corporations belonging to the Educational, Social,
Scientific, Civic and Research Sector under the Corporate Audit Office I, to be audited, similar to the
subsidiary corporations, by employing the team audit approach.8 (Emphases supplied.)
The BSP sought reconsideration of the COA Resolution in a letter9 dated November 26, 1999 signed by
the BSP National President Jejomar C. Binay, who is now the Vice President of the Republic, wherein
he wrote:
It is the position of the BSP, with all due respect, that it is not subject to the Commission’s jurisdiction
on the following grounds:
1. We reckon that the ruling in the case of Boy Scouts of the Philippines vs. National Labor
Relations Commission, et al. (G.R. No. 80767) classifying the BSP as a government-
controlled corporation is anchored on the "substantial Government participation" in the
National Executive Board of the BSP. It is to be noted that the case was decided when the
BSP Charter is defined by Commonwealth Act No. 111 as amended by Presidential Decree
460.
However, may we humbly refer you to Republic Act No. 7278 which amended the BSP’s charter after
the cited case was decided. The most salient of all amendments in RA No. 7278 is the alteration of the
composition of the National Executive Board of the BSP.
The said RA virtually eliminated the "substantial government participation" in the National Executive
Board by removing: (i) the President of the Philippines and executive secretaries, with the exception of
the Secretary of Education, as members thereof; and (ii) the appointment and confirmation power of the
President of the Philippines, as Chief Scout, over the members of the said Board.
The BSP believes that the cited case has been superseded by RA 7278. Thereby weakening the case’s
conclusion that the BSP is a government-controlled corporation (sic). The 1987 Administrative Code
itself, of which the BSP vs. NLRC relied on for some terms, defines government-owned and controlled
corporations as agencies organized as stock or non-stock corporations which the BSP, under its
present charter, is not.
Also, the Government, like in other GOCCs, does not have funds invested in the BSP. What RA 7278
only provides is that the Government or any of its subdivisions, branches, offices, agencies and
instrumentalities can from time to time donate and contribute funds to the BSP.
xxxx
Also the BSP respectfully believes that the BSP is not "appropriately regarded as a government
instrumentality under the 1987 Administrative Code" as stated in the COA resolution. As defined by
Section 2(10) of the said code, instrumentality refers to "any agency of the National Government, not
integrated within the department framework, vested with special functions or jurisdiction by law,
endowed with some if not all corporate powers, administering special funds, and enjoying operational
autonomy, usually through a charter."
The BSP is not an entity administering special funds. It is not even included in the DECS National
Budget. x x x
It may be argued also that the BSP is not an "agency" of the Government. The 1987 Administrative
Code, merely referred the BSP as an "attached agency" of the DECS as distinguished from an actual
line agency of departments that are included in the National Budget. The BSP believes that an
"attached agency" is different from an "agency." Agency, as defined in Section 2(4) of the
Administrative Code, is defined as any of the various units of the Government including a department,
bureau, office, instrumentality, government-owned or controlled corporation or local government or
distinct unit therein.
Under the above definition, the BSP is neither a unit of the Government; a department which refers to
an executive department as created by law (Section 2[7] of the Administrative Code); nor a bureau
which refers to any principal subdivision or unit of any department (Section 2[8], Administrative Code).10
Subsequently, requests for reconsideration of the COA Resolution were also made separately by
Robert P. Valdellon, Regional Scout Director, Western Visayas Region, Iloilo City and Eugenio F.
Capreso, Council Scout Executive of Calbayog City.11
In a letter12 dated July 3, 2000, Director Crescencio S. Sunico, Corporate Audit Officer (CAO) I of the
COA, furnished the BSP with a copy of the Memorandum13 dated June 20, 2000 of Atty. Santos M.
Alquizalas, the COA General Counsel. In said Memorandum, the COA General Counsel opined that
Republic Act No. 7278 did not supersede the Court’s ruling in Boy Scouts of the Philippines v. National
Labor Relations Commission, even though said law eliminated the substantial government participation
in the selection of members of the National Executive Board of the BSP. The Memorandum further
provides:
Analysis of the said case disclosed that the substantial government participation is only one (1) of the
three (3) grounds relied upon by the Court in the resolution of the case. Other considerations
include the character of the BSP’s purposes and functions which has a public aspect and the statutory
designation of the BSP as a "public corporation". These grounds have not been deleted by R.A. No.
7278. On the contrary, these were strengthened as evidenced by the amendment made relative to
BSP’s purposes stated in Section 3 of R.A. No. 7278.
On the argument that BSP is not appropriately regarded as "a government instrumentality" and
"agency" of the government, such has already been answered and clarified. The Supreme Court has
elucidated this matter in the BSP case when it declared that BSP is regarded as, both a "government-
controlled corporation with an original charter" and as an "instrumentality" of the Government. Likewise,
it is not disputed that the Administrative Code of 1987 designated the BSP as one of the attached
agencies of DECS. Being an attached agency, however, it does not change its nature as a government-
controlled corporation with original charter and, necessarily, subject to COA audit jurisdiction. Besides,
Section 2(1), Article IX-D of the Constitution provides that COA shall have the power, authority, and
duty to examine, audit and settle all accounts pertaining to the revenue and receipts of, and
expenditures or uses of funds and property, owned or held in trust by, or pertaining to, the Government,
or any of its subdivisions, agencies or instrumentalities, including government-owned or controlled
corporations with original charters.14
Based on the Memorandum of the COA General Counsel, Director Sunico wrote:
In view of the points clarified by said Memorandum upholding COA Resolution No. 99-011, we have to
comply with the provisions of the latter, among which is to conduct an annual financial audit of the Boy
Scouts of the Philippines.15
In a letter dated November 20, 2000 signed by Director Amorsonia B. Escarda, CAO I, the COA
informed the BSP that a preliminary survey of its organizational structure, operations and accounting
system/records shall be conducted on November 21 to 22, 2000.16
Upon the BSP’s request, the audit was deferred for thirty (30) days. The BSP then filed a Petition for
Review with Prayer for Preliminary Injunction and/or Temporary Restraining Order before the COA.
This was denied by the COA in its questioned Decision, which held that the BSP is under its audit
jurisdiction. The BSP moved for reconsideration but this was likewise denied under its questioned
Resolution.17
This led to the filing by the BSP of this petition for prohibition with preliminary injunction and temporary
restraining order against the COA.
The Issue
As stated earlier, the sole issue to be resolved in this case is whether the BSP falls under the COA’s
audit jurisdiction.
The Parties’ Respective Arguments
The BSP contends that Boy Scouts of the Philippines v. National Labor Relations Commission is
inapplicable for purposes of determining the audit jurisdiction of the COA as the issue therein was the
jurisdiction of the National Labor Relations Commission over a case for illegal dismissal and unfair labor
practice filed by certain BSP employees.18
While the BSP concedes that its functions do relate to those that the government might otherwise
completely assume on its own, it avers that this alone was not determinative of the COA’s audit
jurisdiction over it. The BSP further avers that the Court in Boy Scouts of the Philippines v. National
Labor Relations Commission "simply stated x x x that in respect of functions, the BSP is akin to a public
corporation" but this was not synonymous to holding that the BSP is a government corporation or entity
subject to audit by the COA. 19
The BSP contends that Republic Act No. 7278 introduced crucial amendments to its charter; hence, the
findings of the Court in Boy Scouts of the Philippines v. National Labor Relations Commission are no
longer valid as the government has ceased to play a controlling influence in it. The BSP claims that the
pronouncements of the Court therein must be taken only within the context of that case; that the Court
had categorically found that its assets were acquired from the Boy Scouts of America and not from the
Philippine government, and that its operations are financed chiefly from membership dues of the Boy
Scouts themselves as well as from property rentals; and that "the BSP may correctly be characterized
as non-governmental, and hence, beyond the audit jurisdiction of the COA." It further claims that the
designation by the Court of the BSP as a government agency or instrumentality is mere obiter dictum.20
The BSP maintains that the provisions of Republic Act No. 7278 suggest that "governance of BSP has
come to be overwhelmingly a private affair or nature, with government participation restricted to the
seat of the Secretary of Education, Culture and Sports."21 It cites Philippine Airlines Inc. v. Commission
on Audit22 wherein the Court declared that, "PAL, having ceased to be a government-owned or
controlled corporation is no longer under the audit jurisdiction of the COA."23 Claiming that the
amendments introduced by Republic Act No. 7278 constituted a supervening event that changed the
BSP’s corporate identity in the same way that the government’s privatization program changed PAL’s,
the BSP makes the case that the government no longer has control over it; thus, the COA cannot use
the Boy Scouts of the Philippines v. National Labor Relations Commission as its basis for the exercise
of its jurisdiction and the issuance of COA Resolution No. 99-011.24 The BSP further claims as follows:
It is not far-fetched, in fact, to concede that BSP’s funds and assets are private in character. Unlike
ordinary public corporations, such as provinces, cities, and municipalities, or government-owned and
controlled corporations, such as Land Bank of the Philippines and the Development Bank of the
Philippines, the assets and funds of BSP are not derived from any government grant. For its operations,
BSP is not dependent in any way on any government appropriation; as a matter of fact, it has not even
been included in any appropriations for the government. To be sure, COA has not alleged, in its
Resolution No. 99-011 or in the Memorandum of its General Counsel, that BSP received, receives or
continues to receive assets and funds from any agency of the government. The foregoing simply point
to the private nature of the funds and assets of petitioner BSP.
xxxx
As stated in petitioner’s third argument, BSP’s assets and funds were never acquired from the
government. Its operations are not in any way financed by the government, as BSP has never been
included in any appropriations act for the government. Neither has the government invested funds with
BSP. BSP, has not been, at any time, a user of government property or funds; nor have properties of
the government been held in trust by BSP. This is precisely the reason why, until this time, the COA
has not attempted to subject BSP to its audit jurisdiction. x x x.25
To summarize its other arguments, the BSP contends that it is not a government-owned or controlled
corporation; neither is it an instrumentality, agency, or subdivision of the government.
In its Comment,26 the COA argues as follows:
1. The BSP is a public corporation created under Commonwealth Act No. 111 dated October
31, 1936, and whose functions relate to the fostering of public virtues of citizenship and
patriotism and the general improvement of the moral spirit and fiber of the youth. The manner
of creation and the purpose for which the BSP was created indubitably prove that it is a
government agency.
 2. Being a government agency, the funds and property owned or held in trust by the BSP are
subject to the audit authority of respondent Commission on Audit pursuant to Section 2 (1),
Article IX-D of the 1987 Constitution.
3. Republic Act No. 7278 did not change the character of the BSP as a government-owned or
controlled corporation and government instrumentality.27
The COA maintains that the functions of the BSP that include, among others, the teaching to the youth
of patriotism, courage, self-reliance, and kindred virtues, are undeniably sovereign functions enshrined
under the Constitution and discussed by the Court in Boy Scouts of the Philippines v. National Labor
Relations Commission. The COA contends that any attempt to classify the BSP as a private corporation
would be incomprehensible since no less than the law which created it had designated it as a public
corporation and its statutory mandate embraces performance of sovereign functions.28
The COA claims that the only reason why the BSP employees fell within the scope of the Civil Service
Commission even before the 1987 Constitution was the fact that it was a government-owned or
controlled corporation; that as an attached agency of the Department of Education, Culture and Sports
(DECS), the BSP is an agency of the government; and that the BSP is a chartered institution under
Section 1(12) of the Revised Administrative Code of 1987, embraced under the term government
instrumentality.29
The COA concludes that being a government agency, the funds and property owned or held by the
BSP are subject to the audit authority of the COA pursuant to Section 2(1), Article IX (D) of the 1987
Constitution.
In support of its arguments, the COA cites The Veterans Federation of the Philippines (VFP) v.
Reyes,30 wherein the Court held that among the reasons why the VFP is a public corporation is that its
charter, Republic Act No. 2640, designates it as one. Furthermore, the COA quotes the Court as saying
in that case:
In several cases, we have dealt with the issue of whether certain specific activities can be classified as
sovereign functions. These cases, which deal with activities not immediately apparent to be sovereign
functions, upheld the public sovereign nature of operations needed either to promote social justice or to
stimulate patriotic sentiments and love of country.
xxxx
Petitioner claims that its funds are not public funds because no budgetary appropriations or government
funds have been released to the VFP directly or indirectly from the DBM, and because VFP funds come
from membership dues and lease rentals earned from administering government lands reserved for the
VFP.
The fact that no budgetary appropriations have been released to the VFP does not prove that it is a
private corporation. The DBM indeed did not see it fit to propose budgetary appropriations to the VFP,
having itself believed that the VFP is a private corporation. If the DBM, however, is mistaken as to its
conclusion regarding the nature of VFP's incorporation, its previous assertions will not prevent future
budgetary appropriations to the VFP. The erroneous application of the law by public officers does not
bar a subsequent correct application of the law.31(Citations omitted.)
The COA points out that the government is not precluded by law from extending financial support to the
BSP and adding to its funds, and that "as a government instrumentality which continues to perform a
vital function imbued with public interest and reflective of the government’s policy to stimulate patriotic
sentiments and love of country, the BSP’s funds from whatever source are public funds, and can be
used solely for public purpose in pursuance of the provisions of Republic Act No. [7278]."32
The COA claims that the fact that it has not yet audited the BSP’s funds may not bar the subsequent
exercise of its audit jurisdiction.
The BSP filed its Reply33 on August 29, 2007 maintaining that its statutory designation as a "public
corporation" and the public character of its purpose and functions are not determinative of the COA’s
audit jurisdiction; reiterating its stand that Boy Scouts of the Philippines v. National Labor Relations
Commission is not applicable anymore because the aspect of government ownership and control has
been removed by Republic Act No. 7278; and concluding that the funds and property that it either
owned or held in trust are not public funds and are not subject to the COA’s audit jurisdiction.
Thereafter, considering the BSP’s claim that it is a private corporation, this Court, in a
Resolution34 dated July 20, 2010, required the parties to file, within a period of twenty (20) days from
receipt of said Resolution, their respective comments on the issue of whether Commonwealth Act No.
111, as amended by Republic Act No. 7278, is constitutional.
In compliance with the Court’s resolution, the parties filed their respective Comments.
In its Comment35 dated October 22, 2010, the COA argues that the constitutionality of Commonwealth
Act No. 111, as amended, is not determinative of the resolution of the present controversy on the
COA’s audit jurisdiction over petitioner, and in fact, the controversy may be resolved on other grounds;
thus, the requisites before a judicial inquiry may be made, as set forth in Commissioner of Internal
Revenue v. Court of Tax Appeals,36 have not been fully met.37 Moreover, the COA maintains that behind
every law lies the presumption of constitutionality.38 The COA likewise argues that contrary to the BSP’s
position, repeal of a law by implication is not favored.39 Lastly, the COA claims that there was no
violation of Section 16, Article XII of the 1987 Constitution with the creation or declaration of the BSP as
a government corporation. Citing Philippine Society for the Prevention of Cruelty to Animals v.
Commission on Audit,40 the COA further alleges:
The true criterion, therefore, to determine whether a corporation is public or private is found in the
totality of the relation of the corporation to the State. If the corporation is created by the State as the
latter’s own agency or instrumentality to help it in carrying out its governmental functions, then that
corporation is considered public; otherwise, it is private. x x x.41
For its part, in its Comment42 filed on December 3, 2010, the BSP submits that its charter,
Commonwealth Act No. 111, as amended by Republic Act No. 7278, is constitutional as it does not
violate Section 16, Article XII of the Constitution. The BSP alleges that "while [it] is not a public
corporation within the purview of COA’s audit jurisdiction, neither is it a private corporation created by
special law falling within the ambit of the constitutional prohibition x x x."43 The BSP further alleges:
Petitioner’s purpose is embodied in Section 3 of C.A. No. 111, as amended by Section 1 of R.A. No.
7278, thus:
xxxx
A reading of the foregoing provision shows that petitioner was created to advance the interest of the
youth, specifically of young boys, and to mold them into becoming good citizens. Ultimately, the
creation of petitioner redounds to the benefit, not only of those boys, but of the public good or welfare.
Hence, it can be said that petitioner’s purpose and functions are more of a public rather than a private
character. Petitioner caters to all boys who wish to join the organization without any distinction. It does
not limit its membership to a particular class of boys. Petitioner’s members are trained in scoutcraft and
taught patriotism, civic consciousness and responsibility, courage, self-reliance, discipline and kindred
virtues, and moral values, preparing them to become model citizens and outstanding leaders of the
country.44
The BSP reiterates its stand that the public character of its purpose and functions do not place it within
the ambit of the audit jurisdiction of the COA as it lacks the government ownership or control that the
Constitution requires before an entity may be subject of said jurisdiction.45 It avers that it merely stated
in its Reply that the withdrawal of government control is akin to privatization, but it does not necessarily
mean that petitioner is a private corporation.46The BSP claims that it has a unique characteristic which
"neither classifies it as a purely public nor a purely private corporation";47 that it is not a quasi-public
corporation; and that it may belong to a different class altogether.48
The BSP claims that assuming arguendo that it is a private corporation, its creation is not contrary to
the purpose of Section 16, Article XII of the Constitution; and that the evil sought to be avoided by said
provision is inexistent in the enactment of the BSP’s charter,49 as, (i) it was not created for any
pecuniary purpose; (ii) those who will primarily benefit from its creation are not its officers but its entire
membership consisting of boys being trained in scoutcraft all over the country; (iii) it caters to all boys
who wish to join the organization without any distinction; and (iv) it does not limit its membership to a
particular class or group of boys. Thus, the enactment of its charter confers no special privilege to
particular individuals, families, or groups; nor does it bring about the danger of granting undue favors to
certain groups to the prejudice of others or of the interest of the country, which are the evils sought to
be prevented by the constitutional provision involved.50
Finally, the BSP states that the presumption of constitutionality of a legislative enactment prevails
absent any clear showing of its repugnancy to the Constitution.51
The Ruling of the Court
After looking at the legislative history of its amended charter and carefully studying the applicable laws
and the arguments of both parties, we find that the BSP is a public corporation and its funds are subject
to the COA’s audit jurisdiction.
The BSP Charter (Commonwealth Act No. 111, approved on October 31, 1936), entitled "An Act to
Create a Public Corporation to be Known as the Boy Scouts of the Philippines, and to Define its Powers
and Purposes" created the BSP as a "public corporation" to serve the following public interest or
purpose:
Sec. 3. The purpose of this corporation shall be to promote through organization and cooperation with
other agencies, the ability of boys to do useful things for themselves and others, to train them in
scoutcraft, and to inculcate in them patriotism, civic consciousness and responsibility, courage, self-
reliance, discipline and kindred virtues, and moral values, using the method which are in common use
by boy scouts.
Presidential Decree No. 460, approved on May 17, 1974, amended Commonwealth Act No. 111 and
provided substantial changes in the BSP organizational structure. Pertinent provisions are quoted
below:
Section II. Section 5 of the said Act is also amended to read as follows:
The governing body of the said corporation shall consist of a National Executive Board composed of (a)
the President of the Philippines or his representative; (b) the charter and life members of the Boy
Scouts of the Philippines; (c) the Chairman of the Board of Trustees of the Philippine Scouting
Foundation; (d) the Regional Chairman of the Scout Regions of the Philippines; (e) the Secretary of
Education and Culture, the Secretary of Social Welfare, the Secretary of National Defense, the
Secretary of Labor, the Secretary of Finance, the Secretary of Youth and Sports, and the Secretary of
Local Government and Community Development; (f) an equal number of individuals from the private
sector; (g) the National President of the Girl Scouts of the Philippines; (h) one Scout of Senior age from
each Scout Region to represent the boy membership; and (i) three representatives of the cultural
minorities. Except for the Regional Chairman who shall be elected by the Regional Scout Councils
during their annual meetings, and the Scouts of their respective regions, all members of the National
Executive Board shall be either by appointment or cooption, subject to ratification and confirmation by
the Chief Scout, who shall be the Head of State. Vacancies in the Executive Board shall be filled by a
majority vote of the remaining members, subject to ratification and confirmation by the Chief Scout. The
by-laws may prescribe the number of members of the National Executive Board necessary to constitute
a quorum of the board, which number may be less than a majority of the whole number of the board.
The National Executive Board shall have power to make and to amend the by-laws, and, by a two-thirds
vote of the whole board at a meeting called for this purpose, may authorize and cause to be executed
mortgages and liens upon the property of the corporation.
Subsequently, on March 24, 1992, Republic Act No. 7278 further amended Commonwealth Act No. 111
"by strengthening the volunteer and democratic character" of the BSP and reducing government
representation in its governing body, as follows:
Section 1. Sections 2 and 3 of Commonwealth Act. No. 111, as amended, is hereby amended to read
as follows:
"Sec. 2. The said corporation shall have the powers of perpetual succession, to sue and be sued; to
enter into contracts; to acquire, own, lease, convey and dispose of such real and personal estate, land
grants, rights and choses in action as shall be necessary for corporate purposes, and to accept and
receive funds, real and personal property by gift, devise, bequest or other means, to conduct fund-
raising activities; to adopt and use a seal, and the same to alter and destroy; to have offices and
conduct its business and affairs in Metropolitan Manila and in the regions, provinces, cities,
municipalities, and barangays of the Philippines, to make and adopt by-laws, rules and regulations not
inconsistent with this Act and the laws of the Philippines, and generally to do all such acts and things,
including the establishment of regulations for the election of associates and successors, as may be
necessary to carry into effect the provisions of this Act and promote the purposes of said corporation:
Provided, That said corporation shall have no power to issue certificates of stock or to declare or pay
dividends, its objectives and purposes being solely of benevolent character and not for pecuniary profit
of its members.
"Sec. 3. The purpose of this corporation shall be to promote through organization and cooperation with
other agencies, the ability of boys to do useful things for themselves and others, to train them in
scoutcraft, and to inculcate in them patriotism, civic consciousness and responsibility, courage, self-
reliance, discipline and kindred virtues, and moral values, using the method which are in common use
by boy scouts."
Sec. 2. Section 4 of Commonwealth Act No. 111, as amended, is hereby repealed and in lieu thereof,
Section 4 shall read as follows:
"Sec. 4. The President of the Philippines shall be the Chief Scout of the Boy Scouts of the Philippines."
Sec. 3. Sections 5, 6, 7 and 8 of Commonwealth Act No. 111, as amended, are hereby amended to
read as follows:
"Sec. 5. The governing body of the said corporation shall consist of a National Executive Board, the
members of which shall be Filipino citizens of good moral character. The Board shall be composed of
the following:
"(a) One (1) charter member of the Boy Scouts of the Philippines who shall be elected by the
members of the National Council at its meeting called for this purpose;
"(b) The regional chairmen of the scout regions who shall be elected by the representatives of
all the local scout councils of the region during its meeting called for this purpose: Provided,
That a candidate for regional chairman need not be the chairman of a local scout council;
"(c) The Secretary of Education, Culture and Sports;
"(d) The National President of the Girl Scouts of the Philippines;
"(e) One (1) senior scout, each from Luzon, Visayas and Mindanao areas, to be elected by
the senior scout delegates of the local scout councils to the scout youth forums in their
respective areas, in its meeting called for this purpose, to represent the boy scout
membership;
"(f) Twelve (12) regular members to be elected by the members of the National Council in its
meeting called for this purpose;
"(g) At least ten (10) but not more than fifteen (15) additional members from the private sector
who shall be elected by the members of the National Executive Board referred to in the
immediately preceding paragraphs (a), (b), (c), (d), (e) and (f) at the organizational meeting of
the newly reconstituted National Executive Board which shall be held immediately after the
meeting of the National Council wherein the twelve (12) regular members and the one (1)
charter member were elected.
xxxx
"Sec. 8. Any donation or contribution which from time to time may be made to the Boy Scouts of the
Philippines by the Government or any of its subdivisions, branches, offices, agencies or
instrumentalities or by a foreign government or by private, entities and individuals shall be expended by
the National Executive Board in pursuance of this Act.
The BSP as a Public Corporation under Par. 2, Art. 2 of the Civil Code
There are three classes of juridical persons under Article 44 of the Civil Code and the BSP, as presently
constituted under Republic Act No. 7278, falls under the second classification. Article 44 reads:
Art. 44. The following are juridical persons:
(1) The State and its political subdivisions;
(2) Other corporations, institutions and entities for public interest or purpose created
by law; their personality begins as soon as they have been constituted according to
law;
(3) Corporations, partnerships and associations for private interest or purpose to which the
law grants a juridical personality, separate and distinct from that of each shareholder, partner
or member. (Emphases supplied.)
The BSP, which is a corporation created for a public interest or purpose, is subject to the law creating it
under Article 45 of the Civil Code, which provides:
Art. 45. Juridical persons mentioned in Nos. 1 and 2 of the preceding article are governed by the
laws creating or recognizing them.
Private corporations are regulated by laws of general application on the subject.
Partnerships and associations for private interest or purpose are governed by the provisions of this
Code concerning partnerships. (Emphasis and underscoring supplied.)
The purpose of the BSP as stated in its amended charter shows that it was created in order to
implement a State policy declared in Article II, Section 13 of the Constitution, which reads:
ARTICLE II - DECLARATION OF PRINCIPLES AND STATE POLICIES
Section 13. The State recognizes the vital role of the youth in nation-building and shall promote and
protect their physical, moral, spiritual, intellectual, and social well-being. It shall inculcate in the youth
patriotism and nationalism, and encourage their involvement in public and civic affairs.
Evidently, the BSP, which was created by a special law to serve a public purpose in pursuit of a
constitutional mandate, comes within the class of "public corporations" defined by paragraph 2, Article
44 of the Civil Code and governed by the law which creates it, pursuant to Article 45 of the same Code.
The BSP’s Classification Under the Administrative Code of 1987
The public, rather than private, character of the BSP is recognized by the fact that, along with the Girl
Scouts of the Philippines, it is classified as an attached agency of the DECS under Executive Order No.
292, or the Administrative Code of 1987, which states:
TITLE VI – EDUCATION, CULTURE AND SPORTS
Chapter 8 – Attached Agencies
SEC. 20. Attached Agencies. – The following agencies are hereby attached to the Department:
xxxx
(12) Boy Scouts of the Philippines;
 (13) Girl Scouts of the Philippines.
The administrative relationship of an attached agency to the department is defined in the Administrative
Code of 1987 as follows:
BOOK IV
THE EXECUTIVE BRANCH
Chapter 7 – ADMINISTRATIVE RELATIONSHIP
SEC. 38. Definition of Administrative Relationship. – Unless otherwise expressly stated in the Code or
in other laws defining the special relationships of particular agencies, administrative relationships shall
be categorized and defined as follows:
xxxx
(3) Attachment. – (a) This refers to the lateral relationship between the department or its equivalent and
the attached agency or corporation for purposes of policy and program coordination. The coordination
may be accomplished by having the department represented in the governing board of the attached
agency or corporation, either as chairman or as a member, with or without voting rights, if this is
permitted by the charter; having the attached corporation or agency comply with a system of periodic
reporting which shall reflect the progress of programs and projects; and having the department or its
equivalent provide general policies through its representative in the board, which shall serve as the
framework for the internal policies of the attached corporation or agency. (Emphasis ours.)
As an attached agency, the BSP enjoys operational autonomy, as long as policy and program
coordination is achieved by having at least one representative of government in its governing board,
which in the case of the BSP is the DECS Secretary. In this sense, the BSP is not under government
control or "supervision and control." Still this characteristic does not make the attached chartered
agency a private corporation covered by the constitutional proscription in question.
Art. XII, Sec. 16 of the Constitution refers to "private corporations" created by government for
proprietary or economic/business purposes
At the outset, it should be noted that the provision of Section 16 in issue is found in Article XII of the
Constitution, entitled "National Economy and Patrimony." Section 1 of Article XII is quoted as follows:
SECTION 1. The goals of the national economy are a more equitable distribution of opportunities,
income, and wealth; a sustained increase in the amount of goods and services produced by the nation
for the benefit of the people; and an expanding productivity as the key to raising the quality of life for all,
especially the underprivileged.
The State shall promote industrialization and full employment based on sound agricultural development
and agrarian reform, through industries that make full and efficient use of human and natural resources,
and which are competitive in both domestic and foreign markets. However, the State shall protect
Filipino enterprises against unfair foreign competition and trade practices.
In the pursuit of these goals, all sectors of the economy and all regions of the country shall be given
optimum opportunity to develop. Private enterprises, including corporations, cooperatives, and similar
collective organizations, shall be encouraged to broaden the base of their ownership.
The scope and coverage of Section 16, Article XII of the Constitution can be seen from the
aforementioned declaration of state policies and goals which pertains to national economy and
patrimony and the interests of the people in economic development.
Section 16, Article XII deals with "the formation, organization, or regulation of private
corporations,"52 which should be done through a general law enacted by Congress, provides for an
exception, that is: if the corporation is government owned or controlled; its creation is in the interest of
the common good; and it meets the test of economic viability. The rationale behind Article XII, Section
16 of the 1987 Constitution was explained in Feliciano v. Commission on Audit,53 in the following
manner:
The Constitution emphatically prohibits the creation of private corporations except by a general law
applicable to all citizens. The purpose of this constitutional provision is to ban private corporations
created by special charters, which historically gave certain individuals, families or groups special
privileges denied to other citizens.54 (Emphasis added.)
It may be gleaned from the above discussion that Article XII, Section 16 bans the creation of "private
corporations" by special law. The said constitutional provision should not be construed so as to prohibit
the creation of public corporations or a corporate agency or instrumentality of the government
intended to serve a public interest or purpose, which should not be measured on the basis of economic
viability, but according to the public interest or purpose it serves as envisioned by paragraph (2), of
Article 44 of the Civil Code and the pertinent provisions of the Administrative Code of 1987.
The BSP is a Public Corporation Not Subject to the Test of Government Ownership or Control and
Economic Viability
The BSP is a public corporation or a government agency or instrumentality with juridical personality,
which does not fall within the constitutional prohibition in Article XII, Section 16, notwithstanding the
amendments to its charter. Not all corporations, which are not government owned or controlled, are
ipso facto to be considered private corporations as there exists another distinct class of corporations or
chartered institutions which are otherwise known as "public corporations." These corporations are
treated by law as agencies or instrumentalities of the government which are not subject to the tests of
ownership or control and economic viability but to different criteria relating to their public
purposes/interests or constitutional policies and objectives and their administrative relationship to the
government or any of its Departments or Offices.
Classification of Corporations Under Section 16, Article XII of the Constitution on National Economy
and Patrimony
The dissenting opinion of Associate Justice Antonio T. Carpio, citing a line of cases, insists that the
Constitution recognizes only two classes of corporations: private corporations under a general law, and
government-owned or controlled corporations created by special charters.
We strongly disagree. Section 16, Article XII should not be construed so as to prohibit Congress from
creating public corporations. In fact, Congress has enacted numerous laws creating public corporations
or government agencies or instrumentalities vested with corporate powers. Moreover, Section 16,
Article XII, which relates to National Economy and Patrimony, could not have tied the hands of
Congress in creating public corporations to serve any of the constitutional policies or objectives.
In his dissent, Justice Carpio contends that this ponente introduces "a totally different species of
corporation, which is neither a private corporation nor a government owned or controlled corporation"
and, in so doing, is missing the fact that the BSP, "which was created as a non-stock, non-profit
corporation, can only be either a private corporation or a government owned or controlled corporation."
Note that in Boy Scouts of the Philippines v. National Labor Relations Commission, the BSP, under its
former charter, was regarded as both a government owned or controlled corporation with original
charter and a "public corporation." The said case pertinently stated:
While the BSP may be seen to be a mixed type of entity, combining aspects of both public and private
entities, we believe that considering the character of its purposes and its functions, the statutory
designation of the BSP as "a public corporation" and the substantial participation of the Government in
the selection of members of the National Executive Board of the BSP, the BSP, as presently constituted
under its charter, is a government-controlled corporation within the meaning of Article IX (B) (2) (1) of
the Constitution.
We are fortified in this conclusion when we note that the Administrative Code of 1987 designates the
BSP as one of the attached agencies of the Department of Education, Culture and Sports ("DECS"). An
"agency of the Government" is defined as referring to any of the various units of the Government
including a department, bureau, office, instrumentality, government-owned or -controlled corporation, or
local government or distinct unit therein. "Government instrumentality" is in turn defined in the 1987
Administrative Code in the following manner:
Instrumentality - refers to any agency of the National Government, not integrated within the department
framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate
powers, administering special funds, and enjoying operational autonomy usually through a charter. This
term includes regulatory agencies, chartered institutions and government-owned or controlled
corporations.
The same Code describes a "chartered institution" in the following terms:
Chartered institution - refers to any agency organized or operating under a special charter, and vested
by law with functions relating to specific constitutional policies or objectives. This term includes the state
universities and colleges, and the monetary authority of the State.
We believe that the BSP is appropriately regarded as "a government instrumentality" under the 1987
Administrative Code.
It thus appears that the BSP may be regarded as both a "government controlled corporation with an
original charter" and as an "instrumentality" of the Government within the meaning of Article IX (B) (2)
(1) of the Constitution. x x x.55(Emphases supplied.)
The existence of public or government corporate or juridical entities or chartered institutions by
legislative fiat distinct from private corporations and government owned or controlled corporation is best
exemplified by the 1987 Administrative Code cited above, which we quote in part:
Sec. 2. General Terms Defined. – Unless the specific words of the text, or the context as a whole, or a
particular statute, shall require a different meaning:
xxxx
(10) "Instrumentality" refers to any agency of the National Government, not integrated within the
department framework, vested with special functions or jurisdiction by law, endowed with some if not all
corporate powers, administering special funds, and enjoying operational autonomy, usually through a
charter. This term includes regulatory agencies, chartered institutions and government-owned or
controlled corporations.
xxxx
(12) "Chartered institution" refers to any agency organized or operating under a special charter, and
vested by law with functions relating to specific constitutional policies or objectives. This term includes
the state universities and colleges and the monetary authority of the State.
(13) "Government-owned or controlled corporation" refers to any agency organized as a stock or non-
stock corporation, vested with functions relating to public needs whether governmental or proprietary in
nature, and owned by the Government directly or through its instrumentalities either wholly, or, where
applicable as in the case of stock corporations, to the extent of at least fifty-one (51) per cent of its
capital stock: Provided, That government-owned or controlled corporations may be further categorized
by the Department of the Budget, the Civil Service Commission, and the Commission on Audit for
purposes of the exercise and discharge of their respective powers, functions and responsibilities with
respect to such corporations.
Assuming for the sake of argument that the BSP ceases to be owned or controlled by the government
because of reduction of the number of representatives of the government in the BSP Board, it does not
follow that it also ceases to be a government instrumentality as it still retains all the characteristics of
the latter as an attached agency of the DECS under the Administrative Code. Vesting corporate powers
to an attached agency or instrumentality of the government is not constitutionally prohibited and is
allowed by the above-mentioned provisions of the Civil Code and the 1987 Administrative Code.
Economic Viability and Ownership and Control Tests Inapplicable to Public Corporations
As presently constituted, the BSP still remains an instrumentality of the national government. It is a
public corporation created by law for a public purpose, attached to the DECS pursuant to its Charter
and the Administrative Code of 1987. It is not a private corporation which is required to be owned or
controlled by the government and be economically viable to justify its existence under a special law.
The dissent of Justice Carpio also submits that by recognizing "a new class of public corporation(s)"
created by special charter that will not be subject to the test of economic viability, the constitutional
provision will be circumvented.
However, a review of the Record of the 1986 Constitutional Convention reveals the intent of the framers
of the highest law of our land to distinguish between government corporations performing governmental
functions and corporations involved in business or proprietary functions:
THE PRESIDENT. Commissioner Foz is recognized.
MR. FOZ. Madam President, I support the proposal to insert "ECONOMIC VIABILITY" as one of the
grounds for organizing government corporations. x x x.
MR. OPLE. Madam President, the reason for this concern is really that when the government creates a
corporation, there is a sense in which this corporation becomes exempt from the test of economic
performance. We know what happened in the past. If a government corporation loses, then it makes its
claim upon the taxpayers’ money through new equity infusions from the government and what is always
invoked is the common good. x x x
Therefore, when we insert the phrase "ECONOMIC VIABILITY" together with the "common good," this
becomes a restraint on future enthusiasts for state capitalism to excuse themselves from the
responsibility of meeting the market test so that they become viable. x x x.
xxxx
THE PRESIDENT. Commissioner Quesada is recognized.
MS. QUESADA. Madam President, may we be clarified by the committee on what is meant by
economic viability?
THE PRESIDENT. Please proceed.
MR. MONSOD. Economic viability normally is determined by cost-benefit ratio that takes into
consideration all benefits, including economic external as well as internal benefits. These are what they
call externalities in economics, so that these are not strictly financial criteria. Economic viability involves
what we call economic returns or benefits of the country that are not quantifiable in financial terms. x x
x.
xxxx
MS. QUESADA. So, would this particular formulation now really limit the entry of government
corporations into activities engaged in by corporations?
MR. MONSOD. Yes, because it is also consistent with the economic philosophy that this Commission
approved – that there should be minimum government participation and intervention in the economy.
MS. QUESDA. Sometimes this Commission would just refer to Congress to provide the particular
requirements when the government would get into corporations. But this time around, we specifically
mentioned economic viability. x x x.
MR. VILLEGAS. Commissioner Ople will restate the reason for his introducing that amendment.
MR. OPLE. I am obliged to repeat what I said earlier in moving for this particular amendment jointly with
Commissioner Foz. During the past three decades, there had been a proliferation of government
corporations, very few of which have succeeded, and many of which are now earmarked by the
Presidential Reorganization Commission for liquidation because they failed the economic test. x x x.
xxxx
MS. QUESADA. But would not the Commissioner say that the reason why many of the government-
owned or controlled corporations failed to come up with the economic test is due to the management of
these corporations, and not the idea itself of government corporations? It is a problem of efficiency and
effectiveness of management of these corporations which could be remedied, not by eliminating
government corporations or the idea of getting into state-owned corporations, but improving
management which our technocrats should be able to do, given the training and the experience.
MR. OPLE. That is part of the economic viability, Madam President.
MS. QUESADA. So, is the Commissioner saying then that the Filipinos will benefit more if these
government-controlled corporations were given to private hands, and that there will be more goods and
services that will be affordable and within the reach of the ordinary citizens?
MR. OPLE. Yes. There is nothing here, Madam President, that will prevent the formation of a
government corporation in accordance with a special charter given by Congress. However, we are
raising the standard a little bit so that, in the future, corporations established by the government will
meet the test of the common good but within that framework we should also build a certain standard of
economic viability.
xxxx
THE PRESIDENT. Commissioner Padilla is recognized.
MR. PADILLA. This is an inquiry to the committee. With regard to corporations created by a special
charter for government-owned or controlled corporations, will these be in the pioneer fields or in places
where the private enterprise does not or cannot enter? Or is this so general that these government
corporations can compete with private corporations organized under a general law?
MR. MONSOD. Madam President, x x x. There are two types of government corporations – those that
are involved in performing governmental functions, like garbage disposal, Manila waterworks, and so
on; and those government corporations that are involved in business functions. As we said earlier, there
are two criteria that should be followed for corporations that want to go into business. First is for
government corporations to first prove that they can be efficient in the areas of their proper functions.
This is one of the problems now because they go into all kinds of activities but are not even efficient in
their proper functions. Secondly, they should not go into activities that the private sector can do better.
MR. PADILLA. There is no question about corporations performing governmental functions or functions
that are impressed with public interest. But the question is with regard to matters that are covered,
perhaps not exhaustively, by private enterprise. It seems that under this provision the only qualification
is economic viability and common good, but shall government, through government-controlled
corporations, compete with private enterprise?
MR. MONSOD. No, Madam President. As we said, the government should not engage in activities that
private enterprise is engaged in and can do better. x x x.56 (Emphases supplied.)
Thus, the test of economic viability clearly does not apply to public corporations dealing with
governmental functions, to which category the BSP belongs. The discussion above conveys the
constitutional intent not to apply this constitutional ban on the creation of public corporations where the
economic viability test would be irrelevant. The said test would only apply if the corporation is engaged
in some economic activity or business function for the government.
It is undisputed that the BSP performs functions that are impressed with public interest. In fact, during
the consideration of the Senate Bill that eventually became Republic Act No. 7278, which amended the
BSP Charter, one of the bill’s sponsors, Senator Joey Lina, described the BSP as follows:
Senator Lina. Yes, I can only think of two organizations involving the masses of our youth, Mr.
President, that should be given this kind of a privilege – the Boy Scouts of the Philippines and the Girl
Scouts of the Philippines. Outside of these two groups, I do not think there are other groups similarly
situated.
The Boy Scouts of the Philippines has a long history of providing value formation to our young, and
considering how huge the population of the young people is, at this point in time, and also considering
the importance of having an organization such as this that will inculcate moral uprightness among the
young people, and further considering that the development of these young people at that tender age of
seven to sixteen is vital in the development of the country producing good citizens, I believe that we can
make an exception of the Boy Scouting movement of the Philippines from this general prohibition
against providing tax exemption and privileges.57
Furthermore, this Court cannot agree with the dissenting opinion which equates the changes introduced
by Republic Act No. 7278 to the BSP Charter as clear manifestation of the intent of Congress "to return
the BSP to the private sector." It was not the intent of Congress in enacting Republic Act No. 7278 to
give up all interests in this basic youth organization, which has been its partner in forming responsible
citizens for decades.
In fact, as may be seen in the deliberation of the House Bills that eventually resulted to Republic Act
No. 7278, Congress worked closely with the BSP to rejuvenate the organization, to bring it back to its
former glory reached under its original charter, Commonwealth Act No. 111, and to correct the
perceived ills introduced by the amendments to its Charter under Presidential Decree No. 460. The
BSP suffered from low morale and decrease in number because the Secretaries of the different
departments in government who were too busy to attend the meetings of the BSP’s National Executive
Board ("the Board") sent representatives who, as it turned out, changed from meeting to meeting. Thus,
the Scouting Councils established in the provinces and cities were not in touch with what was
happening on the national level, but they were left to implement what was decided by the Board.58
A portion of the legislators’ discussion is quoted below to clearly show their intent:
HON. DEL MAR. x x x I need not mention to you the value and the tremendous good that the Boy Scout
Movement has done not only for the youth in particular but for the country in general. And that is why, if
we look around, our past and present national leaders, prominent men in the various fields of endeavor,
public servants in government offices, and civic leaders in the communities all over the land, and not
only in our country but all over the world many if not most of them have at one time or another been
beneficiaries of the Scouting Movement. And so, it is along this line, Mr. Chairman, that we would like to
have the early approval of this measure if only to pay back what we owe much to the Scouting
Movement. Now, going to the meat of the matter, Mr. Chairman, if I may just – the Scouting Movement
was enacted into law in October 31, 1936 under Commonwealth Act No. 111. x x x [W]e were
acknowledged as the third biggest scouting organization in the world x x x. And to our mind, Mr.
Chairman, this erratic growth and this decrease in membership [number] is because of the bad policy
measures that were enunciated with the enactment or promulgation by the President before of
Presidential Decree No. 460 which we feel is the culprit of the ills that is flagging the Boy Scout
Movement today. And so, this is specifically what we are attacking, Mr. Chairman, the
disenfranchisement of the National Council in the election of the national board. x x x. And so, this is
what we would like to be appraised of by the officers of the Boy [Scouts] of the Philippines whom we
are also confident, have the best interest of the Boy Scout Movement at heart and it is in this spirit, Mr.
Chairman, that we see no impediment towards working together, the Boy Scout of the Philippines
officers working together with the House of Representatives in coming out with a measure that will put
back the vigor and enthusiasm of the Boy Scout Movement. x x x.59 (Emphasis ours.)
The following is another excerpt from the discussion on the House version of the bill, in the Committee
on Government Enterprises:
HON. AQUINO: x x x Well, obviously, the two bills as well as the previous laws that have created the
Boy Scouts of the Philippines did not provide for any direct government support by way of appropriation
from the national budget to support the activities of this organization. The point here is, and at the same
time they have been subjected to a governmental intervention, which to their mind has been inimical to
the objectives and to the institution per se, that is why they are seeking legislative fiat to restore back
the original mandate that they had under Commonwealth Act 111. Such having been the experience in
the hands of government, meaning, there has been negative interference on their part and inasmuch as
their mandate is coming from a legislative fiat, then shouldn’t it be, this rhetorical question, shouldn’t it
be better for this organization to seek a mandate from, let’s say, the government the Corporation Code
of the Philippines and register with the SEC as non-profit non-stock corporation so that government
intervention could be very very minimal. Maybe that’s a rhetorical question, they may or they may not
answer, ano. I don’t know what would be the benefit of a charter or a mandate being provided for by
way of legislation versus a registration with the SEC under the Corporation Code of the Philippines
inasmuch as they don’t get anything from the government anyway insofar as direct funding. In fact, the
only thing that they got from government was intervention in their affairs. Maybe we can solicit some
commentary comments from the resource persons. Incidentally, don’t take that as an objection, I’m not
objecting. I’m all for the objectives of these two bills. It just occurred to me that since you have had very
bad experience in the hands of government and you will always be open to such possible intervention
even in the future as long as you have a legislative mandate or your mandate or your charter coming
from legislative action.
xxxx
MR. ESCUDERO: Mr. Chairman, there may be a disadvantage if the Boy Scouts of the Philippines will
be required to register with the SEC. If we are registered with the SEC, there could be a danger of
proliferation of scout organization. Anybody can organize and then register with the SEC. If there will be
a proliferation of this, then the organization will lose control of the entire organization. Another
disadvantage, Mr. Chairman, anybody can file a complaint in the SEC against the Boy Scouts of the
Philippines and the SEC may suspend the operation or freeze the assets of the organization and
hamper the operation of the organization. I don’t know, Mr. Chairman, how you look at it but there could
be a danger for anybody filing a complaint against the organization in the SEC and the SEC might
suspend the registration permit of the organization and we will not be able to operate.
HON. AQUINO: Well, that I think would be a problem that will not be exclusive to corporations
registered with the SEC because even if you are government corporation, court action may be taken
against you in other judicial bodies because the SEC is simply another quasi-judicial body. But, I think,
the first point would be very interesting, the first point that you raised. In effect, what you are saying is
that with the legislative mandate creating your charter, in effect, you have been given some sort of a
franchise with this movement.
MR. ESCUDERO: Yes.
HON. AQUINO: Exclusive franchise of that movement?
MR. ESCUDERO: Yes.
HON. AQUINO: Well, that’s very well taken so I will proceed with other issues, Mr. Chairman. x x
x.60 (Emphases added.)
Therefore, even though the amended BSP charter did away with most of the governmental presence in
the BSP Board, this was done to more strongly promote the BSP’s objectives, which were not
supported under Presidential Decree No. 460. The BSP objectives, as pointed out earlier, are
consistent with the public purpose of the promotion of the well-being of the youth, the future leaders of corporations, but this is only during special activities that the Boy Scouts of the Philippines would
the country. The amendments were not done with the view of changing the character of the BSP into a conduct during the year. Otherwise, we have to raise our own funds to support the organization.62
privatized corporation. The BSP remains an agency attached to a department of the government, the
DECS, and it was not at all stripped of its public character.
The nature of the funds of the BSP and the COA’s audit jurisdiction were likewise brought up in said
congressional deliberations, to wit:
The ownership and control test is likewise irrelevant for a public corporation like the BSP. To reiterate,
the relationship of the BSP, an attached agency, to the government, through the DECS, is defined in
HON. AQUINO: x x x Insofar as this organization being a government created organization, in fact, a
the Revised Administrative Code of 1987. The BSP meets the minimum statutory requirement of an
government corporation classified as such, are your funds or your finances subjected to the COA audit?
attached government agency as the DECS Secretary sits at the BSP Board ex officio, thus facilitating
the policy and program coordination between the BSP and the DECS.
MR. ESCUDERO: Mr. Chairman, we are not. Our funds is not subjected. We don’t fall under the
jurisdiction of the COA.
Requisites for Declaration of Unconstitutionality Not Met in this Case

HON. AQUINO: All right, but before were you?

The dissenting opinion of Justice Carpio improperly raised the issue of unconstitutionality of certain
provisions of the BSP Charter. Even if the parties were asked to Comment on the validity of the BSP
charter by the Court, this alone does not comply with the requisites for judicial review, which were
clearly set forth in a recent case:
When questions of constitutional significance are raised, the Court can exercise its power of judicial
review only if the following requisites are present: (1) the existence of an actual and appropriate case;
(2) the existence of personal and substantial interest on the part of the party raising the constitutional
question; (3) recourse to judicial review is made at the earliest opportunity; and (4) the constitutional
question is the lis mota of the case.61(Emphasis added.)
Thus, when it comes to the exercise of the power of judicial review, the constitutional issue should be
the very lis mota, or threshold issue, of the case, and that it should be raised by either of the parties.
These requirements would be ignored under the dissent’s rather overreaching view of how this case
should have been decided. True, it was the Court that asked the parties to comment, but the Court
cannot be the one to raise a constitutional issue. Thus, the Court chooses to once more exhibit restraint
in the exercise of its power to pass upon the validity of a law.
MR. ESCUDERO: No, Mr. Chairman.
MR. JESUS: May I? As historical backgrounder, Commonwealth Act 111 was written by then Secretary
Jorge Vargas and before and up to the middle of the Martial Law years, the BSP was receiving a
subsidy in the form of an annual… a one draw from the Sweepstakes. And, this was the case also with
the Girl Scouts at the Anti-TB, but then this was… and the Boy Scouts then because of this funding
partly from government was being subjected to audit in the contributions being made in the part of the
Sweepstakes. But this was removed later during the Martial Law years with the creation of the Human
Settlements Commission. So the situation right now is that the Boy Scouts does not receive any funding
from government, but then in the case of the local councils and this legislative charter, so to speak,
enables the local councils even the national headquarters in view of the provisions in the existing law to
receive donations from the government or any of its instrumentalities, which would be difficult if the Boy
Scouts is registered as a private corporation with the Securities and Exchange Commission.
Government bodies would be estopped from making donations to the Boy Scouts, which at present is
not the case because there is the Boy Scouts charter, this Commonwealth Act 111 as amended by PD
463.

Re: the COA’s Jurisdiction

xxxx

Regarding the COA’s jurisdiction over the BSP, Section 8 of its amended charter allows the BSP to
HON. AMATONG: Mr. Chairman, in connection with that.
receive contributions or donations from the government. Section 8 reads:

THE CHAIRMAN: Yeah, Gentleman from Zamboanga.

Section 8. Any donation or contribution which from time to time may be made to the Boy Scouts of the
Philippines by the Government or any of its subdivisions, branches, offices, agencies or
instrumentalities shall be expended by the Executive Board in pursuance of this Act.lawph!1 HON. AMATONG: There is no auditing being made because there’s no money put in the organization,
but how about donated funds to this organization? What are the remedies of the donors of how will they
know how their money are being spent?
The sources of funds to maintain the BSP were identified before the House Committee on Government
Enterprises while the bill was being deliberated, and the pertinent portion of the discussion is quoted
below: MR. ESCUDERO: May I answer, Mr. Chairman?

MR. ESCUDERO. Yes, Mr. Chairman. The question is the sources of funds of the organization. First, THE CHAIRMAN: Yes, gentleman.
Mr. Chairman, the Boy Scouts of the Philippines do not receive annual allotment from the government.
The organization has to raise its own funds through fund drives and fund campaigns or fund raising
MR. ESCUDERO: The Boy Scouts of the Philippines has an external auditor and by the charter we are
activities. Aside from this, we have some revenue producing projects in the organization that gives us
required to submit a financial report at the end of each year to the National Executive Board. So all the
funds to support the operation. x x x From time to time, Mr. Chairman, when we have special activities
funds donated or otherwise is accounted for at the end of the year by our external auditor. In this case
we request for assistance or financial assistance from government agencies, from private business and
the SGV.63
Historically, therefore, the BSP had been subjected to government audit in so far as public funds had
been infused thereto. However, this practice should not preclude the exercise of the audit jurisdiction of
COA, clearly set forth under the Constitution, which pertinently provides:
Section 2. (1) The Commission on Audit shall have the power, authority, and duty to examine, audit,
and settle all accounts pertaining to the revenue and receipts of, and expenditures or uses of funds and
property, owned or held in trust by, or pertaining to, the Government, or any of its subdivisions,
agencies, or instrumentalities, including government-owned and controlled corporations with original
charters, and on a post-audit basis: (a) constitutional bodies, commissions and offices that have been
granted fiscal autonomy under this Constitution; (b) autonomous state colleges and universities; (c)
other government-owned or controlled corporations with original charters and their subsidiaries; and (d)
such non-governmental entities receiving subsidy or equity, directly or indirectly, from or through the
Government, which are required by law of the granting institution to submit to such audit as a condition
of subsidy or equity. x x x. 64
Since the BSP, under its amended charter, continues to be a public corporation or a government
instrumentality, we come to the inevitable conclusion that it is subject to the exercise by the COA of its
audit jurisdiction in the manner consistent with the provisions of the BSP Charter.
WHEREFORE, premises considered, the instant petition for prohibition is DISMISSED.
SO ORDERED.
G.R. No. L-48494 February 5, 1990
BRENT SCHOOL, INC., and REV. GABRIEL DIMACHE, petitioners, 
vs.
RONALDO ZAMORA, the Presidential Assistant for Legal Affairs, Office of the President, and
DOROTEO R. ALEGRE, respondents.
Quasha, Asperilla, Ancheta, Peña & Nolasco for petitioners.
Mauricio G. Domogon for respondent Alegre.
NARVASA, J.:
The question presented by the proceedings at bar 1 is whether or not the provisions of the Labor
Code, 2 as amended,3 have anathematized "fixed period employment" or employment for a term.
The root of the controversy at bar is an employment contract in virtue of which Doroteo R. Alegre was
engaged as athletic director by Brent School, Inc. at a yearly compensation of P20,000.00. 4 The
contract fixed a specific term for its existence, five (5) years, i.e., from July 18, 1971, the date of
execution of the agreement, to July 17, 1976. Subsequent subsidiary agreements dated March 15,
1973, August 28, 1973, and September 14, 1974 reiterated the same terms and conditions, including
the expiry date, as those contained in the original contract of July 18, 1971. 5
Some three months before the expiration of the stipulated period, or more precisely on April 20,1976,
Alegre was given a copy of the report filed by Brent School with the Department of Labor advising of the
termination of his services effective on July 16, 1976. The stated ground for the termination was
"completion of contract, expiration of the definite period of employment." And a month or so later, on
May 26, 1976, Alegre accepted the amount of P3,177.71, and signed a receipt therefor containing the
phrase, "in full payment of services for the period May 16, to July 17, 1976 as full payment of contract."
However, at the investigation conducted by a Labor Conciliator of said report of termination of his
services, Alegre protested the announced termination of his employment. He argued that although his
contract did stipulate that the same would terminate on July 17, 1976, since his services were
necessary and desirable in the usual business of his employer, and his employment had lasted for five
years, he had acquired the status of a regular employee and could not be removed except for valid
cause. 6 The Regional Director considered Brent School's report as an application for clearance to
terminate employment (not a report of termination), and accepting the recommendation of the Labor
Conciliator, refused to give such clearance and instead required the reinstatement of Alegre, as a
"permanent employee," to his former position without loss of seniority rights and with full back wages.
The Director pronounced "the ground relied upon by the respondent (Brent) in terminating the services
of the complainant (Alegre) . . . (as) not sanctioned by P.D. 442," and, quite oddly, as prohibited by
Circular No. 8, series of 1969, of the Bureau of Private Schools. 7
Brent School filed a motion for reconsideration. The Regional Director denied the motion and forwarded
the case to the Secretary of Labor for review. 8 The latter sustained the Regional Director. 9 Brent
appealed to the Office of the President. Again it was rebuffed. That Office dismissed its appeal for lack
of merit and affirmed the Labor Secretary's decision, ruling that Alegre was a permanent employee who
could not be dismissed except for just cause, and expiration of the employment contract was not one of
the just causes provided in the Labor Code for termination of services. 10
The School is now before this Court in a last attempt at vindication. That it will get here.
The employment contract between Brent School and Alegre was executed on July 18, 1971, at a time
when the Labor Code of the Philippines (P.D. 442) had not yet been promulgated. Indeed, the Code did
not come into effect until November 1, 1974, some three years after the perfection of the employment
contract, and rights and obligations thereunder had arisen and been mutually observed and enforced.
At that time, i.e., before the advent of the Labor Code, there was no doubt whatever about the validity of
term employment. It was impliedly but nonetheless clearly recognized by the Termination Pay Law,
R.A. 1052, 11 as amended by R.A. 1787. 12 Basically, this statute provided that—
In cases of employment, without a definite period, in a commercial, industrial, or
agricultural establishment or enterprise, the employer or the employee may
terminate at any time the employment with just cause; or without just cause in the
case of an employee by serving written notice on the employer at least one month
in advance, or in the case of an employer, by serving such notice to the employee
at least one month in advance or one-half month for every year of service of the
employee, whichever is longer, a fraction of at least six months being considered
as one whole year.
The employer, upon whom no such notice was served in case of termination of
employment without just cause, may hold the employee liable for damages.
The employee, upon whom no such notice was served in case of termination of
employment without just cause, shall be entitled to compensation from the date of
termination of his employment in an amount equivalent to his salaries or wages
corresponding to the required period of notice.
There was, to repeat, clear albeit implied recognition of the licitness of term employment. RA 1787 also
enumerated what it considered to be just causes for terminating an employment without a definite
period, either by the employer or by the employee without incurring any liability therefor.
Prior, thereto, it was the Code of Commerce which governed employment without a fixed period, and
also implicitly acknowledged the propriety of employment with a fixed period. Its Article 302 provided
that —
In cases in which the contract of employment does not have a fixed period, any of
the parties may terminate it, notifying the other thereof one month in advance.
The factor or shop clerk shall have a right, in this case, to the salary corresponding
to said month.
The salary for the month directed to be given by the said Article 302 of the Code of
Commerce to the factor or shop clerk, was known as the mesada (from mes, Spanish for
"month"). When Article 302 (together with many other provisions of the Code of Commerce)
was repealed by the Civil Code of the Philippines, Republic Act No. 1052 was enacted
avowedly for the precise purpose of reinstating the mesada.
Now, the Civil Code of the Philippines, which was approved on June 18, 1949 and became effective on
August 30,1950, itself deals with obligations with a period in section 2, Chapter 3, Title I, Book IV; and
with contracts of labor and for a piece of work, in Sections 2 and 3, Chapter 3, Title VIII, respectively, of
Book IV. No prohibition against term-or fixed-period employment is contained in any of its articles or is
otherwise deducible therefrom.
It is plain then that when the employment contract was signed between Brent School and Alegre on
July 18, 1971, it was perfectly legitimate for them to include in it a stipulation fixing the duration thereof
Stipulations for a term were explicitly recognized as valid by this Court, for instance, in Biboso
v. Victorias Milling Co., Inc., promulgated on March 31, 1977, 13 and J. Walter Thompson Co.
(Phil.) v. NLRC, promulgated on December 29, 1983. 14 The Thompson case involved an executive who
had been engaged for a fixed period of three (3) years. Biboso involved teachers in a private school as
regards whom, the following pronouncement was made:
What is decisive is that petitioners (teachers) were well aware an the time that their
tenure was for a limited duration. Upon its termination, both parties to the
employment relationship were free to renew it or to let it lapse. (p. 254)
Under American law 15 the principle is the same. "Where a contract specifies the period of its duration, it
terminates on the expiration of such period." 16 "A contract of employment for a definite period
terminates by its own terms at the end of such period." 17
The status of legitimacy continued to be enjoyed by fixed-period employment contracts under the Labor
Code (Presidential Decree No. 442), which went into effect on November 1, 1974. The Code contained
explicit references to fixed period employment, or employment with a fixed or definite period.
Nevertheless, obscuration of the principle of licitness of term employment began to take place at about
this time
Article 320, entitled "Probationary and fixed period employment," originally stated that the "termination
of employment of probationary employees and those employed WITH A FIXED PERIOD shall be
subject to such regulations as the Secretary of Labor may prescribe." The asserted
objective to was "prevent the circumvention of the right of the employee to be secured in their
employment as provided . . . (in the Code)."
Article 321 prescribed the just causes for which an employer could terminate "an employment without a
definite period."
And Article 319 undertook to define "employment without a fixed period" in the following manner: 18
An employment shall be deemed to be without a definite period for purposes of this
Chapter where the employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the employer,
except where the employment has been fixed for a specific project or undertaking
the completion or termination of which has been determined at the time of the
engagement of the employee or where the work or service to be performed is
seasonal in nature and the employment is for the duration of the season.
The question immediately provoked by a reading of Article 319 is whether or not a voluntary agreement
on a fixed term or period would be valid where the employee "has been engaged to perform activities
which are usually necessary or desirable in the usual business or trade of the employer." The definition
seems a non sequitur. From the premise — that the duties of an employee entail "activities which are
usually necessary or desirable in the usual business or trade of the employer the" — conclusion does
not necessarily follow that the employer and employee should be forbidden to stipulate any period of
time for the performance of those activities. There is nothing essentially contradictory between a
definite period of an employment contract and the nature of the employee's duties set down in that
contract as being "usually necessary or desirable in the usual business or trade of the employer." The
concept of the employee's duties as being "usually necessary or desirable in the usual business or
trade of the employer" is not synonymous with or identical to employment with a fixed term. Logically,
the decisive determinant in term employment should not be the activities that the employee is called
upon to perform, but the day certain agreed upon by the parties for the commencement and termination
of their employment relationship, a day certain being understood to be "that which must necessarily
come, although it may not be known when." 19 Seasonalemployment, and employment for a particular
project are merely instances employment in which a period, where not expressly set down, necessarily
implied.
Of course, the term — period has a definite and settled signification. It means, "Length of existence;
duration. A point of time marking a termination as of a cause or an activity; an end, a limit, a bound;
conclusion; termination. A series of years, months or days in which something is completed. A time of
definite length. . . . the period from one fixed date to another fixed date . . ." 20 It connotes a "space of
time which has an influence on an obligation as a result of a juridical act, and either suspends its
demandableness or produces its extinguishment." 21 It should be apparent that this settled and familiar
notion of a period, in the context of a contract of employment, takes no account at all of the nature of
the duties of the employee; it has absolutely no relevance to the character of his duties as being
"usually necessary or desirable to the usual business of the employer," or not.
Subsequently, the foregoing articles regarding employment with "a definite period" and "regular"
employment were amended by Presidential Decree No. 850, effective December 16, 1975.
Article 320, dealing with "Probationary and fixed period employment," was altered by eliminating the
reference to persons "employed with a fixed period," and was renumbered (becoming Article 271). The
article 22 now reads:
 . . . Probationary employment.—Probationary employment shall not exceed six opinion should now be addressed. Is it then the legislative intention to outlaw stipulations in
months from the date the employee started working, unless it is covered by an employment contracts laying down a definite period therefor? Are such stipulations in essence contrary
apprenticeship agreement stipulating a longer period. The services of an employee to public policy and should not on this account be accorded legitimacy?
who has been engaged in a probationary basis may be terminated for a just cause
or when he fails to qualify as a regular employee in accordance with reasonable
On the one hand, there is the gradual and progressive elimination of references to term or fixed-period
standards made known by the employer to the employee at the time of his
employment in the Labor Code, and the specific statement of the rule 25 that—
engagement. An employee who is allowed to work after a probationary period shall
be considered a regular employee.
. . . Regular and Casual Employment.— The provisions of written agreement to
the contrary notwithstanding and regardless of the oral agreement of the parties,
Also amended by PD 850 was Article 319 (entitled "Employment with a fixed period," supra) by
an employment shall be deemed to be regular where the employee has been
(a) deleting mention of employment with a fixed or definite period, (b) adding a general exclusion clause
engaged to perform activities which are usually necessary or desirable in the usual
declaring irrelevant written or oral agreements "to the contrary," and (c) making the provision treat
business or trade of the employer except where the employment has been fixed for
exclusively of "regular" and "casual" employment. As revised, said article, renumbered 270, 23 now
a specific project or undertaking the completion or termination of which has been
reads:
determined at the time of the engagement of the employee or where the work or
service to be employed is seasonal in nature and the employment is for the
. . . Regular and Casual Employment.—The provisions of written agreement to the duration of the season.
contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged
An employment shall be deemed to be casual if it is not covered by the preceding
to perform activities which are usually necessary or desirable in the usual business
paragraph: provided,that, any employee who has rendered at least one year of
or trade of the employer except where the employment has been fixed for a
service, whether such service is continuous or broken, shall be considered a
specific project or undertaking the completion or termination of which has been
regular employee with respect to the activity in which he is employed and his
determined at the time of the engagement of the employee or where the work or
employment shall continue while such actually exists.
service to be employed is seasonal in nature and the employment is for the
duration of the season.
There is, on the other hand, the Civil Code, which has always recognized, and continues to recognize,
the validity and propriety of contracts and obligations with a fixed or definite period, and imposes no
An employment shall be deemed to he casual if it is not covered by the preceding
restraints on the freedom of the parties to fix the duration of a contract, whatever its object, be it specie,
paragraph: provided,that, any employee who has rendered at least one year of
goods or services, except the general admonition against stipulations contrary to law, morals, good
service, whether such service is continuous or broken, shall be considered a
customs, public order or public policy. 26 Under the Civil Code, therefore, and as a general proposition,
regular employee with respect to the activity in which he is employed and his
fixed-term employment contracts are not limited, as they are under the present Labor Code, to those by
employment shall continue while such actually exists.
nature seasonal or for specific projects with pre-determined dates of completion; they also include
those to which the parties by free choice have assigned a specific date of termination.
The first paragraph is identical to Article 319 except that, as just mentioned, a clause has
been added, to wit: "The provisions of written agreement to the contrary notwithstanding and
Some familiar examples may be cited of employment contracts which may be neither for seasonal work
regardless of the oral agreements of the parties . . ." The clause would appear to be
nor for specific projects, but to which a fixed term is an essential and natural appurtenance: overseas
addressed inter alia to agreements fixing a definite period for employment. There is withal no
employment contracts, for one, to which, whatever the nature of the engagement, the concept of
clear indication of the intent to deny validity to employment for a definite period. Indeed, not
regular employment will all that it implies does not appear ever to have been applied, Article 280 of the
only is the concept of regular employment not essentially inconsistent with employment for a
Labor Code not withstanding; also appointments to the positions of dean, assistant dean, college
fixed term, as above pointed out, Article 272 of the Labor Code, as amended by said PD 850,
secretary, principal, and other administrative offices in educational institutions, which are by practice or
still impliedly acknowledged the propriety of term employment: it listed the "just causes" for
tradition rotated among the faculty members, and where fixed terms are a necessity, without which no
which "an employer may terminate employment without a definite period," thus giving rise to
reasonable rotation would be possible. Similarly, despite the provisions of Article 280, Policy,
the inference that if the employment be with a definite period, there need be no just cause for
Instructions No. 8 of the Minister of Labor 27 implicitly recognize that certain company officials may be
termination thereof if the ground be precisely the expiration of the term agreed upon by the
elected for what would amount to fixed periods, at the expiration of which they would have to stand
parties for the duration of such employment.
down, in providing that these officials," . . . may lose their jobs as president, executive vice-president or
vice-president, etc. because the stockholders or the board of directors for one reason or another did not
Still later, however, said Article 272 (formerly Article 321) was further amended by Batas Pambansa re-elect them."
Bilang 130, 24 to eliminate altogether reference to employment without a definite period. As lastly
amended, the opening lines of the article (renumbered 283), now pertinently read: "An employer may
There can of course be no quarrel with the proposition that where from the circumstances it is apparent
terminate an employment for any of the following just causes: . . . " BP 130 thus completed the
that periods have been imposed to preclude acquisition of tenurial security by the employee, they
elimination of every reference in the Labor Code, express or implied, to employment with a fixed or
should be struck down or disregarded as contrary to public policy, morals, etc. But where no such intent
definite period or term.
to circumvent the law is shown, or stated otherwise, where the reason for the law does not exist, e.g.,
where it is indeed the employee himself who insists upon a period or where the nature of the
It is in the light of the foregoing description of the development of the provisions of the Labor Code engagement is such that, without being seasonal or for a specific project, a definite date of termination
bearing on term or fixed-period employment that the question posed in the opening paragraph of this is a sine qua non, would an agreement fixing a period be essentially evil or illicit, therefore anathema?
Would such an agreement come within the scope of Article 280 which admittedly was enacted "to
prevent the circumvention of the right of the employee to be secured in . . . (his) employment?"
As it is evident from even only the three examples already given that Article 280 of the Labor Code,
under a narrow and literal interpretation, not only fails to exhaust the gamut of employment contracts to
which the lack of a fixed period would be an anomaly, but would also appear to restrict, without
reasonable distinctions, the right of an employee to freely stipulate with his employer the duration of his
engagement, it logically follows that such a literal interpretation should be eschewed or avoided. The
law must be given a reasonable interpretation, to preclude absurdity in its application. Outlawing the
whole concept of term employment and subverting to boot the principle of freedom of contract to
remedy the evil of employer's using it as a means to prevent their employees from obtaining security of
tenure is like cutting off the nose to spite the face or, more relevantly, curing a headache by lopping off
the head.
It is a salutary principle in statutory construction that there exists a valid
presumption that undesirable consequences were never intended by a legislative
measure, and that a construction of which the statute is fairly susceptible is
favored, which will avoid all objecionable mischievous, undefensible, wrongful, evil
and injurious consequences. 28
Nothing is better settled than that courts are not to give words a meaning which
would lead to absurd or unreasonable consequences. That s a principle that does
back to In re Allen decided oil October 27, 1903, where it was held that a literal
interpretation is to be rejected if it would be unjust or lead to absurd results. That is
a strong argument against its adoption. The words of Justice Laurel are particularly
apt. Thus: "The fact that the construction placed upon the statute by the appellants
would lead to an absurdity is another argument for rejecting it. . . ." 29
. . . We have, here, then a case where the true intent of the law is clear that calls
for the application of the cardinal rule of statutory construction that such intent of
spirit must prevail over the letter thereof, for whatever is within the spirit of a statute
is within the statute, since adherence to the letter would result in absurdity, injustice
and contradictions and would defeat the plain and vital purpose of the statute. 30
Accordingly, and since the entire purpose behind the development of legislation culminating in the
present Article 280 of the Labor Code clearly appears to have been, as already observed, to prevent
circumvention of the employee's right to be secure in his tenure, the clause in said article
indiscriminately and completely ruling out all written or oral agreements conflicting with the concept of
regular employment as defined therein should be construed to refer to the substantive evil that the
Code itself has singled out: agreements entered into precisely to circumvent security of tenure. It should
have no application to instances where a fixed period of employment was agreed upon knowingly and
voluntarily by the parties, without any force, duress or improper pressure being brought to bear upon
the employee and absent any other circumstances vitiating his consent, or where it satisfactorily
appears that the employer and employee dealt with each other on more or less equal terms with no
moral dominance whatever being exercised by the former over the latter. Unless thus limited in its
purview, the law would be made to apply to purposes other than those explicitly stated by its framers; it
thus becomes pointless and arbitrary, unjust in its effects and apt to lead to absurd and unintended
consequences.
Such interpretation puts the seal on Bibiso 31 upon the effect of the expiry of an agreed period of
employment as still good rule—a rule reaffirmed in the recent case of Escudero vs. Office of the
President (G.R. No. 57822, April 26, 1989) where, in the fairly analogous case of a teacher being
served by her school a notice of termination following the expiration of the last of three successive
fixed-term employment contracts, the Court held:
Reyes (the teacher's) argument is not persuasive. It loses sight of the fact that her
employment was probationary, contractual in nature, and one with a definitive
period. At the expiration of the period stipulated in the contract, her appointment
was deemed terminated and the letter informing her of the non-renewal of her
contract is not a condition sine qua non before Reyes may be deemed to have
ceased in the employ of petitioner UST. The notice is a mere reminder that Reyes'
contract of employment was due to expire and that the contract would no longer be
renewed. It is not a letter of termination. The interpretation that the notice is only a
reminder is consistent with the court's finding in Labajo supra. ...32
Paraphrasing Escudero, respondent Alegre's employment was terminated upon the expiration of his
last contract with Brent School on July 16, 1976 without the necessity of any notice. The advance
written advice given the Department of Labor with copy to said petitioner was a mere reminder of the
impending expiration of his contract, not a letter of termination, nor an application for clearance to
terminate which needed the approval of the Department of Labor to make the termination of his
services effective. In any case, such clearance should properly have been given, not denied.
WHEREFORE, the public respondent's Decision complained of is REVERSED and SET ASIDE.
Respondent Alegre's contract of employment with Brent School having lawfully terminated with and by
reason of the expiration of the agreed term of period thereof, he is declared not entitled to reinstatement
and the other relief awarded and confirmed on appeal in the proceedings below. No pronouncement as
to costs.
SO ORDERED.
G.R. No. L-19650             September 29, 1966
CALTEX (PHILIPPINES), INC., petitioner-appellee, 
vs.
ENRICO PALOMAR, in his capacity as THE POSTMASTER GENERAL, respondent-appellant.
Office of the Solicitor General for respondent and appellant.
Ross, Selph and Carrascoso for petitioner and appellee.
CASTRO, J.:
In the year 1960 the Caltex (Philippines) Inc. (hereinafter referred to as Caltex) conceived and laid the
groundwork for a promotional scheme calculated to drum up patronage for its oil products.
Denominated "Caltex Hooded Pump Contest", it calls for participants therein to estimate the actual
number of liters a hooded gas pump at each Caltex station will dispense during a specified period.
Employees of the Caltex (Philippines) Inc., its dealers and its advertising agency, and their immediate
families excepted, participation is to be open indiscriminately to all "motor vehicle owners and/or
licensed drivers". For the privilege to participate, no fee or consideration is required to be paid, no
purchase of Caltex products required to be made. Entry forms are to be made available upon request at
each Caltex station where a sealed can will be provided for the deposit of accomplished entry stubs.
A three-staged winner selection system is envisioned. At the station level, called "Dealer Contest", the sums named in money orders or telegraphic transfers drawn in favor of such person or
contestant whose estimate is closest to the actual number of liters dispensed by the hooded pump company or its agent.
thereat is to be awarded the first prize; the next closest, the second; and the next, the third. Prizes at
this level consist of a 3-burner kerosene stove for first; a thermos bottle and a Ray-O-Vac hunter lantern
The overtures were later formalized in a letter to the Postmaster General, dated October 31, 1960, in
for second; and an Everready Magnet-lite flashlight with batteries and a screwdriver set for third. The
which the Caltex, thru counsel, enclosed a copy of the contest rules and endeavored to justify its
first-prize winner in each station will then be qualified to join in the "Regional Contest" in seven different
position that the contest does not violate the anti-lottery provisions of the Postal Law. Unimpressed, the
regions. The winning stubs of the qualified contestants in each region will be deposited in a sealed can
then Acting Postmaster General opined that the scheme falls within the purview of the provisions
from which the first-prize, second-prize and third-prize winners of that region will be drawn. The regional
aforesaid and declined to grant the requested clearance. In its counsel's letter of December 7, 1960,
first-prize winners will be entitled to make a three-day all-expenses-paid round trip to Manila,
Caltex sought a reconsideration of the foregoing stand, stressing that there being involved no
accompanied by their respective Caltex dealers, in order to take part in the "National Contest". The
consideration in the part of any contestant, the contest was not, under controlling authorities,
regional second-prize and third-prize winners will receive cash prizes of P500 and P300, respectively.
condemnable as a lottery. Relying, however, on an opinion rendered by the Secretary of Justice on an
At the national level, the stubs of the seven regional first-prize winners will be placed inside a sealed
unrelated case seven years before (Opinion 217, Series of 1953), the Postmaster General maintained
can from which the drawing for the final first-prize, second-prize and third-prize winners will be made.
his view that the contest involves consideration, or that, if it does not, it is nevertheless a "gift
Cash prizes in store for winners at this final stage are: P3,000 for first; P2,000 for second; Pl,500 for
enterprise" which is equally banned by the Postal Law, and in his letter of December 10, 1960 not only
third; and P650 as consolation prize for each of the remaining four participants.
denied the use of the mails for purposes of the proposed contest but as well threatened that if the
contest was conducted, "a fraud order will have to be issued against it (Caltex) and all its
Foreseeing the extensive use of the mails not only as amongst the media for publicizing the contest but representatives".
also for the transmission of communications relative thereto, representations were made by Caltex with
the postal authorities for the contest to be cleared in advance for mailing, having in view sections
Caltex thereupon invoked judicial intervention by filing the present petition for declaratory relief against
1954(a), 1982 and 1983 of the Revised Administrative Code, the pertinent provisions of which read as
Postmaster General Enrico Palomar, praying "that judgment be rendered declaring its 'Caltex Hooded
follows:
Pump Contest' not to be violative of the Postal Law, and ordering respondent to allow petitioner the use
of the mails to bring the contest to the attention of the public". After issues were joined and upon the
SECTION 1954. Absolutely non-mailable matter. — No matter belonging to any of the respective memoranda of the parties, the trial court rendered judgment as follows:
following classes, whether sealed as first-class matter or not, shall be imported into the
Philippines through the mails, or to be deposited in or carried by the mails of the Philippines,
In view of the foregoing considerations, the Court holds that the proposed 'Caltex Hooded
or be delivered to its addressee by any officer or employee of the Bureau of Posts:
Pump Contest' announced to be conducted by the petitioner under the rules marked as
Annex B of the petitioner does not violate the Postal Law and the respondent has no right to
Written or printed matter in any form advertising, describing, or in any manner pertaining to, bar the public distribution of said rules by the mails.
or conveying or purporting to convey any information concerning any lottery, gift enterprise,
or similar scheme depending in whole or in part upon lot or chance, or any scheme, device,
The respondent appealed.
or enterprise for obtaining any money or property of any kind by means of false or fraudulent
pretenses, representations, or promises.
The parties are now before us, arrayed against each other upon two basic issues: first, whether the
petition states a sufficient cause of action for declaratory relief; and second, whether the proposed
"SECTION 1982. Fraud orders.—Upon satisfactory evidence that any person or company is
"Caltex Hooded Pump Contest" violates the Postal Law. We shall take these up in seriatim.
engaged in conducting any lottery, gift enterprise, or scheme for the distribution of money, or
of any real or personal property by lot, chance, or drawing of any kind, or that any person or
company is conducting any scheme, device, or enterprise for obtaining money or property of 1. By express mandate of section 1 of Rule 66 of the old Rules of Court, which was the applicable legal
any kind through the mails by means of false or fraudulent pretenses, representations, or basis for the remedy at the time it was invoked, declaratory relief is available to any person "whose
promises, the Director of Posts may instruct any postmaster or other officer or employee of rights are affected by a statute . . . to determine any question of construction or validity arising under
the Bureau to return to the person, depositing the same in the mails, with the word the . . . statute and for a declaration of his rights thereunder" (now section 1, Rule 64, Revised Rules of
"fraudulent" plainly written or stamped upon the outside cover thereof, any mail matter of Court). In amplification, this Court, conformably to established jurisprudence on the matter, laid down
whatever class mailed by or addressed to such person or company or the representative or certain conditions sine qua non therefor, to wit: (1) there must be a justiciable controversy; (2) the
agent of such person or company. controversy must be between persons whose interests are adverse; (3) the party seeking declaratory
relief must have a legal interest in the controversy; and (4) the issue involved must be ripe for judicial
determination (Tolentino vs. The Board of Accountancy, et al., G.R. No. L-3062, September 28, 1951;
SECTION 1983. Deprivation of use of money order system and telegraphic transfer service.
Delumen, et al. vs. Republic of the Philippines, 50 O.G., No. 2, pp. 576, 578-579; Edades vs.
—The Director of Posts may, upon evidence satisfactory to him that any person or company
Edades, et al., G.R. No. L-8964, July 31, 1956). The gravamen of the appellant's stand being that the
is engaged in conducting any lottery, gift enterprise or scheme for the distribution of money,
petition herein states no sufficient cause of action for declaratory relief, our duty is to assay the factual
or of any real or personal property by lot, chance, or drawing of any kind, or that any person
bases thereof upon the foregoing crucible.
or company is conducting any scheme, device, or enterprise for obtaining money or property
of any kind through the mails by means of false or fraudulent pretenses, representations, or
promise, forbid the issue or payment by any postmaster of any postal money order or As we look in retrospect at the incidents that generated the present controversy, a number of significant
telegraphic transfer to said person or company or to the agent of any such person or points stand out in bold relief. The appellee (Caltex), as a business enterprise of some consequence,
company, whether such agent is acting as an individual or as a firm, bank, corporation, or concededly has the unquestioned right to exploit every legitimate means, and to avail of all appropriate
association of any kind, and may provide by regulation for the return to the remitters of the media to advertise and stimulate increased patronage for its products. In contrast, the appellant, as the
authority charged with the enforcement of the Postal Law, admittedly has the power and the duty to
suppress transgressions thereof — particularly thru the issuance of fraud orders, under Sections 1982
and 1983 of the Revised Administrative Code, against legally non-mailable schemes. Obviously
pursuing its right aforesaid, the appellee laid out plans for the sales promotion scheme hereinbefore
detailed. To forestall possible difficulties in the dissemination of information thereon thru the mails,
amongst other media, it was found expedient to request the appellant for an advance clearance
therefor. However, likewise by virtue of his jurisdiction in the premises and construing the pertinent
provisions of the Postal Law, the appellant saw a violation thereof in the proposed scheme and
accordingly declined the request. A point of difference as to the correct construction to be given to the
applicable statute was thus reached. Communications in which the parties expounded on their
respective theories were exchanged. The confidence with which the appellee insisted upon its position
was matched only by the obstinacy with which the appellant stood his ground. And this impasse was
climaxed by the appellant's open warning to the appellee that if the proposed contest was "conducted, a
fraud order will have to be issued against it and all its representatives."
Against this backdrop, the stage was indeed set for the remedy prayed for. The appellee's insistent
assertion of its claim to the use of the mails for its proposed contest, and the challenge thereto and
consequent denial by the appellant of the privilege demanded, undoubtedly spawned a live controversy.
The justiciability of the dispute cannot be gainsaid. There is an active antagonistic assertion of a legal
right on one side and a denial thereof on the other, concerning a real — not a mere theoretical —
question or issue. The contenders are as real as their interests are substantial. To the appellee, the
uncertainty occasioned by the divergence of views on the issue of construction hampers or disturbs its
freedom to enhance its business. To the appellant, the suppression of the appellee's proposed contest
believed to transgress a law he has sworn to uphold and enforce is an unavoidable duty. With the
appellee's bent to hold the contest and the appellant's threat to issue a fraud order therefor if carried
out, the contenders are confronted by the ominous shadow of an imminent and inevitable litigation
unless their differences are settled and stabilized by a tranquilizing declaration (Pablo y Sen, et al. vs.
Republic of the Philippines, G.R. No. L-6868, April 30, 1955). And, contrary to the insinuation of the
appellant, the time is long past when it can rightly be said that merely the appellee's "desires are
thwarted by its own doubts, or by the fears of others" — which admittedly does not confer a cause of
action. Doubt, if any there was, has ripened into a justiciable controversy when, as in the case at bar, it
was translated into a positive claim of right which is actually contested (III Moran, Comments on the
Rules of Court, 1963 ed., pp. 132-133, citing: Woodward vs. Fox West Coast Theaters, 36 Ariz., 251,
284 Pac. 350).
We cannot hospitably entertain the appellant's pretense that there is here no question of construction
because the said appellant "simply applied the clear provisions of the law to a given set of facts as
embodied in the rules of the contest", hence, there is no room for declaratory relief. The infirmity of this
pose lies in the fact that it proceeds from the assumption that, if the circumstances here presented, the
construction of the legal provisions can be divorced from the matter of their application to the appellee's
contest. This is not feasible. Construction, verily, is the art or process of discovering and expounding
the meaning and intention of the authors of the law with respect to its application to a given case, where
that intention is rendered doubtful, amongst others, by reason of the fact that the given case is not
explicitly provided for in the law (Black, Interpretation of Laws, p. 1). This is precisely the case here.
Whether or not the scheme proposed by the appellee is within the coverage of the prohibitive provisions
of the Postal Law inescapably requires an inquiry into the intended meaning of the words used therein.
To our mind, this is as much a question of construction or interpretation as any other.
Nor is it accurate to say, as the appellant intimates, that a pronouncement on the matter at hand can
amount to nothing more than an advisory opinion the handing down of which is anathema to a
declaratory relief action. Of course, no breach of the Postal Law has as yet been committed. Yet, the
disagreement over the construction thereof is no longer nebulous or contingent. It has taken a fixed and
final shape, presenting clearly defined legal issues susceptible of immediate resolution. With the battle
lines drawn, in a manner of speaking, the propriety — nay, the necessity — of setting the dispute at rest
before it accumulates the asperity distemper, animosity, passion and violence of a full-blown battle
which looms ahead (III Moran, Comments on the Rules of Court, 1963 ed., p. 132 and cases cited),
cannot but be conceded. Paraphrasing the language in Zeitlin vs. Arnebergh 59 Cal., 2d., 901, 31 Cal.
Rptr., 800, 383 P. 2d., 152, cited in 22 Am. Jur., 2d., p. 869, to deny declaratory relief to the appellee in
the situation into which it has been cast, would be to force it to choose between undesirable
alternatives. If it cannot obtain a final and definitive pronouncement as to whether the anti-lottery
provisions of the Postal Law apply to its proposed contest, it would be faced with these choices: If it
launches the contest and uses the mails for purposes thereof, it not only incurs the risk, but is also
actually threatened with the certain imposition, of a fraud order with its concomitant stigma which may
attach even if the appellee will eventually be vindicated; if it abandons the contest, it becomes a self-
appointed censor, or permits the appellant to put into effect a virtual fiat of previous censorship which is
constitutionally unwarranted. As we weigh these considerations in one equation and in the spirit of
liberality with which the Rules of Court are to be interpreted in order to promote their object (section 1,
Rule 1, Revised Rules of Court) — which, in the instant case, is to settle, and afford relief from
uncertainty and insecurity with respect to, rights and duties under a law — we can see in the present
case any imposition upon our jurisdiction or any futility or prematurity in our intervention.
The appellant, we apprehend, underrates the force and binding effect of the ruling we hand down in this
case if he believes that it will not have the final and pacifying function that a declaratory judgment is
calculated to subserve. At the very least, the appellant will be bound. But more than this, he obviously
overlooks that in this jurisdiction, "Judicial decisions applying or interpreting the law shall form a part of
the legal system" (Article 8, Civil Code of the Philippines). In effect, judicial decisions assume the same
authority as the statute itself and, until authoritatively abandoned, necessarily become, to the extent
that they are applicable, the criteria which must control the actuations not only of those called upon to
abide thereby but also of those in duty bound to enforce obedience thereto. Accordingly, we entertain
no misgivings that our resolution of this case will terminate the controversy at hand.
It is not amiss to point out at this juncture that the conclusion we have herein just reached is not without
precedent. In Liberty Calendar Co. vs. Cohen, 19 N.J., 399, 117 A. 2d., 487, where a corporation
engaged in promotional advertising was advised by the county prosecutor that its proposed sales
promotion plan had the characteristics of a lottery, and that if such sales promotion were conducted, the
corporation would be subject to criminal prosecution, it was held that the corporation was entitled to
maintain a declaratory relief action against the county prosecutor to determine the legality of its sales
promotion plan. In pari materia, see also: Bunis vs. Conway, 17 App. Div. 2d., 207, 234 N.Y.S. 2d.,
435; Zeitlin vs. Arnebergh, supra; Thrillo, Inc. vs. Scott, 15 N.J. Super. 124, 82 A. 2d., 903.
In fine, we hold that the appellee has made out a case for declaratory relief.
2. The Postal Law, chapter 52 of the Revised Administrative Code, using almost identical terminology in
sections 1954(a), 1982 and 1983 thereof, supra, condemns as absolutely non-mailable, and empowers
the Postmaster General to issue fraud orders against, or otherwise deny the use of the facilities of the
postal service to, any information concerning "any lottery, gift enterprise, or scheme for the distribution
of money, or of any real or personal property by lot, chance, or drawing of any kind". Upon these words
hinges the resolution of the second issue posed in this appeal.
Happily, this is not an altogether untrodden judicial path. As early as in 1922, in "El Debate", Inc. vs.
Topacio, 44 Phil., 278, 283-284, which significantly dwelt on the power of the postal authorities under
the abovementioned provisions of the Postal Law, this Court declared that —
While countless definitions of lottery have been attempted, the authoritative one for this
jurisdiction is that of the United States Supreme Court, in analogous cases having to do with
the power of the United States Postmaster General, viz.: The term "lottery" extends to all
schemes for the distribution of prizes by chance, such as policy playing, gift exhibitions, prize
concerts, raffles at fairs, etc., and various forms of gambling. The three essential elements of
 a lottery are: First, consideration; second, prize; and third, chance. (Horner vs. States [1892],
147 U.S. 449; Public Clearing House vs. Coyne [1903], 194 U.S., 497; U.S. vs. Filart and
Singson [1915], 30 Phil., 80; U.S. vs. Olsen and Marker [1917], 36 Phil., 395; U.S. vs. Baguio
[1919], 39 Phil., 962; Valhalla Hotel Construction Company vs. Carmona, p. 233, ante.)
Unanimity there is in all quarters, and we agree, that the elements of prize and chance are too obvious
in the disputed scheme to be the subject of contention. Consequently as the appellant himself
concedes, the field of inquiry is narrowed down to the existence of the element of consideration therein.
Respecting this matter, our task is considerably lightened inasmuch as in the same case just cited, this
Court has laid down a definitive yard-stick in the following terms —
In respect to the last element of consideration, the law does not condemn the gratuitous
distribution of property by chance, if no consideration is derived directly or indirectly from the
party receiving the chance, but does condemn as criminal schemes in which a valuable
consideration of some kind is paid directly or indirectly for the chance to draw a prize.
Reverting to the rules of the proposed contest, we are struck by the clarity of the language in which the
invitation to participate therein is couched. Thus —
No puzzles, no rhymes? You don't need wrappers, labels or boxtops? You don't have to buy
anything? Simply estimate the actual number of liter the Caltex gas pump with the hood at
your favorite Caltex dealer will dispense from — to —, and win valuable prizes . . . ." .
Nowhere in the said rules is any requirement that any fee be paid, any merchandise be bought, any
service be rendered, or any value whatsoever be given for the privilege to participate. A prospective
contestant has but to go to a Caltex station, request for the entry form which is available on demand,
and accomplish and submit the same for the drawing of the winner. Viewed from all angles or turned
inside out, the contest fails to exhibit any discernible consideration which would brand it as a lottery.
Indeed, even as we head the stern injunction, "look beyond the fair exterior, to the substance, in order
to unmask the real element and pernicious tendencies which the law is seeking to prevent" ("El
Debate", Inc. vs. Topacio, supra, p. 291), we find none. In our appraisal, the scheme does not only
appear to be, but actually is, a gratuitous distribution of property by chance.
There is no point to the appellant's insistence that non-Caltex customers who may buy Caltex products
simply to win a prize would actually be indirectly paying a consideration for the privilege to join the
contest. Perhaps this would be tenable if the purchase of any Caltex product or the use of any Caltex
service were a pre-requisite to participation. But it is not. A contestant, it hardly needs reiterating, does
not have to buy anything or to give anything of value.1awphîl.nèt
Off-tangent, too, is the suggestion that the scheme, being admittedly for sales promotion, would
naturally benefit the sponsor in the way of increased patronage by those who will be encouraged to
prefer Caltex products "if only to get the chance to draw a prize by securing entry blanks". The required
element of consideration does not consist of the benefit derived by the proponent of the contest. The
true test, as laid down in People vs. Cardas, 28 P. 2d., 99, 137 Cal. App. (Supp.) 788, is whether the
participant pays a valuable consideration for the chance, and not whether those conducting the
enterprise receive something of value in return for the distribution of the prize. Perspective properly
oriented, the standpoint of the contestant is all that matters, not that of the sponsor. The following,
culled from Corpus Juris Secundum, should set the matter at rest:
The fact that the holder of the drawing expects thereby to receive, or in fact does receive,
some benefit in the way of patronage or otherwise, as a result of the drawing; does not
supply the element of consideration. Griffith Amusement Co. vs. Morgan, Tex. Civ. App., 98
S.W., 2d., 844" (54 C.J.S., p. 849).
Thus enlightened, we join the trial court in declaring that the "Caltex Hooded Pump Contest" proposed
by the appellee is not a lottery that may be administratively and adversely dealt with under the Postal
Law.
But it may be asked: Is it not at least a "gift enterprise, or scheme for the distribution of money, or of any
real or personal property by lot, chance, or drawing of any kind", which is equally prescribed?
Incidentally, while the appellant's brief appears to have concentrated on the issue of consideration, this
aspect of the case cannot be avoided if the remedy here invoked is to achieve its tranquilizing effect as
an instrument of both curative and preventive justice. Recalling that the appellant's action was
predicated, amongst other bases, upon Opinion 217, Series 1953, of the Secretary of Justice, which
opined in effect that a scheme, though not a lottery for want of consideration, may nevertheless be a gift
enterprise in which that element is not essential, the determination of whether or not the proposed
contest — wanting in consideration as we have found it to be — is a prohibited gift enterprise, cannot
be passed over sub silencio.
While an all-embracing concept of the term "gift enterprise" is yet to be spelled out in explicit words,
there appears to be a consensus among lexicographers and standard authorities that the term is
commonly applied to a sporting artifice of under which goods are sold for their market value but by way
of inducement each purchaser is given a chance to win a prize (54 C.J.S., 850; 34 Am. Jur., 654; Black,
Law Dictionary, 4th ed., p. 817; Ballantine, Law Dictionary with Pronunciations, 2nd ed., p. 55; Retail
Section of Chamber of Commerce of Plattsmouth vs. Kieck, 257 N.W., 493, 128 Neb. 13; Barker vs.
State, 193 S.E., 605, 56 Ga. App., 705; Bell vs. State, 37 Tenn. 507, 509, 5 Sneed, 507, 509). As thus
conceived, the term clearly cannot embrace the scheme at bar. As already noted, there is no sale of
anything to which the chance offered is attached as an inducement to the purchaser. The contest is
open to all qualified contestants irrespective of whether or not they buy the appellee's products.
Going a step farther, however, and assuming that the appellee's contest can be encompassed within
the broadest sweep that the term "gift enterprise" is capable of being extended, we think that the
appellant's pose will gain no added comfort. As stated in the opinion relied upon, rulings there are
indeed holding that a gift enterprise involving an award by chance, even in default of the element of
consideration necessary to constitute a lottery, is prohibited (E.g.: Crimes vs. States, 235 Ala 192, 178
So. 73; Russell vs. Equitable Loan & Sec. Co., 129 Ga. 154, 58 S.E., 88; State ex rel. Stafford vs. Fox-
Great Falls Theater Corporation, 132 P. 2d., 689, 694, 698, 114 Mont. 52). But this is only one side of
the coin. Equally impressive authorities declare that, like a lottery, a gift enterprise comes within the
prohibitive statutes only if it exhibits the tripartite elements of prize, chance and consideration (E.g.: Bills
vs. People, 157 P. 2d., 139, 142, 113 Colo., 326; D'Orio vs. Jacobs, 275 P. 563, 565, 151 Wash., 297;
People vs. Psallis, 12 N.Y.S., 2d., 796; City and County of Denver vs. Frueauff, 88 P., 389, 394, 39
Colo., 20, 7 L.R.A., N.S., 1131, 12 Ann. Cas., 521; 54 C.J.S., 851, citing: Barker vs. State, 193 S.E.,
605, 607, 56 Ga. App., 705; 18 Words and Phrases, perm. ed., pp. 590-594). The apparent conflict of
opinions is explained by the fact that the specific statutory provisions relied upon are not identical. In
some cases, as pointed out in 54 C.J.S., 851, the terms "lottery" and "gift enterprise" are used
interchangeably (Bills vs. People, supra); in others, the necessity for the element of consideration or
chance has been specifically eliminated by statute. (54 C.J.S., 351-352, citing Barker vs. State, supra;
State ex rel. Stafford vs. Fox-Great Falls Theater Corporation, supra). The lesson that we derive from
this state of the pertinent jurisprudence is, therefore, that every case must be resolved upon the
particular phraseology of the applicable statutory provision.
Taking this cue, we note that in the Postal Law, the term in question is used in association with the
word "lottery". With the meaning of lottery settled, and consonant to the well-known principle of legal
hermeneutics noscitur a sociis — which Opinion 217 aforesaid also relied upon although only insofar as
the element of chance is concerned — it is only logical that the term under a construction should be
accorded no other meaning than that which is consistent with the nature of the word associated
therewith. Hence, if lottery is prohibited only if it involves a consideration, so also must the term "gift
enterprise" be so construed. Significantly, there is not in the law the slightest indicium of any intent to
eliminate that element of consideration from the "gift enterprise" therein included.
This conclusion firms up in the light of the mischief sought to be remedied by the law, resort to the
determination thereof being an accepted extrinsic aid in statutory construction. Mail fraud orders, it is
axiomatic, are designed to prevent the use of the mails as a medium for disseminating printed matters
which on grounds of public policy are declared non-mailable. As applied to lotteries, gift enterprises and
similar schemes, justification lies in the recognized necessity to suppress their tendency to inflame the
gambling spirit and to corrupt public morals (Com. vs. Lund, 15 A. 2d., 839, 143 Pa. Super. 208). Since
in gambling it is inherent that something of value be hazarded for a chance to gain a larger amount, it
follows ineluctably that where no consideration is paid by the contestant to participate, the reason
behind the law can hardly be said to obtain. If, as it has been held —
Gratuitous distribution of property by lot or chance does not constitute "lottery", if it is not
resorted to as a device to evade the law and no consideration is derived, directly or indirectly,
from the party receiving the chance, gambling spirit not being cultivated or stimulated
thereby. City of Roswell vs. Jones, 67 P. 2d., 286, 41 N.M., 258." (25 Words and Phrases,
perm. ed., p. 695, emphasis supplied).
we find no obstacle in saying the same respecting a gift enterprise. In the end, we are persuaded to
hold that, under the prohibitive provisions of the Postal Law which we have heretofore examined, gift
enterprises and similar schemes therein contemplated are condemnable only if, like lotteries, they
involve the element of consideration. Finding none in the contest here in question, we rule that the
appellee may not be denied the use of the mails for purposes thereof.
Recapitulating, we hold that the petition herein states a sufficient cause of action for declaratory relief,
and that the "Caltex Hooded Pump Contest" as described in the rules submitted by the appellee does
not transgress the provisions of the Postal Law.
ACCORDINGLY, the judgment appealed from is affirmed. No costs.
G.R. No. 155344               January 20, 2004
ROLANDO N. CANET, Petitioner, 
vs.
MAYOR JULIETA A. DECENA, Respondent.
DECISION
YNARES-SANTIAGO, J.:
On July 27, 1998, the Sangguniang Bayan of Bula, Camarines Sur, passed Resolution No. 049, Series
of 1998,1authorizing petitioner Rolando N. Canet to establish, operate and maintain a cockpit in Sitio,
Cabaya, San Roque, Bula, Camarines Sur.
Subsequently, the Sangguniang Bayan passed Ordinance No. 001, Series of 1999, entitled "An
Ordinance Regulating the Operation of Cockpits and Other Related Game-Fowl Activities in the
Municipality of Bula, Camarines Sur and Providing Penalties for any Violation to (sic) the Provisions
Thereof."2 Upon transmittal to respondent Mayor Julieta A. Decena of the said municipality, it was noted
that the Ordinance does not contain rules and regulations on cockfighting and other related game fowl
activities and a separability clause. The Ordinance was returned to the Sangguniang Bayan. In
Resolution No. 078, Series of 1999, Sangguniang Bayan resolved to withdraw, set aside and shelf
indefinitely Ordinance No. 001, Series of 1999.3
Meanwhile, petitioner, relying on Resolution No. 049, Series of 1998, of the Sangguniang Bayan, filed
an application for a mayor’s permit to operate, establish and maintain a cockpit in Sitio Cabuya, San
Roque, Bula, Camarines Sur. Respondent Mayor Julieta Decena denied the application on the ground,
among others, that under the Local Government Code of 1991, the authority to give licenses for the
establishment, operation and maintenance of cockpits as well as the regulation of cockfighting and
commercial breeding of gamecocks is vested in the Sangguniang Bayan.4
Therefore, she cannot issue the said permit inasmuch as there was no ordinance passed by the
Sangguniang Bayan authorizing the same.
On July 26, 1999, petitioner filed a complaint5 against respondent Mayor with the Regional Trial Court of
Pili, Camarines Sur, Branch XXXI, which was docketed as Special Civil Action No. P-84-99, for
Mandamus and Damages with Application for Preliminary Mandatory Injunction. Respondent moved for
the dismissal of the complaint.
A Resolution was issued by the trial court on January 27, 2000, the dispositive portion of which reads:
WHEREFORE, in view of the foregoing, the motion to dismiss is hereby denied. Let a writ of preliminary
mandatory injunction issue upon the posting of an injunction bond by the plaintiff in the amount of
FIFTY THOUSAND PESOS (P50,000.00) executed to defendant to stand for all the damages which
she may sustain if it should be finally found that plaintiff is not entitled thereto, said mandatory injunction
ordering and commanding herein defendant, incumbent Mayor of the Municipality of Bula, Camarines
Sur to approve and issue forthwith the Mayor’s Permit and to accept the fees therefor for plaintiff to
establish, maintain and operate a cockpit in Cabaya, San Roque, Bula, Camarines Sur. Upon finality of
this resolution, let the main case be set for further proceedings.
SO ORDERED.6
The writ of preliminary mandatory injunction was issued on February 1, 2000.7
Respondent filed a petition for certiorari and prohibition with the Court of Appeals, docketed as CA-G.R.
SP No. 57797.8 On April 3, 2000, the Court of Appeals issued a temporary restraining order,9 directing
petitioner and the presiding judge to temporarily cease and desist from enforcing the writ of preliminary
mandatory injunction issued on February 1, 2000 in Special Civil Action No. P-84-99.
On June 3, 2002, the Court of Appeals rendered the assailed Decision, the dispositive portion of which
reads:
WHEREFORE, the petition is granted and the questioned January 27, 2000 Resolution and February 1,
2000 writ of preliminary mandatory injunction issued by respondent Judge are ANNULLED AND SET
ASIDE while the writ of preliminary injunction heretofore issued by this Court on July 10, 2000 is made
permanent. No costs.
SO ORDERED.10
Petitioner filed a Motion for Reconsideration which was denied for lack of merit in a Resolution dated
August 2002.11
Hence, this petition for review.
The core issue in this petition is whether or not respondent, in her capacity as Municipal Mayor, can be
compelled to issue the necessary business permit to petitioner absent a municipal ordinance which
would empower her to do so.
The pertinent provision of law in contention is Section 447 (a) (3) (v) of the Local Government Code of
1991 (Republic Act No. 7160), which reads:
SEC. 447. Powers, Functions and Compensation. (a) The Sangguniang Bayan as the legislative body
of the municipality shall enact ordinances, approve resolutions and appropriate funds for the general
welfare of the municipality and its inhabitants pursuant to Section 16 of this Code and in the proper
exercise of the corporate powers of the municipality as provided for under Section 22, and shall:
x x x           x x x          x x x
(3) Subject to the provisions of Book II of this Code, grant franchises, enact ordinances levying taxes,
fees and charges upon such conditions and for such purposes intended to promote the general welfare
of the inhabitants of the municipality, and pursuant to this legislative authority shall:
x x x           x x x          x x x
(v) Any law to the contrary notwithstanding, authorize and license the establishment, operation and
maintenance of cockpits and regulate cockfighting and commercial breeding of gamecocks: Provided,
That existing rights should not be prejudiced.
Petitioner admits that there is no ordinance in Bula, Camarines Sur which authorizes the grant of a
mayor’s permit to operate and maintain a cockfighting arena. However, he invokes Resolution No. 049,
S. 1998, wherein the Sangguniang Bayan authorized him to operate a cockpit. Furthermore, he cites
Municipal Tax Ordinances Nos. 01, S. 1989, and 05, S. 1993, which generally provide for the issuance
of a mayor’s permit for the operation of businesses.
Municipal Tax Ordinances Nos. 01, S. 1989 and 05, S. 1993 contain general provisions for the issuance
of business permits but do not contain specific provisions prescribing the reasonable fees to be paid in
the operation of cockpits and other game fowl activities.
It was Ordinance No. 001, S. 1999 which provided for the collection of application filing fees, ocular
inspection fees, mayor’s permit fees, filing fees for the institution of complaints, entrance fees and
special derby assessments for the operation of cockpits.12 This Ordinance, however, was withdrawn by
the Sangguniang Bayan.
Hence, there being in effect no ordinance allowing the operation of a cockpit, Resolution No. 049, S.
1998, authorizing petitioner to establish, operate and maintain a cockpit in Bula, Camarines Sur cannot
be implemented. Suffice it to state in this regard that to compel respondent to issue the mayor’s permit
would not only be a violation of the explicit provisions of Section 447 of the Local Government Code of
1991, but would also be an undue encroachment on respondent’s administrative prerogatives.
Along the same vein, to read into the ordinances relied upon by petitioner objects which were neither
specifically mentioned nor enumerated would be to run afoul of the dictum that where a statute, by its
terms, is expressly limited to certain matters, it may not, by interpretation or construction, be extended
to other matters.13 In other words, it is a basic precept of statutory construction that the express mention
of one person, thing, act, or consequence excludes all others, as expressed in the oft-repeated maxim
expression unius est exlusio alterius.14 Elsewise stated, expressium facit cessare tacitum – what is
expressed puts an end to what is implied.15 The rule proceeds from the premise that the legislative body
would not have made specific enumerations in a statute, if it had the intention not to restrict its meaning
and confine its terms to those expressly mentioned.
Even on the assumption that there is in fact a legislative gap caused by such an omission, neither could
the Court presume otherwise and supply the details thereof, because a legislative lacuna cannot be
filled by judicial fiat.16Indeed, courts may not, in the guise of interpretation, enlarge the scope of a
statute and include therein situations not provided nor intended by the lawmakers. An omission at the
time of the enactment, whether careless or calculated, cannot be judicially supplied however after later
wisdom may recommend the inclusion.17 Courts are not authorized to insert into the law what they think
should be in it or to supply what they think the legislature would have supplied if its attention has been
called to the omission.18 1âwphi1
Courts should not, by construction, revise even the most arbitrary and unfair action of the legislature,
nor rewrite the law to conform with what they think should be the law.19 Nor may they interpret into the
law a requirement which the law does not prescribe.20 Where a statute contains no limitations in its
operation or scope, courts should not engraft any.21 And where a provision of law expressly limits its
application to certain transactions, it cannot be extended to other transactions by interpretation.22 To do
any of such things would be to do violence to the language of the law and to invade the legislative
sphere.23
It should, furthermore, be borne in mind that cockfighting although authorized by law is still a form of
gambling. Gambling is essentially antagonistic to the aims of enhancing national productivity and self-
reliance.24 As has been previously said, a statute which authorizes a gambling activity or business
should be strictly construed, and every reasonable doubt resolved so as to limit rather than expand the
powers and rights claimed by franchise holders under its authority.25
WHEREFORE, in view of all the foregoing, the petition is hereby DENIED for lack of merit. The
Decision of the Court of Appeals dated June 3, 2002 in CA-G.R. SP No. 57797 is AFFIRMED in toto.
SO ORDERED.
G.R. No. 193247               September 14, 2011
SERGIO I. CARBONILLA, EMILIO Y. LEGASPI IV, and ADONAIS Y. REJUSO, Petitioners, 
vs.
BOARD OF AIRLINES REPRESENTATIVES (MEMBER AIRLINES: ASIANA AIRLINES, CATHAY
PACIFIC AIRWAYS, CHINA AIRLINES, CEBU PACIFIC AIRLINES, CHINA SOUTHERN AIRLINES,
CONTINENTAL MICRONESIA AIRLINES, EMIRATES, ETIHAD AIRWAYS, EVA AIR AIRWAYS,
FEDERAL EXPRESS CORPORATION, GULF AIR, JAPAN AIRLINES, AIR FRANCE-KLM ROYAL
DUTCH AIRLINES, KOREAN AIR, KUWAIT AIRWAYS CORPORATION, LUFTHANSA GERMAN
AIRLINES, MALAYSIA AIRLINES, NORTHWEST AIRLINES, PHILIPPINE AIRLINES, INC., QANTAS
AIRWAYS, LTD., QATAR AIRLINES, ROYAL BRUNEI AIRLINES, SINGAPORE AIRLINES, SWISS
INTERNATIONAL AIRLINES, LTD., SAUDI ARABIAN AIRLINES, and THAI INTERNATIONAL
AIRWAYS Respondents.
x - - - - - - - - - - - - - - -x International Airport (NAIA) and to propose its adjustment from the exchange rate of ₱25 to US$1 to the
then exchange rate of ₱55 to US$1. The Office of the President, et al. alleged that for a period of more
than two years from the creation of the committee, several meetings were conducted with the agencies
G.R. No. 194276
concerned, including respondent Board of Airlines Representatives (BAR), to discuss the proposed rate
adjustment that would be embodied in an Amendatory Customs Administrative Order.
OFFICE OF THE PRESIDENT, represented by HON. PAQUITO N. OCHOA,* in his capacity as
EXECUTIVE SECRETARY, DEPARTMENT OF FINANCE, represented by HON. CESAR V.
On the other hand, BAR alleged that it learned of the proposed increase in the overtime rates only
PURISIMA** in his capacity as SECRETARY OF FINANCE, and THE BUREAU OF CUSTOMS,
sometime in 2004 and only through unofficial reports.
represented by HON. ANGELITO A. ALVAREZ**** in his capacity as COMMISSIONER OF
CUSTOMS, Petitioners, 
vs. On 23 August 2004, BAR wrote a letter addressed to Edgardo L. De Leon, Chief, Bonded Warehouse
BOARD OF AIRLINES REPRESENTATIVES (MEMBER AIRLINES: ASIANA AIRLINES, CATHAY Division, BOC-NAIA, informing the latter of its objection to the proposed increase in the overtime rates.
PACIFIC AIRWAYS, CHINA AIRLINES, CEBU PACIFIC AIRLINES, CHINA SOUTHERN AIRLINES, BAR further requested for a meeting to discuss the matter.
CONTINENTAL MICRONESIA AIRLINES, EMIRATES, ETIHAD AIRWAYS, EVA AIR AIRWAYS,
FEDERAL EXPRESS CORPORATION, GULF AIR, JAPAN AIRLINES, AIR FRANCE-KLM ROYAL
BAR wrote the Secretary of Finance on 31 January 2005 and 21 February 2005 reiterating its concerns
DUTCH AIRLINES, KOREAN AIR, KUWAIT AIRWAYS CORPORATION, LUFTHANSA GERMAN
against the issuance of CAO 1-2005. In a letter dated 3 March 2005, the Acting District Collector of
AIRLINES, MALAYSIA AIRLINES, NORTHWEST AIRLINES, PHILIPPINE AIRLINES, INC., QANTAS
BOC informed BAR that the Secretary of Finance already approved CAO 1-2005 on 9 February 2005.
AIRWAYS, LTD., QATAR AIRLINES, ROYAL BRUNEI AIRLINES, SINGAPORE AIRLINES, SWISS
As such, the increase in the overtime rates became effective on 16 March 2005. BAR still requested for
INTERNATIONAL AIRLINES, LTD., SAUDI ARABIAN AIRLINES, and THAI INTERNATIONAL
an audience with the Secretary of Finance which was granted on 12 October 2005.
AIRWAYS), Respondents.

The BOC then sent a letter to BAR’s member airlines demanding payment of overtime services to BOC
DECISION
personnel in compliance with CAO 1-2005. The BAR’s member airlines refused and manifested their
intention to file a petition with the Commissioner of Customs and/or the Secretary of Finance to
CARPIO, J.: suspend the implementation of CAO 1-2005.

The Cases In a letter dated 31 August 2006,10 Undersecretary Gaudencio A. Mendoza, Jr. (Usec. Mendoza), Legal
and Revenue Operations Group, Department of Finance informed BAR, through its Chairman Felix J.
Cruz (Cruz), that they "find no valid ground to disturb the validity of CAO 1-2005, much less to suspend
Before the Court are two petitions for review1 assailing the Decision2 promulgated on 9 July 2009 by the
its implementation or effectivity" and that its implementation effective 16 March 2005 is legally proper.
Court of Appeals in CA-G.R. SP No. 103250.

In separate letters both dated 4 December 2006,11 Cruz requested the Office of the President and the
In G.R. No. 193247, petitioners Sergio I. Carbonilla, Emilio Y. Legaspi IV, and Adonais Y. Rejuso
Office of the Executive Secretary to review the decision of Usec. Mendoza. Cruz manifested the
(Carbonilla, et al.) assail the Resolution3 promulgated on 5 August 2010 by the Court of Appeals in CA-
objection of the International Airlines operating in the Philippines to CAO 1-2005. On 13 December
G.R. SP No. 103250.
2006, Deputy Executive Secretary Manuel B. Gaite (Deputy Exec. Sec. Gaite) issued an
Order12 requiring BAR to pay its appeal fee and submit an appeal memorandum within 15 days from
In G.R. No. 194276, petitioners Office of the President, represented by Paquito N. Ochoa in his notice. BAR paid the appeal fee and submitted its appeal memorandum on 19 January 2007.
capacity as Executive Secretary, Department of Finance, represented by Cesar V. Purisima in his
capacity as Secretary of Finance, and the Bureau of Customs (BOC), represented by Angelito A.
The Decision of the Office of the President
Alvarez in his capacity as Commissioner of Customs (Office of the President, et al.), assail the
Resolution4 promulgated on 26 October 2010 by the Court of Appeals in CA-G.R. SP No. 103250.
In a Decision13 dated 12 March 2007, the Office of the President denied the appeal of BAR and affirmed
the Decision of the Department of Finance.
The Antecedent Facts

The facts, as gathered from the assailed Decision of the Court of Appeals, are as follows:
The Bureau of Customs5 issued Customs Administrative Order No. 1-2005 (CAO 1-2005) amending
CAO 7-92.6The Department of Finance7 approved CAO 1-2005 on 9 February 2006. CAO 7-92 and
CAO 1-2005 were promulgated pursuant to Section 35068 in relation to Section 6089 of the Tariff and
Customs Code of the Philippines (TCCP).
Petitioners Office of the President, et al. alleged that prior to the amendment of CAO 7-92, the BOC
created on 23 April 2002 a committee to review the overtime pay of Customs personnel in Ninoy Aquino
The Office of the President ruled that the BOC was merely exercising its rule-making or quasi-
legislative power when it issued CAO 1-2005. The Office of the President ruled that since CAO 1-2005
was issued in the exercise of BOC’s rule-making or quasi-legislative power, its validity and
constitutionality may only be assailed through a direct action before the regular courts. The Office of the
President further ruled that, assuming that BAR’s recourse before the Office of the President was
proper and in order, the appeal was filed out of time because BAR received the letter-decision of the
Secretary of Finance on 4 September 2006 but it filed its appeal only on 4 December 2006, beyond the
30-day period provided under Administrative Order No. 18 dated 12 February 1987.
The Office of the President also ruled that the grounds raised by BAR, namely, (1) the failure to comply 3506 of the TCCP only authorized payment of additional compensation for overtime work, and thus, the
with the publication requirement; (2) that the foreign exchange cannot be a basis for rate increase; and payment of traveling and meal allowances under CAO 7-92 and CAO 1-2005 are unconstitutional and
(3) that increase in rate was ill-timed, were already deliberated during the meetings held between the could not be enforced against BAR members.
BOC and the stakeholders and were also considered by the Secretary of Finance. The Office of the
President further adopted the position of the BOC that several public hearings and consultations were
The Court of Appeals ruled that Section 3506 of the TCCP failed the completeness and sufficient
conducted by the BOC-NAIA Collection District, which were in substantial compliance with Section 9,
standard tests to the extent that it attempted to cover BAR members through CAO 7-92 and CAO 1-
Chapter I, Book VII of the Administrative Code of 1987. BAR did not oppose the exchange rate used in
2005. The Court of Appeals ruled that the phrase "other persons served" did not provide for descriptive
CAO 7-92 which was the exchange rate at that time and thus, the BOC-NAIA Collection District found it
terms and conditions that might be completely understood by the BOC. The Court of Appeals ruled that
strange that BAR was questioning the fixing of the adjusted pay rates which were lower than the rate
devoid of common distinguishable characteristic, aircraft owners and operators should not have been
provided under Section 3506 of the TCCP. The Office of the President ruled that there is a legal
lumped together with importers and shippers. The Court of Appeals also ruled that Section 3506 of the
presumption that the rates fixed by an administrative agency are reasonable, and that the fixing of the
TCCP failed the sufficient standard test because it does not contain adequate guidelines or limitations
rates by the Government, through its authorized agents, involved the exercise of reasonable discretion.
needed to map out the boundaries of the delegate’s authority.

BAR filed a motion for reconsideration. In its Resolution14 dated 14 March 2008, the Office of the
The dispositive portion of the Court of Appeals’ Decision reads:
President denied BAR’s motion for reconsideration.

WHEREFORE, the petition is GRANTED. Declaring Section 3506 of the TCCP as well as CAO 7-92
BAR filed a petition for review under Rule 45 before the Court of Appeals.
and CAO 1-2005 to be unenforceable as against the petitioners, the appealed Decision dated March
12, 2007 and Resolution dated March 14, 2008 are hereby SET ASIDE.
Petitioners Carbonilla, et al. filed an Omnibus Motion to Intervene before the Court of Appeals on the
ground that as customs personnel, they would be directly affected by the outcome of the case.
SO ORDERED.16
Petitioners Carbonilla, et al. also adopted the Comment filed by the Office of the Solicitor General
(OSG).
Petitioners Carbonilla, et al. filed their motion for reconsideration of the 9 July 2009 Decision. In its 5
August 2010 Resolution, the Court of Appeals, among others, denied Carbonilla, et al.’s motion for
The Decision of the Court of Appeals
reconsideration.

In its 26 February 2009 Resolution,15 the Court of Appeals denied the motion for intervention filed by
Carbonilla, et al. came to this Court via a petition for review, docketed as G.R. No. 193247, on the
Carbonilla, et al. The Court of Appeals ruled that the petition before it involved the resolution of whether
following grounds:
the decision of the Office of the President was correctly rendered. The Court of Appeals held that the
intervenors’ case was for collection of their unpaid overtime services and their interests could not be
protected or addressed in the resolution of the case. The Court of Appeals ruled that Carbonilla, et al. I. The Honorable Court of Appeals seriously erred in law in ruling that the Court of Tax
should pursue their case in a separate proceeding against the proper respondents. Appeals did not have jurisdiction on the subject controversy.

Carbonilla, et al. filed a motion for reconsideration of the 26 February 2009 resolution.
Without resolving Carbonilla, et al.’s motion for reconsideration, the Court of Appeals promulgated the
assailed 9 July 2009 Decision which set aside the 12 March 2007 Decision and 14 March 2008
Resolution of the Office of the President and declared Section 3506 of the TCCP, CAO 7-92 and CAO
1-2005 unenforceable against BAR.
II. The Honorable Court of Appeals seriously erred in law in ruling that Section 3506 of the
TCCP failed the completeness and sufficient standard tests.
III. The Honorable Court of Appeals seriously erred in law in ruling that CAO 7-92 as
amended by CAO 1-2005 as well as Section 3506 of the TCCP are not enforceable against
BAR’s members.

Ruling that it could take cognizance of BAR’s appeal, the Court of Appeals held that BAR could not be IV. The Honorable Court of Appeals seriously erred in law in not ruling that estoppel and/or
faulted for not filing a case before the Court of Tax Appeals (CTA) because the Office of the President laches should have prevented the BAR from questioning CAO 1-2005.
admitted that it preempted any action before the CTA. Deputy Exec. Sec. Gaite treated the letters of
BAR as an appeal and required it to pay appeal fee and to submit an appeal memorandum. The Court
V. The Honorable Court of Appeals seriously erred in law in issuing the decision dated July 9,
of Appeals further ruled that what the Office of the President treated as a decision of the Department of
2009 in denying petitioners’ intervention and motion for reconsideration dated August 3,
Finance was merely an advisory letter dated 31 August 2006 and to treat it as a decision from which an
2009.17
appeal could be taken and then rule that it was not perfected on time would deprive BAR of its right to
due process.
The Office of the President, et al. also filed a motion for reconsideration dated 28 July 2009 assailing
the 9 July 2009 Decision of the Court of Appeals.
The Court of Appeals further ruled that it has the power to resolve the constitutional issue raised
against CAO 7-92 and CAO 1-2005. The Court of Appeals ruled that Section 8, Article IX(B) of the
Constitution prohibits an appointive public officer or employee from receiving additional, double or Meanwhile, in a Resolution promulgated on 12 May 2010,18 the Court of Appeals directed BAR to
indirect compensation, unless specifically authorized by law. The Court of Appeals ruled that Section continue complying with the 12 March 2007 Decision of the Office of the President. The Court of
Appeals ruled that BAR unlawfully withheld the rightful overtime payment of BOC employees when it promulgate pursuant to Section 608 in relation to Section 3506 of the Tariff and Customs
stopped paying its obligations under CAO 7-92, as amended by CAO 1-2005, since the Court of Code (TCCP), as amended, not only CAO No. 1-2005, but also CAO No. 7-92.
Appeals’ 9 July 2009 Decision had not attained finality pending the resolution of the motion for
reconsideration filed by the Office of the President, et al. BAR filed a motion for reconsideration dated
III. The Court of Appeals erred in going beyond the issues raised by respondents BAR and its
26 May 2010 for the reversal of the 12 May 2010 Resolution of the Court of Appeals.
member airlines not only in the pleadings filed by them in the proceedings below but also in
their petition for review.
In a Resolution promulgated on 26 October 2010, the Court of Appeals granted BAR’s 26 May 2010
motion for reconsideration and denied the 28 July 2009 motion for reconsideration of the Office of the
IV. Section 3506 of the TCCP, CAO No. 1-2005 and CAO No. 7-92 are valid. Said law and its
President, et al.
implementing regulations neither constitute undue delegation of legislative power nor
authorize overpayment of BOC personnel.19
The Office of the President, et al. filed a petition for review before this Court, docketed as G.R. No.
194276, raising the following grounds:
The Issues

I. The Court of Appeals erred in giving due course to respondents BAR and its member airlines’ petition
For resolution in these cases are the following issues:
for review because it had no jurisdiction over the issues raised therein by respondents, to wit:

1. Whether the Court of Appeals committed a reversible error in denying the intervention of
1. CAO No. 1-2005 is invalid as the increased overtime pay rates and meal and
Carbonilla, et al.;
transportation allowances fixed therein are unreasonable and confiscatory; and

2. Whether the Court of Appeals has jurisdiction over BAR’s petition;

2. The act of the Bureau of Customs charging and/or collecting from BAR’s member airlines
the cost of the overtime pay and meal and transportation allowances of Bureau of Customs
(BOC) personnel in connection with the discharge of their government duties, functions and 3. Whether BAR’s appeal before the Office of the President was filed on time;
responsibilities is legally impermissible and, therefore, invalid.
4. Whether the officers of some of BAR’s member airlines who executed the verification and
These issues involve the validity and collection of money charges authorized by the Customs Law and certification of non-forum shopping have the necessary authorization to execute them;
thus the Court of Tax Appeals (CTA) has exclusive jurisdiction thereof.
5. Whether BAR was guilty of laches and/or estoppel; and
I. Granting arguendo that the Court of Appeals has jurisdiction over the said issues raised by
the BAR and its member airlines, the Court of Appeals should have dismissed their petition
6. Whether the Court of Appeals committed a reversible error in declaring Section 3506 of the
for review filed under Rule 45 of the Rules of Court on the following grounds:
TCCP, CAO 7-92, and CAO 1-2005 unenforceable against BAR.

1. A petition for review under Ruled 43 of the Rules of Court cannot be filed to
question the quasi-legislative or rule-making power of the Commissioner of
Customs;
2. BAR’s appeal to the Office of the President questioning the 31 August 2006
Decision of the Department of Finance (DOF), finding that CAO No. 1-2005 is valid,
was filed out of time;
3. Some of respondents BAR member airlines’ country managers who executed
the verification and certification of non-forum shopping of their petition for review
did not have the necessary authorization of the said member airlines for them to
execute the same; and
4. Administrative procedural due process was observed in the promulgation by the
Commissioner of Customs of the questioned CAO No. 1-2005.
II. Respondents BAR and its member airlines are guilty of laches and estoppel and thus are
effectively barred from questioning the authority of the Commissioner of Customs to
The Ruling of this Court
The petition in G.R. No. 193247 has no merit while the petition in G.R. No. 194276 is meritorious.
Intervention in G.R. No. 193247
On the matter of the intervention of Carbonilla, et al., Section 1, Rule 19 of the 1997 Rules of Civil
Procedure provides:
Section 1. Who may intervene. - A person who has a legal interest in the matter in litigation, or in the
success of either of the parties, or an interest against both, or is so situated as to be adversely affected
by a distribution or other disposition of property in the custody of the court or of an officer thereof may,
with leave of court, be allowed to intervene in the action. The court shall consider whether or not the
intervention will unduly delay or prejudice the adjudication of the rights of the original parties, and
whether or not the intervenor’s rights may be fully protected in a separate proceeding.
Intervention is not a matter of right but it may be permitted by the courts when the applicant shows facts
which satisfy the requirements authorizing intervention.20 In G.R. No. 193247, the Court of Appeals
denied Carbonilla, et al.’s motion for intervention in its 26 February 2009 Resolution on the ground that
the case was for collection of unpaid overtime services and thus should be pursued in a separate
proceeding against the proper respondents. A reading of the Carbonilla, et al.’s Omnibus
Motion21 supports the ground invoked by the Court of Appeals in denying the motion. The Omnibus
Motion states:
3. The said movants-intervenors all held offices or were stationed at the Ninoy Aquino International
Airport [NAIA] and who have all been rendering overtime services thereat for so many years.
4. Movant-Intervenor Carbonilla has retired from government service last September 2007 without his
being paid the additional rates set by CAO No. 1-2005 which became effective on March 16, 2007. The
effectivity and implementation of the said CAO No. 1-2005 is the main issue in this case.
5. Thus, it is noteworthy to mention that all the movants-intervenors all rendered overtime services
since March 16, 2005 or for all the time material to the issue in this case.
6. Movants-Intervenors urgently need their respective [differential]/back payments representing
overtime services rendered from 16 March 2005 to the present pursuant to the implementation of CAO
No. 1-2005.
7. Said differential/back payments pursuant to CAO No. 1-2005 would be of great help to the movants-
intervenors considering that as of 24 January 2008, herein movants-intervenors were stripped of their
respective overtime duties by the District Collector of Customs at NAIA for reasons only known to the
latter.
8. The full implementation of CAO No. 1-2005 would not only benefit the cause and financial needs of
herein movants-intervenors but also that of the other 900 or so employees of the Bureau of Customs-
NAIA who are rendering overtime services thereat up to the present.22
Clearly, Carbonilla, et al. were really after the payment of their differential or back payments for services
rendered. Hence, the Court of Appeals correctly denied the motion for intervention.
It should be stressed that the allowance or disallowance of a motion for intervention is addressed to the
sound discretion of the courts.23 The permissive tenor of the Rules of Court shows the intention to give
the courts the full measure of discretion in allowing or disallowing the intervention.24 Once the courts
have exercised this discretion, it could not be reviewed by certiorari or controlled by mandamus unless
it could be shown that the discretion was exercised in an arbitrary or capricious manner.25 Carbonilla, et
al. failed to show that the Court of Appeals rendered its resolution in an arbitrary or capricious manner.
In addition, Carbonilla, et al. admitted in their petition that their motion for reconsideration of the 26
February 2009 Resolution of the Court of Appeals had been denied in open court during the oral
arguments held by the Court of Appeals on 16 December 2009.26 Carbonilla, et al. did not act on the
denial of this motion but only pursued their motion for reconsideration of the 9 July 2009 Decision of the
Court of Appeals. Hence, the denial of Carbonilla, et al.’s motion for intervention had already attained
finality.
Having ruled against the right of Carbonilla, et al. to intervene, we see no reason to rule on the other
issues they raise unless raised in G.R. No. 194276.
We now discuss the issues raised in G.R. No. 194276.
Jurisdiction of the Court of Appeals
The Office of the President, et al. argue that the Court of Appeals should have denied BAR’s petition
because it had no jurisdiction over the issues raised, involving the validity and collection of money
charges authorized by Customs Law, which are under the jurisdiction of the CTA.
We do not agree.
The jurisdiction of the Court of Appeals over BAR’s petition stems from Section 1 in relation to Section
3, Rule 43 of the 1997 Rules of Civil Procedure which states that appeals from "awards, judgments,
final orders or resolutions of or authorized by any quasi-judicial agency in the exercise of its quasi
judicial functions[,]" which includes the Office of the President, may be taken to the Court of Appeals.
BAR’s petition for review to the Court of Appeals from the 12 March 2007 Decision and 14 March 2008
Resolution of the Office of the President falls within the jurisdiction of the Court of Appeals.
As noted by the Court of Appeals, the Office of the President took cognizance of Cruz’s letter dated 4
December 2006 requesting for a review of the 31 August 2006 letter of Usec. Mendoza. Deputy Exec.
Sec. Gaite required BAR to pay the appeal fee and submit its appeal memorandum. Thereafter, the
Office of the President issued its 12 March 2007 Decision affirming the decision of the Department of
Finance and then denied BAR’s motion for reconsideration in its 14 March 2008 Resolution. BAR’s only
recourse is to file a petition for review before the Court of Appeals under Rule 43 of the 1997 Rules on
Civil Procedure. The exercise by the Court of Appeals of its appellate jurisdiction over the decision of
the Office of the President is entirely distinct from the issue of whether BAR committed a procedural
error in elevating the case before the Office of the President instead of filing its appeal before the CTA.
Timeliness of the Appeal before the Office of the President
The Court of Appeals ruled that the question of whether BAR’s appeal before the Office of the President
was filed on time was rendered academic when BAR paid the appeal fee and submitted its appeal
memorandum on time. The Court of Appeals held that Deputy Exec. Sec. Gaite could not validly require
BAR to perfect its appeal in his 13 December 2006 Order and then rule, after its perfection, that the
appeal was not filed on time. The Court of Appeals ruled that the 13 December 2006 Order of Deputy
Exec. Sec. Gaite stopped BAR from pursuing any recourse with the CTA. The Court of Appeals further
ruled that the Office of the President did not explain how the 31 August 2006 letter of Usec. Mendoza
became a decision of the Secretary of Finance when it was only an advisory letter.
We do not agree with the Court of Appeals.
The Office of the President is not precluded from issuing the assailed decision in the same way that this
Court is not proscribed from accepting a petition before it, requiring the payment of docket fees,
directing the respondent to comment on the petition, and after studying the case, from ruling that the
petition was filed out of time or that it lacks merit.
However, Cruz’s 4 December 2006 letters to then President Gloria Macapagal Arroyo and then Exec.
Sec. Eduardo Ermita are not in the nature of an appeal provided for under Administrative Order No. 18,
series of 1987 (AO 18).27Section 1 of AO 18 provides that an appeal to the Office of the President shall
be taken within 30 days from receipt by the aggrieved party of the decision, resolution or order
complained of or appealed from. Section 2 of AO 18 cites caption, docket number of the case as
presented in the office of origin, and addresses of the parties. Section 3 mentions pauper litigants. In
sum, the appeal provided under AO 18 refers to adversarial cases. It does not refer to a review of
administrative rules and regulations, as what BAR asked the Office of the President to do in this case.
BAR, in writing the Office of the President, was exhausting its administrative remedies. BAR could still
go to the regular courts after the Office of the President acted on its request for a review of Usec. xxxx
Mendoza’s 31 August 2006 letter. The decision of the Office of the President did not foreclose BAR’s
remedy to bring the matter to the regular courts.
Section 2402 of RA 1937 further provides:

BAR is assailing the issuance and implementation of CAO 1-2005. CAO 1-2005 is an amendment to
Section 2402. Review by Court of Appeals. - The party aggrieved by a ruling of the Commissioner in
CAO 7-92. CAO 7-92 was issued "[b]y authority of Section 608, in relation to Section 3506, of the Tariff
any matter brought before him upon protest or by his action or ruling in any case of seizure may appeal
and Customs Code of the Philippines x x x." On this score, we do not agree with the Office of the
to the Court of Tax Appeals, in the manner and within the period prescribed by law and regulations.
President that BAR, instead of filing an appeal before its office, should have filed an appeal before the
CTA in accordance with Section 7 of Republic Act No. 928228 (RA 9282) which reads:
Clearly, what is appealable to the CTA are cases involving protest or seizure, which is not the subject
of BAR’s appeal in these cases. BAR’s actions, including seeking an audience with the Secretary of
Section 7. Jurisdiction. - The CTA shall exercise:
Finance,30 as well as writing to the Executive Secretary and the Office of the President, are part of the
administrative process to question the validity of the issuance of an administrative regulation, that is, of
(a) Exclusive appellate jurisdiction, to review by appeal, as herein provided: CAO 1-2005, entitled Amendments to Customs Administrative Order No. 7-92 (Rules and Regulations
Governing the Overtime Pay and Other Compensations Related Thereto Due to Customs Personnel at
the NAIA).
xxxx

4. Decisions of the Commissioner of Customs in vases involving liability for customs duties, fees and
other money charges, seizure, detention or release of property affected, fines forfeitures or other
penalties in relation thereto, or other matters arising under the Customs Law or other laws administered
by the Bureau of Customs.
Under Section 11 of RA 9282, an appeal to the CTA should be taken within 30 days from receipt of the
assailed decision or ruling.
However, Section 2313, Book II of Republic Act No. 1937 (RA 1937)29 provides:
CAO 1-2005 was issued pursuant to Section 608 of the TCCP which provides:
Section 608. Commissioner to Make Rules and Regulations. - The Commissioner shall, subject to the
approval of the Secretary of Finance, promulgate all rules and regulations necessary to enforce the
provisions of this Code. x x x
The jurisdiction over the validity and constitutionality of rules and regulations issued by the
Commissioner under Section 608 of the TCCP lies before the regular courts. It is not within the
jurisdiction of the Office of the President or the CTA. Hence, the Office of the President erred in holding
that BAR’s appeal was filed late because BAR can still raise the issue before the regular courts.

Section 2313. Review of Commissioner. - The person aggrieved by the decision or action of the
Verification and Certification
Collector in any matter presented upon protest or by his action in any case of seizure may, within fifteen
of Non-Forum Shopping
(15) days after notification on writing by the Collector of his action or decision, file a written notice to the
Collector with a copy furnished to the Commissioner of his intention to appeal the action or decision of
the Collector to the Commissioner. Thereupon the Collector shall forthwith transmit all the records of The Office of the President, et al. allege that the Court of Appeals should have dismissed the petition
the proceedings to the Commissioner, who shall approve, modify or reverse the action or decision of because of BAR’s failure to comply fully with the requirements of verification and certification of non-
the Collector and take such steps and make such orders as may be necessary to give effect to his forum shopping.
decision. Provided, That when an appeal is filed beyond the period herein prescribed, the same shall be
deemed dismissed.
We agree with the Court of Appeals in its liberal interpretation of the Rules. Verification of a pleading is
a formal, not jurisdictional, requirement.31 The requirement is simply a condition affecting the form of the
If in any seizure proceedings, the Collector renders a decision adverse to the Government, such pleading and non-compliance with the requirement does not render the pleading fatally defective.32
decision shall automatically be reviewed by the Commissioner and the records of the case shall be
elevated within five (5) days from the promulgation of the decision of the Collector. The Commissioner
As regards the certification of non-forum shopping, this Court may relax the rigid application of the rules
shall render a decision on the automatic appeal within thirty (30) days from receipts of the records of
to afford the parties the opportunity to fully ventilate their cases on the merits.33 This is in line with the
the case. If the Collector’s decision is reversed by the Commissioner, the decision of the Commissioner
principle that cases should be decided only after giving all parties the chance to argue their causes and
shall be final and executory. However, if the Collector’s decision is affirmed, or if within thirty (30) days
defenses.34 Technicality and procedural imperfections should not serve as basis of decisions and
from receipt of the record of the case by the Commissioner no decision is rendered of the decision
should not be used to defeat the substantive rights of the other party.35
involves imported articles whose published value is five million pesos (₱5,000,000) or more, such
decision shall be deemed automatically appealed to the Secretary of Finance and the records of the
proceedings shall be elevated within five (5) days from the promulgation of the decision of the Estoppel and Laches
Commissioner or of the Collector under appeal, as the case may be. Provided, further, That if the
decision of the Commissioner or of the Collector under appeal, as the case may be, is affirmed by the
The Office of the President, et al. allege that BAR is guilty of estoppel and laches because it did not
Secretary of Finance, or if within thirty (30) days from receipt of the records of the proceedings by the
question CAO 7-92 which had been in effect since 1992. The Office of the President, et al. argue that a
Secretary of Finance, no decision is rendered, the decision of the Secretary of Finance, or of the
direct attack of CAO 1-2005 is a collateral attack of CAO 7-92 since CAO 7-92 is the main
Commissioner, or of the Collector under appeal, as the case may be, shall become final and executory.
administrative regulation enacted to implement Section 3506 of the TCCP.
The argument has no merit.
BAR is not questioning the validity of CAO 7-92 or Section 3506 of the TCCP. BAR is questioning the
validity of CAO 1-2005 on the following grounds: (1) that it was approved in violation of BAR’s right to
due process because its approval did not comply with the required publication notice under Section
9(2), Chapter I, Book VII, of the Administrative Code of the Philippines; (2) that CAO 1-2005
inappropriately based its justification on the declining value of the Philippine peso versus the U.S. dollar
when services of the BOC are rendered without spending any foreign currency; and (3) that the
increase in BOC rates aggravates the already high operating cost paid by the airlines which are still
reeling from the impact of consecutive negative events such as SARS, Iraqi war, avian flu and the
unprecedented increase in fuel prices. BAR’s objection to CAO 1-2005 could not be considered a direct
attack on CAO 7-92 because BAR was merely objecting to the amendments to CAO 7-92. BAR did not
question the validity of CAO 7-92 itself. Even during the pendency of these cases before the Court of
Appeals, BAR members continued to pay the rates prescribed under CAO 7-92. It was only upon the
promulgation of the Court of Appeals’ Decision declaring CAO 7-92 and CAO 1-2005 unconstitutional
that BAR recommended to its members to stop paying the charges imposed by the BOC.
Hence, BAR is not estopped from questioning CAO 1-2005 on the ground alone that it did not question
the validity of CAO 7-92.
Constitutionality of CAO 7-92, CAO 1-2005
and Section 3506 of the TCCP
The Office of the President, et al. allege that the Court of Appeals acted beyond its jurisdiction when it
passed upon the validity of CAO 7-92 and Section 3506 of the TCCP.
We do not agree with the Office of the President, et al.
Section 8, Rule 51 of the 1997 Rules of Civil Procedure also states:
Section 8. Questions that may be decided. - No error which does not affect the jurisdiction over the
subject matter or the validity of the judgment appealed from or the proceedings therein, will be
considered unless stated in the assignment of errors, or closely related to or dependent on an assigned
error and properly argued in the brief, save as the court may pass upon plain errors and clerical errors.
The Court of Appeals deemed it necessary to rule on the issue for the proper determination of these
cases. The Court has ruled that the Court of Appeals is imbued with sufficient authority and discretion
to review matters, not otherwise assigned as errors on appeal, if it finds that their consideration is
necessary in arriving at a complete and just resolution of the case or to serve the interests of justice or
to avoid dispensing piecemeal justice.36 Further, while it is true that the issue of constitutionality must be
raised at the first opportunity, this Court, in the exercise of sound discretion, can take cognizance of the
constitutional issues raised by the parties in accordance with Section 5(2)(a), Article VII of the 1987
Constitution.37
The Court has further ruled:
When an administrative regulation is attacked for being unconstitutional or invalid, a party may raise its
unconstitutionality or invalidity on every occasion that the regulation is being enforced. For the Court to
exercise its power of judicial review, the party assailing the regulation must show that the question of
constitutionality has been raised at the earliest opportunity. This requisite should not be taken to mean
that the question of constitutionality must be raised immediately after the execution of the state action
complained of. That the question of constitutionality has not been raised before is not a valid reason for
refusing to allow it to be raised later. A contrary rule would mean that a law, otherwise unconstitutional,
would lapse into constitutionality by the mere failure of the proper party to promptly file a case to
challenge the same.38
Section 3506 of the TCCP provides:
Section 3506. Assignment of Customs Employees to Overtime Work. - Customs employees may be
assigned by a Collector to do overtime work at rates fixed by the Commissioner of Customs when the
service rendered is to be paid by the importers, shippers or other persons served. The rates to be fixed
shall not be less than that prescribed by law to be paid to employees of private enterprise.
We do not agree with the Court of Appeals in excluding airline companies, aircraft owners, and
operators from the coverage of Section 3506 of the TCCP. The term "other persons served" refers to all
other persons served by the BOC employees. Airline companies, aircraft owners, and operators are
among other persons served by the BOC employees. As pointed out by the OSG, the processing of
embarking and disembarking from aircrafts of passengers, as well as their baggages and cargoes,
forms part of the BOC functions. BOC employees who serve beyond the regular office hours are
entitled to overtime pay for the services they render.
The Court of Appeals ruled that, applying the principle of ejusdem generis, airline companies, aircraft
owners, and operators are not in the same category as importers and shippers because an importer
"brings goods to the country from a foreign country and pays custom duties" while a shipper is "one
who ships goods to another; one who engages the services of a carrier of goods; one who tenders
goods to a carrier for transportation." However, airline passengers pass through the BOC to declare
whether they are bringing goods that need to be taxed. The passengers cannot leave the airport of
entry without going through the BOC. Clearly, airline companies, aircraft owners, and operators are
among the persons served by the BOC under Section 3506 of the TCCP.
The overtime pay of BOC employees may be paid by any of the following: (1) all the taxpayers in the
country; (2) the airline passengers; and (3) the airline companies which are expected to pass on the
overtime pay to passengers. If the overtime pay is taken from all taxpayers, even those who do not
travel abroad will shoulder the payment of the overtime pay. If the overtime pay is taken directly from
the passengers or from the airline companies, only those who benefit from the overtime services will
pay for the services rendered. Here, Congress deemed it proper that the payment of overtime services
shall be shouldered by the "other persons served" by the BOC, that is, the airline companies. This is a
policy decision on the part of Congress that is within its discretion to determine. Such determination by
Congress is not subject to judicial review.
We do not agree with the Court of Appeals that Section 3506 of the TCCP failed the completeness and
sufficient standard tests. Under the first test, the law must be complete in all its terms and conditions
when it leaves the legislature such that when it reaches the delegate, the only thing he will have to do is
to enforce it.39 The second test requires adequate guidelines or limitations in the law to determine the
boundaries of the delegate’s authority and prevent the delegation from running riot.40 Contrary to the
ruling of the Court of Appeals, Section 3506 of the TCCP complied with these requirements. The law is
complete in itself that it leaves nothing more for the BOC to do: it gives authority to the Collector to
assign customs employees to do overtime work; the Commissioner of Customs fixes the rates; and it
provides that the payments shall be made by the importers, shippers or other persons served. Section
3506 also fixed the standard to be followed by the Commissioner of Customs when it provides that the
rates shall not be less than that prescribed by law to be paid to employees of private enterprise.
Contrary to the ruling of the Court of Appeals, BOC employees rendering overtime services are not
receiving double compensation for the overtime pay, travel and meal allowances provided for under
CAO 7-92 and CAO 1-2005. Section 3506 provides that the rates shall not be less than that prescribed
by law to be paid to employees of private enterprise. The overtime pay, travel and meal allowances are
payment for additional work rendered after regular office hours and do not constitute double
compensation prohibited under Section 8, Article IX(B) of the 1987 Constitution41 as they are in fact
authorized by law or Section 3506 of the TCCP.1âwphi1
BAR raises the alleged failure of BOC to publish the required notice of public hearing and to conduct
public hearings to give all parties the opportunity to be heard prior to the issuance of CAO 1-2005 as
required under Section 9(2), Chapter I, Book VII of the Administrative Code of the Philippines. Section
9(2) 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.1âwphi1
(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 cases of opposition, the rules on contested cases shall be observed.
BAR’s argument has no merit.
The BOC created a committee to re-evaluate the proposed increase in the rate of overtime pay and for
two years, several meetings were conducted with the agencies concerned to discuss the
proposal. BAR and the Airline Operators Council participated in these meetings and discussions.
Hence, BAR cannot claim that it was denied due process in the imposition of the increase of the
overtime rate. CAO 1-2005 was published in the Manila Standard, a newspaper of general circulation in
the Philippines on 18 February 200542 and while it was supposed to take effect on 5 March 2005, or 15
days after its publication, the BOC-NAIA still deferred BAR’s compliance until 16 March 2005.
WHEREFORE, we DENY the petition in G.R. No. 193247. We GRANT the petition in G.R. No. 194276
and SET ASIDE the 9 July 2009 Decision and 26 October 2010 Resolution of the Court of Appeals in
CA-G.R. SP No. 103250. Petitioner Bureau of Customs is DIRECTED to implement CAO 1-2005
immediately.
SO ORDERED.
G.R. No. 202242               April 16, 2013
FRANCISCO I. CHAVEZ, Petitioner,  In this disposition, it bears reiterating that from the birth of the Philippine Republic, the exercise of
vs.
JUDICIALAND BAR COUNCIL, SEN. FRANCIS JOSEPH G. ESCUDERO and REP. NIEL C. TUPAS,
JR.,Respondents.
RESOLUTION
MENDOZA, J.:
This resolves the Motion for Reconsideration1 filed by the Office of the Solicitor General (OSG) on
behalf of the respondents, Senator Francis Joseph G. Escudero and Congressman Niel C. Tupas, Jr.
(respondents), duly opposed2 by the petitioner, former Solicitor General Francisco I. Chavez
(petitioner).
By way of recapitulation, the present action stemmed from the unexpected departure of former Chief
Justice Renato C. Corona on May 29, 2012, and the nomination of petitioner, as his potential
successor. In his initiatory pleading, petitioner asked the Court to determine 1] whether the first
paragraph of Section 8, Article VIII of the 1987 Constitution allows more than one (1) member of
Congress to sit in the JBC; and 2] if the practice of having two (2) representatives from each House of
Congress with one (1) vote each is sanctioned by the Constitution.
On July 17, 2012, the Court handed down the assailed subject decision, disposing the same in the
following manner:
WHEREFORE, the petition is GRANTED. The current numerical composition of the Judicial and Bar
Council is declared UNCONSTITUTIONAL. The Judicial and Bar Council is hereby enjoined to
reconstitute itself so that only one (1) member of Congress will sit as a representative in its
proceedings, in accordance with Section 8(1), Article VIII of the 1987 Constitution.
This disposition is immediately executory.
SO ORDERED.
On July 31, 2012, following respondents’ motion for reconsideration and with due regard to Senate
Resolution Nos. 111,3 112,4 113,5 and 114,6 the Court set the subject motion for oral arguments on
August 2, 2012.7 On August 3, 2012, the Court discussed the merits of the arguments and agreed, in
the meantime, to suspend the effects of the second paragraph of the dispositive portion of the July 17,
2012 Decision which decreed that it was immediately executory. The decretal portion of the August 3,
2012 Resolution8 reads:
WHEREFORE, the parties are hereby directed to submit their respective MEMORANDA within ten (10)
days from notice. Until further orders, the Court hereby SUSPENDS the effect of the second paragraph
of the dispositive portion of the Court’s July 17, 2012 Decision, which reads: "This disposition is
immediately executory."9
Pursuant to the same resolution, petitioner and respondents filed their respective memoranda.10
Brief Statement of the Antecedents
appointing members of the Judiciary has always been the exclusive prerogative of the executive and
legislative branches of the government. Like their progenitor of American origins, both the Malolos
Constitution11 and the 1935 Constitution12vested the power to appoint the members of the Judiciary in
the President, subject to confirmation by the Commission on Appointments. It was during these times
that the country became witness to the deplorable practice of aspirants seeking confirmation of their
appointment in the Judiciary to ingratiate themselves with the members of the legislative body.13
Then, under the 1973 Constitution,14 with the fusion of the executive and legislative powers in one body,
the appointment of judges and justices ceased to be subject of scrutiny by another body. The power
became exclusive and absolute to the Executive, subject only to the condition that the appointees must
have all the qualifications and none of the disqualifications.
Prompted by the clamor to rid the process of appointments to the Judiciary of the evils of political
pressure and partisan activities,15 the members of the Constitutional Commission saw it wise to create a
separate, competent and independent body to recommend nominees to the President.
Thus, it conceived of a body, representative of all the stakeholders in the judicial appointment process,
and called it the Judicial and Bar Council (JBC). The Framers carefully worded Section 8, Article VIII of
the 1987 Constitution in this wise:
Section 8. (1) A Judicial and Bar Council is hereby created under the supervision of the Supreme Court
composed of the Chief Justice as ex officio Chairman, the Secretary of Justice, and a representative of
the Congress as ex officio Members, a representative of the Integrated Bar, a professor of law, a retired
Member of the Supreme Court, and a representative of the private sector.
From the moment of the creation of the JBC, Congress designated one (1) representative to sit in the
JBC to act as one of the ex-officio members.16 Pursuant to the constitutional provision that Congress is
entitled to one (1) representative, each House sent a representative to the JBC, not together, but
alternately or by rotation.
In 1994, the seven-member composition of the JBC was substantially altered.1âwphi1 An eighth
member was added to the JBC as the two (2) representatives from Congress began sitting
simultaneously in the JBC, with each having one-half (1/2) of a vote.17
In 2001, the JBC En Banc decided to allow the representatives from the Senate and the House of
Representatives one full vote each.18 It has been the situation since then.
Grounds relied upon by Respondents
Through the subject motion, respondents pray that the Court reconsider its decision and dismiss the
petition on the following grounds: 1] that allowing only one representative from Congress in the JBC
would lead to absurdity considering its bicameral nature; 2] that the failure of the Framers to make the
proper adjustment when there was a shift from unilateralism to bicameralism was a plain oversight; 3]
that two representatives from Congress would not subvert the intention of the Framers to insulate the
JBC from political partisanship; and 4] that the rationale of the Court in declaring a seven-member
composition would provide a solution should there be a stalemate is not exactly correct.
While the Court may find some sense in the reasoning in amplification of the third and fourth grounds
listed by respondents, still, it finds itself unable to reverse the assailed decision on the principal issues
covered by the first and second grounds for lack of merit. Significantly, the conclusion arrived at, with
respect to the first and second grounds, carries greater bearing in the final resolution of this case.
As these two issues are interrelated, the Court shall discuss them jointly.
Ruling of the Court
The Constitution evinces the direct action of the Filipino people by which the fundamental powers of
government are established, limited and defined and by which those powers are distributed among the
several departments for their safe and useful exercise for the benefit of the body politic.19 The Framers
reposed their wisdom and vision on one suprema lex to be the ultimate expression of the principles and
the framework upon which government and society were to operate. Thus, in the interpretation of the
constitutional provisions, the Court firmly relies on the basic postulate that the Framers mean what they
say. The language used in the Constitution must be taken to have been deliberately chosen for a
definite purpose. Every word employed in the Constitution must be interpreted to exude its deliberate
intent which must be maintained inviolate against disobedience and defiance. What the Constitution
clearly says, according to its text, compels acceptance and bars modification even by the branch tasked
to interpret it.
For this reason, the Court cannot accede to the argument of plain oversight in order to justify
constitutional construction. As stated in the July 17, 2012 Decision, in opting to use the singular letter
"a" to describe "representative of Congress," the Filipino people through the Framers intended that
Congress be entitled to only one (1) seat in the JBC. Had the intention been otherwise, the Constitution
could have, in no uncertain terms, so provided, as can be read in its other provisions.
A reading of the 1987 Constitution would reveal that several provisions were indeed adjusted as to be
in tune with the shift to bicameralism. One example is Section 4, Article VII, which provides that a tie in
the presidential election shall be broken "by a majority of all the Members of both Houses of the
Congress, voting separately."20 Another is Section 8 thereof which requires the nominee to replace the
Vice-President to be confirmed "by a majority of all the Members of both Houses of the Congress,
voting separately."21 Similarly, under Section 18, the proclamation of martial law or the suspension of
the privilege of the writ of habeas corpus may be revoked or continued by the Congress, voting
separately, by a vote of at least a majority of all its Members."22 In all these provisions, the bicameral
nature of Congress was recognized and, clearly, the corresponding adjustments were made as to how
a matter would be handled and voted upon by its two Houses.
Thus, to say that the Framers simply failed to adjust Section 8, Article VIII, by sheer inadvertence, to
their decision to shift to a bicameral form of the legislature, is not persuasive enough. Respondents
cannot just lean on plain oversight to justify a conclusion favorable to them. It is very clear that the
Framers were not keen on adjusting the provision on congressional representation in the JBC because
it was not in the exercise of its primary function – to legislate. JBC was created to support the executive
power to appoint, and Congress, as one whole body, was merely assigned a contributory non-
legislative function.
The underlying reason for such a limited participation can easily be discerned. Congress has two (2)
Houses. The need to recognize the existence and the role of each House is essential considering that
the Constitution employs precise language in laying down the functions which particular House plays,
regardless of whether the two Houses consummate an official act by voting jointly or separately.
Whether in the exercise of its legislative23 or its non-legislative functions such as inter alia, the power
of appropriation,24 the declaration of an existence of a state of war,25 canvassing of electoral returns for
the President and Vice-President,26 and impeachment,27 the dichotomy of each House must be
acknowledged and recognized considering the interplay between these two Houses. In all these
instances, each House is constitutionally granted with powers and functions peculiar to its nature and
with keen consideration to 1) its relationship with the other chamber; and 2) in consonance with the
principle of checks and balances, as to the other branches of government.
In checkered contrast, there is essentially no interaction between the two Houses in their participation in
the JBC. No mechanism is required between the Senate and the House of Representatives in the
screening and nomination of judicial officers. Rather, in the creation of the JBC, the Framers arrived at
a unique system by adding to the four (4) regular members, three (3) representatives from the major
branches of government - the Chief Justice as ex-officio Chairman (representing the Judicial
Department), the Secretary of Justice (representing the Executive Department), and a representative of
the Congress (representing the Legislative Department). The total is seven (7), not eight. In so
providing, the Framers simply gave recognition to the Legislature, not because it was in the interest of a
certain constituency, but in reverence to it as a major branch of government.
On this score, a Member of Congress, Hon. Simeon A. Datumanong, from the Second District of
Maguindanao, submitted his well-considered position28 to then Chief Justice Reynato S. Puno:
I humbly reiterate my position that there should be only one representative of Congress in the JBC in
accordance with Article VIII, Section 8 (1) of the 1987 Constitution x x x.
The aforesaid provision is clear and unambiguous and does not need any further interpretation.
Perhaps, it is apt to mention that the oft-repeated doctrine that "construction and interpretation come
only after it has been demonstrated that application is impossible or inadequate without them."
Further, to allow Congress to have two representatives in the Council, with one vote each, is to negate
the principle of equality among the three branches of government which is enshrined in the
Constitution.
In view of the foregoing, I vote for the proposition that the Council should adopt the rule of single
representation of Congress in the JBC in order to respect and give the right meaning to the above-
quoted provision of the Constitution. (Emphases and underscoring supplied)
On March 14, 2007, then Associate Justice Leonardo A. Quisumbing, also a JBC Consultant, submitted
to the Chief Justice and ex-officio JBC Chairman his opinion,29 which reads:
8. Two things can be gleaned from the excerpts and citations above: the creation of the JBC is intended
to curtail the influence of politics in Congress in the appointment of judges, and the understanding is
that seven (7) persons will compose the JBC. As such, the interpretation of two votes for Congress runs
counter to the intendment of the framers. Such interpretation actually gives Congress more influence in
the appointment of judges. Also, two votes for Congress would increase the number of JBC members
to eight, which could lead to voting deadlock by reason of even-numbered membership, and a clear
violation of 7 enumerated members in the Constitution. (Emphases and underscoring supplied)
In an undated position paper,30 then Secretary of Justice Agnes VST Devanadera opined:
As can be gleaned from the above constitutional provision, the JBC is composed of seven (7)
representatives coming from different sectors. From the enumeration it is patent that each category of
members pertained to a single individual only. Thus, while we do not lose sight of the bicameral nature
of our legislative department, it is beyond dispute that Art. VIII, Section 8 (1) of the 1987 Constitution is
explicit and specific that "Congress" shall have only "xxx a representative." Thus, two (2)
representatives from Congress would increase the number of JBC members to eight (8), a number
beyond what the Constitution has contemplated. (Emphases and underscoring supplied)
In this regard, the scholarly dissection on the matter by retired Justice Consuelo Ynares-Santiago, a
former JBC consultant, is worth reiterating.31 Thus:
A perusal of the records of the Constitutional Commission reveals that the composition of the JBC
reflects the Commission’s desire "to have in the Council a representation for the major elements of the
community." xxx The ex-officio members of the Council consist of representatives from the three main
branches of government while the regular members are composed of various stakeholders in the
judiciary. The unmistakeable tenor of Article VIII, Section 8(1) was to treat each ex-officio member as
representing one co-equal branch of government. xxx Thus, the JBC was designed to have seven
voting members with the three ex-officio members having equal say in the choice of judicial nominees.
xxx
No parallelism can be drawn between the representative of Congress in the JBC and the exercise by
Congress of its legislative powers under Article VI and constituent powers under Article XVII of the
Constitution. Congress, in relation to the executive and judicial branches of government, is
constitutionally treated as another co-equal branch in the matter of its representative in the JBC. On the
other hand, the exercise of legislative and constituent powers requires the Senate and the House of
Representatives to coordinate and act as distinct bodies in furtherance of Congress’ role under our
constitutional scheme. While the latter justifies and, in fact, necessitates the separateness of the two
Houses of Congress as they relate inter se, no such dichotomy need be made when Congress interacts
with the other two co-equal branches of government.
It is more in keeping with the co-equal nature of the three governmental branches to assign the same
weight to considerations that any of its representatives may have regarding aspiring nominees to the
judiciary. The representatives of the Senate and the House of Representatives act as such for one
branch and should not have any more quantitative influence as the other branches in the exercise of
prerogatives evenly bestowed upon the three. Sound reason and principle of equality among the three
branches support this conclusion. [Emphases and underscoring supplied]
The argument that a senator cannot represent a member of the House of Representatives in the JBC
and vice-versa is, thus, misplaced. In the JBC, any member of Congress, whether from the Senate or
the House of Representatives, is constitutionally empowered to represent the entire Congress. It may
be a constricted constitutional authority, but it is not an absurdity.
From this score stems the conclusion that the lone representative of Congress is entitled to one full
vote. This pronouncement effectively disallows the scheme of splitting the said vote into half (1/2),
between two representatives of Congress. Not only can this unsanctioned practice cause disorder in
the voting process, it is clearly against the essence of what the Constitution authorized. After all, basic
and reasonable is the rule that what cannot be legally done directly cannot be done indirectly. To permit
or tolerate the splitting of one vote into two or more is clearly a constitutional circumvention that cannot
be countenanced by the Court. Succinctly put, when the Constitution envisioned one member of
Congress sitting in the JBC, it is sensible to presume that this representation carries with him one full
vote.
It is also an error for respondents to argue that the President, in effect, has more influence over the JBC
simply because all of the regular members of the JBC are his appointees. The principle of checks and
balances is still safeguarded because the appointment of all the regular members of the JBC is subject
to a stringent process of confirmation by the Commission on Appointments, which is composed of
members of Congress.
Respondents’ contention that the current irregular composition of the JBC should be accepted, simply
because it was only questioned for the first time through the present action, deserves scant
consideration. Well-settled is the rule that acts done in violation of the Constitution no matter how
frequent, usual or notorious cannot develop or gain acceptance under the doctrine of estoppel or
laches, because once an act is considered as an infringement of the Constitution it is void from the very
beginning and cannot be the source of any power or authority.
It would not be amiss to point out, however, that as a general rule, an unconstitutional act is not a law; it
confers no rights; it imposes no duties; it affords no protection; it creates no office; it is inoperative as if
it has not been passed at all. This rule, however, is not absolute. Under the doctrine of operative facts, G.R. No. 148083             July 21, 2006
actions previous to the declaration of unconstitutionality are legally recognized. They are not nullified.
This is essential in the interest of fair play. To reiterate the doctrine enunciated in Planters Products,
COMMISSIONER OF INTERNAL REVENUE, petitioner, 
Inc. v. Fertiphil Corporation:32
vs.
BICOLANDIA DRUG CORPORATION (Formerly known as ELMAS DRUG CO.), respondent.
The doctrine of operative fact, as an exception to the general rule, only applies as a matter of equity
and fair play. It nullifies the effects of an unconstitutional law by recognizing that the existence of a
DECISION
statute prior to a determination of unconstitutionality is an operative fact and may have consequences
which cannot always be ignored. The past cannot always be erased by a new judicial declaration. The
doctrine is applicable when a declaration of unconstitutionality will impose an undue burden on those VELASCO, JR., J.:
who have relied on the invalid law. Thus, it was applied to a criminal case when a declaration of
unconstitutionality would put the accused in double jeopardy or would put in limbo the acts done by a
In cases of conflict between the law and the rules and regulations implementing the law, the law shall
municipality in reliance upon a law creating it.33
always prevail. Should Revenue Regulations deviate from the law they seek to implement, they will be
struck down.
Under the circumstances, the Court finds the exception applicable in this case and holds that
notwithstanding its finding of unconstitutionality in the current composition of the JBC, all its prior official
The Facts
actions are nonetheless valid.

In 1992, Republic Act No. 7432, otherwise known as "An Act to Maximize the Contribution of Senior
Considering that the Court is duty bound to protect the Constitution which was ratified by the direct
Citizens to Nation Building, Grant Benefits and Special Privileges and For Other Purposes," granted
action of the Filipino people, it cannot correct what respondents perceive as a mistake in its mandate.
senior citizens several privileges, one of which was obtaining a 20 percent discount from all
Neither can the Court, in the exercise of its power to interpret the spirit of the Constitution, read into the
establishments relative to the use of transportation services, hotels and similar lodging establishments,
law something that is contrary to its express provisions and justify the same as correcting a perceived
restaurants and recreation centers and purchase of medicines anywhere in the country.1 The law also
inadvertence. To do so would otherwise sanction the Court action of making amendment to the
provided that the private establishments giving the discount to senior citizens may claim the cost as tax
Constitution through a judicial pronouncement.
credit.2 In compliance with the law, the Bureau of Internal Revenue issued Revenue Regulations No. 2-
94, which defined "tax credit" as follows:
In other words, the Court cannot supply the legislative omission. According to the rule of casus omissus
"a case omitted is to be held as intentionally omitted."34 "The principle proceeds from a reasonable
Tax Credit – refers to the amount representing the 20% discount granted to a qualified senior
certainty that a particular person, object or thing has been omitted from a legislative
citizen by all establishments relative to their utilization of transportation services, hotels and
enumeration."35 Pursuant to this, "the Court cannot under its power of interpretation supply the omission
similar lodging establishments, restaurants, halls, circuses, carnivals and other similar places
even though the omission may have resulted from inadvertence or because the case in question was
of culture, leisure and amusement, which discount shall be deducted by the said
not foreseen or contemplated."36 "The Court cannot supply what it thinks the legislature would have
establishments from their gross income for income tax purposes and from their gross sales
supplied had its attention been called to the omission, as that would be judicial legislation."37
for value-added tax or other percentage tax purposes.3

Stated differently, the Court has no power to add another member by judicial construction.
The call for judicial activism fails to stir the sensibilities of the Court tasked to guard the Constitution
against usurpation. The Court remains steadfast in confining its powers in the sphere granted by the
Constitution itself. Judicial activism should never be allowed to become judicial exuberance.38 In cases
like this, no amount of practical logic or convenience can convince the Court to perform either an
excision or an insertion that will change the manifest intent of the Framers. To broaden the scope of
congressional representation in the JBC is tantamount to the inclusion of a subject matter which was
not included in the provision as enacted. True to its constitutional mandate, the Court cannot craft and
tailor constitutional provisions in order to accommodate all of situations no matter how ideal or
reasonable the proposed solution may sound. To the exercise of this intrusion, the Court declines.
WHEREFORE, the Motion for Reconsideration filed by respondents is hereby DENIED.
In 1995, respondent Bicolandia Drug Corporation, a corporation engaged in the business of retailing
pharmaceutical products under the business style of "Mercury Drug," granted the 20 percent sales
discount to qualified senior citizens purchasing their medicines in compliance with R.A. No.
7432.4 Respondent treated this discount as a deduction from its gross income in compliance with
Revenue Regulations No. 2-94, which implemented R.A. No. 7432.5 On April 15, 1996, respondent filed
its 1995 Corporate Annual Income Tax Return declaring a net loss position with nil income tax liability.6
On December 27, 1996, respondent filed a claim for tax refund or credit in the amount of PhP
259,659.00 with the Appellate Division of the Bureau of Internal Revenue—because its net losses for
the year 1995 prevented it from benefiting from the treatment of sales discounts as a deduction from
gross sales during the said taxable year.7 It alleged that the petitioner Commissioner of Internal
Revenue erred in treating the 20 percent sales discount given to senior citizens as a deduction from its
gross income for income tax purposes or other percentage tax purposes rather than as a tax credit.8

The suspension of the effects of the second paragraph of the dispositive portion of the July 17, 2012
Decision of the Court, which reads, "This disposition is immediately executory," is hereby LIFTED.
SO ORDERED.
On April 6, 1998, respondent appealed to the Court of Tax Appeals in order to toll the running of two
(2)-year prescriptive period to file a claim for refund pursuant to Section 230 of the Tax Code
then.9 Respondent argued that since Section 4 of R.A. No. 7432 provided that discounts granted to
senior citizens may be claimed as tax credit, Section 2(i) of Revenue Regulations No. 2-94, which
referred to the tax credit as the amount representing the 20 percent discount that "shall be deducted by
the said establishments from their gross income for income tax purposes and from their gross sales for
value-added tax or other percentage tax purposes,"10 is illegal, void and without effect for being
inconsistent with the statute it implements.
Petitioner maintained that Revenue Regulations No. 2-94 is valid since the law tasked the Department
of Finance, among other government offices, with the issuance of the necessary rules and regulations
to carry out the objectives of the law.11
Ruling of the Court of Tax Appeals
The Court of Tax Appeals declared that the provisions of R.A. No. 7432 would prevail over Section 2(i)
of Revenue Regulations No. 2-94, whose definition of "tax credit" deviated from the intendment of the
law; and as a result, partially granted the respondent's claim for a refund. After examining the evidence
on record, the Court of Tax Appeals reduced the claimed 20 percent sales discount, thus reducing the
refund to be given. It ruled that "Respondent is hereby ORDERED to REFUND in favor of Petitioner the
amount of P236,321.52, representing overpaid income tax for the year 1995."12
Ruling of the Court of Appeals
On appeal, the Court of Appeals modified the decision of the Court of Tax Appeals as the law provided
for a tax credit, not a tax refund. The fallo of the Decision states:
WHEREFORE, premises considered, the present appeal is hereby GRANTED and the
Decision of the Court of Tax Appeals in C.T.A. Case No. 5599 is hereby MODIFIED in the
sense that the award of tax refund is ANNULLED and SET ASIDE. Instead, the petitioner is
hereby ORDERED to issue a tax credit certificate in favor of the respondent in the amount of
P 236,321.52.
No pronouncement as to costs.13
The Issue
Petitioner now argues that the Court of Appeals erred in holding that the 20 percent sales discount
granted to qualified senior citizens by the respondent pursuant to R.A. No. 7432 may be claimed as a
tax credit, instead of a deduction from gross income or gross sales.14
The Court's Ruling
The petition is not meritorious.
Redefining "Tax Credit" as "Tax Deduction"
The problem stems from the issuance of Revenue Regulations No. 2-94, which was supposed to
implement R.A. No. 7432, and the radical departure it made when it defined the "tax credit" that would
be granted to establishments that give 20 percent discount to senior citizens. Under Revenue
Regulations No. 2-94, the tax credit is "the amount representing the 20 percent discount granted to a
qualified senior citizen by all establishments relative to their utilization of transportation services, hotels
and similar lodging establishments, restaurants, drugstores, recreation centers, theaters, cinema
houses, concert halls, circuses, carnivals and other similar places of culture, leisure and amusement,
which discount shall be deducted by the said establishments from their gross income for income tax
purposes and from their gross sales for value-added tax or other percentage tax purposes."15 It equated
"tax credit" with "tax deduction," contrary to the definition in Black's Law Dictionary, which defined tax
credit as:
An amount subtracted from an individual's or entity's tax liability to arrive at the total tax
liability. A tax credit reduces the taxpayer's liability x x x, compared to a deduction which
reduces taxable income upon which the tax liability is calculated. A credit differs from
deduction to the extent that the former is subtracted from the tax while the latter is subtracted
from income before the tax is computed.16
The interpretation of an administrative government agency, which is tasked to implement the statute, is
accorded great respect and ordinarily controls the construction of the courts.17 Be that as it may, the
definition laid down in the questioned Revenue Regulations can still be subjected to scrutiny. Courts will
not hesitate to set aside an executive interpretation when it is clearly erroneous. There is no need for
interpretation when there is no ambiguity in the rule, or when the language or words used are clear and
plain or readily understandable to an ordinary reader.18 The definition of the term "tax credit" is plain and
clear, and the attempt of Revenue Regulations No. 2-94 to define it differently is the root of the conflict.
Tax Credit is not Tax Refund
Petitioner argues that the tax credit is in the nature of a tax refund and should be treated as a return for
tax payments erroneously or excessively assessed against a taxpayer, in line with Section 204(c) of
Republic Act No. 8424, or the National Internal Revenue Code of 1997. Petitioner claims that there
should first be payment of the tax before the tax credit can be claimed. However, in the National
Internal Revenue Code, we see at least one instance where this is not the case. Any VAT-registered
person, whose sales are zero-rated or effectively zero-rated may, within two (2) years after the close of
the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or
refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the
extent that such input tax has not been applied against output tax.19 It speaks of a tax credit for tax due,
so payment of the tax has not yet been made in that particular example.
The Court of Appeals expressly recognized the differences between a "tax credit" and a "tax refund,"
and stated that the same are not synonymous with each other, which is why it modified the ruling of the
Court of Tax Appeals.
Revenue Regulations No. 2-94 vs. R.A. No. 7432 and
R.A. No. 7432 vs. the National Internal Revenue Code
Petitioner contends that since R.A. No. 7432 used the word "may," the availability of the tax credit to
private establishments is only permissive and not absolute or mandatory. From that starting point,
petitioner further argues that the definition of the term "tax credit" in Revenue Regulations No. 2-94 was
validly issued under the authority granted by the law to the Department of Finance to formulate the
needed guidelines. It further explained that Revenue Regulations No. 2-94 can be harmonized with R.A
No. 7432, such that the definition of the term "tax credit" in Revenue Regulations No. 2-94 is controlling.
It claims that to do otherwise would result in Section 4(a) of R.A. No. 7432 impliedly repealing Section
204 (c) of the National Internal Revenue Code.
These arguments must also fail.
Revenue Regulations No. 2-94 is still subordinate to R.A. No. 7432, and in cases of conflict, the
implementing rule will not prevail over the law it seeks to implement. While seemingly conflicting laws
must be harmonized as far as practicable, in this particular case, the conflict cannot be resolved in the
manner the petitioner wishes. There is a great divide separating the idea of "tax credit" and "tax
deduction," as seen in the definition in Black's Law Dictionary.
The claimed absurdity of Section 4(a) of R.A. No. 7432 impliedly repealing Section 204(c) of the
National Internal Revenue Code could only come about if it is accepted that a tax credit is akin to a tax
refund wherein payment of taxes must be made in order for it to be claimed. But as shown in Section
112(a) of the National Internal Revenue Code, it is not always necessary for payment to be made for a
tax credit to be available.
Looking into R.A. No. 7432
Finally, petitioner argues that should private establishments, which count respondent in their number,
be allowed to claim tax credits for discounts given to senior citizens, they would be earning and not just
be reimbursed for the discounts given.
It cannot be denied that R.A. No. 7432 has a laudable goal. Moreover, it cannot be argued that it was
the intent of lawmakers for private establishments to be the primary beneficiaries of the law. However,
while the purpose of the law to benefit senior citizens is praiseworthy, the concerns of the affected
private establishments were also considered by the lawmakers. As in other cases wherein private
property is taken by the State for public use, there must be just compensation. In this particular case, it
took the form of the tax credit granted to private establishments, purposely chosen by the lawmakers. In
the similar case of Commissioner of Internal Revenue v. Central Luzon Drug Corporation,20 scrutinizing
the deliberations of the Bicameral Conference Committee Meeting on Social Justice on February 5,
1992 which finalized R.A. No. 7432, the discussions of the lawmakers clearly showed the intent that the
cost of the 20 percent discount may be claimed by the private establishments as a tax credit. An
excerpt from the deliberations is as follows:
SEN. ANGARA. In the case of private hospitals they got the grant of 15% discount, provided
that, the private hospitals can claim the expense as a tax credit.
REP. AQUINO. Yah could be allowed as deductions in the preparation of (inaudible) income.
SEN. ANGARA. I-tax credit na lang natin para walang cash-out?
REP. AQUINO. Oo, tax credit. Tama. Okay. Hospitals ba o lahat ng establishments na
covered.
THE CHAIRMAN. Sa kuwan lang yon, as private hospitals lang.
REP. AQUINO. Ano ba yung establishments na covered?
SEN. ANGARA. Restaurant, lodging houses, recreation centers.
REP. AQUINO. All establishments covered siguro?
SEN. ANGARA. From all establishments. Alisin na natin `yung kuwan kung ganon. Can we
go back to Section 4 ha?
REP. AQUINO. Oho.
SEN. ANGARA. Letter A. To capture that thought, we'll say the grant of 20% discount from all
establishments et cetera, et cetera, provided that said establishments may claim the cost as
a tax credit. Ganon ba `yon?
REP. AQUINO. Yah.
SEN. ANGARA. Dahil kung government, they don't need to claim it.
THE CHAIRMAN. Tax credit.
SEN. ANGARA. As a tax credit [rather] than a kuwan – deduction, Okay.21
It is clear that the lawmakers intended the grant of a tax credit to complying private establishments like
the respondent.
If the private establishments appear to benefit more from the tax credit than originally intended, it is not
for petitioner to say that they shouldn't. The tax credit may actually have provided greater incentive for
the private establishments to comply with R.A. No. 7432, or quicker relief from the cut into profits of
these businesses.
Revenue Regulations No. 2-94 Null and Void
From the above discussion, it must be concluded that Revenue Regulations No. 2-94 is null and void
for failing to conform to the law it sought to implement. In case of discrepancy between the basic law
and a rule or regulation issued to implement said law, the basic law prevails because said rule or
regulation cannot go beyond the terms and provisions of the basic law.22
Revenue Regulations No. 2-94 being null and void, it must be ruled then that under R.A. No. 7432,
which was effective at the time, respondent is entitled to its claim of a tax credit, and the ruling of the
Court of Appeals must be affirmed.
But even as this particular case is decided in this manner, it must be noted that the concerns of the
petitioner regarding tax credits granted to private establishments giving discounts to senior citizens
have been addressed. R.A. No. 7432 has been amended by Republic Act No. 9257, the "Expanded
Senior Citizens Act of 2003." In this, the term "tax credit" is no longer used. The 20 percent discount
granted by hotels and similar lodging establishments, restaurants and recreation centers, and in the
purchase of medicines in all establishments for the exclusive use and enjoyment of senior citizens is
treated in the following manner:
The establishment may claim the discounts granted under (a), (f), (g) and (h) as tax
deduction based on the net cost of the goods sold or services rendered: Provided, That the
cost of the discount shall be allowed as deduction from gross income for the same taxable
year that the discount is granted. Provided, further, that the total amount of the claimed tax
deduction net of value added tax if applicable, shall be included in their gross sales receipts
for tax purposes and shall be subject to proper documentation and to the provisions of the
National Internal Revenue Code, as amended.23
This time around, there is no conflict between the law and the implementing Revenue Regulations.
Under Revenue Regulations No. 4-2006, "(o)nly the actual amount of the discount granted or a sales
discount not exceeding 20% of the gross selling price can be deducted from the gross income, net of
value added tax, if applicable, for income tax purposes, and from gross sales or gross receipts of the
business enterprise concerned, for VAT or other percentage tax purposes."24 Under the new law, there
is no tax credit to speak of, only deductions.
Petitioner can find some vindication in the amendment made to R.A. No. 7432 by R.A. No. 9257, which
may be more in consonance with the principles of taxation, but as it was R.A. No. 7432 in force at the
time this case arose, this law controls the result in this particular case, for which reason the petition
must fail.
On September 19, 1997, Eastern filed with the CIR a written application for refund or credit of unapplied
input taxes it paid on the imported equipment during the taxable years 1995 and 1996 amounting to
₱22,013,134.00. In claiming for the tax refund, Eastern principally relied on Sec. 10 of RA No. 7617,
which allows Eastern to pay 3% of its gross receipts in lieu of all taxes on this franchise or earnings
thereof.5 In the alternative, Eastern cited Section 106(B) of the National Internal Revenue Code of
19776 (Tax Code) which authorizes a VAT-registered taxpayer to claim for the issuance of a tax credit
certificate or a tax refund of input taxes paid on capital goods imported or purchased locally to the
extent that such input taxes7 have not been applied against its output taxes.8

To toll the running of the two-year prescriptive period under the same provision, Eastern filed an appeal
This case should remind all heads of executive agencies which are given the power to promulgate rules
with the CTA on September 25, 1997 without waiting for the CIR’s decision on its application for refund.
and regulations, that they assume the roles of lawmakers. It is well-settled that a regulation should not
The CIR filed an Answer to Eastern’s appeal in which it raised the following special and affirmative
conflict with the law it implements. Thus, those drafting the regulations should study well the laws their
defenses:
rules will implement, even to the extent of reviewing the minutes of the deliberations of Congress about
its intent when it drafted the law. They may also consult the Secretary of Justice or the Solicitor General
for their opinions on the drafted rules. Administrative rules, regulations and orders have the efficacy and 6. [Eastern’s] claim for refund/tax credit is pending administrative investigation;
force of law so long as they do not contravene any statute or the Constitution.25 It is then the duty of the
agencies to ensure that their rules do not deviate from or amend acts of Congress, for their regulations
xxxx
are always subordinate to law.

8. [Eastern’s] exempting clause under its legislative franchise x x x should be understood or

WHEREFORE, the Petition is hereby DENIED. The assailed Decision of the Court of Appeals
interpreted as written, meaning, the 3% franchise tax shall be collected as substitute for any
is AFFIRMED. There is no pronouncement as to costs.
internal revenue taxes x x x imposed on its franchise or gross receipts/earnings thereof x x x;

SO ORDERED.
9. The [VAT] on importation under Section 101 of the [1977] Tax Code is neither a tax on
franchise nor on gross receipts or earnings thereof. It is a tax on the privilege of importing
G.R. No. 163835               July 7, 2010 goods whether or not the taxpayer is engaged in business, and regardless of whether the
imported goods are intended for sale, barter or exchange;
COMMISSIONER OF INTERNAL REVENUE, Petitioner, 
vs. 10. The VAT under Section 101(A) of the Tax Code x x x replaced the advance sales tax and
EASTERN TELECOMMUNICATIONS PHILIPPINES, INC., Respondent. compensating tax x x x. Accordingly, the 3% franchise tax did not substitute the 10% [VAT]
on [Eastern’s] importation of equipment, machineries and spare parts for the use of its
telecommunication system;
DECISION

11. Tax refunds are in the nature of tax exemptions. As such, they are regarded in derogation
BRION, J.:
of sovereign authority and to be construed in strictissimi juris against the person or entity
claiming the exemption. The burden is upon him who claims the exemption in his favour and
Through a petition for review on certiorari,1 petitioner Commissioner of Internal Revenue (CIR) seeks to he must be able to justify his claim by the clearest grant of organic or statute law and cannot
set aside the decision dated October 1, 20032 and the resolution dated May 26, 20043 of the Court of be permitted to exist upon vague implication x x x;
Appeals (CA) in CA G.R. SP No. 61157. The assailed CA rulings affirmed the decision dated July 17,
20004 of the Court of Tax Appeals (CTA) in CTA Case No. 5551, partially granting respondent Eastern
12. Taxes paid and collected are presumed to have been made in accordance with the laws
Telecommunications Philippines, Inc.’s (Eastern’s) claim for refund of unapplied input tax from its
and regulations; and
purchase and importation of capital goods.

13. It is incumbent upon the taxpayer to establish its right to the refund and failure to sustain
THE FACTUAL ANTECEDENTS
the burden is fatal to the claim for refund.9

Eastern is a domestic corporation granted by Congress with a telecommunications franchise under

Ruling in favor of Eastern, the CTA found that Eastern has a valid claim for the refund/credit of the
Republic Act (RA) No. 7617 on June 25, 1992. Under its franchise, Eastern is allowed to install,
unapplied input taxes, not on the basis of the "in lieu of all taxes" provision of its legislative
operate, and maintain telecommunications system throughout the Philippines.
franchise,10 but rather, on Section 106(B) of the Tax Code, which states:

From July 1, 1995 to December 31, 1996, Eastern purchased various imported equipment,
SECTION 106. Refunds or tax credits of input tax.
machineries, and spare parts necessary in carrying out its business activities. The importations were
subjected to a 10% value-added tax (VAT) by the Bureau of Customs, which was duly paid by Eastern.
 xxxx (B) A ratable portion of any input tax which cannot be directly attributed to either
activity.18 [Emphases supplied.]
(b) Capital goods. - A VAT-registered person may apply for the issuance of a tax credit certificate or
refund of input taxes paid on capital goods imported or locally purchased, to the extent that such input To be entitled to a tax refund of the full amount of ₱16,229,100.00, the CIR asserts that Eastern must
taxes have not been applied against output taxes. The application may be made only within two (2) prove that (a) it was engaged in purely VAT taxable transactions and (b) the unapplied input taxes it
years after the close of the taxable quarter when the importation or purchase was made.11 [Emphases claims as refund were directly attributable to transactions subject to VAT. The VAT returns of Eastern
supplied.] for the 1st, 2nd, 3rd, and 4th quarters of 1996, however, showed that it earned income from both
transactions subject to VAT and transactions exempt from VAT;19 the returns reported income earned
from taxable sales, zero-rated sales, and exempt sales in the following amounts:
The CTA ruled that Eastern had satisfactorily shown that it was entitled to the claimed refund/credit as
all the elements of the above provision were present: (1) Eastern was a VAT-registered entity which
paid 10% input taxes on its importations of capital equipment; (2) this input VAT remained unapplied as Zero-Rated
of the first quarter of 1997; and (3) Eastern seasonably filed its application for refund/credit within the 1996 Taxable Sales Exempt Sales
Sales
two-year period stated in the law. However, the CTA noted that Eastern was able to substantiate only
₱21,487,702.00 of its claimed amount of ₱22,013,134.00. The difference represented input taxes that 1st Quarter 820,673.70 --- ---
were allegedly paid but were not supported by the corresponding receipts, as found by an independent
auditor. Moreover, it excluded ₱5,360,634.00 in input taxes on imported equipment for the year 1995, 2nd
3,361,618.59 225,088,899.07 140,111,655.85
even when these were properly documented as they were already booked by Eastern as part of the Quarter
cost. Once input tax becomes part of the cost of capital equipment, it necessarily forms part of
depreciation. Thus, to grant the refund of the 1995 creditable input tax amounts to twice giving Eastern 3rd Quarter 2,607,168.96 169,821,537.80 187,712,657.16
the tax benefit. Thus, in its July 17, 2000 decision, the CTA granted in part Eastern’s appeal by
declaring it entitled to a tax refund of ₱16,229,100.00, representing unapplied input taxes on imported 4th Quarter 1,134,942.71 162,530,947.40 147,717,028.53
capital goods for the taxable year 1996.12
TOTAL 7,924,403.96 557,441,384.27 475,541,341.54

The CIR filed, on August 3, 2000, a motion for reconsideration13 of the CTA’s decision. About a month Total Amount of Sales 1,040,907,129.77
and a half later, it filed a supplemental motion for reconsideration dated September 15, 2000.14 The
CTA denied the CIR’s motion for reconsideration in its resolution dated September 20, 2000.15 The CIR
then elevated the case to the CA through a petition for review under Rule 43 of the Rules of Court. The The taxable sales and zero-rated sales are considered transactions subject to VAT,20 while exempt
CA affirmed the CTA ruling through its decision dated October 1, 200316 and its resolution dated May sales refer to transactions not subject to VAT.
26, 2004,17 denying the motion for reconsideration. Hence, the present petition.
Since the VAT returns clearly reflected income from exempt sales, the CIR asserts that this constitutes
THE PETITIONER’S ARGUMENTS as an admission on Eastern’s part that it engaged in transactions not subject to VAT. Hence, the
proportionate allocation of the tax credit to VAT and non-VAT transactions provided in Section 104(A) of
the Tax Code should apply. Eastern is then entitled to only ₱8,814,790.15 as the ratable portion of the
The CIR takes exception to the CA’s ruling that Eastern is entitled to the full amount of unapplied input tax credit, computed in the following manner:
taxes paid for its purchase of imported capital goods that were substantiated by the corresponding
receipts and invoices. The CIR posits that, applying Section 104(A) of the Tax Code on apportionment
of tax credits, Eastern is entitled to a tax refund of only ₱8,814,790.15, instead of the ₱16,229,100.00 Taxable Sales + Zero-rated Sales
adjudged by the CTA and the CA. Section 104(A) of the Tax Code states: x Input Tax as found by the CTA = Refu
Total Sales
SEC. 104. Tax Credits. –
7,924,403.96 + 557,445,384.97
(a) Creditable Input tax. - x 16,229,100.00 =P
1,040,907,129.77
xxxx
THE RESPONDENT’S ARGUMENTS
A VAT-registered person who is also engaged in transactions not subject to the value-added tax shall
be allowed input tax credit as follows: Eastern objects to the arguments raised in the petition, alleging that these have not been raised in the
Answer filed by the CIR before the CTA. In fact, the CIR only raised the applicability of Section 104(A)
(A) Total input tax which can be directly attributed to transactions subject to value-added tax; of the Tax Code in his supplemental motion for reconsideration of the CTA’s ruling which, notably, was
and filed a month and a half after the original motion was filed, and thus beyond the 15-day reglementary
period.21 Accordingly, the applicability of Section 104(A) was never validly presented as an issue before
the CTA; this, Eastern presumes, is the reason why it was not discussed in the CTA’s resolution
denying the motion for reconsideration. Eastern claims that for the CIR to raise such an issue now
would constitute a violation of its right to due process; following settled rules of procedure and fair play,
the CIR should not be allowed at the appeal level to change his theory of the case.
Moreover, in raising the question of whether Eastern was in fact engaged in transactions not subject to
VAT and whether the unapplied input taxes can be directly attributable to transactions subject to VAT,
Eastern posits that the CIR is effectively raising factual questions that cannot be the subject of an
appeal by certiorari before the Court.
Even if the CIR’s arguments were considered, Eastern insists that the petition should nevertheless be
denied since the CA found that there was no evidence in the claim that it was engaged in non-VAT
transactions. The CA has ruled that:
The following requirements must be present before [Section 104(A)] of the [1977 Tax Code] can be
applied, to wit:
1. The person claiming the creditable input tax must be VAT-registered;
2. Such person is engaged in a transaction subject to VAT;
3. The person is also engaged in other transactions not subject to VAT; and
4. The ratable portion of any input tax cannot be directly attributed to either activity.
In the case at bar, the third and fourth requisites are not extant. It is undisputed that [Eastern] is VAT-
registered and the importation of [Eastern’s] telecommunications equipment, machinery, spare parts,
fiber optic cables, and the like, as found by the CTA, is a transaction subject to VAT. However, there is
no evidence on record that would evidently show that respondent is also engaged in other transactions
that are not subject to VAT. [Emphasis supplied.]22
Given the parties’ arguments, the issue for resolution is whether the rule in Section 104(A) of the Tax
Code on the apportionment of tax credits can be applied in appreciating Eastern’s claim for tax refund,
considering that the matter was raised by the CIR only when he sought reconsideration of the CTA
ruling?
THE COURT’S RULING
We find the CIR’s petition meritorious.
The Rules of Court prohibits raising new issues on appeal; the question of the applicability of Section
104(A) of the Tax Code was already raised but the tax court did not rule on it
Section 15, Rule 44 of the Rules of Court embodies the rule against raising new issues on appeal:
SEC. 15. Questions that may be raised on appeal. – Whether or not the appellant has filed a motion for
new trial in the court below, he may include in his assignment of errors any question of law or fact that
has been raised in the court below and which is within the issues framed by the parties.
The general rule is that appeals can only raise questions of law or fact that (a) were raised in the court
below, and (b) are within the issues framed by the parties therein.23 An issue which was neither averred
in the pleadings nor raised during trial in the court below cannot be raised for the first time on
appeal.24 The rule was made for the benefit of the adverse party and the trial court as well. Raising new
issues at the appeal level is offensive to the basic rules of fair play and justice and is violative of a
party’s constitutional right to due process of law. Moreover, the trial court should be given a meaningful
opportunity to consider and pass upon all the issues, and to avoid or correct any alleged errors before
those issues or errors become the basis for an appeal.25
Eastern posits that since the CIR raised the applicability of Section 104(A) of the Tax Code only in his
supplemental motion for reconsideration of the CTA decision (which was even belatedly filed), the issue
was not properly and timely raised and, hence, could not be considered by the CTA. By raising the
issue in his appeal before the CA, the CIR has violated the above-cited procedural rule.
Contrary to Eastern’s claim, we find that the CIR has previously questioned the nature of Eastern’s
transactions insofar as they affected the claim for tax refund in his motion for reconsideration of the
CTA decision, although it did not specifically refer to Section 104(A) of the Tax Code. We quote
relevant portions of the motion:
[W]e maintain that [Eastern’s] claims are not creditable input taxes under [Section 104(A) of the Tax
Code]. What the law contemplates as creditable input taxes are only those paid on purchases of goods
and services specifically enumerated under [Section 104 (A)] and that such input tax must have been
paid by a VAT[-]registered person/entity in the course of trade or business. It must be noted that
[Eastern] failed to prove that such purchases were used in their VAT[-]taxable business. [Eastern’s
pieces of] evidence are not purchases of capital goods and do not fall under the enumeration x x x.
It is significant to point out here that refund of input taxes on capital goods shall be allowed only to the
extent that such capital goods are used in VAT[-]taxable business. x x x a perusal of the evidence
submitted before [the CTA] does not show that the alleged capital goods were used in VAT[-]taxable
business of [Eastern] x x x. [Emphases supplied.]26
In raising these matters in his motion for reconsideration, the CIR put forward the applicability of
Section 104(A) because, essentially, the applicability of the provision boils down to the question of
whether the purchased capital goods which a taxpayer paid input taxes were also used in a VAT-
taxable business, i.e., transactions that were subject to VAT, in order for them to be
refundable/creditable. Once proved that the taxpayer used the purchased capital goods in a both VAT
taxable and non-VAT taxable business, the proportional allocation of tax credits stated in the law
necessarily applies. This rule is also embodied in Section 4.106-1 of Revenue Regulation No. 7-95,
entitled Consolidated Value-Added Tax Regulations, which states:
SEC. 4.106-1. Refunds or tax credits of input tax. – x x x x
(b) Capital Goods. – Only a VAT-registered person may apply for issuance of a tax credit certificate or
refund of input taxes paid on capital goods imported or locally purchased. The refund shall be allowed
to the extent that such input taxes have not been applied against output taxes. The application should
be made within two (2) years after the close of the taxable quarter when the importation or purchase
was made.
Refund of input taxes on capital goods shall be allowed only to the extent that such capital goods are
used in VAT taxable business. If it is also used in exempt operations, the input tax refundable shall only
be the ratable portion corresponding to the taxable operations. [Emphasis supplied.]
That the CTA failed to rule on this question when it resolved the CIR’s motion for reconsideration
should not be taken against the CIR. It was the CTA which committed an error when it failed to avail of
that "meaningful opportunity to avoid or correct any alleged errors before those errors become the basis
for an appeal."271avvphi1
Exceptions to the general rule; Eastern’s VAT returns reporting income from exempt sales are matters
of record that the tax court should have considered
The rule against raising new issues on appeal is not without exceptions; it is a procedural rule that the
Court may relax when compelling reasons so warrant or when justice requires it. What constitutes good
and sufficient cause that would merit suspension of the rules is discretionary upon the courts.28 Former
Senator Vicente Francisco, a noted authority in procedural law, cites an instance when the appellate
court may take up an issue for the first time:
sellers cannot pass on any output VAT to the purchasers of goods, properties, or services, and they
may not claim tax credit/refund of the input VAT they had paid thereon.34
The mere declaration of exempt sales in the VAT returns, whether based on Section 103 of the Tax
Code or some other special law, should have prompted the CA to apply Section 104(A) of the Tax Code
to Eastern’s claim. It was thus erroneous for the appellate court to rule that the declaration of exempt
sales in Eastern’s VAT return, which may correspond to exempt transactions under Section 103, does
not indicate that Eastern was also involved in non-VAT transactions.
Exception to general rule; taxpayer claiming refund has the duty to prove entitlement thereto
Another exemption from the rule against raising new issues on appeal is when the question involves
matters of public importance.35

The appellate court may, in the interest of justice, properly take into consideration in deciding the case
The power of taxation is an inherent attribute of sovereignty; the government chiefly relies on taxation to
matters of record having some bearing on the issue submitted which the parties failed to raise or the
obtain the means to carry on its operations. Taxes are essential to its very existence;36 hence, the
lower court ignored, although they have not been specifically raised as issues by the pleadings. This is
dictum that "taxes are the lifeblood of the government." For this reason, the right of taxation cannot
in consonance with the liberal spirit that pervades the Rules of Court, and the modern trend of
easily be surrendered; statutes granting tax exemptions are considered as a derogation of the
procedure which accord the courts broad discretionary power, consistent with the orderly administration
sovereign authority and are strictly construed against the person or entity claiming the exemption.
of justice, in the decision of cases brought before them.29 [Emphasis supplied.]
Claims for tax refunds, when based on statutes granting tax exemption or tax refund, partake of the
nature of an exemption; thus, the rule of strict interpretation against the taxpayer-claimant similarly
As applied in the present case, even without the CIR raising the applicability of Section 104(A), the CTA applies.37
should have considered it since all four of Eastern’s VAT returns corresponding to each taxable quarter
of 1996 clearly stated that it earned income from exempt sales, i.e., non-VAT taxable sales. Eastern’s
The taxpayer is charged with the heavy burden of proving that he has complied with and satisfied all the
quarterly VAT returns are matters of record. In fact, Eastern included them in its formal offer of
statutory and administrative requirements to be entitled to the tax refund. This burden cannot be offset
evidence before the CTA "to prove that [it is] engaged in VAT taxable, VAT exempt, and VAT zero-rated
by the non-observance of procedural technicalities by the government’s tax agents when the non-
sales." By declaring income from exempt sales, Eastern effectively admitted that it engaged in
observance of the remedial measure addressing it does not in any manner prejudice the taxpayer’s due
transactions not subject to VAT. In VAT-exempt sales, the taxpayer/seller shall not bill any output tax on
process rights, as in the present case.
his sales to his customers and, corollarily, is not allowed any credit or refund of the input taxes he paid
on his purchases.30 This non-crediting of input taxes in exempt transactions is the underlying reason
why the Tax Code adopted the rule on apportionment of tax credits under Section 104(A) whenever a Eastern cannot validly claim to have been taken by surprise by the CIR’s arguments on the relevance of
VAT-registered taxpayer engages in both VAT taxable and non-VAT taxable sales. In the face of these Section 104(A) of the Tax Code, considering that the arguments were based on the reported exempt
disclosures by Eastern, we thus find the CA’s the conclusion that "there is no evidence on record that sales in the VAT returns that Eastern itself prepared and formally offered as evidence. Even if we were
would evidently show that [Eastern] is also engaged in other transactions that are not subject to VAT" to to consider the CIR’s act as a lapse in the observance of procedural rules, such lapse does not work to
be questionable.31 entitle Eastern to a tax refund when the established and uncontested facts have shown otherwise.
Lapses in the literal observance of a rule of procedure may be overlooked when they have not
prejudiced the adverse party and especially when they are more consistent with upholding settled
Also, we disagree with the CA’s declaration that:
principles in taxation.

The mere fact that [Eastern’s] Quarterly VAT Returns confirm that [Eastern’s] transactions involved
WHEREFORE, we GRANT the petitioner’s petition for review on certiorari, and REVERSE the decision
zero-rated sales and exempt sales do not sufficiently establish that the same were derived from
of the Court of Appeals in CA G.R. SP No. 61157, promulgated on October 1, 2003, as well as its
[Eastern’s] transactions that are not subject to VAT. On the contrary, the transactions from which
resolution of May 26, 2004. We order the REMAND of the case to the Court of Tax Appeals to
[Eastern’s] sales were derived are subject to VAT but are either zero[-]rated (0%) or otherwise
determine the proportionate amount of tax credit that respondent is entitled to, consistent with our ruling
exempted for falling within the transactions enumerated in [Section 102(B) or Section 103] of the Tax
above. Costs against the respondent.
Code.32 [Emphasis supplied.]

SO ORDERED.
Section 103 of the Tax Code33 is an enumeration of transactions exempt from VAT. Explaining the
relation between exempt transactions in Section 103 and claims for tax refunds, the Court declared in
CIR v. Toshiba Equipment (Phils.), Inc. that: G.R. No. 163653               July 19, 2011

Section 103 x x x of the Tax Code of 1977, as amended, relied upon by petitioner CIR, relates to VAT- COMMISSIONER OF INTERNAL REVENUE, Petitioner, 
exempt transactions. These are transactions exempted from VAT by special laws or international vs.
agreements to which the Philippines is a signatory. Since such transactions are not subject to VAT, the FILINVEST DEVELOPMENT CORPORATION, Respondent.
x - - - - - - - - - - - - - - - - - - - - - - -x On various dates during the years 1996 and 1997, in the meantime, FDC also extended advances in
favor of its affiliates, namely, FAI, FLI, Davao Sugar Central Corporation (DSCC) and Filinvest Capital,
Inc. (FCI).8 Duly evidenced by instructional letters as well as cash and journal vouchers, said cash
G.R. No. 167689
advances amounted to ₱2,557,213,942.60 in 19969 and ₱3,360,889,677.48 in 1997.10 On 15 November
1996, FDC also entered into a Shareholders’ Agreement with Reco Herrera PTE Ltd. (RHPL) for the
COMMISSIONER OF INTERNAL REVENUE, Petitioner,  formation of a Singapore-based joint venture company called Filinvest Asia Corporation (FAC), tasked
vs. to develop and manage FDC’s 50% ownership of its PBCom Office Tower Project (the Project). With
FILINVEST DEVELOPMENT CORPORATION, Respondent. their equity participation in FAC respectively pegged at 60% and 40% in the Shareholders’ Agreement,
FDC subscribed to ₱500.7 million worth of shares in said joint venture company to RHPL’s subscription
worth ₱433.8 million. Having paid its subscription by executing a Deed of Assignment transferring to
DECISION FAC a portion of its rights and interest in the Project worth ₱500.7 million, FDC eventually reported a
net loss of ₱190,695,061.00 in its Annual Income Tax Return for the taxable year 1996.11
PEREZ, J.:
On 3 January 2000, FDC received from the BIR a Formal Notice of Demand to pay deficiency income
Assailed in these twin petitions for review on certiorari filed pursuant to Rule 45 of the 1997 Rules of and documentary stamp taxes, plus interests and compromise penalties,12 covered by the following
Civil Procedure are the decisions rendered by the Court of Appeals (CA) in the following cases: (a) Assessment Notices, viz.: (a) Assessment Notice No. SP-INC-96-00018-2000 for deficiency income
Decision dated 16 December 2003 of the then Special Fifth Division in CA-G.R. SP No. 72992;1 and, taxes in the sum of ₱150,074,066.27 for 1996; (b) Assessment Notice No. SP-DST-96-00020-2000 for
(b) Decision dated 26 January 2005 of the then Fourteenth Division in CA-G.R. SP No. 74510.2 deficiency documentary stamp taxes in the sum of ₱10,425,487.06 for 1996; (c) Assessment Notice No.
SP-INC-97-00019-2000 for deficiency income taxes in the sum of ₱5,716,927.03 for 1997; and (d)
Assessment Notice No. SP-DST-97-00021-2000 for deficiency documentary stamp taxes in the sum of
The Facts ₱5,796,699.40 for 1997.13 The foregoing deficiency taxes were assessed on the taxable gain
supposedly realized by FDC from the Deed of Exchange it executed with FAI and FLI, on the dilution
The owner of 80% of the outstanding shares of respondent Filinvest Alabang, Inc. (FAI), respondent resulting from the Shareholders’ Agreement FDC executed with RHPL as well as the "arm’s-length"
Filinvest Development Corporation (FDC) is a holding company which also owned 67.42% of the interest rate and documentary stamp taxes imposable on the advances FDC extended to its affiliates.14
outstanding shares of Filinvest Land, Inc. (FLI). On 29 November 1996, FDC and FAI entered into a
Deed of Exchange with FLI whereby the former both transferred in favor of the latter parcels of land On 3 January 2000, FAI similarly received from the BIR a Formal Letter of Demand for deficiency
appraised at ₱4,306,777,000.00. In exchange for said parcels which were intended to facilitate income taxes in the sum of ₱1,477,494,638.23 for the year 1997.15 Covered by Assessment Notice No.
development of medium-rise residential and commercial buildings, 463,094,301 shares of stock of FLI SP-INC-97-0027-2000,16said deficiency tax was also assessed on the taxable gain purportedly realized
were issued to FDC and FAI.3 As a result of the exchange, FLI’s ownership structure was changed to by FAI from the Deed of Exchange it executed with FDC and FLI.17 On 26 January 2000 or within the
the extent reflected in the following tabular précis, viz.: reglementary period of thirty (30) days from notice of the assessment, both FDC and FAI filed their
respective requests for reconsideration/protest, on the ground that the deficiency income and
documentary stamp taxes assessed by the BIR were bereft of factual and legal basis.18Having
Number of
Number and Percentage of Shares Number and Percentagesubmitted
of Sharesthe relevant supporting documents pursuant to the 31 January 2000 directive from the BIR
Stockholder Additional Shares
Held Prior to the Exchange Appellate Division, FDC and FAI filed on 11 September 2000 a letter requesting an early resolution of
Held After the Exchange
Issued
their request for reconsideration/protest on the ground that the 180 days prescribed for the resolution
19
FDC 2,537,358,000 67.42% 42,217,000 2,579,575,000 thereof under Section 228 of the NIRC was going to expire on 20 September 2000.

FAI 0 0 420,877,000
OTHERS 1,226,177,000 32.58% 0 1,226,177,000
  3,763,535,000 100% 463,094,301
On 13 January 1997, FLI requested a ruling from the Bureau of Internal Revenue (BIR) to the effect that
no gain or loss should be recognized in the aforesaid transfer of real properties. Acting on the request,
the BIR issued Ruling No. S-34-046-97 dated 3 February 1997, finding that the exchange is among
those contemplated under Section 34 (c) (2) of the old National Internal Revenue Code (NIRC)4 which
provides that "(n)o gain or loss shall be recognized if property is transferred to a corporation by a
person in exchange for a stock in such corporation of which as a result of such exchange said person,
alone or together with others, not exceeding four (4) persons, gains control of said corporation."5 With
the BIR’s reiteration of the foregoing ruling upon the 10 February 1997 request for clarification filed by
FLI,6 the latter, together with FDC and FAI, complied with all the requirements imposed in the ruling.7
420,877,000 In view of the failure of petitioner Commissioner of Internal Revenue (CIR) to resolve their request for
reconsideration/protest within the aforesaid period, FDC and FAI filed on 17 October 2000 a petition for
review with the Court of Tax Appeals (CTA) pursuant to Section 228 of the 1997 NIRC. Docketed
before said court as CTA Case No. 6182, the petition alleged, among other matters, that as previously
opined in BIR Ruling No. S-34-046-97, no taxable gain should have been assessed from the subject
4,226,629,000 Deed of Exchange since FDC and FAI collectively gained further control of FLI as a consequence of the
exchange; that correlative to the CIR's lack of authority to impute theoretical interests on the cash
advances FDC extended in favor of its affiliates, the rule is settled that interests cannot be demanded in
the absence of a stipulation to the effect; that not being promissory notes or certificates of obligations,
the instructional letters as well as the cash and journal vouchers evidencing said cash advances were
not subject to documentary stamp taxes; and, that no income tax may be imposed on the prospective
gain from the supposed appreciation of FDC's shareholdings in FAC. As a consequence, FDC and FAC
both prayed that the subject assessments for deficiency income and documentary stamp taxes for the
years 1996 and 1997 be cancelled and annulled.20
On 4 December 2000, the CIR filed its answer, claiming that the transfer of property in question should
not be considered tax free since, with the resultant diminution of its shares in FLI, FDC did not gain
further control of said corporation. Likewise calling attention to the fact that the cash advances FDC
extended to its affiliates were interest free despite the interest bearing loans it obtained from banking
institutions, the CIR invoked Section 43 of the old NIRC which, as implemented by Revenue
Regulations No. 2, Section 179 (b) and (c), gave him "the power to allocate, distribute or apportion
income or deductions between or among such organizations, trades or business in order to prevent
evasion of taxes." The CIR justified the imposition of documentary stamp taxes on the instructional
letters as well as cash and journal vouchers for said cash advances on the strength of Section 180 of
the NIRC and Revenue Regulations No. 9-94 which provide that loan transactions are subject to said
tax irrespective of whether or not they are evidenced by a formal agreement or by mere office memo.
The CIR also argued that FDC realized taxable gain arising from the dilution of its shares in FAC as a
result of its Shareholders' Agreement with RHPL.21
At the pre-trial conference, the parties filed a Stipulation of Facts, Documents and Issues22 which was
admitted in the 16 February 2001 resolution issued by the CTA. With the further admission of the
Formal Offer of Documentary Evidence subsequently filed by FDC and FAI23 and the conclusion of the
testimony of Susana Macabelda anent the cash advances FDC extended in favor of its affiliates,24 the
CTA went on to render the Decision dated 10 September 2002 which, with the exception of the
deficiency income tax on the interest income FDC supposedly realized from the advances it extended in
favor of its affiliates, cancelled the rest of deficiency income and documentary stamp taxes assessed
against FDC and FAI for the years 1996 and 1997,25 thus:
WHEREFORE, in view of all the foregoing, the court finds the instant petition partly meritorious.
Accordingly, Assessment Notice No. SP-INC-96-00018-2000 imposing deficiency income tax on FDC
for taxable year 1996, Assessment Notice No. SP-DST-96-00020-2000 and SP-DST-97-00021-2000
imposing deficiency documentary stamp tax on FDC for taxable years 1996 and 1997, respectively and
Assessment Notice No. SP-INC-97-0027-2000 imposing deficiency income tax on FAI for the taxable
year 1997 are hereby CANCELLED and SET ASIDE. However, [FDC] is hereby ORDERED to PAY the
amount of ₱5,691,972.03 as deficiency income tax for taxable year 1997. In addition, petitioner is also
ORDERED to PAY 20% delinquency interest computed from February 16, 2000 until full payment
thereof pursuant to Section 249 (c) (3) of the Tax Code.26
Finding that the collective increase of the equity participation of FDC and FAI in FLI rendered the gain
derived from the exchange tax-free, the CTA also ruled that the increase in the value of FDC's shares in
FAC did not result in economic advantage in the absence of actual sale or conversion thereof. While
likewise finding that the documents evidencing the cash advances FDC extended to its affiliates cannot
be considered as loan agreements that are subject to documentary stamp tax, the CTA enunciated,
however, that the CIR was justified in assessing undeclared interests on the same cash advances
pursuant to his authority under Section 43 of the NIRC in order to forestall tax evasion. For persuasive
effect, the CTA referred to the equivalent provision in the Internal Revenue Code of the United States
(IRC-US), i.e., Sec. 482, as implemented by Section 1.482-2 of 1965-1969 Regulations of the Law of
Federal Income Taxation.27
Dissatisfied with the foregoing decision, FDC filed on 5 November 2002 the petition for review docketed
before the CA as CA-G.R. No. 72992, pursuant to Rule 43 of the 1997 Rules of Civil Procedure. Calling
attention to the fact that the cash advances it extended to its affiliates were interest-free in the absence
of the express stipulation on interest required under Article 1956 of the Civil Code, FDC questioned the
imposition of an arm's-length interest rate thereon on the ground, among others, that the CIR's authority
under Section 43 of the NIRC: (a) does not include the power to impute imaginary interest on said
transactions; (b) is directed only against controlled taxpayers and not against mother or holding
corporations; and, (c) can only be invoked in cases of understatement of taxable net income or evident
tax evasion.28 Upholding FDC's position, the CA's then Special Fifth Division rendered the herein
assailed decision dated 16 December 2003,29 the decretal portion of which states:
WHEREFORE, premises considered, the instant petition is hereby GRANTED. The assailed Decision
dated September 10, 2002 rendered by the Court of Tax Appeals in CTA Case No. 6182 directing
petitioner Filinvest Development Corporation to pay the amount of ₱5,691,972.03 representing
deficiency income tax on allegedly undeclared interest income for the taxable year 1997, plus 20%
delinquency interest computed from February 16, 2000 until full payment thereof is REVERSED and
SET ASIDE and, a new one entered annulling Assessment Notice No. SP-INC-97-00019-2000
imposing deficiency income tax on petitioner for taxable year 1997. No pronouncement as to costs.30
With the denial of its partial motion for reconsideration of the same 11 December 2002 resolution
issued by the CTA,31 the CIR also filed the petition for review docketed before the CA as CA-G.R. No.
74510. In essence, the CIR argued that the CTA reversibly erred in cancelling the assessment notices:
(a) for deficiency income taxes on the exchange of property between FDC, FAI and FLI; (b) for
deficiency documentary stamp taxes on the documents evidencing FDC's cash advances to its
affiliates; and (c) for deficiency income tax on the gain FDC purportedly realized from the increase of
the value of its shareholdings in FAC.32 The foregoing petition was, however, denied due course and
dismissed for lack of merit in the herein assailed decision dated 26 January 200533 rendered by the
CA's then Fourteenth Division, upon the following findings and conclusions, to wit:
1. As affirmed in the 3 February 1997 BIR Ruling No. S-34-046-97, the 29 November 1996
Deed of Exchange resulted in the combined control by FDC and FAI of more than 51% of the
outstanding shares of FLI, hence, no taxable gain can be recognized from the transaction
under Section 34 (c) (2) of the old NIRC;
2. The instructional letters as well as the cash and journal vouchers evidencing the advances
FDC extended to its affiliates are not subject to documentary stamp taxes pursuant to BIR
Ruling No. 116-98, dated 30 July 1998, since they do not partake the nature of loan
agreements;
3. Although BIR Ruling No. 116-98 had been subsequently modified by BIR Ruling No. 108-
99, dated 15 July 1999, to the effect that documentary stamp taxes are imposable on inter-
office memos evidencing cash advances similar to those extended by FDC, said latter ruling
cannot be given retroactive application if to do so would be prejudicial to the taxpayer;
4. FDC's alleged gain from the increase of its shareholdings in FAC as a consequence of the
Shareholders' Agreement it executed with RHPL cannot be considered taxable income since,
until actually converted thru sale or disposition of said shares, they merely represent
unrealized increase in capital.34
Respectively docketed before this Court as G.R. Nos. 163653 and 167689, the CIR's petitions for
review on certiorari assailing the 16 December 2003 decision in CA-G.R. No. 72992 and the 26 January
2005 decision in CA-G.R. SP No. 74510 were consolidated pursuant to the 1 March 2006 resolution
issued by this Court’s Third Division.
The Issues
In G.R. No. 163653, the CIR urges the grant of its petition on the following ground:
THE COURT OF APPEALS ERRED IN REVERSING THE DECISION OF THE COURT OF TAX
APPEALS AND IN HOLDING THAT THE ADVANCES EXTENDED BY RESPONDENT TO ITS
AFFILIATES ARE NOT SUBJECT TO INCOME TAX.35
In G.R. No. 167689, on the other hand, petitioner proffers the following issues for resolution:
466,40 Sec. 179(b) of Revenue Regulation No. 2 states as follows:
I
Determination of the taxable net income of controlled taxpayer. – (A) DEFINITIONS. – When used in
this section –
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION
IN HOLDING THAT THE EXCHANGE OF SHARES OF STOCK FOR PROPERTY AMONG
FILINVEST DEVELOPMENT CORPORATION (FDC), FILINVEST ALABANG,
INCORPORATED (FAI) AND FILINVEST LAND INCORPORATED (FLI) MET ALL THE
REQUIREMENTS FOR THE NON-RECOGNITION OF TAXABLE GAIN UNDER SECTION
34 (c) (2) OF THE OLD NATIONAL INTERNAL REVENUE CODE (NIRC) (NOW SECTION
40 (C) (2) (c) OF THE NIRC.
II
THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN
HOLDING THAT THE LETTERS OF INSTRUCTION OR CASH VOUCHERS EXTENDED BY
FDC TO ITS AFFILIATES ARE NOT DEEMED LOAN AGREEMENTS SUBJECT TO
DOCUMENTARY STAMP TAXES UNDER SECTION 180 OF THE NIRC.
III
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT GAIN ON
DILUTION AS A RESULT OF THE INCREASE IN THE VALUE OF FDC’S
SHAREHOLDINGS IN FAC IS NOT TAXABLE.36
The Court’s Ruling
While the petition in G.R. No. 163653 is bereft of merit, we find the CIR’s petition in G.R. No. 167689
impressed with partial merit.
In G.R. No. 163653, the CIR argues that the CA erred in reversing the CTA’s finding that theoretical
interests can be imputed on the advances FDC extended to its affiliates in 1996 and 1997 considering
that, for said purpose, FDC resorted to interest-bearing fund borrowings from commercial banks. Since
considerable interest expenses were deducted by FDC when said funds were borrowed, the CIR
theorizes that interest income should likewise be declared when the same funds were sourced for the
advances FDC extended to its affiliates. Invoking Section 43 of the 1993 NIRC in relation to Section
179(b) of Revenue Regulation No. 2, the CIR maintains that it is vested with the power to allocate,
distribute or apportion income or deductions between or among controlled organizations, trades or
businesses even in the absence of fraud, since said power is intended "to prevent evasion of taxes or
clearly to reflect the income of any such organizations, trades or businesses." In addition, the CIR
asseverates that the CA should have accorded weight and respect to the findings of the CTA which, as
the specialized court dedicated to the study and consideration of tax matters, can take judicial notice of
US income tax laws and regulations.37
Admittedly, Section 43 of the 1993 NIRC38 provides that, "(i)n any case of two or more organizations,
trades or businesses (whether or not incorporated and whether or not organized in the Philippines)
owned or controlled directly or indirectly by the same interests, the Commissioner of Internal Revenue
is authorized to distribute, apportion or allocate gross income or deductions between or among such
organization, trade or business, if he determines that such distribution, apportionment or allocation is
necessary in order to prevent evasion of taxes or clearly to reflect the income of any such organization,
trade or business." In amplification of the equivalent provision39 under Commonwealth Act No.
(1) The term "organization" includes any kind, whether it be a sole proprietorship, a
partnership, a trust, an estate, or a corporation or association, irrespective of the
place where organized, where operated, or where its trade or business is
conducted, and regardless of whether domestic or foreign, whether exempt or
taxable, or whether affiliated or not.
(2) The terms "trade" or "business" include any trade or business activity of any
kind, regardless of whether or where organized, whether owned individually or
otherwise, and regardless of the place where carried on.
(3) The term "controlled" includes any kind of control, direct or indirect, whether
legally enforceable, and however exercisable or exercised. It is the reality of the
control which is decisive, not its form or mode of exercise. A presumption of control
arises if income or deductions have been arbitrarily shifted.
(4) The term "controlled taxpayer" means any one of two or more organizations,
trades, or businesses owned or controlled directly or indirectly by the same
interests.
(5) The term "group" and "group of controlled taxpayers" means the organizations,
trades or businesses owned or controlled by the same interests.
(6) The term "true net income" means, in the case of a controlled taxpayer, the net
income (or as the case may be, any item or element affecting net income) which
would have resulted to the controlled taxpayer, had it in the conduct of its affairs
(or, as the case may be, any item or element affecting net income) which would
have resulted to the controlled taxpayer, had it in the conduct of its affairs (or, as
the case may be, in the particular contract, transaction, arrangement or other act)
dealt with the other members or members of the group at arm’s length. It does not
mean the income, the deductions, or the item or element of either, resulting to the
controlled taxpayer by reason of the particular contract, transaction, or
arrangement, the controlled taxpayer, or the interest controlling it, chose to make
(even though such contract, transaction, or arrangement be legally binding upon
the parties thereto).
(B) SCOPE AND PURPOSE. - The purpose of Section 44 of the Tax Code is to place a
controlled taxpayer on a tax parity with an uncontrolled taxpayer, by determining, according
to the standard of an uncontrolled taxpayer, the true net income from the property and
business of a controlled taxpayer. The interests controlling a group of controlled taxpayer are
assumed to have complete power to cause each controlled taxpayer so to conduct its affairs
that its transactions and accounting records truly reflect the net income from the property and
business of each of the controlled taxpayers. If, however, this has not been done and the
taxable net income are thereby understated, the statute contemplates that the Commissioner
of Internal Revenue shall intervene, and, by making such distributions, apportionments, or
allocations as he may deem necessary of gross income or deductions, or of any item or
element affecting net income, between or among the controlled taxpayers constituting the
 group, shall determine the true net income of each controlled taxpayer. The standard to be
applied in every case is that of an uncontrolled taxpayer. Section 44 grants no right to a
controlled taxpayer to apply its provisions at will, nor does it grant any right to compel the
Commissioner of Internal Revenue to apply its provisions.
(C) APPLICATION – Transactions between controlled taxpayer and another will be subjected
to special scrutiny to ascertain whether the common control is being used to reduce, avoid or
escape taxes. In determining the true net income of a controlled taxpayer, the Commissioner
of Internal Revenue is not restricted to the case of improper accounting, to the case of a
fraudulent, colorable, or sham transaction, or to the case of a device designed to reduce or
avoid tax by shifting or distorting income or deductions. The authority to determine true net
income extends to any case in which either by inadvertence or design the taxable net income
in whole or in part, of a controlled taxpayer, is other than it would have been had the taxpayer
in the conduct of his affairs been an uncontrolled taxpayer dealing at arm’s length with
another uncontrolled taxpayer.41
As may be gleaned from the definitions of the terms "controlled" and "controlled taxpayer" under
paragraphs (a) (3) and (4) of the foregoing provision, it would appear that FDC and its affiliates come
within the purview of Section 43 of the 1993 NIRC. Aside from owning significant portions of the shares
of stock of FLI, FAI, DSCC and FCI, the fact that FDC extended substantial sums of money as cash
advances to its said affiliates for the purpose of providing them financial assistance for their operational
and capital expenditures seemingly indicate that the situation sought to be addressed by the subject
provision exists. From the tenor of paragraph (c) of Section 179 of Revenue Regulation No. 2, it may
also be seen that the CIR's power to distribute, apportion or allocate gross income or deductions
between or among controlled taxpayers may be likewise exercised whether or not fraud inheres in the
transaction/s under scrutiny. For as long as the controlled taxpayer's taxable income is not reflective of
that which it would have realized had it been dealing at arm's length with an uncontrolled taxpayer, the
CIR can make the necessary rectifications in order to prevent evasion of taxes.
Despite the broad parameters provided, however, we find that the CIR's powers of distribution,
apportionment or allocation of gross income and deductions under Section 43 of the 1993 NIRC and
Section 179 of Revenue Regulation No. 2 does not include the power to impute "theoretical interests" to
the controlled taxpayer's transactions. Pursuant to Section 28 of the 1993 NIRC,42 after all, the term
"gross income" is understood to mean all income from whatever source derived, including, but not
limited to the following items: compensation for services, including fees, commissions, and similar
items; gross income derived from business; gains derived from dealings in property;" interest; rents;
royalties; dividends; annuities; prizes and winnings; pensions; and partner’s distributive share of the
gross income of general professional partnership.43 While it has been held that the phrase "from
whatever source derived" indicates a legislative policy to include all income not expressly exempted
within the class of taxable income under our laws, the term "income" has been variously interpreted to
mean "cash received or its equivalent", "the amount of money coming to a person within a specific time"
or "something distinct from principal or capital."44 Otherwise stated, there must be proof of the actual or,
at the very least, probable receipt or realization by the controlled taxpayer of the item of gross income
sought to be distributed, apportioned or allocated by the CIR.
Our circumspect perusal of the record yielded no evidence of actual or possible showing that the
advances FDC extended to its affiliates had resulted to the interests subsequently assessed by the
CIR. For all its harping upon the supposed fact that FDC had resorted to borrowings from commercial
banks, the CIR had adduced no concrete proof that said funds were, indeed, the source of the
advances the former provided its affiliates. While admitting that FDC obtained interest-bearing loans
from commercial banks,45 Susan Macabelda - FDC's Funds Management Department Manager who
was the sole witness presented before the CTA - clarified that the subject advances were sourced from
the corporation's rights offering in 1995 as well as the sale of its investment in Bonifacio Land in
1997.46 More significantly, said witness testified that said advances: (a) were extended to give FLI, FAI,
DSCC and FCI financial assistance for their operational and capital expenditures; and, (b) were all
temporarily in nature since they were repaid within the duration of one week to three months and were
evidenced by mere journal entries, cash vouchers and instructional letters."47
Even if we were, therefore, to accord precipitate credulity to the CIR's bare assertion that FDC had
deducted substantial interest expense from its gross income, there would still be no factual basis for the
imputation of theoretical interests on the subject advances and assess deficiency income taxes
thereon. More so, when it is borne in mind that, pursuant to Article 1956 of the Civil Code of the
Philippines, no interest shall be due unless it has been expressly stipulated in writing. Considering that
taxes, being burdens, are not to be presumed beyond what the applicable statute expressly and clearly
declares,48 the rule is likewise settled that tax statutes must be construed strictly against the
government and liberally in favor of the taxpayer.49 Accordingly, the general rule of requiring adherence
to the letter in construing statutes applies with peculiar strictness to tax laws and the provisions of a
taxing act are not to be extended by implication.50 While it is true that taxes are the lifeblood of the
government, it has been held that their assessment and collection should be in accordance with law as
any arbitrariness will negate the very reason for government itself.51
In G.R. No. 167689, we also find a dearth of merit in the CIR's insistence on the imposition of deficiency
income taxes on the transfer FDC and FAI effected in exchange for the shares of stock of FLI. With
respect to the Deed of Exchange executed between FDC, FAI and FLI, Section 34 (c) (2) of the 1993
NIRC pertinently provides as follows:
Sec. 34. Determination of amount of and recognition of gain or loss.-
xxxx
(c) Exception – x x x x
No gain or loss shall also be recognized if property is transferred to a corporation by a person in
exchange for shares of stock in such corporation of which as a result of such exchange said person,
alone or together with others, not exceeding four persons, gains control of said corporation; Provided,
That stocks issued for services shall not be considered as issued in return of property.
As even admitted in the 14 February 2001 Stipulation of Facts submitted by the parties,52 the requisites
for the non-recognition of gain or loss under the foregoing provision are as follows: (a) the transferee is
a corporation; (b) the transferee exchanges its shares of stock for property/ies of the transferor; (c) the
transfer is made by a person, acting alone or together with others, not exceeding four persons; and, (d)
as a result of the exchange the transferor, alone or together with others, not exceeding four, gains
control of the transferee.53 Acting on the 13 January 1997 request filed by FLI, the BIR had, in fact,
acknowledged the concurrence of the foregoing requisites in the Deed of Exchange the former
executed with FDC and FAI by issuing BIR Ruling No. S-34-046-97.54 With the BIR's reiteration of said
ruling upon the request for clarification filed by FLI,55 there is also no dispute that said transferee and
transferors subsequently complied with the requirements provided for the non-recognition of gain or
loss from the exchange of property for tax, as provided under Section 34 (c) (2) of the 1993 NIRC.56
Then as now, the CIR argues that taxable gain should be recognized for the exchange considering that
FDC's controlling interest in FLI was actually decreased as a result thereof. For said purpose, the CIR
calls attention to the fact that, prior to the exchange, FDC owned 2,537,358,000 or 67.42% of FLI's
3,763,535,000 outstanding capital stock. Upon the issuance of 443,094,000 additional FLI shares as a
consequence of the exchange and with only 42,217,000 thereof accruing in favor of FDC for a total of
2,579,575,000 shares, said corporation’s controlling interest was supposedly reduced to 61%.03 when
reckoned from the transferee's aggregate 4,226,629,000 outstanding shares. Without owning a share
from FLI's initial 3,763,535,000 outstanding shares, on the other hand, FAI's acquisition of 420,877,000
FLI shares as a result of the exchange purportedly resulted in its control of only 9.96% of said
transferee corporation's 4,226,629,000 outstanding shares. On the principle that the transaction did not
qualify as a tax-free exchange under Section 34 (c) (2) of the 1993 NIRC, the CIR asseverates that
taxable gain in the sum of ₱263,386,921.00 should be recognized on the part of FDC and in the sum of
₱3,088,711,367.00 on the part of FAI.57
The paucity of merit in the CIR's position is, however, evident from the categorical language of Section
34 (c) (2) of the 1993 NIRC which provides that gain or loss will not be recognized in case the
exchange of property for stocks results in the control of the transferee by the transferor, alone or with
other transferors not exceeding four persons. Rather than isolating the same as proposed by the CIR,
FDC's 2,579,575,000 shares or 61.03% control of FLI's 4,226,629,000 outstanding shares should,
therefore, be appreciated in combination with the 420,877,000 new shares issued to FAI which
represents 9.96% control of said transferee corporation. Together FDC's 2,579,575,000 shares
(61.03%) and FAI's 420,877,000 shares (9.96%) clearly add up to 3,000,452,000 shares or 70.99% of
FLI's 4,226,629,000 shares. Since the term "control" is clearly defined as "ownership of stocks in a
corporation possessing at least fifty-one percent of the total voting power of classes of stocks entitled to
one vote" under Section 34 (c) (6) [c] of the 1993 NIRC, the exchange of property for stocks between
FDC FAI and FLI clearly qualify as a tax-free transaction under paragraph 34 (c) (2) of the same
provision.
Against the clear tenor of Section 34(c) (2) of the 1993 NIRC, the CIR cites then Supreme Court Justice
Jose Vitug and CTA Justice Ernesto D. Acosta who, in their book Tax Law and Jurisprudence, opined
that said provision could be inapplicable if control is already vested in the exchangor prior to
exchange.58 Aside from the fact that that the 10 September 2002 Decision in CTA Case No. 6182
upholding the tax-exempt status of the exchange between FDC, FAI and FLI was penned by no less
than Justice Acosta himself,59 FDC and FAI significantly point out that said authors have acknowledged
that the position taken by the BIR is to the effect that "the law would apply even when the exchangor
already has control of the corporation at the time of the exchange."60 This was confirmed when,
apprised in FLI's request for clarification about the change of percentage of ownership of its outstanding
capital stock, the BIR opined as follows:
Please be informed that regardless of the foregoing, the transferors, Filinvest Development Corp. and
Filinvest Alabang, Inc. still gained control of Filinvest Land, Inc. The term 'control' shall mean ownership
of stocks in a corporation by possessing at least 51% of the total voting power of all classes of stocks
entitled to vote. Control is determined by the amount of stocks received, i.e., total subscribed, whether
for property or for services by the transferor or transferors. In determining the 51% stock ownership,
only those persons who transferred property for stocks in the same transaction may be counted up to
the maximum of five (BIR Ruling No. 547-93 dated December 29, 1993.61
At any rate, it also appears that the supposed reduction of FDC's shares in FLI posited by the CIR is
more apparent than real. As the uncontested owner of 80% of the outstanding shares of FAI, it cannot
be gainsaid that FDC ideally controls the same percentage of the 420,877,000 shares issued to its said
co-transferor which, by itself, represents 7.968% of the outstanding shares of FLI. Considered
alongside FDC's 61.03% control of FLI as a consequence of the 29 November 1996 Deed of Transfer,
said 7.968% add up to an aggregate of 68.998% of said transferee corporation's outstanding shares of
stock which is evidently still greater than the 67.42% FDC initially held prior to the exchange. This much
was admitted by the parties in the 14 February 2001 Stipulation of Facts, Documents and Issues they
submitted to the CTA.62 Inasmuch as the combined ownership of FDC and FAI of FLI's outstanding
capital stock adds up to a total of 70.99%, it stands to reason that neither of said transferors can be
held liable for deficiency income taxes the CIR assessed on the supposed gain which resulted from the
subject transfer.
On the other hand, insofar as documentary stamp taxes on loan agreements and promissory notes are
concerned, Section 180 of the NIRC provides follows:
Sec. 180. Stamp tax on all loan agreements, promissory notes, bills of exchange, drafts, instruments
and securities issued by the government or any of its instrumentalities, certificates of deposit bearing
interest and others not payable on sight or demand. – On all loan agreements signed abroad wherein
the object of the contract is located or used in the Philippines; bill of exchange (between points within
the Philippines), drafts, instruments and securities issued by the Government or any of its
instrumentalities or certificates of deposits drawing interest, or orders for the payment of any sum of
money otherwise than at sight or on demand, or on all promissory notes, whether negotiable or non-
negotiable, except bank notes issued for circulation, and on each renewal of any such note, there shall
be collected a documentary stamp tax of Thirty centavos (₱0.30) on each two hundred pesos, or
fractional part thereof, of the face value of any such agreement, bill of exchange, draft, certificate of
deposit or note: Provided, That only one documentary stamp tax shall be imposed on either loan
agreement, or promissory notes issued to secure such loan, whichever will yield a higher tax: Provided
however, That loan agreements or promissory notes the aggregate of which does not exceed Two
hundred fifty thousand pesos (₱250,000.00) executed by an individual for his purchase on installment
for his personal use or that of his family and not for business, resale, barter or hire of a house, lot,
motor vehicle, appliance or furniture shall be exempt from the payment of documentary stamp tax
provided under this Section.
When read in conjunction with Section 173 of the 1993 NIRC,63 the foregoing provision concededly
applies to "(a)ll loan agreements, whether made or signed in the Philippines, or abroad when the
obligation or right arises from Philippine sources or the property or object of the contract is located or
used in the Philippines." Correlatively, Section 3 (b) and Section 6 of Revenue Regulations No. 9-94
provide as follows:
Section 3. Definition of Terms. – For purposes of these Regulations, the following term shall mean:
(b) 'Loan agreement' – refers to a contract in writing where one of the parties delivers to another money
or other consumable thing, upon the condition that the same amount of the same kind and quality shall
be paid. The term shall include credit facilities, which may be evidenced by credit memo, advice or
drawings.
The terms 'Loan Agreement" under Section 180 and "Mortgage' under Section 195, both of the Tax
Code, as amended, generally refer to distinct and separate instruments. A loan agreement shall be
taxed under Section 180, while a deed of mortgage shall be taxed under Section 195."
"Section 6. Stamp on all Loan Agreements. – All loan agreements whether made or signed in the
Philippines, or abroad when the obligation or right arises from Philippine sources or the property or
object of the contract is located in the Philippines shall be subject to the documentary stamp tax of thirty
centavos (₱0.30) on each two hundred pesos, or fractional part thereof, of the face value of any such
agreements, pursuant to Section 180 in relation to Section 173 of the Tax Code.
In cases where no formal agreements or promissory notes have been executed to cover credit facilities,
the documentary stamp tax shall be based on the amount of drawings or availment of the facilities,
which may be evidenced by credit/debit memo, advice or drawings by any form of check or withdrawal
slip, under Section 180 of the Tax Code.
Applying the aforesaid provisions to the case at bench, we find that the instructional letters as well as
the journal and cash vouchers evidencing the advances FDC extended to its affiliates in 1996 and 1997
qualified as loan agreements upon which documentary stamp taxes may be imposed. In keeping with
the caveat attendant to every BIR Ruling to the effect that it is valid only if the facts claimed by the
taxpayer are correct, we find that the CA reversibly erred in utilizing BIR Ruling No. 116-98, dated 30
July 1998 which, strictly speaking, could be invoked only by ASB Development Corporation, the
taxpayer who sought the same. In said ruling, the CIR opined that documents like those evidencing the
advances FDC extended to its affiliates are not subject to documentary stamp tax, to wit:
On the matter of whether or not the inter-office memo covering the advances granted by an affiliate
company is subject to documentary stamp tax, it is informed that nothing in Regulations No. 26
(Documentary Stamp Tax Regulations) and Revenue Regulations No. 9-94 states that the same is
subject to documentary stamp tax. Such being the case, said inter-office memo evidencing the lendings
or borrowings which is neither a form of promissory note nor a certificate of indebtedness issued by the
corporation-affiliate or a certificate of obligation, which are, more or less, categorized as 'securities', is
not subject to documentary stamp tax imposed under Section 180, 174 and 175 of the Tax Code of
1997, respectively. Rather, the inter-office memo is being prepared for accounting purposes only in
order to avoid the co-mingling of funds of the corporate affiliates.1avvphi1
In its appeal before the CA, the CIR argued that the foregoing ruling was later modified in BIR Ruling
No. 108-99 dated 15 July 1999, which opined that inter-office memos evidencing lendings or
borrowings extended by a corporation to its affiliates are akin to promissory notes, hence, subject to
documentary stamp taxes.64 In brushing aside the foregoing argument, however, the CA applied
Section 246 of the 1993 NIRC65 from which proceeds the settled principle that rulings, circulars, rules
and regulations promulgated by the BIR have no retroactive application if to so apply them would be
prejudicial to the taxpayers.66 Admittedly, this rule does not apply: (a) where the taxpayer deliberately
misstates or omits material facts from his return or in any document required of him by the Bureau of
Internal Revenue; (b) where the facts subsequently gathered by the Bureau of Internal Revenue are
materially different from the facts on which the ruling is based; or (c) where the taxpayer acted in bad
faith.67 Not being the taxpayer who, in the first instance, sought a ruling from the CIR, however, FDC
cannot invoke the foregoing principle on non-retroactivity of BIR rulings.
Viewed in the light of the foregoing considerations, we find that both the CTA and the CA erred in
invalidating the assessments issued by the CIR for the deficiency documentary stamp taxes due on the
instructional letters as well as the journal and cash vouchers evidencing the advances FDC extended to
its affiliates in 1996 and 1997. In Assessment Notice No. SP-DST-96-00020-2000, the CIR correctly
assessed the sum of ₱6,400,693.62 for documentary stamp tax, ₱3,999,793.44 in interests and
₱25,000.00 as compromise penalty, for a total of ₱10,425,487.06. Alongside the sum of ₱4,050,599.62
for documentary stamp tax, the CIR similarly assessed ₱1,721,099.78 in interests and ₱25,000.00 as
compromise penalty in Assessment Notice No. SP-DST-97-00021-2000 or a total of ₱5,796,699.40.
The imposition of deficiency interest is justified under Sec. 249 (a) and (b) of the NIRC which authorizes
the assessment of the same "at the rate of twenty percent (20%), or such higher rate as may be
prescribed by regulations", from the date prescribed for the payment of the unpaid amount of tax until
full payment.68 The imposition of the compromise penalty is, in turn, warranted under Sec. 25069 of the
NIRC which prescribes the imposition thereof "in case of each failure to file an information or return,
statement or list, or keep any record or supply any information required" on the date prescribed
therefor.
To our mind, no reversible error can, finally, be imputed against both the CTA and the CA for
invalidating the Assessment Notice issued by the CIR for the deficiency income taxes FDC is supposed
to have incurred as a consequence of the dilution of its shares in FAC. Anent FDC’s Shareholders’
Agreement with RHPL, the record shows that the parties were in agreement about the following factual
antecedents narrated in the 14 February 2001 Stipulation of Facts, Documents and Issues they
submitted before the CTA,70 viz.:
"1.11. On November 15, 1996, FDC entered into a Shareholders’ Agreement (‘SA’) with Reco
Herrera Pte. Ltd. (‘RHPL’) for the formation of a joint venture company named Filinvest Asia
Corporation (‘FAC’) which is based in Singapore (pars. 1.01 and 6.11, Petition, pars. 1 and 7,
Answer).
1.12. FAC, the joint venture company formed by FDC and RHPL, is tasked to develop and
manage the 50% ownership interest of FDC in its PBCom Office Tower Project (‘Project’) with
the Philippine Bank of Communications (par. 6.12, Petition; par. 7, Answer).
1.13. Pursuant to the SA between FDC and RHPL, the equity participation of FDC and RHPL
in FAC was 60% and 40% respectively.
1.14. In accordance with the terms of the SA, FDC subscribed to ₱500.7 million worth of
shares of stock representing a 60% equity participation in FAC. In turn, RHPL subscribed to
₱433.8 million worth of shares of stock of FAC representing a 40% equity participation in
FAC.
1.15. In payment of its subscription in FAC, FDC executed a Deed of Assignment transferring
to FAC a portion of FDC’s right and interests in the Project to the extent of ₱500.7 million.
1.16. FDC reported a net loss of ₱190,695,061.00 in its Annual Income Tax Return for the
taxable year 1996."71
Alongside the principle that tax revenues are not intended to be liberally construed,72 the rule is settled
that the findings and conclusions of the CTA are accorded great respect and are generally upheld by
this Court, unless there is a clear showing of a reversible error or an improvident exercise of
authority.73 Absent showing of such error here, we find no strong and cogent reasons to depart from
said rule with respect to the CTA's finding that no deficiency income tax can be assessed on the gain
on the supposed dilution and/or increase in the value of FDC's shareholdings in FAC which the CIR, at
any rate, failed to establish. Bearing in mind the meaning of "gross income" as above discussed, it
cannot be gainsaid, even then, that a mere increase or appreciation in the value of said shares cannot
be considered income for taxation purposes. Since "a mere advance in the value of the property of a
person or corporation in no sense constitute the ‘income’ specified in the revenue law," it has been held
in the early case of Fisher vs. Trinidad,74 that it "constitutes and can be treated merely as an increase of
capital." Hence, the CIR has no factual and legal basis in assessing income tax on the increase in the
value of FDC's shareholdings in FAC until the same is actually sold at a profit.
WHEREFORE, premises considered, the CIR's petition for review on certiorari in G.R. No. 163653 is
DENIED for lack of merit and the CA’s 16 December 2003 Decision in G.R. No. 72992 is AFFIRMED in
toto. The CIR’s petition in G.R. No. 167689 is PARTIALLY GRANTED and the CA’s 26 January 2005
Decision in CA-G.R. SP No. 74510 is MODIFIED.
Accordingly, Assessment Notices Nos. SP-DST-96-00020-2000 and SP-DST-97-00021-2000 issued for
deficiency documentary stamp taxes due on the instructional letters as well as journal and cash
vouchers evidencing the advances FDC extended to its affiliates are declared valid.
The cancellation of Assessment Notices Nos. SP-INC-96-00018-2000, SP-INC-97-00019-2000 and SP-
INC-97-0027-2000 issued for deficiency income assessed on (a) the "arms-length" interest from said
advances; (b) the gain from FDC’s Deed of Exchange with FAI and FLI; and (c) income from the dilution
resulting from FDC’s Shareholders’ Agreement with RHPL is, however, upheld.
SO ORDERED.
G.R. No. 160528             October 9, 2006 "On November 5, 1997, [respondent’s] AVP-Revenue Operations and Tax Services Officer,
Atty. Edgardo P. Curbita, filed with the Office of the then Commissioner of Internal Revenue,
Mdm. Liwayway Vinzons-Chato, a written request for refund of the amount of P2,241,527.22
COMMISSIONER OF INTERNAL REVENUE, petitioner, 
which represents the total amount of 20% final withholding tax withheld from the [respondent]
vs.
by various withholding agent banks, and which amount includes the 20% final withholding tax
PHILIPPINE AIRLINES, INC., respondent.
withheld by the United Coconut Planters Bank (UCPB) and Rizal Commercial Banking
Corporation (RCBC) for the period starting March 1995 through February 1997.

"On December 4, 1997, the [respondent’s] AVP-Revenue Operations and Tax Services
Officer again filed with [petitioner] CIR another written request for refund of the amount
of P1,048,047.23, representing the total amount of 20% final withholding tax withheld by
DECISION
various depository banks of the [respondent] which amount includes the 20% withholding tax
withheld by the Philippine National Bank (PNB), Equitable Banking Corporation (EBC), and
the Jade Progressive Savings & Mortgage Bank (JPSMB) for the period starting March 1995
through November 1997.

"The amounts, subject of this petition, and which represent the 20% final withholding tax
PANGANIBAN, CJ.:
allegedly erroneously withheld and remitted to the BIR by the aforesaid banks may be
summarized as follows:
A franchise is a legislative grant to operate a public utility. Like those of any other statute, the
ambiguous provisions of a franchise should be construed in accordance with the intent of the
legislature. In the present case, Presidential Decree 1590 granted Philippine Airlines an option to pay Bank Period Covered Source  
the lower of two alternatives: (a) "the basic corporate income tax based on PAL’s annual net taxable Interest income on prime savings
income computed in accordance with the provisions of the National Internal Revenue Code" or (b) "a UCPB Jan. 9, 1997 – Feb. 21, 1997 deposit P
franchise tax of two percent of gross revenues." Availment of either of these two alternatives shall Interest income on government
exempt the airline from the payment of "all other taxes," including the 20 percent final withholding tax on     securities and/or commercial papers
bank deposits. Interest income on FBTB and
RCBC Jan. 6, 1997 – Feb. 28, 1997 Treasury Bills placements  
The Case Interest income on PNBIG savings
PNB Feb. 19, 1997 – Nov. 14, 1997 account  
1
Interest income on Treasury Bills
Before us is a Petition for Review  under Rule 45 of the Rules of Court, challenging the September 30, EBC Jan. 3, 1997 – Feb. 28, 1997 placement  
2003 Decision2 of the Court of Appeals (CA) in CA-GR SP No. 67970. The CA reversed the June 13,
JPSMB Jan. 1, 1997 – Feb. 28, 1997 Interest income on deposits  
2001 Decision3 and the November 13, 2001 Resolution4 of the Court of Tax Appeals (CTA) in CTA
Case No. 5824. The assailed CA Decision disposed as follows:
"[Petitioner] CIR failed to act on the [respondent’s] request for refund; thus, a petition was
"WHEREFORE, the petition is GRANTED, and [the] Commissioner of Internal Revenue is filed before the CTA on April 23, 1999."6
hereby directed to refund to the [respondent] the amount of P731,190.45 representing the
20% final withholding tax collected and deducted by depository banks on the petitioner’s Ruling of the Court of Tax Appeals
interest income or, in the alternative, to allow the [respondent] a tax credit for the same
amount."5
The CTA ruled that Respondent PAL was not entitled to the refund. Section 13 of Presidential Decree
No. 1590, PAL’s franchise,7 allegedly gave respondent the option to pay either its corporate income tax
The Facts under the provisions of the NIRC or a franchise tax of two percent of its gross revenues. Payment of
either tax would be in lieu of all "other taxes." Had respondent paid the two percent franchise tax, then
The CA narrates the facts thus: the final withholding taxes would have been considered as "other taxes." Since it chose to pay its
corporate income tax, payment of the final withholding tax is deemed part of this liability and therefore
not refundable.8
"[Respondent] Philippine Airlines, Inc. (PAL) is a domestic corporation organized in
accordance with the laws of the Republic of the Philippines, while [Petitioner] Commissioner
of Internal Revenue (CIR) is in-charge of the assessment and collection of the 20% final tax Ruling of the Court of Appeals
on interest on Philippine currency bank deposits and yield or any other monetary benefit from
deposit substitutes and from trust funds and similar arrangements, imposed on domestic As stated earlier, the Court of Appeals reversed the Decision of the CTA. The CA held that PAL was
corporation under Sec. 24 (e) (1) [now Sec. 27 (D) (1)] of the National Internal Revenue Code bound to pay only the corporate income tax or the franchise tax. Section 13 of Presidential Decree No.
(NIRC). 1590 exempts respondent from paying all other taxes, duties, royalties and other fees of any
kind.9 Respondent chose to pay its basic corporate income tax, which, after considering the factors
allowed by law, resulted in a zero tax liability.10 This zero tax liability should neither be taken against
respondent nor deprive it of the exemption granted by the law.11 Having chosen to pay its corporate
income tax liability, respondent should now be exempt from paying all other taxes including the final
withholding tax.
Hence, this Petition.12
The Issue
The sole issue raised by petitioner is stated in this wise:
"The Court of Appeals erred on a question of law ruling that the ‘in lieu of all other taxes’
provision in Section 13 of PD No. 1590 applies even if there were in fact no taxes paid under
any of subsections (A) and (B) of the said decree."13
The Court’s Ruling
The Petition has no merit.
Sole Issue:
Tax Liability of PAL
The resolution of the instant case hinges on the interpretation of Section 13 of PAL’s franchise, which
states in part:
"SEC. 13. In consideration of the franchise and rights hereby granted, the grantee shall pay
to the Philippine Government during the life of this franchise whichever of subsections (a) and
(b) hereunder will result in a lower tax:
‘(a) The basic corporate income tax based on the grantee's annual net taxable
income computed in accordance with the provisions of the National Internal
Revenue Code; or
‘(b) A franchise tax of two percent (2%) of the gross revenues derived by the
grantee from all sources, without distinction as to transport or non-transport
operations; provided, that with respect to international air-transport service, only
the gross passenger, mail, and freight revenues from its outgoing flights shall be
subject to this tax.’
"The tax paid by the grantee under either of the above alternatives shall be in lieu of all other
taxes, duties, royalties, registration, license, and other fees and charges of any kind, nature,
or description, imposed, levied, established, assessed, or collected by any municipal, city,
provincial, or national authority or government agency, now or in the future, x x x."14
Two points are evident from this provision. First, as consideration for the franchise, PAL is liable to pay
either a) its basic corporate income tax based on its net taxable income, as computed under the
National Internal Revenue Code; or b) a franchise tax of two percent based on its gross
revenues, whichever is lower. Second, the tax paid is "in lieu of all other taxes" imposed by all
government entities in the country.
Interpretation of PAL’s Franchise
According to the CA and PAL, the "other taxes in lieu of all other taxes" proviso includes final
withholding taxes.15When respondent availed itself of the basic corporate income tax as its chosen tax
liability, it became exempt from final withholding taxes.
On the other hand, the CTA held that the "in lieu of all other taxes" proviso implied the existence of
something for which a substitution would be made.16 Final withholding taxes come under basic
corporate income tax liability; hence, payment of the latter cannot mean an exemption from the former.
To be exempt from final withholding taxes, PAL should have paid the franchise tax of two percent,
which would have been in lieu of all other taxes including the final withholding tax.
The CIR argues that the "in lieu of all other taxes" proviso is a mere incentive that applies only when
PAL actually pays something; that is, either the basic corporate income tax or the franchise
tax.17 Because of the zero tax liability of respondent under the basic corporate income tax system, it
was not eligible for exemption from other taxes.18
Construing Subsection (a)
of Section 13 of PD 1590
Vis-à-vis the Corporate Income Tax
PAL availed itself of PD 1590, Section 13, Subsection (a), the crux of which hinged on the terms "basic
corporate income tax" and "annual net taxable income." The applicable laws (PAL’s franchise and the
Tax Code) do not define the terms "basic corporate income tax."19 On the other hand, "annual net
taxable income" is computed in accordance with the provisions of the National Internal Revenue Code.
The statutory basis for the income tax on corporations is found in Sections 27 to 30 of the National
Internal Revenue Code of 1997 under Chapter IV: "Tax on Corporations." Section 27 enumerates the
rate of income tax on domestic corporations; Section 28, the rates for foreign corporations; Section 29,
the taxes on improperly accumulated earnings; and Section 30, the corporations exempt from tax.
Being a domestic corporation, PAL is subject to Section 27, which reads as follows:
"Section 27. Rates of Income Tax on Domestic Corporations.—
"(A) In General. — Except as otherwise provided in this Code, an income tax of
thirty-five percent (35%) is hereby imposed upon the taxable income derived during
each taxable year from all sources within and without the Philippines by every
corporation, x x x, organized in, or existing under the laws of the Philippines x x
x."20
The NIRC also imposes final taxes on certain passive incomes, as follows: 1) 20 percent on the
interests on currency bank deposits, other monetary benefits from deposit substitutes, trust
funds and similar arrangements, and royalties derived from sources within the Philippines;21 2) 5
percent and 10 percent on the net capital gains realized from the sale of shares of stock in a domestic
corporation not traded in the stock exchange;22 3) 10 percent on income derived by a depositary bank
under the expanded foreign currency deposit system;23 and 4) 6 percent on the gain presumed to be
realized on the sale or disposition of lands and buildings treated as capital assets.24 These final taxes
are withheld at source.25
A corporate income tax liability, therefore, has two components: the general rate of 35 percent, which is
not disputed; and the specific final rates for certain passive incomes. PAL’s request for a refund in the
present case pertains to the passive income on bank deposits, which is subject to the specific final tax
of 20 percent.26
Computation of Taxable
Income Under the Tax Code
Note that the tax liability of PAL under the option it chose (Item "a" of Section 13 of PD 1590) is to be
"computed in accordance with the provisions of the National Internal Revenue Code," as follows:
"(a) The basic corporate income tax based on the grantee’s annual net taxable income
computed in accordance with the provisions of the National Internal Revenue Code[.]"
Taxable income means the pertinent items of gross income specified in the Tax Code, less the
deductions and/or personal and additional exemptions, if any, authorized for these types of
income.27 Under Section 32 of the Tax Code, gross income means income derived from whatever
source, including compensation for services; the conduct of trade or business or the exercise of a
profession; dealings in property; interests; rents; royalties; dividends; annuities; prizes and winnings;
pensions; and a partner’s distributive share in the net income of a general professional partnership.
Section 34 enumerates the allowable deductions; Section 35, personal and additional exemptions.
The definition of gross income is broad enough to include all passive incomes subject to specific rates
or final taxes. However, since these passive incomes are already subject to different rates and taxed
finally at source, they are no longer included in the computation of gross income, which determines
taxable income.
By basing the tax rate on the annual net taxable income, PD 1590 necessarily recognized the situation
in which taxable income may result in a negative amount and thus translate into a zero tax liability.
Notably, PAL was owned and operated by the government at the time the franchise was last
amended.28 It can reasonably be contemplated that PD 1590 sought to assist the finances of the
government corporation in the form of lower taxes. When respondent operates at a loss (as in the
instant case), no taxes are due; in this instance, it has a lower tax liability than that provided by
Subsection (b).
The fallacy of the CIR’s argument is evident from the fact that the payment of a measly sum of one
peso would suffice to exempt PAL from other taxes, whereas a zero liability arising from its losses
would not. There is no substantial distinction between a zero tax and a one-peso tax liability.
The Court is bound to effectuate the lawmakers’ intent, which is the controlling factor in interpreting a
statute.29Significantly, this Court has held that the soul of the law is intent:
"The intent of a statute is the law. If a statute is valid it is to have effect according to the
purpose and intent of the lawmaker. The intent is the vital part, the essence of the law, and
the primary rule of construction is to ascertain and give effect to the intent. The intention of
the legislature in enacting a law is the law itself, and must be enforced when ascertained,
although it may not be consistent with the strict letter of the statute. Courts will not follow the
letter of a statute when it leads away from the true intent and purpose of the legislature and to
conclusions inconsistent with the general purpose of the act. Intent is the spirit which gives
life to a legislative enactment. In construing statutes the proper course is to start out and
follow the true intent of the legislature and to adopt that sense which harmonizes best with
the context and promotes in the fullest manner the apparent policy and objects of the
legislature."30

Basic Corporate Income Tax Based

While the Court recognizes the general rule that the grant of tax exemptions is strictly construed against
on Annual Net Taxable Income
the taxpayer and in favor of the taxing power,31 Section 13 of the franchise of respondent leaves no
room for interpretation. Its franchise exempts it from paying any tax other than the option it chooses:
To repeat, the pertinent provision in the case at bar reads: "basic corporate income tax based on the either the "basic corporate income tax" or the two percent gross revenue tax.
grantee’s annual net taxable income computed in accordance with the provisions of the National
Internal Revenue Code." The Court has already illustrated that, under the Tax Code, "taxable income"
Determining whether this tax exemption is wise or advantageous is outside the realm of judicial power.
does not include passive income subjected to final withholding taxes. Clearly, then, the "basic corporate
This matter is addressed to the sound discretion of the lawmaking department of government.
income tax" identified in Section 13 (a) of the franchise relates to the general rate of 35 percent as
stipulated in Section 27 of the Tax Code. The final 20 percent taxes disputed in the present case are
not covered under Section 13 (a) of PAL’s franchise; thus, a refund is in order. WHEREFORE, the Petition is DENIED. No pronouncement as to costs.

"Substitution Theory"  SO ORDERED.

of the CIR Untenable
G.R. No. L-66838 December 2, 1991
A careful reading of Section 13 rebuts the argument of the CIR that the "in lieu of all other taxes"
proviso is a mere incentive that applies only when PAL actually pays something. It is clear that PD 1590
COMMISSIONER OF INTERNAL REVENUE, petitioner, 
intended to give respondent the option to avail itself of Subsection (a) or (b) as consideration for its
vs.
franchise. Either option excludes the payment of other taxes and dues imposed or collected by the
PROCTER & GAMBLE PHILIPPINE MANUFACTURING CORPORATION and THE COURT OF TAX
national or the local government. PAL has the option to choose the alternative that results in lower
APPEALS,respondents.
taxes. It is not the fact of tax payment that exempts it, but the exercise of its option.

T.A. Tejada & C.N. Lim for private respondent.

Under Subsection (a), the basis for the tax rate is respondent’s annual net taxable income, which (as
earlier discussed) is computed by subtracting allowable deductions and exemptions from gross income.
 
 RESOLUTION
FELICIANO, J.:
For the taxable year 1974 ending on 30 June 1974, and the taxable year 1975 ending 30 June 1975,
private respondent Procter and Gamble Philippine Manufacturing Corporation ("P&G-Phil.") declared
dividends payable to its parent company and sole stockholder, Procter and Gamble Co., Inc. (USA)
("P&G-USA"), amounting to P24,164,946.30, from which dividends the amount of P8,457,731.21
representing the thirty-five percent (35%) withholding tax at source was deducted.
On 5 January 1977, private respondent P&G-Phil. filed with petitioner Commissioner of Internal
Revenue a claim for refund or tax credit in the amount of P4,832,989.26 claiming, among other things,
that pursuant to Section 24 (b) (1) of the National Internal Revenue Code ("NITC"), 1 as amended by
Presidential Decree No. 369, the applicable rate of withholding tax on the dividends remitted was only
fifteen percent (15%) (and not thirty-five percent [35%]) of the dividends.
There being no responsive action on the part of the Commissioner, P&G-Phil., on 13 July 1977, filed a
petition for review with public respondent Court of Tax Appeals ("CTA") docketed as CTA Case No.
2883. On 31 January 1984, the CTA rendered a decision ordering petitioner Commissioner to refund or
grant the tax credit in the amount of P4,832,989.00.
On appeal by the Commissioner, the Court through its Second Division reversed the decision of the
CTA and held that:
(a) P&G-USA, and not private respondent P&G-Phil., was the proper party to claim the refund
or tax credit here involved;
(b) there is nothing in Section 902 or other provisions of the US Tax Code that allows a credit
against the US tax due from P&G-USA of taxes deemed to have been paid in the Philippines
equivalent to twenty percent (20%) which represents the difference between the regular tax
of thirty-five percent (35%) on corporations and the tax of fifteen percent (15%) on dividends;
and
(c) private respondent P&G-Phil. failed to meet certain conditions necessary in order that "the
dividends received by its non-resident parent company in the US (P&G-USA) may be subject
to the preferential tax rate of 15% instead of 35%."
These holdings were questioned in P&G-Phil.'s Motion for Re-consideration and we will deal with
them seriatim in this Resolution resolving that Motion.
I (3) credit or refund taxes erroneously or illegally received, . . . No credit or refund of taxes or
1. There are certain preliminary aspects of the question of the capacity of P&G-Phil. to bring the present
claim for refund or tax credit, which need to be examined. This question was raised for the first time on
appeal, i.e., in the proceedings before this Court on the Petition for Review filed by the Commissioner of
Internal Revenue. The question was not raised by the Commissioner on the administrative level, and
neither was it raised by him before the CTA.
We believe that the Bureau of Internal Revenue ("BIR") should not be allowed to defeat an otherwise
valid claim for refund by raising this question of alleged incapacity for the first time on appeal before this
Court. This is clearly a matter of procedure. Petitioner does not pretend that P&G-Phil., should it
succeed in the claim for refund, is likely to run away, as it were, with the refund instead of transmitting
such refund or tax credit to its parent and sole stockholder. It is commonplace that in the absence of
explicit statutory provisions to the contrary, the government must follow the same rules of procedure
which bind private parties. It is, for instance, clear that the government is held to compliance with the
provisions of Circular No. 1-88 of this Court in exactly the same way that private litigants are held to
such compliance, save only in respect of the matter of filing fees from which the Republic of the
Philippines is exempt by the Rules of Court.
More importantly, there arises here a question of fairness should the BIR, unlike any other litigant, be
allowed to raise for the first time on appeal questions which had not been litigated either in the lower
court or on the administrative level. For, if petitioner had at the earliest possible opportunity, i.e., at the
administrative level, demanded that P&G-Phil. produce an express authorization from its parent
corporation to bring the claim for refund, then P&G-Phil. would have been able forthwith to secure and
produce such authorization before filing the action in the instant case. The action here was commenced
just before expiration of the two (2)-year prescriptive period.
2. The question of the capacity of P&G-Phil. to bring the claim for refund has substantive dimensions as
well which, as will be seen below, also ultimately relate to fairness.
Under Section 306 of the NIRC, a claim for refund or tax credit filed with the Commissioner of Internal
Revenue is essential for maintenance of a suit for recovery of taxes allegedly erroneously or illegally
assessed or collected:
Sec. 306. Recovery of tax erroneously or illegally collected. — No suit or proceeding shall be
maintained in any court for the recovery of any national internal revenue tax hereafter alleged
to have been erroneously or illegally assessed or collected, or of any penalty claimed to have
been collected without authority, or of any sum alleged to have been excessive or in any
manner wrongfully collected, until a claim for refund or credit has been duly filed with the
Commissioner of Internal Revenue; but such suit or proceeding may be maintained, whether
or not such tax, penalty, or sum has been paid under protest or duress. In any case, no such
suit or proceeding shall be begun after the expiration of two years from the date of payment
of the tax or penalty regardless of any supervening cause that may arise after payment: . . .
(Emphasis supplied)
Section 309 (3) of the NIRC, in turn, provides:
Sec. 309. Authority of Commissioner to Take Compromises and to Refund Taxes.—The
Commissioner may:
x x x           x x x          x x x
penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit
or refund within two (2) years after the payment of the tax or penalty. (As amended by P.D. No. 69)
(Emphasis supplied)
Since the claim for refund was filed by P&G-Phil., the question which arises is: is P&G-Phil.
a "taxpayer" under Section 309 (3) of the NIRC? The term "taxpayer" is defined in our NIRC as referring
to "any person subject to taximposed by the Title [on Tax on Income]." 2 It thus becomes important to

note that under Section 53 (c) of the NIRC, the withholding agent who is "required to deduct and
withhold any tax" is made " personally liable for such tax" and indeed is indemnified against any claims
and demands which the stockholder might wish to make in questioning the amount of payments
effected by the withholding agent in accordance with the provisions of the NIRC. The withholding agent,
P&G-Phil., is directly and independently liable 3 for the correct amount of the tax that should be withheld
from the dividend remittances. The withholding agent is, moreover, subject to and liable for deficiency
assessments, surcharges and penalties should the amount of the tax withheld be finally found to be
less than the amount that should have been withheld under law.
A "person liable for tax" has been held to be a "person subject to tax" and properly considered a
"taxpayer." 4 The terms liable for tax" and "subject to tax" both connote legal obligation or duty to pay a
tax. It is very difficult, indeed conceptually impossible, to consider a person who is statutorily made
"liable for tax" as not "subject to tax." By any reasonable standard, such a person should be regarded
as a party in interest, or as a person having sufficient legal interest, to bring a suit for refund of taxes he
believes were illegally collected from him.
In Philippine Guaranty Company, Inc. v. Commissioner of Internal Revenue, 5 this Court pointed out
that a withholding agent is in fact the agent both of the government and of the taxpayer, and that the
withholding agent is not an ordinary government agent:
The law sets no condition for the personal liability of the withholding agent to attach. The
reason is to compel the withholding agent to withhold the tax under all circumstances. In
effect, the responsibility for the collection of the tax as well as the payment thereof is
concentrated upon the person over whom the Government has jurisdiction. Thus, the
withholding agent is constituted the agent of both the Government and the taxpayer. With
respect to the collection and/or withholding of the tax, he is the Government's agent. In
regard to the filing of the necessary income tax return and the payment of the tax to the
Government, he is the agent of the taxpayer. The withholding agent, therefore, is no ordinary
government agent especially because under Section 53 (c) he is held personally liable for the
tax he is duty bound to withhold; whereas the Commissioner and his deputies are not made
liable by law. 6 (Emphasis supplied)
If, as pointed out in Philippine Guaranty, the withholding agent is also an agent of the beneficial owner of the dividends with respect to the filing of the necessary income tax return
and with respect to actual payment of the tax to the government, such authority may reasonably be held to include the authority to file a claim for refund and to bring an action for
recovery of such claim. This implied authority is especially warranted where, is in the instant case, the withholding agent is the wholly owned subsidiary of the parent-
stockholder and therefore, at all times, under the effective control of such parent-stockholder. In the circumstances of this case, it seems particularly unreal to deny the implied
authority of P&G-Phil. to claim a refund and to commence an action for such refund.
We believe that, even now, there is nothing to preclude the BIR from requiring P&G-Phil. to show some written or telexed confirmation by P&G-USA of the subsidiary's authority to
claim the refund or tax credit and to remit the proceeds of the refund., or to apply the tax credit to some Philippine tax obligation of, P&G-USA, before actual payment of the refund
or issuance of a tax credit certificate. What appears to be vitiated by basic unfairness is petitioner's position that, although P&G-Phil. is directly and personally liable to the
Government for the taxes and any deficiency assessments to be collected, the Government is not legally liable for a refund simply because it did not demand a written confirmation
of P&G-Phil.'s implied authority from the very beginning. A sovereign government should act honorably and fairly at all times, even vis-a-vis taxpayers.
We believe and so hold that, under the circumstances of this case, P&G-Phil. is properly regarded as a "taxpayer" within the meaning of Section 309, NIRC, and as impliedly
authorized to file the claim for refund and the suit to recover such claim.
II
1. We turn to the principal substantive question before us: the applicability to the dividend remittances by P&G-Phil. to P&G-USA of the fifteen percent (15%) tax rate provided for in
the following portion of Section 24 (b) (1) of the NIRC:
(b) Tax on foreign corporations.—
(1) Non-resident corporation. — A foreign corporation not engaged in trade and business in the Philippines, . . ., shall pay a tax equal to 35% of the gross income
receipt during its taxable year from all sources within the Philippines, as . . . dividends . . . Provided, still further, that on dividends received from a domestic
corporation liable to tax under this Chapter, the tax shall be 15% of the dividends, which shall be collected and paid as provided in Section 53 (d) of this Code,
subject to the condition that the country in which the non-resident foreign corporation, is domiciled shall allow a credit against the tax due from the non-resident
foreign corporation, taxes deemed to have been paid in the Philippines equivalent to 20% which represents the difference between the regular tax (35%) on
corporations and the tax (15%) on dividends as provided in this Section . . .
The ordinary thirty-five percent (35%) tax rate applicable to dividend remittances to non-resident corporate stockholders of a Philippine corporation, goes down to fifteen percent
(15%) if the country of domicile of the foreign stockholder corporation "shall allow" such foreign corporation a tax credit for "taxes deemed paid in the Philippines," applicable against
the tax payable to the domiciliary country by the foreign stockholder corporation. In other words, in the instant case, the reduced fifteen percent (15%) dividend tax rate is applicable
if the USA "shall allow" to P&G-USA a tax credit for "taxes deemed paid in the Philippines" applicable against the US taxes of P&G-USA. The NIRC specifies that such tax credit for
"taxes deemed paid in the Philippines" must, as a minimum, reach an amount equivalent to twenty (20) percentage points which represents the difference between the regular thirty-
five percent (35%) dividend tax rate and the preferred fifteen percent (15%) dividend tax rate.
It is important to note that Section 24 (b) (1), NIRC, does not require that the US must give a "deemed paid" tax credit for the dividend tax (20 percentage points) waived by the
Philippines in making applicable the preferred divided tax rate of fifteen percent (15%). In other words, our NIRC does not require that the US tax law deem the parent-corporation
to have paid the twenty (20) percentage points of dividend tax waived by the Philippines. The NIRC only requires that the US "shall allow" P&G-USA a "deemed paid" tax credit in
an amount equivalent to the twenty (20) percentage points waived by the Philippines.
2. The question arises: Did the US law comply with the above requirement? The relevant provisions of the US Intemal Revenue Code ("Tax Code") are the following:
Sec. 901 — Taxes of foreign countries and possessions of United States.
(a) Allowance of credit. — If the taxpayer chooses to have the benefits of this subpart, the tax imposed by this chapter shall, subject to the applicable limitation of
section 904, be credited with the amounts provided in the applicable paragraph of subsection (b) plus, in the case of a corporation, the taxes deemed to have
been paid under sections 902 and 960. Such choice for any taxable year may be made or changed at any time before the expiration of the period prescribed for
making a claim for credit or refund of the tax imposed by this chapter for such taxable year. The credit shall not be allowed against the tax imposed by section 531
(relating to the tax on accumulated earnings), against the additional tax imposed for the taxable year under section 1333 (relating to war loss recoveries) or under
section 1351 (relating to recoveries of foreign expropriation losses), or against the personal holding company tax imposed by section 541.
(b) Amount allowed. — Subject to the applicable limitation of section 904, the following amounts shall be allowed as the credit under subsection (a):
(a) Citizens and domestic corporations. — In the case of a citizen of the United States and of a domestic corporation, the amount of any
income, war profits, and excess profits  taxes paid or accrued during the taxable year to any foreign country or to any possession of the United
States; and
x x x           x x x          x x x
Sec. 902. — Credit for corporate stockholders in foreign corporation.
 (A) Treatment of Taxes Paid by Foreign Corporation. — For purposes of this subject, a domestic corporation which owns at least 10 percent of
the voting stock of a foreign corporation from which itreceives dividends in any taxable year shall —

It is also useful to note that both (i) the tax credit for the Philippine dividend tax actually withheld, and (ii) the tax credit for the Philippine corporate income tax
x x x           x x x          x x x
actually paid by P&G Phil. but "deemed paid" by P&G-USA, are tax credits available or applicable against the US corporate income tax of P&G-USA. These tax

credits are allowed because of the US congressional desire to avoid or reduce double taxation of the same income stream. 9

(2) to the extent such dividends are paid by such foreign corporation out of accumulated profits [as defined in subsection (c) (1) (b)] of a year for
which such foreign corporation is a less developed country corporation, be deemed to have paid the same proportion of any income, war profits,

or excess profits taxes paid or deemed to be paid by such foreign corporation to any foreign country or to any possession of the United
States on or with respect to such accumulated profits, which the amount of such dividends bears to the amount of such accumulated profits.

In order to determine whether US tax law complies with the requirements for applicability of the reduced or preferential fifteen percent (15%) dividend tax rate

x x x           x x x          x x x under Section 24 (b) (1), NIRC, it is necessary:

(c) Applicable Rules a. to determine the amount of the 20 percentage points dividend tax waived by the Philippine government under Section 24 (b) (1), NIRC, and
which hence goes to P&G-USA;

(1) Accumulated profits defined. — For purposes of this section, the term "accumulated profits" means with respect to any foreign corporation,
b. to determine the amount of the "deemed paid" tax credit which US tax law must allow to P&G-USA; and

(A) for purposes of subsections (a) (1) and (b) (1), the amount of its gains, profits, or income computed without reduction by the
amount of the income, war profits, and excess profits taxes imposed on or with respect to such profits or income by any foreign c. to ascertain that the amount of the "deemed paid" tax credit allowed by US law is at least equal to the amount of the dividend tax waived by

country. . . .; and the Philippine Government.

(B) for purposes of subsections (a) (2) and (b) (2), the amount of its gains, profits, or income in excess of the income, war Amount (a), i.e., the amount of the dividend tax waived by the Philippine government is arithmetically determined in the following manner:

profits, and excess profits taxes imposed on or with respect to suchprofits or income.

P100.00 — Pretax net corporate income earned by P&G-Phil.

The Secretary or his delegate shall have full power to determine from the accumulated profits of what year or years such dividends were paid, x 35% — Regular Philippine corporate income tax rate

treating dividends paid in the first 20 days of any year as having been paid from the accumulated profits of the preceding year or years (unless to ———

his satisfaction shows otherwise), and in other respects treating dividends as having been paid from the most recently accumulated gains, profits, P35.00 — Paid to the BIR by P&G-Phil. as Philippine

or earning. . . . (Emphasis supplied) corporate income tax.

P100.00

-35.00
———

Close examination of the above quoted provisions of the US Tax Code 7 P65.00 — Available for remittance as dividends to P&G-USA
 shows the following:

P65.00 — Dividends remittable to P&G-USA

a. US law (Section 901, Tax Code) grants P&G-USA a tax credit for the amount of
x 35% — Regular Philippine dividend tax rate under Section 24
the dividend tax actually paid (i.e., withheld) from the dividend remittances to P&G-
——— (b) (1), NIRC
USA;
P22.75 — Regular dividend tax

b. US law (Section 902, US Tax Code) grants to P&G-USA a "deemed paid' tax

P65.00 — Dividends remittable to P&G-USA
credit 8  for a proportionate part of the corporate income tax actually paid to the Philippines by P&G-Phil.
x 15% — Reduced dividend tax rate under Section 24 (b) (1), NIRC
———
P9.75 — Reduced dividend tax

The parent-corporation P&G-USA is "deemed to have paid" a portion of the  Philippine corporate income taxalthough that tax was actually paid by its Philippine P22.75 — Regular dividend tax under Section 24 (b) (1), NIRC

subsidiary, P&G-Phil., not by P&G-USA. This "deemed paid" concept merely reflects economic reality, since the Philippine corporate income tax was in fact paid -9.75 — Reduced dividend tax under Section 24 (b) (1), NIRC

and deducted from revenues earned in the Philippines, thus reducing the amount remittable as dividends to P&G-USA. In other words, US tax law treats the ———

Philippine corporate income tax as if it came out of the pocket, as it were, of P&G-USA as a part of the economic cost of carrying on business operations in the P13.00 — Amount of dividend tax waived by Philippine

Philippines through the medium of P&G-Phil. and here earning profits.  What is,  under US law,  deemed paid by P&G- USA are  not "phantom taxes" but ===== government under Section 24 (b) (1), NIRC.

instead  Philippine corporate income taxes actually paid here by P&G-Phil.,  which are very real indeed.
Thus, amount (a) above is P13.00 for every P100.00 of pre-tax net income earned by P&G-Phil. Amount (a) is also the minimum amount of the "deemed paid" tax corporation has a net income of P100,000, it will pay P25,000 Philippine income tax thereon in accordance with Section 24(a) of the Tax Code.
credit that US tax law shall allow if P&G-USA is to qualify for the reduced or preferential dividend tax rate under Section 24 (b) (1), NIRC. The net income, after income tax, which is P75,000, will then be declared as dividend to the U.S. corporation at 15% tax, or P11,250, will be

withheld therefrom. Under the aforementioned sections of the U.S. Internal Revenue Code, U.S. corporation receiving the dividend can utilize as

credit against its U.S. tax payable on said dividends the amount of P30,000 composed of:
Amount (b) above, i.e., the amount of the "deemed paid" tax credit which US tax law allows under Section 902, Tax Code, may be computed arithmetically as

follows:
(1) The tax "deemed paid" or indirectly paid on the dividend arrived at as follows:

P75,000 x P25,000 = P18,750

———
100,000 **

P65.00 — Dividends remittable to P&G-USA

- 9.75 — Dividend tax withheld at the reduced (15%) rate (2) The amount of 15% of
——— P75,000 withheld = 11,250
P55.25 — Dividends actually remitted to P&G-USA ———
P30,000

P35.00 — Philippine corporate income tax paid by P&G-Phil.

to the BIR The amount of P18,750 deemed paid and to be credited against the U.S. tax on the dividends received by the U.S. corporation from a Philippine
subsidiary  is clearly more than 20% requirement ofPresidential Decree No. 369 as 20% of P75,000.00 the dividends to be remitted under the
above example, amounts to P15,000.00 only.

In the light of the foregoing, BIR Ruling No. 75-005 dated September 10, 1975 is hereby amended in the sense that the dividends to be remitted
Dividends actually by your client to its parent company shall be subject to the withholding tax at the rate of 15% only.
remitted by P&G-Phil.
to P&G-USA P55.25
This ruling shall have force and effect only for as long as the present pertinent provisions of the U.S. Federal Tax Code, which are the bases of
——————— = ——— x P35.00 = P29.75 10
the ruling, are not revoked, amended and modified, the effect of which will reduce the percentage of tax deemed paid and creditable against the
Amount of accumulated P65.00 ======
U.S. tax on dividends remitted by a foreign corporation to a U.S. corporation. (Emphasis supplied)
profits earned by
P&G-Phil. in excess
of income tax The 1976 Ruling was reiterated in, e.g., BIR Ruling dated 22 July 1981 addressed to Basic Foods Corporation and BIR Ruling dated 20 October 1987 addressed
to Castillo, Laman, Tan and Associates. In other words, the 1976 Ruling of Hon. Efren I. Plana was reiterated by the BIR even as the case at bar was pending
before the CTA and this Court.

4. We should not overlook the fact that the concept of "deemed paid" tax credit, which is embodied in Section 902, US Tax Code, is exactly the same "deemed
Thus,  for every P55.25 of dividends actually remitted (after withholding at the rate of 15%) by P&G-Phil. to its US parent P&G-USA, a tax credit of P29.75 is paid" tax credit found in our NIRC and which Philippine tax law allows to Philippine corporations which have operations abroad (say, in the United States) and
allowed by Section 902 US Tax Code for Philippine corporate income tax "deemed paid" by the parent but actually paid by the wholly-owned subsidiary. which, therefore, pay income taxes to the US government.

Since P29.75 is much higher than P13.00 (the amount of dividend tax waived by the Philippine government), Section 902, US Tax Code, specifically and clearly Section 30 (c) (3) and (8), NIRC, provides:
complies with the requirements of Section 24 (b) (1), NIRC.

(d) Sec. 30. Deductions from Gross Income.—In computing net income, there shall be allowed as deductions — . . .
3. It is important to note also that the foregoing reading of Sections 901 and 902 of the US Tax Code is identical with the reading of the BIR of Sections 901 and
902 of the US Tax Code is identical with the reading of the BIR of Sections 901 and 902 as shown by administrative rulings issued by the BIR.
(c) Taxes. — . . .

The first Ruling was issued in 1976, i.e., BIR Ruling No. 76004, rendered by then Acting Commissioner of Intemal Revenue Efren I. Plana, later Associate Justice
x x x           x x x          x x x
of this Court, the relevant portion of which stated:

(3) Credits against tax for taxes of foreign countries. — If the taxpayer signifies in his return his desire to have the benefits of this paragraphs, the
However, after a restudy of the decision in the American Chicle Company case and the provisions of Section 901 and 902 of the U.S. Internal
tax imposed by this Title shall be credited with . . .
Revenue Code, we find merit in your contention that our computation of the credit which the U.S. tax law allows in such cases is erroneous as
the amount of tax "deemed paid" to the Philippine government for purposes of credit against the U.S. tax by the recipient of dividends includes a

portion of the amount of income tax paid by the corporation declaring the dividend in addition to the tax withheld from the dividend remitted. In (a) Citizen and Domestic Corporation. — In the case of a citizen of the Philippines and of domestic corporation, the amount of net income, war
other words, the U.S. government will allow a credit to the U.S. corporation or recipient of the dividend, in addition to the amount of tax actually profits or excess profits, taxes paid or accrued during the taxable year to any foreign country. (Emphasis supplied)
withheld, a portion of the income tax paid by the corporation declaring the dividend. Thus, if a Philippine corporation wholly owned by a U.S.
 Under Section 30 (c) (3) (a), NIRC, above, the BIR must give a tax credit to a Philippine corporation for taxes actually paid by it to the US government—e.g., for
taxes collected by the US government on dividend remittances to the Philippine corporation. This Section of the NIRC is the equivalent of Section 901 of the US

Tax Code.
In the third place, the position originally taken by the Second Division results in a severe practical problem of administrative circularity. The Second Division in effect held that the
reduced dividend tax rate is not applicable until the US tax credit for "deemed paid" taxes is actually given in the required minimum amount by the US Internal Revenue Service to
Section 30 (c) (8), NIRC, is practically identical with Section 902 of the US Tax Code, and provides as follows:
P&G-USA. But, the US "deemed paid" tax credit cannot be given by the US tax authorities unless dividends have actually been remitted to the US, which means that the Philippine
dividend tax, at the rate here applicable, was actually imposed and collected. 11
 It is this practical or operating circularity that is in fact
(8) Taxes of foreign subsidiary. — For the purposes of this subsection a domestic corporation which owns a majority of the voting stock of a
avoided by our BIR when it issues rulings that the tax laws of particular foreign jurisdictions (e.g.,
foreign corporation from which it receives dividends in any taxable year shall be deemed to have paid the same proportion of any income, war-
Republic of Vanuatu 12Hongkong, 13 Denmark, 14 etc.) comply with the requirements set out in Section
profits, or excess-profits taxes paid by such foreign corporation to any foreign country, upon or with respect to the accumulated profits of such
24 (b) (1), NIRC, for applicability of the fifteen percent (15%) tax rate. Once such a ruling is rendered,
foreign corporation from which such dividends were paid, which the amount of such dividends bears to the amount of such accumulated
the Philippine subsidiary begins to withhold at the reduced dividend tax rate.
profits: Provided, That the amount of tax deemed to have been paid under this subsection shall in no case exceed the same proportion of the tax
against which credit is taken which the amount of such dividends bears to the amount of the entire net income of the domestic corporation in

which such dividends are included. The term"accumulated profits" when used in this subsection reference to a foreign corporation, means the
amount of its gains, profits, or income in excess of the income, war-profits, and excess-profits taxes imposed upon or with respect to such profits
or income; and the Commissioner of Internal Revenue shall have full power to determine from the accumulated profits of what year or years such
dividends were paid; treating dividends paid in the first sixty days of any year as having been paid from the accumulated profits of the preceding
year or years (unless to his satisfaction shown otherwise), and in other respects treating dividends as having been paid from the most recently
accumulated gains, profits, or earnings. In the case of a foreign corporation, the income, war-profits, and excess-profits taxes of which are
determined on the basis of an accounting period of less than one year, the word "year" as used in this subsection shall be construed to mean
such accounting period. (Emphasis supplied)
Under the above quoted Section 30 (c) (8), NIRC, the BIR must give a tax credit to a Philippine parent corporation for taxes "deemed paid" by it, that is, e.g., for
taxes paid to the US by the US subsidiary of a Philippine-parent corporation. The Philippine parent or corporate stockholder is "deemed" under our NIRC to have
A requirement relating to administrative implementation is not properly imposed as a condition for
the applicability, as a matter of law, of a particular tax rate. Upon the other hand, upon the
determination or recognition of the applicability of the reduced tax rate, there is nothing to prevent the
BIR from issuing implementing regulations that would require P&G Phil., or any Philippine corporation
similarly situated, to certify to the BIR the amount of the "deemed paid" tax credit actually subsequently
granted by the US tax authorities to P&G-USA or a US parent corporation for the taxable year involved.
Since the US tax laws can and do change, such implementing regulations could also provide that failure
of P&G-Phil. to submit such certification within a certain period of time, would result in the imposition of
a deficiency assessment for the twenty (20) percentage points differential. The task of this Court is to
settle which tax rate is applicable, considering the state of US law at a given time. We should leave
details relating to administrative implementation where they properly belong — with the BIR.

paid a proportionate part of the US corporate income tax paid by its US subsidiary, although such US tax was actually paid by the subsidiary and not by the
Philippine parent.
2. An interpretation of a tax statute that produces a revenue flow for the government is not, for that
reason alone, necessarily the correct reading of the statute. There are many tax statutes or provisions
which are designed, not to trigger off an instant surge of revenues, but rather to achieve longer-term
and broader-gauge fiscal and economic objectives. The task of our Court is to give effect to the
legislative design and objectives as they are written into the statute even if, as in the case at bar, some
revenues have to be foregone in that process.

Clearly, the "deemed paid" tax credit which, under Section 24 (b) (1), NIRC, must be allowed by US law to P&G-USA, is the same "deemed paid" tax credit that Philippine law allows
The economic objectives sought to be achieved by the Philippine Government by reducing the thirty-
to a Philippine corporation with a wholly- or majority-owned subsidiary in (for instance) the US. The "deemed paid" tax credit allowed in Section 902, US Tax Code, is no more a
five percent (35%) dividend rate to fifteen percent (15%) are set out in the preambular clauses of P.D.
credit for "phantom taxes" than is the "deemed paid" tax credit granted in Section 30 (c) (8), NIRC.
No. 369 which amended Section 24 (b) (1), NIRC, into its present form:

III
WHEREAS, it is imperative to adopt measures responsive to the requirements of a
developing economyforemost of which is the financing of economic development programs;
1. The Second Division of the Court, in holding that the applicable dividend tax rate in the instant case was the regular thirty-five percent (35%) rate rather than the reduced rate of

fifteen percent (15%), held that P&G-Phil. had failed to prove that its parent, P&G-USA, had in fact been given by the US tax authorities a "deemed paid" tax credit in the amount
WHEREAS, nonresident foreign corporations with investments in the Philippines are taxed on
required by Section 24 (b) (1), NIRC.
their earnings from dividends at the rate of 35%;

We believe, in the first place, that we must distinguish between the legal question before this Court from questions of administrative implementation arising after the legal question
WHEREAS, in order to encourage more capital investment for large projects an appropriate
has been answered. The basic legal issue is of course, this: which is the applicable dividend tax rate in the instant case: the regular thirty-five percent (35%) rate or the reduced
tax need be imposed on dividends received by non-resident foreign corporations in the same
fifteen percent (15%) rate? The question of whether or not P&G-USA is in fact given by the US tax authorities a "deemed paid" tax credit in the required amount, relates to the
manner as the tax imposed on interest on foreign loans;
administrative implementation of the applicable reduced tax rate.

x x x           x x x          x x x
In the second place, Section 24 (b) (1), NIRC, does not in fact require that the "deemed paid" tax credit shall have actually been granted before the applicable dividend tax rate goes

down from thirty-five percent (35%) to fifteen percent (15%). As noted several times earlier, Section 24 (b) (1), NIRC, merely requires, in the case at bar, that the USA "shall allow a
credit against the  (Emphasis supplied)
tax due from [P&G-USA for] taxes deemed to have been paid in the Philippines . . ." There is neither statutory provision nor revenue regulation issued by the Secretary of Finance

requiring the actual grant of the "deemed paid" tax credit by the US Internal Revenue Service to P&G-USA before the preferential fifteen percent (15%) dividend rate becomes
More simply put, Section 24 (b) (1), NIRC, seeks to promote the in-flow of foreign equity investment in
applicable. Section 24 (b) (1), NIRC, does not create a tax exemption nor does it provide a tax credit; it is a provision which specifies when a particular (reduced) tax rate is legally
the Philippines by reducing the tax cost of earning profits here and thereby increasing the net dividends
applicable.
remittable to the investor. The foreign investor, however, would not benefit from the reduction of the
Philippine dividend tax rate unless its home country gives it some relief from double taxation (i.e., 3. It remains only to note that under the Philippines-United States Convention "With Respect to Taxes
second-tier taxation) (the home country would simply have more "post-R.P. tax" income to subject to its on Income," 15the Philippines, by a treaty commitment, reduced the regular rate of dividend tax to a
own taxing power) by allowing the investor additional tax credits which would be applicable against the maximum of twenty percent (20%) of the gross amount of dividends paid to US parent corporations:
tax payable to such home country. Accordingly, Section 24 (b) (1), NIRC, requires the home or
domiciliary country to give the investor corporation a "deemed paid" tax credit at least equal in amount
Art 11. — Dividends
to the twenty (20) percentage points of dividend tax foregone by the Philippines, in the assumption that
a positive incentive effect would thereby be felt by the investor.
x x x           x x x          x x x
The net effect upon the foreign investor may be shown arithmetically in the following manner:
(2) The rate of tax imposed by one of the Contracting States on dividends derived from
sources within that Contracting State by a resident of the other Contracting State shall not
P65.00 — Dividends remittable to P&G-USA (please
exceed —
see page 392 above
- 9.75 — Reduced R.P. dividend tax withheld by P&G-Phil.
——— (a) 25 percent of the gross amount of the dividend; or
P55.25 — Dividends actually remitted to P&G-USA
(b) When the recipient is a corporation, 20 percent of the gross amount of the dividend
P55.25 if during the part of the paying corporation's taxable year which precedes the date of payment
x 46% — Maximum US corporate income tax rate of the dividend and during the whole of its prior taxable year (if any), at least 10 percent of
——— the outstanding shares of the voting stock of the paying corporation was owned by the
P25.415—US corporate tax payable by P&G-USA recipient corporation.
without tax credits
x x x           x x x          x x x
P25.415
- 9.75 — US tax credit for RP dividend tax withheld by P&G-Phil.
(Emphasis supplied)
at 15% (Section 901, US Tax Code)
———
P15.66 — US corporate income tax payable after Section 901 The Tax Convention, at the same time, established a treaty obligation on the part of the United States
——— tax credit. that it "shall allow" to a US parent corporation receiving dividends from its Philippine subsidiary "a [tax]
credit for the appropriate amount of taxes paid or accrued to the Philippines by the Philippine
[subsidiary] —. 16 This is, of course, precisely the "deemed paid" tax credit provided for in Section 902,
P55.25
US Tax Code, discussed above. Clearly, there is here on the part of the Philippines a deliberate
- 15.66
undertaking to reduce the regular dividend tax rate of twenty percent (20%) is a maximum rate, there is
———
still a differential or additional reduction of five (5) percentage points which compliance of US law
P39.59 — Amount received by P&G-USA net of R.P. and U.S.
(Section 902) with the requirements of Section 24 (b) (1), NIRC, makes available in respect of dividends
===== taxes without "deemed paid" tax credit.
from a Philippine subsidiary.

P25.415
We conclude that private respondent P&G-Phil, is entitled to the tax refund or tax credit which it seeks.
- 29.75 — "Deemed paid" tax credit under Section 902 US
——— Tax Code (please see page 18 above)
WHEREFORE, for all the foregoing, the Court Resolved to GRANT private respondent's Motion for
Reconsideration dated 11 May 1988, to SET ASIDE the Decision of the and Division of the Court
- 0 - — US corporate income tax payable on dividends
promulgated on 15 April 1988, and in lieu thereof, to REINSTATE and AFFIRM the Decision of the
====== remitted by P&G-Phil. to P&G-USA after 
Court of Tax Appeals in CTA Case No. 2883 dated 31 January 1984 and to DENY the Petition for
Section 902 tax credit.
Review for lack of merit. No pronouncement as to costs.

P55.25 — Amount received by P&G-USA net of RP and US

Narvasa, Gutierrez, Jr., Griño-Aquino, Medialdea and Romero, JJ., concur.
====== taxes after Section 902 tax credit.
Fernan, C.J., is on leave.

It will be seen that the "deemed paid" tax credit allowed by Section 902, US Tax Code, could offset the
 
US corporate income tax payable on the dividends remitted by P&G-Phil. The result, in fine, could be
that P&G-USA would after US tax credits, still wind up with P55.25, the full amount of the dividends
remitted to P&G-USA net of Philippine taxes. In the calculation of the Philippine Government, this  
should encourage additional investment or re-investment in the Philippines by P&G-USA.
Separate Opinions
CRUZ, J., concurring:
I join Mr. Justice Feliciano in his excellent analysis of the difficult issues we are now asked to resolve.
As I understand it, the intention of Section 24 (b) of our Tax Code is to attract foreign investors to this
country by reducing their 35% dividend tax rate to 15% if their own state allows them a deemed paid tax
credit at least equal in amount to the 20% waived by the Philippines. This tax credit would offset the tax
payable by them on their profits to their home state. In effect, both the Philippines and the home state of
the foreign investors reduce their respective tax "take" of those profits and the investors wind up with
more left in their pockets. Under this arrangement, the total taxes to be paid by the foreign investors
may be confined to the 35% corporate income tax and 15% dividend tax only, both payable to the
Philippines, with the US tax liability being offset wholly or substantially by the US "deemed paid" tax
credits.
Without this arrangement, the foreign investors will have to pay to the local state (in addition to the 35%
corporate income tax) a 35% dividend tax and another 35% or more to their home state or a total of
70% or more on the same amount of dividends. In this circumstance, it is not likely that many such
foreign investors, given the onerous burden of the two-tier system, i.e., local state plus home state, will
be encouraged to do business in the local state.
It is conceded that the law will "not trigger off an instant surge of revenue," as indeed the tax collectible
by the Republic from the foreign investor is considerably reduced. This may appear unacceptable to the
superficial viewer. But this reduction is in fact the price we have to offer to persuade the foreign
company to invest in our country and contribute to our economic development. The benefit to us may
not be immediately available in instant revenues but it will be realized later, and in greater measure, in
terms of a more stable and robust economy.
BIDIN, J., concurring:
I agree with the opinion of my esteemed brother, Mr. Justice Florentino P. Feliciano. However, I wish to
add some observations of my own, since I happen to be the ponente in Commissioner of Internal
Revenue v. Wander Philippines, Inc. (160 SCRA 573 [1988]), a case which reached a conclusion that is
diametrically opposite to that sought to be reached in the instant Motion for Reconsideration.
1. In page 5 of his dissenting opinion, Mr. Justice Edgardo L. Paras argues that the failure of petitioner
Commissioner of Internal Revenue to raise before the Court of Tax Appeals the issue of who should be
the real party in interest in claiming a refund cannot prejudice the government, as such failure is merely
a procedural defect; and that moreover, the government can never be in estoppel, especially in matters
involving taxes. In a word, the dissenting opinion insists that errors of its agents should not jeopardize
the government's position.
The above rule should not be taken absolutely and literally; if it were, the government would never lose
any litigation which is clearly not true. The issue involved here is not merely one of procedure; it is also
one of fairness: whether the government should be subject to the same stringent conditions applicable
to an ordinary litigant. As the Court had declared in Wander:
. . . To allow a litigant to assume a different posture when he comes before the court and
challenge the position he had accepted at the administrative level, would be to sanction a
procedure whereby the 
Court — which is supposed to review administrative determinations — would not review, but
determine and decide for the first time, a question not raised at the administrative forum. . . .
(160 SCRA at 566-577)
Had petitioner been forthright earlier and required from private respondent proof of authority from its
parent corporation, Procter and Gamble USA, to prosecute the claim for refund, private respondent
would doubtless have been able to show proof of such authority. By any account, it would be rank
injustice not at this stage to require petitioner to submit such proof.
2. In page 8 of his dissenting opinion, Paras, J., stressed that private respondent had failed: (1) to show
the actual amount credited by the US government against the income tax due from P & G USA on the
dividends received from private respondent; (2) to present the 1975 income tax return of P & G USA
when the dividends were received; and (3) to submit any duly authenticated document showing that the
US government credited the 20% tax deemed paid in the Philippines.
I agree with the main opinion of my colleague, Feliciano J., specifically in page 23 et seq. thereof,
which, as I understand it, explains that the US tax authorities are unable to determine the amount of the
"deemed paid" credit to be given P & G USA so long as the numerator of the fraction, i.e., dividends
actually remitted by P & G-Phil. to P & G USA, is still unknown. Stated in other words, until dividends
have actually been remitted to the US (which presupposes an actual imposition and collection of the
applicable Philippine dividend tax rate), the US tax authorities cannot determine the "deemed paid"
portion of the tax credit sought by P & G USA. To require private respondent to show documentary
proof of its parent corporation having actually received the "deemed paid" tax credit from the proper tax
authorities, would be like putting the cart before the horse. The only way of cutting through this (what
Feliciano, J., termed) "circularity" is for our BIR to issue rulings (as they have been doing) to the effect
that the tax laws of particular foreign jurisdictions, e.g., USA, comply with the requirements in our tax
code for applicability of the reduced 15% dividend tax rate. Thereafter, the taxpayer can be required to
submit, within a reasonable period, proof of the amount of "deemed paid" tax credit actually granted by
the foreign tax authority. Imposing such a resolutory condition should resolve the knotty problem of
circularity.
3. Page 8 of the dissenting opinion of Paras, J., further declares that tax refunds, being in the nature of
tax exemptions, are to be construed strictissimi juris against the person or entity claiming the
exemption; and that refunds cannot be permitted to exist upon "vague implications."
Notwithstanding the foregoing canon of construction, the fundamental rule is still that a judge must
ascertain and give effect to the legislative intent embodied in a particular provision of law. If a statute
(including a tax statute reducing a certain tax rate) is clear, plain and free from ambiguity, it must be
given its ordinary meaning and applied without interpretation. In the instant case, the dissenting opinion
of Paras, J., itself concedes that the basic purpose of Pres. Decree No. 369, when it was promulgated
in 1975 to amend Section 24(b), [11 of the National Internal Revenue Code, was "to decrease the tax
liability" of the foreign capital investor and thereby to promote more inward foreign investment. The
same dissenting opinion hastens to add, however, that the granting of a reduced dividend tax rate "is
premised on reciprocity."
4. Nowhere in the provisions of P.D. No. 369 or in the National Internal Revenue Code itself would one
find reciprocity specified as a condition for the granting of the reduced dividend tax rate in Section 24
(b), [1], NIRC. Upon the other hand, where the law-making authority intended to impose a requirement
of reciprocity as a condition for grant of a privilege, the legislature does so expressly and clearly. For
example, the gross estate of non-citizens and non-residents of the Philippines normally includes
intangible personal property situated in the Philippines, for purposes of application of the estate tax and
donor's tax. However, under Section 98 of the NIRC (as amended by P.D. 1457), no taxes will be
collected by the Philippines in respect of such intangible personal property if the law or the foreign
country of which the decedent was a citizen and resident at the time of his death allows a similar
exemption from transfer or death taxes in respect of intangible personal property located in such foreign
country and owned by Philippine citizens not residing in that foreign country.
There is no statutory requirement of reciprocity imposed as a condition for grant of the reduced dividend
tax rate of 15% Moreover, for the Court to impose such a requirement of reciprocity would be to
contradict the basic policy underlying P.D. 369 which amended Section 24(b), [1], NIRC, P.D. 369 was
promulgated in the effort to promote the inflow of foreign investment capital into the Philippines. A
requirement of reciprocity, i.e., a requirement that the U.S. grant a similar reduction of U.S. dividend
taxes on remittances by the U.S. subsidiaries of Philippine corporations, would assume a desire on the
part of the U.S. and of the Philippines to attract the flow of Philippine capital into the U.S.. But the
Philippines precisely is a capital importing, and not a capital exporting country. If the Philippines had
surplus capital to export, it would not need to import foreign capital into the Philippines. In other words,
to require dividend tax reciprocity from a foreign jurisdiction would be to actively encourage Philippine
corporations to invest outside the Philippines, which would be inconsistent with the notion of attracting
foreign capital into the Philippines in the first place.
5. Finally, in page 15 of his dissenting opinion, Paras, J., brings up the fact that:
Wander cited as authority a BIR ruling dated May 19, 1977, which requires a remittance tax
of only 15%. The mere fact that in this Procter and Gamble case, the BIR desires to charge
35% indicates that the BIR ruling cited in Wander has been obviously discarded today by the
BIR. Clearly, there has been a change of mind on the part of the BIR.
As pointed out by Feliciano, J., in his main opinion, even while the instant case was pending before the
Court of Tax Appeals and this Court, the administrative rulings issued by the BIR from 1976 until as late
as 1987, recognized the "deemed paid" credit referred to in Section 902 of the U.S. Tax Code. To date,
no contrary ruling has been issued by the BIR.
For all the foregoing reasons, private respondent's Motion for Reconsideration should be granted and I
vote accordingly.
PARAS, J., dissenting:
I dissent.
The decision of the Second Division of this Court in the case of "Commissioner of Internal Revenue vs.
Procter & Gamble Philippine Manufacturing Corporation, et al.," G.R. No. 66838, promulgated on April
15, 1988 is sought to be reviewed in the Motion for Reconsideration filed by private respondent. Procter
& Gamble Philippines (PMC-Phils., for brevity) assails the Court's findings that:
(a) private respondent (PMC-Phils.) is not a proper party to claim the refund/tax credit;
(b) there is nothing in Section 902 or other provision of the US Tax Code that allows a credit
against the U.S. tax due from PMC-U.S.A. of taxes deemed to have been paid in the Phils.
equivalent to 20% which represents the difference between the regular tax of 35% on
corporations and the tax of 15% on dividends;
(c) private respondent failed to meet certain conditions necessary in order that the dividends
received by the non-resident parent company in the U.S. may be subject to the preferential
15% tax instead of 35%. (pp. 200-201, Motion for Reconsideration)
Private respondent's position is based principally on the decision rendered by the Third Division of this
Court in the case of "Commissioner of Internal Revenue vs. Wander Philippines, Inc. and the Court of
Tax Appeals," G.R. No. 68375, promulgated likewise on April 15, 1988 which bears the same issues as
in the case at bar, but held an apparent contrary view. Private respondent advances the theory that
since the Wander decision had already become final and executory it should be a precedent in deciding
similar issues as in this case at hand.
Yet, it must be noted that the Wander decision had become final and executory only by reason of the
failure of the petitioner therein to file its motion for reconsideration in due time. Petitioner received the
notice of judgment on April 22, 1988 but filed a Motion for Reconsideration only on June 6, 1988, or
after the decision had already become final and executory on May 9, 1988. Considering that entry of
final judgment had already been made on May 9, 1988, the Third Division resolved to note without
action the said Motion. Apparently therefore, the merits of the motion for reconsideration were not
passed upon by the Court.
The 1987 Constitution provides that a doctrine or principle of law previously laid down either en banc or
in Division may be modified or reversed by the court en banc. The case is now before this Court en
banc and the decision that will be handed down will put to rest the present controversy.
It is true that private respondent, as withholding agent, is obliged by law to withhold and to pay over to
the Philippine government the tax on the income of the taxpayer, PMC-U.S.A. (parent company).
However, such fact does not necessarily connote that private respondent is the real party in interest to
claim reimbursement of the tax alleged to have been overpaid. Payment of tax is an obligation
physically passed off by law on the withholding agent, if any, but the act of claiming tax refund is a right
that, in a strict sense, belongs to the taxpayer which is private respondent's parent company. The role
or function of PMC-Phils., as the remitter or payor of the dividend income, is merely to insure the
collection of the dividend income taxes due to the Philippine government from the taxpayer, "PMC-
U.S.A.," the non-resident foreign corporation not engaged in trade or business in the Philippines, as
"PMC-U.S.A." is subject to tax equivalent to thirty five percent (35%) of the gross income received from
"PMC-Phils." in the Philippines "as . . . dividends . . ." (Sec. 24 [b], Phil. Tax Code). Being a mere
withholding agent of the government and the real party in interest being the parent company in the
United States, private respondent cannot claim refund of the alleged overpaid taxes. Such right properly
belongs to PMC-U.S.A. It is therefore clear that as held by the Supreme Court in a series of cases, the
action in the Court of Tax Appeals as well as in this Court should have been brought in the name of the
parent company as petitioner and not in the name of the withholding agent. This is because the action
should be brought under the name of the real party in interest. (See Salonga v. Warner Barnes, & Co.,
Ltd., 88 Phil. 125; Sutherland, Code Pleading, Practice, & Forms, p. 11; Ngo The Hua v. Chung Kiat
Hua, L-17091, Sept. 30, 1963, 9 SCRA 113; Gabutas v. Castellanes, L-17323, June 23, 1965, 14
SCRA 376; Rep. v. PNB, L-16485, January 30, 1945).
Rule 3, Sec. 2 of the Rules of Court provides:
Sec. 2. Parties in interest. — Every action must be prosecuted and defended in the name of
the real party in interest. All persons having an interest in the subject of the action and in
obtaining the relief demanded shall be joined as plaintiffs. All persons who claim an interest in
the controversy or the subject thereof adverse to the plaintiff, or who are necessary to a
 complete determination or settlement of the questions involved therein shall be joined as Evidently, the U.S. foreign tax credit system operates only on foreign taxes actually paid by U.S.
defendants. corporate taxpayers, whether directly or indirectly. Nowhere under a statute or under a tax treaty, does
the U.S. government recognize much less permit any foreign tax credit for spared or ghost taxes, as in
reality the U.S. foreign-tax credit mechanism under Sections 901-905 of the U.S. Intemal Revenue
It is true that under the Internal Revenue Code the withholding agent may be sued by itself if no
Code does not apply to phantom dividend taxes in the form of dividend taxes waived, spared or
remittance tax is paid, or if what was paid is less than what is due. From this, Justice Feliciano claims
otherwise considered "as if" paid by any foreign taxing authority, including that of the Philippine
that in case of an overpayment(or claim for refund) the agent must be given the right to sue the
government.
Commissioner by itself (that is, the agent here is also a real party in interest). He further claims that to
deny this right would be unfair. This is not so. While payment of the tax due is an OBLIGATION of the
agent the obtaining of a refund is a RIGHT. While every obligation has a corresponding right (and vice- Beyond, that, the private respondent failed: (1) to show the actual amount credited by the U.S.
versa), the obligation to pay the complete tax has the corresponding right of the government to demand government against the income tax due from PMC-U.S.A. on the dividends received from private
the deficiency; and the right of the agent to demand a refund corresponds to the government's duty to respondent; (2) to present the income tax return of its parent company for 1975 when the dividends
refund. Certainly, the obligation of the withholding agent to pay in full does not correspond to its right to were received; and (3) to submit any duly authenticated document showing that the U.S. government
claim for the refund. It is evident therefore that the real party in interest in this claim for reimbursement credited the 20% tax deemed paid in the Philippines.
is the principal (the mother corporation) and NOT the agent.
Tax refunds are in the nature of tax exemptions. As such, they are regarded as in derogation of
This suit therefore for refund must be DISMSSED. sovereign authority and to be construed strictissimi juris against the person or entity claiming the
exemption. The burden of proof is upon him who claims the exemption in his favor and he must be able
to justify his claim by the clearest grant of organic or statute law . . . and cannot be permitted to exist
In like manner, petitioner Commissioner of Internal Revenue's failure to raise before the Court of Tax
upon vague implications. (Asiatic Petroleum Co. v. Llanes, 49 Phil. 466; Northern Phil Tobacco Corp. v.
Appeals the issue relating to the real party in interest to claim the refund cannot, and should not,
Mun. of Agoo, La Union, 31 SCRA 304; Rogan v. Commissioner, 30 SCRA 968; Asturias Sugar
prejudice the government. Such is merely a procedural defect. It is axiomatic that the government can
Central, Inc. v. Commissioner of Customs, 29 SCRA 617; Davao Light and Power Co. Inc. v.
never be in estoppel, particularly in matters involving taxes. Thus, for example, the payment by the tax-
Commissioner of Custom, 44 SCRA 122). Thus, when tax exemption is claimed, it must be shown
payer of income taxes, pursuant to a BIR assessment does not preclude the government from
indubitably to exist, for every presumption is against it, and a well founded doubt is fatal to the claim
making further assessments. The errors or omissions of certain administrative officers should never be
(Farrington v. Tennessee & Country Shelby, 95 U.S. 679, 686; Manila Electric Co. v. Vera, L-29987,
allowed to jeopardize the government's financial position. (See: Phil. Long Distance Tel. Co. v. Coll. of
Oct. 22, 1975; Manila Electric Co. v. Tabios, L-23847, Oct. 22, 1975, 67 SCRA 451).
Internal Revenue, 90 Phil. 674; Lewin v. Galang, L-15253, Oct. 31, 1960; Coll. of Internal Revenue v.
Ellen Wood McGrath, L-12710, L-12721, Feb. 28, 1961; Perez v. Perez, L-14874, Sept, 30, 1960;
Republic v. Caballero, 79 SCRA 179; Favis v. Municipality of Sabongan, L-26522, Feb. 27, 1963). It will be remembered that the tax credit appertaining to remittances abroad of dividend earned here in
the Philippines was amplified in Presidential Decree No. 369 promulgated in 1975, the purpose of which
was to "encourage more capital investment for large projects." And its ultimate purpose is to decrease
As regards the issue of whether PMC-U.S.A. is entitled under the U.S. Tax Code to a United States
the tax liability of the corporation concerned. But this granting of a preferential right is premised on
Foreign Tax Credit equivalent to at least 20 percentage paid portion spared or waived as otherwise
reciprocity, without which there is clearly a derogation of our country's financial sovereignty. No such
deemed waived by the government, We reiterate our ruling that while apparently, a tax-credit is given,
reciprocity has been proved, nor does it actually exist. At this juncture, it would be useful to bear in mind
there is actually nothing in Section 902 of the U.S. Internal Revenue Code, as amended by Public Law-
the following observations:
87-834 that would justify tax return of the disputed 15% to the private respondent. This is because the
amount of tax credit purportedly being allowed is not fixed or ascertained, hence we do not know
whether or not the tax credit contemplated is within the limits set forth in the law. While the The continuing and ever-increasing transnational movement of goods and services, the emergence of
mathematical computations in Justice Feliciano's separate opinion appear to be correct, the multinational corporations and the rise in foreign investments has brought about tremendous pressures
computations suffer from a basic defect, that is we have no way of knowing or checking the figure used on the tax system to strengthen its competence and capability to deal effectively with issues arising
as premises. In view of the ambiguity of Sec. 902 itself, we can conclude that no real tax credit was from the foregoing phenomena.
really intended. In the interpretation of tax statutes, it is axiomatic that as between the interest of
multinational corporations and the interest of our own government, it would be far better, in the absence
International taxation refers to the operationalization of the tax system on an international level. As it is,
of definitive guidelines, to favor the national interest. As correctly pointed out by the Solicitor General:
international taxation deals with the tax treatment of goods and services transferred on a global basis,
multinational corporations and foreign investments.
. . . the tax-sparing credit operates on dummy, fictional or phantom taxes, being considered
as if paid by the foreign taxing authority, the host country.
Since the guiding philosophy behind international trade is free flow of goods and services, it goes
without saying that the principal objective of international taxation is to see through this ideal by way of
In the context of the case at bar, therefore, the thirty five (35%) percent on the dividend feasible taxation arrangements which recognize each country's sovereignty in the matter of taxation, the
income of PMC-U.S.A. would be reduced to fifteen (15%) percent if & only if reciprocally need for revenue and the attainment of certain policy objectives.
PMC-U.S.A's home country, the United States, not only would allow against PMC-U.SA.'s
U.S. income tax liability a foreign tax credit for the fifteen (15%) percentage-point portion of
The institution of feasible taxation arrangements, however, is hard to come by. To begin with,
the thirty five (35%) percent Phil. dividend tax actually paid or accrued but also would allow a
international tax subjects are obviously more complicated than their domestic counter-parts. Hence, the
foreign tax "sparing" credit for the twenty (20%)' percentage-point portion spared, waived,
devise of taxation arrangements to deal with such complications requires a welter of information and
forgiven or otherwise deemed as if paid by the Phil. govt. by virtue of the "tax credit sparing"
data build-up which generally are not readily obtainable and available. Also, caution must be exercised
proviso of Sec. 24(b), Phil. Tax Code." (Reply Brief, pp. 23-24; Rollo, pp. 239-240).
 "X" Foreign Corp. tax payable 70
so that whatever taxation arrangements are set up, the same do not get in the way of free flow of goods
Less: RP tax (35% of 100, the
and services, exchange of technology, movement of capital and investment initiatives.
difference of 20% between 35% and 15%,

deemed paid to RP)

A cardinal principle adhered to in international taxation is the avoidance of double taxation. The Net "X" Foreign Corp.
phenomenon of double taxation (i.e., taxing an item more than once) arises because of global tax payable 35
movement of goods and services. Double taxation also occurs because of overlaps in tax jurisdictions
resulting in the taxation of taxable items by the country of source or location (source or situs rule) and
By way of resume, We may say that the Wander decision of the Third Division cannot, and should not result in the reversal of the Procter & Gamble decision for the following
the taxation of the same items by the country of residence or nationality of the taxpayer
reasons:
(domiciliary or nationality principle).

1) The Wander decision cannot serve as a precedent under the doctrine of stare decisis. It was promulgated on the same day the decision of the Second Division was promulgated,
An item may, therefore, be taxed in full in the country of source because it originated there, and in
and while Wander has attained finality this is simply because no motion for reconsideration thereof was filed within a reasonable period. Thus, said Motion for Reconsideration was
another country because the recipient is a resident or citizen of that country. If the taxes in both
theoretically never taken into account by said Third Division.
countries are substantial and no tax relief is offered, the resulting double taxation would serve as a
discouragement to the activity that gives rise to the taxable item.
2) Assuming that  stare decisis can apply, We reiterate what a former noted jurist Mr. Justice Sabino Padilla aptly said: "More pregnant than anything else is that the court shall be

As a way out of double taxation, countries enter into tax treaties. A tax treaty 1 is a bilateral convention right." We hereby cite settled doctrines from a treatise on Civil Law:

(but may be made multilateral) entered into between sovereign states for purposes of eliminating
double taxation on income and capital, preventing fiscal evasion, promoting mutual trade and We adhere in our country to the doctrine of stare decisis (let it stand, et non quieta movere) for reasons of stability in the law. The doctrine, which is really
investment, and according fair and equitable tax treatment to foreign residents or nationals. 2 "adherence to precedents," states that once a case has been decided one way, then another case, involving exactly the same point at issue, should be decided in

the same manner.

Of course, when a case has been decided erroneously such an error must not be perpetuated by blind obedience to the doctrine of stare decisis. No matter how
sound a doctrine may be, and no matter how long it has been followed thru the years, still if found to be contrary to law, it must be abandoned. The principle
A more general way of mitigating the impact of double taxation is to recognize the foreign tax either as a tax credit or an item of deduction.
of stare decisis does not and should not apply when there is a conflict between the precedent and the law (Tan Chong v. Sec. of Labor, 79 Phil. 249).

Whether the recipient resorts to tax credit or deduction is dependent on the tax advantage or savings that would be derived therefrom.
While stability in the law is eminently to be desired, idolatrous reverence for precedent, simply, as precedent, no longer rules. More pregnant than anything else is

that the court shall be right (Phil. Trust Co. v. Mitchell, 59 Phil. 30).
A principal defect of the tax credit system is when low tax rates or special tax concessions are granted in a country for the obvious reason of encouraging foreign investments. For
instance, if the usual tax rate is 35 percent but a concession rate accrues to the country of the investor rather than to the investor himself To obviate this, a tax sparing provision may
3) Wander deals with tax relations between the Philippines and Switzerland, a country with which we have a pending tax treaty; our Procter & Gamble case deals with relations
be stipulated. With tax sparing, taxes exempted or reduced are considered as having been fully paid.
between the Philippines and the United States, a country with which we had no tax treaty, at the time the taxes herein were collected.

To illustrate:
4) Wander cited as authority a BIR Ruling dated May 19, 1977, which requires a remittance tax of only 15%. The mere fact that in this Procter and Gamble case the B.I.R. desires to

charge 35% indicates that the B.I.R. Ruling cited in Wander has been obviously discarded today by the B.I.R. Clearly, there has been a change of mind on the part of the B.I.R.
"X" Foreign Corporation income 100
Tax rate (35%) 35
5) Wander imposes a tax of 15% without stating whether or not reciprocity on the part of Switzerland exists. It is evident that without reciprocity the desired consequences of the tax
RP income 100
credit under P.D. No. 369 would be rendered unattainable.
Tax rate (general, 35%

concession rate, 15%) 15

6) In the instant case, the amount of the tax credit deductible and other pertinent financial data have not been presented, and therefore even were we inclined to grant the tax credit
claimed, we find ourselves unable to compute the proper amount thereof.
1. "X" Foreign Corp. Tax Liability without Tax Sparing
"X" Foreign Corporation income 100

RP income 100 7) And finally, as stated at the very outset, Procter & Gamble Philippines or P.M.C. (Phils.) is not the proper party to bring up the case.
Total Income 200

"X" tax payable 70

ACCORDINGLY, the decision of the Court of Tax Appeals should be REVERSED and the motion for reconsideration of our own decision should be DENIED.
Less: RP tax 15
Net "X" tax payable 55

Melencio-Herrera, Padilla, Regalado and Davide, Jr., JJ., concur.

2. "X" Foreign Corp. Tax Liability with Tax Sparing

"X" Foreign Corp. income 100  
RP income 100
Total income 200
 
# Separate Opinions
CRUZ, J.,  concurring:
I join Mr. Justice Feliciano in his excellent analysis of the difficult issues we are now asked to resolve.
As I understand it, the intention of Section 24(b) of our Tax Code is to attract foreign investors to this country by reducing their 35% dividend tax rate to 15% if their own state allows
them a deemed paid tax credit at least equal in amount to the 20% waived by the Philippines. This tax credit would offset the tax payable by them on their profits to their home state.
In effect, both the Philippines and the home state of the foreign investors reduce their respective tax "take" of those profits and the investors wind up with more left in their pockets.
Under this arrangement, the total taxes to be paid by the foreign investors may be confined to the 35% corporate income tax and 15% dividend tax only, both payable to the
Philippines, with the US tax hability being offset wholly or substantially by the Us "deemed paid' tax credits.
Without this arrangement, the foreign investors will have to pay to the local state (in addition to the 35% corporate income tax) a 35% dividend tax and another 35% or more to their
home state or a total of 70% or more on the same amount of dividends. In this circumstance, it is not likely that many such foreign investors, given the onerous burden of the two-tier
system, i.e., local state plus home state, will be encouraged to do business in the local state.
It is conceded that the law will "not trigger off an instant surge of revenue," as indeed the tax collectible by the Republic from the foreign investor is considerably reduced. This may
appear unacceptable to the superficial viewer. But this reduction is in fact the price we have to offer to persuade the foreign company to invest in our country and contribute to our
economic development. The benefit to us may not be immediately available in instant revenues but it will be realized later, and in greater measure, in terms of a more stable and
robust economy.
BIDIN, J.,  concurring:
I agree with the opinion of my esteemed brother, Mr. Justice Florentino P. Feliciano. However, I wish to add some observations of my own, since I happen to be
the  ponente in Commissioner of Internal Revenue v. Wander Philippines, Inc. (160 SCRA 573 [1988]), a case which reached a conclusion that is diametrically opposite to that
sought to be reached in the instant Motion for Reconsideration.
1. In page 5 of his dissenting opinion, Mr. Justice Edgardo L. Paras argues that the failure of petitioner Commissioner of Internal Revenue to raise before the Court of Tax Appeals
the issue of who should be the real party in interest in claiming a refund cannot prejudice the government, as such failure is merely a procedural defect; and that moreover, the
government can never in estoppel, especially in matters involving taxes. In a word, the dissenting opinion insists that errors of its agents should not jeopardize the government's
position.
The above rule should not be taken absolutely and literally; if it were, the government would never lose any litigation which is clearly not true. The issue involved here is not merely
one of procedure; it is also one of fairness: whether the government should be subject to the same stringent conditions applicable to an ordinary litigant. As the Court had declared
in Wander:
. . . To allow a litigant to assume a different posture when he comes before the court and challenge the position he had accepted at the administrative level, would
be to sanction a procedure whereby the Court — which is supposed to review administrative determinations — would not review, but determine and decide for the
first time, a question not raised at the administrative forum. ... (160 SCRA at 566-577)
Had petitioner been forthright earlier and required from private respondent proof of authority from its parent corporation, Procter and Gamble USA, to prosecute the claim for refund,
private respondent would doubtless have been able to show proof of such authority. By any account, it would be rank injustice not at this stage to require petitioner to submit such
proof.
2. In page 8 of his dissenting opinion, Paras, J., stressed that private respondent had failed: (1) to show the actual amount credited by the US government against the income tax
due from P & G USA on the dividends received from private respondent; (2) to present the 1975 income tax return of P & G USA when the dividends were received; and (3) to
submit any duly authenticated document showing that the US government credited the 20% tax deemed paid in the Philippines.
I agree with the main opinion of my colleagues, Feliciano J., specifically in page 23 et seq. thereof, which, as I understand it, explains that the US tax authorities are unable to
determine the amount of the "deemed paid" credit to be given P & G USA so long as the numerator of the fraction, i.e., dividends actually remitted by P & G-Phil. to P & G USA, is
still unknown. Stated in other words, until dividends have actually been remitted to the US (which presupposes an actual imposition and collection of the applicable Philippine
dividend tax rate), the US tax authorities cannot determine the "deemed paid" portion of the tax credit sought by P & G USA. To require private respondent to show documentary
proof of its parent corporation having actually received the "deemed paid" tax credit from the proper tax authorities, would be like putting the cart before the horse. The only way of
cutting through this (what Feliciano, J., termed) "circularity" is for our BIR to issue rulings (as they have been doing) to the effect that the tax laws of particular foreign jurisdictions,
e.g., USA, comply with the requirements in our tax code for applicability of the reduced 15% dividend tax rate. Thereafter, the taxpayer can be required to submit, within a
reasonable period, proof of the amount of "deemed paid" tax credit actually granted by the foreign tax authority. Imposing such a resolutory condition should resolve the knotty
problem of circularity.
3. Page 8 of the dissenting opinion of Paras, J., further declares that tax refunds, being in the nature of tax exemptions, are to be construed strictissimi juris against the person or
entity claiming the exemption; and that refunds cannot be permitted to exist upon "vague implications."
Notwithstanding the foregoing canon of construction, the fundamental rule is still that a judge must ascertain and give effect to the legislative intent embodied in a particular
provision of law. If a statute (including a tax statute reducing a certain tax rate) is clear, plain and free from ambiguity, it must be given its ordinary meaning and applied without
interpretation. In the instant case, the dissenting opinion of Paras, J., itself concedes that the basic purpose of Pres. Decree No. 369, when it was promulgated in 1975 to amend
Section 24(b), [11 of the National Internal Revenue Code, was "to decrease the tax liability" of the foreign capital investor and thereby to promote more inward foreign investment.
The same dissenting opinion hastens to add, however, that the granting of a reduced dividend tax rate "is premised on reciprocity."
4. Nowhere in the provisions of P.D. No. 369 or in the National Internal Revenue Code itself would one find reciprocity specified as a condition for the granting of the reduced
dividend tax rate in Section 24 (b), [1], NIRC. Upon the other hand. where the law-making authority intended to impose a requirement of reciprocity as a condition for grant of a
privilege, the legislature does so expressly and clearly. For example, the gross estate of non-citizens and non-residents of the Philippines normally includes intangible personal
property situated in the Philippines, for purposes of application of the estate tax and donor's tax. However, under Section 98 of the NIRC (as amended by P.D. 1457), no taxes will
be collected by the Philippines in respect of such intangible personal property if the law or the foreign country of which the decedent was a citizen and resident at the time of his
death allows a similar exemption from transfer or death taxes in respect of intangible personal property located in such foreign country and owned by Philippine citizens not residing
in that foreign country.
There is no statutory requirement of reciprocity imposed as condition for grant of the reduced dividend tax rate of 15% Moreover, for the Court to impose such a requirement of
reciprocity would be to contradict the basic policy underlying P.D. 369 which amended Section 24(b), [1], NIRC, P.D. 369 was promulgated in the effort to promote the inflow of
foreign investment capital into the Philippines. A requirement of reciprocity, i.e., a requirement that the U.S. grant a similar reduction of U.S. dividend taxes on remittances by the
U.S. subsidiary of Philippine corporations, would assume a desire on the part of the U.S. and of the Philippines to attract the flow of Philippine capital into the U.S.. But the
Philippines precisely is a capital importing, and  not a capital exporting country. If the Philippines had surplus capital to export, it would not need to import foreign capital into the
Philippines. In other words, to require dividend tax reciprocity from a foreign jurisdiction would be to actively encourage Philippine corporations to invest outside the Philippines,
which would be inconsistent with the notion of attracting foreign capital into the Philippines in the first place.
5. Finally, in page 15 of his dissenting opinion, Paras, J., brings up the fact that:
Wander cited as authority a BIR ruling dated May 19, 1977, which requires a remittance tax of only 15%. The mere fact that in this Procter and Gamble case, the
BIR desires to charge 35% indicates that the BIR ruling cited in Wander has been obviously discarded today by the BIR. Clearly, there has been a change of mind
on the part of the BIR.
As pointed out by Feliciano, J., in his main opinion, even while the instant case was pending before the Court of Tax Appeals and this Court, the administrative rulings issued by the
BIR from 1976 until as late as 1987, recognized the "deemed paid" credit referred to in Section 902 of the U.S. Tax Code. To date, no contrary ruling has been issued by the BIR.
For all the foregoing reasons, private respondent's Motion for Reconsideration should be granted and I vote accordingly.

PARAS, J.,  dissenting:
I dissent.
The decision of the Second Division of this Court in the case of "Commissioner of Internal Revenue vs. Procter & Gamble Philippine Manufacturing Corporation, et al.," G.R. No.
66838, promulgated on April 15,1988 is sought to be reviewed in the Motion for Reconsideration filed by private respondent. Procter & Gamble Philippines (PMC-Phils., for brevity)
assails the Court's findings that:
(a) private respondent (PMC-Phils.) is not a proper party to claim the refund/tax aredit;
(b) there is nothing in Section 902 or other provision of the US Tax Code that allows a credit against the U.S. tax due from PMC-U.S.A. of taxes deemed to have
been paid in the Phils. equivalent to 20% which represents the difference between the regular tax of 35% on corporations and the tax of 15% on dividends;
(c) private respondent failed to meet certain conditions necessary in order that the dividends received by the non-resident parent company in the U.S. may be
subject to the preferential 15% tax instead of 35%. (pp, 200-201, Motion for Reconsideration)
Private respondent's position is based principally on the decision rendered by the Third Division of this Court in the case of "Commissioner of Internal Revenue vs. Wander
Philippines, Inc. and the Court of Tax Appeals," G.R. No. 68375, promulgated likewise on April 15, 1988 which bears the same issues as in the case at bar, but held an apparent
contrary view. Private respondent advances the theory that since the Wander decision had already become final and executory it should be a precedent in deciding similar issues as
in this case at hand.
Yet, it must be noted that the Wander decision had become final and executory only by reason of the failure of the petitioner therein to file its motion for reconsideration in due time.
Petitioner received the notice of judgment on April 22, 1988 but filed a Motion for Reconsideration only on June 6, 1988, or after the decision had already become final and
executory on May 9, 1988. Considering that entry of final judgment had already been made on May 9, 1988, the Third Division resolved to note without action the said Motion.
Apparently therefore, the merits of the motion for reconsideration were not passed upon by the Court.
The 1987 Constitution provides that a doctrine or principle of law previously laid down either en banc or in Division may be modified or reversed by the court en banc. The case is
now before this Court en banc and the decision that will be handed down will put to rest the present controversy.
It is true that private respondent, as withholding agent, is obliged by law to withhold and to pay over to the Philippine government the tax on the income of the taxpayer, PMC-U.S.A.
(parent company). However, such fact does not necessarily connote that private respondent is the real party in interest to claim reimbursement of the tax alleged to have been
overpaid. Payment of tax is an obligation physically passed off by law on the withholding agent, if any, but the act of claiming tax refund is a right that, in a strict sense, belongs to
the taxpayer which is private respondent's parent company. The role or function of PMC-Phils., as the remitter or payor of the dividend income, is merely to insure the collection of
the dividend income taxes due to the Philippine government from the taxpayer, "PMC-U.S.A.," the non-resident foreign corporation not engaged in trade or business in the
Philippines, as "PMC-U.S.A." is subject to tax equivalent to thirty five percent (35%) of the gross income received from "PMC-Phils." in the Philippines "as ... dividends ..."(Sec.
24[b],Phil. Tax Code). Being a mere withholding agent of the government and the real party in interest being the parent company in the United States, private respondent cannot
claim refund of the alleged overpaid taxes. Such right properly belongs to PMC-U.S.A. It is therefore clear that as held by the Supreme Court in a series of cases, the action in the
Court of Tax Appeals as well as in this Court should have been brought in the name of the parent company as petitioner and not in the name of the withholding agent. This is
because the action should be brought under the name of the real party in interest. (See Salonga v. Warner Barnes, & Co., Ltd., 88 Phil. 125; Sutherland, Code Pleading, Practice, &
Forms, p. 11; Ngo The Hua v. Chung Kiat Hua, L-17091, Sept. 30, 1963, 9 SCRA 113; Gabutas v. Castellanes, L-17323, June 23, 1965, 14 SCRA 376; Rep. v. PNB, I, 16485,
January 30, 1945).
Rule 3, Sec. 2 of the Rules of Court provides:
Sec. 2. Parties in interest. — Every action must be prosecuted and defended in the name of the real party in interest. All persons having an interest in the subject
of the action and in obtaining the relief demanded shall be joined as plaintiffs. All persons who claim an interest in the controversy or the subject thereof adverse to
the plaintiff, or who are necessary to a complete determination or settlement of the questions involved therein shall be joined as defendants.
It is true that under the Internal Revenue Code the withholding agent may be sued by itself if no remittance tax is paid, or if what was paid is less than what is due. From this, Justice
Feliciano claims that in case of an overpayment(or claim for refund) the agent must be given the right to sue the Commissioner by itself (that is, the agent here is also a real party in
interest). He further claims that to deny this right would be unfair. This is not so. While payment of the tax due is an OBLIGATION of the agent, the obtaining of a refund la a RIGHT.
While every obligation has a corresponding right (and vice-versa), the obligation to pay the complete tax has the corresponding right of the government to demand the deficiency;
and the right of the agent to demand a refund corresponds to the government's duty to refund. Certainly, the obligation of the withholding agent to pay in full does not correspond to
its right to claim for the refund. It is evident therefore that the real party in interest in this claim for reimbursement is the principal (the mother corporation) and NOT the agent.
This suit therefore for refund must be DISMSSED.
In like manner, petitioner Commissioner of Internal Revenue's failure to raise before the Court of Tax Appeals the issue relating to the real party in interest to claim the refund
cannot, and should not, prejudice the government. Such is merely a procedural defect. It is axiomatic that the government can never be in estoppel, particularly in matters involving
taxes. Thus, for example, the payment by the tax-payer of income taxes, pursuant to a BIR assessment does not preclude the government from making further assessments. The
errors or omissions of certain administrative officers should never be allowed to jeopardize the government's financial position. (See: Phil. Long Distance Tel. Co. v. Con. of Internal
Revenue, 9(, Phil. 674; Lewin v. Galang, L-15253, Oct. 31, 1960; Coll. of Internal Revenue v. Ellen Wood McGrath, L-12710, L-12721, Feb. 28,1961; Perez v. Perez, L-14874, Sept.
30,1960; Republic v. Caballero, 79 SCRA 179; Favis v. Municipality of Sabongan, L-26522, Feb. 27,1963).
As regards the issue of whether PMC-U.S.A. is entitled under the U.S. Tax Code to a United States Foreign Tax Credit equivalent to at least 20 percentage paid portion spared or
waived as otherwise deemed waived by the government, We reiterate our ruling that while  apparently, a tax-credit is given, there is actually nothing in Section 902 of the U.S.
Internal Revenue Code, as amended by Public Law-87-834 that would justify tax return of the disputed 15% to the private respondent. This is because the amount of tax credit
purportedly being allowed is not fixed or ascertained, hence we do not know whether or not the tax credit contemplated is within the limits set forth in the law. While the
mathematical computations in Justice Feliciano's separate opinion appear to be correct, the computations suffer from a basic defect, that is we have no way of knowing or checking
the figure used as premises. In view of the ambiguity of Sec. 902 itself, we can conclude that no real tax credit was really intended. In the interpretation of tax statutes, it is axiomatic
that as between the interest of multinational corporations and the interest of our own government, it would be far better, in the absence of definitive guidelines, to favor the national
interest. As correctly pointed out by the Solicitor General:
. . . the tax-sparing credit operates on dummy, fictional or phantom taxes, being considered as if paid by the foreign taxing authority, the host country.
In the context of the case at bar, therefore, the thirty five (35%) percent on the dividend income of PMC-U.S.A. would be reduced to fifteen (15%) percent if & only
if reciprocally PMC-U.S.A's home country, the United States, not only would allow against PMC-U.SA.'s U.S. income tax liability a foreign tax credit for the fifteen
(15%) percentage-point portion of the thirty five (35%) percent Phil. dividend tax actually paid or accrued but also would allow a foreign tax 'sparing' credit for the
twenty (20%)' percentage-point portion spared, waived, forgiven or otherwise deemed as if paid by the Phil. govt. by virtue of . he "tax credit sparing" proviso of
Sec. 24(b), Phil. Tax Code." (Reply Brief, pp. 23-24; Rollo, pp. 239-240).
Evidently, the U.S. foreign tax credit system operates only on foreign taxes actually paid by U.S. corporate taxpayers, whether directly or indirectly. Nowhere under a statute or
under a tax treaty, does the U.S. government recognize much less permit any foreign tax credit for spared or ghost taxes, as in reality the U.S. foreign-tax credit mechanism under
Sections 901-905 of the U.S. Internal Revenue Code does not apply to phantom dividend taxes in the form of dividend taxes waived, spared or otherwise considered "as if' paid by
any foreign taxing authority, including that of the Philippine government.
Beyond, that, the private respondent failed: (1) to show the actual amount credited by the U.S. government against the income tax due from PMC-U.S.A. on the dividends received
from private respondent; (2) to present the income tax return of its parent company for 1975 when the dividends were received; and (3) to submit any duly authenticated document
showing that the U.S. government credited the 20% tax deemed paid in the Philippines.
Tax refunds are in the nature of tax exemptions. As such, they are regarded as in derogation of sovereign authority and to be construed strictissimi juris against the person or entity
claiming the exemption. The burden of proof is upon him who claims the exemption in his favor and he must be able to justify, his claim by the clearest grant of organic or statute
law... and cannot be permitted to exist upon vague implications (Asiatic Petroleum Co. v. Llanes. 49 Phil. 466; Northern Phil Tobacco Corp. v. Mun. of Agoo, La Union, 31 SCRA
304; Rogan v. Commissioner, 30 SCRA 968; Asturias Sugar Central, Inc. v. Commissioner of Customs, 29 SCRA 617; Davao Light and Power Co. Inc. v. Commissioner of Custom,
44 SCRA 122' Thus, when tax exemption is claimed. it must be shown indubitably to exist, for every presumption is against it, and a well founded doubt is fatal to the claim
(Farrington v. Tennessee & Country Shelby, 95 U.S. 679, 686; Manila Electric Co. v. Vera. L-29987. Oct. 22. 1975: Manila Electric Co. v. Vera, L-29987, Oct. 22, 1975; Manila
Electric Co. v. Tabios, L-23847, Oct. 22, 1975, 67 SCRA 451).
It will be remembered that the tax credit appertaining to remittances abroad of dividend earned here in the Philippines was amplified in Presidential Decree 4 No. 369 promulgated in
1975, the purpose of which was to "encourage more capital investment for large projects." And its ultimate purpose it to decrease the tax liability of the corporation concerned. But
this granting of a preferential right is premised on reciprocity, without which there is clearly a derogation of our country's financial sovereignty. No such reciprocity has been proved, Tax rate (general, 35%
nor does it actually exist. At this juncture, it would be useful to bear in mind the following observations: concession rate, 15%) 15

The continuing and ever-increasing transnational movement of goods and services, the emergence of multinational corporations and the rise in foreign investments has brought 1. "X" Foreign Corp. Tax Liability without Tax Sparing

about tremendous pressures on the tax system to strengthen its competence and capability to deal effectively with issues arising from the foregoing phenomena. "X" Foreign Corporation income 100
RP income 100

Total Income 200

International taxation refers to the operationalization of the tax system on an international level. As it is, international taxation deals with the tax treatment of goods and services
"X" tax payable 70
transferred on a global basis, multinational corporations and foreign investments.
Less: RP tax 15
Net "X" tax payable 55

Since the guiding philosophy behind international trade is free flow of goods and services, it goes without saying that the principal objective of  international taxation is to see through
this ideal by way of feasible taxation arrangements which recognize each country's sovereignty in the matter of taxation, the need for revenue and the attainment of certain policy
2. "X" Foreign Corp. Tax Liability with Tax Sparing
objectives.
"X" Foreign Corp. income 100
RP income 100

The institution of feasible taxation arrangements, however, is hard to come by. To begin with, international tax subjects are obviously more complicated than their domestic counter- Total income 200

parts. Hence, the devise of taxation arrangements to deal with such complications requires a welter of information and data buildup which generally are not readily obtainable and "X" Foreign Corp. tax payable 70

available. Also, caution must be exercised so that whatever taxation arrangements are set up, the same do not get in the way of free flow of goods and services, exchange of Less: RP tax (35% of 100, the

technology, movement of capital and investment initiatives. difference of 20% between 35% and 15%,
deemed paid to RP)
Net "X" Foreign Corp.
A cardinal principle adhered to in international taxation is the  avoidance of double taxation. The phenomenon of double taxation (i.e., taxing an item more than once) arises because
tax payable 35
of global movement of goods and services. Double taxation also occurs because of overlaps in tax jurisdictions resulting in the taxation of taxable items by the country of source or

location (source or situs rule) and the taxation of the same items by the country of residence or nationality of the taxpayer (domiciliary or  nationality principle).
By way of resume, We may say that the Wander decision of the Third Division cannot, and should not result in the reversal of the Procter & Gamble decision for the following

reasons:
An item may, therefore, be taxed in full in the country of source because it originated there, and in another country because the recipient is a resident or citizen of that country. If the
taxes in both countries are substantial and no tax relief is offered, the resulting double taxation would serve as a discouragement to the activity that gives rise to the taxable item.
1) The Wander decision cannot serve as a precedent under the doctrine of stare decisis. It was promulgated on the same day the decision of the Second Division was promulgated,
and while Wander has attained finality this is simply because no motion for reconsideration thereof was filed within a reasonable period. Thus, said Motion for Reconsideration was
theoretically never taken into account by said Third Division.

As a way out of double taxation, countries enter into tax treaties. A tax treaty 1 2) Assuming that  stare decisis can apply, We reiterate what a former noted jurist Mr. Justice Sabino Padilla aptly said: "More pregnant than anything else is that the court shall be
 is a bilateral convention (but may be made multilateral)
right." We hereby cite settled doctrines from a treatise on Civil Law:
entered into between sovereign states for purposes of eliminating double taxation on income and
capital, preventing fiscal evasion, promoting mutual trade and investment, and according fair and
equitable tax treatment to foreign residents or nationals. 2 We adhere in our country to the doctrine of stare decisis (let it stand, et non quieta movere) for reasons of stability in the law. The doctrine, which is really
'adherence to precedents,' states that once a case has been decided one way, then another case, involving exactly the same point at issue, should be decided in
the same manner.

Of course, when a case has been decided erroneously such an error must not be perpetuated by blind obedience to the doctrine of stare decisis. No matter how
A more general way of mitigating the impact of double taxation is to recognize the foreign tax either as a tax credit or an item of deduction.
sound a doctrine may be, and no matter how long it has been followed thru the years, still if found to be contrary to law, it must be abandoned. The principle

of stare decisis does not and should not apply when there is a conflict between the precedent and the law (Tan Chong v. Sec. of Labor, 79 Phil. 249).

Whether the recipient resorts to tax credit or deduction is dependent on the tax advantage or savings that would be derived therefrom.

While stability in the law is eminently to be desired, idolatrous reverence for precedent, simply, as precedent, no longer rules. More pregnant than anything else is

A principal defect of the tax credit system is when low tax rates or special tax concessions are granted in a country for the obvious reason of encouraging foreign investments. For that the court shall be right (Phil. Trust Co. v. Mitchell, 69 Phil. 30).

instance, if the usual tax rate is 35 percent but a concession rate accrues to the country of the investor rather than to the investor himself To obviate this, a tax sparing provision may
be stipulated. With tax sparing, taxes exempted or reduced are considered as having been frilly paid.
3) Wander deals with tax relations between the Philippines and Switzerland, a country with which we have a pending tax treaty; our Procter & Gamble case deals with relations
between the Philippines and the United States, a country with which we had no tax treaty, at the time the taxes herein were collected.

To illustrate:

4) Wander cited as authority a BIR Ruling dated May 19, 1977, which requires a remittance tax of only 15%. The mere fact that in this Procter and Gamble case the B.I.R. desires;

"X" Foreign Corporation income 100 to charge 35% indicates that the B.I.R. Ruling cited in Wander has been obviously discarded today by the B.I.R. Clearly, there has been a change of mind on the part of the B.I.R.

Tax rate (35%) 35

RP income 100
5) Wander imposes a tax of 15% without stating whether or not reciprocity on the part of Switzerland exists. It is evident that without reciprocity the desired consequences of the tax

credit under P.D. No. 369 would be rendered unattainable.

6) In the instant case, the amount of the tax credit deductible and other pertinent financial data have not been presented, and therefore even were we inclined to grant the tax credit
dismissed, for having been prematurely filed, Taganito Mining Corporation’s (Taganito) judicial claim for
claimed, we find ourselves unable to compute the proper amount thereof.
P8,365,664.38 tax refund or credit.

7) And finally, as stated at the very outset, Procter & Gamble Philippines or P.M.C. (Phils.) is not the proper party to bring up the case.
G.R. No. 197156 is a petition for review11 assailing the Decision12promulgated on 3 December 2010 as
well as the Resolution13 promulgated on 17 May 2011 by the CTA EB in CTA EB No. 569. The CTA EB
ACCORDINGLY, the decision of the Court of Tax Appeals should be REVERSED and the motion for reconsideration of our own decision should be DENIED. affirmed the 20 July 2009 Decision as well as the 10 November 2009 Resolution of the CTA Second
Division in CTA Case No. 7687. The CTA Second Division denied, due to prescription, Philex Mining
Corporation’s (Philex) judicial claim for P23,956,732.44 tax refund or credit.
G.R. No. 187485               February 12, 2013
On 3 August 2011, the Second Division of this Court resolved14 to consolidate G.R. No. 197156 with
COMMISSIONER OF INTERNAL REVENUE, Petitioner,  G.R. No. 196113, which were pending in the same Division, and with G.R. No. 187485, which was
vs. assigned to the Court En Banc. The Second Division also resolved to refer G.R. Nos. 197156 and
SAN ROQUE POWER CORPORATION, Respondent. 196113 to the Court En Banc, where G.R. No. 187485, the lower-numbered case, was assigned.

X----------------------------X G.R. No. 187485

CIR v. San Roque Power Corporation
G.R. No. 196113
The Facts
TAGANITO MINING CORPORATION, Petitioner, 
vs. The CTA EB’s narration of the pertinent facts is as follows:
COMMISSIONER OF INTERNAL REVENUE, Respondent.
[CIR] is the duly appointed Commissioner of Internal Revenue, empowered, among others, to act upon
x----------------------------x and approve claims for refund or tax credit, with office at the Bureau of Internal Revenue ("BIR")
National Office Building, Diliman, Quezon City.
G.R. No. 197156
[San Roque] is a domestic corporation duly organized and existing under and by virtue of the laws of
the Philippines with principal office at Barangay San Roque, San Manuel, Pangasinan. It was
PHILEX MINING CORPORATION, Petitioner,  incorporated in October 1997 to design, construct, erect, assemble, own, commission and operate
vs. power-generating plants and related facilities pursuant to and under contract with the Government of
COMMISSIONER OF INTERNAL REVENUE, Respondent. the Republic of the Philippines, or any subdivision, instrumentality or agency thereof, or any
governmentowned or controlled corporation, or other entity engaged in the development, supply, or
DECISION distribution of energy.

CARPIO, J.:
The Cases
G.R. No. 187485 is a petitiOn for review1 assailing the Decision2 promulgated on 25 March 2009 as well
as the Resolution3 promulgated on 24 April 2009 by the Court of Tax Appeals En Banc (CTA EB) in
CTA EB No. 408. The CTA EB affirmed the 29 November 2007 Amended Decision4 as well as the 11
July 2008 Resolution5 of the Second Division of the Court of Tax Appeals (CTA Second Division) in
CTA Case No. 6647. The CTA Second Division ordered the Commissioner of Internal Revenue
(Commissioner) to refund or issue a tax credit for P483,797,599.65 to San Roque Power Corporation
(San Roque) for unutilized input value-added tax (VAT) on purchases of capital goods and services for
the taxable year 2001.
G.R. No. 196113 is a petition for review6 assailing the Decision7 promulgated on 8 December 2010 as
well as the Resolution8 promulgated on 14 March 2011 by the CTA EB in CTA EB No. 624. In its
Decision, the CTA EB reversed the 8 January 2010 Decision9 as well as the 7 April 2010 Resolution10of
the CTA Second Division and granted the CIR’s petition for review in CTA Case No. 7574. The CTA EB
As a seller of services, [San Roque] is duly registered with the BIR with TIN/VAT No. 005-017-501. It is
likewise registered with the Board of Investments ("BOI") on a preferred pioneer status, to engage in
the design, construction, erection, assembly, as well as to own, commission, and operate electric
power-generating plants and related activities, for which it was issued Certificate of Registration No. 97-
356 on February 11, 1998.
On October 11, 1997, [San Roque] entered into a Power Purchase Agreement ("PPA") with the
National Power Corporation ("NPC") to develop hydro-potential of the Lower Agno River and generate
additional power and energy for the Luzon Power Grid, by building the San Roque Multi-Purpose
Project located in San Manuel, Pangasinan. The PPA provides, among others, that [San Roque] shall
be responsible for the design, construction, installation, completion, testing and commissioning of the
Power Station and shall operate and maintain the same, subject to NPC instructions. During the
cooperation period of twenty-five (25) years commencing from the completion date of the Power
Station, NPC will take and pay for all electricity available from the Power Station.
On the construction and development of the San Roque Multi- Purpose Project which comprises of the
dam, spillway and power plant, [San Roque] allegedly incurred, excess input VAT in the amount of
₱559,709,337.54 for taxable year 2001 which it declared in its Quarterly VAT Returns filed for the same
year. [San Roque] duly filed with the BIR separate claims for refund, in the total amount of
₱559,709,337.54, representing unutilized input taxes as declared in its VAT returns for taxable year
2001.
However, on March 28, 2003, [San Roque] filed amended Quarterly VAT Returns for the year 2001
since it increased its unutilized input VAT to the amount of ₱560,200,283.14. Consequently, [San
Roque] filed with the BIR on even date, separate amended claims for refund in the aggregate amount of
₱560,200,283.14.
[CIR’s] inaction on the subject claims led to the filing by [San Roque] of the Petition for Review with the
Court [of Tax Appeals] in Division on April 10, 2003.
Trial of the case ensued and on July 20, 2005, the case was submitted for decision.15
The Court of Tax Appeals’ Ruling: Division
The CTA Second Division initially denied San Roque’s claim. In its Decision16 dated 8 March 2006, it
cited the following as bases for the denial of San Roque’s claim: lack of recorded zero-rated or
effectively zero-rated sales; failure to submit documents specifically identifying the purchased
goods/services related to the claimed input VAT which were included in its Property, Plant and
Equipment account; and failure to prove that the related construction costs were capitalized in its books
of account and subjected to depreciation.
The CTA Second Division required San Roque to show that it complied with the following requirements
of Section 112(B) of Republic Act No. 8424 (RA 8424)17 to be entitled to a tax refund or credit of input
VAT attributable to capital goods imported or locally purchased: (1) it is a VAT-registered entity; (2) its
input taxes claimed were paid on capital goods duly supported by VAT invoices and/or official receipts;
(3) it did not offset or apply the claimed input VAT payments on capital goods against any output VAT
liability; and (4) its claim for refund was filed within the two-year prescriptive period both in the
administrative and judicial levels.
The CTA Second Division found that San Roque complied with the first, third, and fourth requirements,
thus:
The fact that [San Roque] is a VAT registered entity is admitted (par. 4, Facts Admitted, Joint
Stipulation of Facts, Records, p. 157). It was also established that the instant claim of ₱560,200,823.14
is already net of the ₱11,509.09 output tax declared by [San Roque] in its amended VAT return for the
first quarter of 2001. Moreover, the entire amount of ₱560,200,823.14 was deducted by [San Roque]
from the total available input tax reflected in its amended VAT returns for the last two quarters of 2001
and first two quarters of 2002 (Exhibits M-6, O-6, OO-1 & QQ-1). This means that the claimed input
taxes of ₱560,200,823.14 did not form part of the excess input taxes of ₱83,692,257.83, as of the
second quarter of 2002 that was to be carried-over to the succeeding quarters. Further, [San Roque’s]
claim for refund/tax credit certificate of excess input VAT was filed within the two-year prescriptive
period reckoned from the dates of filing of the corresponding quarterly VAT returns.
For the first, second, third, and fourth quarters of 2001, [San Roque] filed its VAT returns on April 25,
2001, July 25, 2001, October 23, 2001 and January 24, 2002, respectively (Exhibits "H, J, L, and N").
These returns were all subsequently amended on March 28, 2003 (Exhibits "I, K, M, and O"). On the
other hand, [San Roque] originally filed its separate claims for refund on July 10, 2001, October 10,
2001, February 21, 2002, and May 9, 2002 for the first, second, third, and fourth quarters of 2001,
respectively, (Exhibits "EE, FF, GG, and HH") and subsequently filed amended claims for all quarters
on March 28, 2003 (Exhibits "II, JJ, KK, and LL"). Moreover, the Petition for Review was filed on April
10, 2003. Counting from the respective dates when [San Roque] originally filed its VAT returns for the
first, second, third and fourth quarters of 2001, the administrative claims for refund (original and
amended) and the Petition for Review fall within the two-year prescriptive period.18
San Roque filed a Motion for New Trial and/or Reconsideration on 7 April 2006. In its 29 November
2007 Amended Decision,19 the CTA Second Division found legal basis to partially grant San Roque’s
claim. The CTA Second Division ordered the Commissioner to refund or issue a tax credit in favor of
San Roque in the amount of ₱483,797,599.65, which represents San Roque’s unutilized input VAT on
its purchases of capital goods and services for the taxable year 2001. The CTA based the adjustment in
the amount on the findings of the independent certified public accountant. The following reasons were
cited for the disallowed claims: erroneous computation; failure to ascertain whether the related
purchases are in the nature of capital goods; and the purchases pertain to capital goods. Moreover, the
reduction of claims was based on the following: the difference between San Roque’s claim and that
appearing on its books; the official receipts covering the claimed input VAT on purchases of local
services are not within the period of the claim; and the amount of VAT cannot be determined from the
submitted official receipts and invoices. The CTA Second Division denied San Roque’s claim for refund
or tax credit of its unutilized input VAT attributable to its zero-rated or effectively zero-rated sales
because San Roque had no record of such sales for the four quarters of 2001.
The dispositive portion of the CTA Second Division’s 29 November 2007 Amended Decision reads:
WHEREFORE, [San Roque’s] "Motion for New Trial and/or Reconsideration" is hereby PARTIALLY
GRANTED and this Court’s Decision promulgated on March 8, 2006 in the instant case is hereby
MODIFIED.
Accordingly, [the CIR] is hereby ORDERED to REFUND or in the alternative, to ISSUE A TAX CREDIT
CERTIFICATE in favor of [San Roque] in the reduced amount of Four Hundred Eighty Three Million
Seven Hundred Ninety Seven Thousand Five Hundred Ninety Nine Pesos and Sixty Five Centavos
(₱483,797,599.65) representing unutilized input VAT on purchases of capital goods and services for the
taxable year 2001.
SO ORDERED.20
The Commissioner filed a Motion for Partial Reconsideration on 20 December 2007. The CTA Second
Division issued a Resolution dated 11 July 2008 which denied the CIR’s motion for lack of merit.
The Court of Tax Appeals’ Ruling: En Banc
The Commissioner filed a Petition for Review before the CTA EB praying for the denial of San Roque’s
claim for refund or tax credit in its entirety as well as for the setting aside of the 29 November 2007
Amended Decision and the 11 July 2008 Resolution in CTA Case No. 6647.
The CTA EB dismissed the CIR’s petition for review and affirmed the challenged decision and
resolution.
The CTA EB cited Commissioner of Internal Revenue v. Toledo Power, Inc.21 and Revenue
Memorandum Circular No. 49-03,22 as its bases for ruling that San Roque’s judicial claim was not
prematurely filed. The pertinent portions of the Decision state:
More importantly, the Court En Banc has squarely and exhaustively ruled on this issue in this wise:
It is true that Section 112(D) of the abovementioned provision applies to the present case.
However, what the petitioner failed to consider is Section 112(A) of the same provision. The
respondent is also covered by the two (2) year prescriptive period. We have repeatedly held that the
claim for refund with the BIR and the subsequent appeal to the Court of Tax Appeals must be filed
within the two-year period.
Accordingly, the Supreme Court held in the case of Atlas Consolidated Mining and Development
Corporation vs. Commissioner of Internal Revenue that the two-year prescriptive period for filing a
claim for input tax is reckoned from the date of the filing of the quarterly VAT return and payment of the
tax due. If the said period is about to expire but the BIR has not yet acted on the application for
refund, the taxpayer may interpose a petition for review with this Court within the two year
period.
In the case of Gibbs vs. Collector, the Supreme Court held that if, however, the Collector (now
Commissioner) takes time in deciding the claim, and the period of two years is about to end, the suit or
proceeding must be started in the Court of Tax Appeals before the end of the two-year period without
awaiting the decision of the Collector.
Furthermore, in the case of Commissioner of Customs and Commissioner of Internal Revenue vs. The
Honorable Court of Tax Appeals and Planters Products, Inc., the Supreme Court held that the
taxpayer need not wait indefinitely for a decision or ruling which may or may not be forthcoming
and which he has no legal right to expect. It is disheartening enough to a taxpayer to keep him
waiting for an indefinite period of time for a ruling or decision of the Collector (now Commissioner) of
Internal Revenue on his claim for refund. It would make matters more exasperating for the taxpayer if
we were to close the doors of the courts of justice for such a relief until after the Collector (now
Commissioner) of Internal Revenue, would have, at his personal convenience, given his go signal.
This Court ruled in several cases that once the petition is filed, the Court has already acquired
jurisdiction over the claims and the Court is not bound to wait indefinitely for no reason for whatever
action respondent (herein petitioner) may take. At stake are claims for refund and unlike disputed
assessments, no decision of respondent (herein petitioner) is required before one can go to this
Court. (Emphasis supplied and citations omitted)
Lastly, it is apparent from the following provisions of Revenue Memorandum Circular No. 49-03 dated
August 18, 2003, that [the CIR] knows that claims for VAT refund or tax credit filed with the Court [of
Tax Appeals] can proceed simultaneously with the ones filed with the BIR and that taxpayers need not
wait for the lapse of the subject 120-day period, to wit:
In response to [the] request of selected taxpayers for adoption of procedures in handling refund cases
that are aligned to the statutory requirements that refund cases should be elevated to the Court of Tax
Appeals before the lapse of the period prescribed by law, certain provisions of RMC No. 42-2003 are
hereby amended and new provisions are added thereto.
In consonance therewith, the following amendments are being introduced to RMC No. 42-2003, to wit:
I.) A-17 of Revenue Memorandum Circular No. 42-2003 is hereby revised to read as follows:
In cases where the taxpayer has filed a "Petition for Review" with the Court of Tax Appeals
involving a claim for refund/TCC that is pending at the administrative agency (Bureau of Internal
Revenue or OSS-DOF), the administrative agency and the tax court may act on the case
separately. While the case is pending in the tax court and at the same time is still under process by the
administrative agency, the litigation lawyer of the BIR, upon receipt of the summons from the tax court,
shall request from the head of the investigating/processing office for the docket containing certified true
copies of all the documents pertinent to the claim. The docket shall be presented to the court as
evidence for the BIR in its defense on the tax credit/refund case filed by the taxpayer. In the meantime,
the investigating/processing office of the administrative agency shall continue processing the
refund/TCC case until such time that a final decision has been reached by either the CTA or the
administrative agency.
If the CTA is able to release its decision ahead of the evaluation of the administrative agency,
the latter shall cease from processing the claim. On the other hand, if the administrative agency is
able to process the claim of the taxpayer ahead of the CTA and the taxpayer is amenable to the
findings thereof, the concerned taxpayer must file a motion to withdraw the claim with the
CTA.23 (Emphasis supplied)
G.R. No. 196113
Taganito Mining Corporation v. CIR
The Facts
The CTA Second Division’s narration of the pertinent facts is as follows:
Petitioner, Taganito Mining Corporation, is a corporation duly organized and existing under and by
virtue of the laws of the Philippines, with principal office at 4th Floor, Solid Mills Building, De La Rosa
St., Lega[s]pi Village, Makati City. It is duly registered with the Securities and Exchange Commission
with Certificate of Registration No. 138682 issued on March 4, 1987 with the following primary purpose:
To carry on the business, for itself and for others, of mining lode and/or placer mining, developing,
exploiting, extracting, milling, concentrating, converting, smelting, treating, refining, preparing for
market, manufacturing, buying, selling, exchanging, shipping, transporting, and otherwise producing
and dealing in nickel, chromite, cobalt, gold, silver, copper, lead, zinc, brass, iron, steel, limestone, and
all kinds of ores, metals and their by-products and which by-products thereof of every kind and
description and by whatsoever process the same can be or may hereafter be produced, and generally
and without limit as to amount, to buy, sell, locate, exchange, lease, acquire and deal in lands, mines,
and mineral rights and claims and to conduct all business appertaining thereto, to purchase, locate,
lease or otherwise acquire, mining claims and rights, timber rights, water rights, concessions and
mines, buildings, dwellings, plants machinery, spare parts, tools and other properties whatsoever which
this corporation may from time to time find to be to its advantage to mine lands, and to explore, work,
exercise, develop or turn to account the same, and to acquire, develop and utilize water rights in such
manner as may be authorized or permitted by law; to purchase, hire, make, construct or otherwise,
acquire, provide, maintain, equip, alter, erect, improve, repair, manage, work and operate private roads,
barges, vessels, aircraft and vehicles, private telegraph and telephone lines, and other communication
media, as may be needed by the corporation for its own purpose, and to purchase, import, construct,
machine, fabricate, or otherwise acquire, and maintain and operate bridges, piers, wharves, wells,
reservoirs, plumes, watercourses, waterworks, aqueducts, shafts, tunnels, furnaces, cook ovens,
crushing works, gasworks, electric lights and power plants and compressed air plants, chemical works
of all kinds, concentrators, smelters, smelting plants, and refineries, matting plants, warehouses,
workshops, factories, dwelling houses, stores, hotels or other buildings, engines, machinery, spare
parts, tools, implements and other works, conveniences and properties of any description in connection
with or which may be directly or indirectly conducive to any of the objects of the corporation, and to
contribute to, subsidize or otherwise aid or take part in any operations;
and is a VAT-registered entity, with Certificate of Registration (BIR Form No. 2303) No. OCN
8RC0000017494. Likewise, [Taganito] is registered with the Board of Investments (BOI) as an exporter
of beneficiated nickel silicate and chromite ores, with BOI Certificate of Registration No. EP-88-306.
 Respondent, on the other hand, is the duly appointed Commissioner of Internal Revenue vested with 12/31/05
authority to exercise the functions of the said office, including inter alia, the power to decide refunds of
internal revenue taxes, fees and other charges, penalties imposed in relation thereto, or other matters TOTAL
arising under the National Internal Revenue Code (NIRC) or other laws administered by Bureau of
Internal Revenue (BIR) under Section 4 of the NIRC. He holds office at the BIR National Office Building,
Diliman, Quezon City.
[Taganito] filed all its Monthly VAT Declarations and Quarterly Vat Returns for the period January 1,
2005 to December 31, 2005. For easy reference, a summary of the filing dates of the original and
amended Quarterly VAT Returns for taxable year 2005 of [Taganito] is as follows:
P1,446,854,034.68 P2,314,730.43 P6,050,933.95 P8,365,664.38
On November 14, 2006, [Taganito] filed with [the CIR], through BIR’s Large Taxpayers Audit and
Investigation Division II (LTAID II), a letter dated November 13, 2006 claiming a tax credit/refund of its
supposed input VAT amounting to ₱8,365,664.38 for the period covering January 1, 2004 to December
31, 2004. On the same date, [Taganito] likewise filed an Application for Tax Credits/Refunds for the
period covering January 1, 2005 to December 31, 2005 for the same amount.

On November 29, 2006, [Taganito] sent again another letter dated November 29, 2004 to [the CIR], to
Exhibit(s) Quarter Nature of Mode of filing Filing Date correct the period of the above claim for tax credit/refund in the said amount of ₱8,365,664.38 as
the Return actually referring to the period covering January 1, 2005 to December 31, 2005.
L to L-4 1st Original Electronic April 15, 2005
As the statutory period within which to file a claim for refund for said input VAT is about to lapse without
M to M-3 Amended Electronic July 20, 2005 action on the part of the [CIR], [Taganito] filed the instant Petition for Review on February 17, 2007.
N to N-4 Amended Electronic October 18, 2006
In his Answer filed on March 28, 2007, [the CIR] interposes the following defenses:
Q to Q-3 2nd Original Electronic July 20, 2005

R to R-4 Amended Electronic October 18, 2006 4. [Taganito’s] alleged claim for refund is subject to administrative investigation/examination
by the Bureau of Internal Revenue (BIR);
U to U-4 3rd Original Electronic October 19, 2005

V to V-4 Amended Electronic October 18, 2006 5. The amount of ₱8,365,664.38 being claimed by [Taganito] as alleged unutilized input VAT
on domestic purchases of goods and services and on importation of capital goods for the
Y to Y-4 4th Original Electronic January 20, 2006 period January 1, 2005 to December 31, 2005 is not properly documented;

Z to Z-4 Amended Electronic October 18, 2006

6. [Taganito] must prove that it has complied with the provisions of Sections 112 (A) and (D)
and 229 of the National Internal Revenue Code of 1997 (1997 Tax Code) on the prescriptive
period for claiming tax refund/credit;
As can be gleaned from its amended Quarterly VAT Returns, [Taganito] reported zero-rated sales
amounting to P1,446,854,034.68; input VAT on its domestic purchases and importations of goods
(other than capital goods) and services amounting to P2,314,730.43; and input VAT on its domestic 7. Proof of compliance with the prescribed checklist of requirements to be submitted involving
purchases and importations of capital goods amounting to P6,050,933.95, the details of which are claim for VAT refund pursuant to Revenue Memorandum Order No. 53-98, otherwise there
summarized as follows: would be no sufficient compliance with the filing of administrative claim for refund, the
administrative claim thereof being mere proforma, which is a condition sine qua non
prior to the filing of judicial claim in accordance with the provision of Section 229 of the
Period Zero-Rated Sales Input VAT on Input VAT on Total Input VAT 1997 Tax Code. Further, Section 112 (D) of the Tax Code, as amended, requires
Covered Domestic Domestic the submission of complete documents in support of the application filed with the BIR
Purchases and Purchases and before the 120-day audit period shall apply, and before the taxpayer could avail of judicial
Importations Importations remedies as provided for in the law. Hence, [Taganito’s] failure to submit proof of
of Goods and of Capital compliance with the above-stated requirements warrants immediate dismissal of the petition
Services Goods for review.
01/01/05 - P551,179,871.58 P1,491,880.56 P239,803.22 P1,731,683.78
03/31/05 8. [Taganito] must prove that it has complied with the invoicing requirements mentioned in
Sections 110 and 113 of the 1997 Tax Code, as amended, in relation to provisions of
04/01/05 - 64,677,530.78 204,364.17 5,811,130.73 6,015,494.90 Revenue Regulations No. 7-95.
06/30/05

07/01/05 - 480,784,287.30 144,887.67 - 144,887.67 9. In an action for refund/credit, the burden of proof is on the taxpayer to establish its right to
09/30/05 refund, and failure to sustain the burden is fatal to the claim for refund/credit (Asiatic
Petroleum Co. vs. Llanes, 49 Phil. 466 cited in Collector of Internal Revenue vs. Manila
10/01/05 - 350,212,345.02 473,598.03 - 473,598.03 Jockey Club, Inc., 98 Phil. 670);
 10. Claims for refund are construed strictly against the claimant for the same partake the
nature of exemption from taxation (Commissioner of Internal Revenue vs. Ledesma, 31
SCRA 95) and as such, they are looked upon with disfavor (Western Minolco Corp. vs.
Commissioner of Internal Revenue, 124 SCRA 1211).
SPECIAL AND AFFIRMATIVE DEFENSES
11. The Court of Tax Appeals has no jurisdiction to entertain the instant petition for review for failure on
the part of [Taganito] to comply with the provision of Section 112 (D) of the 1997 Tax Code which
provides, thus:
Section 112. Refunds or Tax Credits of Input Tax. –
x x x           x x x          x x x
(D) Period within which refund or Tax Credit of Input Taxes shall be Made. – In proper cases, the
Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within
one hundred (120) days from the date of submission of complete documents in support of the
application filed in accordance with Subsections (A) and (B) hereof.
In cases of full or partial denial for tax refund or tax credit, or the failure on the part of the Commissioner
to act on the application within the period prescribed above, the taxpayer affected may, within thirty
(30) days from the receipt of the decision denying the claim or after the expiration of the one
hundred twenty dayperiod, appeal the decision or the unacted claim with the Court of Tax
Appeals. (Emphasis supplied.)
12. As stated, [Taganito] filed the administrative claim for refund with the Bureau of Internal Revenue on
November 14, 2006. Subsequently on February 14, 2007, the instant petition was filed. Obviously the
120 days given to the Commissioner to decide on the claim has not yet lapsed when the petition was
filed. The petition was prematurely filed, hence it must be dismissed for lack of jurisdiction.
During trial, [Taganito] presented testimonial and documentary evidence primarily aimed at proving its
supposed entitlement to the refund in the amount of ₱8,365,664.38, representing input taxes for the
period covering January 1, 2005 to December 31, 2005. [The CIR], on the other hand, opted not to
present evidence. Thus, in the Resolution promulgated on January 22, 2009, this case was submitted
for decision as of such date, considering [Taganito’s] "Memorandum" filed on January 19, 2009 and [the
CIR’s] "Memorandum" filed on December 19, 2008.24
The Court of Tax Appeals’ Ruling: Division
The CTA Second Division partially granted Taganito’s claim. In its Decision25 dated 8 January 2010, the
CTA Second Division found that Taganito complied with the requirements of Section 112(A) of RA
8424, as amended, to be entitled to a tax refund or credit of input VAT attributable to zero-rated or
effectively zero-rated sales.26
The pertinent portions of the CTA Second Division’s Decision read:
Finally, records show that [Taganito’s] administrative claim filed on November 14, 2006, which was
amended on November 29, 2006, and the Petition for Review filed with this Court on February 14, 2007
are well within the two-year prescriptive period, reckoned from March 31, 2005, June 30, 2005,
September 30, 2005, and December 31, 2005, respectively, the close of each taxable quarter covering
the period January 1, 2005 to December 31, 2005.
In fine, [Taganito] sufficiently proved that it is entitled to a tax credit certificate in the amount of
₱8,249,883.33 representing unutilized input VAT for the four taxable quarters of 2005.
WHEREFORE, premises considered, the instant Petition for Review is hereby PARTIALLY
GRANTED. Accordingly, [the CIR] is hereby ORDERED to REFUND to [Taganito] the amount of
EIGHT MILLION TWO HUNDRED FORTY NINE THOUSAND EIGHT HUNDRED EIGHTY THREE
PESOS AND THIRTY THREE CENTAVOS (P8,249,883.33) representing its unutilized input taxes
attributable to zero-rated sales from January 1, 2005 to December 31, 2005.
SO ORDERED.27
The Commissioner filed a Motion for Partial Reconsideration on 29 January 2010. Taganito, in turn,
filed a Comment/Opposition on the Motion for Partial Reconsideration on 15 February 2010.
In a Resolution28 dated 7 April 2010, the CTA Second Division denied the CIR’s motion. The CTA
Second Division ruled that the legislature did not intend that Section 112 (Refunds or Tax Credits of
Input Tax) should be read in isolation from Section 229 (Recovery of Tax Erroneously or Illegally
Collected) or vice versa. The CTA Second Division applied the mandatory statute of limitations in
seeking judicial recourse prescribed under Section 229 to claims for refund or tax credit under Section
112.
The Court of Tax Appeals’ Ruling: En Banc
On 29 April 2010, the Commissioner filed a Petition for Review before the CTA EB assailing the 8
January 2010 Decision and the 7 April 2010 Resolution in CTA Case No. 7574 and praying that
Taganito’s entire claim for refund be denied.
In its 8 December 2010 Decision,29 the CTA EB granted the CIR’s petition for review and reversed and
set aside the challenged decision and resolution.
The CTA EB declared that Section 112(A) and (B) of the 1997 Tax Code both set forth the reckoning of
the two-year prescriptive period for filing a claim for tax refund or credit over input VAT to be the close
of the taxable quarter when the sales were made. The CTA EB also relied on this Court’s rulings in the
cases of Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc.
(Aichi)30 and Commisioner of Internal Revenue v. Mirant Pagbilao Corporation
(Mirant).31 Both Aichi and Mirant ruled that the two-year prescriptive period to file a refund for input VAT
arising from zero-rated sales should be reckoned from the close of the taxable quarter when the sales
were made. Aichi further emphasized that the failure to await the decision of the Commissioner or the
lapse of 120-day period prescribed in Section 112(D) amounts to a premature filing.
The CTA EB found that Taganito filed its administrative claim on 14 November 2006, which was well
within the period prescribed under Section 112(A) and (B) of the 1997 Tax Code. However, the CTA EB
found that Taganito’s judicial claim was prematurely filed. Taganito filed its Petition for Review before
the CTA Second Division on 14 February 2007. The judicial claim was filed after the lapse of only 92
days from the filing of its administrative claim before the CIR, in violation of the 120-day period
prescribed in Section 112(D) of the 1997 Tax Code.
The dispositive portion of the Decision states:
WHEREFORE, the instant Petition for Review is hereby GRANTED. The assailed Decision dated
January 8, 2010 and Resolution dated April 7, 2010 of the Special Second Division of this Court are
hereby REVERSED and SET ASIDE. Another one is hereby entered DISMISSING the Petition for
Review filed in CTA Case No. 7574 for having been prematurely filed.
claim, on October 17, 2007, pursuant to Sections 112 and 229 of the NIRC of 1997, as amended,
[Philex] filed a Petition for Review, docketed as C.T.A. Case No. 7687.
In [her] Answer, respondent CIR alleged the following special and affirmative defenses:

SO ORDERED.32
4. Claims for refund are strictly construed against the taxpayer as the same partake the
nature of an exemption;
In his dissent,33 Associate Justice Lovell R. Bautista insisted that Taganito timely filed its claim before
the CTA. Justice Bautista read Section 112(C) of the 1997 Tax Code (Period within which Refund or
5. The taxpayer has the burden to show that the taxes were erroneously or illegally paid.
Tax Credit of Input Taxes shall be Made) in conjunction with Section 229 (Recovery of Tax Erroneously
Failure on the part of [Philex] to prove the same is fatal to its cause of action;
or Illegally Collected). Justice Bautista also relied on this Court’s ruling in Atlas Consolidated Mining
and Development Corporation v. Commissioner of Internal Revenue (Atlas),34 which stated that
refundable or creditable input VAT and illegally or erroneously collected national internal revenue tax 6. [Philex] should prove its legal basis for claiming for the amount being refunded.37
are the same, insofar as both are monetary amounts which are currently in the hands of the
government but must rightfully be returned to the taxpayer. Justice Bautista concluded:
The Court of Tax Appeals’ Ruling: Division

Being merely permissive, a taxpayer claimant has the option of seeking judicial redress for refund or tax
The CTA Second Division, in its Decision dated 20 July 2009, denied Philex’s claim due to prescription.
credit of excess or unutilized input tax with this Court, either within 30 days from receipt of the denial of
The CTA Second Division ruled that the two-year prescriptive period specified in Section 112(A) of RA
its claim, or after the lapse of the 120-day period in the event of inaction by the Commissioner, provided
8424, as amended, applies not only to the filing of the administrative claim with the BIR, but also to the
that both administrative and judicial remedies must be undertaken within the 2-year period.35
filing of the judicial claim with the CTA. Since Philex’s claim covered the 3rd quarter of 2005, its
administrative claim filed on 20 March 2006 was timely filed, while its judicial claim filed on 17 October
Taganito filed its Motion for Reconsideration on 29 December 2010. The Commissioner filed an 2007 was filed late and therefore barred by prescription.
Opposition on 26 January 2011. The CTA EB denied for lack of merit Taganito’s motion in a
Resolution36 dated 14 March 2011. The CTA EB did not see any justifiable reason to depart from this
On 10 November 2009, the CTA Second Division denied Philex’s Motion for Reconsideration.
Court’s rulings in Aichi and Mirant.

The Court of Tax Appeals’ Ruling: En Banc

G.R. No. 197156
Philex Mining Corporation v. CIR
Philex filed a Petition for Review before the CTA EB praying for a reversal of the 20 July 2009 Decision
and the 10 November 2009 Resolution of the CTA Second Division in CTA Case No. 7687.
The Facts

The CTA EB, in its Decision38 dated 3 December 2010, denied Philex’s petition and affirmed the CTA
The CTA EB’s narration of the pertinent facts is as follows:
Second Division’s Decision and Resolution.

[Philex] is a corporation duly organized and existing under the laws of the Republic of the Philippines,
The pertinent portions of the Decision read:
which is principally engaged in the mining business, which includes the exploration and operation of
mine properties and commercial production and marketing of mine products, with office address at 27
Philex Building, Fairlaine St., Kapitolyo, Pasig City. In this case, while there is no dispute that [Philex’s] administrative claim for refund was filed within the
two-year prescriptive period; however, as to its judicial claim for refund/credit, records show that on
March 20, 2006, [Philex] applied the administrative claim for refund of unutilized input VAT in the
[The CIR], on the other hand, is the head of the Bureau of Internal Revenue ("BIR"), the government
amount of ₱23,956,732.44 with the One Stop Shop Center of the Department of Finance, per
entity tasked with the duties/functions of assessing and collecting all national internal revenue taxes,
Application No. 52490. From March 20, 2006, which is also presumably the date [Philex] submitted
fees, and charges, and enforcement of all forfeitures, penalties and fines connected therewith, including
supporting documents, together with the aforesaid application for refund, the CIR has 120 days, or until
the execution of judgments in all cases decided in its favor by [the Court of Tax Appeals] and the
July 18, 2006, within which to decide the claim. Within 30 days from the lapse of the 120-day period, or
ordinary courts, where she can be served with court processes at the BIR Head Office, BIR Road,
from July 19, 2006 until August 17, 2006, [Philex] should have elevated its claim for refund to the CTA.
Quezon City.
However, [Philex] filed its Petition for Review only on October 17, 2007, which is 426 days way beyond
the 30- day period prescribed by law.
On October 21, 2005, [Philex] filed its Original VAT Return for the third quarter of taxable year 2005 and
Amended VAT Return for the same quarter on December 1, 2005.
Evidently, the Petition for Review in CTA Case No. 7687 was filed 426 days late. Thus, the Petition for
Review in CTA Case No. 7687 should have been dismissed on the ground that the Petition for Review
On March 20, 2006, [Philex] filed its claim for refund/tax credit of the amount of ₱23,956,732.44 with the was filed way beyond the 30-day prescribed period; thus, no jurisdiction was acquired by the CTA in
One Stop Shop Center of the Department of Finance. However, due to [the CIR’s] failure to act on such Division; and not due to prescription.
WHEREFORE, premises considered, the instant Petition for Review is hereby DENIED DUE COURSE,
and accordingly, DISMISSED. The assailed Decision dated July 20, 2009, dismissing the Petition for
Review in CTA Case No. 7687 due to prescription, and Resolution dated November 10, 2009 denying
[Philex’s] Motion for Reconsideration are hereby AFFIRMED, with modification that the dismissal is
based on the ground that the Petition for Review in CTA Case No. 7687 was filed way beyond the 30-
day prescribed period to appeal.
SO ORDERED.39
G.R. No. 187485
CIR v. San Roque Power Corporation
The Commissioner raised the following grounds in the Petition for Review:
I. The Court of Tax Appeals En Banc erred in holding that [San Roque’s] claim for refund was
not prematurely filed.
II. The Court of Tax Appeals En Banc erred in affirming the amended decision of the Court of
Tax Appeals (Second Division) granting [San Roque’s] claim for refund of alleged unutilized
input VAT on its purchases of capital goods and services for the taxable year 2001 in the
amount of P483,797,599.65. 40
G.R. No. 196113
Taganito Mining Corporation v. CIR
Taganito raised the following grounds in its Petition for Review:
I. The Court of Tax Appeals En Banc committed serious error and acted with grave abuse of
discretion tantamount to lack or excess of jurisdiction in erroneously applying
the Aichi doctrine in violation of [Taganito’s] right to due process.
II. The Court of Tax Appeals committed serious error and acted with grave abuse of
discretion amounting to lack or excess of jurisdiction in erroneously interpreting the provisions
of Section 112 (D).41
G.R. No. 197156
Philex Mining Corporation v. CIR
Philex raised the following grounds in its Petition for Review:
I. The CTA En Banc erred in denying the petition due to alleged prescription. The fact is that
the petition was filed with the CTA within the period set by prevailing court rulings at the time
it was filed.
II. The CTA En Banc erred in retroactively applying the Aichi ruling in denying the petition in
this instant case.42
The Court’s Ruling
For ready reference, the following are the provisions of the Tax Code applicable to the present cases:
Section 105:
Persons Liable. — Any person who, in the course of trade or business, sells, barters, exchanges,
leases goods or properties, renders services, and any person who imports goods shall be subject
to the value-added tax (VAT) imposed in Sections 106 to 108 of this Code.
The value-added tax is an indirect tax and the amount of tax may be shifted or passed on to the
buyer, transferee or lessee of the goods, properties or services. This rule shall likewise apply to
existing contracts of sale or lease of goods, properties or services at the time of the effectivity of
Republic Act No. 7716.
xxxx
Section 110(B):
Sec. 110. Tax Credits. —
(B) Excess Output or Input Tax. — If at the end of any taxable quarter the output tax exceeds the input
tax, the excess shall be paid by the VAT-registered person. If the input tax exceeds the output tax,
the excess shall be carried over to the succeeding quarter or quarters: [Provided, That the input
tax inclusive of input VAT carried over from the previous quarter that may be credited in every quarter
shall not exceed seventy percent (70%) of the output VAT:]43 Provided, however, That any input tax
attributable to zero-rated sales by a VAT-registered person may at his option be refunded or
credited against other internal revenue taxes, subject to the provisions of Section 112.
Section 112:44
Sec. 112. Refunds or Tax Credits of Input Tax. —
(A) Zero-Rated or Effectively Zero-Rated Sales.— Any VAT-registered person, whose
sales are zero-rated or effectively zero-rated may, within two (2) years after the close of
the taxable quarter when the sales were made, apply for the issuance of a tax credit
certificate or refund of creditable input tax due or paid attributable to such sales,
except transitional input tax, to the extent that such input tax has not been applied against
output tax: Provided, however, That in the case of zero-rated sales under Section 106(A)(2)
(a)(1), (2) and (B) and Section 108(B)(1) and (2), the acceptable foreign currency exchange
proceeds thereof had been duly accounted for in accordance with the rules and regulations of
the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is engaged
in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods or
properties or services, and the amount of creditable input tax due or paid cannot be directly
and entirely attributed to any one of the transactions, it shall be allocated proportionately on
the basis of the volume of sales.
(B) Capital Goods.- A VAT — registered person may apply for the issuance of a tax credit
certificate or refund of input taxes paid on capital goods imported or locally purchased, to the
extent that such input taxes have not been applied against output taxes. The application may
be made only within two (2) years after the close of the taxable quarter when the importation
or purchase was made.
 (C) Cancellation of VAT Registration. — A person whose registration has been cancelled due
to retirement from or cessation of business, or due to changes in or cessation of status under
Section 106(C) of this Code may, within two (2) years from the date of cancellation, apply for
the issuance of a tax credit certificate for any unused input tax which may be used in
payment of his other internal revenue taxes
(D) Period within which Refund or Tax Credit of Input Taxes shall be Made. — In proper
cases, the Commissioner shall grant a refund or issue the tax credit certificate for creditable
input taxes within one hundred twenty (120) days from the date of submission of
complete documents in support of the application filed in accordance with Subsection (A)
and (B) hereof.
In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part
of the Commissioner to act on the application within the period prescribed above, the
taxpayer affected may, within thirty (30) days from the receipt of the decision denying
the claim or after the expiration of the one hundred twenty day-period, appeal the
decision or the unacted claim with the Court of Tax Appeals.
(E) Manner of Giving Refund. — Refunds shall be made upon warrants drawn by the
Commissioner or by his duly authorized representative without the necessity of being
countersigned by the Chairman, Commission on Audit, the provisions of the Administrative
Code of 1987 to the contrary notwithstanding: Provided, that refunds under this paragraph
shall be subject to post audit by the Commission on Audit.
Section 229:
Recovery of Tax Erroneously or Illegally Collected. — No suit or proceeding shall be maintained in any
court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or
illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of
any sum alleged to have been excessively or in any manner wrongfully collected, until a claim for
refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be
maintained, whether or not such tax, penalty, or sum has been paid under protest or duress.
In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the
date of payment of the tax or penalty regardless of any supervening cause that may arise after
payment: Provided, however, That the Commissioner may, even without a written claim therefor, refund
or credit any tax, where on the face of the return upon which payment was made, such payment
appears clearly to have been erroneously paid.
(All emphases supplied)
I. Application of the 120+30 Day Periods
a. G.R. No. 187485 - CIR v. San Roque Power Corporation
On 10 April 2003, a mere 13 days after it filed its amended administrative claim with the Commissioner
on 28 March 2003, San Roque filed a Petition for Review with the CTA docketed as CTA Case No.
6647. From this we gather two crucial facts: first, San Roque did not wait for the 120-day period to
lapse before filing its judicial claim; second, San Roque filed its judicial claim more than four (4)
years before the Atlas45 doctrine, which was promulgated by the Court on 8 June 2007.
Clearly, San Roque failed to comply with the 120-day waiting period, the time expressly given by law to
the Commissioner to decide whether to grant or deny San Roque’s application for tax refund or credit. It
is indisputable that compliance with the 120-day waiting period is mandatory and jurisdictional. The
waiting period, originally fixed at 60 days only, was part of the provisions of the first VAT law, Executive
Order No. 273, which took effect on 1 January 1988. The waiting period was extended to 120 days
effective 1 January 1998 under RA 8424 or the Tax Reform Act of 1997. Thus, the waiting period has
been in our statute books for more than fifteen (15) years before San Roque filed its judicial
claim.
Failure to comply with the 120-day waiting period violates a mandatory provision of law. It violates the
doctrine of exhaustion of administrative remedies and renders the petition premature and thus without a
cause of action, with the effect that the CTA does not acquire jurisdiction over the taxpayer’s petition.
Philippine jurisprudence is replete with cases upholding and reiterating these doctrinal principles.46
The charter of the CTA expressly provides that its jurisdiction is to review on appeal "decisions of the
Commissioner of Internal Revenue in cases involving x x x refunds of internal revenue taxes."47 When a
taxpayer prematurely files a judicial claim for tax refund or credit with the CTA without waiting for the
decision of the Commissioner, there is no "decision" of the Commissioner to review and thus the CTA
as a court of special jurisdiction has no jurisdiction over the appeal. The charter of the CTA also
expressly provides that if the Commissioner fails to decide within "a specific period" required by law,
such "inaction shall be deemed a denial"48 of the application for tax refund or credit. It is the
Commissioner’s decision, or inaction "deemed a denial," that the taxpayer can take to the CTA for
review. Without a decision or an "inaction x x x deemed a denial" of the Commissioner, the CTA has no
jurisdiction over a petition for review.49
San Roque’s failure to comply with the 120-day mandatory period renders its petition for review with
the CTA void. Article 5 of the Civil Code provides, "Acts executed against provisions of mandatory or
prohibitory laws shall be void, except when the law itself authorizes their validity." San Roque’s void
petition for review cannot be legitimized by the CTA or this Court because Article 5 of the Civil Code
states that such void petition cannot be legitimized "except when the law itself authorizes [its] validity."
There is no law authorizing the petition’s validity.
It is hornbook doctrine that a person committing a void act contrary to a mandatory provision of law
cannot claim or acquire any right from his void act. A right cannot spring in favor of a person from his
own void or illegal act. This doctrine is repeated in Article 2254 of the Civil Code, which states, "No
vested or acquired right can arise from acts or omissions which are against the law or which infringe
upon the rights of others."50 For violating a mandatory provision of law in filing its petition with the CTA,
San Roque cannot claim any right arising from such void petition. Thus, San Roque’s petition with the
CTA is a mere scrap of paper.
This Court cannot brush aside the grave issue of the mandatory and jurisdictional nature of the 120-day
period just because the Commissioner merely asserts that the case was prematurely filed with the CTA
and does not question the entitlement of San Roque to the refund. The mere fact that a taxpayer has
undisputed excess input VAT, or that the tax was admittedly illegally, erroneously or excessively
collected from him, does not entitle him as a matter of right to a tax refund or credit. Strict compliance
with the mandatory and jurisdictional conditions prescribed by law to claim such tax refund or credit is
essential and necessary for such claim to prosper. Well-settled is the rule that tax refunds or
credits, just like tax exemptions, are strictly construed against the taxpayer.51 The burden is on
the taxpayer to show that he has strictly complied with the conditions for the grant of the tax refund or
credit.
This Court cannot disregard mandatory and jurisdictional conditions mandated by law simply because
the Commissioner chose not to contest the numerical correctness of the claim for tax refund or credit of
 the taxpayer. Non-compliance with mandatory periods, non-observance of prescriptive periods, and
non-adherence to exhaustion of administrative remedies bar a taxpayer’s claim for tax refund or credit,
whether or not the Commissioner questions the numerical correctness of the claim of the taxpayer. This
Court should not establish the precedent that non-compliance with mandatory and jurisdictional
conditions can be excused if the claim is otherwise meritorious, particularly in claims for tax refunds or
credit. Such precedent will render meaningless compliance with mandatory and jurisdictional
requirements, for then every tax refund case will have to be decided on the numerical correctness of
the amounts claimed, regardless of non-compliance with mandatory and jurisdictional conditions.
San Roque cannot also claim being misled, misguided or confused by the Atlas doctrine because San
Roque filed its petition for review with the CTA more than four years before Atlas was
promulgated. The Atlas doctrine did not exist at the time San Roque failed to comply with the 120- day
period. Thus, San Roque cannot invoke the Atlas doctrine as an excuse for its failure to wait for the
120-day period to lapse. In any event, the Atlas doctrine merely stated that the two-year prescriptive
period should be counted from the date of payment of the output VAT, not from the close of the taxable
quarter when the sales involving the input VAT were made. The Atlas doctrine does not interpret,
expressly or impliedly, the 120+3052 day periods.
In fact, Section 106(b) and (e) of the Tax Code of 1977 as amended, which was the law cited by the
Court in Atlas as the applicable provision of the law did not yet provide for the 30-day period for the
taxpayer to appeal to the CTA from the decision or inaction of the Commissioner.53 Thus,
the Atlas doctrine cannot be invoked by anyone to disregard compliance with the 30-day
mandatory and jurisdictional period. Also, the difference between the Atlas doctrine on one hand,
and the Mirant54 doctrine on the other hand, is a mere 20 days. The Atlas doctrine counts the two-year
prescriptive period from the date of payment of the output VAT, which means within 20 days after the
close of the taxable quarter. The output VAT at that time must be paid at the time of filing of the
quarterly tax returns, which were to be filed "within 20 days following the end of each quarter."
Thus, in Atlas, the three tax refund claims listed below were deemed timely filed because the
administrative claims filed with the Commissioner, and the petitions for review filed with the CTA, were
all filed within two years from the date of payment of the output VAT, following Section 229:
Date of Filing Return Date of Filing Date of Filing
Period Covered
& Payment of Tax Administrative Claim Petition With CTA
2nd Quarter, 1990 20 July 1990 21 August 1990 20 July 1992
Close of Quarter
30 June 1990
3rd Quarter, 1990 18 October 1990 21 November 1990 9 October 1992
Close of Quarter
30 September 1990
4th Quarter, 1990 20 January 1991 19 February 1991 14 January 1993
Close of Quarter
31 December 1990
Atlas paid the output VAT at the time it filed the quarterly tax returns on the 20th, 18th, and 20th
day after the close of the taxable quarter. Had the twoyear prescriptive period been counted from the
"close of the taxable quarter" as expressly stated in the law, the tax refund claims of Atlas would have
already prescribed. In contrast, the Mirant doctrine counts the two-year prescriptive period from the
"close of the taxable quarter when the sales were made" as expressly stated in the law, which means
the last day of the taxable quarter. The 20-day difference55 between the Atlas doctrine and the
later Mirant doctrine is not material to San Roque’s claim for tax refund.
Whether the Atlas doctrine or the Mirant doctrine is applied to San Roque is immaterial because what
is at issue in the present case is San Roque’s non-compliance with the 120-day mandatory and
jurisdictional period, which is counted from the date it filed its administrative claim with the
Commissioner. The 120-day period may extend beyond the two-year prescriptive period, as long as the
administrative claim is filed within the two-year prescriptive period. However, San Roque’s fatal mistake
is that it did not wait for the Commissioner to decide within the 120-day period, a mandatory period
whether the Atlas or the Mirant doctrine is applied.
At the time San Roque filed its petition for review with the CTA, the 120+30 day mandatory periods
were already in the law. Section 112(C)56 expressly grants the Commissioner 120 days within which to
decide the taxpayer’s claim. The law is clear, plain, and unequivocal: "x x x the Commissioner shall
grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty
(120) days from the date of submission of complete documents." Following the verba legis doctrine,
this law must be applied exactly as worded since it is clear, plain, and unequivocal. The taxpayer
cannot simply file a petition with the CTA without waiting for the Commissioner’s decision within the
120-day mandatory and jurisdictional period. The CTA will have no jurisdiction because there will be no
"decision" or "deemed a denial" decision of the Commissioner for the CTA to review. In San Roque’s
case, it filed its petition with the CTA a mere 13 days after it filed its administrative claim with the
Commissioner. Indisputably, San Roque knowingly violated the mandatory 120-day period, and it
cannot blame anyone but itself.
Section 112(C) also expressly grants the taxpayer a 30-day period to appeal to the CTA the decision or
inaction of the Commissioner, thus:
x x x the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the
claim or after the expiration of the one hundred twenty day-period, appeal the decision or the
unacted claim with the Court of Tax Appeals. (Emphasis supplied)
This law is clear, plain, and unequivocal. Following the well-settled verba legis doctrine, this law should
be applied exactly as worded since it is clear, plain, and unequivocal. As this law states, the taxpayer
may, if he wishes, appeal the decision of the Commissioner to the CTA within 30 days from receipt of
the Commissioner’s decision, or if the Commissioner does not act on the taxpayer’s claim within the
120-day period, the taxpayer may appeal to the CTA within 30 days from the expiration of the 120-day
period.
b. G.R. No. 196113 - Taganito Mining Corporation v. CIR
Like San Roque, Taganito also filed its petition for review with the CTA without waiting for the 120-day
period to lapse. Also, like San Roque, Taganito filed its judicial claim before the promulgation of
the Atlas doctrine. Taganito filed a Petition for Review on 14 February 2007 with the CTA. This is
almost four months before the adoption of the Atlas doctrine on 8 June 2007. Taganito is similarly
situated as San Roque - both cannot claim being misled, misguided, or confused by the Atlas doctrine.
However, Taganito can invoke BIR Ruling No. DA-489-0357 dated 10 December 2003, which expressly
ruled that the "taxpayer-claimant need not wait for the lapse of the 120-day period before it could
seek judicial relief with the CTA by way of Petition for Review." Taganito filed its judicial
claim after the issuance of BIR Ruling No. DA-489-03 but before the adoption of the Aichi doctrine.
Thus, as will be explained later, Taganito is deemed to have filed its judicial claim with the CTA on time.
c. G.R. No. 197156 – Philex Mining Corporation v. CIR
Philex (1) filed on 21 October 2005 its original VAT Return for the third quarter of taxable year 2005; (2)
filed on 20 March 2006 its administrative claim for refund or credit; (3) filed on 17 October 2007 its
Petition for Review with the CTA. The close of the third taxable quarter in 2005 is 30 September 2005,
which is the reckoning date in computing the two-year prescriptive period under Section 112(A).
Philex timely filed its administrative claim on 20 March 2006, within the two-year prescriptive period.
Even if the two-year prescriptive period is computed from the date of payment of the output VAT under
Section 229, Philex still filed its administrative claim on time. Thus, the Atlas doctrine is immaterial in
this case. The Commissioner had until 17 July 2006, the last day of the 120-day period, to decide
Philex’s claim. Since the Commissioner did not act on Philex’s claim on or before 17 July 2006, Philex
had until 17 August 2006, the last day of the 30-day period, to file its judicial claim. The CTA EB held
that 17 August 2006 was indeed the last day for Philex to file its judicial claim. However, Philex
filed its Petition for Review with the CTA only on 17 October 2007, or four hundred twenty-six (426)
days after the last day of filing. In short, Philex was late by one year and 61 days in filing its
judicial claim. As the CTA EB correctly found:
Evidently, the Petition for Review in C.T.A. Case No. 7687 was filed 426 days late. Thus, the
Petition for Review in C.T.A. Case No. 7687 should have been dismissed on the ground that the
Petition for Review was filed way beyond the 30-day prescribed period; thus, no jurisdiction was
acquired by the CTA Division; x x x58 (Emphasis supplied)
Unlike San Roque and Taganito, Philex’s case is not one of premature filing but of late filing. Philex did
not file any petition with the CTA within the 120-day period. Philex did not also file any petition with the
CTA within 30 days after the expiration of the 120-day period. Philex filed its judicial claim long
after the expiration of the 120-day period, in fact 426 days after the lapse of the 120-day period. In any
event, whether governed by jurisprudence before, during, or after the Atlas case, Philex’s
judicial claim will have to be rejected because of late filing. Whether the two-year prescriptive
period is counted from the date of payment of the output VAT following the Atlas doctrine, or from the
close of the taxable quarter when the sales attributable to the input VAT were made following
the Mirant and Aichi doctrines, Philex’s judicial claim was indisputably filed late.
The Atlas doctrine cannot save Philex from the late filing of its judicial claim. The inaction of the
Commissioner on Philex’s claim during the 120-day period is, by express provision of law, "deemed a
denial" of Philex’s claim. Philex had 30 days from the expiration of the 120-day period to file its judicial
claim with the CTA. Philex’s failure to do so rendered the "deemed a denial" decision of the
Commissioner final and inappealable. The right to appeal to the CTA from a decision or "deemed a
denial" decision of the Commissioner is merely a statutory privilege, not a constitutional right. The
exercise of such statutory privilege requires strict compliance with the conditions attached by the statute
for its exercise.59 Philex failed to comply with the statutory conditions and must thus bear the
consequences.
II. Prescriptive Periods under Section 112(A) and (C)
There are three compelling reasons why the 30-day period need not necessarily fall within the two-year
prescriptive period, as long as the administrative claim is filed within the two-year prescriptive period.
First, Section 112(A) clearly, plainly, and unequivocally provides that the taxpayer
"may, within two (2) years after the close of the taxable quarter when the sales were
made, apply for the issuance of a tax credit certificate or refund of the creditable input
tax due or paid to such sales." In short, the law states that the taxpayer may apply with the
Commissioner for a refund or credit "within two (2) years," which means at anytime within
two years. Thus, the application for refund or credit may be filed by the taxpayer with the
Commissioner on the last day of the two-year prescriptive period and it will still strictly comply
with the law. The twoyear prescriptive period is a grace period in favor of the taxpayer and he
can avail of the full period before his right to apply for a tax refund or credit is barred by
prescription.
Second, Section 112(C) provides that the Commissioner shall decide the application for
refund or credit "within one hundred twenty (120) days from the date of submission of
complete documents in support of the application filed in accordance with Subsection (A)."
The reference in Section 112(C) of the submission of documents "in support of the
application filed in accordance with Subsection A" means that the application in Section
112(A) is the administrative claim that the Commissioner must decide within the 120-day
period. In short, the two-year prescriptive period in Section 112(A) refers to the period within
which the taxpayer can file an administrative claim for tax refund or credit. Stated otherwise,
the two-year prescriptive period does not refer to the filing of the judicial claim with the
CTA but to the filing of the administrative claim with the Commissioner. As held
in Aichi, the "phrase ‘within two years x x x apply for the issuance of a tax credit or
refund’ refers to applications for refund/credit with the CIR and not to appeals made to
the CTA."
Third, if the 30-day period, or any part of it, is required to fall within the two-year prescriptive
period (equivalent to 730 days60), then the taxpayer must file his administrative claim for
refund or credit within the first 610 days of the two-year prescriptive period. Otherwise, the
filing of the administrative claim beyond the first 610 days will result in the appeal to
the CTA being filed beyond the two-year prescriptive period. Thus, if the taxpayer files
his administrative claim on the 611th day, the Commissioner, with his 120-day period, will
have until the 731st day to decide the claim. If the Commissioner decides only on the 731st
day, or does not decide at all, the taxpayer can no longer file his judicial claim with the CTA
because the two-year prescriptive period (equivalent to 730 days) has lapsed. The 30-day
period granted by law to the taxpayer to file an appeal before the CTA becomes utterly
useless, even if the taxpayer complied with the law by filing his administrative claim within the
two-year prescriptive period.
The theory that the 30-day period must fall within the two-year prescriptive period adds a condition that
is not found in the law. It results in truncating 120 days from the 730 days that the law grants the
taxpayer for filing his administrative claim with the Commissioner. This Court cannot interpret a law to
defeat, wholly or even partly, a remedy that the law expressly grants in clear, plain, and unequivocal
language.
Section 112(A) and (C) must be interpreted according to its clear, plain, and unequivocal language. The
taxpayer can file his administrative claim for refund or credit at anytime within the two-year prescriptive
period. If he files his claim on the last day of the two-year prescriptive period, his claim is still filed on
time. The Commissioner will have 120 days from such filing to decide the claim. If the Commissioner
decides the claim on the 120th day, or does not decide it on that day, the taxpayer still has 30 days to
file his judicial claim with the CTA. This is not only the plain meaning but also the only logical
interpretation of Section 112(A) and (C).
III. "Excess" Input VAT and "Excessively" Collected Tax
The input VAT is not "excessively" collected as understood under Section 229 because at the time the
input VAT is collected the amount paid is correct and proper. The input VAT is a tax liability of, and
legally paid by, a VAT-registered seller61 of goods, properties or services used as input by another VAT-
registered person in the sale of his own goods, properties, or services. This tax liability is true even if
the seller passes on the input VAT to the buyer as part of the purchase price. The second VAT-
registered person, who is not legally liable for the input VAT, is the one who applies the input VAT as
credit for his own output VAT.62 If the input VAT is in fact "excessively" collected as understood under
Section 229, then it is the first VAT-registered person - the taxpayer who is legally liable and who is
deemed to have legally paid for the input VAT - who can ask for a tax refund or credit under Section
229 as an ordinary refund or credit outside of the VAT System. In such event, the second VAT-
registered taxpayer will have no input VAT to offset against his own output VAT.
In a claim for refund or credit of "excess" input VAT under Section 110(B) and Section 112(A), the input
VAT is not "excessively" collected as understood under Section 229. At the time of payment of the input
VAT the amount paid is the correct and proper amount. Under the VAT System, there is no claim or
issue that the input VAT is "excessively" collected, that is, that the input VAT paid is more than what is
legally due. The person legally liable for the input VAT cannot claim that he overpaid the input VAT by
the mere existence of an "excess" input VAT. The term "excess" input VAT simply means that the input
VAT available as credit exceeds the output VAT, not that the input VAT is excessively collected
because it is more than what is legally due. Thus, the taxpayer who legally paid the input VAT cannot
claim for refund or credit of the input VAT as "excessively" collected under Section 229.
Under Section 229, the prescriptive period for filing a judicial claim for refund is two years from the date
of payment of the tax "erroneously, x x x illegally, x x x excessively or in any manner wrongfully
collected." The prescriptive period is reckoned from the date the person liable for the tax pays the tax.
Thus, if the input VAT is in fact "excessively" collected, that is, the person liable for the tax actually pays
more than what is legally due, the taxpayer must file a judicial claim for refund within two years from his
date of payment. Only the person legally liable to pay the tax can file the judicial claim for refund.
The person to whom the tax is passed on as part of the purchase price has no personality to file
the judicial claim under Section 229.63
Under Section 110(B) and Section 112(A), the prescriptive period for filing a judicial claim for "excess"
input VAT is two years from the close of the taxable quarter when the sale was made by the person
legally liable to pay the output VAT. This prescriptive period has no relation to the date of payment of
the "excess" input VAT. The "excess" input VAT may have been paid for more than two years but this
does not bar the filing of a judicial claim for "excess" VAT under Section 112(A), which has a different
reckoning period from Section 229. Moreover, the person claiming the refund or credit of the input VAT
is not the person who legally paid the input VAT. Such person seeking the VAT refund or credit does
not claim that the input VAT was "excessively" collected from him, or that he paid an input VAT that is
more than what is legally due. He is not the taxpayer who legally paid the input VAT.
As its name implies, the Value-Added Tax system is a tax on the value added by the taxpayer in the
chain of transactions. For simplicity and efficiency in tax collection, the VAT is imposed not just on the
value added by the taxpayer, but on the entire selling price of his goods, properties or services.
However, the taxpayer is allowed a refund or credit on the VAT previously paid by those who sold him
the inputs for his goods, properties, or services. The net effect is that the taxpayer pays the VAT only
on the value that he adds to the goods, properties, or services that he actually sells.
Under Section 110(B), a taxpayer can apply his input VAT only against his output VAT. The only
exception is when the taxpayer is expressly "zero-rated or effectively zero-rated" under the law, like
companies generating power through renewable sources of energy.64 Thus, a non zero-rated VAT-
registered taxpayer who has no output VAT because he has no sales cannot claim a tax refund or
credit of his unused input VAT under the VAT System. Even if the taxpayer has sales but his input VAT
exceeds his output VAT, he cannot seek a tax refund or credit of his "excess" input VAT under the VAT
System. He can only carry-over and apply his "excess" input VAT against his future output VAT.
If such "excess" input VAT is an "excessively" collected tax, the taxpayer should be able to seek a
refund or credit for such "excess" input VAT whether or not he has output VAT. The VAT System does
not allow such refund or credit. Such "excess" input VAT is not an "excessively" collected tax under
Section 229. The "excess" input VAT is a correctly and properly collected tax. However, such "excess"
input VAT can be applied against the output VAT because the VAT is a tax imposed only on the value
added by the taxpayer. If the input VAT is in fact "excessively" collected under Section 229, then it is
the person legally liable to pay the input VAT, not the person to whom the tax was passed on as part of
the purchase price and claiming credit for the input VAT under the VAT System, who can file the judicial
claim under Section 229.
Any suggestion that the "excess" input VAT under the VAT System is an "excessively" collected tax
under Section 229 may lead taxpayers to file a claim for refund or credit for such "excess" input VAT
under Section 229 as an ordinary tax refund or credit outside of the VAT System. Under Section 229,
mere payment of a tax beyond what is legally due can be claimed as a refund or credit. There is no
requirement under Section 229 for an output VAT or subsequent sale of goods, properties, or services
using materials subject to input VAT.
From the plain text of Section 229, it is clear that what can be refunded or credited is a tax that is
"erroneously, x x x illegally, x x x excessively or in any manner wrongfully collected." In short, there
must be a wrongful payment because what is paid, or part of it, is not legally due. As the Court held
in Mirant, Section 229 should "apply only to instances of erroneous payment or illegal collection
of internal revenue taxes." Erroneous or wrongful payment includes excessive payment because they
all refer to payment of taxes not legally due. Under the VAT System, there is no claim or issue that
the "excess" input VAT is "excessively or in any manner wrongfully collected." In fact, if the "excess"
input VAT is an "excessively" collected tax under Section 229, then the taxpayer claiming to apply such
"excessively" collected input VAT to offset his output VAT may have no legal basis to make such
offsetting. The person legally liable to pay the input VAT can claim a refund or credit for such
"excessively" collected tax, and thus there will no longer be any "excess" input VAT. This will upend the
present VAT System as we know it.
IV. Effectivity and Scope of the Atlas , Mirant and Aichi Doctrines
The Atlas doctrine, which held that claims for refund or credit of input VAT must comply with the two-
year prescriptive period under Section 229, should be effective only from its promulgation on 8
June 2007 until its abandonment on 12 September 2008 in Mirant. The Atlas doctrine was limited to
the reckoning of the two-year prescriptive period from the date of payment of the output VAT. Prior to
the Atlas doctrine, the two-year prescriptive period for claiming refund or credit of input VAT should be
governed by Section 112(A) following the verba legis rule. The Mirant ruling, which abandoned
the Atlas doctrine, adopted the verba legis rule, thus applying Section 112(A) in computing the two-
year prescriptive period in claiming refund or credit of input VAT.
The Atlas doctrine has no relevance to the 120+30 day periods under Section 112(C) because the
application of the 120+30 day periods was not in issue in Atlas. The application of the 120+30 day
periods was first raised in Aichi, which adopted the verba legis rule in holding that the 120+30 day
periods are mandatory and jurisdictional. The language of Section 112(C) is plain, clear, and
unambiguous. When Section 112(C) states that "the Commissioner shall grant a refund or issue the tax
credit within one hundred twenty (120) days from the date of submission of complete documents," the
law clearly gives the Commissioner 120 days within which to decide the taxpayer’s claim. Resort to the
courts prior to the expiration of the 120-day period is a patent violation of the doctrine of exhaustion of
administrative remedies, a ground for dismissing the judicial suit due to prematurity. Philippine
jurisprudence is awash with cases affirming and reiterating the doctrine of exhaustion of administrative
remedies.65 Such doctrine is basic and elementary.
When Section 112(C) states that "the taxpayer affected may, within thirty (30) days from receipt of the
decision denying the claim or after the expiration of the one hundred twenty-day period, appeal the
decision or the unacted claim with the Court of Tax Appeals," the law does not make the 120+30 day
periods optional just because the law uses the word "may." The word "may" simply means that the
taxpayer may or may not appeal the decision of the Commissioner within 30 days from receipt of the
decision, or within 30 days from the expiration of the 120-day period. Certainly, by no stretch of the
imagination can the word "may" be construed as making the 120+30 day periods optional, allowing the
taxpayer to file a judicial claim one day after filing the administrative claim with the Commissioner.
The old rule66 that the taxpayer may file the judicial claim, without waiting for the Commissioner’s
decision if the two-year prescriptive period is about to expire, cannot apply because that rule was
adopted before the enactment of the 30-day period. The 30-day period was adopted precisely to do
away with the old rule, so that under the VAT System the taxpayer will always have 30 days to
file the judicial claim even if the Commissioner acts only on the 120th day, or does not act at all
during the 120-day period. With the 30-day period always available to the taxpayer, the taxpayer can
no longer file a judicial claim for refund or credit of input VAT without waiting for the Commissioner to
decide until the expiration of the 120-day period.
To repeat, a claim for tax refund or credit, like a claim for tax exemption, is construed strictly against the
taxpayer. One of the conditions for a judicial claim of refund or credit under the VAT System is
compliance with the 120+30 day mandatory and jurisdictional periods. Thus, strict compliance with the
120+30 day periods is necessary for such a claim to prosper, whether before, during, or after the
effectivity of the Atlas doctrine, except for the period from the issuance of BIR Ruling No. DA-489-03 on
10 December 2003 to 6 October 2010 when the Aichi doctrine was adopted, which again reinstated the
120+30 day periods as mandatory and jurisdictional.
V. Revenue Memorandum Circular No. 49-03 (RMC 49-03) dated 15 April 2003
There is nothing in RMC 49-03 that states, expressly or impliedly, that the taxpayer need not wait for
the 120-day period to expire before filing a judicial claim with the CTA. RMC 49-03 merely authorizes
the BIR to continue processing the administrative claim even after the taxpayer has filed its judicial
claim, without saying that the taxpayer can file its judicial claim before the expiration of the 120-day
period. RMC 49-03 states: "In cases where the taxpayer has filed a ‘Petition for Review’ with the Court
of Tax Appeals involving a claim for refund/TCC that is pending at the administrative agency (either the
Bureau of Internal Revenue or the One- Stop Shop Inter-Agency Tax Credit and Duty Drawback Center
of the Department of Finance), the administrative agency and the court may act on the case
separately." Thus, if the taxpayer files its judicial claim before the expiration of the 120-day period, the
BIR will nevertheless continue to act on the administrative claim because such premature filing cannot
divest the Commissioner of his statutory power and jurisdiction to decide the administrative claim within
the 120-day period.
On the other hand, if the taxpayer files its judicial claim after the 120- day period, the Commissioner can
still continue to evaluate the administrative claim. There is nothing new in this because even after the
expiration of the 120-day period, the Commissioner should still evaluate internally the administrative
claim for purposes of opposing the taxpayer’s judicial claim, or even for purposes of determining if the
BIR should actually concede to the taxpayer’s judicial claim. The internal administrative evaluation of
the taxpayer’s claim must necessarily continue to enable the BIR to oppose intelligently the judicial
claim or, if the facts and the law warrant otherwise, for the BIR to concede to the judicial claim, resulting
in the termination of the judicial proceedings.
What is important, as far as the present cases are concerned, is that the mere filing by a
taxpayer of a judicial claim with the CTA before the expiration of the 120-day period cannot
operate to divest the Commissioner of his jurisdiction to decide an administrative claim within
the 120-day mandatory period, unless the Commissioner has clearly given cause for equitable
estoppel to apply as expressly recognized in Section 246 of the Tax Code.67
VI. BIR Ruling No. DA-489-03 dated 10 December 2003
BIR Ruling No. DA-489-03 does provide a valid claim for equitable estoppel under Section 246 of the
Tax Code. BIR Ruling No. DA-489-03 expressly states that the "taxpayer-claimant need not wait for
the lapse of the 120-day period before it could seek judicial relief with the CTA by way of Petition
for Review." Prior to this ruling, the BIR held, as shown by its position in the Court of Appeals,68 that
the expiration of the 120-day period is mandatory and jurisdictional before a judicial claim can be filed.
There is no dispute that the 120-day period is mandatory and jurisdictional, and that the CTA does not
acquire jurisdiction over a judicial claim that is filed before the expiration of the 120-day period. There
are, however, two exceptions to this rule. The first exception is if the Commissioner, through a specific
ruling, misleads a particular taxpayer to prematurely file a judicial claim with the CTA. Such specific
ruling is applicable only to such particular taxpayer. The second exception is where the
Commissioner, through a general interpretative rule issued under Section 4 of the Tax Code, misleads
all taxpayers into filing prematurely judicial claims with the CTA. In these cases, the Commissioner
cannot be allowed to later on question the CTA’s assumption of jurisdiction over such claim since
equitable estoppel has set in as expressly authorized under Section 246 of the Tax Code.
Section 4 of the Tax Code, a new provision introduced by RA 8424, expressly grants to the
Commissioner the power to interpret tax laws, thus:
Sec. 4. Power of the Commissioner To Interpret Tax Laws and To Decide Tax Cases. — The power to
interpret the provisions of this Code and other tax laws shall be under the exclusive and original
jurisdiction of the Commissioner, subject to review by the Secretary of Finance.
The power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges,
penalties imposed in relation thereto, or other matters arising under this Code or other laws or portions
thereof administered by the Bureau of Internal Revenue is vested in the Commissioner, subject to the
exclusive appellate jurisdiction of the Court of Tax Appeals.
Since the Commissioner has exclusive and original jurisdiction to interpret tax laws, taxpayers
acting in good faith should not be made to suffer for adhering to general interpretative rules of the
Commissioner interpreting tax laws, should such interpretation later turn out to be erroneous and be
reversed by the Commissioner or this Court. Indeed, Section 246 of the Tax Code expressly provides
that a reversal of a BIR regulation or ruling cannot adversely prejudice a taxpayer who in good faith
relied on the BIR regulation or ruling prior to its reversal. Section 246 provides as follows:
Sec. 246. Non-Retroactivity of Rulings. — Any revocation, modification or reversal of any of the rules
and regulations promulgated in accordance with the preceding Sections or any of the rulings or
circulars promulgated by the Commissioner shall not be given retroactive application if the
revocation, modification or reversal will be prejudicial to the taxpayers, except in the following
cases:
(a) Where the taxpayer deliberately misstates or omits material facts from his return or any
document required of him by the Bureau of Internal Revenue;
(b) Where the facts subsequently gathered by the Bureau of Internal Revenue are materially
different from the facts on which the ruling is based; or
(c) Where the taxpayer acted in bad faith. (Emphasis supplied)
Thus, a general interpretative rule issued by the Commissioner may be relied upon by taxpayers from
the time the rule is issued up to its reversal by the Commissioner or this Court. Section 246 is not
limited to a reversal only by the Commissioner because this Section expressly states, "Any revocation,
modification or reversal" without specifying who made the revocation, modification or reversal. Hence, a
reversal by this Court is covered under Section 246.
Taxpayers should not be prejudiced by an erroneous interpretation by the Commissioner, particularly
on a difficult question of law. The abandonment of the Atlas doctrine by Mirant and Aichi69 is proof that
the reckoning of the prescriptive periods for input VAT tax refund or credit is a difficult question of law.
The abandonment of the Atlas doctrine did not result in Atlas, or other taxpayers similarly situated,
being made to return the tax refund or credit they received or could have received under Atlas prior to
its abandonment. This Court is applying Mirant and Aichi prospectively. Absent fraud, bad faith or
misrepresentation, the reversal by this Court of a general interpretative rule issued by the
Commissioner, like the reversal of a specific BIR ruling under Section 246, should also apply
prospectively. As held by this Court in CIR v. Philippine Health Care Providers, Inc.:70
In ABS-CBN Broadcasting Corp. v. Court of Tax Appeals, this Court held that under Section 246 of the
1997 Tax Code, the Commissioner of Internal Revenue is precluded from adopting a position
contrary to one previously taken where injustice would result to the taxpayer. Hence, where an
assessment for deficiency withholding income taxes was made, three years after a new BIR Circular
reversed a previous one upon which the taxpayer had relied upon, such an assessment was prejudicial
to the taxpayer. To rule otherwise, opined the Court, would be contrary to the tenets of good faith,
equity, and fair play.
This Court has consistently reaffirmed its ruling in ABS-CBN Broadcasting Corp.1âwphi1 in the later
cases of Commissioner of Internal Revenue v. Borroughs, Ltd., Commissioner of Internal Revenue v.
Mega Gen. Mdsg. Corp., Commissioner of Internal Revenue v. Telefunken Semiconductor (Phils.) Inc.,
and Commissioner of Internal Revenue v. Court of Appeals. The rule is that the BIR rulings have no
retroactive effect where a grossly unfair deal would result to the prejudice of the taxpayer, as in
this case.
More recently, in Commissioner of Internal Revenue v. Benguet Corporation, wherein the taxpayer was
entitled to tax refunds or credits based on the BIR’s own issuances but later was suddenly saddled with
deficiency taxes due to its subsequent ruling changing the category of the taxpayer’s transactions for
the purpose of paying its VAT, this Court ruled that applying such ruling retroactively would be
prejudicial to the taxpayer. (Emphasis supplied)
Thus, the only issue is whether BIR Ruling No. DA-489-03 is a general interpretative rule applicable to
all taxpayers or a specific ruling applicable only to a particular taxpayer.
BIR Ruling No. DA-489-03 is a general interpretative rule because it was a response to a query made,
not by a particular taxpayer, but by a government agency tasked with processing tax refunds and
credits, that is, the One Stop Shop Inter-Agency Tax Credit and Drawback Center of the
Department of Finance. This government agency is also the addressee, or the entity responded to, in
BIR Ruling No. DA-489-03. Thus, while this government agency mentions in its query to the
Commissioner the administrative claim of Lazi Bay Resources Development, Inc., the agency was in
fact asking the Commissioner what to do in cases like the tax claim of Lazi Bay Resources
Development, Inc., where the taxpayer did not wait for the lapse of the 120-day period.
Clearly, BIR Ruling No. DA-489-03 is a general interpretative rule. Thus, all taxpayers can rely on BIR
Ruling No. DA-489-03 from the time of its issuance on 10 December 2003 up to its reversal by this
Court in Aichi on 6 October 2010, where this Court held that the 120+30 day periods are mandatory
and jurisdictional
However, BIR Ruling No. DA-489-03 cannot be given retroactive effect for four reasons: first, it is
admittedly an erroneous interpretation of the law; second, prior to its issuance, the BIR held that the
120-day period was mandatory and jurisdictional, which is the correct interpretation of the law; third,
prior to its issuance, no taxpayer can claim that it was misled by the BIR into filing a judicial claim
prematurely; and fourth, a claim for tax refund or credit, like a claim for tax exemption, is strictly
construed against the taxpayer.
San Roque, therefore, cannot benefit from BIR Ruling No. DA-489-03 because it filed its judicial claim
prematurely on 10 April 2003, before the issuance of BIR Ruling No. DA-489-03 on 10 December
2003. To repeat, San Roque cannot claim that it was misled by the BIR into filing its judicial claim
prematurely because BIR Ruling No. DA-489-03 was issued only after San Roque filed its judicial claim.
At the time San Roque filed its judicial claim, the law as applied and administered by the BIR was that
the Commissioner had 120 days to act on administrative claims. This was in fact the position of the BIR
prior to the issuance of BIR Ruling No. DA-489-03. Indeed, San Roque never claimed the benefit of
BIR Ruling No. DA-489-03 or RMC 49-03, whether in this Court, the CTA, or before the
Commissioner.
Taganito, however, filed its judicial claim with the CTA on 14 February 2007, after the issuance of BIR
Ruling No. DA-489-03 on 10 December 2003. Truly, Taganito can claim that in filing its judicial claim
prematurely without waiting for the 120-day period to expire, it was misled by BIR Ruling No. DA-489-
03. Thus, Taganito can claim the benefit of BIR Ruling No. DA-489-03, which shields the filing of its
judicial claim from the vice of prematurity.
Philex’s situation is not a case of premature filing of its judicial claim but of late filing, indeed very late
filing. BIR Ruling No. DA-489-03 allowed premature filing of a judicial claim, which means non-
exhaustion of the 120-day period for the Commissioner to act on an administrative claim. Philex cannot
claim the benefit of BIR Ruling No. DA-489-03 because Philex did not file its judicial claim prematurely
but filed it long after the lapse of the 30-day period following the expiration of the 120-day period. In
fact, Philex filed its judicial claim 426 days after the lapse of the 30-day period.
VII. Existing Jurisprudence
There is no basis whatsoever to the claim that in five cases this Court had already made a ruling that
the filing dates of the administrative and judicial claims are inconsequential, as long as they are within
the two-year prescriptive period. The effect of the claim of the dissenting opinions is that San Roque’s
failure to wait for the 120-day mandatory period to lapse is inconsequential, thus allowing San Roque to
claim the tax refund or credit. However, the five cases cited by the dissenting opinions do not support
even remotely the claim that this Court had already made such a ruling. None of these five cases
mention, cite, discuss, rule or even hint that compliance with the 120-day mandatory period is
inconsequential as long as the administrative and judicial claims are filed within the two-year
prescriptive period.
In CIR v. Toshiba Information Equipment (Phils.), Inc.,71 the issue was whether any output VAT was
actually passed on to Toshiba that it could claim as input VAT subject to tax credit or refund. The
Commissioner argued that "although Toshiba may be a VAT-registered taxpayer, it is not engaged in a
VAT-taxable business." The Commissioner cited Section 4.106-1 of Revenue Regulations No. 75 that
"refund of input taxes on capital goods shall be allowed only to the extent that such capital goods are
used in VAT-taxable business." In the words of the Court, "Ultimately, however, the issue still to be
resolved herein shall be whether respondent Toshiba is entitled to the tax credit/refund of its input VAT
on its purchases of capital goods and services, to which this Court answers in the affirmative." Nowhere
in this case did the Court discuss, state, or rule that the filing dates of the administrative and judicial
claims are inconsequential, as long as they are within the two-year prescriptive period.
In Intel Technology Philippines, Inc. v. CIR,72 the Court stated: "The issues to be resolved in the instant
case are (1) whether the absence of the BIR authority to print or the absence of the TIN-V in petitioner’s
export sales invoices operates to forfeit its entitlement to a tax refund/credit of its unutilized input VAT
attributable to its zero-rated sales; and (2) whether petitioner’s failure to indicate "TIN-V" in its sales
invoices automatically invalidates its claim for a tax credit certification." Again, nowhere in this case did
the Court discuss, state, or rule that the filing dates of the administrative and judicial claims are
inconsequential, as long as they are within the two-year prescriptive period.
In AT&T Communications Services Philippines, Inc. v. CIR,73 the Court stated: "x x x the CTA First
Division, conceding that petitioner’s transactions fall under the classification of zero-rated sales,
nevertheless denied petitioner’s claim ‘for lack of substantiation,’ x x x." The Court quoted the ruling
of the First Division that "valid VAT official receipts, and not mere sale invoices, should have been
submitted" by petitioner to substantiate its claim. The Court further stated: "x x x the CTA En Banc, x x
x affirmed x x x the CTA First Division," and "petitioner’s motion for reconsideration having been denied
x x x, the present petition for review was filed." Clearly, the sole issue in this case is whether petitioner
complied with the substantiation requirements in claiming for tax refund or credit. Again, nowhere in this
case did the Court discuss, state, or rule that the filing dates of the administrative and judicial claims are
inconsequential, as long as they are within the two-year prescriptive period.
In CIR v. Ironcon Builders and Development Corporation,74 the Court put the issue in this manner:
"Simply put, the sole issue the petition raises is whether or not the CTA erred in granting respondent
Ironcon’s application for refund of its excess creditable VAT withheld." The Commissioner argued that
"since the NIRC does not specifically grant taxpayers the option to refund excess creditable VAT
withheld, it follows that such refund cannot be allowed." Thus, this case is solely about whether the
taxpayer has the right under the NIRC to ask for a cash refund of excess creditable VAT withheld.
Again, nowhere in this case did the Court discuss, state, or rule that the filing dates of the administrative
and judicial claims are inconsequential, as long as they are within the two-year prescriptive period.
In CIR v. Cebu Toyo Corporation,75 the issue was whether Cebu Toyo was exempt or subject to VAT.
Compliance with the 120-day period was never an issue in Cebu Toyo. As the Court explained:
Both the Commissioner of Internal Revenue and the Office of the Solicitor General argue that
respondent Cebu Toyo Corporation, as a PEZA-registered enterprise, is exempt from national and
local taxes, including VAT, under Section 24 of Rep. Act No. 7916 and Section 109 of the NIRC.
Thus, they contend that respondent Cebu Toyo Corporation is not entitled to any refund or credit on
input taxes it previously paid as provided under Section 4.103-1 of Revenue Regulations No. 7-95,
notwithstanding its registration as a VAT taxpayer. For petitioner claims that said registration was
erroneous and did not confer upon the respondent any right to claim recognition of the input tax credit.
The respondent counters that it availed of the income tax holiday under E.O. No. 226 for four years
from August 7, 1995 making it exempt from income tax but not from other taxes such as VAT. Hence,
according to respondent, its export sales are not exempt from VAT, contrary to petitioner’s
claim, but its export sales is subject to 0% VAT. Moreover, it argues that it was able to establish
through a report certified by an independent Certified Public Accountant that the input taxes it incurred
from April 1, 1996 to December 31, 1997 were directly attributable to its export sales. Since it did not
have any output tax against which said input taxes may be offset, it had the option to file a claim for
refund/tax credit of its unutilized input taxes.
Considering the submission of the parties and the evidence on record, we find the petition bereft of
merit.
Petitioner’s contention that respondent is not entitled to refund for being exempt from VAT is
untenable. This argument turns a blind eye to the fiscal incentives granted to PEZA-registered
enterprises under Section 23 of Rep. Act No. 7916. Note that under said statute, the respondent had
two options with respect to its tax burden. It could avail of an income tax holiday pursuant to provisions
of E.O. No. 226, thus exempt it from income taxes for a number of years but not from other internal
revenue taxes such as VAT; or it could avail of the tax exemptions on all taxes, including VAT under
P.D. No. 66 and pay only the preferential tax rate of 5% under Rep. Act No. 7916. Both the Court of
Appeals and the Court of Tax Appeals found that respondent availed of the income tax holiday for four
(4) years starting from August 7, 1995, as clearly reflected in its 1996 and 1997 Annual Corporate
Income Tax Returns, where respondent specified that it was availing of the tax relief under E.O. No.
226. Hence, respondent is not exempt from VAT and it correctly registered itself as a VAT
taxpayer. In fine, it is engaged in taxable rather than exempt transactions. (Emphasis supplied)
Clearly, the issue in Cebu Toyo was whether the taxpayer was exempt from VAT or subject to
VAT at 0% tax rate. If subject to 0% VAT rate, the taxpayer could claim a refund or credit of its input
VAT. Again, nowhere in this case did the Court discuss, state, or rule that the filing dates of the
administrative and judicial claims are inconsequential, as long as they are within the two-year
prescriptive period.
While this Court stated in the narration of facts in Cebu Toyo that the taxpayer "did not bother to wait
for the Resolution of its (administrative) claim by the CIR" before filing its judicial claim with the CTA,
this issue was not raised before the Court. Certainly, this statement of the Court is not a binding
precedent that the taxpayer need not wait for the 120-day period to lapse.
Any issue, whether raised or not by the parties, but not passed upon by the Court, does not
have any value as precedent. As this Court has explained as early as 1926:
It is contended, however, that the question before us was answered and resolved against the
contention of the appellant in the case of Bautista vs. Fajardo (38 Phil. 624). In that case no question
was raised nor was it even suggested that said section 216 did not apply to a public officer. That
question was not discussed nor referred to by any of the parties interested in that case. It has been
frequently decided that the fact that a statute has been accepted as valid, and invoked and applied for
many years in cases where its validity was not raised or passed on, does not prevent a court from later
passing on its validity, where that question is squarely and properly raised and presented. Where a
question passes the Court sub silentio, the case in which the question was so passed is not
binding on the Court (McGirr vs. Hamilton and Abreu, 30 Phil. 563), nor should it be considered
as a precedent. (U.S. vs. Noriega and Tobias, 31 Phil. 310; Chicote vs. Acasio, 31 Phil. 401; U.S. vs.
More, 3 Cranch [U.S.] 159, 172; U.S. vs. Sanges, 144 U.S. 310, 319; Cross vs. Burke, 146 U.S. 82.)
For the reasons given in the case of McGirr vs. Hamilton and Abreu, supra, the decision in the case
of Bautista vs. Fajardo, supra, can have no binding force in the interpretation of the question presented
here.76 (Emphasis supplied)
In Cebu Toyo, the nature of the 120-day period, whether it is mandatory or optional, was not even
raised as an issue by any of the parties. The Court never passed upon this issue. Thus, Cebu
Toyo does not constitute binding precedent on the nature of the 120-day period.
There is also the claim that there are numerous CTA decisions allegedly supporting the argument that
the filing dates of the administrative and judicial claims are inconsequential, as long as they are within
the two-year prescriptive period. Suffice it to state that CTA decisions do not constitute precedents, and
do not bind this Court or the public. That is why CTA decisions are appealable to this Court, which may
affirm, reverse or modify the CTA decisions as the facts and the law may warrant. Only decisions of this
Court constitute binding precedents, forming part of the Philippine legal system.77 As held by this Court
in The Philippine Veterans Affairs Office v. Segundo:78
x x x Let it be admonished that decisions of the Supreme Court "applying or interpreting the laws or the Section 4.106-2. Procedures for claiming refunds or tax credits of input tax — (a) x x x
Constitution . . . form part of the legal system of the Philippines," and, as it were, "laws" by their own
right because they interpret what the laws say or mean. Unlike rulings of the lower courts, which
xxxx
bind the parties to specific cases alone, our judgments are universal in their scope and
application, and equally mandatory in character. Let it be warned that to defy our decisions is to
court contempt. (Emphasis supplied) (c) Period within which refund or tax credit of input taxes shall be made. — In proper cases, the
Commissioner shall grant a tax credit/refund for creditable input taxes within sixty (60) days from the
date of submission of complete documents in support of the application filed in accordance with
The same basic doctrine was reiterated by this Court in De Mesa v. Pepsi Cola Products Phils., Inc.:79
subparagraphs (a) and (b) above.

The principle of stare decisis et non quieta movere is entrenched in Article 8 of the Civil Code, to wit:
In case of full or partial denial of the claim for tax credit/refund as decided by the Commissioner of
Internal Revenue, the taxpayer may appeal to the Court of Tax Appeals within thirty (30) days from the
ART. 8. Judicial decisions applying or interpreting the laws or the Constitution shall form a part of the receipt of said denial, otherwise the decision will become final. However, if no action on the claim for
legal system of the Philippines. tax credit/refund has been taken by the Commissioner of Internal Revenue after the sixty (60)
day period from the date of submission of the application but before the lapse of the two (2)
year period from the date of filing of the VAT return for the taxable quarter, the taxpayer may
It enjoins adherence to judicial precedents. It requires our courts to follow a rule already
appeal to the Court of Tax Appeals.
established in a final decision of the Supreme Court. That decision becomes a judicial precedent to
be followed in subsequent cases by all courts in the land. The doctrine of stare decisis is based on the
principle that once a question of law has been examined and decided, it should be deemed settled and xxxx
closed to further argument. (Emphasis supplied)
1997 Tax Code
VIII. Revenue Regulations No. 7-95 Effective 1 January 1996
Section 112. Refunds or Tax Credits of Input Tax —
Section 4.106-2(c) of Revenue Regulations No. 7-95, by its own express terms, applies only if the
taxpayer files the judicial claim "after" the lapse of the 60-day period, a period with which San Roque
(A) x x x
failed to comply. Under Section 4.106-2(c), the 60-day period is still mandatory and jurisdictional.

Moreover, it is a hornbook principle that a prior administrative regulation can never prevail over a later
contrary law, more so in this case where the later law was enacted precisely to amend the prior
administrative regulation and the law it implements.
The laws and regulation involved are as follows:
xxxx
(D) Period within which Refund or Tax Credit of Input Taxes shall be made. — In proper cases, the
Commissioner shall grant the refund or issue the tax credit certificate for creditable input taxes within
one hundred twenty (120) days from the date of submission of complete documents in support of the
application filed in accordance with Subsections (A) and (B) hereof.

1977 Tax Code, as amended by Republic Act No. 7716 (1994)

In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part
of the Commissioner to act on the application within the period prescribed above, the taxpayer
Sec. 106. Refunds or tax credits of creditable input tax. — affected may, within thirty (30) days from the receipt of the decision denying the claim or after
the expiration of the hundred twenty day-period, appeal the decision or the unacted claim with
the Court of Tax Appeals.
(a) x x x x

There can be no dispute that under Section 106(d) of the 1977 Tax Code, as amended by RA 7716, the
(d) Period within which refund or tax credit of input tax shall be made - In proper cases, the
Commissioner has a 60-day period to act on the administrative claim. This 60-day period is
Commissioner shall grant a refund or issue the tax credit for creditable input taxes within
mandatory and jurisdictional.
sixty (60) days from the date of submission of complete documents in support of the
application filed in accordance with subparagraphs (a) and (b) hereof. In case of full or partial
denial of the claim for tax refund or tax credit, or the failure on the part of the Did Section 4.106-2(c) of Revenue Regulations No. 7-95 change this, so that the 60-day period is no
Commissioner to act on the application within the period prescribed above, the longer mandatory and jurisdictional? The obvious answer is no.
taxpayer affected may, within thirty (30) days from receipt of the decision denying the
claim or after the expiration of the sixty-day period, appeal the decision or the unacted
Section 4.106-2(c) itself expressly states that if, "after the sixty (60) day period," the Commissioner
claim with the Court of Tax Appeals.
fails to act on the administrative claim, the taxpayer may file the judicial claim even "before the lapse of
the two (2) year period." Thus, under Section 4.106-2(c) the 60-day period is still mandatory and
Revenue Regulations No. 7-95 (1996) jurisdictional.
Section 4.106-2(c) did not change Section 106(d) as amended by RA 7716, but merely implemented it,
for two reasons. First, Section 4.106-2(c) still expressly requires compliance with the 60-day
period. This cannot be disputed.1âwphi1
Second, under the novel amendment introduced by RA 7716, mere inaction by the Commissioner
during the 60-day period is deemed a denial of the claim. Thus, Section 4.106-2(c) states that "if no
action on the claim for tax refund/credit has been taken by the Commissioner after the sixty (60) day
period," the taxpayer "may" already file the judicial claim even long before the lapse of the two-year
prescriptive period. Prior to the amendment by RA 7716, the taxpayer had to wait until the two-year
prescriptive period was about to expire if the Commissioner did not act on the claim.80 With the
amendment by RA 7716, the taxpayer need not wait until the two-year prescriptive period is about to
expire before filing the judicial claim because mere inaction by the Commissioner during the 60-day
period is deemed a denial of the claim. This is the meaning of the phrase "but before the lapse of
the two (2) year period" in Section 4.106-2(c). As Section 4.106- 2(c) reiterates that the judicial claim
can be filed only "after the sixty (60) day period," this period remains mandatory and jurisdictional.
Clearly, Section 4.106-2(c) did not amend Section 106(d) but merely faithfully implemented it.
Even assuming, for the sake of argument, that Section 4.106-2(c) of Revenue Regulations No. 7-95, an
administrative issuance, amended Section 106(d) of the Tax Code to make the period given to the
Commissioner non-mandatory, still the 1997 Tax Code, a much later law, reinstated the original intent
and provision of Section 106(d) by extending the 60-day period to 120 days and re-adopting the
original wordings of Section 106(d). Thus, Section 4.106-2(c), a mere administrative issuance,
becomes inconsistent with Section 112(D), a later law. Obviously, the later law prevails over a prior
inconsistent administrative issuance.
Section 112(D) of the 1997 Tax Code is clear, unequivocal, and categorical that the Commissioner has
120 days to act on an administrative claim. The taxpayer can file the judicial claim (1) only within
thirty days after the Commissioner partially or fully denies the claim within the 120- day period, or
(2) only within thirty days from the expiration of the 120- day period if the Commissioner does not
act within the 120-day period.
There can be no dispute that upon effectivity of the 1997 Tax Code on 1 January 1998, or more than
five years before San Roque filed its administrative claim on 28 March 2003, the law has been
clear: the 120- day period is mandatory and jurisdictional. San Roque’s claim, having been filed
administratively on 28 March 2003, is governed by the 1997 Tax Code, not the 1977 Tax Code. Since
San Roque filed its judicial claim before the expiration of the 120-day mandatory and jurisdictional
period, San Roque’s claim cannot prosper.
San Roque cannot also invoke Section 4.106-2(c), which expressly provides that the taxpayer can only
file the judicial claim "after" the lapse of the 60-day period from the filing of the administrative
claim. San Roque filed its judicial claim just 13 days after filing its administrative claim. To recall,
San Roque filed its judicial claim on 10 April 2003, a mere 13 days after it filed its administrative claim.
Even if, contrary to all principles of statutory construction as well as plain common sense, we
gratuitously apply now Section 4.106-2(c) of Revenue Regulations No. 7-95, still San Roque cannot
recover any refund or credit because San Roque did not wait for the 60-day period to lapse,
contrary to the express requirement in Section 4.106-2(c). In short, San Roque does not even
comply with Section 4.106-2(c). A claim for tax refund or credit is strictly construed against the
taxpayer, who must prove that his claim clearly complies with all the conditions for granting the tax
refund or credit. San Roque did not comply with the express condition for such statutory grant.
A final word. Taxes are the lifeblood of the nation. The Philippines has been struggling to improve its
tax efficiency collection for the longest time with minimal success. Consequently, the Philippines has
suffered the economic adversities arising from poor tax collections, forcing the government to continue
borrowing to fund the budget deficits. This Court cannot turn a blind eye to this economic malaise by
being unduly liberal to taxpayers who do not comply with statutory requirements for tax refunds or
credits. The tax refund claims in the present cases are not a pittance. Many other companies stand to
gain if this Court were to rule otherwise. The dissenting opinions will turn on its head the well-settled
doctrine that tax refunds are strictly construed against the taxpayer.
WHEREFORE, the Court hereby (1) GRANTS the petition of the Commissioner of Internal Revenue in
G.R. No. 187485 to DENY the P483,797,599.65 tax refund or credit claim of San Roque Power
Corporation; (2) GRANTS the petition of Taganito Mining Corporation in G.R. No. 196113 for a tax
refund or credit of P8,365,664.38; and (3) DENIES the petition of Philex Mining Corporation in G.R. No.
197156 for a tax refund or credit of P23,956,732.44.
SO ORDERED.
G.R. No. 127105 June 25, 1999
COMMISSIONER OF INTERNAL REVENUE, petitioner, 
vs.
S.C. JOHNSON AND SON, INC., and COURT OF APPEALS, respondents.
GONZAGA-REYES, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to set aside the
decision of the Court of Appeals dated November 7, 1996 in CA-GR SP No. 40802 affirming the
decision of the Court of Tax Appeals in CTA Case No. 5136.
The antecedent facts as found by the Court of Tax Appeals are not disputed, to wit:
[Respondent], a domestic corporation organized and operating under the Philippine
laws, entered into a license agreement with SC Johnson and Son, United States of
America (USA), a non-resident foreign corporation based in the U.S.A. pursuant to
which the [respondent] was granted the right to use the trademark, patents and
technology owned by the latter including the right to manufacture, package and
distribute the products covered by the Agreement and secure assistance in
management, marketing and production from SC Johnson and Son, U. S. A.
The said License Agreement was duly registered with the Technology Transfer
Board of the Bureau of Patents, Trade Marks and Technology Transfer under
Certificate of Registration No. 8064 (Exh. "A").
For the use of the trademark or technology, [respondent] was obliged to pay SC
Johnson and Son, USA royalties based on a percentage of net sales and subjected
the same to 25% withholding tax on royalty payments which [respondent] paid for
the period covering July 1992 to May 1993 in the total amount of P1,603,443.00
(Exhs. "B" to "L" and submarkings).
 On October 29, 1993, [respondent] filed with the International Tax Affairs Division The Commissioner did not act on said claim for refund. Private respondent S.C. Johnson & Son, Inc.
(ITAD) of the BIR a claim for refund of overpaid withholding tax on royalties arguing (S.C. Johnson) then filed a petition for review before the Court of Tax Appeals (CTA) where the case
that, "the antecedent facts attending [respondent's] case fall squarely within the was docketed as CTA Case No. 5136, to claim a refund of the overpaid withholding tax on royalty
same circumstances under which said MacGeorge and Gillete rulings were issued. payments from July 1992 to May 1993.
Since the agreement was approved by the Technology Transfer Board, the
preferential tax rate of 10% should apply to the [respondent]. We therefore submit
On May 7, 1996, the Court of Tax Appeals rendered its decision in favor of S.C. Johnson and ordered
that royalties paid by the [respondent] to SC Johnson and Son, USA is only subject
the Commissioner of Internal Revenue to issue a tax credit certificate in the amount of P963,266.00
to 10% withholding tax pursuant to the most-favored nation clause of the RP-US
representing overpaid withholding tax on royalty payments, beginning July, 1992 to May, 1993.2
Tax Treaty [Article 13 Paragraph 2 (b) (iii)] in relation to the RP-West Germany Tax
Treaty [Article 12 (2) (b)]" (Petition for Review [filed with the Court of Appeals], par.
12). [Respondent's] claim for there fund of P963,266.00 was computed as follows: The Commissioner of Internal Revenue thus filed a petition for review with the Court of Appeals which
rendered the decision subject of this appeal on November 7, 1996 finding no merit in the petition and
affirming in toto the CTA ruling.3
Gross 25% 10%

This petition for review was filed by the Commissioner of Internal Revenue raising the following issue:
Month/ Royalty Withholding Withholding

THE COURT OF APPEALS ERRED IN RULING THAT SC JOHNSON AND SON,

Year Fee Tax Paid Tax Balance
USA IS ENTITLED TO THE "MOST FAVORED NATION" TAX RATE OF 10% ON
ROYALTIES AS PROVIDED IN THE RP-US TAX TREATY IN RELATION TO THE
——— ——— ——— ——— ——— RP-WEST GERMANY TAX TREATY.

July 1992 559,878 139,970 55,988 83,982 Petitioner contends that under Article 13(2) (b) (iii) of the RP-US Tax Treaty, which is known as the
"most favored nation" clause, the lowest rate of the Philippine tax at 10% may be imposed on royalties
derived by a resident of the United States from sources within the Philippines only if the circumstances
August 567,935 141,984 56,794 85,190
of the resident of the United States are similar to those of the resident of West Germany. Since the RP-
US Tax Treaty contains no "matching credit" provision as that provided under Article 24 of the RP-West
September 595,956 148,989 59,596 89,393 Germany Tax Treaty, the tax on royalties under the RP-US Tax Treaty is not paid under similar
circumstances as those obtaining in the RP-West Germany Tax Treaty. Even assuming that the phrase
"paid under similar circumstances" refers to the payment of royalties, and not taxes, as held by the
October 634,405 158,601 63,441 95,161 Court of Appeals, still, the "most favored nation" clause cannot be invoked for the reason that when a
tax treaty contemplates circumstances attendant to the payment of a tax, or royalty remittances for that
November 620,885 155,221 62,089 93,133 matter, these must necessarily refer to circumstances that are tax-related. Finally, petitioner argues that
since S.C. Johnson's invocation of the "most favored nation" clause is in the nature of a claim for
exemption from the application of the regular tax rate of 25% for royalties, the provisions of the treaty
December 383,276 95,819 36,328 57,491 must be construed strictly against it.

Jan 1993 602,451 170,630 68,245 102,368 In its Comment, private respondent S.C. Johnson avers that the instant petition should be denied (1)
because it contains a defective certification against forum shopping as required under SC Circular No.
February 565,845 141,461 56,585 84,877 28-91, that is, the certification was not executed by the petitioner herself but by her counsel; and (2)
that the "most favored nation" clause under the RP-US Tax Treaty refers to royalties paid under similar
circumstances as those royalties subject to tax in other treaties; that the phrase "paid under similar
March 547,253 136,813 54,725 82,088 circumstances" does not refer to payment of the tax but to the subject matter of the tax, that is,
royalties, because the "most favored nation" clause is intended to allow the taxpayer in one state to
April 660,810 165,203 66,081 99,122 avail of more liberal provisions contained in another tax treaty wherein the country of residence of such
taxpayer is also a party thereto, subject to the basic condition that the subject matter of taxation in that
other tax treaty is the same as that in the original tax treaty under which the taxpayer is liable; thus, the
May 603,076 150,769 60,308 90,461 RP-US Tax Treaty speaks of "royalties of the same kind paid under similar circumstances". S.C.
Johnson also contends that the Commissioner is estopped from insisting on her interpretation that the
———— ———— ———— ——— phrase "paid under similar circumstances" refers to the manner in which the tax is paid, for the reason
that said interpretation is embodied in Revenue Memorandum Circular ("RMC") 39-92 which was
already abandoned by the Commissioner's predecessor in 1993; and was expressly revoked in BIR
P6,421,770 P1,605,443 P642,177 P963,2661 Ruling No. 052-95 which stated that royalties paid to an American licensor are subject only to 10%
withholding tax pursuant to Art 13(2)(b)(iii) of the RP-US Tax Treaty in relation to the RP-West
======== ======== ======== ========
Germany Tax Treaty. Said ruling should be given retroactive effect except if such is prejudicial to the
taxpayer pursuant to Section 246 of the National Internal Revenue Code.
Petitioner filed Reply alleging that the fact that the certification against forum shopping was signed by
petitioner's counsel is not a fatal defect as to warrant the dismissal of this petition since Circular No. 28-
91 applies only to original actions and not to appeals, as in the instant case. Moreover, the requirement
that the certification should be signed by petitioner and not by counsel does not apply to petitioner who
has only the Office of the Solicitor General as statutory counsel. Petitioner reiterates that even if the
phrase "paid under similar circumstances" embodied in the most favored nation clause of the RP-US
Tax Treaty refers to the payment of royalties and not taxes, still the presence or absence of a "matching
credit" provision in the said RP-US Tax Treaty would constitute a material circumstance to such
payment and would be determinative of the said clause's application.1âwphi1.nêt
The circular expressly requires that a certificate of non-forum shopping should be attached to petitions
filed before this Court and the Court of Appeals. Petitioner's allegation that Circular No. 28-91 applies
only to original actions and not to appeals as in the instant case is not supported by the text nor by the
obvious intent of the Circular which is to prevent multiple petitions that will result in the same issue
being resolved by different courts.
Anent the requirement that the party, not counsel, must certify under oath that he has not commenced
any other action involving the same issues in this Court or the Court of Appeals or any other tribunal or
agency, we are inclined to accept petitioner's submission that since the OSG is the only lawyer for the
petitioner, which is a government agency mandated under Section 35, Chapter 12, title III, Book IV of
the 1987 Administrative Code4 to be represented only by the Solicitor General, the certification
executed by the OSG in this case constitutes substantial compliance with Circular No. 28-91.

We address first the objection raised by private respondent that the certification against forum shopping
was not executed by the petitioner herself but by her counsel, the Office of the Solicitor General
(O.S.G.) through one of its Solicitors, Atty. Tomas M. Navarro.
SC Circular No. 28-91 provides:
With respect to the merits of this petition, the main point of contention in this appeal is the interpretation
of Article 13 (2) (b) (iii) of the RP-US Tax Treaty regarding the rate of tax to be imposed by the
Philippines upon royalties received by a non-resident foreign corporation. The provision states insofar
as pertinent
that —

1) Royalties derived by a resident of one of the Contracting

SUBJECT:
States from sources within the other Contracting State may be
ADDITIONAL
taxed by both Contracting States.
REQUISITES FOR
PETITIONS FILED
WITH THE 2) However, the tax imposed by that Contracting State shall
SUPREME COURT not exceed.
AND THE COURT OF
APPEALS TO
a) In the case of the United States, 15
PREVENT FORUM
percent of the gross amount of the
SHOPPING OR
royalties, and
MULTIPLE FILING
OF PETITIONS AND
COMPLAINTS b) In the case of the Philippines, the least
of:
TO: xxx xxx xxx
(i) 25 percent of the
gross amount of the
The attention of the Court has been called to the filing of multiple petitions and
royalties;
complaints involving the same issues in the Supreme Court, the Court of Appeals
or other tribunals or agencies, with the result that said courts, tribunals or agencies
have to resolve the same issues. (ii) 15 percent of the
gross amount of the
royalties, where the
(1) To avoid the foregoing, in every petition filed with the Supreme Court or the
royalties are paid by a
Court of Appeals, the petitioner aside from complying with pertinent provisions of
corporation registered
the Rules of Court and existing circulars, must certify under oath to all of the
with the Philippine
following facts or undertakings: (a) he has not theretofore commenced any other
Board of Investments
action or proceeding involving the same issues in the Supreme Court, the Court of
and engaged in
Appeals, or any tribunal or
preferred areas of
agency; . . .
activities; and

(2) Any violation of this revised Circular will entail the following sanctions: (a) it
(iii) the lowest rate of
shall be a cause for the summary dismissal of the multiple petitions or complaints; .
Philippine tax that
..
may be imposed on
royalties of the same
 kind paid under the Philippines in accordance with this
similar circumstances Agreement on:
to a resident of a third
State.
x x x           x x x          x x x

x x x           x x x          x x x
dd) royalties, as
defined in paragraph
(emphasis supplied) 3 of Article 12;

Respondent S. C. Johnson and Son, Inc. claims that on the basis of the quoted provision, it is entitled x x x           x x x          x x x
to the concessional tax rate of 10 percent on royalties based on Article 12 (2) (b) of the RP-Germany
Tax Treaty which provides:
c) For the purpose of the credit referred in
subparagraph; b) the Philippine tax shall
(2) However, such royalties may also be taxed in the be deemed to be
Contracting State in which they arise, and according to the law
of that State, but the tax so charged shall not exceed:
x x x           x x x          x x x

x x x           x x x          x x x
cc) in the case of
royalties for which the
b) 10 percent of the gross amount of tax is reduced to 10 or
royalties arising from the use of, or the 15 per cent according
right to use, any patent, trademark, design to paragraph 2 of
or model, plan, secret formula or process, Article 12, 20 percent
or from the use of or the right to use, of the gross amount
industrial, commercial, or scientific of such royalties.
equipment, or for information concerning
industrial, commercial or scientific
x x x           x x x          x x x
experience.

According to petitioner, the taxes upon royalties under the RP-US Tax Treaty are not paid under
For as long as the transfer of technology, under Philippine law, is subject to
circumstances similar to those in the RP-West Germany Tax Treaty since there is no provision for a 20
approval, the limitation of the tax rate mentioned under b) shall, in the case of
percent matching credit in the former convention and private respondent cannot invoke the
royalties arising in the Republic of the Philippines, only apply if the contract giving
concessional tax rate on the strength of the most favored nation clause in the RP-US Tax Treaty.
rise to such royalties has been approved by the Philippine competent authorities.
Petitioner's position is explained thus:

Unlike the RP-US Tax Treaty, the RP-Germany Tax Treaty allows a tax credit of 20 percent of the gross
Under the foregoing provision of the RP-West Germany Tax Treaty, the Philippine
amount of such royalties against German income and corporation tax for the taxes payable in the
tax paid on income from sources within the Philippines is allowed as a credit
Philippines on such royalties where the tax rate is reduced to 10 or 15 percent under such treaty. Article
against German income and corporation tax on the same income. In the case of
24 of the RP-Germany Tax Treaty states —
royalties for which the tax is reduced to 10 or 15 percent according to paragraph 2
of Article 12 of the RP-West Germany Tax Treaty, the credit shall be 20% of the
1) Tax shall be determined in the case of a resident of the gross amount of such royalty. To illustrate, the royalty income of a German resident
Federal Republic of Germany as follows: from sources within the Philippines arising from the use of, or the right to use, any
patent, trade mark, design or model, plan, secret formula or process, is taxed at
10% of the gross amount of said royalty under certain conditions. The rate of 10%
x x x           x x x          x x x
is imposed if credit against the German income and corporation tax on said royalty
is allowed in favor of the German resident. That means the rate of 10% is granted
b) Subject to the provisions of German tax to the German taxpayer if he is similarly granted a credit against the income and
law regarding credit for foreign tax, there corporation tax of West Germany. The clear intent of the "matching credit" is to
shall be allowed as a credit against soften the impact of double taxation by different jurisdictions.
German income and corporation tax
payable in respect of the following items of
The RP-US Tax Treaty contains no similar "matching credit" as that provided under
income arising in the Republic of the
the RP-West Germany Tax Treaty. Hence, the tax on royalties under the RP-US
Philippines, the tax paid under the laws of
 Tax Treaty is not paid under similar circumstances as those obtaining in the RP- taxpayer's remaining income or capital. On the other hand, in the credit method, although the income or
West Germany Tax Treaty. Therefore, the "most favored nation" clause in the RP- capital which is taxed in the state of source is still taxable in the state of residence, the tax paid in the
West Germany Tax Treaty cannot be availed of in interpreting the provisions of the former is credited against the tax levied in the latter. The basic difference between the two methods is
RP-US Tax Treaty.5 that in the exemption method, the focus is on the income or capital itself, whereas the credit method
focuses upon the tax. 15
The petition is meritorious.
In negotiating tax treaties, the underlying rationale for reducing the tax rate is that the Philippines will
give up a part of the tax in the expectation that the tax given up for this particular investment is not
We are unable to sustain the position of the Court of Tax Appeals, which was upheld by the Court of
taxed by the other
Appeals, that the phrase "paid under similar circumstances in Article 13 (2) (b), (iii) of the RP-US Tax
country. 16 Thus the petitioner correctly opined that the phrase "royalties paid under similar
Treaty should be interpreted to refer to payment of royalty, and not to the payment of the tax, for the
circumstances" in the most favored nation clause of the US-RP Tax Treaty necessarily contemplated
reason that the phrase "paid under similar circumstances" is followed by the phrase "to a resident of a
"circumstances that are tax-related".
third state". The respondent court held that "Words are to be understood in the context in which they
are used", and since what is paid to a resident of a third state is not a tax but a royalty "logic instructs"
that the treaty provision in question should refer to royalties of the same kind paid under similar In the case at bar, the state of source is the Philippines because the royalties are paid for the right to
circumstances. use property or rights, i.e. trademarks, patents and technology, located within the Philippines. 17 The
United States is the state of residence since the taxpayer, S. C. Johnson and Son, U. S. A., is based
there. Under the RP-US Tax Treaty, the state of residence and the state of source are both permitted to
The above construction is based principally on syntax or sentence structure but fails to take into
tax the royalties, with a restraint on the tax that may be collected by the state of source. 18 Furthermore,
account the purpose animating the treaty provisions in point. To begin with, we are not aware of any
the method employed to give relief from double taxation is the allowance of a tax credit to citizens or
law or rule pertinent to the payment of royalties, and none has been brought to our attention, which
residents of the United States (in an appropriate amount based upon the taxes paid or accrued to the
provides for the payment of royalties under dissimilar circumstances. The tax rates on royalties and the
Philippines) against the United States tax, but such amount shall not exceed the limitations provided by
circumstances of payment thereof are the same for all the recipients of such royalties and there is no
United States law for the taxable year. 19 Under Article 13 thereof, the Philippines may impose one of
disparity based on nationality in the circumstances of such payment.6On the other hand, a cursory
three rates — 25 percent of the gross amount of the royalties; 15 percent when the royalties are paid by
reading of the various tax treaties will show that there is no similarity in the provisions on relief from or
a corporation registered with the Philippine Board of Investments and engaged in preferred areas of
avoidance of double taxation7 as this is a matter of negotiation between the contracting parties.8 As will
activities; or the lowest rate of Philippine tax that may be imposed on royalties of the same kind paid
be shown later, this dissimilarity is true particularly in the treaties between the Philippines and the
under similar circumstances to a resident of a third state.
United States and between the Philippines and West Germany.

Given the purpose underlying tax treaties and the rationale for the most favored nation clause, the
The RP-US Tax Treaty is just one of a number of bilateral treaties which the Philippines has entered
concessional tax rate of 10 percent provided for in the RP-Germany Tax Treaty should apply only if the
into for the avoidance of double taxation.9 The purpose of these international agreements is to reconcile
taxes imposed upon royalties in the RP-US Tax Treaty and in the RP-Germany Tax Treaty are paid
the national fiscal legislations of the contracting parties in order to help the taxpayer avoid simultaneous
under similar circumstances. This would mean that private respondent must prove that the RP-US Tax
taxation in two different jurisdictions. 10 More precisely, the tax conventions are drafted with a view
Treaty grants similar tax reliefs to residents of the United States in respect of the taxes imposable upon
towards the elimination of international juridical double taxation, which is defined as the imposition of
royalties earned from sources within the Philippines as those allowed to their German counterparts
comparable taxes in two or more states on the same taxpayer in respect of the same subject matter
under the RP-Germany Tax Treaty.
and for identical periods. 11 The apparent rationale for doing away with double taxation is of encourage
the free flow of goods and services and the movement of capital, technology and persons between
countries, conditions deemed vital in creating robust and dynamic economies. 12 Foreign investments The RP-US and the RP-West Germany Tax Treaties do not contain similar provisions on tax crediting.
will only thrive in a fairly predictable and reasonable international investment climate and the protection Article 24 of the RP-Germany Tax Treaty, supra, expressly allows crediting against German income
against double taxation is crucial in creating such a climate. 13 and corporation tax of 20% of the gross amount of royalties paid under the law of the Philippines. On
the other hand, Article 23 of the RP-US Tax Treaty, which is the counterpart provision with respect to
relief for double taxation, does not provide for similar crediting of 20% of the gross amount of royalties
Double taxation usually takes place when a person is resident of a contracting state and derives income
paid. Said Article 23 reads:
from, or owns capital in, the other contracting state and both states impose tax on that income or
capital. In order to eliminate double taxation, a tax treaty resorts to several methods. First, it sets out
the respective rights to tax of the state of source or situs and of the state of residence with regard to Article 23
certain classes of income or capital. In some cases, an exclusive right to tax is conferred on one of the
contracting states; however, for other items of income or capital, both states are given the right to tax,
Relief from double taxation
although the amount of tax that may be imposed by the state of source is limited. 14

Double taxation of income shall be avoided in the following manner:

The second method for the elimination of double taxation applies whenever the state of source is given
a full or limited right to tax together with the state of residence. In this case, the treaties make it
incumbent upon the state of residence to allow relief in order to avoid double taxation. There are two 1) In accordance with the provisions and subject to the
methods of relief — the exemption method and the credit method. In the exemption method, the income limitations of the law of the United States (as it may be
or capital which is taxable in the state of source or situs is exempted in the state of residence, although amended from time to time without changing the general
in some instances it may be taken into account in determining the rate of tax applicable to the principle thereof), the United States shall allow to a citizen or
 resident of the United States as a credit against the United principle is to allow the taxpayer in one state to avail of more liberal provisions granted in another tax
States tax the appropriate amount of taxes paid or accrued to treaty to which the country of residence of such taxpayer is also a party provided that the subject matter
the Philippines and, in the case of a United States corporation of taxation, in this case royalty income, is the same as that in the tax treaty under which the taxpayer is
owning at least 10 percent of the voting stock of a Philippine liable. Both Article 13 of the RP-US Tax Treaty and Article 12 (2) (b) of the RP-West Germany Tax
corporation from which it receives dividends in any taxable Treaty, above-quoted, speaks of tax on royalties for the use of trademark, patent, and technology. The
year, shall allow credit for the appropriate amount of taxes paid entitlement of the 10% rate by U.S. firms despite the absence of a matching credit (20% for royalties)
or accrued to the Philippines by the Philippine corporation would derogate from the design behind the most grant equality of international treatment since the tax
paying such dividends with respect to the profits out of which burden laid upon the income of the investor is not the same in the two countries. The similarity in the
such dividends are paid. Such appropriate amount shall be circumstances of payment of taxes is a condition for the enjoyment of most favored nation treatment
based upon the amount of tax paid or accrued to the precisely to underscore the need for equality of treatment.
Philippines, but the credit shall not exceed the limitations (for
the purpose of limiting the credit to the United States tax on
We accordingly agree with petitioner that since the RP-US Tax Treaty does not give a matching tax
income from sources within the Philippines or on income from
credit of 20 percent for the taxes paid to the Philippines on royalties as allowed under the RP-West
sources outside the United States) provided by United States
Germany Tax Treaty, private respondent cannot be deemed entitled to the 10 percent rate granted
law for the taxable year. . . .
under the latter treaty for the reason that there is no payment of taxes on royalties under similar
circumstances.
The reason for construing the phrase "paid under similar circumstances" as used in Article 13 (2) (b) (iii)
of the RP-US Tax Treaty as referring to taxes is anchored upon a logical reading of the text in the light
It bears stress that tax refunds are in the nature of tax exemptions. As such they are regarded as in
of the fundamental purpose of such treaty which is to grant an incentive to the foreign investor by
derogation of sovereign authority and to be construed strictissimi juris against the person or entity
lowering the tax and at the same time crediting against the domestic tax abroad a figure higher than
claiming the exemption. 27 The burden of proof is upon him who claims the exemption in his favor and
what was collected in the Philippines.
he must be able to justify his claim by the clearest grant of organic or statute law. 28 Private respondent
is claiming for a refund of the alleged overpayment of tax on royalties; however, there is nothing on
In one case, the Supreme Court pointed out that laws are not just mere compositions, but have ends to record to support a claim that the tax on royalties under the RP-US Tax Treaty is paid under similar
be achieved and that the general purpose is a more important aid to the meaning of a law than any rule circumstances as the tax on royalties under the RP-West Germany Tax Treaty.
which grammar may lay down. 20 It is the duty of the courts to look to the object to be accomplished, the
evils to be remedied, or the purpose to be subserved, and should give the law a reasonable or liberal
WHEREFORE, for all the foregoing, the instant petition is GRANTED. The decision dated May 7, 1996
construction which will best effectuate its purpose. 21 The Vienna Convention on the Law of Treaties
of the Court of Tax Appeals and the decision dated November 7, 1996 of the Court of Appeals are
states that a treaty shall be interpreted in good faith in accordance with the ordinary meaning to be
hereby SET ASIDE.
given to the terms of the treaty in their context and in the light of its object and
purpose. 22
SO ORDERED.
As stated earlier, the ultimate reason for avoiding double taxation is to encourage foreign investors to
invest in the Philippines — a crucial economic goal for developing countries. 23 The goal of double G.R. No. 118127             April 12, 2005
taxation conventions would be thwarted if such treaties did not provide for effective measures to
minimize, if not completely eliminate, the tax burden laid upon the income or capital of the investor.
CITY OF MANILA, HON. ALFREDO S. LIM as the Mayor of the City of Manila, HON. JOSELITO L.
Thus, if the rates of tax are lowered by the state of source, in this case, by the Philippines, there should
ATIENZA, in his capacity as Vice-Mayor of the City of Manila and Presiding Officer of the City
be a concomitant commitment on the part of the state of residence to grant some form of tax relief,
Council of Manila, HON. ERNESTO A. NIEVA, HON. GONZALO P. GONZALES, HON. AVELINO S.
whether this be in the form of a tax credit or exemption. 24 Otherwise, the tax which could have been
CAILIAN, HON. ROBERTO C. OCAMPO, HON. ALBERTO DOMINGO, HON. HONORIO U. LOPEZ,
collected by the Philippine government will simply be collected by another state, defeating the object of
HON. FRANCISCO G. VARONA, JR., HON. ROMUALDO S. MARANAN, HON. NESTOR C. PONCE,
the tax treaty since the tax burden imposed upon the investor would remain unrelieved. If the state of
JR., HON. HUMBERTO B. BASCO, HON. FLAVIANO F. CONCEPCION, JR., HON. ROMEO G.
residence does not grant some form of tax relief to the investor, no benefit would redound to the
RIVERA, HON. MANUEL M. ZARCAL, HON. PEDRO S. DE JESUS, HON. BERNARDITO C. ANG,
Philippines, i.e., increased investment resulting from a favorable tax regime, should it impose a lower
HON. MANUEL L. QUIN, HON. JHOSEP Y. LOPEZ, HON. CHIKA G. GO, HON. VICTORIANO A.
tax rate on the royalty earnings of the investor, and it would be better to impose the regular rate rather
MELENDEZ, HON. ERNESTO V.P. MACEDA, JR., HON. ROLANDO P. NIETO, HON. DANILO V.
than lose much-needed revenues to another country.
ROLEDA, HON. GERINO A. TOLENTINO, JR., HON. MA. PAZ E. HERRERA, HON. JOEY D. HIZON,
HON. FELIXBERTO D. ESPIRITU, HON. KARLO Q. BUTIONG, HON. ROGELIO P. DELA PAZ, HON.
At the same time, the intention behind the adoption of the provision on "relief from double taxation" in BERNARDO D. RAGAZA, HON. MA. CORAZON R. CABALLES, HON. CASIMIRO C. SISON, HON.
the two tax treaties in question should be considered in light of the purpose behind the most favored BIENVINIDO M. ABANTE, JR., HON. MA. LOURDES M. ISIP, HON. ALEXANDER S. RICAFORT,
nation clause. HON. ERNESTO F. RIVERA, HON. LEONARDO L. ANGAT, and HON. JOCELYN B. DAWIS, in their
capacity as councilors of the City of Manila,Petitioner, 
vs.
The purpose of a most favored nation clause is to grant to the contracting party treatment not less
HON. PERFECTO A.S. LAGUIO, JR., as Presiding Judge, RTC, Manila and MALATE TOURIST
favorable than that which has been or may be granted to the "most favored" among other
DEVELOPMENT CORPORATION, Respondents.
countries. 25 The most favored nation clause is intended to establish the principle of equality of
international treatment by providing that the citizens or subjects of the contracting nations may enjoy
the privileges accorded by either party to those of the most favored nation. 26 The essence of the DECISION
TINGA, J.: Cruz Street in the South and Roxas Boulevard in the West, pursuant to P.D. 499 be allowed
or authorized to contract and engage in, any business providing certain forms of
amusement, entertainment, services and facilities where women are used as tools in
I know only that what is moral is what you feel good after and what is immoral is what you
entertainment and which tend to disturb the community, annoy the inhabitants, and
feel bad after.
adversely affect the social and moral welfare of the community, such as but not limited
to:
Ernest Hermingway
Death in the Afternoon, Ch. 1
1. Sauna Parlors

It is a moral and political axiom that any dishonorable act, if performed by oneself, is less
2. Massage Parlors
immoral than if performed by someone else, who would be well-intentioned in his dishonesty.

3. Karaoke Bars
J. Christopher  Gerald
Bonaparte in Egypt, Ch. I
4. Beerhouses
The Court's commitment to the protection of morals is secondary to its fealty to the fundamental law of
the land. It is foremost a guardian of the Constitution but not the conscience of individuals. And if it 5. Night Clubs
need be, the Court will not hesitate to "make the hammer fall, and heavily" in the words of Justice
Laurel, and uphold the constitutional guarantees when faced with laws that, though not lacking in zeal
6. Day Clubs
to promote morality, nevertheless fail to pass the test of constitutionality.

7. Super Clubs
The pivotal issue in this Petition1 under Rule 45 (then Rule 42) of the Revised Rules on Civil Procedure
seeking the reversal of the Decision2 in Civil Case No. 93-66511 of the Regional Trial Court (RTC) of
Manila, Branch 18 (lower court),3 is the validity of Ordinance No. 7783 (the Ordinance) of the City of 8. Discotheques
Manila.4
9. Cabarets
The antecedents are as follows:
10. Dance Halls
Private respondent Malate Tourist Development Corporation (MTDC) is a corporation engaged in the
business of operating hotels, motels, hostels and lodging houses.5 It built and opened Victoria Court in
11. Motels
Malate which was licensed as a motel although duly accredited with the Department of Tourism as a
hotel.6 On 28 June 1993, MTDC filed a Petition for Declaratory Relief with Prayer for a Writ of
Preliminary Injunction and/or Temporary Restraining Order 7 (RTC Petition) with the lower court 12. Inns
impleading as defendants, herein petitioners City of Manila, Hon. Alfredo S. Lim (Lim), Hon. Joselito L.
Atienza, and the members of the City Council of Manila (City Council).  MTDC prayed that
the Ordinance, insofar as it includes motels and inns as among its prohibited establishments, be SEC. 2 The City Mayor, the City Treasurer or any person acting in behalf of the said
declared invalid and unconstitutional.8 officials are prohibited from issuing permits, temporary or otherwise, or from granting
licenses and accepting payments for the operation of business enumerated in the
preceding section.
Enacted by the City Council9 on 9 March 1993 and approved by petitioner City Mayor on 30 March
1993, the said Ordinance is entitled–
SEC. 3. Owners and/or operator of establishments engaged in, or devoted to, the
businesses enumerated in Section 1 hereof are hereby given three (3) months from the
AN ORDINANCE PROHIBITING THE ESTABLISHMENT OR OPERATION OF date of approval of this ordinance within which to wind up business operations or to
BUSINESSES PROVIDING CERTAIN FORMS OF AMUSEMENT, ENTERTAINMENT, transfer to any place outside of the Ermita-Malate area or convert said businesses to
SERVICES AND FACILITIES IN THE ERMITA-MALATE AREA, PRESCRIBING PENALTIES other kinds of business allowable within the area, such as but not limited to:
FOR VIOLATION THEREOF, AND FOR OTHER PURPOSES.10
1. Curio or antique shop
The Ordinance is reproduced in full, hereunder:
2. Souvenir Shops
SECTION 1. Any provision of existing laws and ordinances to the contrary
notwithstanding, no person, partnership, corporation or entity shall, in the Ermita-Malate
area bounded by Teodoro M. Kalaw Sr. Street in the North, Taft Avenue in the East, Vito 3. Handicrafts display centers
 4. Art galleries
5. Records and music shops
6. Restaurants
7. Coffee shops
8. Flower shops
9. Music lounge and sing-along restaurants, with well-defined activities for
wholesome family entertainment that cater to both local and foreign clientele.
10. Theaters engaged in the exhibition, not only of motion pictures but also of
cultural shows, stage and theatrical plays, art exhibitions, concerts and the like.
11. Businesses allowable within the law and medium intensity districts as provided
for in the zoning ordinances for Metropolitan Manila, except new warehouse or
open-storage depot, dock or yard, motor repair shop, gasoline service station, light
industry with any machinery, or funeral establishments.
SEC. 4. Any person violating any provisions of this ordinance, shall upon conviction,
be punished by imprisonment of one (1) year or fine of FIVE THOUSAND (P5,000.00)
PESOS, or both, at the discretion of the Court, PROVIDED, that in case of juridical person,
the President, the General Manager, or person-in-charge of operation shall be liable thereof;
PROVIDED FURTHER, that in case of subsequent violation and conviction, the
premises of the erring establishment shall be closed and padlocked permanently.
SEC. 5. This ordinance shall take effect upon approval.
Enacted by the City Council of Manila at its regular session today, March 9, 1993.
Approved by His Honor, the Mayor on March 30, 1993. (Emphasis supplied)
In the RTC Petition, MTDC argued that the Ordinance erroneously and improperly included in its
enumeration of prohibited establishments, motels and inns such as MTDC's Victoria Court considering
that these were not establishments for "amusement" or "entertainment" and they were not "services or
facilities for entertainment," nor did they use women as "tools for entertainment," and neither did they
"disturb the community," "annoy the inhabitants" or "adversely affect the social and moral welfare of the
community."11
MTDC further advanced that the Ordinance was invalid and unconstitutional for the following reasons:
(1) The City Council has no power to prohibit the operation of motels as Section 458 (a) 4 (iv)12 of the
Local Government Code of 1991 (the Code) grants to the City Council only the power to regulate the
establishment, operation and maintenance of hotels, motels, inns, pension houses, lodging houses and
other similar establishments; (2) The Ordinance is void as it is violative of Presidential Decree (P.D.)
No. 49913 which specifically declared portions of the Ermita-Malate area as a commercial zone with
certain restrictions; (3) The Ordinance does not constitute a proper exercise of police power as the
compulsory closure of the motel business has no reasonable relation to the legitimate municipal
interests sought to be protected; (4) The Ordinance constitutes an ex post facto law by punishing the
operation of Victoria Court which was a legitimate business prior to its enactment; (5)
The Ordinance violates MTDC's constitutional rights in that: (a) it is confiscatory and constitutes an
invasion of plaintiff's property rights; (b) the City Council has no power to find as a fact that a particular
thing is a nuisance per se nor does it have the power to extrajudicially destroy it; and (6)
The Ordinance constitutes a denial of equal protection under the law as no reasonable basis exists for
prohibiting the operation of motels and inns, but not pension houses, hotels, lodging houses or other
similar establishments, and for prohibiting said business in the Ermita-Malate area but not outside of
this area.14
In their Answer15 dated 23 July 1993, petitioners City of Manila and Lim maintained that the City Council
had the power to "prohibit certain forms of entertainment in order to protect the social and moral welfare
of the community" as provided for in Section 458 (a) 4 (vii) of the Local Government Code,16 which 
reads,  thus:
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, and shall:
....
(4) Regulate activities relative to the use of land, buildings and structures within the city in
order to promote the general welfare and for said purpose shall:
....
(vii) Regulate the establishment, operation, and maintenance of any entertainment
or amusement facilities, including theatrical performances, circuses, billiard pools,
public dancing schools, public dance halls, sauna baths, massage parlors, and
other places for entertainment or amusement; regulate such other events or
activities for amusement or entertainment, particularly those which tend to disturb
the community or annoy the inhabitants, or require the suspension or suppression
of the same; or, prohibit certain forms of amusement or entertainment in order to
protect the social and moral welfare of the community.
Citing Kwong Sing v. City of Manila,17 petitioners insisted that the power of regulation spoken of in the
above-quoted provision included the power to control, to govern and to restrain places of exhibition and
amusement.18
Petitioners likewise asserted that the Ordinance was enacted by the City Council of Manila to protect
the social and moral welfare of the community in conjunction with its police power as found in Article III,
Section 18(kk) of Republic Act No. 409,19 otherwise known as the Revised Charter of the City of Manila
(Revised Charter of Manila)20 which reads, thus:
ARTICLE III
THE MUNICIPAL BOARD
.  .  .
 Section 18. Legislative powers. – The Municipal Board shall have the following legislative
powers:
.  .  .
(kk) To enact all ordinances it may deem necessary and proper for the sanitation and safety,
the furtherance of the prosperity, and the promotion of the morality, peace, good order,
comfort, convenience, and general welfare of the city and its inhabitants, and such others as
may be necessary to carry into effect and discharge the powers and duties conferred by this
chapter; and to fix penalties for the violation of ordinances which shall not exceed two
hundred pesos fine or six months' imprisonment, or both such fine and imprisonment, for a
single offense.
Further, the petitioners noted, the Ordinance had the presumption of validity; hence, private respondent
had the burden to prove its illegality or unconstitutionality.21
Petitioners also maintained that there was no inconsistency between P.D. 499 and the Ordinance as
the latter simply disauthorized certain forms of businesses and allowed the Ermita-Malate area to
remain a commercial zone.22 The Ordinance, the petitioners likewise claimed, cannot be assailed as ex
post facto as it was prospective in operation.23 The Ordinance also did not infringe the equal protection
clause and cannot be denounced as class legislation as there existed substantial and real differences
between the Ermita-Malate area and other places in the City of Manila.24
On 28 June 1993, respondent Judge Perfecto A.S. Laguio, Jr. (Judge Laguio) issued an ex-parte
temporary restraining order against the enforcement of the Ordinance.25 And on 16 July 1993, again in
an intrepid gesture, he granted the writ of preliminary injunction prayed for by MTDC.26
After trial, on 25 November 1994, Judge Laguio rendered the assailed Decision, enjoining the
petitioners from implementing the Ordinance. The dispositive portion of said Decision reads:27
WHEREFORE, judgment is hereby rendered declaring Ordinance No. 778[3], Series of 1993,
of the City of Manila null and void, and making permanent the writ of preliminary injunction
that had been issued by this Court against the defendant. No costs.
SO ORDERED.28
Petitioners filed with the lower court a Notice of Appeal29 on 12 December 1994, manifesting that they
are elevating the case to this Court under then Rule 42 on pure questions of law.30
On 11 January 1995, petitioners filed the present Petition, alleging that the following errors were
committed by the lower court in its ruling: (1) It erred in concluding that the subject ordinance is ultra
vires, or otherwise, unfair, unreasonable and oppressive exercise of police power; (2) It erred in holding
that the questioned Ordinancecontravenes P.D. 49931 which allows operators of all kinds of commercial
establishments, except those specified therein; and (3) It erred in declaring the Ordinance void and
unconstitutional.32
In the Petition and in its Memorandum,33 petitioners in essence repeat the assertions they made before
the lower court. They contend that the assailed Ordinance was enacted in the exercise of the inherent
and plenary power of the State and the general welfare clause exercised by local government units
provided for in Art. 3, Sec. 18 (kk) of the Revised Charter of Manila and conjunctively, Section 458 (a) 4
(vii) of the Code.34 They allege that the Ordinance is a valid exercise of police power; it does not
contravene P.D. 499; and that it enjoys the presumption of validity.35
In its Memorandum36 dated 27 May 1996, private respondent maintains that the Ordinance is ultra
vires and that it is void for being repugnant to the general law. It reiterates that the
questioned Ordinance is not a valid exercise of police power; that it is violative of due process,
confiscatory and amounts to an arbitrary interference with its lawful business; that it is violative of the
equal protection clause; and that it confers on petitioner City Mayor or any officer unregulated discretion
in the execution of the Ordinance absent rules to guide and control his actions.
This is an opportune time to express the Court's deep sentiment and tenderness for the Ermita-Malate
area being its home for several decades. A long-time resident, the Court witnessed the area's many
turn of events. It relished its glory days and endured its days of infamy. Much as the Court harks back
to the resplendent era of the Old Manila and yearns to restore its lost grandeur, it believes that
the Ordinance is not the fitting means to that end.  The Court is of the opinion, and so holds, that the
lower court did not err in declaring the Ordinance, as it did, ultra vires and therefore null and void.
The Ordinance is so replete with constitutional infirmities that almost every sentence thereof violates a
constitutional provision. The prohibitions and sanctions therein transgress the cardinal rights of persons
enshrined by the Constitution. The Court is called upon to shelter these rights from attempts at
rendering them worthless.
The tests of a valid ordinance are well established. A long line of decisions has held that for an
ordinance to be valid, it must not only be within the corporate powers of the local government unit to
enact and must be passed according to the procedure prescribed by law, it  must also conform to the
following substantive requirements: (1) must not contravene the Constitution or any statute; (2) must
not be unfair or oppressive; (3) must not be partial or discriminatory; (4) must not prohibit but may
regulate trade; (5) must be general and consistent with public policy; and (6) must not be
unreasonable.37
Anent the first criterion, ordinances shall only be valid when they are not contrary to the Constitution
and to the laws.38 The Ordinance must satisfy two requirements: it must pass muster under the test of
constitutionality and the test of consistency with the prevailing laws. That ordinances should be
constitutional uphold the principle of the supremacy of the Constitution. The requirement that the
enactment must not violate existing law gives stress to the precept that local government units are able
to legislate only by virtue of their derivative legislative power, a delegation of legislative power from the
national legislature.  The delegate cannot be superior to the principal or exercise powers higher than
those of the latter.39
This 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. The
national legislature is still the principal of the local government units, which cannot defy its will or modify
or violate it.40
The Ordinance was passed by the City Council in the exercise of its police power, an enactment of the
City Council acting as agent of Congress. Local government units, as agencies of the State, are
endowed with police power in order to effectively accomplish and carry out the declared objects of their
creation.41 This delegated police power is found in Section 16 of the Code, known as the general
welfare clause, viz:
SECTION 16. General Welfare.Every local government unit shall exercise the powers
expressly granted, those necessarily implied therefrom, as well as powers necessary,
 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 other things, 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.
Local government units exercise police power through their respective legislative bodies; in this case,
the sangguniang panlungsod or the city council. The Code empowers the legislative bodies to "enact
ordinances, approve resolutions and appropriate funds for the general welfare of the
province/city/municipality and its inhabitants pursuant to Section 16 of the Code and in the proper
exercise of the corporate powers of the province/city/ municipality provided under the Code.42 The
inquiry in this Petition is concerned with the validity of the exercise of such delegated power.
The Ordinance contravenes 
the Constitution
The police power of the City Council, however broad and far-reaching, is subordinate to the
constitutional limitations thereon; and is subject to the limitation that its exercise must be reasonable
and for the public good.43 In the case at bar, the enactment of the Ordinance was an invalid exercise of
delegated power as it is unconstitutional and repugnant to general laws.
The relevant constitutional provisions are the following:
SEC. 5. The maintenance of peace and order, the protection of life, liberty, and property, and
the promotion of the general welfare are essential for the enjoyment by all the people of the
blessings of democracy.44
SEC. 14. The State recognizes the role of women in nation-building, and shall ensure the
fundamental equality before the law of women and men.45
SEC. 1. No person shall be deprived of life, liberty or property without due process of law, nor
shall any person be denied the equal protection of laws.46
Sec. 9. Private property shall not be taken for public use without just compensation.47
A. The Ordinance infringes
the Due Process Clause
The constitutional safeguard of due process is embodied in the fiat "(N)o person shall be deprived of
life, liberty or property without due process of law. . . ."48
There is no controlling and precise definition of due process.  It furnishes though a standard to which
governmental action should conform in order that deprivation of life, liberty or property, in each
appropriate case, be valid.  This standard is aptly described as a responsiveness to the supremacy of
reason, obedience to the dictates of justice,49and as such it is a limitation upon the exercise of the
police power.50
The purpose of the guaranty is to prevent governmental encroachment against the life, liberty and
property of individuals; to secure the individual from the arbitrary exercise of the powers of the
government, unrestrained by the established principles of private rights and distributive justice; to
protect property from confiscation by legislative enactments, from seizure, forfeiture, and destruction
without a trial and conviction by the ordinary mode of judicial procedure; and to secure to all persons
equal and impartial justice and the benefit of the general law.51
The guaranty serves as a protection against arbitrary regulation, and private corporations and
partnerships are "persons" within the scope of the guaranty insofar as their property is concerned.52
This clause has been interpreted as imposing two separate limits on government, usually called
"procedural due process" and "substantive due process."
Procedural due process, as the phrase implies, refers to the procedures that the government must
follow before it deprives a person of life, liberty, or property. Classic procedural due process issues are
concerned with what kind of notice and what form of hearing the government must provide when it
takes a particular action.53
Substantive due process, as that phrase connotes, asks whether the government has an adequate
reason for taking away a person's life, liberty, or property. In other words, substantive due process
looks to whether there is a sufficient justification for the government's action.54 Case law in the United
States (U.S.) tells us that whether there is such a justification depends very much on the level of
scrutiny used.55 For example, if a law is in an area where only rational basis review is applied,
substantive due process is met so long as the law is rationally related to a legitimate government
purpose.  But if it is an area where strict scrutiny is used, such as for protecting fundamental rights, then
the government will meet substantive due process only if it can prove that the law is necessary to
achieve a compelling government purpose.56
The police power granted to local government units must always be exercised with utmost observance
of the rights of the people to due process and equal protection of the law. Such power cannot be
exercised whimsically, arbitrarily or despotically57 as its exercise is subject to a qualification, limitation or
restriction demanded by the respect and regard due to the prescription of the fundamental law,
particularly those forming part of the Bill of Rights. Individual rights, it bears emphasis, may be
adversely affected only to the extent that may fairly be required by the legitimate demands of public
interest or public welfare.58 Due process requires the intrinsic validity of the law in interfering with the
rights of the person to his life, liberty and property.59
Requisites for the valid exercise
of Police Power are not met
To successfully invoke the exercise of police power as the rationale for the enactment of
the Ordinance, and to free it from the imputation of constitutional infirmity, not only must it appear that
the interests of the public generally, as distinguished from those of a particular class, require an
interference with private rights, but the means adopted must be reasonably necessary for the
accomplishment of the purpose and not unduly oppressive upon individuals.60It must be evident that no
other alternative for the accomplishment of the purpose less intrusive of private rights can work.  A
reasonable relation must exist between the purposes of the police measure and the means employed
for its accomplishment, for even under the guise of protecting the public interest, personal rights and
those pertaining to private property will not be permitted to be arbitrarily invaded.61
Lacking a concurrence of these two requisites, the police measure shall be struck down as an arbitrary
intrusion into private rights62 a violation of the due process clause.
The Ordinance was enacted to address and arrest the social ills purportedly spawned by the
establishments in the Ermita-Malate area which are allegedly operated under the deceptive veneer of
legitimate, licensed and tax-paying nightclubs, bars, karaoke bars, girlie houses, cocktail lounges,
hotels and motels.  Petitioners insist that even the Court in the case of Ermita-Malate Hotel and Motel
Operators Association, Inc. v. City Mayor of Manila63 had already taken judicial notice of the "alarming
increase in the rate of prostitution, adultery and fornication in Manila traceable in great part to existence
of motels, which provide a necessary atmosphere for clandestine entry, presence and exit and thus
become the ideal haven for prostitutes and thrill-seekers."64
The object of the Ordinance was, accordingly, the promotion and protection of the social and moral
values of the community. Granting for the sake of argument that the objectives of the Ordinance are
within the scope of the City Council's police powers, the means employed for the accomplishment
thereof were unreasonable and unduly oppressive.
It is undoubtedly one of the fundamental duties of the City of Manila to make all reasonable regulations
looking to the promotion of the moral and social values of the community. However, the worthy aim of
fostering public morals and the eradication of the community's social ills can be achieved through
means less restrictive of private rights; it can be attained by reasonable restrictions rather than by an
absolute prohibition. The closing down and transfer of businesses or their conversion into businesses
"allowed" under the Ordinance have no reasonable relation to the accomplishment of its purposes.
Otherwise stated, the prohibition of the enumerated establishments will not per seprotect and promote
the social and moral welfare of the community; it will not in itself eradicate the alluded social ills of
prostitution, adultery, fornication nor will it arrest the spread of sexual disease in Manila.
Conceding for the nonce that the Ermita-Malate area teems with houses of ill-repute and
establishments of the like which the City Council may lawfully prohibit,65 it is baseless and insupportable
to bring within that classification sauna parlors, massage parlors, karaoke bars, night clubs, day clubs,
super clubs, discotheques, cabarets, dance halls, motels and inns. This is not warranted under the
accepted definitions of these terms. The enumerated establishments are lawful pursuits which are
not per se offensive to the moral welfare of the community.
That these are used as arenas to consummate illicit sexual affairs and as venues to further the illegal
prostitution is of no moment. We lay stress on the acrid truth that sexual immorality, being a human
frailty, may take place in the most innocent of places that it may even take place in the substitute
establishments enumerated under Section 3 of the Ordinance.  If the flawed logic of
the Ordinance were to be followed, in the remote instance that an immoral sexual act transpires in a
church cloister or a court chamber, we would behold the spectacle of the City of Manila ordering the
closure of the church or court concerned.  Every house, building, park, curb, street or even vehicles for
that matter will not be exempt from the prohibition. Simply because there are no "pure" places where
there are impure men. Indeed, even the Scripture and the Tradition of Christians churches continually
recall the presence and universality of sin in man's history.66
The problem, it needs to be pointed out, is not the establishment, which by its nature cannot be said to
be injurious to the health or comfort of the community and which in itself is amoral, but the deplorable
human activity that may occur within its premises. While a motel may be used as a venue for immoral
sexual activity, it cannot for that reason alone be punished. It cannot be classified as a house of ill-
repute or as a nuisance per se on a mere likelihood or a naked assumption. If that were so and if that
were allowed, then the Ermita-Malate area would not only be purged of its supposed social ills, it would
be extinguished of its soul as well as every human activity, reprehensible or not, in its every nook and
cranny would be laid bare to the estimation of the authorities.
The Ordinance seeks to legislate morality but fails to address the core issues of morality. Try as
the Ordinance may to shape morality, it should not foster the illusion that it can make a moral man out
of it because immorality is not a thing, a building or establishment; it is in the hearts of men. The City
Council instead should regulate human conduct that occurs inside the establishments, but not to the
detriment of liberty and privacy which are covenants, premiums and blessings of democracy.
While petitioners' earnestness at curbing clearly objectionable social ills is commendable, they
unwittingly punish even the proprietors and operators of "wholesome," "innocent" establishments. In the
instant case, there is a clear invasion of personal or property rights, personal in the case of those
individuals desirous of owning, operating and patronizing those motels and property in terms of the
investments made and the salaries to be paid to those therein employed. If the City of Manila so desires
to put an end to prostitution, fornication and other social ills, it can instead impose reasonable
regulations such as daily inspections of the establishments for any violation of the conditions of their
licenses or permits; it may exercise its authority to suspend or revoke their licenses for these
violations;67 and it may even impose increased license fees. In other words, there are other means to
reasonably accomplish the desired end.
Means employed are
constitutionally infirm
The Ordinance disallows the operation of sauna parlors, massage parlors, karaoke bars, beerhouses,
night clubs, day clubs, super clubs, discotheques, cabarets, dance halls, motels and inns in the Ermita-
Malate area. In Section 3 thereof, owners and/or operators of the enumerated establishments are given
three (3) months from the date of approval of the Ordinance within which "to wind up business
operations or to transfer to any place outside the Ermita-Malate area or convert said businesses to
other kinds of business allowable within the area." Further, it states in Section 4 that in cases of
subsequent violations of the provisions of the Ordinance, the "premises of the erring establishment shall
be closed and padlocked permanently."
It is readily apparent that the means employed by the Ordinance for the achievement of its purposes,
the governmental interference itself, infringes on the constitutional guarantees of a person's
fundamental right to liberty and property.
Liberty as guaranteed by the Constitution was defined by Justice Malcolm to include "the right to exist
and the right to be free from arbitrary restraint or servitude. The term cannot be dwarfed into mere
freedom from physical restraint of the person of the citizen, but is deemed to embrace the right of man
to enjoy the facilities with which he has been endowed by his Creator, subject only to such restraint as
are necessary for the common welfare."68 In accordance with this case, the rights of the citizen to be
free to use his faculties in all lawful ways; to live and work where he will; to earn his livelihood by any
lawful calling; and to pursue any avocation are all deemed embraced in the concept of liberty.69
The U.S. Supreme Court in the case of Roth v. Board of Regents,70 sought to clarify the meaning of
"liberty."  It said:
While the Court has not attempted to define with exactness the liberty. . . guaranteed [by the
Fifth and Fourteenth Amendments], the term denotes not merely freedom from bodily
restraint but also the right of the individual to contract, to engage in any of the common
occupations of life, to acquire useful knowledge, to marry, establish a home and bring up
children, to worship God according to the dictates of his own conscience, and generally to
enjoy those privileges long recognized…as essential to the orderly pursuit of happiness by
free men. In a Constitution for a free people, there can be no doubt that the meaning of
"liberty" must be broad indeed.
In another case, it also confirmed that liberty protected by the due process clause includes personal
decisions relating to marriage, procreation, contraception, family relationships, child rearing, and
education. In explaining the respect the Constitution demands for the autonomy of the person in making
these choices, the U.S. Supreme Court explained:
These matters, involving the most intimate and personal choices a person may make in a
lifetime, choices central to personal dignity and autonomy, are central to the liberty protected
by the Fourteenth Amendment. At the heart of liberty is the right to define one's own concept
of existence, of meaning, of universe, and of the mystery of human life. Beliefs about these
matters could not define the attributes of personhood where they formed under compulsion of
the State.71
Persons desirous to own, operate and patronize the enumerated establishments under Section 1 of
the Ordinancemay seek autonomy for these purposes.
Motel patrons who are single and unmarried may invoke this right to autonomy to consummate their
bonds in intimate sexual conduct within the motel's premisesbe it stressed that their consensual
sexual behavior does not contravene any fundamental state policy as contained in the Constitution.72   justice, should be borne by the public as a whole.79
Adults have a right to choose to forge such relationships with others in the confines of their own private
lives and still retain their dignity as free persons. The liberty protected by the Constitution allows
persons the right to make this choice.73 Their right to liberty under the due process clause gives them
the full right to engage in their conduct without intervention of the government, as long as they do not
run afoul of the law. Liberty should be the rule and restraint the exception.
Liberty in the constitutional sense not only means freedom from unlawful government restraint; it must
include privacy as well, if it is to be a repository of freedom. The right to be let alone is the beginning of
all freedomit is the most comprehensive of rights and the right most valued by civilized men.74
The concept of liberty compels respect for the individual whose claim to privacy and interference
demands respect. As the case of Morfe v. Mutuc,75 borrowing the words of Laski, so very aptly stated:
Man is one among many, obstinately refusing reduction to unity. His separateness, his
isolation, are indefeasible; indeed, they are so fundamental that they are the basis on which
his civic obligations are built. He cannot abandon the consequences of his isolation, which
are, broadly speaking, that his experience is private, and the will built out of that experience
personal to himself. If he surrenders his will to others, he surrenders himself. If his will is set
by the will of others, he ceases to be a master of himself. I cannot believe that a man no
longer a master of himself is in any real sense free.
Indeed, the right to privacy as a constitutional right was recognized in Morfe, the invasion of which
should be justified by a compelling state interest. Morfe accorded recognition to the right to privacy
independently of its identification with liberty; in itself it is fully deserving of constitutional protection.
Governmental powers should stop short of certain intrusions into the personal life of the citizen.76
There is a great temptation to have an extended discussion on these civil liberties but the Court
chooses to exercise restraint and restrict itself to the issues presented when it should. The previous
pronouncements of the Court are not to be interpreted as a license for adults to engage in criminal
conduct. The reprehensibility of such conduct is not diminished. The Court only reaffirms and
guarantees their right to make this choice. Should they be prosecuted for their illegal conduct, they
should suffer the consequences of the choice they have made. That, ultimately, is their choice.
Modality employed is
unlawful taking
In addition, the Ordinance is unreasonable and oppressive as it substantially divests the respondent of
the beneficial use of its property.77 The Ordinance in Section 1 thereof forbids the running of the
enumerated businesses in the Ermita-Malate area and in Section 3 instructs its owners/operators to
wind up business operations or to transfer outside the area or convert said businesses into allowed
businesses. An ordinance which permanently restricts the use of property that it can not be used for
any reasonable purpose goes beyond regulation and must be recognized as a taking of the property
without just compensation.78 It is intrusive and violative of the private property rights of individuals.
The Constitution expressly provides in Article III, Section 9, that "private property shall not be taken for
public use without just compensation." The provision is the most important protection of property rights
in the Constitution. This is a restriction on the general power of the government to take property. The
constitutional provision is about ensuring that the government does not confiscate the property of some
to give it to others. In part too, it is about loss spreading. If the government takes away a person's
property to benefit society, then society should pay. The principal purpose of the guarantee is "to bar
the Government from forcing some people alone to bear public burdens which, in all fairness and
There are two different types of taking that can be identified. A "possessory" taking occurs when the
government confiscates or physically occupies property. A "regulatory" taking occurs when the
government's regulation leaves no reasonable economically viable use of the property.80
In the landmark case of Pennsylvania Coal v. Mahon,81 it was held that a taking also could be found if
government regulation of the use of property went "too far."  When regulation reaches a certain
magnitude, in most if not in all cases there must be an exercise of eminent domain and compensation
to support the act. While property may be regulated to a certain extent, if regulation goes too far it will
be recognized as a taking.82
No formula or rule can be devised to answer the questions of what is too far and when regulation
becomes a taking. In Mahon, Justice Holmes recognized that it was "a question of degree and therefore
cannot be disposed of by general propositions." On many other occasions as well, the U.S. Supreme
Court has said that the issue of when regulation constitutes a taking is a matter of considering the facts
in each case. The Court asks whether justice and fairness require that the economic loss caused by
public action must be compensated by the government and thus borne by the public as a whole, or
whether the loss should remain concentrated on those few persons subject to the public action.83
What is crucial in judicial consideration of regulatory takings is that government regulation is a taking if
it leaves no reasonable economically viable use of property in a manner that interferes with reasonable
expectations for use.84 A regulation that permanently denies all economically beneficial or productive
use of land is, from the owner's point of view, equivalent to a "taking" unless principles of nuisance or
property law that existed when the owner acquired the land make the use prohibitable.85 When the
owner of real property has been called upon to sacrifice all economically beneficial uses in the name of
the common good, that is, to leave his property economically idle, he has suffered a taking.86
A regulation which denies all economically beneficial or productive use of land will require
compensation under the takings clause. Where a regulation places limitations on land that fall short of
eliminating all economically beneficial use, a taking nonetheless may have occurred, depending on a
complex of factors including the regulation's economic effect on the landowner, the extent to which the
regulation interferes with reasonable investment-backed expectations and the character of government
action. These inquiries are informed by the purpose of the takings clause which is to prevent the
government from forcing some people alone to bear public burdens which, in all fairness and justice,
should be borne by the public as a whole.87
A restriction on use of property may also constitute a "taking" if not reasonably necessary to the
effectuation of a substantial public purpose or if it has an unduly harsh impact on the distinct
investment-backed expectations of the owner.88
The Ordinance gives the owners and operators of the "prohibited" establishments three (3) months from
its approval within which to "wind up business operations or to transfer to any place outside of the
Ermita-Malate area or convert said businesses to other kinds of business allowable within the area."
The directive to "wind up business operations" amounts to a closure of the establishment, a permanent
deprivation of property, and is practically confiscatory.  Unless the owner converts his establishment to
accommodate an "allowed" business, the structure which housed the previous business will be left
empty and gathering dust. Suppose he transfers it to another area, he will likewise leave the entire
establishment idle. Consideration must be given to the substantial amount of money invested to build
the edifices which the owner reasonably expects to be returned within a period of time. It is apparent
that the Ordinance leaves no reasonable economically viable use of property in a manner that interferes
with reasonable expectations for use.
The second and third options to transfer to any place outside of the Ermita-Malate area or to convert
into allowed businessesare confiscatory as well. The penalty of permanent closure in cases of
subsequent violations found in Section 4 of the Ordinance is also equivalent to a "taking" of private
property.
The second option instructs the owners to abandon their property and build another one outside the
Ermita-Malate area.  In every sense, it qualifies as a taking without just compensation with an additional
burden imposed on the owner to build another establishment solely from his coffers. The proffered
solution does not put an end to the "problem," it merely relocates it. Not only is this impractical, it is
unreasonable, onerous and oppressive. The conversion into allowed enterprises is just as ridiculous.
How may the respondent convert a motel into a restaurant or a coffee shop, art gallery or music lounge
without essentially destroying its property? This is a taking of private property without due process of
law, nay, even without compensation.
The penalty of closure likewise constitutes unlawful taking that should be compensated by the
government. The burden on the owner to convert or transfer his business, otherwise it will be closed
permanently after a subsequent violation should be borne by the public as this end benefits them as a
whole.
Petitioners cannot take refuge in classifying the measure as a zoning ordinance. A zoning ordinance,
although a valid exercise of police power, which limits a "wholesome" property to a use which can not
reasonably be made of it constitutes the taking of such property without just compensation.  Private
property which is not noxious nor intended for noxious purposes may not, by zoning, be destroyed
without compensation. Such principle finds no support in the principles of justice as we know them.  and other secondary effects. They likewise argued than the ten (10)-hour limitation on the rental of
The police powers of local government units which have always received broad and liberal
interpretation cannot be stretched to cover this particular taking.
Distinction should be made between destruction from necessity and eminent domain.  It needs restating
that the property taken in the exercise of police power is destroyed because it is noxious or intended for
a noxious purpose while the property taken under the power of eminent domain is intended for a public
use or purpose and is therefore "wholesome."89 If it be of public benefit that a "wholesome" property
remain unused or relegated to a particular purpose, then certainly the public should bear the cost of
reasonable compensation for the condemnation of private property for public use.90
Further, the Ordinance fails to set up any standard to guide or limit the petitioners' actions. It in no way
controls or guides the discretion vested in them. It provides no definition of the establishments covered
by it and it fails to set forth the conditions when the establishments come within its ambit of prohibition.
The Ordinance confers upon the mayor arbitrary and unrestricted power to close down establishments.
Ordinances such as this, which make possible abuses in its execution, depending upon no conditions
or qualifications whatsoever other than the unregulated arbitrary will of the city authorities as the
touchstone by which its validity is to be tested, are unreasonable and invalid. The Ordinance should
have established a rule by which its impartial enforcement could be secured.91
Ordinances placing restrictions upon the lawful use of property must, in order to be valid and
constitutional, specify the rules and conditions to be observed and conduct to avoid; and must not admit
of the exercise, or of an opportunity for the exercise, of unbridled discretion by the law enforcers in
carrying out its provisions.92
Thus, in Coates v. City of Cincinnati,93 as cited in People v. Nazario,94      the U.S. Supreme Court struck
down an ordinance that had made it illegal for "three or more persons to assemble on any sidewalk and
there conduct themselves in a manner annoying to persons passing by." The ordinance was nullified as
it imposed no standard at all "because one may never know in advance what 'annoys some people but
does not annoy others.' "
Similarly, the Ordinance does not specify the standards to ascertain which establishments "tend to
disturb the community," "annoy the inhabitants," and "adversely affect the social and moral welfare of
the community." The cited case supports the nullification of the Ordinance for lack of comprehensible
standards to guide the law enforcers in carrying out its provisions.
Petitioners cannot therefore order the closure of the enumerated establishments without infringing the
due process clause. These lawful establishments may be regulated, but not prevented from carrying on
their business.  This is a sweeping exercise of police power that is a result of a lack of imagination on
the part of the City Council and which amounts to an interference into personal and private rights which
the Court will not countenance. In this regard, we take a resolute stand to uphold the constitutional
guarantee of the right to liberty and property.
Worthy of note is an example derived from the U.S. of a reasonable regulation which is a far cry from
the ill-considered Ordinance enacted by the City Council.
In FW/PBS, INC. v. Dallas,95 the city of Dallas adopted a comprehensive ordinance regulating "sexually
oriented businesses," which are defined to include adult arcades, bookstores, video stores, cabarets,
motels, and theaters as well as escort agencies, nude model studio and sexual encounter centers.
Among other things, the ordinance required that such businesses be licensed. A group of motel owners
were among the three groups of businesses that filed separate suits challenging the ordinance. The
motel owners asserted that the city violated the due process clause by failing to produce adequate
support for its supposition that renting room for fewer than ten (10) hours resulted in increased crime
motel rooms placed an unconstitutional burden on the right to freedom of association. Anent the first
contention, the U.S. Supreme Court held that the reasonableness of the legislative judgment combined
with a study which the city considered, was adequate to support the city's determination that motels
permitting room rentals for fewer than ten (10 ) hours should be included within the licensing scheme.
As regards the second point, the Court held that limiting motel room rentals to ten (10) hours will have
no discernible effect on personal bonds as those bonds that are formed from the use of a motel room
for fewer than ten (10) hours are not those that have played a critical role in the culture and traditions of
the nation by cultivating and transmitting shared ideals and beliefs.
The ordinance challenged in the above-cited case merely regulated the targeted businesses. It imposed
reasonable restrictions; hence, its validity was upheld.
The case of Ermita Malate Hotel and Motel Operators Association, Inc. v. City Mayor of Manila,96 it
needs pointing out, is also different from this case in that what was involved therein was a measure
which regulated the mode in which motels may conduct business in order to put an end to practices
which could encourage vice and immorality. Necessarily, there was no valid objection on due process
or equal protection grounds as the ordinance did not prohibit motels. The Ordinance in this case
however is not a regulatory measure but is an exercise of an assumed power to prohibit.97
The foregoing premises show that the Ordinance is an unwarranted and unlawful curtailment of
property and personal rights of citizens. For being unreasonable and an undue restraint of trade, it
cannot, even under the guise of exercising police power, be upheld as valid.
B.  The Ordinance violates Equal
Protection Clause
Equal protection requires that all persons or things similarly situated should be treated alike, both as to
rights conferred and responsibilities imposed. Similar subjects, in other words, should not be treated
differently, so as to give undue favor to some and unjustly discriminate against others.98 The guarantee
means that no person or class of persons shall be denied the same protection of laws which is enjoyed
by other persons or other classes in like circumstances.99 The "equal protection of the laws is a pledge
of the protection of equal laws."100 It limits governmental discrimination. The equal protection clause
extends to artificial persons but only insofar as their property is concerned.101
The Court has explained the scope of the equal protection clause in this wise:
… What does it signify? To quote from J.M. Tuason & Co. v. Land Tenure Administration:
"The ideal situation is for the law's benefits to be available to all, that none be placed outside
the sphere of its coverage. Only thus could chance and favor be excluded and the affairs of
men governed by that serene and impartial uniformity, which is of the very essence of the
idea of law." There is recognition, however, in the opinion that what in fact exists "cannot
approximate the ideal. Nor is the law susceptible to the reproach that it does not take into
account the realities of the situation. The constitutional guarantee then is not to be given a
meaning that disregards what is, what does in fact exist. To assure that the general welfare
be promoted, which is the end of law, a regulatory measure may cut into the rights to liberty
and property. Those adversely affected may under such circumstances invoke the equal
protection clause only if they can show that the governmental act assailed, far from being
inspired by the attainment of the common weal was prompted by the spirit of hostility, or at
the very least, discrimination that finds no support in reason." Classification is thus not ruled
out, it being sufficient to quote from the Tuason decision anew "that the laws operate equally
and uniformly on all persons under similar circumstances or that all persons must be treated
in the same manner, the conditions not being different, both in the privileges conferred and
the liabilities imposed. Favoritism and undue preference cannot be allowed. For the principle
is that equal protection and security shall be given to every person under circumstances
which, if not identical, are analogous. If law be looked upon in terms of burden or charges,
those that fall within a class should be treated in the same fashion, whatever restrictions cast
on some in the group equally binding on the rest.102
Legislative bodies are allowed to classify the subjects of legislation. If the classification is reasonable,
the law may operate only on some and not all of the people without violating the equal protection
clause.103 The classification must, as an indispensable requisite, not be arbitrary. To be valid, it must
conform to the following requirements:
1) It must be based on substantial distinctions.
2) It must be germane to the purposes of the law.
3) It must not be limited to existing conditions only.
4) It must apply equally to all members of the class.104
In the Court's view, there are no substantial distinctions between motels, inns, pension houses, hotels,
lodging houses or other similar establishments. By definition, all are commercial establishments
providing lodging and usually meals and other services for the public. No reason exists for prohibiting
motels and inns but not pension houses, hotels, lodging houses or other similar establishments. The
classification in the instant case is invalid as similar subjects are not similarly treated, both as to rights
conferred and obligations imposed. It is arbitrary as it does not rest on substantial distinctions bearing a
just and fair relation to the purpose of the Ordinance.
The Court likewise cannot see the logic for prohibiting the business and operation of motels in the
Ermita-Malate area but not outside of this area.  A noxious establishment does not become any less
noxious if located outside the area.
The standard "where women are used as tools for entertainment" is also discriminatory as
prostitutionone of the hinted ills the Ordinance aims to banishis not a profession exclusive to
women. Both men and women have an equal propensity to engage in prostitution. It is not any less
grave a sin when men engage in it. And why would the assumption that there is an ongoing immoral
activity apply only when women are employed and be inapposite when men are in harness? This
discrimination based on gender violates equal protection as it is not substantially related to important
government objectives.105 Thus, the discrimination is invalid.
Failing the test of constitutionality, the Ordinance likewise failed to pass the test of consistency with
prevailing laws.
C.    The Ordinance is repugnant
to general laws; it is ultra vires
The Ordinance is in contravention of the Code as the latter merely empowers local government units to
regulate, and not prohibit, the establishments enumerated in Section 1 thereof.
The power of the City Council to regulate by ordinances the establishment, operation, and maintenance
of motels, hotels and other similar establishments is found in Section 458 (a) 4 (iv), which provides that:
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, and shall:
.  .  .
(4) Regulate activities relative to the use of land, buildings and structures within the city in
order to promote the general welfare and for said purpose shall:
 .  .  .
(iv) Regulate the establishment, operation and maintenance of cafes, restaurants,
beerhouses, hotels, motels, inns, pension houses, lodging houses, and other similar
establishments, including tourist guides and transports .  .  .  .
While its power to regulate the establishment, operation and maintenance of any entertainment or
amusement facilities, and to prohibit certain forms of amusement or entertainment is provided under
Section 458 (a) 4 (vii) of the Code, which reads as follows:
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, and shall:
.  .  .
(4) Regulate activities relative to the use of land, buildings and structures within the city in
order to promote the general welfare and for said purpose shall:
.  .  .
(vii) Regulate the establishment, operation, and maintenance of any entertainment
or amusement facilities, including theatrical performances, circuses, billiard pools,
public dancing schools, public dance halls, sauna baths, massage parlors, and
other places for entertainment or amusement; regulate such other events or
activities for amusement or entertainment, particularly those which tend to disturb
the community or annoy the inhabitants, or require the suspension or suppression
of the same; or, prohibit certain forms of amusement or entertainment in order to
protect the social and moral welfare of the community.
Clearly, with respect to cafes, restaurants, beerhouses, hotels, motels, inns, pension houses, lodging
houses, and other similar establishments, the only power of the City Council to legislate relative thereto
is to regulate them to promote the general welfare. The Code still withholds from cities the power to
suppress and prohibit altogether the establishment, operation and maintenance of such establishments.
It is well to recall the rulings of the Court in Kwong Sing v. City of Manila106 that:
The word "regulate," as used in subsection (l), section 2444 of the Administrative Code,
means and includes the power to control, to govern, and to restrain; but "regulate" should not
be construed as synonymous with "suppress" or "prohibit." Consequently, under the power to
regulate laundries, the municipal authorities could make proper police regulations as to the
mode in which the employment or business shall be exercised.107
And in People v. Esguerra,108 wherein the Court nullified an ordinance of the Municipality of Tacloban
which prohibited the selling, giving and dispensing of liquor ratiocinating that the municipality is
empowered only to regulate the same and not prohibit. The Court therein declared that:
(A)s a general rule when a municipal corporation is specifically given authority or power to
regulate or to license and regulate the liquor traffic, power to prohibit is impliedly withheld.109
These doctrines still hold contrary to petitioners' assertion110 that they were modified by the Code
vesting upon City Councils prohibitory powers.
Similarly, the City Council exercises regulatory powers over public dancing schools, public dance halls,
sauna baths, massage parlors, and other places for entertainment or amusement as found in the first
clause of Section 458 (a) 4 (vii). Its powers to regulate, suppress and suspend "such other events or
activities for amusement or entertainment, particularly those which tend to disturb the community or
annoy the inhabitants" and to "prohibit certain forms of amusement or entertainment in order to protect
the social and moral welfare of the community" are stated in the second and third clauses, respectively
of the same Section.  The several powers of the City Council as provided in Section 458 (a) 4 (vii) of the
Code, it is pertinent to emphasize, are separated by semi-colons (;), the use of which indicates that the
clauses in which these powers are set forth are independent of each other albeit closely related to
justify being put together in a single enumeration or paragraph.111 These powers, therefore, should not
be confused, commingled or consolidated as to create a conglomerated and unified power of
regulation, suppression and prohibition.112
The Congress unequivocably specified the establishments and forms of amusement or entertainment
subject to regulation among which are beerhouses, hotels, motels, inns, pension houses, lodging
houses, and other similar establishments (Section 458 (a) 4 (iv)), public dancing schools, public dance
halls, sauna baths, massage parlors, and other places for entertainment or amusement (Section 458 (a)
4 (vii)). This enumeration therefore cannot be included as among "other events or activities for
amusement or entertainment, particularly those which tend to disturb the community or annoy the
inhabitants" or "certain forms of amusement or entertainment" which the City Council may suspend,
suppress or prohibit.
The rule is that the City Council has only such powers as are expressly granted to it and those which
are necessarily implied or incidental to the exercise thereof.  By reason of its limited powers and the
nature thereof, said powers are to be construed strictissimi juris and any doubt or ambiguity arising out
of the terms used in granting said powers must be construed against the City Council.113 Moreover, it is
a general rule in statutory construction that the express mention of one person, thing, or consequence
is tantamount to an express exclusion of all others. Expressio unius est exclusio alterium. This maxim is
based upon the rules of logic and the natural workings of human mind. It is particularly applicable in the
construction of such statutes as create new rights or remedies, impose penalties or punishments, or
otherwise come under the rule of strict construction.114
The argument that the City Council is empowered to enact the Ordinance by virtue of the general
welfare clause of the Code and of Art. 3, Sec. 18 (kk) of the Revised Charter of Manila is likewise
without merit. On the first point, the ruling of the Court in People v. Esguerra,115 is instructive. It held
that:
The powers conferred upon a municipal council in the general welfare clause, or section 2238
of the Revised Administrative Code, refers to matters not covered by the other provisions of
the same Code, and therefore it can not be applied to intoxicating liquors, for the power to
regulate the selling, giving away and dispensing thereof is granted specifically by section
2242 (g) to municipal councils. To hold that, under the general power granted by section
2238,  a municipal council may enact the ordinance in question, notwithstanding the provision
of section 2242 (g), would be to make the latter superfluous and nugatory, because the
power to prohibit, includes the power to regulate, the selling, giving away and dispensing of
intoxicating liquors.
On the second point, it suffices to say that the Code being a later expression of the legislative will must
necessarily prevail and override the earlier law, the Revised Charter of Manila. Legis posteriores
priores contrarias abrogant, or later statute repeals prior ones which are repugnant thereto. As between
two laws on the same subject matter, which are irreconcilably inconsistent, that which is passed later
prevails, since it is the latest expression of legislative will.116 If there is an inconsistency or repugnance
between two statutes, both relating to the same subject matter, which cannot be removed by any fair
and reasonable method of interpretation, it is the latest expression of the legislative will which must
prevail and override the earlier.117
Implied repeals are those which take place when a subsequently enacted law contains provisions
contrary to those of an existing law but no provisions expressly repealing them. Such repeals have
been divided into two general classes: those which occur where an act is so inconsistent or
irreconcilable with an existing prior act that only one of the two can remain in force and those which
occur when an act covers the whole subject of an earlier act and is intended to be a substitute therefor.
The validity of such a repeal is sustained on the ground that the latest expression of the legislative will
should prevail.118
In addition, Section 534(f) of the Code states that "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."
Thus, submitting to petitioners' interpretation that the Revised Charter of Manila empowers the City
Council to prohibit motels, that portion of the Charter stating such must be considered repealed by the
Code as it is at variance with the latter's provisions granting the City Council mere regulatory powers.
It is well to point out that petitioners also cannot seek cover under the general welfare clause
authorizing the abatement of nuisances without judicial proceedings. That tenet applies to a
nuisance per se, or one which affects the immediate safety of persons and property and may be
summarily abated under the undefined law of necessity. It can not be said that motels are injurious to
the rights of property, health or comfort of the community. It is a legitimate business. If it be a
nuisance per accidens it may be so proven in a hearing conducted for that purpose. A motel is not per
se a nuisance warranting its summary abatement without judicial intervention.119
Notably, the City Council was conferred powers to prevent and prohibit certain activities and
establishments in another section of the Code which is reproduced as follows:
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, and shall:
(1) Approve ordinances and pass resolutions necessary for an efficient and effective city
government, and in this connection, shall:
.  .  .
(v) Enact ordinances intended to prevent, suppress and impose  appropriate penalties for
habitual drunkenness in public places, vagrancy, mendicancy,  prostitution, establishment
and maintenance of      houses of ill repute, gambling and other prohibited games of chance,  partial, discriminating or in derogation of a common right.124
fraudulent devices and ways to obtain money or property, drug addiction, maintenance of
drug dens, drug pushing, juvenile delinquency, the printing, distribution or exhibition of
obscene or pornographic materials or publications, and such other activities inimical  to the
welfare and morals of the inhabitants of the city;
.  .  .
If it were the intention of Congress to confer upon the City Council the power to prohibit the
establishments enumerated in Section 1 of the Ordinance, it would have so declared in uncertain terms
by adding them to the list of the matters it may prohibit under the above-quoted Section.
The Ordinance now vainly attempts to lump these establishments with houses of ill-repute and expand
the City Council's powers in the second and third clauses of Section 458 (a) 4 (vii) of the Code in an
effort to overreach its prohibitory powers. It is evident that these establishments may only be regulated
in their establishment, operation and maintenance.
It is important to distinguish the punishable activities from the establishments themselves. That these
establishments are recognized legitimate enterprises can be gleaned from another Section of the Code.
Section 131 under the Title on Local Government Taxation expressly mentioned proprietors or
operators of massage clinics, sauna, Turkish and Swedish baths, hotels, motels and lodging houses as
among the "contractors" defined in paragraph (h) thereof.  The same Section also defined "amusement"
as a "pleasurable diversion and entertainment," "synonymous to relaxation, avocation, pastime or fun;"
and "amusement places" to include "theaters, cinemas, concert halls, circuses and other places of
amusement where one seeks admission to entertain oneself by seeing or viewing the show or
performances." Thus, it can be inferred that the Code considers these establishments as legitimate
enterprises and activities. It is well to recall the maxim reddendo singula singulis which means that
words in different parts of a statute must be referred to their appropriate connection, giving to each in its
place, its proper force and effect, and, if possible, rendering none of them useless or superfluous, even
if strict grammatical construction demands otherwise. Likewise, where words under consideration
appear in different sections or are widely dispersed throughout an act the same principle applies.120
Not only does the Ordinance contravene the Code, it likewise runs counter to the provisions of P.D.
499. As correctly argued by MTDC, the statute had already converted the residential Ermita-Malate
area into a commercial area. The decree allowed the establishment and operation of all kinds of
commercial establishments except warehouse or open storage depot, dump or yard, motor repair shop,
gasoline service station, light industry with any machinery or funeral establishment. The rule is that for
an ordinance to be valid and to have force and effect, it must not only be within the powers of the
council to enact but the same must not be in conflict with or repugnant to the general law.121As
succinctly illustrated in Solicitor General v. Metropolitan Manila Authority:122
The requirement that the enactment must not violate existing law explains itself. Local
political subdivisions are able to legislate only by virtue of a valid delegation of legislative
power from the national legislature (except only that the power to create their own sources of
revenue and to levy taxes is conferred by the Constitution itself). They are mere agents
vested with what is called the power of subordinate legislation. As delegates of the Congress,
the local government units cannot contravene but must obey at all times the will of their
principal. In the case before us, the enactment in question, which are merely local in origin
cannot prevail against the decree, which has the force and effect of a statute.123
Petitioners contend that the Ordinance enjoys the presumption of validity. While this may be the rule, it
has already been held that although the presumption is always in favor of the validity or reasonableness
of the ordinance, such presumption must nevertheless be set aside when the invalidity or
unreasonableness appears on the face of the ordinance itself or is established by proper evidence. The
exercise of police power by the local government is valid unless it contravenes the fundamental law of
the land, or an act of the legislature, or unless it is against public policy or is unreasonable, oppressive,
Conclusion
All considered, the Ordinance invades fundamental personal and property rights and impairs personal
privileges. It is constitutionally infirm. The Ordinance contravenes statutes; it is discriminatory and
unreasonable in its operation; it is not sufficiently detailed and explicit that abuses may attend the
enforcement of its sanctions. And not to be forgotten, the City Council under the Code had no power to
enact the Ordinance and is therefore ultra vires, null and void.
Concededly, the challenged Ordinance was enacted with the best of motives and shares the concern of
the public for the cleansing of the Ermita-Malate area of its social sins. Police power legislation of such
character deserves the full endorsement of the judiciary we reiterate our support for it. But inspite of
its virtuous aims, the enactment of the Ordinance has no statutory or constitutional authority to stand
on. Local legislative bodies, in this case, the City Council, cannot prohibit the operation of the
enumerated establishments under Section 1 thereof or order their transfer or conversion without
infringing the constitutional guarantees of due process and equal protection of laws not even under
the guise of police power.
WHEREFORE, the Petition is hereby DENIED and the decision of the Regional Trial Court declaring
the Ordinancevoid is AFFIRMED.  Costs against petitioners.
SO ORDERED.
G.R. No. 83896             February 22, 1991
CIVIL LIBERTIES UNION, petitioner, 
vs.
THE EXECUTIVE SECRETARY, respondent.
G.R. No. 83815             February 22, 1991
ANTI-GRAFT LEAGUE OF THE PHILIPPINES, INC. and CRISPIN T. REYES, petitioners,  Sec. 13. The President, Vice-President, the Members of the Cabinet, and their deputies or
vs.
PHILIP ELLA C. JUICO, as Secretary of Agrarian Reform; CARLOS DOMINGUEZ, as Secretary of
Agriculture; LOURDES QUISUMBING, as Secretary of Education, Culture and Sports;
FULGENCIO FACTORAN, JR., as Secretary of Environment and Natural Resources; VICENTE V.
JAYME, as Secretary of Finance; SEDFREY ORDOÑEZ, as Secretary of Justice; FRANKLIN N.
DRILON, as Secretary of Labor and Employment; LUIS SANTOS, as Secretary of Local
Government; FIDEL V. RAMOS, as Secretary of National Defense; TEODORO F. BENIGNO, as
Press Secretary; JUANITO FERRER, as Secretary of Public Works and Highways; ANTONIO
ARRIZABAL, as Secretary of Science and Technology; JOSE CONCEPCION, as Secretary of
Trade and Industry; JOSE ANTONIO GONZALEZ, as Secretary of Tourism; ALFREDO R.A.
BENGZON, as Secretary of Health; REINERIO D. REYES, as Secretary of Transportation and
Communication; GUILLERMO CARAGUE, as Commissioner of the Budget; and SOLITA
MONSOD, as Head of the National Economic Development Authority, respondents.
Ignacio P. Lacsina, Luis R. Mauricio, Antonio R. Quintos and Juan T. David for petitioners in 83896.
Antonio P. Coronel for petitioners in 83815.
FERNAN, C.J.:p
These two (2) petitions were consolidated per resolution dated August 9, 19881 and are being resolved
jointly as both seek a declaration of the unconstitutionality of Executive Order No. 284 issued by
President Corazon C. Aquino on July 25, 1987. The pertinent provisions of the assailed Executive
Order are:
Sec. 1. Even if allowed by law or by the ordinary functions of his position, a member of the
Cabinet, undersecretary or assistant secretary or other appointive officials of the Executive
Department may, in addition to his primary position, hold not more than two positions in the
government and government corporations and receive the corresponding compensation
therefor; Provided, that this limitation shall not apply to ad hoc bodies or committees, or to
boards, councils or bodies of which the President is the Chairman.
Sec. 2. If a member of the cabinet, undersecretary or assistant secretary or other appointive
official of the Executive Department holds more positions than what is allowed in Section 1
hereof, they (sic) must relinquish the excess position in favor of the subordinate official who is
next in rank, but in no case shall any official hold more than two positions other than his
primary position.
Sec. 3. In order to fully protect the interest of the government in government-owned or
controlled corporations, at least one-third (1/3) of the members of the boards of such
corporation should either be a secretary, or undersecretary, or assistant secretary.
Petitioners maintain that this Executive Order which, in effect, allows members of the Cabinet, their
undersecretaries and assistant secretaries to hold other government offices or positions in addition to
their primary positions, albeit subject to the limitation therein imposed, runs counter to Section 13,
Article VII of the 1987 Constitution,2 which provides as follows:
assistants shall not, unless otherwise provided in this Constitution, hold any other office or
employment during their tenure. They shall not, during said tenure, directly or indirectly
practice any other profession, participate in any business, or be financially interested in any
contract with, or in any franchise, or special privilege granted by the Government or any
subdivision, agency, or instrumentality thereof, including government-owned or controlled
corporations or their subsidiaries. They shall strictly avoid conflict of interest in the conduct of
their office.
It is alleged that the above-quoted Section 13, Article VII prohibits public respondents, as members of
the Cabinet, along with the other public officials enumerated in the list attached to the petitions as
Annex "C" in G.R. No.
838153 and as Annex "B" in G.R. No. 838964 from holding any other office or employment during their
tenure. In addition to seeking a declaration of the unconstitutionality of Executive Order No. 284,
petitioner Anti-Graft League of the Philippines further seeks in G.R. No. 83815 the issuance of the
extraordinary writs of prohibition and mandamus, as well as a temporary restraining order directing
public respondents therein to cease and desist from holding, in addition to their primary positions, dual
or multiple positions other than those authorized by the 1987 Constitution and from receiving any
salaries, allowances, per diems and other forms of privileges and the like appurtenant to their
questioned positions, and compelling public respondents to return, reimburse or refund any and all
amounts or benefits that they may have received from such positions.
Specifically, petitioner Anti-Graft League of the Philippines charges that notwithstanding the
aforequoted "absolute and self-executing" provision of the 1987 Constitution, then Secretary of Justice
Sedfrey Ordoñez, construing Section 13, Article VII in relation to Section 7, par. (2), Article IX-B,
rendered on July 23, 1987 Opinion No. 73, series of 1987,5 declaring that Cabinet members, their
deputies (undersecretaries) and assistant secretaries may hold other public office, including
membership in the boards of government corporations: (a) when directly provided for in the Constitution
as in the case of the Secretary of Justice who is made an ex-officio member of the Judicial and Bar
Council under Section 8, paragraph 1, Article VIII; or (b) if allowed by law; or (c) if allowed by the
primary functions of their respective positions; and that on the basis of this Opinion, the President of the
Philippines, on July 25, 1987 or two (2) days before Congress convened on July 27, 1987: promulgated
Executive Order No. 284.6
Petitioner Anti-Graft League of the Philippines objects to both DOJ Opinion No. 73 and Executive Order
No. 284 as they allegedly "lumped together" Section 13, Article VII and the general provision in another
article, Section 7, par. (2), Article I-XB. This "strained linkage" between the two provisions, each
addressed to a distinct and separate group of public officers –– one, the President and her official
family, and the other, public servants in general –– allegedly "abolished the clearly separate, higher,
exclusive, and mandatory constitutional rank assigned to the prohibition against multiple jobs for the
President, the Vice-President, the members of the Cabinet, and their deputies and subalterns, who are
the leaders of government expected to lead by example."7 Article IX-B, Section 7, par. (2)8 provides:
Sec. 7. . . . . .
Unless otherwise allowed by law or by the primary functions of his position, no appointive
official shall hold any other office or employment in the government or any subdivision,
agency or instrumentality thereof, including government-owned or controlled corporations or
their subsidiaries.
The Solicitor General counters that Department of Justice DOJ Opinion No. 73, series of 1987, as
further elucidated and clarified by DOJ Opinion No. 129, series of 19879 and DOJ Opinion No. 155,
series of 1988,10 being the first official construction and interpretation by the Secretary of Justice of
Section 13, Article VII and par. (2) of Section 7, Article I-XB of the Constitution, involving the same
subject of appointments or designations of an appointive executive official to positions other than his
primary position, is "reasonably valid and constitutionally firm," and that Executive Order No. 284,
promulgated pursuant to DOJ Opinion No. 73, series of 1987 is consequently constitutional. It is worth
noting that DOJ Opinion No. 129, series of 1987 and DOJ Opinion No. 155, series of 1988 construed
the limitation imposed by E.O. No. 284 as not applying to ex-officio positions or to positions which,
although not so designated as ex-officio are allowed by the primary functions of the public official, but
only to the holding of multiple positions which are not related to or necessarily included in the position of
the public official concerned (disparate positions).
In sum, the constitutionality of Executive Order No. 284 is being challenged by petitioners on the
principal submission that it adds exceptions to Section 13, Article VII other than those provided in the
Constitution. According to petitioners, by virtue of the phrase "unless otherwise provided in this
Constitution," the only exceptions against holding any other office or employment in Government are
those provided in the Constitution, namely: (1) The Vice-President may be appointed as a Member of
the Cabinet under Section 3, par. (2), Article VII thereof; and (2) the Secretary of Justice is an ex-
officio member of the Judicial and Bar Council by virtue of Section 8 (1), Article VIII.
Petitioners further argue that the exception to the prohibition in Section 7, par. (2), Article I-XB on the
Civil Service Commission applies to officers and employees of the Civil Service in general and that said
exceptions do not apply and cannot be extended to Section 13, Article VII which applies specifically to
the President, Vice-President, Members of the Cabinet and their deputies or assistants.
There is no dispute that the prohibition against the President, Vice-President, the members of the
Cabinet and their deputies or assistants from holding dual or multiple positions in the Government
admits of certain exceptions. The disagreement between petitioners and public respondents lies on the
constitutional basis of the exception. Petitioners insist that because of the phrase "unless otherwise
provided in this Constitution" used in Section 13 of Article VII, the exception must be expressly provided
in the Constitution, as in the case of the Vice-President being allowed to become a Member of the
Cabinet under the second paragraph of Section 3, Article VII or the Secretary of Justice being
designated an ex-officio member of the Judicial and Bar Council under Article VIII, Sec. 8 (1). Public
respondents, on the other hand, maintain that the phrase "unless otherwise provided in the
Constitution" in Section 13, Article VII makes reference to Section 7, par. (2), Article I-XB insofar as the
appointive officials mentioned therein are concerned.
The threshold question therefore is: does the prohibition in Section 13, Article VII of the 1987
Constitution insofar as Cabinet members, their deputies or assistants are concerned admit of the broad
exceptions made for appointive officials in general under Section 7, par. (2), Article I-XB which, for easy
reference is quoted anew, thus: "Unless otherwise allowed by law or by the primary functions of his
position, no appointive official shall hold any other office or employment in the Government or any
subdivision, agency or instrumentality thereof, including government-owned or controlled corporation or
their subsidiaries."
We rule in the negative.
A foolproof yardstick in constitutional construction is the intention underlying the provision under
consideration. Thus, it has been held that the Court in construing a Constitution should bear in mind the
object sought to be accomplished by its adoption, and the evils, if any, sought to be prevented or
remedied. A doubtful provision will be examined in the light of the history of the times, and the condition
and circumstances under which the Constitution was framed. The object is to ascertain the reason
which induced the framers of the Constitution to enact the particular provision and the purpose sought
to be accomplished thereby, in order to construe the whole as to make the words consonant to that
reason and calculated to effect that purpose.11
The practice of designating members of the Cabinet, their deputies and assistants as members of the
governing bodies or boards of various government agencies and instrumentalities, including
government-owned and controlled corporations, became prevalent during the time legislative powers in
this country were exercised by former President Ferdinand E. Marcos pursuant to his martial law
authority. There was a proliferation of newly-created agencies, instrumentalities and government-owned
and controlled corporations created by presidential decrees and other modes of presidential issuances
where Cabinet members, their deputies or assistants were designated to head or sit as members of the
board with the corresponding salaries, emoluments, per diems, allowances and other perquisites of
office. Most of these instrumentalities have remained up to the present time.
This practice of holding multiple offices or positions in the government soon led to abuses by
unscrupulous public officials who took advantage of this scheme for purposes of self-enrichment. In
fact, the holding of multiple offices in government was strongly denounced on the floor of the Batasang
Pambansa.12 This condemnation came in reaction to the published report of the Commission on Audit,
entitled "1983 Summary Annual Audit Report on: Government-Owned and Controlled Corporations,
Self-Governing Boards and Commissions" which carried as its Figure No. 4 a "Roaster of Membership
in Governing Boards of Government-Owned and Controlled Corporations as of December 31, 1983."
Particularly odious and revolting to the people's sense of propriety and morality in government service
were the data contained therein that Roberto V. Ongpin was a member of the governing boards of
twenty-nine (29) governmental agencies, instrumentalities and corporations; Imelda R. Marcos of
twenty-three (23); Cesar E.A. Virata of twenty-two (22); Arturo R. Tanco, Jr. of fifteen (15); Jesus S.
Hipolito and Geronimo Z. Velasco, of fourteen each (14); Cesar C. Zalamea of thirteen (13); Ruben B.
Ancheta and Jose A. Roño of twelve (12) each; Manuel P. Alba, Gilberto O. Teodoro, and Edgardo
Tordesillas of eleven (11) each; and Lilia Bautista and Teodoro Q. Peña of ten (10) each.13
The blatant betrayal of public trust evolved into one of the serious causes of discontent with the Marcos
regime. It was therefore quite inevitable and in consonance with the overwhelming sentiment of the
people that the 1986 Constitutional Commission, convened as it was after the people successfully
unseated former President Marcos, should draft into its proposed Constitution the provisions under
consideration which are envisioned to remedy, if not correct, the evils that flow from the holding of
multiple governmental offices and employment. In fact, as keenly observed by Mr. Justice Isagani A.
Cruz during the deliberations in these cases, one of the strongest selling points of the 1987 Constitution
during the campaign for its ratification was the assurance given by its proponents that the scandalous
practice of Cabinet members holding multiple positions in the government and collecting
unconscionably excessive compensation therefrom would be discontinued.
But what is indeed significant is the fact that although Section 7, Article I-XB already contains a blanket
prohibition against the holding of multiple offices or employment in the government subsuming both
elective and appointive public officials, the Constitutional Commission should see it fit to formulate
another provision, Sec. 13, Article VII, specifically prohibiting the President, Vice-President, members of
the Cabinet, their deputies and assistants from holding any other office or employment during their
tenure, unless otherwise provided in the Constitution itself.
Evidently, from this move as well as in the different phraseologies of the constitutional provisions in
question, the intent of the framers of the Constitution was to impose a stricter prohibition on the
President and his official family in so far as holding other offices or employment in the government or
elsewhere is concerned.
Moreover, such intent is underscored by a comparison of Section 13, Article VII with other provisions of
the Constitution on the disqualifications of certain public officials or employees from holding other
offices or employment. Under Section 13, Article VI, "(N)o Senator or Member of the House of
Representatives may hold any other office or employment in the Government . . .". Under Section 5(4),
Article XVI, "(N)o member of the armed forces in the active service shall, at any time, be appointed in
any capacity to a civilian position in the Government,including government-owned or controlled
corporations or any of their subsidiaries." Even Section 7 (2), Article IX-B, relied upon by respondents
provides "(U)nless otherwise allowed by law or by the primary functions of his position, no appointive
official shall hold any other office or employment in the Government."
It is quite notable that in all these provisions on disqualifications to hold other office or employment, the
prohibition pertains to an office or employment in the government and government-owned or controlled
corporations or their subsidiaries. In striking contrast is the wording of Section 13, Article VII which
states that "(T)he President, Vice-President, the Members of the Cabinet, and their deputies or
assistants shall not, unless otherwise provided in this Constitution, hold any other office or employment
during their tenure." In the latter provision, the disqualification is absolute, not being qualified by the
phrase "in the Government." The prohibition imposed on the President and his official family is therefore
all-embracing and covers both public and private office or employment.
Going further into Section 13, Article VII, the second sentence provides: "They shall not, during said
tenure, directly or indirectly, practice any other profession, participate in any business, or be financially
interested in any contract with, or in any franchise, or special privilege granted by the Government or
any subdivision, agency or instrumentality thereof, including government-owned or controlled
corporations or their subsidiaries." These sweeping, all-embracing prohibitions imposed on the
President and his official family, which prohibitions are not similarly imposed on other public officials or
employees such as the Members of Congress, members of the civil service in general and members of
the armed forces, are proof of the intent of the 1987 Constitution to treat the President and his official
family as a class by itself and to impose upon said class stricter prohibitions.
Such intent of the 1986 Constitutional Commission to be stricter with the President and his official
family was also succinctly articulated by Commissioner Vicente Foz after Commissioner Regalado
Maambong noted during the floor deliberations and debate that there was no symmetry between the
Civil Service prohibitions, originally found in the General Provisions and the anticipated report on the
Executive Department. Commissioner Foz Commented, "We actually have to be stricter with the
President and the members of the Cabinet because they exercise more powers and, therefore, more
cheeks and restraints on them are called for because there is more possibility of abuse in their case."14
Thus, while all other appointive officials in the civil service are allowed to hold other office or
employment in the government during their tenure when such is allowed by law or by the primary
functions of their positions, members of the Cabinet, their deputies and assistants may do so only when
expressly authorized by the Constitution itself. In other words, Section 7, Article I-XB is meant to lay
down the general rule applicable to all elective and appointive public officials and employees, while
Section 13, Article VII is meant to be the exception applicable only to the President, the Vice- President,
Members of the Cabinet, their deputies and assistants.
This being the case, the qualifying phrase "unless otherwise provided in this Constitution" in Section 13,
Article VII cannot possibly refer to the broad exceptions provided under Section 7, Article I-XB of the
1987 Constitution. To construe said qualifying phrase as respondents would have us do, would render
nugatory and meaningless the manifest intent and purpose of the framers of the Constitution to impose
a stricter prohibition on the President, Vice-President, Members of the Cabinet, their deputies and
assistants with respect to holding other offices or employment in the government during their tenure.
Respondents' interpretation that Section 13 of Article VII admits of the exceptions found in Section 7,
par. (2) of Article IX-B would obliterate the distinction so carefully set by the framers of the Constitution
as to when the high-ranking officials of the Executive Branch from the President to Assistant Secretary,
on the one hand, and the generality of civil servants from the rank immediately below Assistant
Secretary downwards, on the other, may hold any other office or position in the government during their
tenure.
Moreover, respondents' reading of the provisions in question would render certain parts of the
Constitution inoperative. This observation applies particularly to the Vice-President who, under Section
13 of Article VII is allowed to hold other office or employment when so authorized by the Constitution,
but who as an elective public official under Sec. 7, par. (1) of Article I-XB is absolutely ineligible "for
appointment or designation in any capacity to any public office or position during his tenure." Surely, to
say that the phrase "unless otherwise provided in this Constitution" found in Section 13, Article VII has
reference to Section 7, par. (1) of Article I-XB would render meaningless the specific provisions of the
Constitution authorizing the Vice-President to become a member of the Cabinet,15 and to act as
President without relinquishing the Vice-Presidency where the President shall not nave been chosen or
fails to qualify.16 Such absurd consequence can be avoided only by interpreting the two provisions
under consideration as one, i.e., Section 7, par. (1) of Article I-XB providing the general rule and the
other, i.e., Section 13, Article VII as constituting the exception thereto. In the same manner must
Section 7, par. (2) of Article I-XB be construed vis-a-vis Section 13, Article VII.
It is a well-established rule in Constitutional construction that no one provision of the Constitution is to
be separated from all the others, to be considered alone, but that all the provisions bearing upon a
particular subject are to be brought into view and to be so interpreted as to effectuate the great
purposes of the instrument.17 Sections bearing on a particular subject should be considered and
interpreted together as to effectuate the whole purpose of the Constitution18 and one section is not to be
allowed to defeat another, if by any reasonable construction, the two can be made to stand together.19
In other words, the court must harmonize them, if practicable, and must lean in favor of a construction
which will render every word operative, rather than one which may make the words idle and nugatory.20
Since the evident purpose of the framers of the 1987 Constitution is to impose a stricter prohibition on
the President, Vice-President, members of the Cabinet, their deputies and assistants with respect to
holding multiple offices or employment in the government during their tenure, the exception to this
prohibition must be read with equal severity. On its face, the language of Section 13, Article VII is
prohibitory so that it must be understood as intended to be a positive and unequivocal negation of the
privilege of holding multiple government offices or employment. Verily, wherever the language used in
the constitution is prohibitory, it is to be understood as intended to be a positive and unequivocal
negation.21 The phrase "unless otherwise provided in this Constitution" must be given a literal
interpretation to refer only to those particular instances cited in the Constitution itself, to wit: the Vice-
President being appointed as a member of the Cabinet under Section 3, par. (2), Article VII; or acting as
President in those instances provided under Section 7, pars. (2) and (3), Article VII; and, the Secretary
of Justice being ex-officiomember of the Judicial and Bar Council by virtue of Section 8 (1), Article VIII.
The prohibition against holding dual or multiple offices or employment under Section 13, Article VII of
the Constitution must not, however, be construed as applying to posts occupied by the Executive
officials specified therein without additional compensation in an ex-officio capacity as provided by law
and as required22 by the primary functions of said officials' office. The reason is that these posts do no
comprise "any other office" within the contemplation of the constitutional prohibition but are properly an
imposition of additional duties and functions on said officials.23 To characterize these posts otherwise
would lead to absurd consequences, among which are: The President of the Philippines cannot chair
the National Security Council reorganized under Executive Order No. 115 (December 24, 1986).
Neither can the Vice-President, the Executive Secretary, and the Secretaries of National Defense,
Justice, Labor and Employment and Local Government sit in this Council, which would then have no
reason to exist for lack of a chairperson and members. The respective undersecretaries and assistant
secretaries, would also be prohibited.
The Secretary of Labor and Employment cannot chair the Board of Trustees of the National Manpower
and Youth Council (NMYC) or the Philippine Overseas Employment Administration (POEA), both of
which are attached to his department for policy coordination and guidance. Neither can his
Undersecretaries and Assistant Secretaries chair these agencies.
The Secretaries of Finance and Budget cannot sit in the Monetary Board.24 Neither can their respective
undersecretaries and assistant secretaries. The Central Bank Governor would then be assisted by
lower ranking employees in providing policy direction in the areas of money, banking and credit.25
Indeed, the framers of our Constitution could not have intended such absurd consequences. A
Constitution, viewed as a continuously operative charter of government, is not to be interpreted as
demanding the impossible or the impracticable; and unreasonable or absurd consequences, if possible,
should be avoided.26
To reiterate, the prohibition under Section 13, Article VII is not to be interpreted as covering positions
held without additional compensation in ex-officio capacities as provided by law and as required by the
primary functions of the concerned official's office. The term ex-officio means "from office; by virtue of
office." It refers to an "authority derived from official character merely, not expressly conferred upon the
individual character, but rather annexed to the official position." Ex-officio likewise denotes an "act done
in an official character, or as a consequence of office, and without any other appointment or authority
than that conferred by the office."27 An ex-officio member of a board is one who is a member by virtue of
his title to a certain office, and without further warrant or appointment.28 To illustrate, by express
provision of law, the Secretary of Transportation and Communications is the ex-officioChairman of the
Board of the Philippine Ports Authority,29 and the Light Rail Transit Authority.30
The Court had occasion to explain the meaning of an ex-officio position in Rafael vs. Embroidery and
Apparel Control and Inspection Board, 31 thus: "An examination of section 2 of the questioned statute
(R.A. 3137) reveals that for the chairman and members of the Board to qualify they need only be
designated by the respective department heads. With the exception of the representative from the
private sector, they sit ex-officio. In order to be designated they must already be holding positions in the
offices mentioned in the law. Thus, for instance, one who does not hold a previous appointment in the
Bureau of Customs, cannot, under the act, be designated a representative from that office. The same is
true with respect to the representatives from the other offices. No new appointments are necessary.
This is as it should be, because the representatives so designated merely perform duties in the Board
in addition to those already performed under their original appointments."32
The term "primary" used to describe "functions" refers to the order of importance and thus means chief
or principal function. The term is not restricted to the singular but may refer to the plural.33 The
additional duties must not only be closely related to, but must be required by the official's primary
functions. Examples of designations to positions by virtue of one's primary functions are the Secretaries
of Finance and Budget sitting as members of the Monetary Board, and the Secretary of Transportation
and Communications acting as Chairman of the Maritime Industry Authority34 and the Civil Aeronautics
Board.
If the functions required to be performed are merely incidental, remotely related, inconsistent,
incompatible, or otherwise alien to the primary function of a cabinet official, such additional functions
would fall under the purview of "any other office" prohibited by the Constitution. An example would be
the Press Undersecretary sitting as a member of the Board of the Philippine Amusement and Gaming
Corporation. The same rule applies to such positions which confer on the cabinet official management
functions and/or monetary compensation, such as but not limited to chairmanships or directorships in
government-owned or controlled corporations and their subsidiaries.
Mandating additional duties and functions to the President, Vice-President, Cabinet Members, their
deputies or assistants which are not inconsistent with those already prescribed by their offices or
appointments by virtue of their special knowledge, expertise and skill in their respective executive
offices is a practice long-recognized in many jurisdictions. It is a practice justified by the demands of
efficiency, policy direction, continuity and coordination among the different offices in the Executive
Branch in the discharge of its multifarious tasks of executing and implementing laws affecting national
interest and general welfare and delivering basic services to the people. It is consistent with the power
vested on the President and his alter egos, the Cabinet members, to have control of all the executive
departments, bureaus and offices and to ensure that the laws are faithfully executed.35 Without these
additional duties and functions being assigned to the President and his official family to sit in the
governing bodies or boards of governmental agencies or instrumentalities in an ex-officio capacity as
provided by law and as required by their primary functions, they would be supervision, thereby deprived
of the means for control and resulting in an unwieldy and confused bureaucracy.
It bears repeating though that in order that such additional duties or functions may not transgress the
prohibition embodied in Section 13, Article VII of the 1987 Constitution, such additional duties or
functions must be required by the primary functions of the official concerned, who is to perform the
same in an ex-officio capacity as provided by law, without receiving any additional compensation
therefor.
The ex-officio position being actually and in legal contemplation part of the principal office, it follows that
the official concerned has no right to receive additional compensation for his services in the said
position. The reason is that these services are already paid for and covered by the compensation
attached to his principal office. It should be obvious that if, say, the Secretary of Finance attends a
meeting of the Monetary Board as an ex-officio member thereof, he is actually and in legal
contemplation performing the primary function of his principal office in defining policy in monetary and
banking matters, which come under the jurisdiction of his department. For such attendance, therefore,
he is not entitled to collect any extra compensation, whether it be in the form of a per them or an
honorarium or an allowance, or some other such euphemism. By whatever name it is designated, such
additional compensation is prohibited by the Constitution.
It is interesting to note that during the floor deliberations on the proposal of Commissioner Christian
Monsod to add to Section 7, par. (2), Article IX-B, originally found as Section 3 of the General
Provisions, the exception "unless required by the functions of his position,"36 express reference to
certain high-ranking appointive public officials like members of the Cabinet were made.37 Responding to
a query of Commissioner Blas Ople, Commissioner Monsod pointed out that there are instances when
although not required by current law, membership of certain high-ranking executive officials in other
offices and corporations is necessary by reason of said officials' primary functions. The example given
by Commissioner Monsod was the Minister of Trade and Industry.38
While this exchange between Commissioners Monsod and Ople may be used as authority for saying
that additional functions and duties flowing from the primary functions of the official may be imposed
upon him without offending the constitutional prohibition under consideration, it cannot, however, be
taken as authority for saying that this exception is by virtue of Section 7, par. (2) of Article I-XB. This
colloquy between the two Commissioners took place in the plenary session of September 27, 1986.
Under consideration then was Section 3 of Committee Resolution No. 531 which was the proposed
article on General Provisions.39 At that time, the article on the Civil Service Commission had been
approved on third reading on July 22, 1986,40 while the article on the Executive Department, containing
the more specific prohibition in Section 13, had also been earlier approved on third reading on August
26, 1986.41 It was only after the draft Constitution had undergone reformatting and "styling" by the
Committee on Style that said Section 3 of the General Provisions became Section 7, par. (2) of Article
IX-B and reworded "Unless otherwise allowed by law or by the primary functions of his position. . . ."
What was clearly being discussed then were general principles which would serve as constitutional
guidelines in the absence of specific constitutional provisions on the matter. What was primarily at issue
and approved on that occasion was the adoption of the qualified and delimited phrase "primary
functions" as the basis of an exception to the general rule covering all appointive public officials. Had
the Constitutional Commission intended to dilute the specific prohibition in said Section 13 of Article VII,
it could have re-worded said Section 13 to conform to the wider exceptions provided in then Section 3
of the proposed general Provisions, later placed as Section 7, par. (2) of Article IX-B on the Civil
Service Commission.
That this exception would in the final analysis apply also to the President and his official family is by
reason of the legal principles governing additional functions and duties of public officials rather than by
virtue of Section 7, par. 2, Article IX-B At any rate, we have made it clear that only the additional
functions and duties "required," as opposed to "allowed," by the primary functions may be considered
as not constituting "any other office."
While it is permissible in this jurisdiction to consult the debates and proceedings of the constitutional
convention in order to arrive at the reason and purpose of the resulting Constitution, resort thereto may
be had only when other guides fail42 as said proceedings are powerless to vary the terms of the
Constitution when the meaning is clear.1âwphi1Debates in the constitutional convention "are of value
as showing the views of the individual members, and as indicating the reasons for their votes, but they
give us no light as to the views of the large majority who did not talk, much less of the mass of our
fellow citizens whose votes at the polls gave that instrument the force of fundamental law. We think it
safer to construe the constitution from what appears upon its face."43 The proper interpretation therefore
depends more on how it was understood by the people adopting it than in the framers's understanding
thereof.44
It being clear, as it was in fact one of its best selling points, that the 1987 Constitution seeks to prohibit
the President, Vice-President, members of the Cabinet, their deputies or assistants from holding during
their tenure multiple offices or employment in the government, except in those cases specified in the
Constitution itself and as above clarified with respect to posts held without additional compensation in
an ex-officio capacity as provided by law and as required by the primary functions of their office, the
citation of Cabinet members (then called Ministers) as examples during the debate and deliberation on
the general rule laid down for all appointive officials should be considered as mere personal opinions
which cannot override the constitution's manifest intent and the people' understanding thereof.
In the light of the construction given to Section 13, Article VII in relation to Section 7, par. (2), Article IX-
B of the 1987 Constitution, Executive Order No. 284 dated July 23, 1987 is unconstitutional. Ostensibly
restricting the number of positions that Cabinet members, undersecretaries or assistant secretaries may
hold in addition to their primary position to not more than two (2) positions in the government and
government corporations, Executive Order No. 284 actually allows them to hold multiple offices or
employment in direct contravention of the express mandate of Section 13, Article VII of the 1987
Constitution prohibiting them from doing so, unless otherwise provided in the 1987 Constitution itself.
The Court is alerted by respondents to the impractical consequences that will result from a strict
application of the prohibition mandated under Section 13, Article VII on the operations of the
Government, considering that Cabinet members would be stripped of their offices held in an ex-
officio capacity, by reason of their primary positions or by virtue of legislation. As earlier clarified in this
decision, ex-officio posts held by the executive official concerned without additional compensation as
provided by law and as required by the primary functions of his office do not fall under the definition of
"any other office" within the contemplation of the constitutional prohibition. With respect to other offices
or employment held by virtue of legislation, including chairmanships or directorships in government-
owned or controlled corporations and their subsidiaries, suffice it to say that the feared impractical
consequences are more apparent than real. Being head of an executive department is no mean job. It
is more than a full-time job, requiring full attention, specialized knowledge, skills and expertise. If
maximum benefits are to be derived from a department head's ability and expertise, he should be
allowed to attend to his duties and responsibilities without the distraction of other governmental offices
or employment. He should be precluded from dissipating his efforts, attention and energy among too
many positions of responsibility, which may result in haphazardness and inefficiency. Surely the
advantages to be derived from this concentration of attention, knowledge and expertise, particularly at
this stage of our national and economic development, far outweigh the benefits, if any, that may be
gained from a department head spreading himself too thin and taking in more than what he can handle.
Finding Executive Order No. 284 to be constitutionally infirm, the court hereby orders respondents
Secretary of Environment and Natural Resources Fulgencio Factoran, Jr., Secretary of Local
Government45 Luis Santos, Secretary of National Defense Fidel V. Ramos, Secretary of Health Alfredo
R.A. Bengzon and Secretary of the Budget Guillermo Carague to immediately relinquish their other
offices or employment, as herein defined, in the government, including government-owned or controlled
corporations and their subsidiaries. With respect to the other named respondents, the petitions have
become moot and academic as they are no longer occupying the positions complained of.
During their tenure in the questioned positions, respondents may be considered de facto officers and as
such entitled to emoluments for actual services rendered.46 It has been held that "in cases where there
is no de jure,officer, a de facto officer, who, in good faith has had possession of the office and has
discharged the duties pertaining thereto, is legally entitled to the emoluments of the office, and may in
an appropriate action recover the salary, fees and other compensations attached to the office. This
doctrine is, undoubtedly, supported on equitable grounds since it seems unjust that the public should
benefit by the services of an officer de facto and then be freed from all liability to pay any one for such
services.47 Any per diem, allowances or other emoluments received by the respondents by virtue of
actual services rendered in the questioned positions may therefore be retained by them.
WHEREFORE, subject to the qualification above-stated, the petitions are GRANTED. Executive Order
No. 284 is hereby declared null and void and is accordingly set aside.
SO ORDERED.
G.R. Nos. 206844-45               July 23, 2013
COALITION OF ASSOCIATIONS OF SENIOR CITIZENS IN THE PHILIPPINES, INC. (SENIOR
CITIZENS PARTY-LIST), represented herein by its Chairperson and First Nominee, FRANCISCO
G. DATOL, Jr., Petitioner, 
vs.
COMMISSION ON ELECTIONS, Respondent.
x-----------------------x
G.R. No. 206982
COALITION OF ASSOCIATIONS OF SENIOR CITIZENS IN THE PHILIPPINES, INC. (SENIOR
CITIZENS), represented by its President and Incumbent Representative in the House of
Representatives, ATTY. GODOFREDO V. ARQUIZA, Petitioner, 
vs.
COMMISSION ON ELECTIONS, Respondent.
DECISION
LEONARDO-DE CASTRO, J.:
The present petitions were filed by the two rival factions within the same party-list organization, the
Coalition of Associations of Senior Citizens in the Phil., Inc. (SENIOR CITIZENS) that are now praying
for essentially the same reliefs from this Court.
One group is headed by Godofredo V. Arquiza (Rep. Arquiza), the organization’s incumbent
representative in the House of Representatives. This group shall be hereinafter referred to as the
Arquiza Group. The other group is led by Francisco G. Datol, Jr., the organization’s erstwhile third
nominee. This group shall be hereinafter referred to as the Datol Group.
G.R. Nos. 206844-45 is the Extremely Very Urgent Petition for Certiorari (With Prayer for the Forthwith
Issuance of a Writ of Preliminary Injunction and Temporary Restraining Order [TRO] and/or Status Quo
Ante Order [SQAO])1 filed in the name of SENIOR CITIZENS by Francisco G. Datol, Jr. For brevity, we
shall refer to this petition as the Datol Group’s petition.
G.R. No. 206982 is the Very Urgent Petition for Certiorari (With Application for a Temporary Restraining
Order and Writ of Preliminary Injunction)2 filed on behalf of SENIOR CITIZENS by Rep. Arquiza. We
shall refer to this as the Arquiza Group’s petition.
The above petitions were filed pursuant to Rule 643 in relation to Rule 654 of the Rules of Court, both
assailing the Omnibus Resolution5 dated May 10, 2013 of the Commission on Elections (COMELEC)
En Banc in SPP No. 12-157 (PLM) and SPP No. 12-191 (PLM). Said Resolution disqualified SENIOR
CITIZENS from participating in the May 13, 2013 elections and ordered the cancellation of its
registration and accreditation as a party-list organization.
THE ANTECEDENTS
On March 16, 2007, the COMELEC En Banc accredited SENIOR CITIZENS as a party-list organization
in a Resolution6 issued on even date in SPP No. 06-026 (PL).
SENIOR CITIZENS participated in the May 14, 2007 elections. However, the organization failed to get
the required two percent (2%) of the total votes cast.7 Thereafter, SENIOR CITIZENS was granted
leave to intervene in the case of Barangay Association for National Advancement and Transparency
(BANAT) v. Commission on Elections.8 In accordance with the procedure set forth in BANAT for the
allocation of additional seats under the party-list system, SENIOR CITIZENS was allocated one seat in
Congress. Rep. Arquiza, then the organization’s first nominee, served as a member of the House of
Representatives.
Subsequently, SENIOR CITIZENS was allowed to participate in the May 10, 2010 elections.
On May 5, 2010, the nominees of SENIOR CITIZENS signed an agreement, entitled Irrevocable
Covenant, the relevant terms of which we quote:
IRREVOCABLE COVENANT
KNOW ALL MEN BY THESE PRESENT
We, in representation of our respective personal capacity, hereby covenant and agree as follows:
ARTICLE I
PARTIES AND PERSONS
1. ATTY. GODOFREDO V. ARQUIZA, of legal age, married, Filipino, and residing
at 1881 C.M. Recto Avenue, Sampaloc, Manila, and representing the Senior
Citizens Party-list in my capacity as President with our General Headquarters at
Room 404 West Trade Center, 132 West Avenue, hereinafter referred to as the
FIRST PARTY;
2. ATTY. DAVID L. KHO, of legal age, married, Filipino, and residing at 35 Quezon
Avenue, Quezon City, hereinafter referred to as the SECOND PARTY;
3. FRANCISCO G. DATOL, JR., of legal age, married, Filipino, and residing at
North Olympus Blk., 3, Lot 15 Ph4 Grieg St., Novaliches, Quezon City, hereinafter
referred to as the THIRD PARTY;
4. REMEDIOS D. ARQUIZA, of legal age, married, Filipino, and residing at 1881
C.M. Recto Avenue, Sampaloc, Manila, hereinafter referred to as the FOURTH
PARTY;
5. LINDA GADDI DAVID, of legal age, married, Filipino, and residing at 150 Don
Francisco, St. Francis Vil., San Fernando, Pampanga City (sic) hereinafter referred
to as the FIFTH PARTY;
xxxx
 ARTICLE III
THE LIST OF CANDIDATES No. 3 nominee = 1½ years
All beginning July 1, 2010
We agree that official candidates of the SENIOR CITIZENS PARTY-LIST and in the following order
shall be:
SHARING OF RIGHTS
BENEFITS AND PRIVILEGES
Name CTC No. Issued at Issued on
That serving incumbent Congress Representative in the event one or more is elected and qualified shall
1. Godofredo V. Arquiza S.C.I.D.#2615256 Manila 04-02-04 observe proper sharing of certain benefits by virtue of his position as such, to include among others,
2. David L. Kho 16836192 Quezon City 03-15-09 appointment of persons in his office, projects which may redound to the benefits and privileges that may
be possible under the law.
3. Francisco G. Datol, Jr. 27633197 Quezon City 02-10-10
The above mentioned parties shall oversee the implementation of this COVENANT.
4. Remedios D. Arquiza S.C.I.D.#50696 Quezon City 01-02-07

5. Linda Gaddi David CCI2009 12306699 Pampanga 01-04-10 IN WITNESS WHEREOF, the parties hereto have set their hands this MAY 05 2010 in QUEZON CITY.

ARTICLE IV
SHARING OF POWER (Signed) (Signed)

The Nominees agreed and pledged on their legal and personal honor and interest as well as the legal Godofredo V. Arquiza David L. Kho
privileges and rights of the respective party-list offices, under the following circumstances and events: S.C.I.D. #2615256 Iss. at Manila CTC#16836192 Iss. at
on 04-02-04 Quezon City on 03-15-09
ELECTION RESULTS

(Signed) (Signed)
Where only ONE (1) candidate qualifies and is proclaimed, then No. 1 shall assume the Office of Party-
list Representative in CONGRESS from July 1, 2010 to June 30, 2012 and shall relinquish his seat in
Congress by the proper and legal acts and No. 2 shall assume said seat from July 1, 2012 to June 30, Francisco G. Datol, Jr. Remedios D. Arquiza
2013; CTC#16836192 Iss. at S.C.I.D.#50696 Iss. at
Quezon City on 03-15-09 Quezon City on 01-02-07
In the event TWO (2) candidates qualify and are proclaimed, then, No. 1 shall serve for three (3) years,
and No. 2 and No. 3 will each serve for one-and-a-half years.
(Signed)

In the event THREE (3) candidates qualify and are proclaimed, then No. 1 shall serve for three years;
No. 2 will serve for two (2) years and afterwards shall relinquish the second seat to No. 4 nominee, who Linda Gaddi David
will then serve for one (1) year; No. 3 will occupy the third seat for two (2) years and afterwards shall CTC#CCI2009 12306699 Iss. at
relinquish said seat on the third year to Nominee 5, who will serve for the remaining one (1) year. San Fernando, Pampanga on 01-04-109

In Fine:
If only one (1) seat is won
No. 1 nominee = 2 years
No. 2 nominee = 1 year
If two (2) seats are won
No. 1 nominee = 3 years
No. 2 nominee = 1½ years
After the conduct of the May 10, 2010 elections, SENIOR CITIZENS ranked second among all the
party-list candidates and was allocated two seats in the House of Representatives. The first seat was
occupied by its first nominee, Rep. Arquiza, while the second was given to its second nominee, David
L. Kho (Rep. Kho).
If three (3) seats are won:
No. 1 nominee = 3 years The split among the ranks of SENIOR CITIZENS came about not long after. According to the Datol
No. 2 nominee = 2 years Group’s petition, the members of SENIOR CITIZENS held a national convention on November 27, 2010
No. 3 nominee = 2 years in order to address "the unfulfilled commitment of Rep. Arquiza to his constituents."10 Further, a new set
No. 4 nominee = 1 year of officers and members of the Board of Trustees of the organization were allegedly elected during the
No. 5 nominee = 1 year said convention. SENIOR CITIZENS’ third nominee, Francisco G. Datol, Jr., was supposedly elected as
the organization’s Chairman. Thereafter, on November 30, 2010, in an opposite turn of events, Datol According to the Datol Group, Rep. Kho submitted to them a letter dated December 31, 2011, notifying
was expelled from SENIOR CITIZENS by the Board of Trustees that were allied with Rep. Arquiza.11 them of his resignation in this wise:

Thenceforth, the two factions of SENIOR CITIZENS had been engaged in a bitter rivalry as both December 31, 2011
groups, with their own sets of officers, claimed leadership of the organization.
COALITION OF ASSOCIATIONS OF
The Resignation of Rep. Kho SENIOR CITIZENS IN THE PHILS., INC.
Rm. 405, 4th Floor, WTC Building
132 West Avenue, Quezon City
On December 14, 2011, Rep. Arquiza informed the office of COMELEC Chairman Sixto S. Brillantes,
Jr. in a letter12 dated December 8, 2011 that the second nominee of SENIOR CITIZENS, Rep. Kho, had
tendered his resignation, which was to take effect on December 31, 2011. The fourth nominee, Gentlemen/Ladies:
Remedios D. Arquiza, was to assume the vacant position in view of the previous expulsion from the
organization of the third nominee, Francisco G. Datol, Jr.
It is with deepest regret that I inform this esteemed organization of my decision to resign as the party-
list nominee for the House of Representatives this 15th Congress for personal reason already conveyed
The letter of Rep. Arquiza was also accompanied by a petition13 dated December 14, 2011 in the name to you.
of SENIOR CITIZENS. The petition prayed that the "confirmation and approval of the replacement of
Congressman David L. Kho, in the person of the fourth nominee, Remedios D. Arquiza, due to the
Thank you for the opportunity to serve the Senior Citizens of our dear country.
expulsion of the third nominee, Francisco G. Datol, Jr., be issued immediately in order to pave the way
of her assumption into the office."14 Before the COMELEC, the petition was docketed as E.M. No. 12-
040. Very truly yours,

Attached to the petition was the resignation letter15 of Rep. Kho, which was addressed to the Speaker of (Signed)
the House of Representatives. The letter stated thus: DAVID L. KHO17

THE HONORABLE SPEAKER In the interim, during the pendency of E.M. No. 12-040, COMELEC Resolution No. 936618 was
House of Representatives promulgated on February 21, 2012. Pertinently, Section 7 of Rule 4 thereof provided that:
Congress
Republic of the Philippines
SEC. 7. Term sharing of nominees. Filing of vacancy as a result of term sharing agreement among
Quezon City
nominees of winning party-list groups/organizations shall not be allowed.

Sir:
On March 12, 2012, the Board of Trustees of SENIOR CITIZENS that were allied with Rep. Arquiza
issued Board Resolution No. 003-2012, which pertinently stated thus:
I am hereby tendering my irrevocable resignation as Representative of the Senior Citizens Party-list in
the House of Representatives, effective December 31, 2011 in the event that only two (2) seats are won
BOARD RESOLUTION NO. 003-2012
by our party-list group; and will resign on June 30, 2012 in case three seats are won.
Series of 2012

As a consequence thereof, the Coalition of Associations of Senior Citizens in the Philippines, Inc. shall
A RESOLUTION RECALLING THE ACCEPTANCE OF THE BOARD IN RESOLUTION NO. 11-0012
nominate my successor pursuant to law and Rules on the matter.
OF THE RESIGNATION OF CONGRESSMAN DAVID L. KHO AND ALLOWING HIM TO CONTINUE
REPRESENTING THE SENIOR CITIZENS PARTY-LIST IN THE HOUSE OF REPRESENTATIVES,
Please accept my esteem and respect. ALLOWING HIM TO CONTINUE HIS TERM AND IMPOSING CERTAIN CONDITIONS ON HIM TO BE
PERFORMED WITH THE COALITION;
Truly yours,
WHEREAS, the second nominee, Congressman David L. Kho, tendered his resignation as
representative of the Senior Citizens Party-list effective December 31, 2011, x x x;
(Signed)
Rep. David L. Kho
Party-list Congressman WHEREAS, the said resignation was accepted by the Board of Trustees in a resolution signed
unanimously, in view of the nature of his resignation, and in view of his determination to resign and
return to private life, x x x;
Copy furnished:
The Board of Trustees 
Coalition of Associations of Senior Citizens in the Philippines, Inc. 16
WHEREAS, after much deliberation and consultation, the said nominee changed his mind and
requested the Board of Trustees to reconsider the acceptance, for he also reconsidered his resignation,
and requested to continue his term;
WHEREAS, in consideration of all factors affecting the party-list and in view of the forthcoming
elections, the Board opted to reconsider the acceptance, recall the same, and allow Cong. David L. Kho
to continue his term;
WHEREAS, the Coalition, in recalling the acceptance of the Board, is however imposing certain
conditions on Cong. Kho to be performed;
NOW THEREFORE, BE IT RESOLVED, AS IT IS HEREBY RESOLVED to recall the acceptance of the
resignation of Congressman David L. Kho in view of his request and change of mind, hence allow him
to continue his term subject to conditions stated above.19
Thereafter, on April 18, 2012, the COMELEC En Banc conducted a hearing on SENIOR CITIZENS’
petition in E.M. No. 12-040. At the hearing, the counsel for SENIOR CITIZENS (Arquiza Group)
admitted that Rep. Kho’s tender of resignation was made pursuant to the agreement entered into by the
organization’s nominees.20 However, said counsel also stated that the Board of Trustees of the
organization reconsidered the acceptance of Rep. Kho’s resignation and the latter was, instead, to
complete his term.21 Also, from the transcript of the hearing, it appears that the Arquiza Group
previously manifested that it was withdrawing its petition, but the same was opposed by the Datol
Group and was not acted upon by the COMELEC.22
On June 27, 2012, the COMELEC En Banc issued a Resolution23 in E.M. No. 12-040, dismissing the
petition of the SENIOR CITIZENS (Arquiza Group). The pertinent portions of the Resolution stated,
thus:
In fact, to formalize the policy of disallowing term sharing agreements among party list nominees, the
Commission recently promulgated Resolution No. 9366, which provides:
"SEC. 7. Term sharing of nominees. – Filing of vacancy as a result of term sharing agreement among
nominees of winning party-list groups/organizations shall not be allowed."
Considering all these, we find the term sharing agreement by the nominees of the Senior Citizen’s
Party-List null and void. Any action committed by the parties in pursuit of such term-sharing
arrangement—including the resignation of Congressman David Kho—cannot be recognized and be
given effect. Thus, in so far as this Commission is concerned, no vacancy was created by the
resignation of Rep. Kho and there can be no change in the list and order of nominees of the petitioner
party-list.
Second, the expulsion of Datol –
even if proven true – has no effect
in the list and in the order of
nominees, thus Remedios Arquiza
(the fourth nominee) cannot be
elevated as the third nominee.
xxxx
It must be noted that the list and order of nominees, after submission to this Commission, is meant to
be permanent. The legislature in crafting Republic Act No. 7941 clearly deprived the party-list
organization of the right to change its nominees or to alter the order of nominees once the list is
submitted to the COMELEC, except for three (3) enumerated instances such as when: (a) the nominee
dies; (b) the nominee withdraws in writing his nomination; or (c) the nominee becomes incapacitated.

First, resignation of Kho, xxxx

pursuant to the party nominees’
term-sharing agreement, cannot
Thus, even if the expulsion of Datol in the petitioner party-list were true, the list and order of nominees
be recognized and be given effect
of the Senior Citizen’s party-list remains the same in so far as we are concerned as it does not fall
so as to create a vacancy in the
under one of the three grounds mentioned above. Neither does it have an automatic effect on the
list and change the order of the
organization’s representative in the House of Representatives, for once a party-list nominee is "elected"
nominees.
into office and becomes a member of the House, he is treated similarly and equally with the regular
district representatives. As such, they can only be expelled or suspended upon the concurrence of the
Under Section 8 of Republic Act No. 7941, the withdrawal in writing of the nominee of his nomination is two-thirds of all its Members and never by mere expulsion of a party-list organization.
one of the three (3) exemptions to the rule that "no change of names or alteration of the order of
nominees shall be allowed after the same shall have been submitted to the COMELEC." While we can
xxxx
consider the resignation of Rep. Kho as akin to the withdrawal of his own nomination, we are
constrained however NOT to recognize such resignation but only in so far as to change the order of
petitioner’s nominees as submitted to the Commission. WHEREFORE, there being no vacancy in the list of nominees of the petitioner organization, the instant
petition is hereby DISMISSED for lack of merit. The list and order of nominees of petitioner hereby
remains the same as it was submitted to us there being no legally recognizable ground to cause any
xxxx
changes thereat.24 (Citation omitted.)

Considering that it is an admitted fact that the resignation of Rep. Kho was made by virtue of a prior
The Datol Group filed A Very Urgent Motion for Reconsideration25 of the above resolution, but the same
agreement of the parties, we resolve and hereby rule that we cannot recognize such arrangement and
remained unresolved.
accordingly we cannot approve the movement in the order of nominees for being contrary to public
policy. The term of office of public officials cannot be made subject to any agreement of private parties.
Public office is not a commodity that can be shared, apportioned or be made subject of any private The Review of SENIOR CITIZENS’ Registration
agreement. Public office is vested with public interest that should not be reined by individual interest.
Meanwhile, the Datol Group and the Arquiza Group filed their respective Manifestations of Intent to xxxx
Participate in the Party-list System of Representation in the May 13, 2013 Elections under the name of
SENIOR CITIZENS.26 The Manifestation of the Datol Group was docketed as SPP
(5) It violates or fails to comply with laws, rules or regulations relating to elections;

No. 12-157 (PLM), while that of the Arquiza Group was docketed as SPP No. 12-191 (PLM).
xxxx

On August 2, 2012, the COMELEC issued Resolution No. 9513,27 which, inter alia, set for summary
WHEREFORE, premises considered, the Commission RESOLVED, as it hereby RESOLVES, to
evidentiary hearings by the COMELEC En Banc the review of the registration of existing party-list
CANCEL the registration of Coalition of Associations of Senior Citizens in the Philippines (SENIOR
organizations, which have filed their Manifestations of Intent to Participate in the Party-list System of
CITIZENS) under the Party-List System of Representation.
Representation in the May 13, 2013 Elections.

The rival factions of SENIOR CITIZENS challenged the above resolution before this Court by filing their
The two factions of SENIOR CITIZENS appeared before the COMELEC En Banc on August 24, 2012
respective petitions for certiorari. The petition filed by the Datol Group was docketed as G.R. No.
and they both submitted their respective evidence, which established their continuing compliance with
204421, while the petition of the Arquiza Group was docketed as G.R. No. 204425.
the requirements of accreditation as a party-list organization.28

On December 11, 2012, the Court initially granted status quo ante orders on said petitions, directing the
On December 4, 2012, the COMELEC En Banc issued a Resolution29 in SPP Nos. 12-157 (PLM) and
COMELEC to include the name of SENIOR CITIZENS in the printing of official ballots for the May 13,
12-191 (PLM). By a vote of 4-3, the COMELEC En Banc ordered the cancellation of the registration of
2013 party-list elections. Eventually, both petitions were consolidated with the petition in Atong
SENIOR CITIZENS. The resolution explained that:
Paglaum, Inc. v. Commission on Elections, which was docketed as G.R. No. 203766.

It shall be recalled that on June 27, 2012, this Commission promulgated its resolution in a petition that
On April 2, 2013, the Court promulgated its Decision in Atong Paglaum, which ordered the remand to
involved SENIOR CITIZENS titled "In Re: Petition for Confirmation of Replacement of Resigned
the COMELEC of the petitions that have been granted mandatory injunctions to include the names of
PartyList Nominee" and docketed as EM No. 12-040. In the process of resolving the issues of said
the petitioners in the printing of ballots. Following the parameters set forth in the Court’s Decision, the
case, this Commission found that SENIOR CITIZENS nominees specifically nominees David L. Kho
COMELEC was to determine whether said petitioners, which included the two factions of SENIOR
and Francisco G. Datol, Jr. have entered into a term-sharing agreement. x x x.
CITIZENS, were qualified to register under the party-list system and to participate in the May 13, 2013
elections. For this purpose, the Court stated that the COMELEC may conduct summary evidentiary
Nominee David Kho’s term as party-list congressman is three (3) years which starts on June 30, 2010 hearings.
and to end on June 30, 2013 as directed no less than by the Constitution of the Philippines. Section 7,
Article VI of the 1987 Constitution states:
Thereafter, on May 10, 2013, the COMELEC En Banc rendered the assailed Omnibus Resolution in
SPP Nos. 12-157 (PLM) and 12-191 (PLM), ruling in this wise:
"Sec. 7. The Members of the House of Representatives shall be elected for a term of three years which
shall begin, unless otherwise provided by law, at noon on the thirtieth day of June next following their
Guided by these six new parameters [enunciated by the Court in Atong Paglaum, Inc. v. Commission
election."
on Elections], as well as the provisions of the Constitution, Republic Act No. 7941 ("R.A. No. 7941") or
the Party-List System Act, and other pertinent election laws, and after a careful and exhaustive
But following the term-sharing agreement entered into by SENIOR CITIZENS, David Kho’s term starts reevaluation of the documents submitted by the petitioners per their compliance with Resolution No.
on June 30, 2010 and ends on December 31, 2011, the date of effectivity of Kho’s resignation. By virtue 9513 ("Res. No. 9513"), the Commission En Banc RESOLVES as follows:
of the term-sharing agreement, the term of Kho as member of the House of Representatives is cut short
to one year and six months which is merely half of the three-year term. This is totally opposed to the
I. SPP Nos. 12-157 (PLM) & 12-191 (PLM) – SENIOR CITIZENS
prescription of the Constitution on the term of a Member of the House of Representatives. Hence, when
confronted with this issue on term sharing done by SENIOR CITIZENS, this Commission made a
categorical pronouncement that such term-sharing agreement must be rejected. To DENY the Manifestations of Intent to Participate, and to CANCEL the registration and accreditation,
of petitioner Senior Citizens, for violating laws, rules, and regulations relating to elections pursuant to
Section 6 (5) of R.A. No. 7941.
xxxx

From the foregoing, SENIOR CITIZENS failed to comply with Section 7, Article VI of the 1987
Constitution and Section 7, Rule 4 of Comelec Resolution No. 9366. This failure is a ground for
cancellation of registration under Section 6 of Republic Act No. 7941 which states:
"Section 6. Refusal and/or Cancellation of Registration. – The COMELEC may, motu proprio or upon
verified complaint of any interested party, refuse or cancel, after due notice and hearing, the registration
of any national, regional or sectoral party, organization or coalition on any of the following grounds:
The Commission En Banc finds no cogent reason to reverse its earlier finding in the Resolution for SPP
Nos. 12-157 (PLM) & 12-191 (PLM) promulgated on 04 December 2012, in relation to the Resolution
for E.M. No. 12-040 promulgated on 27 June 2012. The sole ground for which the petitioner Senior
Citizens was disqualified was because of the term-sharing agreement between its nominees, which the
Commission En Banc found to be contrary to public policy. It will be noted that this ground is
independent of the six parameters in Atong Paglaum, and there is nothing in the doctrine enunciated in
that case which will absolve the petitioner Senior Citizen of what, to the Commission En Banc, is a clear
bastardization of the term of office fixed by Section 7, Article VI of the Constitution as implemented by
Section 14 of R.A. No. 7941, which expressly provides that Members of the House of Representatives,
including party-list representatives, shall be elected for a term of three years. A term, in the legal sense, stoppage of the counting of votes of the disqualified party-list groups. The Datol Group urged the Court
is a fixed and definite period of time during which an officer may claim to hold office as a matter of right, to issue a TRO and/or a status quo ante order during the pendency of its petition.
a fixed interval after which the several incumbents succeed one another. Thus, service of the term is for
the entire period; it cannot be broken down to accommodate those who are not entitled to hold the
Meanwhile, on May 24, 2013, the COMELEC En Banc issued a Resolution,32 which considered as final
office.
and executory its May 10, 2013 Resolution that cancelled the registration of SENIOR CITIZENS. On
even date, the COMELEC En Banc, sitting as the National Board of Canvassers (NBOC), promulgated
That the term-sharing agreement was made in 2010, while the expression of the policy prohibiting it NBOC Resolution No. 0006-13,33 proclaiming fourteen (14) party-list organizations as initial winners in
was promulgated only in 2012 via Section 7, Rule 4 of Resolution No. 9366 ("Res. No. 9366"), is of no the party-list elections of May 13, 2013.
moment. As it was in 2010 as it is now, as it was in 1987 when the Constitution was ratified and as it
was in 1995 when R.A. No. 7941 was enacted into law, the agreement was and is contrary to public
The Arquiza Group filed on May 27, 2013 a Supplement to the "Very Urgent Petition for
policy because it subjects a Constitutionally-ordained fixed term to hold public elective office to
Certiorari,"34 also reiterating its application for a TROand a writ of preliminary injunction.
contractual bargaining and negotiation, and treats the same as though it were nothing more than a
contractual clause, an object in the ordinary course of the commerce of men. To accept this defense
will not only open the floodgates to unscrupulous individuals, but more importantly it will render inutile On May 28, 2013, the COMELEC En Banc issued NBOC Resolution No. 0008-13,35 which partially
Section 16 of R.A. No. 7941 which prescribes the procedure to be taken to fill a vacancy in the available proclaimed the winning party-list organizations that filled up a total of fifty-three (53) out of the available
seats for a party-list group or organization. For this mistake, the petitioner Senior Citizens cannot hide fifty-eight (58) seats for party-list organizations.
behind the veil of corporate fiction because the corporate veil can be pierced if necessary to achieve
the ends of justice or equity, such as when it is used to defeat public convenience, justify wrong, or
On May 29, 2013, the Chief Justice issued a TRO,36 which ordered the COMELEC to submit a
protect fraud. It further cannot invoke the prohibition in the enactment of ex post facto laws under
Comment on the instant petitions and to cease and desist from further proclaiming the winners from
Section 22, Article III of the Constitution because the guarantee only the retrospectivity of penal laws
among the party-list candidates in the May 13, 2013 elections.
and definitely, Reso. No. 9366 is not penal in character.

On June 3, 2013, the Datol Group filed a Most Urgent Motion for Issuance of an Order Directing
From the foregoing, the cancellation of the registration and accreditation of the petitioner Senior
Respondent to Proclaim Petitioner Pendente Lite.37
Citizens is therefore in order, and consequently, the two Manifestations of Intent to Participate filed with
the Commission should be denied.
In a Resolution38 dated June 5, 2013, the Court issued an order, which directed the COMELEC to
refrain from implementing the assailed Omnibus Resolution dated May 10, 2013 in SPP No. 12-157
xxxx
(PLM) and SPP No. 12-191 (PLM), insofar as SENIOR CITIZENS was concerned and to observe the
status quo ante before the issuance of the assailed COMELEC resolution. The Court likewise ordered
WHEREFORE, the Commission En Banc RESOLVES: the COMELEC to reserve the seat(s) intended for SENIOR CITIZENS, in accordance with the number
of votes it garnered in the May 13, 2013 Elections. The Court, however, directed the COMELEC to hold
in abeyance the proclamation insofar as SENIOR CITIZENS is concerned until the instant petitions are
A. To DENY the Manifestations of Intent to Participate, and CANCEL the registration and accreditation,
decided. The Most Urgent Motion for Issuance of an Order Directing Respondent to Proclaim Petitioner
of the following parties, groups, or organizations:
Pendente Lite filed by the Datol Group was denied for lack of merit.

(1) SPP No. 12-157 (PLM) & SPP No. 12-191 (PLM) – Coalition of Associations of Senior Citizens in
On June 7, 2013, the COMELEC, through the Office of the Solicitor General (OSG), filed a
the Philippines, Inc.;
Comment39 on the instant petitions. In a Resolution40 dated June 10, 2013, the Court required the
parties to submit their respective memoranda. On June 19, 2013, the Arquiza Group filed its Reply41 to
xxxx the Comment of the COMELEC. Subsequently, the Datol Group and the Arquiza Group filed their
separate memoranda.42 On the other hand, the OSG manifested43 that it was adopting its Comment as
its memorandum in the instant case.
Accordingly, the foregoing shall be REMOVED from the registry of party-list groups and organizations
of the Commission, and shall NOT BE ALLOWED to PARTICIPATE as a candidate for the Party-List
System of Representation for the 13 May 2013 Elections and subsequent elections THE ISSUES
thereafter.30 (Citations omitted.)
The Datol Group’s memorandum raised the following issues for our consideration:
On May 13, 2013, the elections proceeded. Despite the earlier declaration of its disqualification,
SENIOR CITIZENS still obtained 677,642 votes.
IV. STATEMENT OF THE ISSUES

Questioning the cancellation of SENIOR CITIZENS’ registration and its disqualification to participate in
4.1
the May 13, 2013 elections, the Datol Group and the Arquiza Group filed the instant petitions.

WHETHER OR NOT RESPONDENT COMELEC COMMITTED GRAVE ABUSE OF DISCRETION

On May 15, 2013, the Datol Group filed a Very2 Urgent Motion to Reiterate Issuance of Temporary
AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT ADDED ANOTHER GROUND
Restraining Order and/or Status Quo Ante Order,31 alleging that the COMELEC had ordered the
(VIOLATION OF PUBLIC POLICY) FOR CANCELLATION OF REGISTRATION OF A PARTY–LIST a. Is the factual basis thereof valid?
GROUP AS PROVIDED UNDER SECTION 6, REPUBLIC ACT NO. 7941.
b. Has the Comelec En Banc Resolution of May 20, 2013, in fact, become final and
4.2 executory?

WHETHER OR NOT RESPONDENT COMELEC COMMITTED GRAVE ABUSE OF DISCRETION 4.3. Whether or not NATIONAL BOARD of CANVASSERS’ (NBOC) RESOLUTION No. 0006-
AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT CANCELLED PETITIONER’S 13 of MAY 24, 2013 is invalid for being contrary to law and having been issued without or in
CERTIFICATE OF REGISTRATION/ACCREDITATION WITHOUT DUE PROCESS OF LAW. excess of jurisdiction or grave abuse of discretion amounting to lack of jurisdiction?

4.3 (1) The SUBSIDIARY ISSUES are:

WHETHER OR NOT RESPONDENT COMELEC COMMITTED GRAVE ABUSE OF DISCRETION a. Is the factual basis thereof valid?
AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT CONCLUDED THAT
PETITIONER VIOLATED PUBLIC POLICY ON TERM SHARING.
b. Is the total of the party-list votes cast which was made as the basis thereof
correct?
4.4
c. Has the Justice Carpio Formula prescribed in Banat vs. Comelec been followed?
WHETHER OR NOT RESPONDENT COMELEC COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT ORDERED THE AUTOMATIC
4.4. Whether or not NBOC RESOLUTION No. 0008-13 of MAY 28, 2013 is invalid for being
REVIEW BY THE EN BANC OF THE REGISTRATION/ACCREDITATION GRANTED BY ITS
contrary to law and having been issued without or in excess of jurisdiction or in grave abuse
DIVISION, NOTWITHSTANDING THE CONSTITUTIONAL PROVISION THAT THE EN BANC CAN
of discretion amounting to lack of jurisdiction?
ONLY REVIEW DECISIONS OF THE DIVISION UPON FILING OF A MOTION FOR
RECONSIDERATION.44 (Citation omitted.)
(1) The SUBSIDIARY ISSUES are identical with those of Issue No. 4.3, namely:
Upon the other hand, the memorandum of the Arquiza Group brought forward the following arguments:
a. Is the factual basis thereof valid?
4.1. Whether or not COMELEC EN BANC RESOLUTION of MAY 10, 2013 is invalid for being
contrary to law and having been issued without or in excess of jurisdiction or in grave abuse b. Is the total of the party-list votes cast which was made as the basis thereof
of discretion amounting to lack of jurisdiction? correct?

(1) The Comelec En Banc Resolution of May 10, 2013 was issued pursuant to the c. Has the Justice Carpio Formula prescribed in Banat vs. Comelec been followed?
directive of the Supreme Court in Atong Paglaum. Therefore, the SUBSIDIARY
ISSUES arising therefrom are:
4.5. What is the cardinal rule in interpreting laws/rules on qualifications and disqualifications
of the candidates after the election where they have received the winning number of votes?
a. Are there guidelines prescribed in Atong Paglaum to be followed by
respondent Comelec in determining which partylist groups are qualified
4.6. May the COMELEC En Banc Resolutions of May 10 and 24, 2013 and NBOC
to participate in party-list elections?
Resolutions of May 24 and 28, 2013 be annulled and set aside?45

b. If there are these guidelines to be followed, were these adhered to by

THE COURT’S RULING
respondent Comelec?

After reviewing the parties’ pleadings, as well as the various resolutions attached thereto, we find merit
(2) Is the ground -- the Term-Sharing Agreement between Senior Citizens
in the petitioners’ contentions.1âwphi1
nominees -- a legal ground to cancel Senior Citizens’ Certificate of Registration?

SENIOR CITIZENS’ Right to Due Process

4.2. Whether or not COMELEC EN BANC RESOLUTION of MAY 24, 2013 is invalid for being
contrary to law and having been issued without or in excess of jurisdiction or in grave abuse
of discretion amounting to lack of jurisdiction? First, we shall dispose of the procedural issue. In their petitions, the two rival groups of SENIOR
CITIZENS are actually one in asserting that the organization’s disqualification and cancellation of its
registration and accreditation were effected in violation of its right to due process.
(1) The SUBSIDIARY ISSUES are:
The Arquiza Group argues that no notice and hearing were given to SENIOR CITIZENS for the organization. In connection with this, the Court lengthily discussed in Mendoza v. Commission on
cancellation of its registration on account of the term-sharing agreement of its nominees. The Arquiza Elections47 the concept of due process as applied to the COMELEC. We emphasized therein that:
Group maintains that SENIOR CITIZENS was summoned only to a single hearing date in the afternoon
of August 24, 2012 and the COMELEC’s review therein focused on the group’s programs,
The appropriate due process standards that apply to the COMELEC, as an administrative or quasi-
accomplishments, and other related matters. The Arquiza Group asserts that SENIOR CITIZENS was
judicial tribunal, are those outlined in the seminal case of Ang Tibay v. Court of Industrial Relations,
not advised, before or during the hearing, that the issue of the term-sharing agreement would constitute
quoted below:
a basis for the review of its registration and accreditation.

(1) The first of these rights is the right to a hearing, which includes the right of the party
Likewise, the Datol Group faults the COMELEC for cancelling the registration and accreditation of
interested or affected to present his own case and submit evidence in support thereof. x x x.
SENIOR CITIZENS without giving the latter the opportunity to show that it complied with the parameters
laid down in Atong Paglaum. The Arquiza Group confirms that after the promulgation of Atong
Paglaum, the COMELEC conducted summary hearings in executive sessions, without informing (2) Not only must the party be given an opportunity to present his case and to adduce
SENIOR CITIZENS. The Arquiza Group says that it filed a "Very Urgent Motion To Set Case For evidence tending to establish the rights which he asserts but the tribunal must consider the
Hearing Or To Be Included In The Hearing Set On Thursday, May 9, 2013," but its counsel found that evidence presented.
SENIOR CITIZENS was not included in the hearings wherein other party-list groups were heard by the
COMELEC. The Arquiza Group subsequently filed on May 10, 2013 a "2nd Very Urgent Motion To Set
(3) While the duty to deliberate does not impose the obligation to decide right, it does imply a
Case For Public Hearing," but the same was also not acted upon. The Arquiza Group alleges that it
necessity which cannot be disregarded, namely, that of having something to support its
only found out after the elections that the assailed May 10, 2013 Omnibus Resolution was issued and
decision. A decision with absolutely nothing to support it is a nullity, a place when directly
the Arquiza Group was not actually served a copy thereof.
attached.

Section 6 of Republic Act No. 794146 provides for the procedure relative to the review of the registration
of party-list organizations, to wit:
SEC. 6. Refusal and/or Cancellation of Registration. – The COMELEC may, motu proprio or upon
verified complaint of any interested party, refuse or cancel, after due notice and hearing, the registration
of any national, regional or sectoral party, organization or coalition on any of the following grounds:
(1) It is a religious sect or denomination, organization or association organized for religious
purposes;
(2) It advocates violence or unlawful means to seek its goal;
(4) Not only must there be some evidence to support a finding or conclusion, but the
evidence must be "substantial." "Substantial evidence is more than a mere scintilla. It means
such relevant evidence as a reasonable mind might accept as adequate to support a
conclusion."
(5) The decision must be rendered on the evidence presented at the hearing, or at least
contained in the record and disclosed to the parties affected.
(6) The Court of Industrial Relations or any of its judges, therefore, must act on its or his own
independent consideration of the law and facts of the controversy, and not simply accept the
views of a subordinate in arriving at a decision.

(3) It is a foreign party or organization;
(4) It is receiving support from any foreign government, foreign political party, foundation,
organization, whether directly or through any of its officers or members or indirectly through
third parties for partisan election purposes;
(5) It violates or fails to comply with laws, rules or regulations relating to elections;
(6) It declares untruthful statements in its petition;
(7) It has ceased to exist for at least one (1) year; or
(8) It fails to participate in the last two (2) preceding elections or fails to obtain at least two per
centum (2%) of the votes cast under the party-list system in the two (2) preceding elections
for the constituency in which it has registered.
Unquestionably, the twin requirements of due notice and hearing are indispensable before the
COMELEC may properly order the cancellation of the registration and accreditation of a party-list
(7) The Court of Industrial Relations should, in all controversial questions, render its decision
in such a manner that the parties to the proceeding can know the various issues involved,
and the reasons for the decisions rendered. The performance of this duty is inseparable from
the authority conferred upon it.
These are now commonly referred to as cardinal primary rights in administrative proceedings.
The first of the enumerated rights pertain to the substantive rights of a party at hearing stage of the
proceedings. The essence of this aspect of due process, we have consistently held, is simply the
opportunity to be heard, or as applied to administrative proceedings, an opportunity to explain one’s
side or an opportunity to seek a reconsideration of the action or ruling complained of. A formal or trial-
type hearing is not at all times and in all instances essential; in the case of COMELEC, Rule 17 of its
Rules of Procedure defines the requirements for a hearing and these serve as the standards in the
determination of the presence or denial of due process.
The second, third, fourth, fifth, and sixth aspects of the Ang Tibay requirements are reinforcements of
the right to a hearing and are the inviolable rights applicable at the deliberative stage, as the decision-
maker decides on the evidence presented during the hearing. These standards set forth the guiding
considerations in deliberating on the case and are the material and substantial components of decision-
making. Briefly, the tribunal must consider the totality of the evidence presented which must all be
found in the records of the case (i.e., those presented or submitted by the parties); the conclusion,
reached by the decision-maker himself and not by a subordinate, must be based on substantial
evidence.
Finally, the last requirement, relating to the form and substance of the decision of a quasi-judicial body,
further complements the hearing and decision-making due process rights and is similar in substance to
the constitutional requirement that a decision of a court must state distinctly the facts and the law upon
which it is based. As a component of the rule of fairness that underlies due process, this is the "duty to
give reason" to enable the affected person to understand how the rule of fairness has been
administered in his case, to expose the reason to public scrutiny and criticism, and to ensure that the
decision will be thought through by the decision-maker. (Emphases ours, citations omitted.)
In the instant case, the review of the registration of SENIOR CITIZENS was made pursuant to
COMELEC Resolution No. 9513 through a summary evidentiary hearing carried out on August 24, 2012
in SPP No. 12-157 (PLM) and SPP No. 12-191 (PLM). In this hearing, both the Arquiza Group and the
Datol Group were indeed given the opportunity to adduce evidence as to their continuing compliance
with the requirements for party-list accreditation. Nevertheless, the due process violation was
committed when they were not apprised of the fact that the term-sharing agreement entered into by the
nominees of SENIOR CITIZENS in 2010 would be a material consideration in the evaluation of the
organization’s qualifications as a party-list group for the May 13, 2013 elections. As it were, both
factions of SENIOR CITIZENS were not able to answer this issue squarely. In other words, they were
deprived of the opportunity to adequately explain their side regarding the term-sharing agreement
and/or to adduce evidence, accordingly, in support of their position.
In its Comment48 to the petitions, the COMELEC countered that petitioners were actually given the
opportunity to present their side on the issue of the term-sharing agreement during the hearing on April
18, 2012.49 Said hearing was allegedly conducted to determine petitioners’ continuing compliance for
accreditation as a party-list organization.
The Court is not persuaded. It is true that during the April 18, 2012 hearing, the rival groups of SENIOR
CITIZENS admitted to the existence of the term-sharing agreement. Contrary to the claim of
COMELEC, however, said hearing was conducted for purposes of discussing the petition of the Arquiza
Group in E.M. No. 12-040. To recall, said petition asked for the confirmation of the replacement of Rep.
Kho, who had tendered his resignation effective on December 31, 2011. More specifically, the transcript
of the hearing reveals that the focus thereof was on the petition filed by the Arquiza group and its
subsequent manifestation, praying that the group be allowed to withdraw its petition. Also, during the
hearing, COMELEC Chairman Brillantes did admonish the rival factions of SENIOR CITIZENS about
their conflicts and warned them about the complications brought about by their term-sharing agreement.
However, E.M. No. 12-040 was not a proceeding regarding the qualifications of SENIOR CITIZENS as
a party-list group and the issue of whether the term-sharing agreement may be a ground for
disqualification was neither raised nor resolved in that case. Chairman Brillantes’s remonstration was
not sufficient as to constitute a fair warning that the term-sharing agreement would be considered as a
ground for the cancellation of SENIOR CITIZENS’ registration and accreditation.
Furthermore, after the promulgation of Atong Paglaum, which remanded, among other cases, the
disqualification cases involving SENIOR CITIZENS, said organization should have still been afforded
the opportunity to be heard on the matter of the term-sharing agreement, either through a hearing or
through written memoranda. This was the proper recourse considering that the COMELEC was about
to arrive at a final determination as to the qualification of SENIOR CITIZENS. Instead, the COMELEC
issued the May 10, 2013 Omnibus Resolution in SPP No. 12-157 (PLM) and SPP No. 12-191 (PLM)
without conducting any further proceedings thereon after its receipt of our Decision in Atong Paglaum.
The Prohibition on Term-sharing
The second issue both raised by the petitioners herein constitute the threshold legal issue of the instant
cases: whether the COMELEC committed grave abuse of discretion amounting to lack or excess of
jurisdiction when it issued the assailed Omnibus Resolution, disqualifying and cancelling the registration
and accreditation of SENIOR CITIZENS solely on account of its purported violation of the prohibition
against term-sharing.
The Datol Group argues that the public policy prohibiting term-sharing was provided for under Section
7, Rule 4 of COMELEC Resolution No. 9366, which was promulgated only on February 21, 2012.
Hence, the resolution should not be made to apply retroactively to the case of SENIOR CITIZENS as
nothing therein provides for its retroactive effect. When the term-sharing agreement was executed in
2010, the same was not yet expressly proscribed by any law or resolution.
Furthermore, the Datol Group points out that the mere execution of the Irrevocable Covenant between
the nominees of SENIOR CITIZENS for the 2010 elections should not have been a ground for the
cancellation of the organization’s registration and accreditation because the nominees never actually
implemented the agreement.
In like manner, the Arquiza Group vehemently stresses that no term-sharing actually transpired
between the nominees of SENIOR CITIZENS. It explained that whatever prior arrangements were
made by the nominees on the term-sharing agreement, the same did not materialize given that the
resignation of Rep. Kho was disapproved by the Board of Trustees and the members of SENIOR
CITIZENS.
Still, granting for the sake of argument that the term-sharing agreement was actually implemented, the
Arquiza Group points out that SENIOR CITIZENS still cannot be held to have violated Section 7 of
Resolution No. 9366. The term-sharing agreement was entered into in 2010 or two years prior to the
promulgation of said resolution on February 21, 2012. Likewise, assuming that the resolution can be
applied retroactively, the Arquiza Group contends that the same cannot affect SENIOR CITIZENS at it
already earned a vested right in 2010 as party-list organization.
Article 4 of the Civil Code states that "laws shall have no retroactive effect, unless the contrary is
provided." As held in Commissioner of Internal Revenue v. Reyes,50 "the general rule is that statutes
are prospective. However, statutes that are remedial, or that do not create new or take away vested
rights, do not fall under the general rule against the retroactive operation of statutes." We also reiterated
in Lintag and Arrastia v. National Power Corporation51 that:
It is a well-entrenched principle that statutes, including administrative rules and regulations, operate
prospectively unless the legislative intent to the contrary is manifest by express terms or by necessary
implication because the retroactive application of a law usually divests rights that have already become
vested. This is based on the Latin maxim: Lex prospicit non respicit (the law looks forward, not
backward). (Citations omitted.)
True, COMELEC Resolution No. 9366 does not provide that it shall have retroactive effect.
Nonetheless, the Court cannot subscribe to the argument of the Arquiza Group that SENIOR CITIZENS
already earned a vested right to its registration as a party-list organization.
Montesclaros v. Commission on Elections52 teaches that "a public office is not a property right. As the
Constitution expressly states, a ‘Public office is a public trust.’ No one has a vested right to any public
office, much less a vested right to an expectancy of holding a public office." Under Section 2(5), Article
IX-C of the Constitution, the COMELEC is entrusted with the function to "register, after sufficient
publication, political parties, organizations, or coalitions which, in addition to other requirements, must
present their platform or program of government." In fulfilling this function, the COMELEC is duty-bound
to review the grant of registration to parties, organizations, or coalitions already registered in order to (1) The Extremely Very Urgent Petition for Certiorari (With Prayer for the Forthwith Issuance
ensure the latter’s continuous adherence to the requirements prescribed by law and the relevant rulings of a Writ of Preliminary Injunction and Temporary Restraining Order [TRO] and/or Status Quo
of this Court relative to their qualifications and eligibility to participate in party-list elections. Ante Order [SQAO]) in G.R. Nos. 206844-45 and the Very Urgent Petition for Certiorari (With
Application for a Temporary Restraining Order and Writ of Preliminary Injunction) in G.R. No.
206982 are GRANTED;
The Arquiza Group cannot, therefore, object to the retroactive application of COMELEC Resolution No.
9366 on the ground of the impairment of SENIOR CITIZENS’ vested right.
(2) The Omnibus Resolution dated May 10, 2013 of the Commission on Elections En Banc in
SPP No. 12-157 (PLM) and SPP No. 12-191 (PLM) is REVERSED and SET ASIDE insofar
Be that as it may, even if COMELEC Resolution No. 9366 expressly provided for its retroactive
as Coalition of Associations of Senior Citizens in the Philippines, Inc. is concerned; and
application, the Court finds that the COMELEC En Banc indeed erred in cancelling the registration and
accreditation of SENIOR CITIZENS.
(3) The Commission on Elections En Bane is ORDERED to PROCLAIM the Coalition of
Associations of Senior Citizens in the Philippines, Inc. as one of the winning party-list
The reason for this is that the ground invoked by the COMELEC En Banc, i.e., the term-sharing
organizations during the May 13, 20 13 elections with the number of seats it may be entitled
agreement among the nominees of SENIOR CITIZENS, was not implemented. This fact was
to based on the total number of votes it garnered during the said elections.
manifested by the Arquiza Group even during the April 18, 2012 hearing conducted by the COMELEC
En Banc in E.M. No. 12-040 wherein the Arquiza Group manifested that it was withdrawing its petition
for confirmation and approval of Rep. Kho’s replacement. Thereafter, in its Resolution dated June 27, No costs.
2012 in E.M. No. 12-040, the COMELEC En Banc itself refused to recognize the term-sharing
agreement and the tender of resignation of Rep. Kho. The COMELEC even declared that no vacancy
SO ORDERED.
was created despite the execution of the said agreement. Subsequently, there was also no indication
that the nominees of SENIOR CITIZENS still tried to implement, much less succeeded in implementing,
the term-sharing agreement. Before this Court, the Arquiza Group and the Datol Group insist on this G.R. No. L-28329 August 17, 1975
fact of non-implementation of the agreement. Thus, for all intents and purposes, Rep. Kho continued to
hold his seat and served his term as a member of the House of Representatives, in accordance with
COMMISSIONER OF CUSTOMS, petitioner, 
COMELEC Resolution No. 9366 and the COMELEC En Banc ruling in E.M. No. 12-040. Curiously, the
vs.
COMELEC is silent on this point.
ESSO STANDARD EASTERN, INC., (Formerly: Standard-Vacuum Refining Corp.
(Phil.), respondent.
Indubitably, if the term-sharing agreement was not actually implemented by the parties thereto, it
appears that SENIOR CITIZENS, as a party-list organization, had been unfairly and arbitrarily penalized
Office of the Solicitor General Antonio P. Barredo, Assistant Solicitor General Antonio A. Torres and
by the COMELEC En Banc. Verily, how can there be disobedience on the part of SENIOR CITIZENS
Solicitor Antonio M. Martinez for petitioner.
when its nominees, in fact, desisted from carrying out their agreement? Hence, there was no violation
of an election law, rule, or regulation to speak of. Clearly then, the disqualification of SENIOR
CITIZENS and the cancellation of its registration and accreditation have no legal leg to stand on. Carlos J. Valdez & Associates for respondent.

In sum, the due process violations committed in this case and the lack of a legal ground to disqualify
the SENIOR CITIZENS spell out a finding of grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of the COMELEC En Banc. We are, thus, left with no choice but to strike down
the assailed Omnibus Resolution dated May 10, 2013 in SPP No. 12-157 (PLM) and SPP No. 12-191
(PLM).
In light of the foregoing discussion, the Court finds no need to discuss the other issues raised by the
petitioners. In particular, the dispute between the rival factions of SENIOR CITIZENS, not being an
issue raised here, should be threshed out in separate proceedings before the proper tribunal having
jurisdiction thereon.
ESGUERRA, J.:
Appeal from the decision of the Court of Tax Appeals reversing the Commissioner of Customs' decision
holding respondent ESSO Standard Eastern, Inc., (formerly the Standard-Vacuum Refining Corporation
(Phil.) and hereinafter referred to as ESSO) liable in the total sum of P775.62 as special import tax on
certain articles imported by the latter under Republic Act No. 387, otherwise known as the Petroleum
Act of 1949.

Having established that the COMELEC En Banc erred in ordering the disqualification of SENIOR
CITIZENS and the cancellation of its registration and accreditation, said organization is entitled to be
proclaimed as one of the winning party-list organizations in the recently concluded May 13, 2013
elections.
WHEREFORE, the Court hereby rules that:
Respondent ESSO is the holder of Refining Concession No. 2, issued by the Secretary of Agriculture
and Natural Resources on December 9, 1957, and operates a petroleum refining plant in Limay Bataan.
Under Article 103 of Republic Act No. 387 which provides: "During the five years following the granting
of any concession, the concessionaire may import free of customs duty, all equipment, machinery,
material, instruments, supplies and accessories," respondent imported and was assessed the special
import tax (which it paid under protest) on the following separate importations:
1) One carton, scientific instruments with C & F value of assessed a special import
tax in the amount of P31.98 (Airport Protest No. 10);
 2) One carton of recorder parts with C & F value of $221.56; assessed special
import tax in the amount of P43.82 (Airport Protest No. 11);
3) One carton of valves with C & F value of $310.58; assessed special import tax in
the amount of P60.72 (Airport Protest No. 12);
4) One box of parts for Conversion boilers and Auxiliary Equipment with C & F
value of $2,389.69; assessed special import tax in the amount of P467.00 (Airport
Protest No. 15);
5) One carton of X-ray films with C & F value of $132.80; assessed special import
tax in the amount of P26.00 (Airport Protest No. 16); and
6) One carton of recorder parts with C & F value of $750.39; assessed special
import tax in the amount of P147.00 (Airport Protest No. 17).1
The Collector of Customs on February 16, 1962, held that respondent ESSO was subject to the
payment of the special import tax provided in Republic Act No. 1394, as amended by R.A. No. 2352,
and dismissed the protest.2
On March 1, 1962, respondent appealed the ruling of the Collector of Customs to the Commissioner of
Customs who, on March 19, 1965, affirmed the decision of said Collector of Customs.3
On July 2, 1965, respondent ESSO filed a petition with the Court of Tax Appeals for review of the
decision of the Commissioner of Customs.
The Court of Tax Appeals, on September 30, 1967, reversed the decision of herein petitioner
Commissioner of Customs and ordered refund of the amount of P775.62 to respondent ESSO which
the latter had paid under protest.4
This decision of the Court of Tax Appeals is now before this Court for review.
Petitioner contends that the special import tax under Republic Act No. 1394 is separate and distinct
from the customs duty prescribed by the Tariff and Customs Code, and that the exemption enjoyed by
respondent ESSO from the payment of customs duties under the Petroleum net of 1949 does not
include exemption from the payment of the special import tax provided in R.A. No. 1394.5
For its stand petitioner puts forward this rationale:
A perusal of the provisions of R.A. No. 1394 will show that the legislature
considered the special import tax as a tax distinct from customs duties as witness
the fact that Section 2(a) of the said law made separate mention of customs duties
and special import tax when it provided that ... if as a result of the application of the
schedule therein, the total revenue derived from the customs duties and from the
special import tax on goods, ... imported from the United States is less in any
calendar year than the proceeds from the exchange tax imposed under Republic
Act Numbered Six Hundred and One, as amended, on such goods, articles or
products during the calendar year 1955, the President may, by proclamation,
suspend the reduction of the special import tax for the next succeeding calendar
year ....
If it were the intention of Congress to exempt the holders of petroleum refinery
concessions like the protestant (respondent herein), such exemption should have
been clearly stated in the statute. Exemptions are never presumed. They must be
expressed in the clearest and most unambiguous language and not left to mere
implication.6
Specifically, petitioner in his brief submitted two assignment of errors allegedly committed by the Court
of Tax Appeals in the controverted decision, to wit:
1st assignment of error:
THE COURT OF TAX APPEALS ERRED IN HOLDING THAT THE TERM
"CUSTOMS DUTY" IN ARTICLE 103 OF REPUBLIC ACT NO. 387 INCLUDES
THE SPECIAL IMPORT TAX IMPOSED BY REPUBLIC ACT NO. 1394;
2nd assignment of error:
THE COURT OF TAX APPEALS ERRED IN HOLDING THAT EXEMPTION FROM
PAYMENT OF CUSTOMS DUTIES UNDER REPUBLIC ACT NO. 387 INCLUDES
EXEMPTION FROM PAYMENT OF THE SPECIAL IMPORT TAX.
On the other hand, the Court of Tax Appeals rationalized the ground for its ruling thus:
If we are to adhere, as we should, to the plain and obvious meaning of words in
consonance with settled rules of interpretation, it seems clear that the special
import tax is an impost or a charge on the importation or bringing into the
Philippines of all goods, articles or products subject thereto, for the phrase "import
tax on all goods, articles or products imported or brought into the Philippines" in
explicit and unambiguous terms simply means customs duties. It is hardly
necessary to add that "customs duties" are simply taxes assessed on merchandise
imported from, or exported to a foreign country.
And being a charge upon importation, the special import tax is essentially a
customs duty, or at least partakes of the character thereof.
Citing numberous American decisions and definitions of terms "customs duties," "duties," "imposts,"
"levies," "tax," and "tolls," and their distinctions, including some pronouncements of this Court on the
subject, the Court of Tax Appeals in its decision, went to great lengths to show that the term "special
import tax" as used in R.A. No. 1394 includes customs duties. It sees the special import tax as nothing
but an impost or a charge on the importation or bringing into the Philippines of goods, articles or
products.7
To clinch its theory the Court of Tax Appeals cited the similarity in the basis of computation of the
customs duty as well as the similarity in the phraseology of Section 3 of Republic Act No. 1394 (which
established the special import tax) and Section 9-01 of the Tariff & Customs code (the basic law
providing for and regulating the imposition of customs duties and imposts on importations).8
For its part, private respondent, ESSO, in its answer to the petition, leaned heavily on the same
arguments as those given by the Tax Court, the burden of which is that the special import tax law is a
customs law. 9
It is clear that the only issue involved in this case is whether or not the exemption enjoyed by herein construction as will make it harmonize with the pre-existing body of laws. Antagonism between the Act
private respondent ESSO Standard Eastern, Inc. from customs duties granted by Republic Act No. 387, to be interpreted and existing or previous laws is to be avoided, unless it was clearly the intention of the
or the Petroleum Act of 1949, should embrace or include the special import tax imposed by R.A. No. legislature that such antagonism should arise and one amends or repeals the other, either expressly or
1394, or the Special Import Tax Law. by implication.

We have examined the records of this case thoroughly and carefully considered the arguments
presented by both parties and We are convinced that the only thing left to this Court to do is to
determine the intention of the legislature through interpretation of the two statutes involved, i.e.,
Republic Act No. 1394 and Republic Act No. 387.
It is a well accepted principle that where a statute is ambiguous, as Republic Act No. 1394 appears to
be, courts may examine both the printed pages of the published Act as well as those extrinsic matters
that may aid in construing the meaning of the statute, such as the history of its enactment, the reasons
for the passage of the bill and purposes to be accomplished by the measure. 10
Another rule applied by this Court is that the courts may take judicial notice of the origin and history of
the statutes which they are called upon to construe and administer, and of facts which affect their
derivation, validity and operation. 12
Applying the above stated rules and principles, let us consider the history, the purpose and objectives
of Republic Act No. 387 as it relates to Republic Act No. 1394 and other laws passed by the Congress
of the Philippines insofar as they relate to each other.
Republic Act No. 387, the Petroleum Act of 1949, has this for its title, to wit:

Petitioner in the first assignment of error took exception to the finding of the Court of Tax Appeals that
AN ACT TO PROMOTE THE EXPLORATION, DEVELOPMENT, EXPLOITATION,
"The language of Republic Act No. 1394 seems to leave no room for doubt that the law intends that the
AND UTILIZATION OF THE PETROLEUM RESOURCES OF THE PHILIPPINES;
phrase 'Special import tax' is taken to include customs duties" and countered with the argument that
TO ENCOURAGE THE CONSERVATION OF SUCH PETROLEUM RESOURCES;
"An examination of the provisions of Republic Act No. 1394 will indubitably reveal that Congress
TO AUTHORIZE THE SECRETARY OF AGRICULTURE AND NATURAL
considered the special import tax as a tax different from customs duties, as may be seen from the fact
RESOURCES TO CREATE AN ADMINISTRATION UNIT AND A TECHNICAL
that Section 2(a) of said law made separate mention of customs duties and special import tax ..." Thus:
BOARD IN THE BUREAU OF MINES; TO APPROPRIATE FUNDS THEREFORE;
AND FOR OTHER PURPOSES.
... if as a result of the application of the schedule therein the total revenue derived
from the customs duties and from the special import tax on goods, ... imported from
Art. 103 of said Act reads:
the United States is less in any calendar year than the proceeds from the exchange
tax imposed under Republic Act Numbered Six Hundred and One, as amended, on
such goods, articles or products during the calendar year 1955, the President may, ART. 103. Customs duties. — During the five years following the granting of any
by proclamation, suspend the reduction of the special import tax for the next concessions, the concessionaire may import free of customs duty, all equipment,
succeeding calendar year ... machinery, material, instruments, supplies and accessories.

Petitioner further argues: xxx xxx xxx

Customs duties are prescribed by the Tariff and Customs Code, while the special Art. 102 of the Same law insofar as pertinent, provides:
import tax is provided for by Republic Act No. 1394. If our legislature had intended
to classify the special import tax as customs duty, the said Art would not have
ART. 102. Work obligations, taxes, royalties not to be charged. — ...; nor shall any
expressly exempted from payment of the special Import tax importations of
other special taxes or levies be applied to such concessions, nor shall
machinery, equipment, accessories, and spare parts for use of industries, without
concessionaires under this Act be subjected to any provincial, municipal, or other
distinguishing whether the industries referred to are the industries exempt from the
local taxes or levies; nor shall any sales tax be charged on any petroleum
payment of Customs duties or the non-exempt ones (Sec. 6). It is sufficient that the
produced from the concession or portion thereof, manufactured by the
imported machinery, etc., is for the use of any industry. 11
concessionaire and used in the working of his concession. ....

A study of petitioner's two assignments of errors shows that one is anchored on practically the same
Art. 104, still of the same Act, reads:
ground as the other: both involve the interpretation of R.A. No. 387 (The Petroleum Act of 1949) in
relation with R.A. No. 1394 (The Special Import Tax Law).
ART. 104. No export to be imposed. — No export tax shall be levied upon
petroleum produced from concessions granted under this Act.
While the petitioner harps on particular clauses and phrases found in the two cited laws, which in a way
was likewise resorted to by the respondent ESSO, it would do Us well to restate the fundamental rule in
the construction of a statute. The title of Republic Act No. 387 and the provisions of its three articles just cited give a clue to the
intent of the Philippine legislature, which is to encourage the exploitation and development of the
petroleum resources of the country. Through the instrumentality of said law, it declared in no uncertain
In order to determine the true intent of the legislature, the particular clauses and phrases of the statute
terms that the intensification of the exploration for petroleum must be carried on unflinchingly even if, for
should not be taken as detached and isolated expressions, but the whole and every part thereof must
the time being, no taxes, both national and local, may be collected from the industry. This is the
be considered in fixing the meaning of any of its parts. In fact every statute should receive such
unequivocal intention of the Philippine Congress when the language of the Petroleum Act is examined.
Until this law or any substantial portion thereof is clearly amended or repealed by subsequent statutes,
the intention of the legislature must be upheld.
Against this unambiguous language of R.A. No. 387, there is the subsequent legislation, R.A. No. 1394,
the Special Import Tax Law, which, according to the herein petitioner, shows that the legislature
considered the special import tax as a tax distinct from customs duties.
Republic Act No. 1394, otherwise known as the Special Import Tax Law, is entitled as follows:
AN ACT TO IMPOSE A SPECIAL IMPORT TAX ON ALL GOODS, ARTICLES OR
PRODUCTS IMPORTED OR BROUGHT INTO THE PHILIPPINES, AND TO
REPEAL REPUBLIC ACTS NUMBERED SIX HUNDRED AND ONE, EIGHT
HUNDRED AND FOURTEEN, EIGHT HUNDRED AND SEVENTY-ONE, ELEVEN
HUNDRED AND SEVENTY-FIVE. ELEVEN HUNDRED AND NINETY-SEVEN
AND THIRTEEN HUNDRED AND SEVENTY FIVE.
The title indicates unmistakably that it is repealing six prior statutes. As will be seen later, all these laws
dealt with the imposition of a special excise tax on foreign exchange or other form of levy on importation
of goods into the country.
Section I of Republic Act No. 1394 reads as follows:
SECTION 1. Except as herein otherwise provided, there shall be levied, collected
and paid as special import tax on all goods, articles or products imported or
brought into the Philippines, irrespective of source, during the period and in
accordance with the rates provided for in the following schedule:
xxx xxx xxx
It would appear that by the provision of Section 1 of this Act, the pertinent provision of the Petroleum
Law, for which there appears to be no proviso to the contrary has been modified or altered.
Section 6 of Republic Act No. 1394 declares that the tax provided for in its Section I shall not be
imposed against importation into the Philippines of machinery and/or raw materials to be used by new
and necessary industries as determined in accordance with R A. No. 901 and a long list of other goods,
articles, machinery, equipment, accessories and others.
We shall now examine the six statutes repealed by R.A. No. 1394, namely:
R.A. No. 601 is an Act imposing a special excise tax of 17% on foreign exchange
sold by the Central Bank or its agents. This is known as the Exchange Tax Law;
R.A. No. 814 amended Sections one, two and five and repealed Sections three
and four of R.A. No. 601;
R.A. No. 871 amended Sections one and two of R.A. No. 601, as amended earlier
by R.A. No. 814;
R.A. No. 1175 amended further Sections one and two of R.A. No. 601, as
amended;
R.A. No. 1197 amended furthermore R.A. No. 601 as amended previously by R.A.
No. 1175;
R.A. No. 1375 amended Sections one and two of R.A. No. 601 as amended by
R.A. Nos. 1175 and 1197.
As can be seen from the foregoing, in one fell swoop, Republic Act No. 1394
repealed and revoked six earlier statutes which had something to do with the
imposition of special levies and/or exemption of certain importations from the
burden of the special import taxes or levies. On the other hand, it is apparent that
R.A. No. 387, the Petroleum Act, had been spared from the pruning knife of
Congress, although this latter law had granted more concessions and tax
exemption privileges than any of the statutes that were amended, repealed or
revoked by R.A. No. 1394. The answer must be that the Congress of the Philippine
saw fit to preserve the privileges granted under the Petroleum Law of 1949 in order
to keep the door open to the exploitation and development of the petroleum
resources of the country with such incentives as are given under that law.
This ascertained will and intention of the legislature finds a parallelism in a case
brought earlier before this Court.
A fishpond owner was slapped with taxes as a "merchant" by the Collector of Internal Revenue. He paid
under protest and filed an action to recover the taxes paid, claiming that he was an agriculturist and not
a merchant. When this Court was called upon to interpret the provisions of the Internal Revenue Law on
whether fish is an agricultural product which falls under the exemption provisions of said law, it inquired
into the purpose of the legislature in establishing the exemption for agricultural products. We held:
The first inquiry, therefore, must relate to the purpose the legislature had in mind in
establishing the exemption contained in the clause now under consideration. It
seems reasonable to assume that it was due to the belief on the part of the law-
making body that by exempting agricultural products from this tax the farming
industry would be favored and the development of the resources of the country
encouraged. .... 13
Having this in mind, particularly the manner in which extrinsic aids the history of the enactment of the
statute and purpose of the legislature in employing a clause or provision in the law had been applied in
determining the true intent of the lawmaking body, We are convinced that R.A. No. 387, The Petroleum
Act of 1949, was intended to encourage the exploitation, exploration and development of the petroleum
resources of the country by giving it the necessary incentive in the form of tax exemptions. This is
the raison d etre for the generous grant of tax exemptions to those who would invest their financial
resources towards the achievement of this national economic goal.
On the contention of herein petitioner that the exemptions enjoyed by respondent ESSO under R.A. No.
387 have been abrogated by R.A. No. 1394, We hold that repeal by implication is not favored unless it
is manifest that the legislature so intended. As laws are presumed to be passed with deliberation and
with full knowledge of all existing ones on the subject, it is logical to conclude that in passing a statute it
was not intended to interfere with or abrogate any former law relating to the same matter, unless the
repugnancy between the two is not only irreconcilable but also clear and convincing as a result of the
language used, or unless the latter act fully embraces the subject matter of the earlier. 14
As observed earlier, Congress lined up for revocation by Republic Act No. 1394 six statutes dealing
with the imposition of special imposts or levies or the granting of exemptions from special import taxes.
Yet, considering the tremendous amount of revenues it was losing under the Petroleum Law of 1949, it
failed to include the latter statute among those it chose to bury by the Special Import Taw Law. The
reason for this is very clear: The legislature wanted to continue the incentives for the continuing
development of the petroleum industry.
It is not amiss to mention herein passing that contrary to the theory of the herein petitioner, R.A. No.
387 had not been repealed by R.A. No. 2352 which expressly abrogated Section 6 of R.A. No. 1394 but
did not repeal any part of R.A. No. 387. Therefore, the exemption granted by Republic Act No. 387 still
stands.
WHEREFORE, taking into consideration the weight given by this Court to the findings and conclusions
of the Court of Tax Appeals on a matter it is well-equipped to handle, which findings and conclusions
We find no reason to overturn, the petition of the Commissioner of Customs to reverse the decision of
the Court of Tax Appeals should be, as it is hereby, denied.
No costs.
SO ORDERED.
Thus, an Information was filed against petitioner for the crime of estafa, which reads as follows:
That on or about the fifth (5th) day of July 1991, in the City of Olongapo, Philippines, and within the
jurisdiction of this Honorable Court, the above-named accused, after having received from one Danilo
Tangcoy, one (1) men's diamond ring, 18k, worth ₱45,000.00; one (1) three-baht men's bracelet, 22k,
worth ₱25,000.00; one (1) two-baht ladies' bracelet, 22k, worth ₱12,000.00, or in the total amount of
Ninety-Eight Thousand Pesos (₱98,000.00), Philippine currency, under expressed obligation on the
part of said accused to remit the proceeds of the sale of the said items or to return the same, if not sold,
said accused, once in possession of the said items, with intent to defraud, and with unfaithfulness and
abuse of confidence, and far from complying with his aforestated obligation, did then and there wilfully,
unlawfully and feloniously misappropriate, misapply and convert to his own personal use and benefit
the aforesaid jewelries (sic) or the proceeds of the sale thereof, and despite repeated demands, the
accused failed and refused to return the said items or to remit the amount of Ninety- Eight Thousand
Pesos (₱98,000.00), Philippine currency, to the damage and prejudice of said Danilo Tangcoy in the
aforementioned amount.
CONTRARY TO LAW.
On January 28, 1992, petitioner, with the assistance of his counsel, entered a plea of not guilty.
Thereafter, trial on the merits ensued.

The prosecution, to prove the above-stated facts, presented the lone testimony of Danilo Tangcoy. On
G.R. No. 180016               April 29, 2014
the other hand, the defense presented the lone testimony of petitioner, which can be summarized, as
follows:
LITO CORPUZ, Petitioner, 
vs.
Petitioner and private complainant were collecting agents of Antonio Balajadia, who is engaged in the
PEOPLE OF THE PHILIPPINES, Respondent.
financing business of extending loans to Base employees. For every collection made, they earn a
commission. Petitioner denied having transacted any business with private complainant.
DECISION
However, he admitted obtaining a loan from Balajadia sometime in 1989 for which he was made to sign
PERALTA, J.: a blank receipt. He claimed that the same receipt was then dated May 2, 1991 and used as evidence
against him for the supposed agreement to sell the subject pieces of jewelry, which he did not even
see.
This is to resolve the Petition for Review on Certiorari, under Rule 45 of the Rules of Court, dated
November 5, 2007, of petitioner Lito Corpuz (petitioner), seeking to reverse and set aside the
Decision1 dated March 22, 2007 and Resolution2 dated September 5, 2007 of the Court of Appeals After trial, the RTC found petitioner guilty beyond reasonable doubt of the crime charged in the
(CA), which affirmed with modification the Decision3 dated July 30, 2004 of the Regional Trial Court Information. The dispositive portion of the decision states:
(RTC), Branch 46, San Fernando City, finding the petitioner guilty beyond reasonable doubt of the
crime of Estafa under Article 315, paragraph (1), sub-paragraph (b) of the Revised Penal Code.
WHEREFORE, finding accused LITO CORPUZ GUILTY beyond reasonable doubt of the felony of
Estafa under Article 315, paragraph one (1), subparagraph (b) of the Revised Penal Code;
The antecedent facts follow.
there being no offsetting generic aggravating nor ordinary mitigating circumstance/s to vary the penalty
Private complainant Danilo Tangcoy and petitioner met at the Admiral Royale Casino in Olongapo City imposable;
sometime in 1990. Private complainant was then engaged in the business of lending money to casino
players and, upon hearing that the former had some pieces of jewelry for sale, petitioner approached
accordingly, the accused is hereby sentenced to suffer the penalty of deprivation of liberty consisting of
him on May 2, 1991 at the same casino and offered to sell the said pieces of jewelry on commission
an imprisonment under the Indeterminate Sentence Law of FOUR (4) YEARS AND TWO (2) MONTHS
basis. Private complainant agreed, and as a consequence, he turned over to petitioner the following
of Prision Correccional in its medium period AS MINIMUM, to FOURTEEN (14) YEARS AND EIGHT (8)
items: an 18k diamond ring for men; a woman's bracelet; one (1) men's necklace and another men's
MONTHS of Reclusion Temporal in its minimum period AS MAXIMUM; to indemnify private
bracelet, with an aggregate value of ₱98,000.00, as evidenced by a receipt of even date. They both
complainant Danilo Tangcoy the amount of ₱98,000.00 as actual damages, and to pay the costs of suit.
agreed that petitioner shall remit the proceeds of the sale, and/or, if unsold, to return the same items,
within a period of 60 days. The period expired without petitioner remitting the proceeds of the sale or
returning the pieces of jewelry. When private complainant was able to meet petitioner, the latter SO ORDERED.
promised the former that he will pay the value of the said items entrusted to him, but to no avail.
The case was elevated to the CA, however, the latter denied the appeal of petitioner and affirmed the
decision of the RTC, thus:
WHEREFORE, the instant appeal is DENIED. The assailed Judgment dated July 30, 2004 of the RTC
of San Fernando City (P), Branch 46, is hereby AFFIRMED with MODIFICATION on the imposable
prison term, such that accused-appellant shall suffer the indeterminate penalty of 4 years and 2 months
of prision correccional, as minimum, to 8 years of prision mayor, as maximum, plus 1 year for each
additional ₱10,000.00, or a total of 7 years. The rest of the decision stands.
SO ORDERED.
Petitioner, after the CA denied his motion for reconsideration, filed with this Court the present petition
stating the following grounds:
A. THE HONORABLE COURT OF APPEALS ERRED IN CONFIRMING THE ADMISSION AND
APPRECIATION BY THE LOWER COURT OF PROSECUTION EVIDENCE, INCLUDING ITS
EXHIBITS, WHICH ARE MERE MACHINE COPIES, AS THIS VIOLATES THE BEST EVIDENCE
RULE;
B. THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE LOWER COURT'S
FINDING THAT THE CRIMINAL INFORMATION FOR ESTAFA WAS NOT FATALLY DEFECTIVE
ALTHOUGH THE SAME DID NOT CHARGE THE OFFENSE UNDER ARTICLE 315 (1) (B) OF THE
REVISED PENAL CODE IN THAT -
1. THE INFORMATION DID NOT FIX A PERIOD WITHIN WHICH THE SUBJECT
[PIECES OF] JEWELRY SHOULD BE RETURNED, IF UNSOLD, OR THE
MONEY TO BE REMITTED, IF SOLD;
2. THE DATE OF THE OCCURRENCE OF THE CRIME ALLEGED IN THE
INFORMATION AS OF 05 JULY 1991 WAS MATERIALLY DIFFERENT FROM
THE ONE TESTIFIED TO BY THE PRIVATE COMPLAINANT WHICH WAS 02
MAY 1991;
C. THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE LOWER COURT'S
FINDING THAT DEMAND TO RETURN THE SUBJECT [PIECES OF] JEWELRY, IF UNSOLD, OR
REMIT THE PROCEEDS, IF SOLD – AN ELEMENT OF THE OFFENSE – WAS PROVED;
D. THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE LOWER COURT'S
FINDING THAT THE PROSECUTION'S CASE WAS PROVEN BEYOND REASONABLE DOUBT
ALTHOUGH -
1. THE PRIVATE COMPLAINANT TESTIFIED ON TWO (2) VERSIONS OF THE
INCIDENT;
2. THE VERSION OF THE PETITIONER – ACCUSED IS MORE
STRAIGHTFORWARD AND LOGICAL, CONSISTENT WITH HUMAN
EXPERIENCE;
3. THE EQUIPOISE RULE WAS NOT APPRECIATED IN AND APPLIED TO THIS
CASE;
4. PENAL STATUTES ARE STRICTLY CONSTRUED AGAINST THE STATE.
In its Comment dated May 5, 2008, the Office of the Solicitor General (OSG) stated the following
counter-arguments:
The exhibits were properly admitted inasmuch as petitioner failed to object to their admissibility.
The information was not defective inasmuch as it sufficiently established the designation of the offense
and the acts complained of.
The prosecution sufficiently established all the elements of the crime charged.
This Court finds the present petition devoid of any merit.
The factual findings of the appellate court generally are conclusive, and carry even more weight when
said court affirms the findings of the trial court, absent any showing that the findings are totally devoid of
support in the records, or that they are so glaringly erroneous as to constitute grave abuse of
discretion.4 Petitioner is of the opinion that the CA erred in affirming the factual findings of the trial court.
He now comes to this Court raising both procedural and substantive issues.
According to petitioner, the CA erred in affirming the ruling of the trial court, admitting in evidence a
receipt dated May 2, 1991 marked as Exhibit "A" and its submarkings, although the same was merely a
photocopy, thus, violating the best evidence rule. However, the records show that petitioner never
objected to the admissibility of the said evidence at the time it was identified, marked and testified upon
in court by private complainant. The CA also correctly pointed out that petitioner also failed to raise an
objection in his Comment to the prosecution's formal offer of evidence and even admitted having signed
the said receipt. The established doctrine is that when a party failed to interpose a timely objection to
evidence at the time they were offered in evidence, such objection shall be considered as waived.5
Another procedural issue raised is, as claimed by petitioner, the formally defective Information filed
against him. He contends that the Information does not contain the period when the pieces of jewelry
were supposed to be returned and that the date when the crime occurred was different from the one
testified to by private complainant. This argument is untenable. The CA did not err in finding that the
Information was substantially complete and in reiterating that objections as to the matters of form and
substance in the Information cannot be made for the first time on appeal. It is true that the gravamen of
the crime of estafa under Article 315, paragraph 1, subparagraph (b) of the RPC is the appropriation or
conversion of money or property received to the prejudice of the owner6 and that the time of occurrence
is not a material ingredient of the crime, hence, the exclusion of the period and the wrong date of the
occurrence of the crime, as reflected in the Information, do not make the latter fatally defective. The CA
ruled:
x x x An information is legally viable as long as it distinctly states the statutory designation of the
offense and the acts or omissions constitutive thereof. Then Section 6, Rule 110 of the Rules of Court
provides that a complaint or information is sufficient if it states the name of the accused;
the designation of the offense by the statute; the acts or omissions complained of as constituting the
offense; the name of the offended party; the approximate time of the commission of the offense, and
the place wherein the offense was committed. In the case at bar, a reading of the subject Information
shows compliance with the foregoing rule. That the time of the commission of the offense was stated as
" on or about the fifth (5th) day of July, 1991" is not likewise fatal to the prosecution's cause considering
that Section 11 of the same Rule requires a statement of the precise time only when the same is a
material ingredient of the offense. The gravamen of the crime of estafa under Article 315, paragraph 1 a I looked for him for a week, sir.
(b) of the Revised Penal Code (RPC) is the appropriation or conversion of money or property received
to the prejudice of the offender. Thus, aside from the fact that the date of the commission thereof is not
q Did you know his residence?
an essential element of the crime herein charged, the failure of the prosecution to specify the exact date
does not render the Information ipso facto defective. Moreover, the said date is also near the due date
within which accused-appellant should have delivered the proceeds or returned the said [pieces of a Yes, sir.
jewelry] as testified upon by Tangkoy, hence, there was sufficient compliance with the rules. Accused-
appellant, therefore, cannot now be allowed to claim that he was not properly apprised of the charges
q Did you go there?
proferred against him.7

a Yes, sir.
It must be remembered that petitioner was convicted of the crime of Estafa under Article 315,
paragraph 1 (b) of the RPC, which reads:
q Did you find him?
ART. 315. Swindling (estafa). – Any person who shall defraud another by any of the means mentioned
hereinbelow. a No, sir.

1. With unfaithfulness or abuse of confidence, namely: q Were you able to talk to him since 5 July 1991?

xxxx a I talked to him, sir.

(b) By misappropriating or converting, to the prejudice of another, money, goods, or any other personal q How many times?
property received by the offender in trust or on commission, or for administration, or under any other
obligation involving the duty to make delivery of or to return the same, even though such obligation be
totally or partially guaranteed by a bond; or by denying having received such money, goods, or other a Two times, sir.
property; x x x
q What did you talk (sic) to him?
The elements of estafa with abuse of confidence are as follows: (a) that money, goods or other
personal property is received by the offender in trust, or on commission, or for administration, or under a About the items I gave to (sic) him, sir.
any other obligation involving the duty to make delivery of, or to return the same; (b) that there be
misappropriation or conversion of such money or property by the offender or denial on his part of such
receipt; (c) that such misappropriation or conversion or denial is to the prejudice of another; and (d) that q Referring to Exhibit A-2?
there is a demand made by the offended party on the offender.8
a Yes, sir, and according to him he will take his obligation and I asked him where the items are and he
Petitioner argues that the last element, which is, that there is a demand by the offended party on the promised me that he will pay these amount, sir.
offender, was not proved. This Court disagrees. In his testimony, private complainant narrated how he
was able to locate petitioner after almost two (2) months from the time he gave the pieces of jewelry q Up to this time that you were here, were you able to collect from him partially or full?
and asked petitioner about the same items with the latter promising to pay them. Thus:
a No, sir.9
PROS. MARTINEZ
No specific type of proof is required to show that there was demand.10 Demand need not even be
q Now, Mr. Witness, this was executed on 2 May 1991, and this transaction could have been finished formal; it may be verbal.11 The specific word "demand" need not even be used to show that it has
on 5 July 1991, the question is what happens (sic) when the deadline came? indeed been made upon the person charged, since even a mere query as to the whereabouts of the
money [in this case, property], would be tantamount to a demand.12 As expounded in Asejo v. People:13
a I went looking for him, sir.
With regard to the necessity of demand, we agree with the CA that demand under this kind of estafa
q For whom? need not be formal or written. The appellate court observed that the law is silent with regard to the form
of demand in estafa under Art. 315 1(b), thus:

a Lito Corpuz, sir.

When the law does not qualify, We should not qualify. Should a written demand be necessary, the law
would have stated so. Otherwise, the word "demand" should be interpreted in its general meaning as to
q Were you able to look (sic) for him?
include both written and oral demand. Thus, the failure of the prosecution to present a written demand
as evidence is not fatal.
In Tubb v. People, where the complainant merely verbally inquired about the money entrusted to the
accused, we held that the query was tantamount to a demand, thus:
ART. 5. Duty of the court in connection with acts which should be repressed but which are not covered
by the law, and in cases of excessive penalties. - Whenever a court has knowledge of any act which it
may deem proper to repress and which is not punishable by law, it shall render the proper decision, and
shall report to the Chief Executive, through the Department of Justice, the reasons which induce the
court to believe that said act should be made the subject of penal legislation.

In the same way, the court shall submit to the Chief Executive, through the Department of Justice, such
x x x [T]he law does not require a demand as a condition precedent to the existence of the crime of
statement as may be deemed proper, without suspending the execution of the sentence, when a strict
embezzlement. It so happens only that failure to account, upon demand for funds or property held in
enforcement of the provisions of this Code would result in the imposition of a clearly excessive penalty,
trust, is circumstantial evidence of misappropriation. The same way, however, be established by other
taking into consideration the degree of malice and the injury caused by the offense.18
proof, such as that introduced in the case at bar.14

The first paragraph of the above provision clearly states that for acts bourne out of a case which is not
In view of the foregoing and based on the records, the prosecution was able to prove the existence of
punishable by law and the court finds it proper to repress, the remedy is to render the proper decision
all the elements of the crime. Private complainant gave petitioner the pieces of jewelry in trust, or on
and thereafter, report to the Chief Executive, through the Department of Justice, the reasons why the
commission basis, as shown in the receipt dated May 2, 1991 with an obligation to sell or return the
same act should be the subject of penal legislation. The premise here is that a deplorable act is present
same within sixty (60) days, if unsold. There was misappropriation when petitioner failed to remit the
but is not the subject of any penal legislation, thus, the court is tasked to inform the Chief Executive of
proceeds of those pieces of jewelry sold, or if no sale took place, failed to return the same pieces of
the need to make that act punishable by law through legislation. The second paragraph is similar to the
jewelry within or after the agreed period despite demand from the private complainant, to the prejudice
first except for the situation wherein the act is already punishable by law but the corresponding penalty
of the latter.
is deemed by the court as excessive. The remedy therefore, as in the first paragraph is not to suspend
the execution of the sentence but to submit to the Chief Executive the reasons why the court considers
Anent the credibility of the prosecution's sole witness, which is questioned by petitioner, the same is the said penalty to be non-commensurate with the act committed. Again, the court is tasked to inform
unmeritorious. Settled is the rule that in assessing the credibility of witnesses, this Court gives great the Chief Executive, this time, of the need for a legislation to provide the proper penalty.
respect to the evaluation of the trial court for it had the unique opportunity to observe the demeanor of
witnesses and their deportment on the witness stand, an opportunity denied the appellate courts, which
In his book, Commentaries on the Revised Penal Code,19 Guillermo B. Guevara opined that in Article 5,
merely rely on the records of the case.15 The assessment by the trial court is even conclusive and
the duty of the court is merely to report to the Chief Executive, with a recommendation for an
binding if not tainted with arbitrariness or oversight of some fact or circumstance of weight and
amendment or modification of the legal provisions which it believes to be harsh. Thus:
influence, especially when such finding is affirmed by the CA.16 Truth is established not by the number
of witnesses, but by the quality of their testimonies, for in determining the value and credibility of
evidence, the witnesses are to be weighed not numbered.17 This provision is based under the legal maxim "nullum crimen, nulla poena sige lege," that is, that there
can exist no punishable act except those previously and specifically provided for by penal statute.
As regards the penalty, while this Court's Third Division was deliberating on this case, the question of
the continued validity of imposing on persons convicted of crimes involving property came up. The No matter how reprehensible an act is, if the law-making body does not deem it necessary to prohibit its
legislature apparently pegged these penalties to the value of the money and property in 1930 when it perpetration with penal sanction, the Court of justice will be entirely powerless to punish such act.
enacted the Revised Penal Code. Since the members of the division reached no unanimity on this
question and since the issues are of first impression, they decided to refer the case to the Court en
Under the provisions of this article the Court cannot suspend the execution of a sentence on the ground
banc for consideration and resolution. Thus, several amici curiae were invited at the behest of the Court
that the strict enforcement of the provisions of this Code would cause excessive or harsh penalty. All
to give their academic opinions on the matter. Among those that graciously complied were Dean Jose
that the Court could do in such eventuality is to report the matter to the Chief Executive with a
Manuel Diokno, Dean Sedfrey M. Candelaria, Professor Alfredo F. Tadiar, the Senate President, and
recommendation for an amendment or modification of the legal provisions which it believes to be
the Speaker of the House of Representatives. The parties were later heard on oral arguments before
harsh.20
the Court en banc, with Atty. Mario L. Bautista appearing as counsel de oficio of the petitioner.

Anent the non-suspension of the execution of the sentence, retired Chief Justice Ramon C. Aquino and
After a thorough consideration of the arguments presented on the matter, this Court finds the following:
retired Associate Justice Carolina C. Griño-Aquino, in their book, The Revised Penal Code,21 echoed
the above-cited commentary, thus:
There seems to be a perceived injustice brought about by the range of penalties that the courts
continue to impose on crimes against property committed today, based on the amount of damage
The second paragraph of Art. 5 is an application of the humanitarian principle that justice must be
measured by the value of money eighty years ago in 1932. However, this Court cannot modify the said
tempered with mercy. Generally, the courts have nothing to do with the wisdom or justness of the
range of penalties because that would constitute judicial legislation. What the legislature's perceived
penalties fixed by law. "Whether or not the penalties prescribed by law upon conviction of violations of
failure in amending the penalties provided for in the said crimes cannot be remedied through this
particular statutes are too severe or are not severe enough, are questions as to which commentators on
Court's decisions, as that would be encroaching upon the power of another branch of the government.
the law may fairly differ; but it is the duty of the courts to enforce the will of the legislator in all cases
This, however, does not render the whole situation without any remedy. It can be appropriately
unless it clearly appears that a given penalty falls within the prohibited class of excessive fines or cruel
presumed that the framers of the Revised Penal Code (RPC) had anticipated this matter by including
and unusual punishment." A petition for clemency should be addressed to the Chief Executive.22
Article 5, which reads:
There is an opinion that the penalties provided for in crimes against property be based on the current
inflation rate or at the ratio of ₱1.00 is equal to ₱100.00 . However, it would be dangerous as this would
result in uncertainties, as opposed to the definite imposition of the penalties. It must be remembered
that the economy fluctuates and if the proposed imposition of the penalties in crimes against property
be adopted, the penalties will not cease to change, thus, making the RPC, a self-amending law. Had
the framers of the RPC intended that to be so, it should have provided the same, instead, it included the
earlier cited Article 5 as a remedy. It is also improper to presume why the present legislature has not
made any moves to amend the subject penalties in order to conform with the present times. For all we
know, the legislature intends to retain the same penalties in order to deter the further commission of
those punishable acts which have increased tremendously through the years. In fact, in recent moves
of the legislature, it is apparent that it aims to broaden the coverage of those who violate penal laws. In
the crime of Plunder, from its original minimum amount of ₱100,000,000.00 plundered, the legislature
lowered it to ₱50,000,000.00. In the same way, the legislature lowered the threshold amount upon
which the Anti-Money Laundering Act may apply, from ₱1,000,000.00 to ₱500,000.00.
It is also worth noting that in the crimes of Theft and Estafa, the present penalties do not seem to be
excessive compared to the proposed imposition of their corresponding penalties. In Theft, the
provisions state that:
Art. 309. Penalties. — Any person guilty of theft shall be punished by:
1. The penalty of prision mayor in its minimum and medium periods, if the value of the thing
stolen is more than 12,000 pesos but does not exceed 22,000 pesos, but if the value of the
thing stolen exceeds the latter amount the penalty shall be the maximum period of the one
prescribed in this paragraph, and one year for each additional ten thousand pesos, but the
total of the penalty which may be imposed shall not exceed twenty years. In such cases, and
in connection with the accessory penalties which may be imposed and for the purpose of the
other provisions of this Code, the penalty shall be termed prision mayor or reclusion
temporal, as the case may be.
2. The penalty of prision correccional in its medium and maximum periods, if the value of the
thing stolen is more than 6,000 pesos but does not exceed 12,000 pesos.
3. The penalty of prision correccional in its minimum and medium periods, if the value of the
property stolen is more than 200 pesos but does not exceed 6,000 pesos.
4. Arresto mayor in its medium period to prision correccional in its minimum period, if the
value of the property stolen is over 50 pesos but does not exceed 200 pesos.
5. Arresto mayor to its full extent, if such value is over 5 pesos but does not exceed 50 pesos.
6. Arresto mayor in its minimum and medium periods, if such value does not exceed 5 pesos.
7. Arresto menor or a fine not exceeding 200 pesos, if the theft is committed under the
circumstances enumerated in paragraph 3 of the next preceding article and the value of the
thing stolen does not exceed 5 pesos. If such value exceeds said amount, the provision of
any of the five preceding subdivisions shall be made applicable.
8. Arresto menor in its minimum period or a fine not exceeding 50 pesos, when the value of
the thing stolen is not over 5 pesos, and the offender shall have acted under the impulse of
hunger, poverty, or the difficulty of earning a livelihood for the support of himself or his family.
In a case wherein the value of the thing stolen is ₱6,000.00, the above-provision states that the penalty
is prision correccional in its minimum and medium periods (6 months and 1 day to 4 years and 2
months). Applying the proposal, if the value of the thing stolen is ₱6,000.00, the penalty is
imprisonment of arresto mayor in its medium period to prision correccional minimum period (2 months
and 1 day to 2 years and 4 months). It would seem that under the present law, the penalty imposed is
almost the same as the penalty proposed. In fact, after the application of the Indeterminate Sentence
Law under the existing law, the minimum penalty is still lowered by one degree; hence, the minimum
penalty is arresto mayor in its medium period to maximum period (2 months and 1 day to 6 months),
making the offender qualified for pardon or parole after serving the said minimum period and may even
apply for probation. Moreover, under the proposal, the minimum penalty after applying the
Indeterminate Sentence Law is arresto menor in its maximum period to arresto mayor in its minimum
period (21 days to 2 months) is not too far from the minimum period under the existing law. Thus, it
would seem that the present penalty imposed under the law is not at all excessive. The same is also
true in the crime of Estafa.23
Moreover, if we apply the ratio of 1:100, as suggested to the value of the thing stolen in the crime of
Theft and the damage caused in the crime of Estafa, the gap between the minimum and the maximum
amounts, which is the basis of determining the proper penalty to be imposed, would be too wide and
the penalty imposable would no longer be commensurate to the act committed and the value of the
thing stolen or the damage caused:
I. Article 309, or the penalties for the crime of Theft, the value would be modified but the penalties are
not changed:
1. ₱12,000.00 to ₱22,000.00 will become ₱1,200,000.00 to ₱2,200,000.00, punished by
prision mayor minimum to prision mayor medium (6 years and 1 day to 10 years).
2. ₱6,000.00 to ₱12,000.00 will become ₱600,000.00 to ₱1,200,000.00, punished by prision
correccional medium and to prision correccional maximum (2 years, 4 months and 1 day to 6
years).24
3. ₱200.00 to ₱6,000.00 will become ₱20,000.00 to ₱600,000.00, punishable by prision
correccional minimum to prision correccional medium (6 months and 1 day to 4 years and 2
months).
4. ₱50.00 to ₱200.00 will become ₱5,000.00 to ₱20,000.00, punishable by arresto mayor
medium to prision correccional minimum (2 months and 1 day to 2 years and 4 months).
5. ₱5.00 to ₱50.00 will become ₱500.00 to ₱5,000.00, punishable by arresto mayor (1 month
and 1 day to 6 months).
6. ₱5.00 will become ₱500.00, punishable by arresto mayor minimum to arresto mayor
medium.
x x x x.
II. Article 315, or the penalties for the crime of Estafa, the value would also be modified but the
penalties are not changed, as follows:
 1st. ₱12,000.00 to ₱22,000.00, will become ₱1,200,000.00 to ₱2,200,000.00, punishable by JUSTICE PERALTA:
prision correccional maximum to prision mayor minimum (4 years, 2 months and 1 day to 8
years).25
Now, your position is to declare that the incremental penalty should be struck down as unconstitutional
because it is absurd.
2nd. ₱6,000.00 to ₱12,000.00 will become ₱600,000.00 to ₱1,200,000.00, punishable by
prision correccional minimum to prision correccional medium (6 months and 1 day to 4 years
DEAN DIOKNO:
and 2 months).26

Absurd, it violates equal protection, Your Honor, and cruel and unusual punishment.
3rd. ₱200.00 to ₱6,000.00 will become ₱20,000.00 to ₱600,000.00, punishable by arresto
mayor maximum to prision correccional minimum (4 months and 1 day to 2 years and 4
months). JUSTICE PERALTA:

4th. ₱200.00 will become ₱20,000.00, punishable by arresto mayor maximum (4 months and Then what will be the penalty that we are going to impose if the amount is more than Twenty-Two
1 day to 6 months). Thousand (₱22,000.00) Pesos.

An argument raised by Dean Jose Manuel I. Diokno, one of our esteemed amici curiae, is that the DEAN DIOKNO:
incremental penalty provided under Article 315 of the RPC violates the Equal Protection Clause.
Well, that would be for Congress to ... if this Court will declare the incremental penalty rule
The equal protection clause requires equality among equals, which is determined according to a valid unconstitutional, then that would ... the void should be filled by Congress.
classification. The test developed by jurisprudence here and yonder is that of reasonableness,27 which
has four requisites:
JUSTICE PERALTA:

(1) The classification rests on substantial distinctions;

But in your presentation, you were fixing the amount at One Hundred Thousand (₱100,000.00)
Pesos ...
(2) It is germane to the purposes of the law;
DEAN DIOKNO:
(3) It is not limited to existing conditions only; and
Well, my presen ... (interrupted)
(4) It applies equally to all members of the same class.28
JUSTICE PERALTA:
According to Dean Diokno, the Incremental Penalty Rule (IPR) does not rest on substantial distinctions
as ₱10,000.00 may have been substantial in the past, but it is not so today, which violates the first
For every One Hundred Thousand (₱100,000.00) Pesos in excess of Twenty-Two Thousand
requisite; the IPR was devised so that those who commit estafa involving higher amounts would receive
(₱22,000.00) Pesos you were suggesting an additional penalty of one (1) year, did I get you right?
heavier penalties; however, this is no longer achieved, because a person who steals ₱142,000.00
would receive the same penalty as someone who steals hundreds of millions, which violates the second
requisite; and, the IPR violates requisite no. 3, considering that the IPR is limited to existing conditions DEAN DIOKNO:
at the time the law was promulgated, conditions that no longer exist today.
Yes, Your Honor, that is, if the court will take the route of statutory interpretation.
Assuming that the Court submits to the argument of Dean Diokno and declares the incremental penalty
in Article 315 unconstitutional for violating the equal protection clause, what then is the penalty that
should be applied in case the amount of the thing subject matter of the crime exceeds ₱22,000.00? It JUSTICE PERALTA:
seems that the proposition poses more questions than answers, which leads us even more to conclude
that the appropriate remedy is to refer these matters to Congress for them to exercise their inherent Ah ...
power to legislate laws.
DEAN DIOKNO:
Even Dean Diokno was of the opinion that if the Court declares the IPR unconstitutional, the remedy is
to go to Congress. Thus:
If the Court will say that they can go beyond the literal wording of the law...

xxxx
JUSTICE PERALTA:
But if we de ... (interrupted) Yes, Your Honor.

DEAN DIOKNO: JUSTICE PERALTA:

....then.... That will be equivalent to the incremental penalty of one (1) year in excess of Twenty-Two Thousand
(₱22,000.00) Pesos.
JUSTICE PERALTA:
DEAN DIOKNO:
Ah, yeah. But if we declare the incremental penalty as unsconstitutional, the court cannot fix the amount
... Yes, Your Honor.

DEAN DIOKNO: JUSTICE PERALTA:

No, Your Honor. The amount in excess of Twenty-Two Thousand (₱22,000.00) Pesos.

JUSTICE PERALTA: Thank you, Dean.

... as the equivalent of one, as an incremental penalty in excess of Twenty-Two Thousand (₱22,000.00) DEAN DIOKNO:
Pesos.
Thank you.
DEAN DIOKNO:
x x x x29
No, Your Honor.
Dean Diokno also contends that Article 315 of the Revised Penal Code constitutes cruel and unusual
JUSTICE PERALTA: punishment. Citing Solem v. Helm,30 Dean Diokno avers that the United States Federal Supreme Court
has expanded the application of a similar Constitutional provision prohibiting cruel and unusual
punishment, to the duration of the penalty, and not just its form. The court therein ruled that three things
The Court cannot do that.
must be done to decide whether a sentence is proportional to a specific crime, viz.; (1) Compare the
nature and gravity of the offense, and the harshness of the penalty; (2) Compare the sentences
DEAN DIOKNO: imposed on other criminals in the same jurisdiction, i.e., whether more serious crimes are subject to the
same penalty or to less serious penalties; and (3) Compare the sentences imposed for commission of
the same crime in other jurisdictions.
Could not be.

However, the case of Solem v. Helm cannot be applied in the present case, because in Solem what
JUSTICE PERALTA: respondent therein deemed cruel was the penalty imposed by the state court of South Dakota after it
took into account the latter’s recidivist statute and not the original penalty for uttering a "no account"
The only remedy is to go to Congress... check. Normally, the maximum punishment for the crime would have been five years imprisonment and
a $5,000.00 fine. Nonetheless, respondent was sentenced to life imprisonment without the possibility of
parole under South Dakota’s recidivist statute because of his six prior felony convictions. Surely, the
DEAN DIOKNO: factual antecedents of Solem are different from the present controversy.

Yes, Your Honor. With respect to the crime of Qualified Theft, however, it is true that the imposable penalty for the
offense is high. Nevertheless, the rationale for the imposition of a higher penalty against a domestic
JUSTICE PERALTA: servant is the fact that in the commission of the crime, the helper will essentially gravely abuse the trust
and confidence reposed upon her by her employer. After accepting and allowing the helper to be a
member of the household, thus entrusting upon such person the protection and safekeeping of the
... and determine the value or the amount. employer’s loved ones and properties, a subsequent betrayal of that trust is so repulsive as to warrant
the necessity of imposing a higher penalty to deter the commission of such wrongful acts.
DEAN DIOKNO:
There are other crimes where the penalty of fine and/or imprisonment are dependent on the subject
matter of the crime and which, by adopting the proposal, may create serious implications. For example,
in the crime of Malversation, the penalty imposed depends on the amount of the money malversed by
the public official, thus:
Art. 217. Malversation of public funds or property; Presumption of malversation. — Any public officer
who, by reason of the duties of his office, is accountable for public funds or property, shall appropriate
the same or shall take or misappropriate or shall consent, through abandonment or negligence, shall
permit any other person to take such public funds, or property, wholly or partially, or shall otherwise be
guilty of the misappropriation or malversation of such funds or property, shall suffer:
1. The penalty of prision correccional in its medium and maximum periods, if the amount
involved in the misappropriation or malversation does not exceed two hundred pesos.
2. The penalty of prision mayor in its minimum and medium periods, if the amount involved is
more than two hundred pesos but does not exceed six thousand pesos.
3. The penalty of prision mayor in its maximum period to reclusion temporal in its minimum
period, if the amount involved is more than six thousand pesos but is less than twelve
thousand pesos.
4. The penalty of reclusion temporal, in its medium and maximum periods, if the amount
involved is more than twelve thousand pesos but is less than twenty-two thousand pesos. If
the amount exceeds the latter, the penalty shall be reclusion temporal in its maximum period
to reclusion perpetua.
In all cases, persons guilty of malversation shall also suffer the penalty of perpetual special
disqualification and a fine equal to the amount of the funds malversed or equal to the total value of the
property embezzled.
The failure of a public officer to have duly forthcoming any public funds or property with which he is
chargeable, upon demand by any duly authorized officer, shall be prima facie evidence that he has put
such missing funds or property to personal use.
The above-provisions contemplate a situation wherein the Government loses money due to the
unlawful acts of the offender. Thus, following the proposal, if the amount malversed is ₱200.00 (under
the existing law), the amount now becomes ₱20,000.00 and the penalty is prision correccional in its
medium and maximum periods (2 years 4 months and 1 day to 6 years). The penalty may not be
commensurate to the act of embezzlement of ₱20,000.00 compared to the acts committed by public
officials punishable by a special law, i.e., Republic Act No. 3019 or the Anti-Graft and Corrupt Practices
Act, specifically Section 3,31 wherein the injury caused to the government is not generally defined by
any monetary amount, the penalty (6 years and 1 month to 15 years)32 under the Anti-Graft Law will
now become higher. This should not be the case, because in the crime of malversation, the public
official takes advantage of his public position to embezzle the fund or property of the government
entrusted to him.
The said inequity is also apparent in the crime of Robbery with force upon things (inhabited or
uninhabited) where the value of the thing unlawfully taken and the act of unlawful entry are the bases of
the penalty imposable, and also, in Malicious Mischief, where the penalty of imprisonment or fine is
dependent on the cost of the damage caused.
In Robbery with force upon things (inhabited or uninhabited), if we increase the value of the thing
unlawfully taken, as proposed in the ponencia, the sole basis of the penalty will now be the value of the
thing unlawfully taken and no longer the element of force employed in entering the premises. It may
likewise cause an inequity between the crime of Qualified Trespass to Dwelling under Article 280, and
this kind of robbery because the former is punishable by prision correccional in its medium and
maximum periods (2 years, 4 months and 1 day to 6 years) and a fine not exceeding ₱1,000.00
(₱100,000.00 now if the ratio is 1:100) where entrance to the premises is with violence or intimidation,
which is the main justification of the penalty. Whereas in the crime of Robbery with force upon things, it
is punished with a penalty of prision mayor (6 years and 1 day to 12 years) if the intruder is unarmed
without the penalty of Fine despite the fact that it is not merely the illegal entry that is the basis of the
penalty but likewise the unlawful taking.
Furthermore, in the crime of Other Mischiefs under Article 329, the highest penalty that can be imposed
is arresto mayor in its medium and maximum periods (2 months and 1 day to 6 months) if the value of
the damage caused exceeds ₱1,000.00, but under the proposal, the value of the damage will now
become ₱100,000.00 (1:100), and still punishable by arresto mayor (1 month and 1 day to 6 months).
And, if the value of the damaged property does not exceed ₱200.00, the penalty is arresto menor or a
fine of not less than the value of the damage caused and not more than ₱200.00, if the amount involved
does not exceed ₱200.00 or cannot be estimated. Under the proposal, ₱200.00 will now become
₱20,000.00, which simply means that the fine of ₱200.00 under the existing law will now become
₱20,000.00. The amount of Fine under this situation will now become excessive and afflictive in nature
despite the fact that the offense is categorized as a light felony penalized with a light penalty under
Article 26 of the RPC.33 Unless we also amend Article 26 of the RPC, there will be grave implications on
the penalty of Fine, but changing the same through Court decision, either expressly or impliedly, may
not be legally and constitutionally feasible.
There are other crimes against property and swindling in the RPC that may also be affected by the
proposal, such as those that impose imprisonment and/or Fine as a penalty based on the value of the
damage caused, to wit: Article 311 (Theft of the property of the National Library and National Museum),
Article 312 (Occupation of real property or usurpation of real rights in property), Article 313 (Altering
boundaries or landmarks), Article 316 (Other forms of swindling), Article 317 (Swindling a minor), Article
318 (Other deceits), Article 328 (Special cases of malicious mischief) and Article 331 (Destroying or
damaging statues, public monuments or paintings). Other crimes that impose Fine as a penalty will also
be affected, such as: Article 213 (Frauds against the public treasury and similar offenses), Article 215
(Prohibited Transactions),
Article 216 (Possession of prohibited interest by a public officer), Article 218 (Failure of accountable
officer to render accounts), Article 219 (Failure of a responsible public officer to render accounts before
leaving the country).
In addition, the proposal will not only affect crimes under the RPC. It will also affect crimes which are
punishable by special penal laws, such as Illegal Logging or Violation of Section 68 of Presidential
Decree No. 705, as amended.34The law treats cutting, gathering, collecting and possessing timber or
other forest products without license as an offense as grave as and equivalent to the felony of qualified
theft.35 Under the law, the offender shall be punished with the penalties imposed under Articles 309 and
31036 of the Revised Penal Code, which means that the penalty imposable for the offense is, again,
based on the value of the timber or forest products involved in the offense. Now, if we accept the said
proposal in the crime of Theft, will this particular crime of Illegal Logging be amended also in so far as
the penalty is concerned because the penalty is dependent on Articles 309 and 310 of the RPC? The
answer is in the negative because the soundness of this particular law is not in question.
With the numerous crimes defined and penalized under the Revised Penal Code and Special Laws,
and other related provisions of these laws affected by the proposal, a thorough study is needed to
determine its effectivity and necessity. There may be some provisions of the law that should be
amended; nevertheless, this Court is in no position to conclude as to the intentions of the framers of the
Revised Penal Code by merely making a study of the applicability of the penalties imposable in the
present times. Such is not within the competence of the Court but of the Legislature which is
empowered to conduct public hearings on the matter, consult legal luminaries and who, after due
proceedings, can decide whether or not to amend or to revise the questioned law or other laws, or even
create a new legislation which will adopt to the times.
Admittedly, Congress is aware that there is an urgent need to amend the Revised Penal Code. During
the oral arguments, counsel for the Senate informed the Court that at present, fifty-six (56) bills are now
pending in the Senate seeking to amend the Revised Penal Code,37 each one proposing much needed
change and updates to archaic laws that were promulgated decades ago when the political, socio-
economic, and cultural settings were far different from today’s conditions.
Verily, the primordial duty of the Court is merely to apply the law in such a way that it shall not usurp
legislative powers by judicial legislation and that in the course of such application or construction, it
should not make or supervise legislation, or under the guise of interpretation, modify, revise, amend,
distort, remodel, or rewrite the law, or give the law a construction which is repugnant to its terms.38 The
Court should apply the law in a manner that would give effect to their letter and spirit, especially when
the law is clear as to its intent and purpose. Succinctly put, the Court should shy away from
encroaching upon the primary function of a co-equal branch of the Government; otherwise, this would
lead to an inexcusable breach of the doctrine of separation of powers by means of judicial legislation.
Moreover, it is to be noted that civil indemnity is, technically, not a penalty or a Fine; hence, it can be
increased by the Court when appropriate. Article 2206 of the Civil Code provides:
Art. 2206. The amount of damages for death caused by a crime or quasi-delict shall be at least three
thousand pesos, even though there may have been mitigating circumstances. In addition:
(1) The defendant shall be liable for the loss of the earning capacity of the deceased, and the
indemnity shall be paid to the heirs of the latter; such indemnity shall in every case be
assessed and awarded by the court, unless the deceased on account of permanent physical
disability not caused by the defendant, had no earning capacity at the time of his death;
(2) If the deceased was obliged to give support according to the provisions of Article 291, the
recipient who is not an heir called to the decedent's inheritance by the law of testate or
intestate succession, may demand support from the person causing the death, for a period
not exceeding five years, the exact duration to be fixed by the court;
(3) The spouse, legitimate and illegitimate descendants and ascendants of the deceased may
demand moral damages for mental anguish by reason of the death of the deceased.
In our jurisdiction, civil indemnity is awarded to the offended party as a kind of monetary restitution or
compensation to the victim for the damage or infraction that was done to the latter by the accused,
which in a sense only covers the civil aspect. Precisely, it is civil indemnity. Thus, in a crime where a
person dies, in addition to the penalty of imprisonment imposed to the offender, the accused is also
ordered to pay the victim a sum of money as restitution. Clearly, this award of civil indemnity due to the
death of the victim could not be contemplated as akin to the value of a thing that is unlawfully taken
which is the basis in the imposition of the proper penalty in certain crimes. Thus, the reasoning in
increasing the value of civil indemnity awarded in some offense cannot be the same reasoning that
would sustain the adoption of the suggested ratio. Also, it is apparent from Article 2206 that the law only
imposes a minimum amount for awards of civil indemnity, which is ₱3,000.00. The law did not provide
for a ceiling. Thus, although the minimum amount for the award cannot be changed, increasing the
amount awarded as civil indemnity can be validly modified and increased when the present
circumstance warrants it. Corollarily, moral damages under Article 222039 of the Civil Code also does
not fix the amount of damages that can be awarded. It is discretionary upon the court, depending on the
mental anguish or the suffering of the private offended party. The amount of moral damages can, in
relation to civil indemnity, be adjusted so long as it does not exceed the award of civil indemnity.
In addition, some may view the penalty provided by law for the offense committed as tantamount to
cruel punishment. However, all penalties are generally harsh, being punitive in nature. Whether or not
they are excessive or amount to cruel punishment is a matter that should be left to lawmakers. It is the
prerogative of the courts to apply the law, especially when they are clear and not subject to any other
interpretation than that which is plainly written.
Similar to the argument of Dean Diokno, one of Justice Antonio Carpio’s opinions is that the
incremental penalty provision should be declared unconstitutional and that the courts should only
impose the penalty corresponding to the amount of ₱22,000.00, regardless if the actual amount
involved exceeds ₱22,000.00. As suggested, however, from now until the law is properly amended by
Congress, all crimes of Estafa will no longer be punished by the appropriate penalty. A conundrum in
the regular course of criminal justice would occur when every accused convicted of the crime of estafa
will be meted penalties different from the proper penalty that should be imposed. Such drastic twist in
the application of the law has no legal basis and directly runs counter to what the law provides.
It should be noted that the death penalty was reintroduced in the dispensation of criminal justice by the
Ramos Administration by virtue of Republic Act No. 765940 in December 1993. The said law has been
questioned before this Court. There is, arguably, no punishment more cruel than that of death. Yet still,
from the time the death penalty was re-imposed until its lifting in June 2006 by Republic Act No.
9346,41 the Court did not impede the imposition of the death penalty on the ground that it is a "cruel
punishment" within the purview of Section 19 (1),42 Article III of the Constitution. Ultimately, it was
through an act of Congress suspending the imposition of the death penalty that led to its non-imposition
and not via the intervention of the Court.
Even if the imposable penalty amounts to cruel punishment, the Court cannot declare the provision of
the law from which the proper penalty emanates unconstitutional in the present action. Not only is it
violative of due process, considering that the State and the concerned parties were not given the
opportunity to comment on the subject matter, it is settled that the constitutionality of a statute cannot
be attacked collaterally because constitutionality issues must be pleaded directly and not
collaterally,43 more so in the present controversy wherein the issues never touched upon the
constitutionality of any of the provisions of the Revised Penal Code.
Besides, it has long been held that the prohibition of cruel and unusual punishments is generally aimed
at the form or character of the punishment rather than its severity in respect of duration or amount, and
applies to punishments which public sentiment has regarded as cruel or obsolete, for instance, those
inflicted at the whipping post, or in the pillory, burning at the stake, breaking on the wheel,
disemboweling, and the like. Fine and imprisonment would not thus be within the prohibition.44
It takes more than merely being harsh, excessive, out of proportion, or severe for a penalty to be
obnoxious to the Constitution. The fact that the punishment authorized by the statute is severe does not
make it cruel and unusual. Expressed in other terms, it has been held that to come under the ban, the
punishment must be "flagrantly and plainly oppressive," "wholly disproportionate to the nature of the
offense as to shock the moral sense of the community."45
Cruel as it may be, as discussed above, it is for the Congress to amend the law and adapt it to our
modern time.
The solution to the present controversy could not be solved by merely adjusting the questioned ... and so on. Is the Supreme Court equipped to determine those factors?
monetary values to the present value of money based only on the current inflation rate. There are other
factors and variables that need to be taken into consideration, researched, and deliberated upon before
PROFESSOR TADIAR:
the said values could be accurately and properly adjusted. The effects on the society, the injured party,
the accused, its socio-economic impact, and the likes must be painstakingly evaluated and weighed
upon in order to arrive at a wholistic change that all of us believe should be made to our existing law. There are many ways by which the value of the Philippine Peso can be determined utilizing all of those
Dejectedly, the Court is ill-equipped, has no resources, and lacks sufficient personnel to conduct public economic terms.
hearings and sponsor studies and surveys to validly effect these changes in our Revised Penal Code.
This function clearly and appropriately belongs to Congress. Even Professor Tadiar concedes to this
JUSTICE PERALTA:
conclusion, to wit:

Yeah, but ...

xxxx

PROFESSOR TADIAR:
JUSTICE PERALTA:

And I don’t think it is within the power of the Supreme Court to pass upon and peg the value to One
Yeah, Just one question. You are suggesting that in order to determine the value of Peso you have to
Hundred (₱100.00) Pesos to ...
take into consideration several factors.

JUSTICE PERALTA:
PROFESSOR TADIAR:

Yeah.
Yes.

PROFESSOR TADIAR:
JUSTICE PERALTA:

... One (₱1.00.00) Peso in 1930.

Per capita income.

JUSTICE PERALTA:
PROFESSOR TADIAR:

That is legislative in nature.

Per capita income.

PROFESSOR TADIAR:
JUSTICE PERALTA:

That is my position that the Supreme Court ...

Consumer price index.

JUSTICE PERALTA:
PROFESSOR TADIAR:

Yeah, okay.
Yeah.

PROFESSOR TADIAR:
JUSTICE PERALTA:

... has no power to utilize the power of judicial review to in order to adjust, to make the adjustment that
Inflation ...
is a power that belongs to the legislature.

PROFESSOR TADIAR:
JUSTICE PERALTA:

Yes.
Thank you, Professor.

JUSTICE PERALTA:
PROFESSOR TADIAR: The penalty prescribed by Article 315 is composed of only two, not three, periods, in which case, Article
65 of the same Code requires the division of the time included in the penalty into three equal portions of
time included in the penalty prescribed, forming one period of each of the three portions. Applying the
Thank you.46
latter provisions, the maximum, medium and minimum periods of the penalty prescribed are:

Finally, the opinion advanced by Chief Justice Maria Lourdes P. A. Sereno echoes the view that the
Maximum - 6 years, 8 months, 21 days to 8 years
role of the Court is not merely to dispense justice, but also the active duty to prevent injustice. Thus, in
order to prevent injustice in the present controversy, the Court should not impose an obsolete penalty
pegged eighty three years ago, but consider the proposed ratio of 1:100 as simply compensating for Medium - 5 years, 5 months, 11 days to 6 years, 8 months, 20 days
inflation. Furthermore, the Court has in the past taken into consideration "changed conditions" or
"significant changes in circumstances" in its decisions.
Minimum - 4 years, 2 months, 1 day to 5 years, 5 months, 10 days49

Similarly, the Chief Justice is of the view that the Court is not delving into the validity of the substance of
To compute the maximum period of the prescribed penalty, prisión correccional maximum to prisión
a statute. The issue is no different from the Court’s adjustment of indemnity in crimes against persons,
mayor minimum should be divided into three equal portions of time each of which portion shall be
which the Court had previously adjusted in light of current times, like in the case of People v.
deemed to form one period in accordance with Article 6550 of the RPC.51 In the present case, the
Pantoja.47 Besides, Article 10 of the Civil Code mandates a presumption that the lawmaking body
amount involved is ₱98,000.00, which exceeds ₱22,000.00, thus, the maximum penalty imposable
intended right and justice to prevail.
should be within the maximum period of 6 years, 8 months and 21 days to 8 years of prision mayor.
Article 315 also states that a period of one year shall be added to the penalty for every additional
With due respect to the opinions and proposals advanced by the Chief Justice and my Colleagues, all ₱10,000.00 defrauded in excess of ₱22,000.00, but in no case shall the total penalty which may be
the proposals ultimately lead to prohibited judicial legislation. Short of being repetitious and as imposed exceed 20 years.
extensively discussed above, it is truly beyond the powers of the Court to legislate laws, such immense
power belongs to Congress and the Court should refrain from crossing this clear-cut divide. With regard
Considering that the amount of ₱98,000.00 is ₱76,000.00 more than the ₱22,000.00 ceiling set by law,
to civil indemnity, as elucidated before, this refers to civil liability which is awarded to the offended party
then, adding one year for each additional ₱10,000.00, the maximum period of 6 years, 8 months and 21
as a kind of monetary restitution. It is truly based on the value of money. The same cannot be said on
days to 8 years of prision mayor minimum would be increased by 7 years. Taking the maximum of the
penalties because, as earlier stated, penalties are not only based on the value of money, but on several
prescribed penalty, which is 8 years, plus an additional 7 years, the maximum of the indeterminate
other factors. Further, since the law is silent as to the maximum amount that can be awarded and only
penalty is 15 years.
pegged the minimum sum, increasing the amount granted as civil indemnity is not proscribed. Thus, it
can be adjusted in light of current conditions.
Applying the Indeterminate Sentence Law, since the penalty prescribed by law for the estafa charge
against petitioner is prision correccional maximum to prision mayor minimum, the penalty next lower
Now, with regard to the penalty imposed in the present case, the CA modified the ruling of the RTC.
would then be prision correccional in its minimum and medium periods.
The RTC imposed the indeterminate penalty of four (4) years and two (2) months of prision correccional
in its medium period, as minimum, to fourteen (14) years and eight (8) months of reclusion temporal in
its minimum period, as maximum. However, the CA imposed the indeterminate penalty of four (4) years Thus, the minimum term of the indeterminate sentence should be anywhere from 6 months and 1 day
and two (2) months of prision correccional, as minimum, to eight (8) years of prision mayor, as to 4 years and 2 months.
maximum, plus one (1) year for each additional ₱10,000.00, or a total of seven (7) years.
One final note, the Court should give Congress a chance to perform its primordial duty of lawmaking.
In computing the penalty for this type of estafa, this Court's ruling in Cosme, Jr. v. People48 is highly The Court should not pre-empt Congress and usurp its inherent powers of making and enacting laws.
instructive, thus: While it may be the most expeditious approach, a short cut by judicial fiat is a dangerous proposition,
lest the Court dare trespass on prohibited judicial legislation.
With respect to the imposable penalty, Article 315 of the Revised Penal Code provides:
WHEREFORE, the Petition for Review on Certiorari dated November 5, 2007 of petitioner Lito Corpuz
is hereby DENIED. Consequently, the Decision dated March 22, 2007 and Resolution dated September
ART. 315 Swindling (estafa). - Any person who shall defraud another by any of the means mentioned
5, 2007 of the Court of Appeals, which affirmed with modification the Decision dated July 30, 2004 of
hereinbelow shall be punished by:
the Regional Trial Court, Branch 46, San Fernando City, finding petitioner guilty beyond reasonable
doubt of the crime of Estafa under Article 315, paragraph (1), sub-paragraph (b) of the Revised Penal
1st. The penalty of prision correccional in its maximum period to prision mayor in its minimum period, if Code, are hereby AFFIRMED with MODIFICATION that the penalty imposed is the indeterminate
the amount of the fraud is over 12,000 but does not exceed 22,000 pesos, and if such amount exceeds penalty of imprisonment ranging from THREE (3) YEARS, TWO (2) MONTHS and ELEVEN DAYS of
the latter sum, the penalty provided in this paragraph shall be imposed in its maximum period, adding prision correccional, as minimum, to FIFTEEN (15) YEARS of reclusion temporal as maximum.
one year for each additional 10,000 pesos; but the total penalty which may be imposed shall not exceed
twenty years. In such case, and in connection with the accessory penalties which may be imposed and
Pursuant to Article 5 of the Revised Penal Code, let a Copy of this Decision be furnished the President
for the purpose of the other provisions of this Code, the penalty shall be termed prision mayor or
of the Republic of the Philippines, through the Department of Justice.
reclusion temporal, as the case may be.
Also, let a copy of this Decision be furnished the President of the Senate and the Speaker of the House
of Representatives.
SO ORDERED.
G.R. No. 193960               January 7, 2013
KARLO ANGELO DABALOS y SAN DIEGO, Petitioner, 
vs.
REGIONAL TRIAL COURT,BRANCH 59, ANGELES CITY (PAMPANGA), REPRESENTED BY ITS
PRESIDING JUDGE MA. ANGELICA T. PARAS-QUIAMBAO; THE OFFICE OF THE CITY
PROSECUTOR, ANGELES CITY (PAMPANGA); AND ABC,1 Respondents.
DECISION
PERLAS-BERNABE, J.:
The Court will not read into Republic Act (RA) No. 9262 a provision that would render it toothless in the
pursuit of the declared policy of the State to protect women and children from violence and threats to
their personal safety and security.
Before the Court is a petition for certiorari and prohibition assailing the Orders dated September 13,
20102 and October 5, 20103 of the Regional Trial Court (RTC) of Angeles City, Branch 59 in Criminal
Case No. 09-5210 which denied petitioner’s Motion for Judicial Determination of Probable Cause with
Motion to Quash the Information.
The Facts
Petitioner was charged with violation of Section 5(a) of RA 9262 before the RTC of Angeles City,
Branch 59, in an Information which states:
That on or about the 13th day of July, 2009, in the City of Angeles, Philippines, and within the
jurisdiction of this Honorable Court, the above-named accused, being then the boyfriend of the
complainant, x x x did then and there willfully, unlawfully and feloniously use personal violence on the
complainant, by pulling her hair, punching complainant’s back, shoulder and left eye, thereby
demeaning and degrading the complainant’s intrinsic worth and dignity as a human being, in violation of
Section 5(a) of the Republic Act 9262.4
After examining the supporting evidence, the RTC found probable cause and consequently, issued a
warrant of arrest against petitioner on November 19, 2009. The latter posted a cash bond for his
provisional liberty and on August 12, 2010, filed a Motion for Judicial Determination of Probable Cause
with Motion to Quash the Information. Petitioner averred that at the time of the alleged incident on July
13, 2009, he was no longer in a dating relationship with private respondent; hence, RA 9262 was
inapplicable.
In her affidavit, private respondent admitted that her relationship with petitioner had ended prior to the
subject incident. She narrated that on July 13, 2009, she sought payment of the money she had lent to
petitioner but the latter could not pay. She then inquired from petitioner if he was responsible for
spreading rumors about her which he admitted. Thereupon, private respondent slapped petitioner
causing the latter to inflict on her the physical injuries alleged in the Information.
The RTC Ruling
The RTC denied petitioner’s motion. It did not consider material the fact that the parties’ dating
relationship had ceased prior to the incident, ratiocinating that since the parties had admitted a prior
dating relationship, the infliction of slight physical injuries constituted an act of violence against women
and their children as defined in Sec. 3(a) of RA 9262.
Issues
Hence, the instant petition raising the following issues: 1) whether the RTC has jurisdiction over the
offense; 2) whether RA 9262 should be construed in a manner that will favor the accused; and 3)
whether the Information alleging a fact contrary to what has been admitted should be quashed.
The Court’s Ruling
The petition has no merit.
Petitioner insists that the act which resulted in physical injuries to private respondent is not covered by
RA 9262 because its proximate cause was not their dating relationship. Instead, he claims that the
offense committed was only slight physical injuries under the Revised Penal Code which falls under the
jurisdiction of the Municipal Trial Court.
The Court is not persuaded.
Sec. 3(a) of RA 9262 reads:
SEC. 3. Definition of Terms.- As used in this Act, (a) "Violence against women and their children" refers
to any act or a series of acts committed by any person against a woman who is his wife, former wife, or
against a woman with whom the person has or had a sexual or dating relationship, or with whom he has
a common child, or against her child whether legitimate or illegitimate, within or without the family
abode, which result in or is likely to result in physical, sexual, psychological harm or suffering, or
economic abuse including threats of such acts, battery, assault, coercion, harassment or arbitrary
deprivation of liberty. x x x.
The law is broad in scope but specifies two limiting qualifications for any act or series of acts to be
considered as a crime of violence against women through physical harm, namely: 1) it is committed
against a woman or her child and the woman is the offender’s wife, former wife, or with whom he has or
had sexual or dating relationship or with whom he has a common child; and 2) it results in or is likely to
result in physical harm or suffering.
In Ang v. Court of Appeals,5 the Court enumerated the elements of the crime of violence against women
through harassment, to wit:
1. The offender has or had a sexual or dating relationship with the offended woman;
2. The offender, by himself or through another, commits an act or series of acts of
harassment against the woman; and
3. The harassment alarms or causes substantial emotional or psychological distress to her.6
Notably, while it is required that the offender has or had a sexual or dating relationship with the PROF. RANDOLF S. DAVID, LORENZO TAÑADA III, RONALD LLAMAS, H. HARRY L. ROQUE,
offended woman, for RA 9262 to be applicable, it is not indispensable that the act of violence be a JR., JOEL RUIZ BUTUYAN, ROGER R. RAYEL, GARY S. MALLARI, ROMEL REGALADO
consequence of such relationship. Nowhere in the law can such limitation be inferred. Hence, applying BAGARES, CHRISTOPHER F.C. BOLASTIG, Petitioners,
the rule on statutory construction that when the law does not distinguish, neither should the courts, vs.
then, clearly, the punishable acts refer to all acts of violence against women with whom the offender GLORIA MACAPAGAL-ARROYO, AS PRESIDENT AND COMMANDER-IN-CHIEF, EXECUTIVE
has or had a sexual or dating relationship. As correctly ruled by the RTC, it is immaterial whether the SECRETARY EDUARDO ERMITA, HON. AVELINO CRUZ II, SECRETARY OF NATIONAL
relationship had ceased for as long as there is sufficient evidence showing the past or present DEFENSE, GENERAL GENEROSO SENGA, CHIEF OF STAFF, ARMED FORCES OF THE
existence of such relationship between the offender and the victim when the physical harm was PHILIPPINES, DIRECTOR GENERAL ARTURO LOMIBAO, CHIEF, PHILIPPINE NATIONAL
committed. Consequently, the Court cannot depart from the parallelism in Ang and give credence to POLICE, Respondents.
petitioner's assertion that the act of violence should be due to the sexual or dating relationship.
x————————————-x
Neither can the Court construe the statute in favor of petitioner using the rule of lenity7 because there is
no ambiguity in RA 9262 that would necessitate any construction. While the degree of physical harm
G.R. No. 171409             May 3, 2006
under RA 9262 and Article 2668 of the Revised Penal Code are the same, there is sufficient justification
for prescribing a higher penalty for the former. Clearly, the legislative intent is to purposely impose a
more severe sanction on the offenders whose violent act/s physically harm women with whom they NIÑEZ CACHO-OLIVARES AND TRIBUNE PUBLISHING CO., INC., Petitioners,
have or had a sexual or dating relationship, and/or their children with the end in view of promoting the vs.
protection of women and children. HONORABLE SECRETARY EDUARDO ERMITA AND HONORABLE DIRECTOR GENERAL
ARTURO C. LOMIBAO, Respondents.
Accordingly, the Information having sufficiently alleged the necessary elements of the crime, such as: a
dating relationship between the petitioner and the private respondent; the act of violence committed by x————————————-x
the petitioner; and the resulting physical harm to private respondent, the offense is covered by RA 9262
which falls under the jurisdiction of the RTC in accordance with Sec. 7 of the said law which reads:
G.R. No. 171485             May 3, 2006

SEC. 7. Venue – The Regional Trial Court designated as a Family Court shall have original and
exclusive jurisdiction over cases of violence against women and their children under this law. In the
absence of such court in the place where the offense was committed, the case shall be filed in the
Regional Trial Court where the crime or any of its elements was committed at the option of the
complainant.
Finally, the Court finds the Order9 of the RTC, giving the prosecutor a period of two (2) days to amend
the Information to reflect the cessation of the dating relationship between the petitioner and the
offended party, to be in accord with Sec. 4 of Rule 117 of the Rules of Court, to wit:
SEC. 4. Amendment of complaint or information.- If the motion to quash is based on an alleged defect
of the complaint or information which can be cured by amendment, the court shall order that an
amendment be made.1âwphi1
FRANCIS JOSEPH G. ESCUDERO, JOSEPH A. SANTIAGO, TEODORO A. CASINO, AGAPITO A.
AQUINO, MARIO J. AGUJA, SATUR C. OCAMPO, MUJIV S. HATAMAN, JUAN EDGARDO
ANGARA, TEOFISTO DL. GUINGONA III, EMMANUEL JOSEL J. VILLANUEVA, LIZA L. MAZA,
IMEE R. MARCOS, RENATO B. MAGTUBO, JUSTIN MARC SB. CHIPECO, ROILO GOLEZ,
DARLENE ANTONINO-CUSTODIO, LORETTA ANN P. ROSALES, JOSEL G. VIRADOR, RAFAEL
V. MARIANO, GILBERT C. REMULLA, FLORENCIO G. NOEL, ANA THERESIA HONTIVEROS-
BARAQUEL, IMELDA C. NICOLAS, MARVIC M.V.F. LEONEN, NERI JAVIER COLMENARES,
MOVEMENT OF CONCERNED CITIZENS FOR CIVIL LIBERTIES REPRESENTED BY AMADO GAT
INCIONG, Petitioners,
vs.
EDUARDO R. ERMITA, EXECUTIVE SECRETARY, AVELINO J. CRUZ, JR., SECRETARY, DND
RONALDO V. PUNO, SECRETARY, DILG, GENEROSO SENGA, AFP CHIEF OF STAFF, ARTURO
LOMIBAO, CHIEF PNP, Respondents.

x————————————-x
Furthermore, Sec. 14 of Rule 110 of the Rules of Court provides that an information may be amended,
in form or in substance, without leave of court, at any time before the accused enters his plea. In the
present case, the accused petitioner has not yet been arraigned, hence, the RTC was correct in G.R. No. 171483             May 3, 2006
directing the amendment of the Information and in denying the motion to quash the same.
KILUSANG MAYO UNO, REPRESENTED BY ITS CHAIRPERSON ELMER C. LABOG AND
WHEREFORE, the petition is DISMISSED. The Orders dated September 13, 2010 and October 5, 2010 SECRETARY GENERAL JOEL MAGLUNSOD, NATIONAL FEDERATION OF LABOR UNIONS –
of the Regional Trial Court ( RTC) of Angeles City, Branch 59 in Criminal Case No. 09-5210 are AF.FI KILUSANG MAYO UNO (NAFLU-KMU), REPRESENTED BY ITS NATIONAL PRESIDENT,
RM ED. The Temporary Restraining Order issued by the Court is LIFTED and the RTC is directed to JOSELITO V. USTAREZ, ANTONIO C. PASCUAL, SALVADOR T. CARRANZA, EMILIA P.
continue with the proceedings in Criminal Case No. 09-5210. DAPULANG, MARTIN CUSTODIO, JR., AND ROQUE M. TAN, Petitioners,
vs.
HER EXCELLENCY, PRESIDENT GLORIA MACAPAGAL-ARROYO, THE HONORABLE
SO ORDERED.
EXECUTIVE SECRETARY, EDUARDO ERMITA, THE CHIEF OF STAFF, ARMED FORCES OF THE
PHILIPPINES, GENEROSO SENGA, AND THE PNP DIRECTOR GENERAL, ARTURO
G.R. No. 171396             May 3, 2006 LOMIBAO, Respondents.
x————————————-x trampling upon the very freedom guaranteed and protected by the Constitution. Hence, such issuances
are void for being unconstitutional.
G.R. No. 171400             May 3, 2006
Once again, the Court is faced with an age-old but persistently modern problem. How does the
Constitution of a free people combine the degree of liberty, without which, law becomes tyranny, with
ALTERNATIVE LAW GROUPS, INC. (ALG), Petitioner,
the degree of law, without which, liberty becomes license?3
vs.
EXECUTIVE SECRETARY EDUARDO R. ERMITA, LT. GEN. GENEROSO SENGA, AND DIRECTOR
GENERAL ARTURO LOMIBAO,Respondents. On February 24, 2006, as the nation celebrated the 20th Anniversary of the Edsa People Power I,
President Arroyo issued PP 1017 declaring a state of national emergency, thus:
G.R. No. 171489             May 3, 2006
NOW, THEREFORE, I, Gloria Macapagal-Arroyo, President of the Republic of the Philippines and
Commander-in-Chief of the Armed Forces of the Philippines, by virtue of the powers vested upon me by
JOSE ANSELMO I. CADIZ, FELICIANO M. BAUTISTA, ROMULO R. RIVERA, JOSE AMOR M.
Section 18, Article 7 of the Philippine Constitution which states that: “The President. . . whenever it
AMORADO, ALICIA A. RISOS-VIDAL, FELIMON C. ABELITA III, MANUEL P. LEGASPI, J.B. JOVY
becomes necessary, . . . may call out (the) armed forces to prevent or suppress. . .rebellion. . .,” and in
C. BERNABE, BERNARD L. DAGCUTA, ROGELIO V. GARCIA AND INTEGRATED BAR OF THE
my capacity as their Commander-in-Chief, do hereby command the Armed Forces of the
PHILIPPINES (IBP), Petitioners,
Philippines, to maintain law and order throughout the Philippines, prevent or suppress all forms
vs.
of lawless violence as well as any act of insurrection or rebellion and to enforce obedience to all
HON. EXECUTIVE SECRETARY EDUARDO ERMITA, GENERAL GENEROSO SENGA, IN HIS
the laws and to all decrees, orders and regulations promulgated by me personally or upon my
CAPACITY AS AFP CHIEF OF STAFF, AND DIRECTOR GENERAL ARTURO LOMIBAO, IN HIS
direction; and as provided in Section 17, Article 12 of the Constitution do hereby declare a State
CAPACITY AS PNP CHIEF, Respondents.
of National Emergency.

x————————————-x
She cited the following facts as bases:

G.R. No. 171424             May 3, 2006

WHEREAS, over these past months, elements in the political opposition have conspired with
authoritarians of the extreme Left represented by the NDF-CPP-NPA and the extreme Right,
LOREN B. LEGARDA, Petitioner, represented by military adventurists—the historical enemies of the democratic Philippine State
vs. —who are now in a tactical alliance and engaged in a concerted and systematic conspiracy, over a
GLORIA MACAPAGAL-ARROYO, IN HER CAPACITY AS PRESIDENT AND COMMANDER-IN- broad front, to bring down the duly constituted Government elected in May 2004;
CHIEF; ARTURO LOMIBAO, IN HIS CAPACITY AS DIRECTOR-GENERAL OF THE PHILIPPINE
NATIONAL POLICE (PNP); GENEROSO SENGA, IN HIS CAPACITY AS CHIEF OF STAFF OF THE
WHEREAS, these conspirators have repeatedly tried to bring down the President;
ARMED FORCES OF THE PHILIPPINES (AFP); AND EDUARDO ERMITA, IN HIS CAPACITY AS
EXECUTIVE SECRETARY, Respondents.
WHEREAS, the claims of these elements have been recklessly magnified by certain segments of
the national media;
DECISION

WHEREAS, this series of actions is hurting the Philippine State—by obstructing governance
SANDOVAL-GUTIERREZ, J.:
including hindering the growth of the economy and sabotaging the people’s confidence in
government and their faith in the future of this country;
All powers need some restraint; practical adjustments rather than rigid formula are necessary. 1 Superior
strength—the use of force—cannot make wrongs into rights. In this regard, the courts should be vigilant
WHEREAS, these actions are adversely affecting the economy;
in safeguarding the constitutional rights of the citizens, specifically their liberty.

WHEREAS, these activities give totalitarian forces of both the extreme Left and extreme Right
Chief Justice Artemio V. Panganiban’s philosophy of liberty is thus most relevant. He said: “In cases
the opening to intensify their avowed aims to bring down the democratic Philippine State;
involving liberty, the scales of justice should weigh heavily against government and in favor of
the poor, the oppressed, the marginalized, the dispossessed and the weak.” Laws and actions
that restrict fundamental rights come to the courts “with a heavy presumption against their constitutional WHEREAS, Article 2, Section 4 of the our Constitution makes the defense and preservation of the
validity.”2 democratic institutions and the State the primary duty of Government;

These seven (7) consolidated petitions for certiorari and prohibition allege that in issuing Presidential WHEREAS, the activities above-described, their consequences, ramifications and collateral effects
Proclamation No. 1017 (PP 1017) and General Order No. 5 (G.O. No. 5), President Gloria Macapagal- constitute a clear and present danger to the safety and the integrity of the Philippine State and of the
Arroyo committed grave abuse of discretion. Petitioners contend that respondent officials of the Filipino people;
Government, in their professed efforts to defend and preserve democratic institutions, are actually
On the same day, the President issued G. O. No. 5 implementing PP 1017, thus:
WHEREAS, over these past months, elements in the political opposition have conspired with
authoritarians of the extreme Left, represented by the NDF-CPP-NPA and the extreme Right,
represented by military adventurists – the historical enemies of the democratic Philippine State—and
who are now in a tactical alliance and engaged in a concerted and systematic conspiracy, over a broad
front, to bring down the duly-constituted Government elected in May 2004;
WHEREAS, these conspirators have repeatedly tried to bring down our republican government;
WHEREAS, the claims of these elements have been recklessly magnified by certain segments of the
national media;
WHEREAS, these series of actions is hurting the Philippine State by obstructing governance, including
hindering the growth of the economy and sabotaging the people’s confidence in the government and
their faith in the future of this country;
WHEREAS, these actions are adversely affecting the economy;
WHEREAS, these activities give totalitarian forces; of both the extreme Left and extreme Right the
opening to intensify their avowed aims to bring down the democratic Philippine State;
WHEREAS, Article 2, Section 4 of our Constitution makes the defense and preservation of the
democratic institutions and the State the primary duty of Government;
WHEREAS, the activities above-described, their consequences, ramifications and collateral effects
constitute a clear and present danger to the safety and the integrity of the Philippine State and of the
Filipino people;
WHEREAS, Proclamation 1017 date February 24, 2006 has been issued declaring a State of National
Emergency;
NOW, THEREFORE, I GLORIA MACAPAGAL-ARROYO, by virtue of the powers vested in me under
the Constitution as President of the Republic of the Philippines, and Commander-in-Chief of the
Republic of the Philippines, and pursuant to Proclamation No. 1017 dated February 24, 2006, do
hereby call upon the Armed Forces of the Philippines (AFP) and the Philippine National Police (PNP),
to prevent and suppress acts of terrorism and lawless violence in the country;
I hereby direct the Chief of Staff of the AFP and the Chief of the PNP, as well as the officers and men of
the AFP and PNP, to immediately carry out the necessary and appropriate actions and measures
to suppress and prevent acts of terrorism and lawless violence.
On March 3, 2006, exactly one week after the declaration of a state of national emergency and after all
these petitions had been filed, the President lifted PP 1017. She issued Proclamation No. 1021 which
reads:
WHEREAS, pursuant to Section 18, Article VII and Section 17, Article XII of the Constitution,
Proclamation No. 1017 dated February 24, 2006, was issued declaring a state of national emergency;
WHEREAS, by virtue of General Order No.5 and No.6 dated February 24, 2006, which were issued on
the basis of Proclamation No. 1017, the Armed Forces of the Philippines (AFP) and the Philippine
National Police (PNP), were directed to maintain law and order throughout the Philippines, prevent and
suppress all form of lawless violence as well as any act of rebellion and to undertake such action as
may be necessary;
WHEREAS, the AFP and PNP have effectively prevented, suppressed and quelled the acts lawless
violence and rebellion;
NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO, President of the Republic of the Philippines,
by virtue of the powers vested in me by law, hereby declare that the state of national emergency
has ceased to exist.
In their presentation of the factual bases of PP 1017 and G.O. No. 5, respondents stated that the
proximate cause behind the executive issuances was the conspiracy among some military officers,
leftist insurgents of the New People’s Army (NPA), and some members of the political opposition in a
plot to unseat or assassinate President Arroyo.4They considered the aim to oust or assassinate the
President and take-over the reigns of government as a clear and present danger.
During the oral arguments held on March 7, 2006, the Solicitor General specified the facts leading to
the issuance of PP 1017 and G.O. No. 5. Significantly, there was no refutation from petitioners’
counsels.
The Solicitor General argued that the intent of the Constitution is to give full discretionary powers to
the President in determining the necessity of calling out the armed forces. He emphasized that none of
the petitioners has shown that PP 1017 was without factual bases. While he explained that it is not
respondents’ task to state the facts behind the questioned Proclamation, however, they are presenting
the same, narrated hereunder, for the elucidation of the issues.
On January 17, 2006, Captain Nathaniel Rabonza and First Lieutenants Sonny Sarmiento, Lawrence
San Juan and Patricio Bumidang, members of the Magdalo Group indicted in the Oakwood mutiny,
escaped their detention cell in Fort Bonifacio, Taguig City. In a public statement, they vowed to remain
defiant and to elude arrest at all costs. They called upon the people to “show and proclaim our
displeasure at the sham regime. Let us demonstrate our disgust, not only by going to the streets in
protest, but also by wearing red bands on our left arms.” 5
On February 17, 2006, the authorities got hold of a document entitled “Oplan Hackle I ” which detailed
plans for bombings and attacks during the Philippine Military Academy Alumni Homecoming in Baguio
City. The plot was to assassinate selected targets including some cabinet members and President
Arroyo herself. 6 Upon the advice of her security, President Arroyo decided not to attend the Alumni
Homecoming. The next day, at the height of the celebration, a bomb was found and detonated at the
PMA parade ground.
On February 21, 2006, Lt. San Juan was recaptured in a communist safehouse in Batangas province.
Found in his possession were two (2) flash disks containing minutes of the meetings between members
of the Magdalo Group and the National People’s Army (NPA), a tape recorder, audio cassette
cartridges, diskettes, and copies of subversive documents.  7 Prior to his arrest, Lt. San Juan announced
through DZRH that the “Magdalo’s D-Day would be on February 24, 2006, the 20th Anniversary of
Edsa I.”
On February 23, 2006, PNP Chief Arturo Lomibao intercepted information that members of the PNP-
Special Action Force were planning to defect. Thus, he immediately ordered SAF Commanding General
Marcelino Franco, Jr. to “disavow” any defection. The latter promptly obeyed and issued a public
statement: “All SAF units are under the effective control of responsible and trustworthy officers with
proven integrity and unquestionable loyalty.“
On the same day, at the house of former Congressman Peping Cojuangco, President Cory Aquino’s
brother, businessmen and mid-level government officials plotted moves to bring down the Arroyo
administration. Nelly Sindayen of TIME Magazine reported that Pastor Saycon, longtime Arroyo critic,
called a U.S. government official about his group’s plans if President Arroyo is ousted. Saycon also
phoned a man code-named Delta. Saycon identified him as B/Gen. Danilo Lim, Commander of the
Army’s elite Scout Ranger. Lim said “it was all systems go for the planned movement against Arroyo.“8
B/Gen. Danilo Lim and Brigade Commander Col. Ariel Querubin confided to Gen. Generoso Senga,
Chief of Staff of the Armed Forces of the Philippines (AFP), that a huge number of soldiers would join
the rallies to provide a critical mass and armed component to the Anti-Arroyo protests to be held on
February 24, 2005. According to these two (2) officers, there was no way they could possibly stop the
soldiers because they too, were breaking the chain of command to join the forces foist to unseat the
President. However, Gen. Senga has remained faithful to his Commander-in-Chief and to the chain of
command. He immediately took custody of B/Gen. Lim and directed Col. Querubin to return to the
Philippine Marines Headquarters in Fort Bonifacio.
Earlier, the CPP-NPA called for intensification of political and revolutionary work within the military and
the police establishments in order to forge alliances with its members and key officials. NPA
spokesman Gregorio “Ka Roger” Rosal declared: “The Communist Party and revolutionary movement
and the entire people look forward to the possibility in the coming year of accomplishing its immediate
task of bringing down the Arroyo regime; of rendering it to weaken and unable to rule that it will not take
much longer to end it.”9
On the other hand, Cesar Renerio, spokesman for the National Democratic Front (NDF) at North
Central Mindanao, publicly announced: “Anti-Arroyo groups within the military and police are growing
rapidly, hastened by the economic difficulties suffered by the families of AFP officers and enlisted
personnel who undertake counter-insurgency operations in the field.” He claimed that with the forces of
the national democratic movement, the anti-Arroyo conservative political parties, coalitions, plus the
groups that have been reinforcing since June 2005, it is probable that the President’s ouster is nearing
its concluding stage in the first half of 2006.
Respondents further claimed that the bombing of telecommunication towers and cell sites in Bulacan
and Bataan was also considered as additional factual basis for the issuance of PP 1017 and G.O. No.
5. So is the raid of an army outpost in Benguet resulting in the death of three (3) soldiers. And also the
directive of the Communist Party of the Philippines ordering its front organizations to join 5,000 Metro
Manila radicals and 25,000 more from the provinces in mass protests.10
By midnight of February 23, 2006, the President convened her security advisers and several cabinet
members to assess the gravity of the fermenting peace and order situation. She directed both the AFP
and the PNP to account for all their men and ensure that the chain of command remains solid and
undivided. To protect the young students from any possible trouble that might break loose on the
streets, the President suspended classes in all levels in the entire National Capital Region.
For their part, petitioners cited the events that followed after the issuance of PP 1017 and G.O.
No. 5.
Immediately, the Office of the President announced the cancellation of all programs and activities
related to the 20th anniversary celebration of Edsa People Power I; and revoked the permits to hold
rallies issued earlier by the local governments. Justice Secretary Raul Gonzales stated that political
rallies, which to the President’s mind were organized for purposes of destabilization, are
cancelled.Presidential Chief of Staff Michael Defensor announced that “warrantless arrests and take-
over of facilities, including media, can already be implemented.”11
Undeterred by the announcements that rallies and public assemblies would not be allowed, groups of
protesters (members of Kilusang Mayo Uno [KMU] and National Federation of Labor Unions-Kilusang
Mayo Uno [NAFLU-KMU]), marched from various parts of Metro Manila with the intention of converging
at the EDSA shrine. Those who were already near the EDSA site were violently dispersed by huge
clusters of anti-riot police. The well-trained policemen used truncheons, big fiber glass shields, water
cannons, and tear gas to stop and break up the marching groups, and scatter the massed participants.
The same police action was used against the protesters marching forward to Cubao, Quezon City and
to the corner of Santolan Street and EDSA. That same evening, hundreds of riot policemen broke up an
EDSA celebration rally held along Ayala Avenue and Paseo de Roxas Street in Makati City.12
According to petitioner Kilusang Mayo Uno, the police cited PP 1017 as the ground for the dispersal of
their assemblies.
During the dispersal of the rallyists along EDSA, police arrested (without warrant) petitioner Randolf S.
David, a professor at the University of the Philippines and newspaper columnist. Also arrested was his
companion, Ronald Llamas, president of party-list Akbayan.
At around 12:20 in the early morning of February 25, 2006, operatives of the Criminal Investigation and
Detection Group (CIDG) of the PNP, on the basis of PP 1017 and G.O. No. 5, raided the Daily
Tribune offices in Manila. The raiding team confiscated news stories by reporters, documents, pictures,
and mock-ups of the Saturday issue. Policemen from Camp Crame in Quezon City were stationed
inside the editorial and business offices of the newspaper; while policemen from the Manila Police
District were stationed outside the building.13
A few minutes after the search and seizure at the Daily Tribune offices, the police surrounded the
premises of another pro-opposition paper, Malaya, and its sister publication, the tabloid Abante.
The raid, according to Presidential Chief of Staff Michael Defensor, is “meant to show a ‘strong
presence,’ to tell media outlets not to connive or do anything that would help the rebels in bringing
down this government.” The PNP warned that it would take over any media organization that would not
follow “standards set by the government during the state of national emergency.” Director General
Lomibao stated that “if they do not follow the standards—and the standards are—if they would
contribute to instability in the government, or if they do not subscribe to what is in General Order No. 5
and Proc. No. 1017—we will recommend a ‘takeover.’” National Telecommunications’ Commissioner
Ronald Solis urged television and radio networks to “cooperate” with the government for the duration of
the state of national emergency. He asked for “balanced reporting” from broadcasters when covering
the events surrounding the coup attempt foiled by the government. He warned that his agency will not
hesitate to recommend the closure of any broadcast outfit that violates rules set out for media coverage
when the national security is threatened.14
Also, on February 25, 2006, the police arrested Congressman Crispin Beltran, representing
the Anakpawis Party and Chairman of Kilusang Mayo Uno (KMU), while leaving his farmhouse in
Bulacan. The police showed a warrant for his arrest dated 1985. Beltran’s lawyer explained that the
warrant, which stemmed from a case of inciting to rebellion filed during the Marcos regime, had long
been quashed. Beltran, however, is not a party in any of these petitions.
When members of petitioner KMU went to Camp Crame to visit Beltran, they were told they could not In G.R. No. 171400, petitioner Alternative Law Groups, Inc. (ALGI) alleged that PP 1017 and G.O. No.
be admitted because of PP 1017 and G.O. No. 5. Two members were arrested and detained, while the 5 are unconstitutional because they violate (a) Section 415 of Article II, (b)Sections 1,16 2,17 and 418 of
rest were dispersed by the police. Article III, (c) Section 2319 of Article VI, and (d) Section 1720 of Article XII of the Constitution.

Bayan Muna Representative Satur Ocampo eluded arrest when the police went after him during a
public forum at the Sulo Hotel in Quezon City. But his two drivers, identified as Roel and Art, were taken
into custody.
Retired Major General Ramon Montaño, former head of the Philippine Constabulary, was arrested while
with his wife and golfmates at the Orchard Golf and Country Club in Dasmariñas, Cavite.
In G.R. No. 171489, petitioners Jose Anselmo I. Cadiz et al., alleged that PP 1017 is an “arbitrary and
unlawful exercise by the President of her Martial Law powers.” And assuming that PP 1017 is not really
a declaration of Martial Law, petitioners argued that “it amounts to an exercise by the President of
emergency powers without congressional approval.” In addition, petitioners asserted that PP 1017
“goes beyond the nature and function of a proclamation as defined under the Revised Administrative
Code.”

And lastly, in G.R. No. 171424,petitionerLoren B. Legarda maintained that PP 1017 and G.O. No. 5 are
Attempts were made to arrest Anakpawis Representative Satur Ocampo, Representative Rafael
“unconstitutional for being violative of the freedom of expression, including its cognate rights such as
Mariano, Bayan Muna Representative Teodoro Casiño and Gabriela Representative Liza Maza. Bayan
freedom of the press and the right to access to information on matters of public concern, all guaranteed
Muna Representative Josel Virador was arrested at the PAL Ticket Office in Davao City. Later, he was
under Article III, Section 4 of the 1987 Constitution.” In this regard, she stated that these issuances
turned over to the custody of the House of Representatives where the “Batasan 5” decided to stay
prevented her from fully prosecuting her election protest pending before the Presidential Electoral
indefinitely.
Tribunal.

Let it be stressed at this point that the alleged violations of the rights of Representatives Beltran, Satur
Ocampo, et al., are not being raised in these petitions.
On March 3, 2006, President Arroyo issued PP 1021 declaring that the state of national emergency has
ceased to exist.
In the interim, these seven (7) petitions challenging the constitutionality of PP 1017 and G.O. No. 5
were filed with this Court against the above-named respondents. Three (3) of these petitions impleaded
President Arroyo as respondent.
In respondents’ Consolidated Comment, the Solicitor General countered that: first, the petitions should
be dismissed for being moot; second,petitioners in G.R. Nos. 171400 (ALGI), 171424 (Legarda),
171483 (KMU et al.), 171485 (Escudero et al.) and 171489 (Cadiz et al.) have no legal standing; third, it
is not necessary for petitioners to implead President Arroyo as respondent; fourth, PP 1017 has
constitutional and legal basis; and fifth, PP 1017 does not violate the people’s right to free expression
and redress of grievances.
On March 7, 2006, the Court conducted oral arguments and heard the parties on the above interlocking
issues which may be summarized as follows:

In G.R. No. 171396, petitioners Randolf S. David, et al. assailed PP 1017 on the grounds that (1) it A. PROCEDURAL:
encroaches on the emergency powers of Congress; (2) itis a subterfuge to avoid the constitutional
requirements for the imposition of martial law; and (3) it violates the constitutional guarantees of
1) Whether the issuance of PP 1021 renders the petitions moot and academic.
freedom of the press, of speech and of assembly.

2) Whether petitioners in 171485 (Escudero et al.), G.R. Nos. 171400 (ALGI), 171483 (KMU et

In G.R. No. 171409, petitioners Ninez Cacho-Olivares and Tribune Publishing Co., Inc.challenged the
al.), 171489 (Cadiz et al.), and 171424 (Legarda) have legal standing.
CIDG’s act of raiding the Daily Tribune offices as a clear case of “censorship” or “prior restraint.” They
also claimed that the term “emergency” refers only to tsunami, typhoon, hurricane and similar
occurrences, hence, there is “absolutely no emergency” that warrants the issuance of PP 1017. B. SUBSTANTIVE:

In G.R. No. 171485, petitioners herein are Representative Francis Joseph G. Escudero, and twenty 1) Whetherthe Supreme Court can review the factual bases of PP 1017.
one (21) other members of the House of Representatives, including Representatives Satur Ocampo,
Rafael Mariano, Teodoro Casiño, Liza Maza, and Josel Virador. They asserted that PP 1017 and G.O.
2) Whether PP 1017 and G.O. No. 5 are unconstitutional.
No. 5 constitute “usurpation of legislative powers“; “violation of freedom of expression” and “a
declaration of martial law.” They alleged that President Arroyo “gravely abused her discretion in calling
out the armed forces without clear and verifiable factual basis of the possibility of lawless violence and a. Facial Challenge
a showing that there is necessity to do so.“
b. Constitutional Basis
In G.R. No. 171483,petitioners KMU, NAFLU-KMU, and their members averred that PP 1017 and G.O.
No. 5 are unconstitutional because (1) they arrogate unto President Arroyo the power to enact laws and
c. As Applied Challenge
decrees; (2) their issuance was without factual basis; and (3) they violate freedom of expression and
the right of the people to peaceably assemble to redress their grievances.
A. PROCEDURAL
First, we must resolve the procedural roadblocks.
I- Moot and Academic Principle
One of the greatest contributions of the American system to this country is the concept of judicial review
enunciated in Marbury v. Madison.21 This concept rests on the extraordinary simple foundation—
The Constitution is the supreme law. It was ordained by the people, the ultimate source of all political
authority. It confers limited powers on the national government. x x x If the government consciously
or unconsciously oversteps these limitations there must be some authority competent to hold it
in control, to thwart its unconstitutional attempt, and thus to vindicate and preserve inviolate the
will of the people as expressed in the Constitution. This power the courts exercise. This is the
beginning and the end of the theory of judicial review.22
But the power of judicial review does not repose upon the courts a “self-starting capacity.” 23 Courts may
exercise such power only when the following requisites are present: first, there must be an actual case
or controversy; second, petitioners have to raise a question of constitutionality; third, the constitutional
question must be raised at the earliest opportunity; and fourth, the decision of the constitutional
question must be necessary to the determination of the case itself.24
Respondents maintain that the first and second requisites are absent, hence, we shall limit our
discussion thereon.
An actual case or controversy involves a conflict of legal right, an opposite legal claims susceptible of
judicial resolution. It is “definite and concrete, touching the legal relations of parties having adverse
legal interest;” a real and substantial controversy admitting of specific relief. 25 The Solicitor General
refutes the existence of such actual case or controversy, contending that the present petitions were
rendered “moot and academic” by President Arroyo’s issuance of PP 1021.
Such contention lacks merit.
A moot and academic case is one that ceases to present a justiciable controversy by virtue of
supervening events,26 so that a declaration thereon would be of no practical use or value. 27 Generally,
courts decline jurisdiction over such case28 or dismiss it on ground of mootness.29
The Court holds that President Arroyo’s issuance of PP 1021 did not render the present petitions moot
and academic. During the eight (8) days that PP 1017 was operative, the police officers, according to
petitioners, committed illegal acts in implementing it. Are PP 1017 and G.O. No. 5 constitutional or
valid? Do they justify these alleged illegal acts?These are the vital issues that must be resolved in
the present petitions. It must be stressed that “an unconstitutional act is not a law, it confers no
rights, it imposes no duties, it affords no protection; it is in legal contemplation, inoperative.”30
The “moot and academic” principle is not a magical formula that can automatically dissuade the courts
in resolving a case. Courts will decide cases, otherwise moot and academic, if: first, there is a grave
violation of the Constitution;31second, the exceptional character of the situation and the paramount
public interest is involved;32 third, when constitutional issue raised requires formulation of controlling
principles to guide the bench, the bar, and the public; 33 and fourth, the case is capable of repetition yet
evading review.34
All the foregoing exceptions are present here and justify this Court’s assumption of jurisdiction over the
instant petitions. Petitioners alleged that the issuance of PP 1017 and G.O. No. 5 violates the
Constitution. There is no question that the issues being raised affect the public’s interest, involving as
they do the people’s basic rights to freedom of expression, of assembly and of the press. Moreover, the
Court has the duty to formulate guiding and controlling constitutional precepts, doctrines or rules. It has
the symbolic function of educating the bench and the bar, and in the present petitions, the military and
the police, on the extent of the protection given by constitutional guarantees. 35 And lastly, respondents’
contested actions are capable of repetition. Certainly, the petitions are subject to judicial review.
In their attempt to prove the alleged mootness of this case, respondents cited Chief Justice Artemio V.
Panganiban’s Separate Opinion in Sanlakas v. Executive Secretary.36However, they failed to take into
account the Chief Justice’s very statement that an otherwise “moot” case may still be decided “provided
the party raising it in a proper case has been and/or continues to be prejudiced or damaged as a direct
result of its issuance.” The present case falls right within this exception to the mootness rule pointed out
by the Chief Justice.
II- Legal Standing
In view of the number of petitioners suing in various personalities, the Court deems it imperative to have
a more than passing discussion on legal standing or locus standi.
Locus standi is defined as “a right of appearance in a court of justice on a given question.” 37 In private
suits, standing is governed by the “real-parties-in interest” rule as contained in Section 2, Rule 3 of the
1997 Rules of Civil Procedure, as amended. It provides that “every action must be prosecuted or
defended in the name of the real party in interest.” Accordingly, the “real-party-in interest” is “the
party who stands to be benefited or injured by the judgment in the suit or the party entitled to
the avails of the suit.“38Succinctly put, the plaintiff’s standing is based on his own right to the relief
sought.
The difficulty of determining locus standi arises in public suits. Here, the plaintiff who asserts a “public
right” in assailing an allegedly illegal official action, does so as a representative of the general public.
He may be a person who is affected no differently from any other person. He could be suing as a
“stranger,” or in the category of a “citizen,” or ‘taxpayer.” In either case, he has to adequately show that
he is entitled to seek judicial protection. In other words, he has to make out a sufficient interest in the
vindication of the public order and the securing of relief as a “citizen” or “taxpayer.
Case law in most jurisdictions now allows both “citizen” and “taxpayer” standing in public actions. The
distinction was first laid down in Beauchamp v. Silk,39 where it was held that the plaintiff in a taxpayer’s
suit is in a different category from the plaintiff in a citizen’s suit. In the former, the plaintiff is affected
by the expenditure of public funds, while in the latter, he is but the mere instrument of the public
concern. As held by the New York Supreme Court in People ex rel Case v. Collins:40 “In matter of
mere public right, however…the people are the real parties…It is at least the right, if not the
duty, of every citizen to interfere and see that a public offence be properly pursued and
punished, and that a public grievance be remedied.” With respect to taxpayer’s suits, Terr v.
Jordan41 held that “the right of a citizen and a taxpayer to maintain an action in courts to restrain
the unlawful use of public funds to his injury cannot be denied.“
However, to prevent just about any person from seeking judicial interference in any official policy or act
with which he disagreed with, and thus hinders the activities of governmental agencies engaged in
public service, the United State Supreme Court laid down the more stringent “direct injury” test in Ex
Parte Levitt,42 later reaffirmed in Tileston v. Ullman.43 The same Court ruled that for a private individual
to invoke the judicial power to determine the validity of an executive or legislative action, he must show
that he has sustained a direct injury as a result of that action, and it is not sufficient that he has
a general interest common to all members of the public.
This Court adopted the “direct injury” test in our jurisdiction. In People v. Vera,44 it held that the
person who impugns the validity of a statute must have “a personal and substantial interest in the
case such that he has sustained, or will sustain direct injury as a result.” The Vera doctrine was
upheld in a litany of cases, such as, Custodio v. President of the Senate,45Manila Race Horse Trainers’
Association v. De la Fuente,46Pascual v. Secretary of Public Works47 and Anti-Chinese League of the
Philippines v. Felix.48
However, being a mere procedural technicality, the requirement of locus standi may be waived by the
Court in the exercise of its discretion. This was done in the 1949 Emergency Powers Cases,Araneta
v. Dinglasan,49 where the “transcendental importance” of the cases prompted the Court to act
liberally. Such liberality was neither a rarity nor accidental. In Aquino v. Comelec,50 this Court resolved
to pass upon the issues raised due to the “far-reaching implications” of the petition notwithstanding its
categorical statement that petitioner therein had no personality to file the suit. Indeed, there is a chain of
cases where this liberal policy has been observed, allowing ordinary citizens, members of Congress,
and civic organizations to prosecute actions involving the constitutionality or validity of laws, regulations
and rulings.51
Thus, the Court has adopted a rule that even where the petitioners have failed to show direct injury,
they have been allowed to sue under the principle of “transcendental importance.” Pertinent are the
following cases:
(1)Chavez v. Public Estates Authority,52 where the Court ruled that the enforcement of the
constitutional right to information and the equitable diffusion of natural resources are matters of
transcendental importance which clothe the petitioner with locus standi;
(2)Bagong Alyansang Makabayan v. Zamora, 53 wherein the Court held that “given the transcendental
importance of the issues involved, the Court may relax the standing requirements and allow the
suit to prosper despite the lack of direct injury to the parties seeking judicial review” of the
Visiting Forces Agreement;
(3) Lim v. Executive Secretary,54 while the Court noted that the petitioners may not file suit in their
capacity as taxpayers absent a showing that “Balikatan 02-01” involves the exercise of Congress’
taxing or spending powers, it reiterated its ruling in Bagong Alyansang Makabayan v. Zamora, 55that in
cases of transcendental importance, the cases must be settled promptly and definitely and
standing requirements may be relaxed.
By way of summary, the following rules may be culled from the cases decided by this Court. Taxpayers,
voters, concerned citizens, and legislators may be accorded standing to sue, provided that the following
requirements are met:
(1) the cases involve constitutional issues;
(2) for taxpayers, there must be a claim of illegal disbursement of public funds or that the tax measure
is unconstitutional;
(3) for voters, there must be a showing of obvious interest in the validity of the election law in question;
(4) for concerned citizens, there must be a showing that the issues raised are of transcendental
importance which must be settled early; and
(5) for legislators, there must be a claim that the official action complained of infringes upon their
prerogatives as legislators.
Significantly, recent decisions show a certain toughening in the Court’s attitude toward legal standing.
In Kilosbayan, Inc. v. Morato,56 the Court ruled that the status of Kilosbayan as a people’s organization
does not give it the requisite personality to question the validity of the on-line lottery contract, more so
where it does not raise any issue of constitutionality. Moreover, it cannot sue as a taxpayer absent any
allegation that public funds are being misused. Nor can it sue as a concerned citizen as it does not
allege any specific injury it has suffered.
In Telecommunications and Broadcast Attorneys of the Philippines, Inc. v. Comelec,57 the Court
reiterated the “direct injury” test with respect to concerned citizens’ cases involving constitutional
issues. It held that “there must be a showing that the citizen personally suffered some actual or
threatened injury arising from the alleged illegal official act.”
In Lacson v. Perez,58 the Court ruled that one of the petitioners, Laban ng Demokratikong
Pilipino (LDP), is not a real party-in-interest as it had not demonstrated any injury to itself or to its
leaders, members or supporters.
In Sanlakas v. Executive Secretary,59 the Court ruled that only the petitioners who are members of
Congress have standing to sue, as they claim that the President’s declaration of a state of rebellion  is a
usurpation of the emergency powers of Congress, thus impairing their legislative powers. As to
petitioners Sanlakas, Partido Manggagawa, and Social Justice Society, the Court declared them to be
devoid of standing, equating them with the LDP in Lacson.
Now, the application of the above principles to the present petitions.
The locus standi of petitioners in G.R. No. 171396, particularly David and Llamas, is beyond doubt. The
same holds true with petitioners in G.R. No. 171409, Cacho-Olivares and Tribune Publishing Co. Inc.
They alleged “direct injury” resulting from “illegal arrest” and “unlawful search” committed by police
operatives pursuant to PP 1017. Rightly so, the Solicitor General does not question their legal standing.
In G.R. No. 171485, the opposition Congressmen alleged there was usurpation of legislative powers.
They also raised the issue of whether or not the concurrence of Congress is necessary whenever the
alarming powers incident to Martial Law are used. Moreover, it is in the interest of justice that those
affected by PP 1017 can be represented by their Congressmen in bringing to the attention of the Court
the alleged violations of their basic rights.
In G.R. No. 171400, (ALGI), this Court applied the liberality rule in Philconsa v. Enriquez,60Kapatiran Ng
Mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc. v. Tan,61Association of Small Landowners in the
Philippines, Inc. v. Secretary of Agrarian Reform,62 Basco v. Philippine Amusement and Gaming
Corporation,63 and Tañada v. Tuvera,64 that when the issue concerns a public right, it is sufficient that
the petitioner is a citizen and has an interest in the execution of the laws.
In G.R. No. 171483, KMU’s assertion that PP 1017 and G.O. No. 5 violated its right to peaceful
assembly may be deemed sufficient to give it legal standing. Organizations may be granted standing
to assert the rights of their members.65 We take judicial notice of the announcement by the Office of
the President banning all rallies and canceling all permits for public assemblies following the issuance
of PP 1017 and G.O. No. 5.
In G.R. No. 171489, petitioners, Cadiz et al., who are national officers of the Integrated Bar of the
Philippines (IBP) have no legal standing, having failed to allege any direct or potential injury which the
IBP as an institution or its members may suffer as a consequence of the issuance of PP No. 1017 and
G.O. No. 5. In Integrated Bar of the Philippines v. Zamora, 66 the Court held that the mere invocation by
the IBP of its duty to preserve the rule of law and nothing more, while undoubtedly true, is not sufficient
to clothe it with standing in this case. This is too general an interest which is shared by other groups
and the whole citizenry. However, in view of the transcendental importance of the issue, this Court
declares that petitioner have locus standi.
In G.R. No. 171424, Loren Legarda has no personality as a taxpayer to file the instant petition as there
are no allegations of illegal disbursement of public funds. The fact that she is a former Senator is of no
consequence. She can no longer sue as a legislator on the allegation that her prerogatives as a
lawmaker have been impaired by PP 1017 and G.O. No. 5. Her claim that she is a media personality
will not likewise aid her because there was no showing that the enforcement of these issuances
prevented her from pursuing her occupation. Her submission that she has pending electoral protest
before the Presidential Electoral Tribunal is likewise of no relevance. She has not sufficiently shown
that PP 1017 will affect the proceedings or result of her case. But considering once more the
transcendental importance of the issue involved, this Court may relax the standing rules.
It must always be borne in mind that the question of locus standi is but corollary to the bigger question
of proper exercise of judicial power. This is the underlying legal tenet of the “liberality doctrine” on legal
standing. It cannot be doubted that the validity of PP No. 1017 and G.O. No. 5 is a judicial question
which is of paramount importance to the Filipino people. To paraphrase Justice Laurel, the whole of
Philippine society now waits with bated breath the ruling of this Court on this very critical matter. The
petitions thus call for the application of the “transcendental importance” doctrine, a relaxation of the
standing requirements for the petitioners in the “PP 1017 cases.”
This Court holds that all the petitioners herein have locus standi.
Incidentally, it is not proper to implead President Arroyo as respondent. Settled is the doctrine that the
President, during his tenure of office or actual incumbency, 67 may not be sued in any civil or criminal
case, and there is no need to provide for it in the Constitution or law. It will degrade the dignity of the
high office of the President, the Head of State, if he can be dragged into court litigations while serving
as such. Furthermore, it is important that he be freed from any form of harassment, hindrance or
distraction to enable him to fully attend to the performance of his official duties and functions. Unlike the
legislative and judicial branch, only one constitutes the executive branch and anything which impairs his
usefulness in the discharge of the many great and important duties imposed upon him by the
Constitution necessarily impairs the operation of the Government. However, this does not mean that the
President is not accountable to anyone. Like any other official, he remains accountable to the
people68 but he may be removed from office only in the mode provided by law and that is by
impeachment.69
B. SUBSTANTIVE
I. Review of Factual Bases
Petitioners maintain that PP 1017 has no factual basis. Hence, it was not “necessary” for President
Arroyo to issue such Proclamation.
The issue of whether the Court may review the factual bases of the President’s exercise of his
Commander-in-Chief power has reached its distilled point—from the indulgent days of Barcelon v.
Baker70 and Montenegro v. Castaneda71 to the volatile era of Lansang v. Garcia,72Aquino, Jr. v.
Enrile,73 and Garcia-Padilla v. Enrile.74 The tug-of-war always cuts across the line defining “political
questions,” particularly those questions “in regard to which full discretionary authority has been
delegated to the legislative or executive branch of the government.”75Barcelon and Montenegro were in
unison in declaring that the authority to decide whether an exigency has arisen belongs to the
President and his decision is final and conclusive on the courts. Lansang took the opposite view.
There, the members of the Court were unanimous in the conviction that the Court has the authority to
inquire into the existence of factual bases in order to determine their constitutional sufficiency. From
the principle of separation of powers, it shifted the focus to the system of checks and balances,
“under which the President is supreme, x x x only if and when he acts within the sphere allotted
to him by the Basic Law, and the authority to determine whether or not he has so acted is vested
in the Judicial Department, which in this respect, is, in turn, constitutionally supreme.“76 In 1973,
the unanimous Court of Lansang was divided in Aquino v. Enrile.77 There, the Court was almost evenly
divided on the issue of whether the validity of the imposition of Martial Law is a political or justiciable
question.78 Then came Garcia-Padilla v. Enrile which greatly diluted Lansang. It declared that there is a
need to re-examine the latter case, ratiocinating that “in times of war or national emergency, the
President must be given absolute control for the very life of the nation and the government is in
great peril. The President, it intoned, is answerable only to his conscience, the People, and
God.”79
The Integrated Bar of the Philippines v. Zamora 80—a recent case most pertinent to these cases at bar—
echoed a principle similar to Lansang. While the Court considered the President’s “calling-out” power
as a discretionary power solely vested in his wisdom, it stressed that “this does not prevent an
examination of whether such power was exercised within permissible constitutional limits or
whether it was exercised in a manner constituting grave abuse of discretion.”This ruling is mainly
a result of the Court’s reliance on Section 1, Article VIII of 1987 Constitution which fortifies the authority
of the courts to determine in an appropriate action the validity of the acts of the political departments.
Under the new definition of judicial power, the courts are authorized not only “to settle actual
controversies involving rights which are legally demandable and enforceable,” but also “to determine
whether or not there has been a grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of any branch or instrumentality of the government.” The latter part of the
authority represents a broadening of judicial power to enable the courts of justice to review what was
before a forbidden territory, to wit, the discretion of the political departments of the government. 81 It
speaks of judicial prerogative not only in terms of power but also of duty.82
As to how the Court may inquire into the President’s exercise of power, Lansang adopted the test that
“judicial inquiry can go no further than to satisfy the Court not that the President’s decision is correct,”
but that “the President did not act arbitrarily.” Thus, the standard laid down is not correctness, but
arbitrariness.83 In Integrated Bar of the Philippines, this Court further ruled that “it is incumbent upon
the petitioner to show that the President’s decision is totally bereft of factual basis” and that if he
fails, by way of proof, to support his assertion, then “this Court cannot undertake an independent
investigation beyond the pleadings.”
Petitioners failed to show that President Arroyo’s exercise of the calling-out power, by issuing PP 1017,
is totally bereft of factual basis. A reading of the Solicitor General’s Consolidated Comment and
Memorandum shows a detailed narration of the events leading to the issuance of PP 1017, with
supporting reports forming part of the records. Mentioned are the escape of the Magdalo Group, their
audacious threat of the Magdalo D-Day, the defections in the military, particularly in the Philippine
Marines, and the reproving statements from the communist leaders. There was also the Minutes of the
Intelligence Report and Security Group of the Philippine Army showing the growing alliance between
the NPA and the military. Petitioners presented nothing to refute such events. Thus, absent any
contrary allegations, the Court is convinced that the President was justified in issuing PP 1017 calling
for military aid.
Indeed, judging the seriousness of the incidents, President Arroyo was not expected to simply fold her
arms and do nothing to prevent or suppress what she believed was lawless violence, invasion or
rebellion. However, the exercise of such power or duty must not stifle liberty.
II. Constitutionality of PP 1017 and G.O. No. 5
Doctrines of Several Political Theorists
on the Power of the President in Times of Emergency
This case brings to fore a contentious subject—the power of the President in times of emergency. A
glimpse at the various political theories relating to this subject provides an adequate backdrop for our
ensuing discussion.
John Locke, describing the architecture of civil government, called upon the English doctrine of
prerogative to cope with the problem of emergency. In times of danger to the nation, positive law
enacted by the legislature might be inadequate or even a fatal obstacle to the promptness of action
necessary to avert catastrophe. In these situations, the Crown retained a prerogative “power to act
according to discretion for the public good, without the proscription of the law and sometimes
even against it.”84 But Locke recognized that this moral restraint might not suffice to avoid abuse of
prerogative powers. Who shall judge the need for resorting to the prerogative and how may its
abuse be avoided? Here, Locke readily admitted defeat, suggesting that “the people have no other
remedy in this, as in all other cases where they have no judge on earth, but to appeal to
Heaven.”85
Jean-Jacques Rousseau also assumed the need for temporary suspension of democratic processes of
government in time of emergency. According to him:
The inflexibility of the laws, which prevents them from adopting themselves to circumstances, may, in
certain cases, render them disastrous and make them bring about, at a time of crisis, the ruin of the
State…
It is wrong therefore to wish to make political institutions as strong as to render it impossible to suspend
their operation. Even Sparta allowed its law to lapse…
If the peril is of such a kind that the paraphernalia of the laws are an obstacle to their preservation, the
method is to nominate a supreme lawyer, who shall silence all the laws and suspend for a moment the
sovereign authority. In such a case, there is no doubt about the general will, and it clear that the
people’s first intention is that the State shall not perish.86
Rosseau did not fear the abuse of the emergency dictatorship or “supreme magistracy” as he termed
it. For him, it would more likely be cheapened by “indiscreet use.” He was unwilling to rely upon an
“appeal to heaven.” Instead, he relied upon a tenure of office of prescribed duration to avoid
perpetuation of the dictatorship.87
John Stuart Mill concluded his ardent defense of representative government: “I am far from
condemning, in cases of extreme necessity, the assumption of absolute power in the form of a
temporary dictatorship.”88
Nicollo Machiavelli’s view of emergency powers, as one element in the whole scheme of limited
government, furnished an ironic contrast to the Lockean theory of prerogative. He recognized and
attempted to bridge this chasm in democratic political theory, thus:
Now, in a well-ordered society, it should never be necessary to resort to extra-constitutional measures;
for although they may for a time be beneficial, yet the precedent is pernicious, for if the practice is once
established for good objects, they will in a little while be disregarded under that pretext but for evil
purposes. Thus, no republic will ever be perfect if she has not by law provided for everything, having a
remedy for every emergency and fixed rules for applying it.89
Machiavelli—in contrast to Locke, Rosseau and Mill—sought to incorporate into the constitution a
regularized system of standby emergency powers to be invoked with suitable checks and controls in
time of national danger. He attempted forthrightly to meet the problem of combining a capacious
reserve of power and speed and vigor in its application in time of emergency, with effective
constitutional restraints.90
Contemporary political theorists, addressing themselves to the problem of response to emergency by
constitutional democracies, have employed the doctrine of constitutional dictatorship. 91 Frederick M.
Watkins saw “no reason why absolutism should not be used as a means for the defense of liberal
institutions,” provided it “serves to protect established institutions from the danger of permanent
injury in a period of temporary emergency and is followed by a prompt return to the previous
forms of political life.”92He recognized the two (2) key elements of the problem of emergency
governance, as well as all constitutional governance: increasing administrative powers of the
executive, while at the same time”imposing limitation upon that power.”93 Watkins placed his real
faith in a scheme of constitutional dictatorship. These are the conditions of success of such a
dictatorship: “The period of dictatorship must be relatively short…Dictatorship should always be
strictly legitimate in character…Final authority to determine the need for dictatorship in any
given case must never rest with the dictator himself…”94 and the objective of such an emergency
dictatorship should be “strict political conservatism.”
Carl J. Friedrich cast his analysis in terms similar to those of Watkins. 95 “It is a problem of concentrating
power—in a government where power has consciously been divided—to cope with… situations of
unprecedented magnitude and gravity. There must be a broad grant of powers, subject to equally
strong limitations as to who shall exercise such powers, when, for how long, and to what
end.”96 Friedrich, too, offered criteria for judging the adequacy of any of scheme of emergency powers,
to wit: “The emergency executive must be appointed by constitutional means—i.e., he must be
legitimate; he should not enjoy power to determine the existence of an emergency; emergency
powers should be exercised under a strict time limitation; and last, the objective of emergency
action must be the defense of the constitutional order.”97
Clinton L. Rossiter, after surveying the history of the employment of emergency powers in Great Britain,
France, Weimar, Germany and the United States, reverted to a description of a scheme of
“constitutional dictatorship” as solution to the vexing problems presented by emergency.  98 Like Watkins
and Friedrich, he stated a priori the conditions of success of the “constitutional dictatorship,” thus:
1) No general regime or particular institution of constitutional dictatorship should be initiated unless it is
necessary or even indispensable to the preservation of the State and its constitutional order…
2) …the decision to institute a constitutional dictatorship should never be in the hands of the man or
men who will constitute the dictator…
3) No government should initiate a constitutional dictatorship without making specific provisions for its
termination…
4) …all uses of emergency powers and all readjustments in the organization of the government should
be effected in pursuit of constitutional or legal requirements…
5) … no dictatorial institution should be adopted, no right invaded, no regular procedure altered any
more than is absolutely necessary for the conquest of the particular crisis . . .
6) The measures adopted in the prosecution of the a constitutional dictatorship should never be
permanent in character or effect…
7) The dictatorship should be carried on by persons representative of every part of the citizenry
interested in the defense of the existing constitutional order. . .
8.) Ultimate responsibility should be maintained for every action taken under a constitutional
dictatorship. . .
9) The decision to terminate a constitutional dictatorship, like the decision to institute one should never
be in the hands of the man or men who constitute the dictator. . .
10) No constitutional dictatorship should extend beyond the termination of the crisis for which it was
instituted…
11) …the termination of the crisis must be followed by a complete return as possible to the political and
governmental conditions existing prior to the initiation of the constitutional dictatorship…99
Rossiter accorded to legislature a far greater role in the oversight exercise of emergency powers than
did Watkins. He would secure to Congress final responsibility for declaring the existence or termination
of an emergency, and he places great faith in the effectiveness of congressional investigating
committees.100
Scott and Cotter, in analyzing the above contemporary theories in light of recent experience, were one
in saying that, “the suggestion that democracies surrender the control of government to an
authoritarian ruler in time of grave danger to the nation is not based upon sound constitutional
theory.” To appraise emergency power in terms of constitutional dictatorship serves merely to distort
the problem and hinder realistic analysis. It matters not whether the term “dictator” is used in its normal
sense (as applied to authoritarian rulers) or is employed to embrace all chief executives administering
emergency powers. However used, “constitutional dictatorship” cannot be divorced from the implication
of suspension of the processes of constitutionalism. Thus, they favored instead the “concept of
constitutionalism” articulated by Charles H. McIlwain:
A concept of constitutionalism which is less misleading in the analysis of problems of emergency
powers, and which is consistent with the findings of this study, is that formulated by Charles H.
McIlwain. While it does not by any means necessarily exclude some indeterminate limitations upon the
substantive powers of government, full emphasis is placed upon procedural limitations, and political
responsibility. McIlwain clearly recognized the need to repose adequate power in government. And in
discussing the meaning of constitutionalism, he insisted that the historical and proper test of
constitutionalism was the existence of adequate processes for keeping government
responsible. He refused to equate constitutionalism with the enfeebling of government by an
exaggerated emphasis upon separation of powers and substantive limitations on governmental power.
He found that the really effective checks on despotism have consisted not in the weakening of
government but, but rather in the limiting of it; between which there is a great and very significant
difference. In associating constitutionalism with “limited” as distinguished from “weak”
government, McIlwain meant government limited to the orderly procedure of law as opposed to
the processes of force. The two fundamental correlative elements of constitutionalism for which
all lovers of liberty must yet fight are the legal limits to arbitrary power and a complete political
responsibility of government to the governed.101
In the final analysis, the various approaches to emergency of the above political theorists—from Lock’s
“theory of prerogative,” to Watkins’ doctrine of “constitutional dictatorship” and, eventually, to McIlwain’s
“principle of constitutionalism”—ultimately aim to solve one real problem in emergency governance,
i.e., that of allotting increasing areas of discretionary power to the Chief Executive, while
insuring that such powers will be exercised with a sense of political responsibility and under
effective limitations and checks.
Our Constitution has fairly coped with this problem. Fresh from the fetters of a repressive regime, the
1986 Constitutional Commission, in drafting the 1987 Constitution, endeavored to create a government
in the concept of Justice Jackson’s “balanced power structure.” 102 Executive, legislative, and judicial
powers are dispersed to the President, the Congress, and the Supreme Court, respectively. Each is
supreme within its own sphere. But none has the monopoly of power in times of emergency. Each
branch is given a role to serve as limitation or check upon the other. This system does
not weaken the President, it just limits his power, using the language of McIlwain. In other words, in
times of emergency, our Constitution reasonably demands that we repose a certain amount of faith in
the basic integrity and wisdom of the Chief Executive but, at the same time, it obliges him to operate
within carefully prescribed procedural limitations.
a. “Facial Challenge”
Petitioners contend that PP 1017 is void on its face because of its “overbreadth.” They claim that its
enforcement encroached on both unprotected and protected rights under Section 4, Article III of the
Constitution and sent a “chilling effect” to the citizens.
A facial review of PP 1017, using the overbreadth doctrine, is uncalled for.
First and foremost, the overbreadth doctrine is an analytical tool developed for testing “on their faces”
statutes in free speech cases, also known under the American Law as First Amendment cases.103
A plain reading of PP 1017 shows that it is not primarily directed to speech or even speech-related
conduct. It is actually a call upon the AFP to prevent or suppress all forms
of lawlessviolence. In United States v. Salerno,104 the US Supreme Court held that “we have not
recognized an ‘overbreadth’ doctrine outside the limited context of the First Amendment”
(freedom of speech).
Moreover, the overbreadth doctrine is not intended for testing the validity of a law that “reflects
legitimate state interest in maintaining comprehensive control over harmful, constitutionally unprotected
conduct.” Undoubtedly, lawless violence, insurrection and rebellion are considered “harmful” and
“constitutionally unprotected conduct.” In Broadrick v. Oklahoma,105 it was held:
It remains a ‘matter of no little difficulty’ to determine when a law may properly be held void on its face
and when ‘such summary action’ is inappropriate. But the plain import of our cases is, at the very
least, that facial overbreadth adjudication is an exception to our traditional rules of practice and
that its function, a limited one at the outset, attenuates as the otherwise unprotected behavior
that it forbids the State to sanction moves from ‘pure speech’ toward conduct and that conduct
—even if expressive—falls within the scope of otherwise valid criminal laws that reflect
legitimate state interests in maintaining comprehensive controls over harmful, constitutionally
unprotected conduct.
Thus, claims of facial overbreadth are entertained in cases involving statutes which, by their terms,
seek to regulate only “spoken words” and again, that “overbreadth claims, if entertained at all, have
been curtailed when invoked against ordinary criminal laws that are sought to be applied to
protected conduct.”106 Here, the incontrovertible fact remains that PP 1017 pertains to a spectrum
of conduct, not free speech, which is manifestly subject to state regulation.
Second, facial invalidation of laws is considered as “manifestly strong medicine,” to be used
“sparingly and only as a last resort,” and is “generally disfavored;”107 The reason for this is obvious.
Embedded in the traditional rules governing constitutional adjudication is the principle that a person to
whom a law may be applied will not be heard to challenge a law on the ground that it may conceivably
be applied unconstitutionally to others, i.e., in other situations not before the Court.108 A writer and
scholar in Constitutional Law explains further:
The most distinctive feature of the overbreadth technique is that it marks an exception to some
of the usual rules of constitutional litigation. Ordinarily, a particular litigant claims that a statute
is unconstitutional as applied to him or her; if the litigant prevails, the courts carve away the
unconstitutional aspects of the law by invalidating its improper applications on a case to case
basis. Moreover, challengers to a law are not permitted to raise the rights of third parties and
can only assert their own interests. In overbreadth analysis, those rules give way; challenges
are permitted to raise the rights of third parties; and the court invalidates the entire statute “on its
face,” not merely “as applied for” so that the overbroad law becomes unenforceable until a properly
authorized court construes it more narrowly. The factor that motivates courts to depart from the normal
adjudicatory rules is the concern with the “chilling;” deterrent effect of the overbroad statute on third
parties not courageous enough to bring suit. The Court assumes that an overbroad law’s “very
existence may cause others not before the court to refrain from constitutionally protected speech or
expression.” An overbreadth ruling is designed to remove that deterrent effect on the speech of those
third parties.
In other words, a facial challenge using the overbreadth doctrine will require the Court to examine PP
1017 and pinpoint its flaws and defects, not on the basis of its actual operation to petitioners, but on the
assumption or prediction that its very existence may cause others not before the Court to refrain from
constitutionally protected speech or expression. In Younger v. Harris,109 it was held that:
[T]he task of analyzing a proposed statute, pinpointing its deficiencies, and requiring correction of these
deficiencies before the statute is put into effect, is rarely if ever an appropriate task for the judiciary. The
combination of the relative remoteness of the controversy, the impact on the legislative process
of the relief sought, and above all the speculative and amorphous nature of the required line-by-
line analysis of detailed statutes,…ordinarily results in a kind of case that is wholly
unsatisfactory for deciding constitutional questions, whichever way they might be decided.
And third, a facial challenge on the ground of overbreadth is the most difficult challenge to mount
successfully, since the challenger must establish that there can be no instance when the assailed
law may be valid. Here, petitioners did not even attempt to show whether this situation exists.
Petitioners likewise seek a facial review of PP 1017 on the ground of vagueness. This, too, is
unwarranted.
Related to the “overbreadth” doctrine is the “void for vagueness doctrine” which holds that “a law is
facially invalid if men of common intelligence must necessarily guess at its meaning and differ
as to its application.“110 It is subject to the same principles governing overbreadth doctrine. For one, it
is also an analytical tool for testing “on their faces” statutes in free speech cases. And like
overbreadth, it is said that a litigant may challenge a statute on its face only if it is vague in all its
possible applications. Again, petitioners did not even attempt to show that PP 1017 is vague in
all its application. They also failed to establish that men of common intelligence cannot understand
the meaning and application of PP 1017.
b. Constitutional Basis of PP 1017
Now on the constitutional foundation of PP 1017.
The operative portion of PP 1017 may be divided into three important provisions, thus:
First provision:
“by virtue of the power vested upon me by Section 18, Artilce VII … do hereby command the Armed
Forces of the Philippines, to maintain law and order throughout the Philippines, prevent or suppress all
forms of lawless violence as well any act of insurrection or rebellion”
Second provision:
“and to enforce obedience to all the laws and to all decrees, orders and regulations promulgated by me
personally or upon my direction;”
Third provision:
“as provided in Section 17, Article XII of the Constitution do hereby declare a State of National
Emergency.”
First Provision: Calling-out Power
The first provision pertains to the President’s calling-out power. In Sanlakas v. Executive
Secretary,111 this Court, through Mr. Justice Dante O. Tinga, held that Section 18, Article VII of the
Constitution reproduced as follows:
Sec. 18. The President shall be the Commander-in-Chief of all armed forces of the Philippines
and whenever it becomes necessary, he may call out such armed forces to prevent or suppress
lawless violence, invasion or rebellion. In case of invasion or rebellion, when the public safety
requires it, he may, for a period not exceeding sixty days, suspend the privilege of the writ of habeas
corpus or place the Philippines or any part thereof under martial law. Within forty-eight hours from the
proclamation of martial law or the suspension of the privilege of the writ of habeas corpus, the President
shall submit a report in person or in writing to the Congress. The Congress, voting jointly, by a vote of at
least a majority of all its Members in regular or special session, may revoke such proclamation or
suspension, which revocation shall not be set aside by the President. Upon the initiative of the
President, the Congress may, in the same manner, extend such proclamation or suspension for a
period to be determined by the Congress, if the invasion or rebellion shall persist and public safety
requires it.
The Congress, if not in session, shall within twenty-four hours following such proclamation or
suspension, convene in accordance with its rules without need of a call.
The Supreme Court may review, in an appropriate proceeding filed by any citizen, the sufficiency of the
factual bases of the proclamation of martial law or the suspension of the privilege of the writ or the
extension thereof, and must promulgate its decision thereon within thirty days from its filing.
A state of martial law does not suspend the operation of the Constitution, nor supplant the functioning of
the civil courts or legislative assemblies, nor authorize the conferment of jurisdiction on military courts
and agencies over civilians where civil courts are able to function, nor automatically suspend the
privilege of the writ.
The suspension of the privilege of the writ shall apply only to persons judicially charged for rebellion or
offenses inherent in or directly connected with invasion.
During the suspension of the privilege of the writ, any person thus arrested or detained shall be
judicially charged within three days, otherwise he shall be released.
grants the President, as Commander-in-Chief, a “sequence” of graduated powers. From the most to the
least benign, these are: the calling-out power, the power to suspend the privilege of the writ of habeas
corpus, and the power to declare Martial Law. Citing Integrated Bar of the Philippines v. Zamora,112 the
Court ruled that the only criterion for the exercise of the calling-out power is that “whenever it
becomes necessary,” the President may call the armed forces “to prevent or suppress lawless
violence, invasion or rebellion.” Are these conditions present in the instant cases? As stated earlier,
considering the circumstances then prevailing, President Arroyo found it necessary to issue PP 1017.
Owing to her Office’s vast intelligence network, she is in the best position to determine the actual
condition of the country.
Under the calling-out power, the President may summon the armed forces to aid him in
suppressing lawless violence, invasion and rebellion. This involves ordinary police action. But every
act that goes beyond the President’s calling-out power is considered illegal or ultra vires. For this
reason, a President must be careful in the exercise of his powers. He cannot invoke a greater power
when he wishes to act under a lesser power. There lies the wisdom of our Constitution, the greater the
power, the greater are the limitations.
It is pertinent to state, however, that there is a distinction between the President’s authority to declare a
“state of rebellion” (in Sanlakas) and the authority to proclaim a state of national emergency. While
President Arroyo’s authority to declare a “state of rebellion” emanates from her powers as Chief
Executive, the statutory authority cited in Sanlakaswas Section 4, Chapter 2, Book II of the Revised
Administrative Code of 1987, which provides:
SEC. 4. – Proclamations. – Acts of the President fixing a date or declaring a status or condition of
public moment or interest, upon the existence of which the operation of a specific law or regulation is
made to depend, shall be promulgated in proclamations which shall have the force of an executive
order.
President Arroyo’s declaration of a “state of rebellion” was merely an act declaring a status or condition
of public moment or interest, a declaration allowed under Section 4 cited above. Such declaration, in
the words of Sanlakas, is harmless, without legal significance, and deemed not written. In these cases,
PP 1017 is more than that. In declaring a state of national emergency, President Arroyo did not only
rely on Section 18, Article VII of the Constitution, a provision calling on the AFP to prevent or suppress
lawless violence, invasion or rebellion. She also relied on Section 17, Article XII, a provision on the
State’s extraordinary power to take over privately-owned public utility and business affected with public
interest. Indeed, PP 1017 calls for the exercise of an awesome power. Obviously, such Proclamation
cannot be deemed harmless, without legal significance, or not written, as in the case of Sanlakas.
Some of the petitioners vehemently maintain that PP 1017 is actually a declaration of Martial Law. It is
no so. What defines the character of PP 1017 are its wordings. It is plain therein that what the President
invoked was her calling-out power.
The declaration of Martial Law is a “warn[ing] to citizens that the military power has been called upon by
the executive to assist in the maintenance of law and order, and that, while the emergency lasts, they
must, upon pain of arrest and punishment, not commit any acts which will in any way render more
difficult the restoration of order and the enforcement of law.”113
In his “Statement before the Senate Committee on Justice” on March 13, 2006, Mr. Justice Vicente V.
Mendoza,114 an authority in constitutional law, said that of the three powers of the President as
Commander-in-Chief, the power to declare Martial Law poses the most severe threat to civil liberties. It
is a strong medicine which should not be resorted to lightly. It cannot be used to stifle or persecute
critics of the government. It is placed in the keeping of the President for the purpose of enabling him to
secure the people from harm and to restore order so that they can enjoy their individual freedoms. In
fact, Section 18, Art. VII, provides:
A state of martial law does not suspend the operation of the Constitution, nor supplant the functioning of
the civil courts or legislative assemblies, nor authorize the conferment of jurisdiction on military courts
and agencies over civilians where civil courts are able to function, nor automatically suspend the
privilege of the writ.
Justice Mendoza also stated that PP 1017 is not a declaration of Martial Law. It is no more than a call
by the President to the armed forces to prevent or suppress lawless violence. As such, it cannot be
used to justify acts that only under a valid declaration of Martial Law can be done. Its use for any other
purpose is a perversion of its nature and scope, and any act done contrary to its command is ultra vires.
Justice Mendoza further stated that specifically, (a) arrests and seizures without judicial warrants; (b)
ban on public assemblies; (c) take-over of news media and agencies and press censorship; and (d)
issuance of Presidential Decrees, are powers which can be exercised by the President as Commander-
in-Chief only where there is a valid declaration of Martial Law or suspension of the writ of habeas
corpus.
Based on the above disquisition, it is clear that PP 1017 is not a declaration of Martial Law. It is merely
an exercise of President Arroyo’s calling-out power for the armed forces to assist her in preventing
or suppressing lawless violence.
Second Provision: “Take Care” Power
The second provision pertains to the power of the President to ensure that the laws be faithfully
executed. This is based on Section 17, Article VII which reads:
SEC. 17. The President shall have control of all the executive departments, bureaus, and offices. He
shall ensure that the laws be faithfully executed.
As the Executive in whom the executive power is vested, 115 the primary function of the President is to
enforce the laws as well as to formulate policies to be embodied in existing laws. He sees to it that all
laws are enforced by the officials and employees of his department. Before assuming office, he is
required to take an oath or affirmation to the effect that as President of the Philippines, he will, among
others, “execute its laws.”116 In the exercise of such function, the President, if needed, may employ the
powers attached to his office as the Commander-in-Chief of all the armed forces of the
country,117 including the Philippine National Police118 under the Department of Interior and Local
Government.119
Petitioners, especially Representatives Francis Joseph G. Escudero, Satur Ocampo, Rafael Mariano, bureaus or offices of the Government, for information or compliance, shall be embodied in
Teodoro Casiño, Liza Maza, and Josel Virador argue that PP 1017 is unconstitutional as it arrogated memorandum circulars.
upon President Arroyo the power to enact laws and decrees in violation of Section 1, Article VI of the
Constitution, which vests the power to enact laws in Congress. They assail the clause “to enforce
Sec. 7. General or Special Orders. — Acts and commands of the President in his capacity as
obedience to all the laws and to all decrees, orders and regulations promulgated by me
Commander-in-Chief of the Armed Forces of the Philippines shall be issued as general or special
personally or upon my direction.”
orders.

Petitioners’ contention is understandable. A reading of PP 1017 operative clause shows that it was
President Arroyo’s ordinance power is limited to the foregoing issuances. She cannot
lifted120 from Former President Marcos’ Proclamation No. 1081, which partly reads:
issue decrees similar to those issued by Former President Marcos under PP 1081. Presidential
Decrees are laws which are of the same category and binding force as statutes because they were
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines by virtue of the powers issued by the President in the exercise of his legislative power during the period of Martial Law under
vested upon me by Article VII, Section 10, Paragraph (2) of the Constitution, do hereby place the entire the 1973 Constitution.121
Philippines as defined in Article 1, Section 1 of the Constitution under martial law and, in my capacity as
their Commander-in-Chief, do hereby command the Armed Forces of the Philippines, to maintain
This Court rules that the assailed PP 1017 is unconstitutional insofar as it grants President
law and order throughout the Philippines, prevent or suppress all forms of lawless violence as
Arroyo the authority to promulgate “decrees.” Legislative power is peculiarly within the province of
well as any act of insurrection or rebellion and to enforce obedience to all the laws and decrees,
the Legislature. Section 1, Article VI categorically states that “[t]he legislative power shall be vested
orders and regulations promulgated by me personally or upon my direction.
in the Congress of the Philippines which shall consist of a Senate and a House of
Representatives.” To be sure, neither Martial Law nor a state of rebellion nor a state of emergency can
We all know that it was PP 1081 which granted President Marcos legislative power. Its enabling clause justify President Arroyo’s exercise of legislative power by issuing decrees.
states: “to enforce obedience to all the laws and decrees, orders and regulations promulgated
by me personally or upon my direction.” Upon the other hand, the enabling clause of PP 1017
Can President Arroyo enforce obedience to all decrees and laws through the military?
issued by President Arroyo is: to enforce obedience to all the laws and to all decrees, orders and
regulations promulgated by me personally or upon my direction.”
As this Court stated earlier, President Arroyo has no authority to enact decrees. It follows that these
decrees are void and, therefore, cannot be enforced. With respect to “laws,” she cannot call the military
Is it within the domain of President Arroyo to promulgate “decrees“?
to enforce or implement certain laws, such as customs laws, laws governing family and property
relations, laws on obligations and contracts and the like. She can only order the military, under PP
PP 1017 states in part: “to enforce obedience to all the laws and decrees x x x promulgated by me 1017, to enforce laws pertinent to its duty to suppress lawless violence.
personally or upon my direction.“
Third Provision: Power to Take Over
The President is granted an Ordinance Power under Chapter 2, Book III of Executive Order No. 292
(Administrative Code of 1987). She may issue any of the following:
The pertinent provision of PP 1017 states:

Sec. 2. Executive Orders. — Acts of the President providing for rules of a general or permanent
x x x and to enforce obedience to all the laws and to all decrees, orders, and regulations promulgated
character in implementation or execution of constitutional or statutory powers shall be promulgated in
by me personally or upon my direction; and as provided in Section 17, Article XII of the
executive orders.
Constitution do hereby declare a state of national emergency.

Sec. 3. Administrative Orders. — Acts of the President which relate to particular aspect of governmental
The import of this provision is that President Arroyo, during the state of national emergency under PP
operations in pursuance of his duties as administrative head shall be promulgated in administrative
1017, can call the military not only to enforce obedience “to all the laws and to all decrees x x x” but
orders.
also to act pursuant to the provision of Section 17, Article XII which reads:

Sec. 4. Proclamations. — Acts of the President fixing a date or declaring a status or condition of public
Sec. 17. In times of national emergency, when the public interest so requires, the State may, during the
moment or interest, upon the existence of which the operation of a specific law or regulation is made to
emergency and under reasonable terms prescribed by it, temporarily take over or direct the operation of
depend, shall be promulgated in proclamations which shall have the force of an executive order.
any privately-owned public utility or business affected with public interest.

Sec. 5. Memorandum Orders. — Acts of the President on matters of administrative detail or of

What could be the reason of President Arroyo in invoking the above provision when she issued PP
subordinate or temporary interest which only concern a particular officer or office of the Government
1017?
shall be embodied in memorandum orders.

The answer is simple. During the existence of the state of national emergency, PP 1017 purports to
Sec. 6. Memorandum Circulars. — Acts of the President on matters relating to internal administration,
grant the President, without any authority or delegation from Congress, to take over or direct the
which the President desires to bring to the attention of all or some of the departments, agencies,
operation of any privately-owned public utility or business affected with public interest.
This provision was first introduced in the 1973 Constitution, as a product of the “martial law” thinking of
the 1971 Constitutional Convention.122 In effect at the time of its approval was President Marcos’ Letter
of Instruction No. 2 dated September 22, 1972 instructing the Secretary of National Defense to take
over “the management, control and operation of the Manila Electric Company, the Philippine Long
Distance Telephone Company, the National Waterworks and Sewerage Authority, the Philippine
National Railways, the Philippine Air Lines, Air Manila (and) Filipinas Orient Airways . . . for the
successful prosecution by the Government of its effort to contain, solve and end the present national
emergency.“
Petitioners, particularly the members of the House of Representatives, claim that President Arroyo’s
inclusion of Section 17, Article XII in PP 1017 is an encroachment on the legislature’s emergency
powers.
This is an area that needs delineation.
A distinction must be drawn between the President’s authority to declare “a state of national
emergency” and to exercise emergency powers. To the first, as elucidated by the Court, Section 18,
Article VII grants the President such power, hence, no legitimate constitutional objection can be raised.
But to the second, manifold constitutional issues arise.
Section 23, Article VI of the Constitution reads:
SEC. 23. (1) The Congress, by a vote of two-thirds of both Houses in joint session assembled, voting
separately, shall have the sole power to declare the existence of a state of war.
(2) In times of war or other national emergency, the Congress may, by law, authorize the President,
for a limited period and subject to such restrictions as it may prescribe, to exercise powers necessary
and proper to carry out a declared national policy. Unless sooner withdrawn by resolution of the
Congress, such powers shall cease upon the next adjournment thereof.
It may be pointed out that the second paragraph of the above provision refers not only to war but also to
“other national emergency.” If the intention of the Framers of our Constitution was to withhold from
the President the authority to declare a “state of national emergency” pursuant to Section 18, Article VII
(calling-out power) and grant it to Congress (like the declaration of the existence of a state of war), then
the Framers could have provided so. Clearly, they did not intend that Congress should first authorize
the President before he can declare a “state of national emergency.” The logical conclusion then is that
President Arroyo could validly declare the existence of a state of national emergency even in the
absence of a Congressional enactment.
But the exercise of emergency powers, such as the taking over of privately owned public utility or
business affected with public interest, is a different matter. This requires a delegation from Congress.
Courts have often said that constitutional provisions in pari materia are to be construed together.
Otherwise stated, different clauses, sections, and provisions of a constitution which relate to the same
subject matter will be construed together and considered in the light of each other.123 Considering
thatSection 17 of Article XII and Section 23 of Article VI, previously quoted, relate to national
emergencies, they must be read together to determine the limitation of the exercise of emergency
powers.
Generally, Congress is the repository of emergency powers. This is evident in the tenor of Section
23 (2), Article VI authorizing it to delegate such powers to the President. Certainly, a body cannot
delegate a power not reposed upon it. However, knowing that during grave emergencies, it may not
be possible or practicable for Congress to meet and exercise its powers, the Framers of our
Constitution deemed it wise to allow Congress to grant emergency powers to the President, subject to
certain conditions, thus:
(1) There must be a war or other emergency.
(2) The delegation must be for a limited period only.
(3) The delegation must be subject to such restrictions as the Congress may prescribe.
(4) The emergency powers must be exercised to carry out a national policy declared by Congress.124
Section 17, Article XII must be understood as an aspect of the emergency powers clause. The taking
over of private business affected with public interest is just another facet of the emergency powers
generally reposed upon Congress. Thus, when Section 17 states that the “the State may, during the
emergency and under reasonable terms prescribed by it, temporarily take over or direct the
operation of any privately owned public utility or business affected with public interest ,” it refers
to Congress, not the President. Now, whether or not the President may exercise such power is
dependent on whether Congress may delegate it to him pursuant to a law prescribing the reasonable
terms thereof. Youngstown Sheet & Tube Co. et al. v. Sawyer,125 held:
It is clear that if the President had authority to issue the order he did, it must be found in some provision
of the Constitution. And it is not claimed that express constitutional language grants this power to the
President. The contention is that presidential power should be implied from the aggregate of his powers
under the Constitution. Particular reliance is placed on provisions in Article II which say that “The
executive Power shall be vested in a President . . . .;” that “he shall take Care that the Laws be faithfully
executed;” and that he “shall be Commander-in-Chief of the Army and Navy of the United States.
The order cannot properly be sustained as an exercise of the President’s military power as
Commander-in-Chief of the Armed Forces. The Government attempts to do so by citing a number of
cases upholding broad powers in military commanders engaged in day-to-day fighting in a theater of
war. Such cases need not concern us here. Even though “theater of war” be an expanding
concept, we cannot with faithfulness to our constitutional system hold that the Commander-in-
Chief of the Armed Forces has the ultimate power as such to take possession of private
property in order to keep labor disputes from stopping production. This is a job for the nation’s
lawmakers, not for its military authorities.
Nor can the seizure order be sustained because of the several constitutional provisions that
grant executive power to the President. In the framework of our Constitution, the President’s
power to see that the laws are faithfully executed refutes the idea that he is to be a
lawmaker.The Constitution limits his functions in the lawmaking process to the recommending
of laws he thinks wise and the vetoing of laws he thinks bad. And the Constitution is neither
silent nor equivocal about who shall make laws which the President is to execute. The first
section of the first article says that “All legislative Powers herein granted shall be vested in a
Congress of the United States. . .”126
Petitioner Cacho-Olivares, et al. contends that the term “emergency” under Section 17, Article XII refers
to “tsunami,” “typhoon,” “hurricane” and “similar occurrences.”This is a limited view of “emergency.”
Emergency, as a generic term, connotes the existence of conditions suddenly intensifying the degree of
existing danger to life or well-being beyond that which is accepted as normal. Implicit in this definitions
are the elements of intensity, variety, and perception.127 Emergencies, as perceived by legislature or
executive in the United Sates since 1933, have been occasioned by a wide range of situations,
classifiable under three (3) principal heads: a)economic,128b)natural disaster,129 and c)national
security.130
“Emergency,” as contemplated in our Constitution, is of the same breadth. It may include rebellion,
economic crisis, pestilence or epidemic, typhoon, flood, or other similar catastrophe of nationwide
proportions or effect.131 This is evident in the Records of the Constitutional Commission, thus:
MR. GASCON. Yes. What is the Committee’s definition of “national emergency” which appears in
Section 13, page 5? It reads:
When the common good so requires, the State may temporarily take over or direct the operation of any
privately owned public utility or business affected with public interest.
MR. VILLEGAS. What I mean is threat from external aggression, for example, calamities or natural
disasters.
MR. GASCON. There is a question by Commissioner de los Reyes. What about strikes and riots?
MR. VILLEGAS. Strikes, no; those would not be covered by the term “national emergency.”
MR. BENGZON. Unless they are of such proportions such that they would paralyze government
service.132
xxxxxx
MR. TINGSON. May I ask the committee if “national emergency” refers to military national
emergency or could this be economic emergency?”
MR. VILLEGAS. Yes, it could refer to both military or economic dislocations.
MR. TINGSON. Thank you very much.133
It may be argued that when there is national emergency, Congress may not be able to convene and,
therefore, unable to delegate to the President the power to take over privately-owned public utility or
business affected with public interest.
In Araneta v. Dinglasan,134 this Court emphasized that legislative power, through which extraordinary
measures are exercised, remains in Congress even in times of crisis.
“x x x
After all the criticisms that have been made against the efficiency of the system of the separation of
powers, the fact remains that the Constitution has set up this form of government, with all its defects
and shortcomings, in preference to the commingling of powers in one man or group of men. The Filipino
people by adopting parliamentary government have given notice that they share the faith of other
democracy-loving peoples in this system, with all its faults, as the ideal. The point is, under this
framework of government, legislation is preserved for Congress all the time, not excepting periods of
crisis no matter how serious. Never in the history of the United States, the basic features of whose
Constitution have been copied in ours, have specific functions of the legislative branch of enacting laws
been surrendered to another department—unless we regard as legislating the carrying out of a
legislative policy according to prescribed standards; no, not even when that Republic was fighting a
total war, or when it was engaged in a life-and-death struggle to preserve the Union. The truth is that
under our concept of constitutional government, in times of extreme perils more than in normal
circumstances ‘the various branches, executive, legislative, and judicial,’ given the ability to act, are
called upon ‘to perform the duties and discharge the responsibilities committed to them respectively.”
Following our interpretation of Section 17, Article XII, invoked by President Arroyo in issuing PP 1017,
this Court rules that such Proclamation does not authorize her during the emergency to temporarily take
over or direct the operation of any privately owned public utility or business affected with public interest
without authority from Congress.
Let it be emphasized that while the President alone can declare a state of national emergency,
however, without legislation, he has no power to take over privately-owned public utility or business
affected with public interest. The President cannot decide whether exceptional circumstances exist
warranting the take over of privately-owned public utility or business affected with public interest. Nor
can he determine when such exceptional circumstances have ceased. Likewise, without
legislation, the President has no power to point out the types of businesses affected with public
interest that should be taken over. In short, the President has no absolute authority to exercise all the
powers of the State under Section 17, Article VII in the absence of an emergency powers act passed by
Congress.
c. “AS APPLIED CHALLENGE”
One of the misfortunes of an emergency, particularly, that which pertains to security, is that military
necessity and the guaranteed rights of the individual are often not compatible. Our history reveals that
in the crucible of conflict, many rights are curtailed and trampled upon. Here, the right against
unreasonable search and seizure; the right against warrantless arrest; and the freedom of
speech, of expression, of the press, and of assembly under the Bill of Rights suffered the greatest
blow.
Of the seven (7) petitions, three (3) indicate “direct injury.”
In G.R. No. 171396, petitioners David and Llamas alleged that, on February 24, 2006, they were
arrested without warrants on their way to EDSA to celebrate the 20th Anniversary of People Power
I. The arresting officers cited PP 1017 as basis of the arrest.
In G.R. No. 171409, petitioners Cacho-Olivares and Tribune Publishing Co., Inc. claimed that on
February 25, 2006, the CIDG operatives “raided and ransacked without warrant” their office. Three
policemen were assigned to guard their office as a possible “source of destabilization.” Again, the basis
was PP 1017.
And in G.R. No. 171483, petitioners KMU and NAFLU-KMU et al. alleged that their members were
“turned away and dispersed” when they went to EDSA and later, to Ayala Avenue, to celebrate the 20th
Anniversary of People Power I.
A perusal of the “direct injuries” allegedly suffered by the said petitioners shows that they resulted from
the implementation, pursuant to G.O. No. 5, of PP 1017.
Can this Court adjudge as unconstitutional PP 1017 and G.O. No 5 on the basis of these illegal acts? In
general, does the illegal implementation of a law render it unconstitutional?
Settled is the rule that courts are not at liberty to declare statutes invalid although they may be
abused and misabused135 and may afford an opportunity for abuse in the manner of
application.136 The validity of a statute or ordinance is to be determined from its general purpose and
its efficiency to accomplish the end desired, not from its effects in a particular case.137 PP 1017 is
merely an invocation of the President’s calling-out power. Its general purpose is to command the AFP
to suppress all forms of lawless violence, invasion or rebellion. It had accomplished the end desired
which prompted President Arroyo to issue PP 1021. But there is nothing in PP 1017 allowing the police,
expressly or impliedly, to conduct illegal arrest, search or violate the citizens’ constitutional rights.
Now, may this Court adjudge a law or ordinance unconstitutional on the ground that its implementor
committed illegal acts? The answer is no. The criterion by which the validity of the statute or ordinance
is to be measured is the essential basis for the exercise of power, and not a mere incidental result
arising from its exertion.138 This is logical. Just imagine the absurdity of situations when laws maybe
declared unconstitutional just because the officers implementing them have acted arbitrarily. If this were
so, judging from the blunders committed by policemen in the cases passed upon by the Court, majority
of the provisions of the Revised Penal Code would have been declared unconstitutional a long time
ago.
President Arroyo issued G.O. No. 5 to carry into effect the provisions of PP 1017. General orders are
“acts and commands of the President in his capacity as Commander-in-Chief of the Armed Forces of
the Philippines.” They are internal rules issued by the executive officer to his subordinates precisely for
the proper and efficient administration of law. Such rules and regulations create no relation except
between the official who issues them and the official who receives them. 139 They are based on and are
the product of, a relationship in which power is their source, and obedience, their object. 140 For these
reasons, one requirement for these rules to be valid is that they must be reasonable, not arbitrary or
capricious.
G.O. No. 5 mandates the AFP and the PNP to immediately carry out the “necessary and appropriate
actions and measures to suppress and prevent acts of terrorism and lawless violence.”
Unlike the term “lawless violence” which is unarguably extant in our statutes and the Constitution, and
which is invariably associated with “invasion, insurrection or rebellion,” the phrase “acts of terrorism” is
still an amorphous and vague concept. Congress has yet to enact a law defining and punishing acts of
terrorism.
In fact, this “definitional predicament” or the “absence of an agreed definition of terrorism” confronts not
only our country, but the international community as well. The following observations are quite apropos:
In the actual unipolar context of international relations, the “fight against terrorism” has become one of
the basic slogans when it comes to the justification of the use of force against certain states and against
groups operating internationally. Lists of states “sponsoring terrorism” and of terrorist organizations are
set up and constantly being updated according to criteria that are not always known to the public, but
are clearly determined by strategic interests.
The basic problem underlying all these military actions—or threats of the use of force as the most
recent by the United States against Iraq—consists in the absence of an agreed definition of terrorism.
Remarkable confusion persists in regard to the legal categorization of acts of violence either by states,
by armed groups such as liberation movements, or by individuals.
The dilemma can by summarized in the saying “One country’s terrorist is another country’s freedom
fighter.” The apparent contradiction or lack of consistency in the use of the term “terrorism” may further
be demonstrated by the historical fact that leaders of national liberation movements such as Nelson
Mandela in South Africa, Habib Bourgouiba in Tunisia, or Ahmed Ben Bella in Algeria, to mention only a
few, were originally labeled as terrorists by those who controlled the territory at the time, but later
became internationally respected statesmen.
What, then, is the defining criterion for terrorist acts—the differentia specifica distinguishing those acts
from eventually legitimate acts of national resistance or self-defense?
Since the times of the Cold War the United Nations Organization has been trying in vain to reach a
consensus on the basic issue of definition. The organization has intensified its efforts recently, but has
been unable to bridge the gap between those who associate “terrorism” with any violent act by non-
state groups against civilians, state functionaries or infrastructure or military installations, and those
who believe in the concept of the legitimate use of force when resistance against foreign occupation or
against systematic oppression of ethnic and/or religious groups within a state is concerned.
The dilemma facing the international community can best be illustrated by reference to the contradicting
categorization of organizations and movements such as Palestine Liberation Organization (PLO)—
which is a terrorist group for Israel and a liberation movement for Arabs and Muslims—the Kashmiri
resistance groups—who are terrorists in the perception of India, liberation fighters in that of Pakistan—
the earlier Contras in Nicaragua—freedom fighters for the United States, terrorists for the Socialist
camp—or, most drastically, the Afghani Mujahedeen (later to become the Taliban movement): during
the Cold War period they were a group of freedom fighters for the West, nurtured by the United States,
and a terrorist gang for the Soviet Union. One could go on and on in enumerating examples of
conflicting categorizations that cannot be reconciled in any way—because of opposing political interests
that are at the roots of those perceptions.
How, then, can those contradicting definitions and conflicting perceptions and evaluations of one and
the same group and its actions be explained? In our analysis, the basic reason for these striking
inconsistencies lies in the divergent interest of states. Depending on whether a state is in the position of
an occupying power or in that of a rival, or adversary, of an occupying power in a given territory, the
definition of terrorism will “fluctuate” accordingly. A state may eventually see itself as protector of the
rights of a certain ethnic group outside its territory and will therefore speak of a “liberation struggle,” not
of “terrorism” when acts of violence by this group are concerned, and vice-versa.
The United Nations Organization has been unable to reach a decision on the definition of terrorism
exactly because of these conflicting interests of sovereign states that determine in each and every
instance how a particular armed movement (i.e. a non-state actor) is labeled in regard to the terrorists-
freedom fighter dichotomy. A “policy of double standards” on this vital issue of international affairs has
been the unavoidable consequence.
This “definitional predicament” of an organization consisting of sovereign states—and not of peoples, in
spite of the emphasis in the Preamble to the United Nations Charter!—has become even more serious
in the present global power constellation: one superpower exercises the decisive role in the Security
Council, former great powers of the Cold War era as well as medium powers are increasingly being
marginalized; and the problem has become even more acute since the terrorist attacks of 11
September 2001 I the United States.141
The absence of a law defining “acts of terrorism” may result in abuse and oppression on the part of the
police or military. An illustration is when a group of persons are merely engaged in a drinking spree. Yet
the military or the police may consider the act as an act of terrorism and immediately arrest them
pursuant to G.O. No. 5. Obviously, this is abuse and oppression on their part. It must be remembered
that an act can only be considered a crime if there is a law defining the same as such and imposing the
corresponding penalty thereon.
So far, the word “terrorism” appears only once in our criminal laws, i.e., in P.D. No. 1835 dated January
16, 1981 enacted by President Marcos during the Martial Law regime. This decree is entitled “Codifying
The Various Laws on Anti-Subversion and Increasing The Penalties for Membership in Subversive
Organizations.” The word “terrorism” is mentioned in the following provision: “That one who conspires
with any other person for the purpose of overthrowing the Government of the Philippines x x x by force,
violence, terrorism, x x x shall be punished by reclusion temporal x x x.”
P.D. No. 1835 was repealed by E.O. No. 167 (which outlaws the Communist Party of the Philippines)
enacted by President Corazon Aquino on May 5, 1985. These two (2) laws, however, do not define
“acts of terrorism.” Since there is no law defining “acts of terrorism,” it is President Arroyo alone, under
G.O. No. 5, who has the discretion to determine what acts constitute terrorism. Her judgment on this
aspect is absolute, without restrictions. Consequently, there can be indiscriminate arrest without
warrants, breaking into offices and residences, taking over the media enterprises, prohibition and
dispersal of all assemblies and gatherings unfriendly to the administration. All these can be effected in
the name of G.O. No. 5. These acts go far beyond the calling-out power of the President. Certainly,
they violate the due process clause of the Constitution. Thus, this Court declares that the “acts of
terrorism” portion of G.O. No. 5 is unconstitutional.
Significantly, there is nothing in G.O. No. 5 authorizing the military or police to commit acts beyond what
are necessary and appropriate to suppress and prevent lawless violence, the limitation of their
authority in pursuing the Order. Otherwise, such acts are considered illegal.
We first examine G.R. No. 171396(David et al.)
The Constitution provides that “the right of the people to be secured in their persons, houses, papers
and effects against unreasonable search and seizure of whatever nature and for any purpose shall
be inviolable, and no search warrant or warrant of arrest shall issue except upon probable cause to
be determined personally by the judge after examination under oath or affirmation of the complainant
and the witnesses he may produce, and particularly describing the place to be searched and the
persons or things to be seized.” 142 The plain import of the language of the Constitution is that searches,
seizures and arrests are normally unreasonable unless authorized by a validly issued search warrant
or warrant of arrest. Thus, the fundamental protection given by this provision is that between person
and police must stand the protective authority of a magistrate clothed with power to issue or refuse to
issue search warrants or warrants of arrest.143
In the Brief Account144 submitted by petitioner David, certain facts are established: first, he was arrested
without warrant; second, the PNP operatives arrested him on the basis of PP 1017; third, he was
brought at Camp Karingal, Quezon City where he was fingerprinted, photographed and booked like a
criminal suspect; fourth,he was treated brusquely by policemen who “held his head and tried to push
him” inside an unmarked car; fifth, he was charged with Violation of Batas Pambansa Bilang No.
880145 and Inciting to Sedition; sixth, he was detained for seven (7) hours; and seventh,he was
eventually released for insufficiency of evidence.
Section 5, Rule 113 of the Revised Rules on Criminal Procedure provides:
Sec. 5. Arrest without warrant; when lawful. – A peace officer or a private person may, without a
warrant, arrest a person:
(a) When, in his presence, the person to be arrested has committed, is actually committing, or is
attempting to commit an offense.
(b) When an offense has just been committed and he has probable cause to believe based on personal
knowledge of facts or circumstances that the person to be arrested has committed it; and
x x x.
Neither of the two (2) exceptions mentioned above justifies petitioner David’s warrantless arrest. During
the inquest for the charges of inciting to seditionand violation of BP 880, all that the arresting officers
could invoke was their observation that some rallyists were wearing t-shirts with the invective “Oust
Gloria Now” and their erroneous assumption that petitioner David was the leader of the
rally.146 Consequently, the Inquest Prosecutor ordered his immediate release on the ground of
insufficiency of evidence. He noted that petitioner David was not wearing the subject t-shirt and even if
he was wearing it, such fact is insufficient to charge him with inciting to sedition. Further, he also
stated that there is insufficient evidence for the charge of violation of BP 880 as it was not even known
whether petitioner David was the leader of the rally.147
But what made it doubly worse for petitioners David et al. is that not only was their right against
warrantless arrest violated, but also their right to peaceably assemble.
Section 4 of Article III guarantees:
No law shall be passed abridging the freedom of speech, of expression, or of the press, or the right of
the people peaceably to assemble and petition the government for redress of grievances.
“Assembly” means a right on the part of the citizens to meet peaceably for consultation in respect to
public affairs. It is a necessary consequence of our republican institution and complements the right of
speech. As in the case of freedom of expression, this right is not to be limited, much less denied, except
on a showing of a clear and present danger of a substantive evil that Congress has a right to prevent.
In other words, like other rights embraced in the freedom of expression, the right to assemble is not
subject to previous restraint or censorship. It may not be conditioned upon the prior issuance of a
permit or authorization from the government authorities except, of course, if the assembly is intended to
be held in a public place, a permit for the use of such place, and not for the assembly itself, may be
validly required.
The ringing truth here is that petitioner David, et al. were arrested while they were exercising their right
to peaceful assembly. They were not committing any crime, neither was there a showing of a clear and
present danger that warranted the limitation of that right. As can be gleaned from circumstances, the
charges of inciting to sedition and violation of BP 880 were mere afterthought. Even the Solicitor
General, during the oral argument, failed to justify the arresting officers’ conduct. In De Jonge v.
Oregon,148 it was held that peaceable assembly cannot be made a crime, thus:
Peaceable assembly for lawful discussion cannot be made a crime. The holding of meetings for
peaceable political action cannot be proscribed. Those who assist in the conduct of such meetings
cannot be branded as criminals on that score. The question, if the rights of free speech and peaceful
assembly are not to be preserved, is not as to the auspices under which the meeting was held but as to
its purpose; not as to the relations of the speakers, but whether their utterances transcend the bounds
of the freedom of speech which the Constitution protects. If the persons assembling have committed
crimes elsewhere, if they have formed or are engaged in a conspiracy against the public peace and
order, they may be prosecuted for their conspiracy or other violations of valid laws. But it is a different
matter when the State, instead of prosecuting them for such offenses, seizes upon mere
participation in a peaceable assembly and a lawful public discussion as the basis for a criminal
charge.
On the basis of the above principles, the Court likewise considers the dispersal and arrest of the
members of KMU et al. (G.R. No. 171483) unwarranted. Apparently, their dispersal was done merely on
the basis of Malacañang’s directive canceling all permits previously issued by local government units.
This is arbitrary. The wholesale cancellation of all permits to rally is a blatant disregard of the principle
that “freedom of assembly is not to be limited, much less denied, except on a showing of a  clear
and present dangerof a substantive evil that the State has a right to prevent.”149 Tolerance is the
rule and limitation is the exception. Only upon a showing that an assembly presents a clear and present
danger that the State may deny the citizens’ right to exercise it. Indeed, respondents failed to show or
convince the Court that the rallyists committed acts amounting to lawless violence, invasion or rebellion.
With the blanket revocation of permits, the distinction between protected and unprotected assemblies
was eliminated.
Not only that, the search violated petitioners’ freedom of the press. The best gauge of a free and
democratic society rests in the degree of freedom enjoyed by its media. In theBurgos v. Chief of
Staff152 this Court held that—
As heretofore stated, the premises searched were the business and printing offices of the “Metropolitan
Mail” and the “We Forum” newspapers. As a consequence of the search and seizure, these premises
were padlocked and sealed, with the further result that the printing and publication of said
newspapers were discontinued.
Such closure is in the nature of previous restraint or censorship abhorrent to the freedom of the
press guaranteed under the fundamental law, and constitutes a virtual denial of petitioners’
freedom to express themselves in print. This state of being is patently anathematic to a
democratic framework where a free, alert and even militant press is essential for the political
enlightenment and growth of the citizenry.

Moreover, under BP 880, the authority to regulate assemblies and rallies is lodged with the local
While admittedly, the Daily Tribune was not padlocked and sealed like the “Metropolitan Mail” and “We
government units. They have the power to issue permits and to revoke such permits after due notice
Forum” newspapers in the above case, yet it cannot be denied that the CIDG operatives exceeded their
and hearing on the determination of the presence of clear and present danger. Here, petitioners were
enforcement duties. The search and seizure of materials for publication, the stationing of policemen in
not even notified and heard on the revocation of their permits.150 The first time they learned of it was at
the vicinity of the The Daily Tribuneoffices, and the arrogant warning of government officials to media,
the time of the dispersal. Such absence of notice is a fatal defect. When a person’s right is restricted by
are plain censorship. It is that officious functionary of the repressive government who tells the citizen
government action, it behooves a democratic government to see to it that the restriction is fair,
that he may speak only if allowed to do so, and no more and no less than what he is permitted to say
reasonable, and according to procedure.
on pain of punishment should he be so rash as to disobey. 153 Undoubtedly, the The Daily Tribune was
subjected to these arbitrary intrusions because of its anti-government sentiments. This Court cannot
G.R. No. 171409,(Cacho-Olivares, et al.) presents another facet of freedom of speech i.e., the freedom tolerate the blatant disregard of a constitutional right even if it involves the most defiant of our citizens.
of the press. Petitioners’ narration of facts, which the Solicitor General failed to refute, established the Freedom to comment on public affairs is essential to the vitality of a representative democracy. It is the
following: first, the Daily Tribune’s offices were searched without warrant;second, the police operatives duty of the courts to be watchful for the constitutional rights of the citizen, and against any stealthy
seized several materials for publication; third, the search was conducted at about 1:00 o’ clock in the encroachments thereon. The motto should always be obsta principiis.154
morning of February 25, 2006; fourth, the search was conducted in the absence of any official of
the Daily Tribuneexcept the security guard of the building; and fifth, policemen stationed themselves at
Incidentally, during the oral arguments, the Solicitor General admitted that the search of
the vicinity of the Daily Tribune offices.
the Tribune’s offices and the seizure of its materials for publication and other papers are illegal; and that
the same are inadmissible “for any purpose,” thus:
Thereafter, a wave of warning came from government officials. Presidential Chief of Staff Michael
Defensor was quoted as saying that such raid was “meant to show a ‘strong presence,’ to tell
JUSTICE CALLEJO:
media outlets not to connive or do anything that would help the rebels in bringing down this
government.” Director General Lomibao further stated that “if they do not follow the standards—
and the standards are if they would contribute to instability in the government, or if they do not You made quite a mouthful of admission when you said that the policemen, when inspected the Tribune
subscribe to what is in General Order No. 5 and Proc. No. 1017—we will recommend for the purpose of gathering evidence and you admitted that the policemen were able to get the
a ‘takeover.’” National Telecommunications Commissioner Ronald Solis urged television and radio clippings. Is that not in admission of the admissibility of these clippings that were taken from the
networks to “cooperate“ with the government for the duration of the state of national emergency. He Tribune?
warned that his agency will not hesitate to recommend the closure of any broadcast outfit that
violates rules set out for media coverage during times when the national security is
SOLICITOR GENERAL BENIPAYO:
threatened.151

Under the law they would seem to be, if they were illegally seized, I think and I know, Your Honor, and
The search is illegal. Rule 126 of The Revised Rules on Criminal Procedure lays down the steps in the
these are inadmissible for any purpose.155
conduct of search and seizure. Section 4 requires that a search warrant be issued upon probable
cause in connection with one specific offence to be determined personally by the judge after
examination under oath or affirmation of the complainant and the witnesses he may produce. Section xxxxxxxxx
8 mandates that the search of a house, room, or any other premise be made in the presence of the
lawful occupant thereof or any member of his family or in the absence of the latter, in the presence of
two (2) witnesses of sufficient age and discretion residing in the same locality. And Section 9 states SR. ASSO. JUSTICE PUNO:
that the warrant must direct that it be served in the daytime, unless the property is on the person or in
the place ordered to be searched, in which case a direction may be inserted that it be served at any These have been published in the past issues of the Daily Tribune; all you have to do is to get those
time of the day or night. All these rules were violated by the CIDG operatives. past issues. So why do you have to go there at 1 o’clock in the morning and without any search
warrant? Did they become suddenly part of the evidence of rebellion or inciting to sedition or what?
SOLGEN BENIPAYO: The Dissenting Opinion states that PP 1017 and G.O. No. 5 are constitutional in every aspect and
“should result in no constitutional or statutory breaches if applied according to their letter.”
Well, it was the police that did that, Your Honor. Not upon my instructions.
The Court has passed upon the constitutionality of these issuances. Its ratiocination has been
exhaustively presented. At this point, suffice it to reiterate that PP 1017 is limited to the calling out by
SR. ASSO. JUSTICE PUNO:
the President of the military to prevent or suppress lawless violence, invasion or rebellion. When in
implementing its provisions, pursuant to G.O. No. 5, the military and the police committed acts which
Are you saying that the act of the policeman is illegal, it is not based on any law, and it is not based on violate the citizens’ rights under the Constitution, this Court has to declare such acts unconstitutional
Proclamation 1017. and illegal.

SOLGEN BENIPAYO: In this connection, Chief Justice Artemio V. Panganiban’s concurring opinion, attached hereto, is
considered an integral part of this ponencia.
It is not based on Proclamation 1017, Your Honor, because there is nothing in 1017 which says that the
police could go and inspect and gather clippings from Daily Tribune or any other newspaper. SUMMATION

SR. ASSO. JUSTICE PUNO: In sum, the lifting of PP 1017 through the issuance of PP 1021—a supervening event—would have
normally rendered this case moot and academic. However, while PP 1017 was still operative, illegal
acts were committed allegedly in pursuance thereof. Besides, there is no guarantee that PP 1017, or
Is it based on any law? one similar to it, may not again be issued. Already, there have been media reports on April 30, 2006
that allegedly PP 1017 would be reimposed “if the May 1 rallies” become “unruly and violent.”
SOLGEN BENIPAYO: Consequently, the transcendental issues raised by the parties should not be “evaded;” they must now
be resolved to prevent future constitutional aberration.
As far as I know, no, Your Honor, from the facts, no.
The Court finds and so holds that PP 1017 is constitutional insofar as it constitutes a call by the
President for the AFP to prevent or suppress lawless violence. The proclamation is sustained by
SR. ASSO. JUSTICE PUNO: Section 18, Article VII of the Constitution and the relevant jurisprudence discussed earlier. However, PP
1017’s extraneous provisions giving the President express or implied power (1) to issue decrees; (2) to
So, it has no basis, no legal basis whatsoever? direct the AFP to enforce obedience to all laws even those not related to lawless violence as well as
decrees promulgated by the President; and (3) to impose standards on media or any form of prior
restraint on the press, are ultra vires and unconstitutional. The Court also rules that under Section 17,
SOLGEN BENIPAYO: Article XII of the Constitution, the President, in the absence of a legislation, cannot take over privately-
owned public utility and private business affected with public interest.
Maybe so, Your Honor. Maybe so, that is why I said, I don’t know if it is premature to say this, we do
not condone this. If the people who have been injured by this would want to sue them, they can In the same vein, the Court finds G.O. No. 5 valid. It is an Order issued by the President—acting as
sue and there are remedies for this.156 Commander-in-Chief—addressed to subalterns in the AFP to carry out the provisions of PP 1017.
Significantly, it also provides a valid standard—that the military and the police should take only the
Likewise, the warrantless arrests and seizures executed by the police were, according to the Solicitor “necessary and appropriate actions and measures to suppress and prevent acts of lawless
General, illegal and cannot be condoned, thus: violence.”But the words “acts of terrorism” found in G.O. No. 5 have not been legally defined and
made punishable by Congress and should thus be deemed deleted from the said G.O. While “terrorism”
has been denounced generally in media, no law has been enacted to guide the military, and eventually
CHIEF JUSTICE PANGANIBAN: the courts, to determine the limits of the AFP’s authority in carrying out this portion of G.O. No. 5.

There seems to be some confusions if not contradiction in your theory.
SOLICITOR GENERAL BENIPAYO:
I don’t know whether this will clarify. The acts, the supposed illegal or unlawful acts committed on the
occasion of 1017, as I said, it cannot be condoned. You cannot blame the President for, as you said,
a misapplication of the law. These are acts of the police officers, that is their responsibility.157
On the basis of the relevant and uncontested facts narrated earlier, it is also pristine clear that (1) the
warrantless arrest of petitioners Randolf S. David and Ronald Llamas; (2) the dispersal of the rallies
and warrantless arrest of the KMU and NAFLU-KMU members; (3) the imposition of standards on
media or any prior restraint on the press; and (4) the warrantless search of the Tribune offices and the
whimsical seizures of some articles for publication and other materials, are not authorized by the
Constitution, the law and jurisprudence. Not even by the valid provisions of PP 1017 and G.O. No. 5.
Other than this declaration of invalidity, this Court cannot impose any civil, criminal or administrative
sanctions on the individual police officers concerned. They have not been individually identified and
given their day in court. The civil complaints or causes of action and/or relevant criminal Informations
have not been presented before this Court. Elementary due process bars this Court from making any
specific pronouncement of civil, criminal or administrative liabilities.
It is well to remember that military power is a means to an end and substantive civil rights are
ends in themselves. How to give the military the power it needs to protect the Republic without
unnecessarily trampling individual rights is one of the eternal balancing tasks of a democratic
state.During emergency, governmental action may vary in breadth and intensity from normal times, yet
they should not be arbitrary as to unduly restrain our people’s liberty.
Perhaps, the vital lesson that we must learn from the theorists who studied the various competing
political philosophies is that, it is possible to grant government the authority to cope with crises without
surrendering the two vital principles of constitutionalism: the maintenance of legal limits to arbitrary
power, and political responsibility of the government to the governed.158
WHEREFORE, the Petitions are partly granted. The Court rules that PP 1017
is CONSTITUTIONAL insofar as it constitutes a call by President Gloria Macapagal-Arroyo on the
AFP to prevent or suppress lawless violence. However, the provisions of PP 1017 commanding the
AFP to enforce laws not related to lawless violence, as well as decrees promulgated by the President,
are declared UNCONSTITUTIONAL. In addition, the provision in PP 1017 declaring national
emergency under Section 17, Article VII of the Constitution is CONSTITUTIONAL, but such declaration
does not authorize the President to take over privately-owned public utility or business affected with
public interest without prior legislation.
G.O. No. 5 is CONSTITUTIONAL since it provides a standard by which the AFP and the PNP should
implement PP 1017, i.e. whatever is “necessary and appropriate actions and measures to
suppress and prevent acts of lawless violence.“ Considering that “acts of terrorism” have not yet
been defined and made punishable by the Legislature, such portion of G.O. No. 5 is
declared UNCONSTITUTIONAL.
The warrantless arrest of Randolf S. David and Ronald Llamas; the dispersal and warrantless arrest of
the KMU and NAFLU-KMU members during their rallies, in the absence of proof that these petitioners
were committing acts constituting lawless violence, invasion or rebellion and violating BP 880; the
imposition of standards on media or any form of prior restraint on the press, as well as the warrantless
search of the Tribune offices and whimsical seizure of its articles for publication and other materials,
are declared UNCONSTITUTIONAL.
No costs.
SO ORDERED.
G.R. No. 191002               April 20, 2010
ARTURO M. DE CASTRO, Petitioner,  WOMEN TRIAL LAWYERS ORGANIZATION OF THE PHILIPPINES, represented by YOLANDA
vs.
JUDICIAL AND BAR COUNCIL (JBC) and PRESIDENT GLORIA MACAPAGAL -
ARROYO, Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 191032
JAIME N. SORIANO, Petitioner, 
vs.
JUDICIAL AND BAR COUNCIL (JBC), Respondent.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 191057
PHILIPPINE CONSTITUTION ASSOCIATION (PHILCONSA), Petitioner, 
vs.
JUDICIAL AND BAR COUNCIL (JBC), Respondent.
x - - - - - - - - - - - - - - - - - - - - - - -x
A.M. No. 10-2-5-SC
IN RE APPLICABILITY OF SECTION 15, ARTICLE VII OF THE CONSTITUTION TO
APPOINTMENTS TO THE JUDICIARY, ESTELITO P. MENDOZA, Petitioner,
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 191149
JOHN G. PERALTA, Petitioner, 
vs.
JUDICIAL AND BAR COUNCIL (JBC). Respondent.
PETER IRVING CORVERA; CHRISTIAN ROBERT S. LIM; ALFONSO V. TAN, JR.; NATIONAL
UNION OF PEOPLE’S LAWYERS; MARLOU B. UBANO; INTEGRATED BAR OF THE
PHILIPPINES-DAVAO DEL SUR CHAPTER, represented by its Immediate Past President, ATTY.
ISRAELITO P. TORREON, and the latter in his own personal capacity as a MEMBER of the
PHILIPPINE BAR; MITCHELL JOHN L. BOISER; BAGONG ALYANSANG BAYAN (BAYAN)
CHAIRMAN DR. CAROLINA P. ARAULLO; BAYAN SECRETARY GENERAL RENATO M. REYES,
JR.; CONFEDERATION FOR UNITY, RECOGNITION AND ADVANCE-MENT OF GOVERNMENT
EMPLOYEES (COURAGE) CHAIRMAN FERDINAND GAITE; KALIPUNAN NG DAMAYANG
MAHIHIRAP (KADAMAY) SECRETARY GENERAL GLORIA ARELLANO; ALYANSA NG
NAGKAKAISANG KABATAAN NG SAMBAYANAN PARA SA KAUNLARAN (ANAKBAYAN)
CHAIRMAN KEN LEONARD RAMOS; TAYO ANG PAG-ASA CONVENOR ALVIN PETERS;
LEAGUE OF FILIPINO STUDENTS (LFS) CHAIRMAN JAMES MARK TERRY LACUANAN RIDON;
NATIONAL UNION OF STUDENTS OF THE PHILIPPINES (NUSP) CHAIRMAN EINSTEIN
RECEDES; COLLEGE EDITORS GUILD OF THE PHILIPPINES (CEGP) CHAIRMAN VIJAE
ALQUISOLA; and STUDENT CHRISTIAN MOVEMENT OF THE PHILIPPINES (SCMP) CHAIRMAN
MA. CRISTINA ANGELA GUEVARRA; WALDEN F. BELLO and LORETTA ANN P. ROSALES;
QUISUMBING-JAVELLANA; BELLEZA ALOJADO DEMAISIP; TERESITA GANDIONCO-OLEDAN;
MA. VERENA KASILAG-VILLANUEVA; MARILYN STA. ROMANA; LEONILA DE JESUS; and
GUINEVERE DE LEON; AQUILINO Q. PIMENTEL, JR.;Intervenors.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 191342
ATTY. AMADOR Z. TOLENTINO, JR., (IBP Governor-Southern Luzon), and ATTY. ROLAND B. Petitioners Jaime N. Soriano (G.R. No. 191032), Amador Z. Tolentino and Roland B. Inting (G.R. No.
INTING (IBPGovernor-Eastern Visayas), Petitioners,  191342), and Philippine Bar Association (G.R. No. 191420), as well as intervenors Integrated Bar of the
vs. Philippines-Davao del Sur (IBP-Davao del Sur, et al.); Christian Robert S. Lim; Peter Irving Corvera;
JUDICIAL AND BAR COUNCIL (JBC), Respondent. Bagong Alyansang Bayan and others (BAYAN, et al.); Alfonso V. Tan, Jr.; the Women Trial Lawyers
Organization of the Philippines (WTLOP); Marlou B. Ubano; Mitchell John L. Boiser; and Walden F.
Bello and Loretta Ann P. Rosales (Bello, et al.), filed their respective motions for reconsideration. Also
x - - - - - - - - - - - - - - - - - - - - - - -x
filing a motion for reconsideration was Senator Aquilino Q. Pimentel, Jr., whose belated intervention
was allowed.
G.R. No. 191420
We summarize the arguments and submissions of the various motions for reconsideration, in the
PHILIPPINE BAR ASSOCIATION, INC., Petitioner,  aforegiven order:
vs.
JUDICIAL AND BAR COUNCIL and HER EXCELLENCY GLORIA MACAPAGAL-
Soriano
ARROYO, Respondents.

1. The Court has not squarely ruled upon or addressed the issue of whether or not the power
RESOLUTION
to designate the Chief Justice belonged to the Supreme Court en banc.

BERSAMIN, J.:
On March 17, 2010, the Court promulgated its decision, holding:
WHEREFORE, the Court:
1. Dismisses the petitions for certiorari and mandamus in G.R. No. 191002 and G.R. No.
191149, and the petition for mandamus in G.R. No. 191057 for being premature;
2. The Mendoza petition should have been dismissed, because it sought a mere declaratory
judgment and did not involve a justiciable controversy.
3. All Justices of the Court should participate in the next deliberations. The mere fact that the
Chief Justice sits as ex officio head of the JBC should not prevail over the more compelling
state interest for him to participate as a Member of the Court.
Tolentino and Inting

2. Dismisses the petitions for prohibition in G.R. No. 191032 and G.R. No. 191342 for lack of 1. A plain reading of Section 15, Article VII does not lead to an interpretation that exempts
merit; and judicial appointments from the express ban on midnight appointments.

3. Grants the petition in A.M. No. 10-2-5-SC and, accordingly, directs the Judicial and Bar 2. In excluding the Judiciary from the ban, the Court has made distinctions and has created
Council: exemptions when none exists.

(a) To resume its proceedings for the nomination of candidates to fill the vacancy to
be created by the compulsory retirement of Chief Justice Reynato S. Puno by May
17, 2010;
(b) To prepare the short list of nominees for the position of Chief Justice;
3. The ban on midnight appointments is placed in Article VII, not in Article VIII, because it
limits an executive, not a judicial, power.
4. Resort to the deliberations of the Constitutional Commission is superfluous, and is
powerless to vary the terms of the clear prohibition.

(c) To submit to the incumbent President the short list of nominees for the position
of Chief Justice on or before May 17, 2010; and
(d) To continue its proceedings for the nomination of candidates to fill other
vacancies in the Judiciary and submit to the President the short list of nominees
corresponding thereto in accordance with this decision.
5. The Court has given too much credit to the position taken by Justice Regalado. Thereby,
the Court has raised the Constitution to the level of a venerated text whose intent can only be
divined by its framers as to be outside the realm of understanding by the sovereign people
that ratified it.
6. Valenzuela should not be reversed.

SO ORDERED. 7. The petitioners, as taxpayers and lawyers, have the clear legal standing to question the
illegal composition of the JBC.
Motions for Reconsideration
Philippine Bar Association
1. The Court’s strained interpretation of the Constitution violates the basic principle that the
Court should not formulate a rule of constitutional law broader than what is required by the
precise facts of the case.
2. Considering that Section 15, Article VII is clear and straightforward, the only duty of the
Court is to apply it. The provision expressly and clearly provides a general limitation on the
appointing power of the President in prohibiting the appointment of any person to any position
in the Government without any qualification and distinction.
3. The Court gravely erred in unilaterally ignoring the constitutional safeguard against
midnight appointments.
4. The Constitution has installed two constitutional safeguards:- the prohibition against
midnight appointments, and the creation of the JBC. It is not within the authority of the Court
to prefer one over the other, for the Court’s duty is to apply the safeguards as they are, not as
the Court likes them to be.
5. The Court has erred in failing to apply the basic principles of statutory construction in
interpreting the Constitution.
6. The Court has erred in relying heavily on the title, chapter or section headings, despite
precedents on statutory construction holding that such headings carried very little weight.
7. The Constitution has provided a general rule on midnight appointments, and the only
exception is that on temporary appointments to executive positions.
8. The Court has erred in directing the JBC to resume the proceedings for the nomination of
the candidates to fill the vacancy to be created by the compulsory retirement of Chief Justice
Puno with a view to submitting the list of nominees for Chief Justice to President Arroyo on or
before May 17, 2010. The Constitution grants the Court only the power of supervision over
the JBC; hence, the Court cannot tell the JBC what to do, how to do it, or when to do it,
especially in the absence of a real and justiciable case assailing any specific action or
inaction of the JBC.
9. The Court has engaged in rendering an advisory opinion and has indulged in speculations.
10. The constitutional ban on appointments being already in effect, the Court’s directing the
JBC to comply with the decision constitutes a culpable violation of the Constitution and the
commission of an election offense.
11. The Court cannot reverse on the basis of a secondary authority a doctrine unanimously
formulated by the Court en banc.
12. The practice has been for the most senior Justice to act as Chief Justice whenever the
incumbent is indisposed. Thus, the appointment of the successor Chief Justice is not urgently
necessary.
13. The principal purpose for the ban on midnight appointments is to arrest any attempt to
prolong the outgoing President’s powers by means of proxies. The attempt of the incumbent
President to appoint the next Chief Justice is undeniably intended to perpetuate her power
beyond her term of office.
IBP-Davao del Sur, et al.
1. Its language being unambiguous, Section 15, Article VII of the Constitution applies to
appointments to the Judiciary. Hence, no cogent reason exists to warrant the reversal of the
Valenzuela pronouncement.
2. Section 16, Article VII of the Constitution provides for presidential appointments to the
Constitutional Commissions and the JBC with the consent of the Commission on
Appointments. Its phrase "other officers whose appointments are vested in him in this
Constitution" is enough proof that the limitation on the appointing power of the President
extends to appointments to the Judiciary. Thus, Section 14, Section 15, and Section 16 of
Article VII apply to all presidential appointments in the Executive and Judicial Branches of the
Government.
3. There is no evidence that the framers of the Constitution abhorred the idea of an Acting
Chief Justice in all cases.
Lim
1. There is no justiciable controversy that warrants the Court’s exercise of judicial review.
2. The election ban under Section 15, Article VII applies to appointments to fill a vacancy in
the Court and to other appointments to the Judiciary.
3. The creation of the JBC does not justify the removal of the safeguard under Section 15 of
Article VII against midnight appointments in the Judiciary.
Corvera
1. The Court’s exclusion of appointments to the Judiciary from the Constitutional ban on
midnight appointments is based on an interpretation beyond the plain and unequivocal
language of the Constitution.
2. The intent of the ban on midnight appointments is to cover appointments in both the
Executive and Judicial Departments. The application of the principle of verba legis (ordinary
meaning) would have obviated dwelling on the organization and arrangement of the
provisions of the Constitution. If there is any ambiguity in Section 15, Article VII, the intent
behind the provision, which is to prevent political partisanship in all branches of the
Government, should have controlled.
3. A plain reading is preferred to a contorted and strained interpretation based on
compartmentalization and physical arrangement, especially considering that the Constitution
must be interpreted as a whole.
4. Resort to the deliberations or to the personal interpretation of the framers of the
Constitution should yield to the plain and unequivocal language of the Constitution.
5. There is no sufficient reason for reversing Valenzuela, a ruling that is reasonable and in 6. There is no basis to direct the JBC to submit the list of nominees on or before May 17,
accord with the Constitution. 2010. The directive to the JBC sanctions a culpable violation of the Constitution and
constitutes an election offense.
BAYAN, et al.
7. There is no pressing necessity for the appointment of a Chief Justice, because the Court
sits en banc, even when it acts as the sole judge of all contests relative to the election,
1. The Court erred in granting the petition in A.M. No. 10-2-5-SC, because the petition did not
returns and qualifications of the President and Vice-President. Fourteen other Members of
present a justiciable controversy. The issues it raised were not yet ripe for adjudication,
the Court can validly comprise the Presidential Electoral Tribunal.
considering that the office of the Chief Justice was not yet vacant and that the JBC itself has
yet to decide whether or not to submit a list of nominees to the President.
WTLOP
2. The collective wisdom of Valenzuela Court is more important and compelling than the
opinion of Justice Regalado. 1. The Court exceeded its jurisdiction in ordering the JBC to submit the list of nominees for
Chief Justice to the President on or before May 17, 2010, and to continue its proceedings for
the nomination of the candidates, because it granted a relief not prayed for; imposed on the
3. In ruling that Section 15, Article VII is in conflict with Section 4(1), Article VIII, the Court has
JBC a deadline not provided by law or the Constitution; exercised control instead of mere
violated the principle of ut magis valeat quam pereat (which mandates that the Constitution
supervision over the JBC; and lacked sufficient votes to reverse Valenzuela.
should be interpreted as a whole, such that any conflicting provisions are to be harmonized
as to fully give effect to all). There is no conflict between the provisions; they complement
each other. 2. In interpreting Section 15, Article VII, the Court has ignored the basic principle of statutory
construction to the effect that the literal meaning of the law must be applied when it is clear
and unambiguous; and that we should not distinguish where the law does not distinguish.
4. The form and structure of the Constitution’s titles, chapters, sections, and draftsmanship
carry little weight in statutory construction. The clear and plain language of Section 15, Article
VII precludes interpretation. 3. There is no urgency to appoint the next Chief Justice, considering that the Judiciary Act of
1948 already provides that the power and duties of the office devolve on the most senior
Associate Justice in case of a vacancy in the office of the Chief Justice.
Tan, Jr.

Ubano
1. The factual antecedents do not present an actual case or controversy. The clash of legal
rights and interests in the present case are merely anticipated. Even if it is anticipated with
certainty, no actual vacancy in the position of the Chief Justice has yet occurred. 1. The language of Section 15, Article VII, being clear and unequivocal, needs no
interpretation
2. The ruling that Section 15, Article VII does not apply to a vacancy in the Court and the
Judiciary runs in conflict with long standing principles and doctrines of statutory construction. 2. The Constitution must be construed in its entirety, not by resort to the organization and
The provision admits only one exception, temporary appointments in the Executive arrangement of its provisions.
Department. Thus, the Court should not distinguish, because the law itself makes no
distinction.
3. The opinion of Justice Regalado is irrelevant, because Section 15, Article VII and the
pertinent records of the Constitutional Commission are clear and unambiguous.
3. Valenzuela was erroneously reversed. The framers of the Constitution clearly intended the
ban on midnight appointments to cover the members of the Judiciary. Hence, giving more
4. The Court has erred in ordering the JBC to submit the list of nominees to the President by
weight to the opinion of Justice Regalado to reverse the en banc decision in Valenzuela was
May 17, 2010 at the latest, because no specific law requires the JBC to submit the list of
unwarranted.
nominees even before the vacancy has occurred.

4. Section 15, Article VII is not incompatible with Section 4(1), Article VIII. The 90-day
mandate to fill any vacancy lasts until August 15, 2010, or a month and a half after the end of
the ban. The next President has roughly the same time of 45 days as the incumbent
President (i.e., 44 days) within which to scrutinize and study the qualifications of the next
Chief Justice. Thus, the JBC has more than enough opportunity to examine the nominees
without haste and political uncertainty.1avvphi1
5. When the constitutional ban is in place, the 90-day period under Section 4(1), Article VIII is
suspended.
Boiser
1. Under Section 15, Article VII, the only exemption from the ban on midnight appointments is
the temporary appointment to an executive position. The limitation is in keeping with the clear
intent of the framers of the Constitution to place a restriction on the power of the outgoing
Chief Executive to make appointments.
2. To exempt the appointment of the next Chief Justice from the ban on midnight
appointments makes the appointee beholden to the outgoing Chief Executive, and
 compromises the independence of the Chief Justice by having the outgoing President be
continually influential.
3. The Court’s reversal of Valenzuela without stating the sufficient reason violates the
principle of stare decisis.
Bello, et al.
1. Section 15, Article VII does not distinguish as to the type of appointments an outgoing
President is prohibited from making within the prescribed period. Plain textual reading and
the records of the Constitutional Commission support the view that the ban on midnight
appointments extends to judicial appointments.
2. Supervision of the JBC by the Court involves oversight. The subordinate subject to
oversight must first act not in accord with prescribed rules before the act can be redone to
conform to the prescribed rules.
3. The Court erred in granting the petition in A.M. No. 10-2-5-SC, because the petition did not
present a justiciable controversy.
Pimentel
1. Any constitutional interpretative changes must be reasonable, rational, and conformable to
the general intent of the Constitution as a limitation to the powers of Government and as a
bastion for the protection of the rights of the people. Thus, in harmonizing seemingly
conflicting provisions of the Constitution, the interpretation should always be one that protects
the citizenry from an ever expanding grant of authority to its representatives.
2. The decision expands the constitutional powers of the President in a manner totally
repugnant to republican constitutional democracy, and is tantamount to a judicial amendment
of the Constitution without proper authority.
Comments
The Office of the Solicitor General (OSG) and the JBC separately represent in their respective
comments, thus:
OSG
1. The JBC may be compelled to submit to the President a short list of its nominees for the
position of Chief Justice.
2. The incumbent President has the power to appoint the next Chief Justice.
3. Section 15, Article VII does not apply to the Judiciary.
4. The principles of constitutional construction favor the exemption of the Judiciary from the
ban on midnight appointments.1awph!1
5. The Court has the duty to consider and resolve all issues raised by the parties as well as
other related matters.
JBC
1. The consolidated petitions should have been dismissed for prematurity, because the JBC
has not yet decided at the time the petitions were filed whether the incumbent President has
the power to appoint the new Chief Justice, and because the JBC, having yet to interview the
candidates, has not submitted a short list to the President.
2. The statement in the decision that there is a doubt on whether a JBC short list is necessary
for the President to appoint a Chief Justice should be struck down as bereft of constitutional
and legal basis. The statement undermines the independence of the JBC.
3. The JBC will abide by the final decision of the Court, but in accord with its constitutional
mandate and its implementing rules and regulations.
For his part, petitioner Estelito P. Mendoza (A.M. No. 10-2-5-SC) submits his comment even if the OSG
and the JBC were the only ones the Court has required to do so. He states that the motions for
reconsideration were directed at the administrative matter he initiated and which the Court resolved. His
comment asserts:
1. The grounds of the motions for reconsideration were already resolved by the decision and
the separate opinion.
2. The administrative matter he brought invoked the Court’s power of supervision over the
JBC as provided by Section 8(1), Article VIII of the Constitution, as distinguished from the
Court’s adjudicatory power under Section 1, Article VIII. In the former, the requisites for
judicial review are not required, which was why Valenzuela was docketed as an
administrative matter. Considering that the JBC itself has yet to take a position on when to
submit the short list to the proper appointing authority, it has effectively solicited the exercise
by the Court of its power of supervision over the JBC.
3. To apply Section 15, Article VII to Section 4(1) and Section 9, Article VIII is to amend the
Constitution.
4. The portions of the deliberations of the Constitutional Commission quoted in the dissent of
Justice Carpio Morales, as well as in some of the motions for reconsideration do not refer to
either Section 15, Article VII or Section 4(1), Article VIII, but to Section 13, Article VII (on
nepotism).
Ruling
We deny the motions for reconsideration for lack of merit, for all the matters being thereby raised and
argued, not being new, have all been resolved by the decision of March 17, 2010.
Nonetheless, the Court opts to dwell on some matters only for the purpose of clarification and
emphasis.
First: Most of the movants contend that the principle of stare decisis is controlling, and accordingly insist
that the Court has erred in disobeying or abandoning Valenzuela.1
The contention has no basis.
The spouse and relatives by consanguinity or affinity within the fourth civil degree of the President shall
not during his tenure be appointed as Members of the Constitutional Commissions, or the Office of the
Ombudsman, or as Secretaries, Undersecretaries, chairmen or heads of bureaus or offices, including
government-owned or controlled corporations and their subsidiaries.

Stare decisis derives its name from the Latin maxim stare decisis et non quieta movere, i.e., to adhere
to precedent and not to unsettle things that are settled. It simply means that a principle underlying the
decision in one case is deemed of imperative authority, controlling the decisions of like cases in the
same court and in lower courts within the same jurisdiction, unless and until the decision in question is
reversed or overruled by a court of competent authority. The decisions relied upon as precedents are
commonly those of appellate courts, because the decisions of the trial courts may be appealed to
higher courts and for that reason are probably not the best evidence of the rules of law laid down. 2
Judicial decisions assume the same authority as a statute itself and, until authoritatively abandoned,
necessarily become, to the extent that they are applicable, the criteria that must control the actuations,
not only of those called upon to abide by them, but also of those duty-bound to enforce obedience to
them.3 In a hierarchical judicial system like ours, the decisions of the higher courts bind the lower
courts, but the courts of co-ordinate authority do not bind each other. The one highest court does not
bind itself, being invested with the innate authority to rule according to its best lights.4
The Court, as the highest court of the land, may be guided but is not controlled by precedent. Thus, the
Court, especially with a new membership, is not obliged to follow blindly a particular decision that it
determines, after re-examination, to call for a rectification.5 The adherence to precedents is strict and
rigid in a common-law setting like the United Kingdom, where judges make law as binding as an Act of
Parliament.6 But ours is not a common-law system; hence, judicial precedents are not always strictly
and rigidly followed. A judicial pronouncement in an earlier decision may be followed as a precedent in
a subsequent case only when its reasoning and justification are relevant, and the court in the latter case
accepts such reasoning and justification to be applicable to the case. The application of the precedent
is for the sake of convenience and stability.
Last: The movants take the majority to task for holding that Section 15, Article VII does not apply to
appointments in the Judiciary. They aver that the Court either ignored or refused to apply many
principles of statutory construction.
The movants gravely err in their posture, and are themselves apparently contravening their avowed
reliance on the principles of statutory construction.
For one, the movants, disregarding the absence from Section 15, Article VII of the express extension of
the ban on appointments to the Judiciary, insist that the ban applied to the Judiciary under the principle
of verba legis. That is self-contradiction at its worst.
Another instance is the movants’ unhesitating willingness to read into Section 4(1) and Section 9, both
of Article VIII, the express applicability of the ban under Section 15, Article VII during the period
provided therein, despite the silence of said provisions thereon. Yet, construction cannot supply the
omission, for doing so would generally constitute an encroachment upon the field of the Constitutional
Commission. Rather, Section 4(1) and Section 9 should be left as they are, given that their meaning is
clear and explicit, and no words can be interpolated in them.9Interpolation of words is unnecessary,
because the law is more than likely to fail to express the legislative intent with the interpolation. In other
words, the addition of new words may alter the thought intended to be conveyed. And, even where the
meaning of the law is clear and sensible, either with or without the omitted word or words, interpolation
is improper, because the primary source of the legislative intent is in the language of the law itself.10
Thus, the decision of March 17, 2010 has fittingly observed:

Had the framers intended to extend the prohibition contained in Section 15, Article VII to the
For the intervenors to insist that Valenzuela ought not to be disobeyed, or abandoned, or reversed, and
appointment of Members of the Supreme Court, they could have explicitly done so. They could not
that its wisdom should guide, if not control, the Court in this case is, therefore, devoid of rationality and
have ignored the meticulous ordering of the provisions. They would have easily and surely written the
foundation. They seem to conveniently forget that the Constitution itself recognizes the innate authority
prohibition made explicit in Section 15, Article VII as being equally applicable to the appointment of
of the Court en banc to modify or reverse a doctrine or principle of law laid down in any decision
Members of the Supreme Court in Article VIII itself, most likely in Section 4 (1), Article VIII. That such
rendered en banc or in division.7
specification was not done only reveals that the prohibition against the President or Acting President
making appointments within two months before the next presidential elections and up to the end of the
Second: Some intervenors are grossly misleading the public by their insistence that the Constitutional President’s or Acting President’s term does not refer to the Members of the Supreme Court.
Commission extended to the Judiciary the ban on presidential appointments during the period stated in
Section 15, Article VII.
We cannot permit the meaning of the Constitution to be stretched to any unintended point in order to
suit the purposes of any quarter.
The deliberations that the dissent of Justice Carpio Morales quoted from the records of the
Constitutional Commission did not concern either Section 15, Article VII or Section 4(1), Article VIII, but
Final Word
only Section 13, Article VII, a provision on nepotism. The records of the Constitutional Commission
show that Commissioner Hilario G. Davide, Jr. had proposed to include judges and justices related to
the President within the fourth civil degree of consanguinity or affinity among the persons whom the It has been insinuated as part of the polemics attendant to the controversy we are resolving that
President might not appoint during his or her tenure. In the end, however, Commissioner Davide, Jr. because all the Members of the present Court were appointed by the incumbent President, a majority of
withdrew the proposal to include the Judiciary in Section 13, Article VII "(t)o avoid any further them are now granting to her the authority to appoint the successor of the retiring Chief Justice.
complication,"8 such that the final version of the second paragraph of Section 13, Article VII even
completely omits any reference to the Judiciary, to wit:
The insinuation is misguided and utterly unfair.

Section 13. xxx

The Members of the Court vote on the sole basis of their conscience and the merits of the issues. Any
claim to the contrary proceeds from malice and condescension. Neither the outgoing President nor the
present Members of the Court had arranged the current situation to happen and to evolve as it has. REYNATO S. PUNO
None of the Members of the Court could have prevented the Members composing the Court when she Chief Justice
assumed the Presidency about a decade ago from retiring during her prolonged term and tenure, for
their retirements were mandatory. Yet, she is now left with an imperative duty under the Constitution to
fill up the vacancies created by such inexorable retirements within 90 days from their occurrence. Her
official duty she must comply with. So must we ours who are tasked by the Constitution to settle the
controversy.
Footnotes
ACCORDINGLY, the motions for reconsideration are denied with finality.
1
 In Re Appointments Dated March 30, 1998 of Hon. Mateo A. Valenzuela and Hon. Placido
SO ORDERED. B. Vallarta as Judges of the Regional Trial Court of Branch 62, Bago City and of Branch 24,
Cabanatuan City, respectively, A.M. No. 98-5-01-SC, November 9, 1998, 298 SCRA 408.
LUCAS P. BERSAMIN
2
Associate Justice  Price & Bitner, Effective Legal Research, Little, Brown & Co., New York (1962), § 9.7.

3
WE CONCUR:  Caltex (Phil.), Inc. v. Palomar, No. L-19650, September 29, 1966, 18 SCRA 247

4
REYNATO S. PUNO  E.g., Dias, Jurisprudence, Butterworths, London, 1985, Fifth Edition, p. 127.
Chief Justice
5
 Limketkai Sons Milling, Inc. v. Court of Appeals, G.R. No. 118509, September 5, 1996, 261
SCRA 464.
ANTONIO T. CARPIO RENATO C. CORONA
Associate Justice Associate Justice 6
 See Calabresi, A Common Law for the Age of Statutes, Harvard University Press, p. 4
(1982) and endnote 12 of the page, which essentially recounts that the strict application of
CONCHITA CARPIO MORALES PRESBITERO J. VELASCO, JR. the doctrine of stare decisis is true only in a common-law jurisdiction like England (citing
Associate Justice Associate Justice Wise, The Doctrine of Stare Decisis, 21 Wayne Law Review, 1043, 1046-1047 (1975).
Calabresi recalls that the English House of Lords decided in 1898 (London Tramways Co. v.
London County Council, A.C. 375) that they could not alter precedents laid down by the
ANTONIO EDUARDO B. NACHURA TERESITA J. LEONARDO-DE CASTRO House of Lords acting as the supreme court in previous cases, but that such precedents
Associate Justice Associate Justice could only be altered by an Act of Parliament, for to do otherwise would mean that the courts
would usurp legislative function; he mentions that in 1966, Lord Chancellor Gardiner
ARTURO D. BRION DIOSDADO M. PERALTA announced in a Practice Statement a kind of general memorandum from the court that while:
Associate Justice Associate Justice "Their Lordships regard the use of precedent as an indispensable foundation upon which to
decide what is the law," they "nevertheless recognize that too rigid adherence to precedent
may lead to injustice in a particular case and also unduly restrict the proper development of
MARIANO C. DEL CASTILLO ROBERTO A. ABAD the law. They propose, therefore, to modify their present practice and, while treating former
Associate Justice Associate Justice decisions of this House as normally binding, to depart from a previous decision when it
appears right to do so." (Calabresi cites Leach, Revisionism in the House of Lords: The
Bastion of Rigid Stare Decisis Falls, 80 Harvard Law Review, 797 (1967).
MARTIN S. VILLARAMA, JR. JOSE PORTUGAL PEREZ
Associate Justice Associate Justice
7
 Section 4 (2), Article VIII, provides:

JOSE CATRAL MENDOZA xxx

Associate Justice

(3) Cases or matters heard by a division shall be decided or resolved with the
CERTIFICATION concurrence of a majority of the Members who actually took part in the
deliberations on the issues in the case and voted thereon, and in no case, without
Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the the concurrence of at least three of such Members. When the required number is
above Resolution had been reached in consultation before the case was assigned to the writer of the not obtained, the case shall be decided en banc; Provided, that no doctrine or
opinion of the Court. principle of law laid down by the court in a decision rendered en banc or in division
may be modified or reversed except by the court sitting en banc.
 8
 Record of the 1986 Constitutional Commission, Vol. 2, July 31, 1986, RCC No. 44. pp. 542-
543.
9
 Smith v. State, 66 Md. 215, 7 Atl. 49.
10
 State ex rel Everding v. Simon, 20 Ore. 365, 26 Pac. 170.
The Lawphil Project - Arellano Law Foundation
DISSENTING OPINION
CARPIO MORALES, J.:
No compelling reason exists for the Court to deny a reconsideration of the assailed Decision. The
various motions for reconsideration raise hollering substantial arguments and legitimately nagging
questions which the Court must meet head on.
If this Court is to deserve or preserve its revered place not just in the hierarchy but also in history,
passion for reason demands the issuance of an extended and extensive resolution that confronts the
ramifications and repercussions of its assailed Decision. Only then can it offer an illumination that any
self-respecting student of the law clamors and any adherent of the law deserves. Otherwise, it takes the
risk of reeking of an objectionable air of supreme judicial arrogance.
It is thus imperative to settle the following issues and concerns:
Whether the incumbent President is constitutionally proscribed from appointing the successor
of Chief Justice Reynato S. Puno upon his retirement on May 17, 2010 until the ban ends at
12:00 noon of June 30, 2010
1. In interpreting the subject constitutional provisions, the Decision disregarded established
canons of statutory construction. Without explaining the inapplicability of each of the relevant
rules, the Decision immediately placed premium on the arrangement and ordering of
provisions, one of the weakest tools of construction, to arrive at its conclusion.
2. In reversing Valenzuela, the Decision held that the Valenzuela dictum did not firmly rest on
ConCom deliberations, yet it did not offer to cite a material ConCom deliberation. It instead
opted to rely on the memory of Justice Florenz Regalado which incidentally mentioned only
the "Court of Appeals." The Decision’s conclusion must rest on the strength of its own
favorable Concom deliberation, none of which to date has been cited.
3. Instead of choosing which constitutional provision carves out an exception from the other
provision, the most legally feasible interpretation (in the limited cases of temporary physical
or legal impossibility of compliance, as expounded in my Dissenting Opinion) is to consider
the appointments ban or other substantial obstacle as a temporary impossibility which
excuses or releases the constitutional obligation of the Office of the President for the duration
of the ban or obstacle.
In view of the temporary nature of the circumstance causing the impossibility of performance, the
outgoing President is released from non-fulfillment of the obligation to appoint, and the duty devolves
upon the new President. The delay in the fulfillment of the obligation becomes excusable, since the law
cannot exact compliance with what is impossible. The 90-day period within which to appoint a member
of the Court is thus suspended and the period could only start or resume to run when the temporary
obstacle disappears (i.e., after the period of the appointments ban; when there is already a quorum in
the JBC; or when there is already at least three applicants).
Whether the Judicial and Bar Council is obliged to submit to the President the shortlist of
nominees for the position of Chief Justice (or Justice of this Court) on or before the occurrence
of the vacancy.
1. The ruling in the Decision that obligates the JBC to submit the shortlist to the President on
or before the occurrence of the vacancy in the Court runs counter to the Concom
deliberations which explain that the 90-day period is allotted for both the nomination by the
JBC and the appointment by the President. In the move to increase the period to 90 days,
Commissioner Romulo stated that "[t]he sense of the Committee is that 60 days is awfully
short and that the [Judicial and Bar] Council, as well as the President, may have difficulties
with that."
2. To require the JBC to submit to the President a shortlist of nominees on or before the
occurrence of vacancy in the Court leads to preposterous results. It bears reiterating that the
requirement is absurd when, inter alia, the vacancy is occasioned by the death of a member
of the Court, in which case the JBC could never anticipate the death of a Justice, and could
never submit a list to the President on or before the occurrence of vacancy.
3. The express allowance in the Constitution of a 90-day period of vacancy in the
membership of the Court rebuts any public policy argument on avoiding a vacuum of even a
single day without a duly appointed Chief Justice. Moreover, as pointed out in my Dissenting
Opinion, the practice of having an acting Chief Justice in the interregnum is provided for by
law, confirmed by tradition, and settled by jurisprudence to be an internal matter.
The Resolution of the majority, in denying the present Motions for Reconsideration, failed to rebut the
foregoing crucial matters.
I, therefore, maintain my dissent and vote to GRANT the Motions for Reconsideration of the Decision of
March 17, 2010 insofar as it holds that the incumbent President is not constitutionally proscribed from
appointing the successor of Chief Justice Reynato S. Puno upon his retirement on May 17, 2010 until
the ban ends at 12:00 noon of June 30, 2010 and that the Judicial and Bar Council is obliged to submit
to the President the shortlist of nominees for the position of Chief Justice on or before May 17, 2010.
CONCHITA CARPIO MORALES
Associate Justice
The Lawphil Project - Arellano Law Foundation

CONCURRING AND DISSENTING OPINION
BRION, J.:
The Motions for Reconsideration
After sifting through the motions for reconsideration, I found that the arguments are largely the same
arguments that we have passed upon, in one form or another, in the various petitions. Essentially, the
issues boil down to justiciability; the conflict of constitutional provisions; the merits of the cited
constitutional deliberations; and the status and effect of the Valenzuela1 ruling. Even the motion for
reconsideration of the Philippine Bar Association (G.R. No. 191420), whose petition I did not expressly
touch upon in my Separate Opinion, basically dwells on these issues.
I have addressed most, if not all, of these issues and I submit my Separate Opinion2 as my basic
response to the motions for reconsideration, supplemented by the discussions below.
As I reflected in my Separate Opinion (which three other Justices joined),3 the election appointment ban
under Article VII, Section 15 of the Constitution should not apply to the appointment of Members of the
Supreme Court whose period for appointment is separately provided for under Article VIII, Section 4(1).
I shared this conclusion with the Court’s Decision although our reasons differed on some points.
I diverged fully from the Decision on the question of whether we should maintain or reverse our ruling in
Valenzuela. I maintained that it is still good law; no reason exists to touch the ruling as its main focus –
the application of the election ban on the appointment of lower court judges under Article VIII, Section 9
of the Constitution – is not even an issue in the present case and was discussed only because the
petitions incorrectly cited the ruling as authority on the issue of the Chief Justice’s appointment. The
Decision proposed to reverse Valenzuela but only secured the support of five (5) votes, while my
Separate Opinion in support of Valenzuela had four (4) votes. Thus, on the whole, the Decision did not
prevail in reversing Valenzuela, as it only had five (5) votes in a field of 12 participating Members of the
Court. Valenzuela should therefore remain, as of the filing of this Opinion, as a valid precedent.
Acting on the present motions for reconsideration, I join the majority in denying the motions with respect
to the Chief Justice issue, although we differ in some respects on the reasons supporting the denial. I
dissent from the conclusion that the Valenzuela ruling should be reversed. My divergence from the
majority’s reasons and conclusions compels me to write this Concurring and Dissenting Opinion.
The Basic Requisites / Justiciability
One marked difference between the Decision and my Separate Opinion is our approach on the basic
requisites/justiciability issues. The Decision apparently glossed over this aspect of the case, while I fully
explained why the De Castro4 and Peralta5 petitions should be dismissed outright. In my view, these
petitions violated the most basic requirements of their chosen medium for review – a petition for
certiorari and mandamus under Rule 65 of the Rules of Court.
The petitions commonly failed to allege that the Judicial and Bar Council (JBC) performs judicial or
quasi-judicial functions, an allegation that the petitions could not really make, since the JBC does not
really undertake these functions and, for this reason, cannot be the subject of a petition for certiorari;
hence, the petitions should be dismissed outright. They likewise failed to facially show any failure or
refusal by the JBC to undertake a constitutional duty to justify the issuance of a writ of mandamus; they
invoked judicial notice that we could not give because there was, and is, no JBC refusal to act.6 Thus,
the mandamus aspects of these petitions should have also been dismissed outright. The ponencia,
unfortunately, failed to fully discuss these legal infirmities.
The motions for reconsideration lay major emphasis on the alleged lack of an actual case or
controversy that made the Chief Justice’s appointment a justiciable issue. They claim that the Court
cannot exercise the power of judicial review where there is no clash of legal rights and interests or
where this clash is merely anticipated, although the anticipated event shall come with certainty.7
What the movants apparently forgot, focused as they were on their respective petitions, is that the
present case is not a single-petition case that rises or falls on the strength of that single petition. The
present case involves various petitions and interventions,8 not necessarily pulling towards the same
direction, although each one is focused on the issue of whether the election appointment ban under
Article VII, Section 15 of the Constitution should apply to the appointment of the next Chief Justice of
the Supreme Court.
Among the petitions filed were those of Tolentino (G.R. No. 191342), Soriano (G.R. No. 191032) and
Mendoza (A.M. No. 10-2-5-SC). The first two are petitions for prohibition under Section 2 of Rule 65 of
the Rules of Court.9 While they commonly share this medium of review, they differ in their supporting
reasons. The Mendoza petition, on the other hand, is totally different – it is a petition presented as an
administrative matter (A.M.) in the manner that the Valenzuela case was an A.M. case. As I pointed out
in the Separate Opinion, the Court uses the A.M. docket designation on matters relating to its exercise
of supervision over all courts and their personnel.10 I failed to note then, but I make of record now, that
court rules and regulations – the outputs in the Court’s rulemaking function – are also docketed as A.M.
cases.
That an actual case or controversy involving a clash of rights and interests exists is immediately and
patently obvious in the Tolentino and Soriano petitions. At the time the petitions were filed, the JBC had
started its six-phase nomination process that would culminate in the submission of a list of nominees to
the President of the Philippines for appointive action. Tolentino and Soriano – lawyers and citizens with
interest in the strict observance of the election ban – sought to prohibit the JBC from continuing with
this process. The JBC had started to act, without any prodding from the Court, because of its duty to
start the nomination process but was hampered by the petitions filed and the legal questions raised that
only the Supreme Court can settle with finality.11 Thus, a clash of interests based on law existed
between the petitioners and the JBC. To state the obvious, a decision in favor of Tolentino or Soriano
would result in a writ of prohibition that would direct the JBC not to proceed with the nomination
process.
The Mendoza petition cited the effect of a complete election ban on judicial appointments (in view of the
already high level of vacancies and the backlog of cases) as basis, and submitted the question as an
administrative matter that the Court, in the exercise of its supervisory authority over the Judiciary and
the JBC itself, should act upon. At the same time, it cited the "public discourse and controversy" now
taking place because of the application of the election ban on the appointment of the Chief Justice,
pointing in this regard to the very same reasons mentioned in Valenzuela about the need to resolve the
issue and avoid the recurrence of conflict between the Executive and the Judiciary, and the need to
"avoid polemics concerning the matter."12
I recognized in the Separate Opinion that, unlike in Valenzuela where an outright defiance of the
election ban took place, no such obvious triggering event transpired in the Mendoza petition.13 Rather,
the Mendoza petition looked to the supervisory power of the Court over judicial personnel and over the
JBC as basis to secure a resolution of the election ban issue. The JBC, at that time, had indicated its
intent to look up to the Court’s supervisory power and role as the final interpreter of the Constitution to
guide it in responding to the challenges it confronts.14 To me, this was "a point no less critical, from the
point of view of supervision, than the appointment of the two judges during the election ban period in
Valenzuela."15
In making this conclusion, I pointed out in my Separate Opinion the unavoidable surrounding realities
evident from the confluence of events, namely: (1) an election to be held on May 10, 2010; (2) the
retirement of the Chief Justice on May 17, 2010; (3) the lapse of the terms of the elective officials from
the President to the congressmen on June 30, 2010; (4) the delay before the Congress can organize
and send its JBC representatives; and (5) the expiration of the term of a non-elective JBC member in
July 2010.16 All these – juxtaposed with the Court’s supervision over the JBC, the latter’s need for
guidance, and the existence of an actual controversy on the same issues bedeviling the JBC – in my
view, were sufficient to save the Mendoza petition from being a mere request for opinion or a petition
for declaratory relief that falls under the jurisdiction of the lower court. This recognition is beyond the
level of what this Court can do in handling a moot and academic case – usually, one that no longer
presents a judiciable controversy but one that can still be ruled upon at the discretion of the court when
the constitutional issue is of paramount public interest and controlling principles are needed to guide the
bench, the bar and the public.17
To be sure, this approach in recognizing when a petition is actionable is novel. An overriding reason for
this approach can be traced to the nature of the petition, as it rests on the Court’s supervisory authority
and relates to the exercise of the Court’s administrative rather than its judicial functions (other than
these two functions, the Court also has its rulemaking function under Article VIII, Section 5(5) of the
Constitution). Strictly speaking, the Mendoza petition calls for directions from the Court in the exercise
of its power of supervision over the JBC,18 not on the basis of the power of judicial review.19 In this
sense, it does not need the actual clash of interests of the type that a judicial adjudication requires. All
that must be shown is the active need for supervision to justify the Court’s intervention as supervising
authority.
Under these circumstances, the Court’s recognition of the Mendoza petition was not an undue stretch
of its constitutional powers. If the recognition is unusual at all, it is so only because of its novelty; to my
knowledge, this is the first time ever in Philippine jurisprudence that the supervisory authority of the
Court over an attached agency has been highlighted in this manner. Novelty, per se, however, is not a
ground for objection nor a mark of infirmity for as long as the novel move is founded in law. In this case,
as in the case of the writ of amparo and habeas data that were then novel and avowedly activist in
character, sufficient legal basis exists to actively invoke the Court’s supervisory authority – granted
under the Constitution, no less – as basis for action.
To partly quote the wording of the Constitution, Article VIII, Section 8(1) and (5) provide that "A Judicial
and Bar Council is hereby created under the supervision of the Supreme Court… It may exercise such
other functions and duties as the Supreme Court may assign to it." Supervision, as a legal concept,
more often than not, is defined in relation with the concept of control.20 In Social Justice Society v.
Atienza,21 we defined "supervision" as follows:
[Supervision] means overseeing or the power or authority of an officer to see that subordinate officers
perform their duties. If the latter fail or neglect to fulfill them, the former may take such action or step as
prescribed by law to make them perform their duties. Control, on the other hand, means the power of
an officer to alter or modify or nullify or set aside what a subordinate officer ha[s] done in the
performance of his duties and to substitute the judgment of the former for that of the latter.
Under this definition, the Court cannot dictate on the JBC the results of its assigned task, i.e., who to
recommend or what standards to use to determine who to recommend. It cannot even direct the JBC
on how and when to do its duty, but it can, under its power of supervision, direct the JBC to "take such
action or step as prescribed by law to make them perform their duties," if the duties are not being
performed because of JBC’s fault or inaction, or because of extraneous factors affecting performance.
Note in this regard that, constitutionally, the Court can also assign the JBC other functions and duties –
a power that suggests authority beyond what is purely supervisory.
Where the JBC itself is at a loss on how to proceed in light of disputed constitutional provisions that
require interpretation,22 the Court is not legally out of line – as the final authority on the interpretation of
the Constitution and as the entity constitutionally-tasked to supervise the JBC – in exercising its
oversight function by clarifying the interpretation of the disputed constitutional provision to guide the
JBC. In doing this, the Court is not simply rendering a general legal advisory; it is providing concrete
and specific legal guidance to the JBC in the exercise of its supervisory authority, after the latter has
asked for assistance in this regard. That the Court does this while concretely resolving actual
controversies (the Tolentino and Soriano petitions) on the same issue immeasurably strengthens the
intrinsic correctness of the Court’s action.
It may be asked: why does the Court have to recognize the Mendoza petition when it can resolve the
conflict between Article VII, Section 15 and Article VIII, Section 4(1) through the Tolentino and Soriano
petitions?
The answer is fairly simple and can be read between the lines of the above explanation on the
relationship between the Court and the JBC. First, administrative is different from judicial function and
providing guidance to the JBC can only be appropriate in the discharge of the Court’s administrative
function. Second, the resolution of the Tolentino and Soriano petitions will lead to rulings directly related
to the underlying facts of these petitions, without clear guidelines to the JBC on the proper parameters
to observe vis-à-vis the constitutional dispute along the lines the JBC needs. In fact, concrete
guidelines addressed to the JBC in the resolution of the Tolentino/Soriano petitions may even lead to
accusations that the Court’s resolution is broader than is required by the facts of the petitions. The
Mendoza petition, because it pertains directly to the performance of the JBC’s duty and the Court’s
supervisory authority, allows the issuance of precise guidelines that will enable the JBC to fully and
seasonably comply with its constitutional mandate.
I hasten to add that the JBC’s constitutional task is not as simple as some people think it to be. The
process of preparing and submitting a list of nominees is an arduous and time-consuming task that
cannot be done overnight. It is a six-step process lined with standards requiring the JBC to attract the
best available candidates, to examine and investigate them, to exhibit transparency in all its actions
while ensuring that these actions conform to constitutional and statutory standards (such as the election
ban on appointments), to submit the required list of nominees on time, and to ensure as well that all
these acts are politically neutral. On the time element, the JBC list for the Supreme Court has to be
submitted on or before the vacancy occurs given the 90-day deadline that the appointing President is
given in making the appointment. The list will be submitted, not to the President as an outgoing
President, nor to the election winner as an incoming President, but to the President of the Philippines
whoever he or she may be. If the incumbent President does not act on the JBC list within the time left in
her term, the same list shall be available to the new President for him to act upon. In all these, the
Supreme Court bears the burden of overseeing that the JBC’s duty is done, unerringly and with utmost
dispatch; the Court cannot undertake this supervision in a manner consistent with the Constitution’s
expectation from the JBC unless it adopts a pro-active stance within the limits of its supervisory
authority.
The Disputed Provisions
The movants present their arguments on the main issue at several levels. Some argue that the disputed
constitutional provisions – Article VII, Section 15 and Article VIII, Section 4(1) – are clear and speak for
themselves on what the Constitution covers in banning appointments during the election period.23 One
even posits that there is no conflict because both provisions can be given effect without one detracting
against the full effectiveness of the other,24 although the effect is to deny the sitting President the option
to appoint in favor of a deferment for the incoming President’s action. Still others, repeating their
original arguments, appeal to the principles of interpretation and latin maxims to prove their point.25
In my discussions in the Separate Opinion, I stated upfront my views on how the disputed provisions
interact with each other. Read singly and in isolation, they appear clear (this reading applies the "plain
meaning rule" that Tolentino advocates in his motion for reconsideration, as explained below). Arrayed
side by side with each other and considered in relation with the other provisions of the Constitution,
particularly its structure and underlying intents, the conflict however becomes obvious and unavoidable.
Section 15 on its face disallows any appointment in clear negative terms ("shall not make") without
specifying the appointments covered by the prohibition.26 From this literal and isolated reading springs
the argument that no exception is provided (except that found in Section 15 itself) so that even the
Judiciary is covered by the ban on appointments.
On the other hand, Section 4(1) is likewise very clear and categorical in its terms: any vacancy in the
Court shall be filled within 90 days from its occurrence.27 In the way of Section 15, Section 4(1) is also
clear and categorical and provides no exception; the appointment refers solely to the Members of the
Supreme Court and does not mention any period that would interrupt, hold or postpone the 90-day
requirement.
From this perspective, the view that no conflict exists cannot be seriously made, unless with the
mindset that one provision controls and the other should yield. Many of the petitions in fact advocate
this kind of reading, some of them openly stating that the power of appointment should be reserved for
the incoming President.28 The question, however, is whether – from the viewpoint of strict law and
devoid of the emotionalism and political partisanship that permeate the present Philippine political
environment – this kind of mindset can really be adopted in reading and applying the Constitution.
In my view, this kind of mindset and the conclusion it inevitably leads to cannot be adopted; the
provisions of the Constitution cannot be read in isolation from what the whole contains. To be exact, the
Constitution must be read and understood as a whole, reconciling and harmonizing apparently
conflicting provisions so that all of them can be given full force and effect,29 unless the Constitution itself
expressly states otherwise.30
Not to be forgotten in reading and understanding the Constitution are the many established underlying
constitutional principles that we have to observe and respect if we are to be true to the Constitution.
These principles – among them the principles of checks and balances and separation of powers – are
not always expressly stated in the Constitution, but no one who believes in and who has studied the
Constitution can deny that they are there and deserve utmost attention, respect, and even priority
consideration.
In establishing the structures of government, the ideal that the Constitution seeks to achieve is one of
balance among the three great departments of government – the Executive, the Legislative and the
Judiciary, with each department undertaking its constitutionally-assigned task as a check against the
exercise of power by the others, while all three departments move forward in working for the progress
of the nation. Thus, the Legislature makes the laws and is supreme in this regard, in the way that the
Executive is supreme in enforcing and administering the law, while the Judiciary interprets both the
Constitution and the law. Any provision in each of the Articles on these three departments31 that
intrudes into the other must be closely examined if the provision affects and upsets the desired balance.
Under the division of powers, the President as Chief Executive is given the prerogative of making
appointments, subject only to the legal qualification standards, to the checks provided by the
Legislature’s Commission on Appointments (when applicable) and by the JBC for appointments in the
Judiciary, and to the Constitution’s own limitations. Conflict comes in when the Constitution laid down
Article VII, Section 15 limiting the President’s appointing power during the election period. This
limitation of power would have been all-encompassing and would, thus, have extended to all
government positions the President can fill, had the Constitution not inserted a provision, also on
appointments, in the Article on the Judiciary with respect to appointments to the Supreme Court. This
conflict gives rise to the questions: which provision should prevail, or should both be given effect? Or
should both provisions yield to a higher concern – the need to maintain the integrity of our elections?
A holistic reading of the Constitution – a must in constitutional interpretation – dictates as a general rule
that the tasks assigned to each department and their limitations should be given full effect to fulfill the
constitutional purposes under the check and balance principle, unless the Constitution itself expressly
indicates its preference for one task, concern or standard over the others,32 or unless this Court, in its
role as interpreter of the Constitution, has spoken on the appropriate interpretation that should be
made.33
In considering the interests of the Executive and the Judiciary, a holistic approach starts from the
premise that the constitutional scheme is to grant the President the power of appointment, subject to
the limitation provided under Article VII, Section 15. At the same time, the Judiciary is assured, without
qualifications under Article VIII, Section 4(1), of the immediate appointment of Members of the Supreme
Court, i.e., within 90 days from the occurrence of the vacancy. If both provisions would be allowed to
take effect, as I believe they should, the limitation on the appointment power of the President under
Article VII, Section 15 should itself be limited by the appointment of Members of the Court pursuant to
Article VIII, Section 4(1), so that the provision applicable to the Judiciary can be given full effect without
detriment to the President’s appointing authority. This harmonization will result in restoring to the
President the full authority to appoint Members of the Supreme Court pursuant to the combined
operation of Article VII, Section 15 and Article VIII, Section 4(1).
Viewed in this light, there is essentially no conflict, in terms of the authority to appoint, between the
Executive and Judiciary; the President would effectively be allowed to exercise the Executive’s
traditional presidential power of appointment while respecting the Judiciary’s own prerogative. In other
words, the President retains full powers to appoint Members of the Court during the election period, and
the Judiciary is assured of a full membership within the time frame given.
Interestingly, the objection to the full application of Article VIII, Section 4(1) comes, not from the current
President, but mainly from petitioners echoing the present presidential candidates, one of whom shall
soon be the incoming President. They do not, of course, cite reasons of power and the loss of the
opportunity to appoint the Chief Justice; many of the petitioners/intervenors oppose the full application
of Article VIII, Section 4(1) based on the need to maintain the integrity of the elections through the
avoidance of a "midnight appointment."
This "integrity" reason is a given in a democracy and can hardly be opposed on the theoretical plane,
as the integrity of the elections must indeed prevail in a true democracy. The statement, however, begs
a lot of questions, among them the question of whether the appointment of a full Court under the terms
of Article VIII, Section 4(1) will adversely affect or enhance the integrity of the elections.
In my Separate Opinion, I concluded that the appointment of a Member of the Court even during the
election period per se implies no adverse effect on the integrity of the election; a full Court is ideal
during this period in light of the Court’s unique role during elections. I maintain this view and fully concur
in this regard with the majority.
During the election period, the court is not only the interpreter of the Constitution and the election laws; stability although divergent in their individual views, as the Justices individually make their contributions
other than the Commission on Elections and the lower courts to a limited extent, the Court is likewise to the collegial result. To some, this leadership may only be symbolic, as the Court has fully functioned
the highest impartial recourse available to decisively address any problem or dispute arising from the in the past even with an incomplete membership or under an Acting Chief Justice. But as I said before,
election. It is the leader and the highest court in the Judiciary, the only one of the three departments of an incomplete Court "is not a whole Supreme Court; it will only be a Court with 14 members who would
government directly unaffected by the election. The Court is likewise the entity entrusted by the act and vote on all matters before it." To fully recall what I have said on this matter:
Constitution, no less, with the gravest election-related responsibilities. In particular, it is the sole judge
of all contests in the election of the President and the Vice-President, with leadership and participation
The importance of the presence of one Member of the Court can and should never be underestimated,
as well in the election tribunals that directly address Senate and House of Representatives electoral
particularly on issues that may gravely affect the nation. Many a case has been won or lost on the basis
disputes. With this grant of responsibilities, the Constitution itself has spoken on the trust it reposes on
of one vote. On an issue of the constitutionality of a law, treaty or statute, a tie vote – which is possible
the Court on election matters. This reposed trust, to my mind, renders academic any question of
in a 14 member court – means that the constitutionality is upheld. This was our lesson in Isagani Cruz
whether an appointment during the election period will adversely affect the integrity of the elections – it
v. DENR Secretary.
will not, as the maintenance of a full Court in fact contributes to the enforcement of the constitutional
scheme to foster a free and orderly election.
More than the vote, Court deliberation is the core of the decision-making process and one voice is less
is not only a vote less but a contributed opinion, an observation, or a cautionary word less for the Court.
In reading the motions for reconsideration against the backdrop of the partisan political noise of the
One voice can be a big difference if the missing voice is that of the Chief Justice.
coming elections, one cannot avoid hearing echoes from some of the arguments that the objection is
related, more than anything else, to their lack of trust in an appointment to be made by the incumbent
President who will soon be bowing out of office. They label the incumbent President’s act as a "midnight Without meaning to demean the capability of an Acting Chief Justice, the ascendancy in the Court of a
appointment" – a term that has acquired a pejorative meaning in contemporary society. permanent sitting Chief Justice cannot be equaled. He is the first among equals – a primus inter pares
– who sets the tone for the Court and the Judiciary, and who is looked up to on all matters, whether
administrative or judicial. To the world outside the Judiciary, he is the personification of the Court and
As I intimated in my Separate Opinion, the imputation of distrust can be made against any appointing
the whole Judiciary. And this is not surprising since, as Chief Justice, he not only chairs the Court en
authority, whether outgoing or incoming. The incoming President himself will be before this Court if an
banc, but chairs as well the Presidential Electoral Tribunal that sits in judgment over election disputes
election contest arises; any President, past or future, would also naturally wish favorable outcomes in
affecting the President and the Vice-President. Outside of his immediate Court duties, he sits as Chair
legal problems that the Court would resolve. These possibilities and the potential for continuing
of the Judicial and Bar Council, the Philippine Judicial Academy and, by constitutional command,
influence in the Court, however, cannot be active considerations in resolving the election ban issue as
presides over the impeachment of the President. To be sure, the Acting Chief Justice may be the
they are, in their present form and presentation, all speculative. If past record is to be the measure, the
ablest, but he is not the Chief Justice without the mantle and permanent title of the Office, and even his
record of past Chief Justices and of this Court speaks for itself with respect to the Justices’ relationship
presence as Acting Chief Justice leaves the Court with one member less. Sadly, this member is the
with, and deferral to, the appointing authority in their decisions.
Chief Justice; even with an Acting Chief Justice, the Judiciary and the Court remains headless. 35

What should not be forgotten in examining the records of the Court, from the prism of problems an
Given these views, I see no point in re-discussing the finer points of technical interpretation and their
electoral exercise may bring, is the Court’s unique and proven capacity to intervene and diffuse
supporting latin maxims that I have addressed in my Separate Opinion and now feel need no further
situations that are potentially explosive for the nation. EDSA II particularly comes to mind in this regard
elaboration; maxims can be found to serve a pleader’s every need and in any case are the last
(although it was an event that was not rooted in election problems) as it is a perfect example of the
interpretative tools in constitutional interpretation. Nor do I see any point in discussing arguments based
potential for damage to the nation that the Court can address and has addressed. When acting in this
on the intent of the framers of the Constitution now cited by the parties in the contexts that would serve
role, a vacancy in the Court is not only a vote less, but a significant contribution less in the Court’s
their own ends. As may be evident in these discussions, other than the texts of the disputed provisions,
deliberations and capacity for action, especially if the missing voice is the voice of the Chief Justice.
I prefer to examine their purposes and the consequences of their application, understood within the
context of democratic values. Past precedents are equally invaluable for the lead, order, and stability
Be it remembered that if any EDSA-type situation arises in the coming elections, it will be compounded they contribute, but only if they are in point, certain, and still alive to current realities, while the history of
by the lack of leaders because of the lapse of the President’s term by June 30, 2010; by a possible provisions, including the intents behind them, are primarily important to ascertain the purposes the
failure of succession if for some reason the election of the new leadership becomes problematic; and by provisions serve.
the similar absence of congressional leadership because Congress has not yet convened to organize
itself.34 In this scenario, only the Judiciary of the three great departments of government stands
From these perspectives and without denigrating the framers’ historical contributions, I say that it is the
unaffected by the election and should at least therefore be complete to enable it to discharge its
Constitution that now primarily speaks to us in this case and what we hear are its direct words, not
constitutional role to its fullest potential and capacity. To state the obvious, leaving the Judiciary without
merely the recorded isolated debates reflecting the personal intents of the constitutional commissioners
any permanent leader in this scenario may immeasurably complicate the problem, as all three
as cited by the parties to fit their respective theories. The voice speaking the words of the Constitution
departments of government will then be leaderless.
is our best guide, as these words will unalterably be there for us to read in the context of their purposes
and the nation’s needs and circumstances. This Concurring and Dissenting Opinion hears and listens to
To stress what I mentioned on this point in my Separate Opinion, the absence of a Chief Justice will that voice.
make a lot of difference in the effectiveness of the Court as he or she heads the Judiciary, sits as Chair
of the JBC and of the Presidential Electoral Tribunal, presides over impeachment proceedings, and
The Valenzuela Decision
provides the moral suasion and leadership that only the permanent mantle of the Chief Justice can
bestow. EDSA II is just one of the many lessons from the past when the weightiest of issues were
tackled and promptly resolved by the Court. Unseen by the general public in all these was the The ponencia’s ruling reversing Valenzuela, in my view, is out of place in the present case, since at
leadership that was there to ensure that the Court would act as one, in the spirit of harmony and issue here is the appointment of the Chief Justice during the period of the election ban, not the
appointment of lower court judges that Valenzuela resolved. To be perfectly clear, the conflict in the
constitutional provisions is not confined to Article VII, Section 15 and Article VIII, Section 4(1) with
respect to the appointment of Members of the Supreme Court; even before the Valenzuela ruling, the
conflict already existed between Article VII, Section 15 and Article VIII, Section 9 – the provision on the
appointment of the justices and judges of courts lower than the Supreme Court. After this Court’s ruling
in Valenzuela, no amount of hairsplitting can result in the conclusion that Article VII, Section 15 applied
the election ban over the whole Judiciary, including the Supreme Court, as the facts and the fallo of
Valenzuela plainly spoke of the objectionable appointment of two Regional Trial Court judges. To
reiterate, Valenzuela only resolved the conflict between Article VII, Section 15 and appointments to the
Judiciary under Article VIII, Section 9.
If Valenzuela did prominently figure at all in the present case, the prominence can be attributed to the
petitioners’ mistaken reading that this case is primary authority for the dictum that Article VII, Section 15
completely bans all appointments to the Judiciary, including appointments to the Supreme Court, during
the election period up to the end of the incumbent President’s term.
In reality, this mistaken reading is an obiter dictum in Valenzuela, and hence, cannot be cited for its
primary precedential value. This legal situation still holds true as Valenzuela was not doctrinally
reversed as its proposed reversal was supported only by five (5) out of the 12 participating Members of
the Court. In other words, this ruling on how Article VII, Section 15 is to be interpreted in relation with
Article VIII, Section 9, should continue to stand unless otherwise expressly reversed by this Court.
But separately from the mistaken use of an obiter ruling as primary authority, I believe that I should
sound the alarm bell about the Valenzuela ruling in light of a recent vacancy in the position of Presiding
Justice of the Sandiganbayan resulting from Presiding Justice Norberto Geraldez’s death soon after we
issued the decision in the present case. Reversing the Valenzuela ruling now, in the absence of a
properly filed case addressing an appointment at this time to the Sandiganbayan or to any other
vacancy in the lower courts, will be an irregular ruling of the first magnitude by this Court, as it will
effectively be a shortcut that lifts the election ban on appointments to the lower courts without the
benefit of a case whose facts and arguments would directly confront the continued validity of the
Valenzuela ruling. This is especially so after we have placed the Court on notice that a reversal of
Valenzuela is uncalled for because its ruling is not the litigated issue in this case.
In any case, let me repeat what I stressed in my Separate Opinion about Valenzuela which rests on the
reasoning that the evils Section 15 seeks to remedy – vote buying, midnight appointments and partisan
reasons to influence the elections – exist, thus justifying an election appointment ban. In particular, the
"midnight appointment" justification, while fully applicable to the more numerous vacancies at the lower
echelons of the Judiciary (with an alleged current lower court vacancy level of 537 or a 24.5% vacancy
rate), should not apply to the Supreme Court which has only a total of 15 positions that are not even
vacated at the same time. The most number of vacancies for any one year occurred only last year
(2009) when seven (7) positions were vacated by retirement, but this vacancy rate is not expected to be
replicated at any time within the next decade. Thus "midnight appointments" to the extent that they
were understood in Aytona36 will not occur in the vacancies of this Court as nominations to its vacancies
are all processed through the JBC under the public’s close scrutiny. As already discussed above, the
institutional integrity of the Court is hardly an issue. If at all, only objections personal to the individual
Members of the Court or against the individual applicants can be made, but these are matters
addressed in the first place by the JBC before nominees are submitted. There, too, are specific
reasons, likewise discussed above, explaining why the election ban should not apply to the Supreme
Court. These exempting reasons, of course, have yet to be shown to apply to the lower courts. Thus, on
the whole, the reasons justifying the election ban in Valenzuela still obtain in so far as the lower courts
are concerned, and have yet to be proven otherwise in a properly filed case. Until then, Valenzuela,
except to the extent that it mentioned Section 4(1), should remain an authoritative ruling of this Court.
CONCLUSION
In light of these considerations, a writ of prohibition cannot issue to prevent the JBC from performing its
principal function, under the Constitution, of recommending nominees for the position of Chief Justice.
Thus, I vote to deny with finality the Tolentino and Soriano motions for reconsideration.
The other motions for reconsideration in so far as they challenge the conclusion that the President can
appoint the Chief Justice even during the election period are likewise denied with finality for lack of
merit, but are granted in so far as they support the continued validity of the ruling of this Court in In Re:
Valenzuela and Vallarta, A.M. No. 98-5-01-SC, November 9, 1998.
My opinion on the Mendoza petition stands.
G.R. No. 87416             April 8, 1991
CECILIO S. DE VILLA, petitioner, 
vs.
THE HONORABLE COURT OF APPEALS, PEOPLE OF THE PHILIPPINES, HONORABLE JOB B.
MADAYAG, and ROBERTO Z. LORAYES, respondents.
San Jose Enriquez, Lacas Santos & Borje for petitioner.
Eduardo R. Robles for private respondent.
PARAS, J.:
This petition for review on certiorari seeks to reverse and set aside the decision* of the Court of
Appeals promulgated on February 1, 1989 in CA-G.R. SP No. 16071 entitled "Cecilio S. de Villa vs.
Judge Job B. Madayag, etc. and Roberto Z. Lorayes," dismissing the petition for certiorari filed therein.
The factual backdrop of this case, as found by the Court of Appeals, is as follows:
On October 5, 1987, petitioner Cecilio S. de Villa was charged before the Regional Trial
Court of the National Capital Judicial Region (Makati, Branch 145) with violation of Batas
Pambansa Bilang 22, allegedly committed as follows:
That on or about the 3rd day of April 1987, in the municipality of Makati, Metro
Manila, Philippines and within the jurisdiction of this Honorable Court, the above-
named accused, did, then and there willfully, unlawfully and feloniously make or
draw and issue to ROBERTO Z. LORAYEZ, to apply on account or for value a
Depositors Trust Company Check No. 3371 antedated March 31, 1987, payable to
herein complainant in the total amount of U.S. $2,500.00 equivalent to P50,000.00,
said accused well knowing that at the time of issue he had no sufficient funds in or
credit with drawee bank for payment of such check in full upon its presentment
which check when presented to the drawee bank within ninety (90) days from the
date thereof was subsequently dishonored for the reason "INSUFFICIENT FUNDS"
and despite receipt of notice of such dishonor said accused failed to pay said
ROBERTO Z. LORAYEZ the amount of P50,000.00 of said check or to make
arrangement for full payment of the same within five (5) banking days after
receiving said notice.
After arraignment and after private respondent had testified on direct examination, petitioner WHEREFORE, the petition is hereby dismissed. Costs against petitioner.
moved to dismiss the Information on the following grounds: (a) Respondent court has no
jurisdiction over the offense charged; and (b) That no offense was committed since the check
SO ORDERED. (Rollo, Annex "A", Decision, p. 5)
involved was payable in dollars, hence, the obligation created is null and void pursuant to
Republic Act No. 529 (An Act to Assure Uniform Value of Philippine Coin and Currency).
A motion for reconsideration of the said decision was filed by the petitioner on February 7,
1989 (Rollo, Petition, p. 6) but the same was denied by the Court of Appeals in its resolution
On July 19, 1988, respondent court issued its first questioned orders stating:
dated March 3, 1989 (Rollo, Annex "B", p. 26).

Accused's motion to dismiss dated July 5, 1988, is denied for lack of merit.
Hence, this petition.

Under the Bouncing Checks Law (B.P. Blg. 22), foreign checks, provided they are
In its resolution dated November 13, 1989, the Second Division of this Court gave due course
either drawn and issued in the Philippines though payable outside thereof, or made
to the petition and required the parties to submit simultaneously their respective memoranda
payable and dishonored in the Philippines though drawn and issued outside
(Rollo, Resolution, p. 81).
thereof, are within the coverage of said law. The law likewise applied to checks
drawn against current accounts in foreign currency.
The sole issue in this case is whether or not the Regional Trial Court of Makati has
jurisdiction over the case in question.
Petitioner moved for reconsideration but his motion was subsequently denied by respondent
court in its order dated September 6, 1988, and which reads:
The petition is without merit.
Accused's motion for reconsideration, dated August 9, 1988, which was opposed
by the prosecution, is denied for lack of merit.1âwphi1 Jurisdiction is the power with which courts are invested for administering justice, that is, for
hearing and deciding cases (Velunta vs. Philippine Constabulary, 157 SCRA 147 [1988]).
The Bouncing Checks Law is applicable to checks drawn against current accounts
in foreign currency (Proceedings of the Batasang Pambansa, February 7, 1979, p. Jurisdiction in general, is either over the nature of the action, over the subject matter, over the
1376, cited in Makati RTC Judge (now Manila City Fiscal) Jesus F. Guerrero's The person of the defendant, or over the issues framed in the pleadings (Balais vs. Balais, 159
Ramifications of the Law on Bouncing Checks, p. 5). (Rollo, Annex "A", Decision, SCRA 37 [1988]).
pp. 20-22).
Jurisdiction over the subject matter is determined by the statute in force at the time of
A petition for certiorari seeking to declare the nullity of the aforequoted orders dated July 19, commencement of the action (De la Cruz vs. Moya, 160 SCRA 538 [1988]).
1988 and September 6, 1988 was filed by the petitioner in the Court of Appeals wherein he
contended:
The trial court's jurisdiction over the case, subject of this review, can not be questioned.

(a) That since the questioned check was drawn against the dollar account of
Sections 10 and 15(a), Rule 110 of the Rules of Court specifically provide that:
petitioner with a foreign bank, respondent court has no jurisdiction over the same
or with accounts outside the territorial jurisdiction of the Philippines and that Batas
Pambansa Bilang 22 could have not contemplated extending its coverage over Sec. 10. Place of the commission of the offense. The complaint or information is
dollar accounts; sufficient if it can be understood therefrom that the offense was committed or some
of the essential ingredients thereof occured at some place within the jurisdiction of
the court, unless the particular place wherein it was committed constitutes an
(b) That assuming that the subject check was issued in connection with a private
essential element of the offense or is necessary for identifying the offense charged.
transaction between petitioner and private respondent, the payment could not be
legally paid in dollars as it would violate Republic Act No. 529; and
Sec. 15. Place where action is to be instituted. (a) Subject to existing laws, in all
criminal prosecutions the action shall be instituted and tried in the court of the
(c) That the obligation arising from the issuance of the questioned check is null and
municipality or territory where the offense was committed or any of the essential
void and is not enforceable with the Philippines either in a civil or criminal suit.
ingredients thereof took place.
Upon such premises, petitioner concludes that the dishonor of the questioned
check cannot be said to have violated the provisions of Batas Pambansa Bilang 22.
(Rollo, Annex "A", Decision, p. 22). In the case of People vs. Hon. Manzanilla (156 SCRA 279 [1987] cited in the case of Lim vs.
Rodrigo, 167 SCRA 487 [1988]), the Supreme Court ruled "that jurisdiction or venue is
determined by the allegations in the information."
On February 1, 1989, the Court of Appeals rendered a decision, the decretal portion of which
reads:
The information under consideration specifically alleged that the offense was committed in
Makati, Metro Manila and therefore, the same is controlling and sufficient to vest jurisdiction
upon the Regional Trial Court of Makati. The Court acquires jurisdiction over the case and
over the person of the accused upon the filing of a complaint or information in court which
initiates a criminal action (Republic vs. Sunga, 162 SCRA 191 [1988]).
The records of the Batasan, Vol. III, unmistakably show that the intention of the lawmakers is
to apply the law to whatever currency may be the subject thereof. The discussion on the floor
of the then Batasang Pambansa fully sustains this view, as follows:
x x x           x x x          x x x

Moreover, it has been held in the case of Que v. People of the Philippines (154 SCRA 160
THE SPEAKER. The Gentleman from Basilan is recognized.
[1987] cited in the case of People vs. Grospe, 157 SCRA 154 [1988]) that "the determinative
factor (in determining venue) is the place of the issuance of the check."
MR. TUPAY. Parliamentary inquiry, Mr. Speaker.
On the matter of venue for violation of Batas Pambansa Bilang 22, the Ministry of
Justice, citing the case of People vs. Yabut (76 SCRA 624 [1977], laid down the following THE SPEAKER. The Gentleman may proceed.
guidelines in Memorandum Circular No. 4 dated December 15, 1981, the pertinent portion of
which reads:
MR. TUPAY. Mr. Speaker, it has been mentioned by one of the Gentlemen who
interpellated that any check may be involved, like U.S. dollar checks, etc. We are
(1) Venue of the offense lies at the place where the check was executed and talking about checks in our country. There are U.S. dollar checks, checks, in our
delivered; (2) the place where the check was written, signed or dated does not currency, and many others.
necessarily fix the place where it was executed, as what is of decisive importance
is the delivery thereof which is the final act essential to its consummation as an
THE SPEAKER. The Sponsor may answer that inquiry.
obligation; . . . (Res. No. 377, s. 1980, Filtex Mfg. Corp. vs. Manuel Chua, October
28, 1980)." (See The Law on Bouncing Checks Analyzed by Judge Jesus F.
Guerrero, Philippine Law Gazette, Vol. 7. Nos. 11 & 12, October-December, 1983, MR. MENDOZA. The bill refers to any check, Mr. Speaker, and this check may be
p. 14). a check in whatever currency. This would not even be limited to U.S. dollar checks.
The check may be in French francs or Japanese yen or deutschunorhs. (sic.) If
drawn, then this bill will apply.
It is undisputed that the check in question was executed and delivered by the petitioner to
herein private respondent at Makati, Metro Manila.
MR TUPAY. So it include U.S. dollar checks.
However, petitioner argues that the check in question was drawn against the dollar account
of petitioner with a foreign bank, and is therefore, not covered by the Bouncing Checks Law MR. MENDOZA. Yes, Mr. Speaker.
(B.P. Blg. 22).
x x x           x x x          x x x
But it will be noted that the law does not distinguish the currency involved in the case. As the
trial court correctly ruled in its order dated July 5, 1988:
(p. 1376, Records of the Batasan, Volume III; Emphasis supplied).

Under the Bouncing Checks Law (B.P. Blg. 22), foreign checks, provided they are
either drawn and issued in the Philippines though payable outside thereof . . . are PREMISES CONSIDERED, the petition is DISMISSED for lack of merit.
within the coverage of said law.
G.R. No. 182358               February 20, 2013
It is a cardinal principle in statutory construction that where the law does not distinguish
courts should not distinguish.1âwphi1 Parenthetically, the rule is that where the law does not DEPARTMENT OF HEALTH, THE SECRETARY OF HEALTH, and MA. MARGARITA M.
make any exception, courts may not except something unless compelling reasons exist to GALON, Petitioners, 
justify it (Phil. British Assurance Co., Inc. vs. IAC, 150 SCRA 520 [1987]). vs.
PHIL PHARMA WEALTH, INC., Respondent.
More importantly, it is well established that courts may avail themselves of the actual
proceedings of the legislative body to assist in determining the construction of a statute of DECISION
doubtful meaning (Palanca vs. City of Manila, 41 Phil. 125 [1920]). Thus, where there is
doubts as to what a provision of a statute means, the meaning put to the provision during the
legislative deliberation or discussion on the bill may be adopted (Arenas vs. City of San DEL CASTILLO, J.:
Carlos, 82 SCRA 318 [1978]).
The state may not be sued without its consent. Likewise, public officials may not be sued for acts done
in the perfom1ance of their official functions or within the scope of their authority.
This Petition for Review on Certiorari1 assails the October 25, 2007 Decision2 of the Court of Appeals In this connection, we inform you that we have already instructed our lawyers to prepare on our behalf
(CA) in CA-G.R. CV No. 85670, and its March 31, 2008 Reso1ution3 denying petitioners' Motion for the appropriate reply to the Report furnished to us. Our lawyers in time shall revert to you and furnish
Reconsideration.4 you the said reply.

Factual Antecedents Please be guided accordingly.

On December 22, 1998, Administrative Order (AO) No. 27 series of 19985 was issued by then Very truly yours,
Department of Health (DOH) Secretary Alfredo G. Romualdez (Romualdez). AO 27 set the guidelines
and procedure for accreditation of government suppliers of pharmaceutical products for sale or
(signed)
distribution to the public, such accreditation to be valid for three years but subject to annual review.
ATTY. ALAN A.B. ALAMBRA

On January 25, 2000, Secretary Romualdez issued AO 10 series of 20006 which amended AO 27.
Under Section VII7 of AO 10, the accreditation period for government suppliers of pharmaceutical
products was reduced to two years. Moreover, such accreditation may be recalled, suspended or
revoked after due deliberation and proper notice by the DOH Accreditation Committee, through its
Chairman.
Section VII of AO 10 was later amended by AO 66 series of 2000,8 which provided that the two-year
accreditation period may be recalled, suspended or revoked only after due deliberation, hearing and
notice by the DOH Accreditation Committee, through its Chairman.
On August 28, 2000, the DOH issued Memorandum No. 171-C9 which provided for a list and category
of sanctions to be imposed on accredited government suppliers of pharmaceutical products in case of
adverse findings regarding their products (e.g. substandard, fake, or misbranded) or violations
committed by them during their accreditation.
Vice-President for Legal and Administrative Affairs14
In a letter-reply15 dated November 23, 2000 Undersecretary Galon found "untenable" PPI’s November
13, 2000 letter and therein informed PPI that, effective immediately, its accreditation has been
suspended for two years pursuant to AO 10 and Memorandum No. 171-C.
In another December 14, 2000 letter16 addressed to Undersecretary Galon, PPI through counsel
questioned the suspension of its accreditation, saying that the same was made pursuant to Section VII
of AO 10 which it claimed was patently illegal and null and void because it arrogated unto the DOH
Accreditation Committee powers and functions which were granted to the BFAD under Republic Act
(RA) No. 372017 and Executive Order (EO) No. 175.18 PPI added that its accreditation was suspended
without the benefit of notice and hearing, in violation of its right to substantive and administrative due
process. It thus demanded that the DOH desist from implementing the suspension of its accreditation,
under pain of legal redress.

In line with Memorandum No. 171-C, the DOH, through former Undersecretary Ma. Margarita M. Galon
On December 28, 2000, PPI filed before the Regional Trial Court of Pasig City a Complaint19 seeking to
(Galon), issued Memorandum No. 209 series of 2000,10 inviting representatives of 24 accredited drug
declare null and void certain DOH administrative issuances, with prayer for damages and injunction
companies, including herein respondent Phil Pharmawealth, Inc. (PPI) to a meeting on October 27,
against the DOH, former Secretary Romualdez and DOH Undersecretary Galon. Docketed as Civil
2000. During the meeting, Undersecretary Galon handed them copies of a document entitled "Report
Case No. 68200, the case was raffled to Branch 160. On February 8, 2002, PPI filed an Amended and
on Violative Products"11 issued by the Bureau of Food and Drugs12 (BFAD), which detailed violations or
Supplemental Complaint,20 this time impleading DOH Secretary Manuel Dayrit (Dayrit). PPI claimed that
adverse findings relative to these accredited drug companies’ products. Specifically, the BFAD found
AO 10, Memorandum No. 171-C, Undersecretary Galon’s suspension order contained in her November
that PPI’s products which were being sold to the public were unfit for human consumption.
23, 2000 letter, and AO 14 series of 200121 are null and void for being in contravention of Section 26(d)
of RA 3720 as amended by EO 175, which states as follows:
During the October 27, 2000 meeting, the 24 drug companies were directed to submit within 10 days, or
until November 6, 2000, their respective explanations on the adverse findings covering their respective
SEC. 26. x x x
products contained in the Report on Violative Products.

(d) When it appears to the Director [of the BFAD] that the report of the Bureau that any article of food or
Instead of submitting its written explanation within the 10-day period as required, PPI belatedly sent a
any drug, device, or cosmetic secured pursuant to Section twenty-eight of this Act is adulterated,
letter13 dated November 13, 2000 addressed to Undersecretary Galon, informing her that PPI has
misbranded, or not registered, he shall cause notice thereof to be given to the person or persons
referred the Report on Violative Products to its lawyers with instructions to prepare the corresponding
concerned and such person or persons shall be given an opportunity to be heard before the Bureau
reply. However, PPI did not indicate when its reply would be submitted; nor did it seek an extension of
and to submit evidence impeaching the correctness of the finding or charge in question.
the 10-day period, which had previously expired on November 6, 2000, much less offer any explanation
for its failure to timely submit its reply. PPI’s November 13, 2000 letter states:
For what it claims was an undue suspension of its accreditation, PPI prayed that AO 10, Memorandum
No. 171-C, Undersecretary Galon’s suspension order contained in her November 23, 2000 letter, and
Madam,
AO 14 be declared null and void, and that it be awarded moral damages of ₱5 million, exemplary
damages of ₱1 million, attorney’s fees of ₱1 million, and costs of suit. PPI likewise prayed for the
This refers to your directive on 27 October 2000, on the occasion of the meeting with selected issuance of temporary and permanent injunctive relief.
accredited suppliers, during which you made known to the attendees of your requirement for them to
submit their individual comments on the Report on Violative Products (the "Report") compiled by your
In their Amended Answer,22 the DOH, former Secretary Romualdez, then Secretary Dayrit, and
office and disseminated on that date.
Undersecretary Galon sought the dismissal of the Complaint, stressing that PPI’s accreditation was
suspended because most of the drugs it was importing and distributing/selling to the public were found The CA further held that instead of dismissing the case, the trial court should have deferred the hearing
by the BFAD to be substandard for human consumption. They added that the DOH is primarily and resolution of the motion to dismiss and proceeded to trial. It added that it was apparent from the
responsible for the formulation, planning, implementation, and coordination of policies and programs in Complaint that petitioners were being sued in their private and personal capacities for acts done
the field of health; it is vested with the comprehensive power to make essential health services and beyond the scope of their official functions. Thus, the issue of whether the suit is against the State could
goods available to the people, including accreditation of drug suppliers and regulation of importation best be threshed out during trial on the merits, rather than in proceedings covering a motion to dismiss.
and distribution of basic medicines for the public.
The dispositive portion of the CA Decision reads:
Petitioners added that, contrary to PPI’s claim, it was given the opportunity to present its side within the
10-day period or until November 6, 2000, but it failed to submit the required comment/reply. Instead, it
WHEREFORE, the appeal is hereby GRANTED. The Order dated June 14, 2004 of the Regional Trial
belatedly submitted a November 13, 2000 letter which did not even constitute a reply, as it merely
Court of Pasig City, Branch 160, is hereby REVERSED and SET-ASIDE. ACCORDINGLY, this case is
informed petitioners that the matter had been referred by PPI to its lawyer. Petitioners argued that due
REMANDED to the trial court for further proceedings.
process was afforded PPI, but because it did not timely avail of the opportunity to explain its side, the
DOH had to act immediately – by suspending PPI’s accreditation – to stop the distribution and sale of
substandard drug products which posed a serious health risk to the public. By exercising DOH’s SO ORDERED.30
mandate to promote health, it cannot be said that petitioners committed grave abuse of discretion.
Petitioners sought, but failed, to obtain a reconsideration of the Decision. Hence, they filed the present
In a January 8, 2001 Order,23 the trial court partially granted PPI’s prayer for a temporary restraining Petition.
order, but only covering PPI’s products which were not included in the list of violative products or drugs
as found by the BFAD.
Issue

In a Manifestation and Motion24 dated July 8, 2003, petitioners moved for the dismissal of Civil Case No.
Petitioners now raise the following lone issue for the Court’s resolution:
68200, claiming that the case was one against the State; that the Complaint was improperly verified;
and lack of authority of the corporate officer to commence the suit, as the requisite resolution of PPI’s
board of directors granting to the commencing officer – PPI’s Vice President for Legal and Should Civil Case No. 68200 be dismissed for being a suit against the State?31
Administrative Affairs, Alan Alambra, – the authority to file Civil Case No. 68200 was lacking. To this,
PPI filed its Comment/Opposition.25
Petitioners’ Arguments

Ruling of the Regional Trial Court

26
In a June 14, 2004 Order,  the trial court dismissed Civil Case No. 68200, declaring the case to be one
instituted against the State, in which case the principle of state immunity from suit is applicable.
PPI moved for reconsideration,27 but the trial court remained steadfast.28
Petitioners submit that because PPI’s Complaint prays for the award of damages against the DOH, Civil
Case No. 68200 should be considered a suit against the State, for it would require the appropriation of
the needed amount to satisfy PPI’s claim, should it win the case. Since the State did not give its
consent to be sued, Civil Case No. 68200 must be dismissed. They add that in issuing and
implementing the questioned issuances, individual petitioners acted officially and within their authority,
for which reason they should not be held to account individually.

Respondent’s Arguments
PPI appealed to the CA.

Apart from echoing the pronouncement of the CA, respondent insists that Civil Case No. 68200 is a suit
Ruling of the Court of Appeals
against the petitioners in their personal capacity for acts committed outside the scope of their authority.

Docketed as CA-G.R. CV No. 85670, PPI’s appeal centered on the issue of whether it was proper for
Our Ruling
the trial court to dismiss Civil Case No. 68200.

The CA, in the herein assailed Decision,29 reversed the trial court ruling and ordered the remand of the
case for the conduct of further proceedings. The CA concluded that it was premature for the trial court
to have dismissed the Complaint. Examining the Complaint, the CA found that a cause of action was
sufficiently alleged – that due to defendants’ (petitioners’) acts which were beyond the scope of their
authority, PPI’s accreditation as a government supplier of pharmaceutical products was suspended
without the required notice and hearing as required by Section 26(d) of RA 3720 as amended by EO
175. Moreover, the CA held that by filing a motion to dismiss, petitioners were deemed to have
hypothetically admitted the allegations in the Complaint – which state that petitioners were being sued
in their individual and personal capacities – thus negating their claim that Civil Case No. 68200 is an
unauthorized suit against the State.
The Petition is granted.
The doctrine of non-suability.
The discussion of this Court in Department of Agriculture v. National Labor Relations Commission32 on
the doctrine of non-suability is enlightening.
The basic postulate enshrined in the constitution that ‘(t)he State may not be sued without its consent,’
reflects nothing less than a recognition of the sovereign character of the State and an express
affirmation of the unwritten rule effectively insulating it from the jurisdiction of courts. It is based on the b) The Complaint seeks to hold the DOH solidarily and jointly liable with the other defendants
very essence of sovereignty. x x x [A] sovereign is exempt from suit, not because of any formal for damages which constitutes a charge or financial liability against the state.
conception or obsolete theory, but on the logical and practical ground that there can be no legal right as
against the authority that makes the law on which the right depends. True, the doctrine, not too
Moreover, it is settled that if a Complaint seeks to "impose a charge or financial liability against the
infrequently, is derisively called ‘the royal prerogative of dishonesty’ because it grants the state the
state,"42 the defense of non-suability may be properly invoked. In this case, PPI specifically prayed, in
prerogative to defeat any legitimate claim against it by simply invoking its nonsuability. We have had
its Complaint and Amended and Supplemental Complaint, for the DOH, together with Secretaries
occasion to explain in its defense, however, that a continued adherence to the doctrine of non-suability
Romualdez and Dayrit as well as Undersecretary Galon, to be held jointly and severally liable for moral
cannot be deplored, for the loss of governmental efficiency and the obstacle to the performance of its
damages, exemplary damages, attorney’s fees and costs of suit.43 Undoubtedly, in the event that PPI
multifarious functions would be far greater in severity than the inconvenience that may be caused
succeeds in its suit, the government or the state through the DOH would become vulnerable to an
private parties, if such fundamental principle is to be abandoned and the availability of judicial remedy is
imposition or financial charge in the form of damages. This would require an appropriation from the
not to be accordingly restricted.
national treasury which is precisely the situation which the doctrine of state immunity aims to protect the
state from.
The rule, in any case, is not really absolute for it does not say that the state may not be sued under any
circumstance. On the contrary, as correctly phrased, the doctrine only conveys, ‘the state may not be
The mantle of non-suability extends to complaints filed against public officials for acts done in
sued without its consent;’ its clear import then is that the State may at times be sued. The State’s
the performance of their official functions.
consent may be given either expressly or impliedly. Express consent may be made through a general
law or a special law. x x x Implied consent, on the other hand, is conceded when the State itself
commences litigation, thus opening itself to a counterclaim or when it enters into a contract. In this As regards the other petitioners, to wit, Secretaries Romualdez and Dayrit, and Undersecretary Galon,
situation, the government is deemed to have descended to the level of the other contracting party and it must be stressed that the doctrine of state immunity extends its protective mantle also to complaints
to have divested itself of its sovereign immunity. This rule, x x x is not, however, without qualification. filed against state officials for acts done in the discharge and performance of their duties.44 "The
Not all contracts entered into by the government operate as a waiver of its non-suability; distinction suability of a government official depends on whether the official concerned was acting within his official
must still be made between one which is executed in the exercise of its sovereign function and another or jurisdictional capacity, and whether the acts done in the performance of official functions will result in
which is done in its proprietary capacity.33 a charge or financial liability against the government."45 Otherwise stated, "public officials can be held
personally accountable for acts claimed to have been performed in connection with official duties where
they have acted ultra vires or where there is showing of bad faith."46 Moreover, "[t]he rule is that if the
As a general rule, a state may not be sued. However, if it consents, either expressly or impliedly, then it
judgment against such officials will require the state itself to perform an affirmative act to satisfy the
may be the subject of a suit.34 There is express consent when a law, either special or general, so
same, such as the appropriation of the amount needed to pay the damages awarded against them, the
provides. On the other hand, there is implied consent when the state "enters into a contract or it itself
suit must be regarded as against the state x x x. In such a situation, the state may move to dismiss the
commences litigation."35 However, it must be clarified that when a state enters into a contract, it does
[C]omplaint on the ground that it has been filed without its consent." 47
not automatically mean that it has waived its non-suability. 36 The State "will be deemed to have
impliedly waived its non-suability [only] if it has entered into a contract in its proprietary or private
capacity. [However,] when the contract involves its sovereign or governmental capacity[,] x x x no such It is beyond doubt that the acts imputed against Secretaries Romualdez and Dayrit, as well as
waiver may be implied."37 "Statutory provisions waiving [s]tate immunity are construed in strictissimi Undersecretary Galon, were done while in the performance and discharge of their official functions or in
juris. For, waiver of immunity is in derogation of sovereignty."38 their official capacities, and not in their personal or individual capacities. Secretaries Romualdez and
Dayrit were being charged with the issuance of the assailed orders. On the other hand, Undersecretary
Galon was being charged with implementing the assailed issuances. By no stretch of imagination could
The DOH can validly invoke state immunity.
the same be categorized as ultra vires simply because the said acts are well within the scope of their
authority. Section 4 of RA 3720 specifically provides that the BFAD is an office under the Office of the
a) DOH is an unincorporated agency which performs sovereign or governmental functions. Health Secretary. Also, the Health Secretary is authorized to issue rules and regulations as may be
necessary to effectively enforce the provisions of RA 3720.48 As regards Undersecretary Galon, she is
authorized by law to supervise the offices under the DOH’s authority,49 such as the BFAD. Moreover,
In this case, the DOH, being an "unincorporated agency of the government"39 can validly invoke the
there was also no showing of bad faith on their part. The assailed issuances were not directed only
defense of immunity from suit because it has not consented, either expressly or impliedly, to be sued.
against PPI. The suspension of PPI’s accreditation only came about after it failed to submit its comment
Significantly, the DOH is an unincorporated agency which performs functions of governmental
as directed by Undersecretary Galon. It is also beyond dispute that if found wanting, a financial charge
character.
will be imposed upon them which will require an appropriation from the state of the needed amount.
Thus, based on the foregoing considerations, the Complaint against them should likewise be dismissed
The ruling in Air Transportation Office v. Ramos40 is relevant, viz: for being a suit against the state which absolutely did not give its consent to be sued. Based on the
foregoing considerations, and regardless of the merits of PPI’s case, this case deserves a dismissal.
Evidently, the very foundation of Civil Case No. 68200 has crumbled at this initial juncture.
An unincorporated government agency without any separate juridical personality of its own enjoys
immunity from suit because it is invested with an inherent power of sovereignty. Accordingly, a claim for
damages against the agency cannot prosper; otherwise, the doctrine of sovereign immunity is violated. PPI was not denied due process.
However, the need to distinguish between an unincorporated government agency performing
governmental function and one performing proprietary functions has arisen. The immunity has been
However, we cannot end without a discussion of PPI’s contention that it was denied due process when
upheld in favor of the former because its function is governmental or incidental to such function; it has
its accreditation was suspended "without due notice and hearing." It is undisputed that during the
not been upheld in favor of the latter whose function was not in pursuit of a necessary function of
October 27, 2000 meeting, Undersecretary Galon directed representatives of pharmaceutical
government but was essentially a business.41
companies, PPI included, to submit their comment and/or reactions to the Report on Violative Products
furnished them within a period of 10 days. PPI, instead of submitting its comment or explanation, wrote
a letter addressed to Undersecretary Galon informing her that the matter had already been referred to
its lawyer for the drafting of an appropriate reply. Aside from the fact that the said letter was belatedly
submitted, it also failed to specifically mention when such reply would be forthcoming. Finding the
foregoing explanation to be unmeritorious, Undersecretary Galon ordered the suspension of PPI’s
accreditation for two years. Clearly these facts show that PPI was not denied due process. It was given
the opportunity to explain its side. Prior to the suspension of its accreditation, PPI had the chance to
rebut, explain, or comment on the findings contained in the Report on Violative Products that several of
PPI’s products are not fit for human consumption. However, PPI squandered its opportunity to explain.
Instead of complying with the directive of the DOH Undersecretary within the time allotted, it instead
haughtily informed Undersecretary Galon that the matter had been referred to its lawyers. Worse, it
impliedly told Undersecretary Galon to just wait until its lawyers shall have prepared the appropriate
reply. PPI however failed to mention when it will submit its "appropriate reply" or how long
Undersecretary Galon should wait. In the meantime, PPI’s drugs which are included in the Report on
Violative Products are out and being sold in the market. Based on the foregoing, we find PPI’s
contention of denial of due process totally unfair and absolutely lacking in basis. At this juncture, it
would be trite to mention that "[t]he essence of due process in administrative proceedings is the
opportunity to explain one’s side or seek a reconsideration of the action or ruling complained of. As long
as the parties are given the opportunity to be heard before judgment is rendered, the demands of due
process are sufficiently met. What is offensive to due process is the denial of the opportunity to be
heard. The Court has repeatedly stressed that parties who chose not to avail themselves of the
opportunity to answer charges against them cannot complain of a denial of due process."50
Incidentally, we find it inieresting that in the earlier case of Department q( Health v. Phil Pharmawealth,
Inc.  51respondent filed a Complaint against DOH anchored on the same issuances which it assails in
the present case. In the earlier case of Department of Health v. Phil Pharmawealth, Jnc.,  52 PPI
submitted to the DOH a request for the inclusion of its products in the list of accredited drugs as
required by AO 27 series of 1998 which was later amended by AO 10 series of 2000. In the instant
case, however, PPI interestingly claims that these issuances are null and void.
WHEREFORE, premises considered, the Petition is GRANTED. Civil Case No. 68200 is ordered
DISMISSED.
SO ORDERED.
G.R. No. 188550               August 19, 2013
DEUTSCHE BANK AG MANILA BRANCH, PETITIONER, 
vs.
COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
DECISION
SERENO, CJ.:
This is a Petition for Review1 filed by Deutsche Bank AG Manila Branch (petitioner) under Rule 45 of
the 1997 Rules of Civil Procedure assailing the Court of Tax Appeals En Banc (CTA En Banc)
Decision2 dated 29 May 2009 and Resolution3 dated 1 July 2009 in C.T.A. EB No. 456.
THE FACTS
In accordance with Section 28(A)(5)4 of the National Internal Revenue Code (NIRC) of 1997, petitioner
withheld and remitted to respondent on 21 October 2003 the amount of PHP 67,688,553.51, which
represented the fifteen percent (15%) branch profit remittance tax (BPRT) on its regular banking unit
(RBU) net income remitted to Deutsche Bank Germany (DB Germany) for 2002 and prior taxable
years.5
Believing that it made an overpayment of the BPRT, petitioner filed with the BIR Large Taxpayers
Assessment and Investigation Division on 4 October 2005 an administrative claim for refund or
issuance of its tax credit certificate in the total amount of PHP 22,562,851.17. On the same date,
petitioner requested from the International Tax Affairs Division (ITAD) a confirmation of its entitlement to
the preferential tax rate of 10% under the RP-Germany Tax Treaty.6
Alleging the inaction of the BIR on its administrative claim, petitioner filed a Petition for Review7 with the
CTA on 18 October 2005. Petitioner reiterated its claim for the refund or issuance of its tax credit
certificate for the amount of PHP 22,562,851.17 representing the alleged excess BPRT paid on branch
profits remittance to DB Germany.
THE CTA SECOND DIVISION RULING8
After trial on the merits, the CTA Second Division found that petitioner indeed paid the total amount of
PHP 67,688,553.51 representing the 15% BPRT on its RBU profits amounting to PHP 451,257,023.29
for 2002 and prior taxable years. Records also disclose that for the year 2003, petitioner remitted to DB
Germany the amount of EURO 5,174,847.38 (or PHP 330,175,961.88 at the exchange rate of PHP
63.804:1 EURO), which is net of the 15% BPRT.
However, the claim of petitioner for a refund was denied on the ground that the application for a tax
treaty relief was not filed with ITAD prior to the payment by the former of its BPRT and actual
remittance of its branch profits to DB Germany, or prior to its availment of the preferential rate of ten
percent (10%) under the RP-Germany Tax Treaty provision. The court a quo held that petitioner
violated the fifteen (15) day period mandated under Section III paragraph (2) of Revenue Memorandum
Order (RMO) No. 1-2000.
Further, the CTA Second Division relied on Mirant (Philippines) Operations Corporation (formerly
Southern Energy Asia-Pacific Operations [Phils.], Inc.) v. Commissioner of Internal Revenue9 (Mirant)
where the CTA En Banc ruled that before the benefits of the tax treaty may be extended to a foreign
corporation wishing to avail itself thereof, the latter should first invoke the provisions of the tax treaty
and prove that they indeed apply to the corporation.
THE CTA EN BANC RULING10
The CTA En Banc affirmed the CTA Second Division’s Decision dated 29 August 2008 and Resolution
dated 14 January 2009. Citing Mirant, the CTA En Banc held that a ruling from the ITAD of the BIR
must be secured prior to the availment of a preferential tax rate under a tax treaty. Applying the
principle of stare decisis et non quieta movere, the CTA En Banc took into consideration that this Court
had denied the Petition in G.R. No. 168531 filed by Mirant for failure to sufficiently show any reversible
error in the assailed judgment.11 The CTA En Banc ruled that once a case has been decided in one
way, any other case involving exactly the same point at issue should be decided in the same manner.
The court likewise ruled that the 15-day rule for tax treaty relief application under RMO No. 1-2000
cannot be relaxed for petitioner, unlike in CBK Power Company Limited v. Commissioner of Internal
Revenue.12 In that case, the rule was relaxed and the claim for refund of excess final withholding taxes
was partially granted. While it issued a ruling to CBK Power Company Limited after the payment of
withholding taxes, the ITAD did not issue any ruling to petitioner even if it filed a request for
confirmation on 4 October 2005 that the remittance of branch profits to DB Germany is subject to a
preferential tax rate of 10% pursuant to Article 10 of the RP-Germany Tax Treaty.
ISSUE
This Court is now confronted with the issue of whether the failure to strictly comply with RMO No. 1-
2000 will deprive persons or corporations of the benefit of a tax treaty.
THE COURT’S RULING
The Petition is meritorious.
Under Section 28(A)(5) of the NIRC, any profit remitted to its head office shall be subject to a tax of
15% based on the total profits applied for or earmarked for remittance without any deduction of the tax
component. However, petitioner invokes paragraph 6, Article 10 of the RP-Germany Tax Treaty, which
provides that where a resident of the Federal Republic of Germany has a branch in the Republic of the
Philippines, this branch may be subjected to the branch profits remittance tax withheld at source in
accordance with Philippine law but shall not exceed 10% of the gross amount of the profits remitted by
that branch to the head office.
By virtue of the RP-Germany Tax Treaty, we are bound to extend to a branch in the Philippines,
remitting to its head office in Germany, the benefit of a preferential rate equivalent to 10% BPRT.
On the other hand, the BIR issued RMO No. 1-2000, which requires that any availment of the tax treaty
relief must be preceded by an application with ITAD at least 15 days before the transaction. The Order
was issued to streamline the processing of the application of tax treaty relief in order to improve
efficiency and service to the taxpayers. Further, it also aims to prevent the consequences of an
erroneous interpretation and/or application of the treaty provisions (i.e., filing a claim for a tax
refund/credit for the overpayment of taxes or for deficiency tax liabilities for underpayment).13
The crux of the controversy lies in the implementation of RMO No. 1-2000.
Petitioner argues that, considering that it has met all the conditions under Article 10 of the RP-Germany
Tax Treaty, the CTA erred in denying its claim solely on the basis of RMO No. 1-2000. The filing of a
tax treaty relief application is not a condition precedent to the availment of a preferential tax rate.
Further, petitioner posits that, contrary to the ruling of the CTA, Mirant is not a binding judicial precedent
to deny a claim for refund solely on the basis of noncompliance with RMO No. 1-2000.
Respondent counters that the requirement of prior application under RMO No. 1-2000 is mandatory in
character. RMO No. 1-2000 was issued pursuant to the unquestioned authority of the Secretary of
Finance to promulgate rules and regulations for the effective implementation of the NIRC. Thus, courts
cannot ignore administrative issuances which partakes the nature of a statute and have in their favor a
presumption of legality.
The CTA ruled that prior application for a tax treaty relief is mandatory, and noncompliance with this
prerequisite is fatal to the taxpayer’s availment of the preferential tax rate.
We disagree.
A minute resolution is not a binding precedent
At the outset, this Court’s minute resolution on Mirant is not a binding precedent. The Court has clarified
this matter in Philippine Health Care Providers, Inc. v. Commissioner of Internal Revenue14 as follows:
It is true that, although contained in a minute resolution, our dismissal of the petition was a disposition
of the merits of the case. When we dismissed the petition, we effectively affirmed the CA ruling being
questioned. As a result, our ruling in that case has already become final. When a minute resolution
denies or dismisses a petition for failure to comply with formal and substantive requirements, the
challenged decision, together with its findings of fact and legal conclusions, are deemed sustained. But
what is its effect on other cases?
With respect to the same subject matter and the same issues concerning the same parties, it
constitutes res judicata. However, if other parties or another subject matter (even with the same parties
and issues) is involved, the minute resolution is not binding precedent. Thus, in CIR v. Baier-Nickel, the
Court noted that a previous case, CIR v. Baier-Nickel involving the same parties and the same issues,
was previously disposed of by the Court thru a minute resolution dated February 17, 2003 sustaining
the ruling of the CA. Nonetheless, the Court ruled that the previous case "ha(d) no bearing" on the latter
case because the two cases involved different subject matters as they were concerned with the taxable
income of different taxable years.
Besides, there are substantial, not simply formal, distinctions between a minute resolution and a
decision. The constitutional requirement under the first paragraph of Section 14, Article VIII of the
Constitution that the facts and the law on which the judgment is based must be expressed clearly and
distinctly applies only to decisions, not to minute resolutions. A minute resolution is signed only by the
clerk of court by authority of the justices, unlike a decision. It does not require the certification of the
Chief Justice. Moreover, unlike decisions, minute resolutions are not published in the Philippine
Reports. Finally, the proviso of Section 4(3) of Article VIII speaks of a decision. Indeed, as a rule, this
Court lays down doctrines or principles of law which constitute binding precedent in a decision duly
signed by the members of the Court and certified by the Chief Justice. (Emphasis supplied)
Even if we had affirmed the CTA in Mirant, the doctrine laid down in that Decision cannot bind this
Court in cases of a similar nature. There are differences in parties, taxes, taxable periods, and treaties
involved; more importantly, the disposition of that case was made only through a minute resolution.
Tax Treaty vs. RMO No. 1-2000
Our Constitution provides for adherence to the general principles of international law as part of the law
of the land.15The time-honored international principle of pacta sunt servanda demands the performance
in good faith of treaty obligations on the part of the states that enter into the agreement. Every treaty in
force is binding upon the parties, and obligations under the treaty must be performed by them in good
faith.16 More importantly, treaties have the force and effect of law in this jurisdiction.17
Tax treaties are entered into "to reconcile the national fiscal legislations of the contracting parties and,
in turn, help the taxpayer avoid simultaneous taxations in two different jurisdictions."18 CIR v. S.C.
Johnson and Son, Inc. further clarifies that "tax conventions are drafted with a view towards the
elimination of international juridical double taxation, which is defined as the imposition of comparable
taxes in two or more states on the same taxpayer in respect of the same subject matter and for identical
periods. The apparent rationale for doing away with double taxation is to encourage the free flow of
goods and services and the movement of capital, technology and persons between countries,
conditions deemed vital in creating robust and dynamic economies. Foreign investments will only thrive
in a fairly predictable and reasonable international investment climate and the protection against double the RP-Germany Tax Treaty, but on the regular rate as prescribed by the NIRC. Hence, the prior
taxation is crucial in creating such a climate."19 application requirement becomes illogical. Therefore, the fact that petitioner invoked the provisions of
the RP-Germany Tax Treaty when it requested for a confirmation from the ITAD before filing an
administrative claim for a refund should be deemed substantial compliance with RMO No. 1-2000.
Simply put, tax treaties are entered into to minimize, if not eliminate the harshness of international
juridical double taxation, which is why they are also known as double tax treaty or double tax
agreements. Corollary thereto, Section 22921 of the NIRC provides the taxpayer a remedy for tax recovery when
there has been an erroneous payment of tax.1âwphi1 The outright denial of petitioner’s claim for a
refund, on the sole ground of failure to apply for a tax treaty relief prior to the payment of the BPRT,
"A state that has contracted valid international obligations is bound to make in its legislations those
would defeat the purpose of Section 229.
modifications that may be necessary to ensure the fulfillment of the obligations undertaken."20 Thus,
laws and issuances must ensure that the reliefs granted under tax treaties are accorded to the parties
entitled thereto. The BIR must not impose additional requirements that would negate the availment of Petitioner is entitled to a refund
the reliefs provided for under international agreements. More so, when the RP-Germany Tax Treaty
does not provide for any pre-requisite for the availment of the benefits under said agreement.
It is significant to emphasize that petitioner applied – though belatedly – for a tax treaty relief, in
substantial compliance with RMO No. 1-2000. A ruling by the BIR would have confirmed whether
Likewise, it must be stressed that there is nothing in RMO No. 1-2000 which would indicate a petitioner was entitled to the lower rate of 10% BPRT pursuant to the RP-Germany Tax Treaty.
deprivation of entitlement to a tax treaty relief for failure to comply with the 15-day period. We recognize
the clear intention of the BIR in implementing RMO No. 1-2000, but the CTA’s outright denial of a tax
Nevertheless, even without the BIR ruling, the CTA Second Division found as follows:
treaty relief for failure to strictly comply with the prescribed period is not in harmony with the objectives
of the contracting state to ensure that the benefits granted under tax treaties are enjoyed by duly
entitled persons or corporations. Based on the evidence presented, both documentary and testimonial, petitioner was able to establish
the following facts:
Bearing in mind the rationale of tax treaties, the period of application for the availment of tax treaty relief
as required by RMO No. 1-2000 should not operate to divest entitlement to the relief as it would a. That petitioner is a branch office in the Philippines of Deutsche Bank AG, a corporation
constitute a violation of the duty required by good faith in complying with a tax treaty. The denial of the organized and existing under the laws of the Federal Republic of Germany;
availment of tax relief for the failure of a taxpayer to apply within the prescribed period under the
administrative issuance would impair the value of the tax treaty. At most, the application for a tax treaty
b. That on October 21, 2003, it filed its Monthly Remittance Return of Final Income Taxes
relief from the BIR should merely operate to confirm the entitlement of the taxpayer to the relief.
Withheld under BIR Form No. 1601-F and remitted the amount of ₱67,688,553.51 as branch
profits remittance tax with the BIR; and
The obligation to comply with a tax treaty must take precedence over the objective of RMO No. 1-
2000.1âwphi1 Logically, noncompliance with tax treaties has negative implications on international
c. That on October 29, 2003, the Bangko Sentral ng Pilipinas having issued a clearance,
relations, and unduly discourages foreign investors. While the consequences sought to be prevented by
petitioner remitted to Frankfurt Head Office the amount of EUR5,174,847.38 (or
RMO No. 1-2000 involve an administrative procedure, these may be remedied through other system
₱330,175,961.88 at 63.804 Peso/Euro) representing its 2002 profits remittance.22
management processes, e.g., the imposition of a fine or penalty. But we cannot totally deprive those
who are entitled to the benefit of a treaty for failure to strictly comply with an administrative issuance
requiring prior application for tax treaty relief. The amount of PHP 67,688,553.51 paid by petitioner represented the 15% BPRT on its RBU net
income, due for remittance to DB Germany amounting to PHP 451,257,023.29 for 2002 and prior
taxable years.23
Prior Application vs. Claim for Refund

Again, RMO No. 1-2000 was implemented to obviate any erroneous interpretation and/or application of
the treaty provisions. The objective of the BIR is to forestall assessments against corporations who
erroneously availed themselves of the benefits of the tax treaty but are not legally entitled thereto, as
well as to save such investors from the tedious process of claims for a refund due to an inaccurate
application of the tax treaty provisions. However, as earlier discussed, noncompliance with the 15-day
period for prior application should not operate to automatically divest entitlement to the tax treaty relief
especially in claims for refund.
The underlying principle of prior application with the BIR becomes moot in refund cases, such as the
present case, where the very basis of the claim is erroneous or there is excessive payment arising from
non-availment of a tax treaty relief at the first instance. In this case, petitioner should not be faulted for
not complying with RMO No. 1-2000 prior to the transaction. It could not have applied for a tax treaty
relief within the period prescribed, or 15 days prior to the payment of its BPRT, precisely because it
erroneously paid the BPRT not on the basis of the preferential tax rate under
Likewise, both the administrative and the judicial actions were filed within the two-year prescriptive
period pursuant to Section 229 of the NIRC.24
Clearly, there is no reason to deprive petitioner of the benefit of a preferential tax rate of 10% BPRT in
accordance with the RP-Germany Tax Treaty.
Petitioner is liable to pay only the amount of PHP 45,125,702.34 on its RBU net income amounting to
PHP 451,257,023.29 for 2002 and prior taxable years, applying the 10% BPRT. Thus, it is proper to
grant petitioner a refund ofthe difference between the PHP 67,688,553.51 (15% BPRT) and PHP
45,125,702.34 (10% BPRT) or a total of PHP 22,562,851.17.
WHEREFORE, premises considered, the instant Petition is GRANTED. Accordingly, the Court of Tax
Appeals En Banc Decision dated 29 May 2009 and Resolution dated 1 July 2009 are REVERSED and
SET ASIDE. A new one is hereby entered ordering respondent Commissioner of Internal Revenue to
refund or issue a tax credit certificate in favor of petitioner Deutsche Bank AG Manila Branch the
amount of TWENTY TWO MILLION FIVE HUNDRED SIXTY TWO THOUSAND EIGHT HUNDRED
FIFTY ONE PESOS AND SEVENTEEN CENTAVOS (PHP 22,562,851.17), Philippine currency,
representing the erroneously paid BPRT for 2002 and prior taxable years.
SO ORDERED.
G.R. No. L-4712             July 11, 1952
RAMON DIOKNO, plaintiff-appellant,  directory, sense. If a different interpretation is sought, it must rest upon something in the
vs.
REHABILITATION FINANCE CORPORATION, defendant-appellee.
Sixto de la Costa for appellee.
LABRADOR, J.:
Plaintiff is the holder of a backpay certificate of indebtedness issued by the Treasurer of the Philippines
under the provisions of Republic Act No. 304 of a face value of P75,857.14 dated August 30, 1948. On
or about November 10, 1050, when the action was brought, he had an outstanding loan with the
Rehabilitation Finance Corporation, contracted therewith on January 27, 1950, in the total sum of
P50,000, covered by a mortgage on his property situated at 44 Alhambra, Ermita, Manila, with interest
at 4 per cent per annum, of which P47,355.28 was still unpaid. In this action he seeks to compel the
defendant corporation to accept payment of the balance of his indebted with his backpay certificate.
The defendant resists the suit on the ground that plaintiffs' demand is not only not authorized by section
2 of Republic Act No. 304 but contrary to the provisions thereof, and furthermore because plaintiff's loan
was obtain on January 27, 1950, much after the passage of Republic Act No. 304, and because the law
permits only "acceptance or discount of backpay certificates," not the repayment of loans. The court a
quo held that section 2 of Republic Act No. 304 is permissive merely, and that even if where mandatory,
plaintiff's case can not fall thereunder because he is not acquiring property for a home or construing a
residential house, but compelling the acceptance of his backpay certificate to pay a debt he contracted
after the enactment of Republic Act No. 304. It, therefore, dismissed the complaint with costs.
The appeal involves the interpretation of section 2 of Republic Act No. 302, which provides:
. . . And provided, also, That investment funds or banks or other financial institutions owned
or controlled by the Government shall, subject to the availability of loanable funds, and any
provision of the their charters, articles of incorporation's, by-laws, or rules and regulations to
the contrary notwithstanding, accept or discount at not more than two per centum per
annum for ten years such certificate for the following purposes only: (1) the acquisition of real
property for use as the applicant's home, or (2) the building or construction of the residential
house of the payee of said certificate: . . .
It is first contended by the appellant that the above provision is mandatory, not only because it employs
the word "shall", which in its ordinary signification is mandatory, not permissive, but also because the
provision is applicable to institutions of credit under the control of the Government, and because
otherwise the phrases "subject to availability of loanable funds" and "any provisions of this charter, . . .
and regulations to the contrary notwithstanding" would be superfluous.
It is true that its ordinary signification the word "shall" is imperative.
In common or ordinary parlance, and in its ordinary signification, the term "shall" is a word of
command, and one which has always or which must be given compulsory meaning; as
denoting obligation. It has a preemptory meaning, and it is generally imperative or mandatory.
It has the invariable significance of operating to impose a duty which may be enforced,
particularly if public policy is in favor of this meaning or when addressed to public officials, or
where a public interest is involved, or where the public or persons have rights which ought to
be exercised or enforced, unless a contrary intent appears. People vs. O'Rourke, 13 P. 2d.
989, 992, 124 Cal. App. 752. (39 Words and Phrases, Permanent Ed., p. 90.)
The presumption is that the word "shall" in a statute is used is an imperative, and not in a
character of the legislation or in the context which will justify a different meaning. Haythorn
vs. Van Keuren & Son, 74 A. 502, 504, 79 N. J. L. 101; Board of Finance of School City of
Aurora vs. People's Nat. Bank of Lawrenceburg, 89 N. E. 904, 905 44 Ind. App. 578. (39
Words and Phrases, Permanent Ed., p. 93.)
However, the rule is not absolute; it may be construed as "many", when so required by the context or by
the intention of the statute.
In the ordinary signification, "shall" is imperative, and not permissive, though it may have the
latter meaning when required by the context. Town of Milton vs. Cook, 138 N.E. 589, 590,
244 Mass. 93. (39 Words and Phrases, Permanent Ed., p. 89.)
"Must" or "shall" in a statute is not always imperative, but may be consistent with an exercise
of discretion. In re O'Hara, 82 N.Y.S. 293, 296, 40 Misc. 355, citing In re Thurber's Estate,
162 N.Y. 244, 252, 56 N.E. 638, 639. (Ibid. p. 92.)
The word "shall" is generally regarded as imperative, but in some context it is given a
permissive meaning, the intended meaning being determined by what is intended by the
statute. National Transit Corporation Co. vs. Boardman, 197 A. 239, 241, 328, Pa. 450.
The word "shall" is to be construed as merely permissive, where no public benefit or private
right requires it to be given an imperative meaning Sheldon vs. Sheldon, 134 A. 904, 905,
100 N.J. Ex. 24.
Presumption is that word "shall" in ordinance, is mandatory; but, where it is necessary to give
effect to legislative intent, the word will be construed as "may." City of Colorado
Springs vs. Street, 254 p. 440, 441, 81 Colo. 181.
The word "shall" does not necessarily indicate a mandatory behest. Grimsrud vs.
Johnson, 202 N. W. 72, 73, 162 Minn. 98.
Words like "may," "must," "shall" etc., are constantly used in statutes without intending that
they shall be taken literally, and in their construction the object evidently designed to be
reached limits and controls the literal import of the terms and phrases employed.
Fields vs. United States, 27 App. D. C. 433, 440. (39 Words and Phrases, Permanent Ed.,
89, 92).
In this jurisdiction the tendency has been to interpret the word "shall" as the context or a reasonable
construction of the statute in which it is used demands or requires. Thus the provision of section 11 of
Rule 4 of the Rules requiring a municipal judge or a justice of the peace to render judgment of the
conclusion of the trial has been held in the directory. (Alejandro vs. Judge of First Instance1 40 Off.
Gaz., 9th Supp., 261). In like manner section 178 of the Election Law, in so far a it requires that appeals
shall be decided in three months, has been to the directory for the Court of Appeals. (Querubin vs. The
Court of Appeals,2 46 Off. Gaz., 155).
In the provision subject controversy, it is to be noted that the verb-phrase "shall accept or discount" has
two modifiers, namely, "subject to availability of loanable funds" and "at not more that two per centum
per annum for ten years." As to the second modifier, the interest to be charged, there seems to be no
question that the verb phrase is mandatory, because not only does the law use "at not more" but the
legislative purpose and intent, to conserve the value of the backpay certificate for the benefit of the
holders, for whose benefit the same have been issued, can be carried out by fixing a maximum limit for
discounts. But as to when the discounting or acceptance shall be made, the context and the sense
demand a contrary interpretation. The phrase "subject" means "being under the contingency of"
(Webster's Int. Dict.) a condition. If the acceptance or discount of the certificates to be "subject" to the
condition of the availability of a loanable funds, it is evident that the Legislature intended that the
acceptance shall be allowed on the condition that there are "available loanable funds." In other words,
acceptance or discount is to be permitted only if there are loanable funds.
Let us now consider the meaning of the condition imposed for accepting or discounting certificates, the
"availability of loanable funds." On this issue the appellant contends that the mere fact that P50,000
was loaned to him and that the Rehabilitation Finance Corporation has been granting loans up to the
time plaintiff offered to pay the loan with his certificate — these prove that there are "available loanable
funds". As the court a quo did not pass on such availability, he also contends that this is a question of
fact to be determined by the courts. The defendant denies the existence of "available loanable funds."
The gist of plaintiffs' contention is that any and all funds of the Rehabilitation Finance Corporation are
subject to the provision of the discount or acceptance of the certificates; that of defendant-appellee is
that only funds made available for the purpose of discounting backpay certificates may be used for such
purpose and that at the time the action was filed there was no such funds.
The Rehabilitation Finance Corporation was created by Republic Act No. 85, which was approved on
October 29, 1946. The corporation was created "to provide credit facilities for the rehabilitation and
development of agriculture, commerce, and industry, the reconstruction of property damaged by war,
and the broadening and diversification of the national economy" (section 1), and to achieve the above
aims it was granted the following powers:
SEC. 2. Corporate powers. — The Rehabilitation Finance Corporation shall have the power:
(a) To grant loans for home building and for the rehabilitation, establishment or development
of any agricultural, commercial or industrial enterprise, including public utilities;
(b) To grant loans to provincial, city and municipal governments for the rehabilitation,
construction or reconstruction of public markets, waterworks, toll bridges, slaughterhouses,
and other self-liquidating or income-producing services;
(c) To grant loans to agencies and corporations owned or controlled by the Government of
the Republic of the Philippines for the production and distribution of electrical power, for the
purchase and subdivision of rural and urban estates, for housing projects, for irrigation and
waterworks systems, and for other essential industrial and agricultural enterprises;
(d) To grant loans to cooperative associations to facilitate production, the marketing of crops,
and the acquisition of essential commodities;
(e) To underwrite, purchase, own, sell, mortgage or otherwise dispose of stocks, bonds,
debentures, securities and other evidences of indebtedness issued for or in connection with
any project or enterprise referred to in the proceeding paragraphs;
(f) To issue bonds, debentures, securities, collaterals, and other obligations with the approval
of the President, but in no case to exceed at any one time an aggregate amount equivalent to
one hundred per centum of its subscribed capital and surplus. . . .
If the Rehabilitation Finance Corporation is to carry out the aims and purposes for which it was created,
It must evolve a definite plan of the industries or activities which it should be rehabilitate, establish, or
develop, and apportion its available funds and resources among these, consistent with the policies
outlined in its charter.
As of May 31, 1948, immediately prior to the passage of the Backpay Law, it had granted the following
classes of loans:
Agricultural loans ........................................................ P23,610,350.74
Industrial loans ............................................................ 22,717,565.87
Real Estate Loans ........................................................ 34,601,258.29
Loans for purchase, Subdivision and Resale of Landed
Estates ......................................................... 7,271,258.78
Loans to Provinces, Cities, and Municipalities for Self-
liquidating Projects ..............................................  1,889,763.00
            Total Loans .................................................. P90,090,77.68
(Exhibit 2)
As of February 2, 1951, the corporation had accepted in payment of loans granted before June 18,
1948, the total amount of P8,225,229.96, as required by section 2 of the Backpay Law. (See Exhibit 11,
p.4.).
The third anniversary report of the Rehabilitation Finance Corporation dated January 2, 1950 (Exhibit
1,), shows that the funds originally available to the corporation came from the following sources:
Funds made available:
Initial cash capital ................................................................ P50,000,000,00
Cash Transferred from Financial Rehabilitation Funds .... 2,423,079.94
Cash received from Surplus Property Commission ....... 26,350,000.00
Cash received from Phil. Shipping Adm. ........................... 3,700,000.00
Cash payment of capital .................................................. 82,473,079.74
Proceeds of bond issues .................................................. 58,909,148.18
Advances from the Central Bank ....................................... 10,000,000.00
There was also collectible from the loans the total amount of P28,659,442.12, so that the total cash
available to the corporation from January 2, 1947, to November 30, 1949, was P180,041,670.04. But
the Total amount of loans already approved as of the last date was P203,667,403.78 and the total of
approved loans pending release was P25,342,020.78, and the only cash balance available in imposed by law and is properly the designated as a special civil action of mandamus because the
November, 1949, to meet these approved loans was P1,716,286.71. appellant seeks to compel the appellee to accept his backpay certificate in payment of his outstanding
obligation. We are not impressed by the defense technical in a sense, that the Rehabilitation Finance
Corporation is not expressly authorized to accept certificates in payment of outstanding loans. There is
It may readily be seen from the above data that were we to follow appellant's theory and contention that
no provision expressly authorizing this procedure or system; but neither is there one prohibiting it. The
the law is mandatory, the loan he had applied for, as well as that of any holder of a backpay certificate,
legislature has once ordered it; the Rehabilitation Finance Corporation has once authorized it. We
would have to be paid out of this available cash, pursuant to the alleged mandate of section 2 of the
believe the legislature could not have intended to discriminate against those who have already built
Backpay Law. The compulsory acceptance and discount of certificates will bring about, as a direct and
their houses, who have contracted obligations in so doing. We prefer to predicate court ruling that this
necessary consequence, the suspension of all, if not of most, of the activities of the Rehabilitation
special action does not lie on the ground that the duty imposed by the Backpay Law upon the appellee
Finance Corporation; and no agricultural or industrial loans, or loans to financial institutions and local
as to the acceptance or discount of backpay certificates is neither clear nor ministerial, but discretionary
governments for their markets, waterworks, etc., would be granted until all the backpay certificates
merely and that mandamus does not issue to control the exercise of discretion of public officer. (Viuda e
(amounting to some hundred millions of pesos) shall heave been accepted or discounted. And as the
hijos de Crispulo Zamora vs. Wright and Segado, 53 Phil., 613, 621; Blanco vs. Board of Medical
defendant-appellant forcefully argues, even funds obtained by the Rehabilitation Finance Corporation
Examiners, 46 Phil., 190 192, citing Lamb vs. Phipps, 22 Phil., 456; Gonzales vs. Board of Pharmacy,
by the issue of the bonds, at rates of interest of more than 2 per cent, the rate fixed for the discount of
20 Phil., 367, etc.) It is, however, argued on behalf of the appellant that inasmuch as the Board of
the backpay certificates, will have to be loaned to holders of backpay certificates at a loss, to the
Directors of the Rehabilitation Finance Corporation has seen fit to approve a resolution accepting
prejudice of the corporation. There would be loans for holders of backpay certificates, but none for
backpay certificates amounting to P151,000 (Exhibit H), law and equity demand that the same privilege
rehabilitation or reconstruction, or development of industries, or of the national economy; there would
should be accorded him. The trial court held that the above resolution was illegal and that its
be funds for employees' loans, but none for the improvements of public services, etc., as all
unauthorized enactment (which he called a "wrong") does not justify its repetition for the benefit of
Rehabilitation Finance Corporation funds will be necessary to meet the demands of holders of backpay
appellant. As we have indicated above, we believe that its approval (not any supposed discrimination
certificates. And if it be remembered that the provision is intended for all financial institutions controlled
on behalf of some special holders) can be defended under the law, but that the passage of a similar
by the Government, the consequences would be felt by all industries and activities, and the whole
resolution can not be enjoined by an action of mandamus.
scheme of national financial organization and development disrupted. It seems evident that the
legislature never could have intended such absurd consequences, even with all the sympathy that it is
showing for holders of backpay certificates. We must admit, however, that appellant's case is not entirely without any merit or justification; similar
situations have already been favorably acted upon by the Congress, when it ordered that certificates be
accepted in payment of outstanding obligations, and by the Rehabilitation Finance Corporation in its
But while we agree with the appellee that it could not have been the intention of Congress to disrupt the
above-mentioned resolution. But we feel we are powerless to enforce his claim, as the acceptance and
whole scheme of rehabilitation, reconstruction, and development envisioned in the Rehabilitation Act,
discount to backpay certificates has been placed within the sound discretion of the rehabilitation
by its passage of section 2 of the Backpay Law, neither we are prepared to follow appellee's insinuation
Finance Corporation, and subject to the availability of loanable funds, and said discretion may not be
that the section is impracticable or impossible of execution by the Rehabilitation Finance Corporation in
reviewed or controlled by us. It is clear that this remedy must be available in other quarters, not in the
the situation in which its funds and resources were at the time of the trial. In our opinion, what the
courts of justice.
Legislature intended by the provision in dispute is that the Rehabilitation Finance Corporation, through
its Board of Directors, should from time to time set aside some reasonable amount for the discount of
backpay certificates, when this can be done without unduly taxing its resources, or unduly prejudicing For all the foregoing considerations, we are constrained to dismiss the appeal, with coasts against the
the plan of rehabilitation and development that it has mapped out, or that which the corresponding app
authority has laid down as a policy. This legislative intention can be inferred from the fact that Congress
itself expressly ordered that all financial institutions accept or discount backpay certificates in payment
G.R. No. 102858 July 28, 1997
of those loans, evidently laying down an example to be followed by financial institutions under its
control. The loans granted under section 2 of the law by the Rehabilitation Finance Corporation
amounted to P8,225,229.96. It is shown or even presented that the payment of this considerable THE DIRECTOR OF LANDS, petitioner, 
amount has impaired or disrupted the activities of the Rehabilitation Finance Corporation. It is not vs.
claimed, either, that at the time of the filing of appellant's action the Rehabilitation Finance Corporation COURT OF APPEALS and TEODORO ABISTADO, substituted by MARGARITA, MARISSA,
was in no position to set aside a modest sum, in a manner similar to the creation of a sinking fund, for MARIBEL, ARNOLD and MARY ANN, all surnamed ABISTO, respondents.
the discount of backpay certificates to help the Government comply with its financial commitments. We
are convinced that the Rehabilitation Finance Corporation may, without impairment of its activities, set
aside from time to time, say, half a million pesos or a considerable part thereof, for the payment of
backpay certificates. But these circumstances notwithstanding, we are of the opinion that the law in
question (section 2 of the Backpay Law), in so far as the discount and acceptance of backpay PANGANIBAN, J.:
certificates are concerned, should be interpreted to be directory merely, not mandatory, as claimed by
plaintiff-appellant, the same to be construed as a directive for the Rehabilitation Finance Corporation to
invest a reasonable portion of its funds for the discount of backpay certificates, from time to time and in Is newspaper publication of the notice of initial hearing in an original land registration case mandatory
its sound discretion, as circumstances and its resources may warrant. or directory?

Having come to the conclusion that section 2 of the Backpay Law is directly merely, we now address Statement of the Case
ourselves to the propriety of the action, which the plaintiff and appellant labels specific performance. As
the action is not based on any contractual relation between the plaintiff and appellant and the defendant The Court of Appeals ruled that it was merely procedural and that the failure to cause such publication
and appellee, it may be one for specific performance; it is in effect predicated on a supposed legal duty did not deprive the trial court of its authority to grant the application. But the Solicitor General disagreed
and thus filed this petition to set aside the Decision1 promulgated on July 3, 1991 and the subsequent
Resolution2 promulgated on November 19, 1991 by Respondent Court of Appeals3 in CA-G.R. CV No.
23719. The dispositive portion of the challenged Decision reads:4
WHEREFORE, premises considered, the judgment of dismissal appealed from is hereby set
aside, and a new one entered confirming the registration and title of applicant, Teodoro
Abistado, Filipino, a resident of Barangay 7, Poblacion Mamburao, Occidental Mindoro, now
deceased and substituted by Margarita, Marissa, Maribel, Arnold and Mary Ann, all surnamed
Abistado, represented by their aunt, Miss Josefa Abistado, Filipinos, residents of Poblacion
Mamburao, Occidental Mindoro, to the parcel of land covered under MSI (IV-A-8) 315-D
located in Poblacion Mamburao, Occidental Mindoro.
The oppositions filed by the Republic of the Philippines and private oppositor are hereby
dismissed for want of evidence.
Upon the finality of this decision and payment of the corresponding taxes due on this land, let
an order for the issuance of a decree be issued.
The Facts
On December 8, 1986, Private Respondent Teodoro Abistado filed a petition for original registration of
his title over 648 square meters of land under Presidential Decree (PD) No. 1529.5 The application was
docketed as Land Registration Case (LRC) No. 86 and assigned to Branch 44 of the Regional Trial
Court of Mamburao, Occidental Mindoro.6 However, during the pendency of his petition, applicant died.
Hence, his heirs — Margarita, Marissa, Maribel, Arnold and Mary Ann, all surnamed Abistado —
represented by their aunt Josefa Abistado, who was appointed their guardian ad litem, were substituted
as applicants.
The land registration court in its decision dated June 13, 1989 dismissed the petition "for want of
jurisdiction." However, it found that the applicants through their predecessors-in-interest had been in
open, continuous, exclusive and peaceful possession of the subject land since 1938.
In dismissing the petition, the trial court reasoned:7
. . . However, the Court noted that applicants failed to comply with the provisions of Section
23 (1) of PD 1529, requiring the Applicants to publish the notice of Initial Hearing (Exh. "E") in
a newspaper of general circulation in the Philippines. Exhibit "E" was only published in the
Official Gazette (Exhibits "F" and "G"). Consequently, the Court is of the well considered view
that it has not legally acquired jurisdiction over the instant application for want of compliance
with the mandatory provision requiring publication of the notice of initial hearing in a
newspaper of general circulation.
The trial court also cited Ministry of Justice Opinion No. 48, Series of 1982, which in its pertinent portion
provides:8
It bears emphasis that the publication requirement under Section 23 [of PD 1529] has a two-
fold purpose; the first, which is mentioned in the provision of the aforequoted provision refers
to publication in the Official Gazette, and is jurisdictional; while the second, which is
mentioned in the opening clause of the same paragraph, refers to publication not only in the
Official Gazette but also in a newspaper of general circulation, and is procedural. Neither one
nor the other is dispensable. As to the first, publication in the Official Gazette is indispensably
necessary because without it, the court would be powerless to assume jurisdiction over a
particular land registration case. As to the second, publication of the notice of initial hearing
also in a newspaper of general circulation is indispensably necessary as a requirement of
procedural due process; otherwise, any decision that the court may promulgate in the case
would be legally infirm.
Unsatisfied, private respondents appealed to Respondent Court of Appeals which, as earlier explained,
set aside the decision of the trial court and ordered the registration of the title in the name of Teodoro
Abistado.
The subsequent motion for reconsideration was denied in the challenged CA Resolution dared
November 19, 1991.
The Director of Lands represented by the Solicitor General thus elevated this recourse to us. This Court
notes that the petitioner's counsel anchored his petition on Rule 65. This is an error. His remedy should
be based on Rule 45 because he is appealing a final disposition of the Court of Appeals. Hence, we
shall treat his petition as one for review under Rule 45, and not for certiorari under Rule 65.9
The Issue
Petitioner alleges that Respondent Court of Appeals committed "grave abuse of discretion"10 in holding
—
. . . that publication of the petition for registration of title in LRC Case No. 86 need not be
published in a newspaper of general circulation, and in not dismissing LRC Case No. 86 for
want of such publication.
Petitioner points out that under Section 23 of PD 1529, the notice of initial hearing shall be
"published both in the Official Gazette and in a newspaper of general circulation." According to
petitioner, publication in the Official Gazette is "necessary to confer jurisdiction upon the trial court,
and . . . in . . . a newspaper of general circulation to comply with the notice requirement of due
process."11
Private respondents, on the other hand, contend that failure to comply with the requirement of
publication in a newspaper of general circulation is a mere "procedural defect." They add that
publication in the Official Gazette is sufficient to confer jurisdiction.12
In reversing the decision of the trial court, Respondent Court of Appeals ruled:13
. . . although the requirement of publication in the Official Gazette and in a newspaper of
general circulation is couched in mandatory terms, it cannot be gainsaid that the law also
mandates with equal force that publication in the Official Gazette shall be sufficient to confer
jurisdiction upon the court.
Further, Respondent Court found that the oppositors were afforded the opportunity "to explain matters
fully and present their side." Thus, it justified its disposition in this wise:14
. . . We do not see how the lack of compliance with the required procedure prejudiced them in
any way. Moreover, the other requirements of: publication in the Official Gazette, personal
notice by mailing, and posting at the site and other conspicuous places, were complied with
 and these are sufficient to notify any party who is minded to make any objection of the
application for registration.
The Court's Ruling
We find for petitioner.
Newspaper Publication Mandatory
The pertinent part of Section 23 of Presidential Decree No. 1529 requiring publication of the notice of
initial hearing reads as follows:
Sec. 23. Notice of initial hearing, publication, etc. — The court shall, within five days from
filing of the application, issue an order setting the date and hour of the initial hearing which
shall not be earlier than forty-five days nor later than ninety days from the date of the order.
The public shall be given notice of initial hearing of the application for land registration by
means of (1) publication; (2) mailing; and (3) posting.
1. By publication. —
Upon receipt of the order of the court setting the time for initial hearing, the Commissioner of
Land Registration shall cause a notice of initial hearing to be published once in the Official
Gazette and once in a newspaper of general circulation in the Philippines: Provided,
however, that the publication in the Official Gazette shall be sufficient to confer jurisdiction
upon the court. Said notice shall be addressed to all persons appearing to have an interest in
the land involved including the adjoining owners so far as known, and "to all whom it may
concern." Said notice shall also require all persons concerned to appear in court at a certain
date and time to show cause why the prayer of said application shall not be granted.
x x x           x x x          x x x
Admittedly, the above provision provides in clear and categorical terms that publication in the Official
Gazette suffices to confer jurisdiction upon the land registration court. However, the question boils
down to whether, absent any publication in a newspaper of general circulation, the land registration
court can validly confirm and register the title of private respondents.
We answer this query in the negative. This answer is impelled by the demands of statutory construction
and the due process rationale behind the publication requirement.
The law used the term "shall" in prescribing the work to be done by the Commissioner of Land
Registration upon the latter's receipt of the court order setting the time for initial hearing. The said word
denotes an imperative and thus indicates the mandatory character of a statute.15 While concededly
such literal mandate is not an absolute rule in statutory construction, as its import ultimately depends
upon its context in the entire provision, we hold that in the present case the term must be understood in
its normal mandatory meaning. In Republic vs. Marasigan,16 the Court through Mr. Justice Hilario G.
Davide, Jr. held that Section 23 of PD 1529 requires notice of the initial hearing by means of (1)
publication, (2) mailing and (3) posting, all of which must be complied with. "If the intention of the law
were otherwise, said section would not have stressed in detail the requirements of mailing of notices to
all persons named in the petition who, per Section 15 of the Decree, include owners of adjoining
properties, and occupants of the land." Indeed, if mailing of notices is essential, then by parity of
reasoning, publication in a newspaper of general circulation is likewise imperative since the law
included such requirement in its detailed provision.
It should be noted further that land registration is a proceeding in rem.  17 Being in rem, such proceeding
requires constructive seizure of the land as against all persons, including the state, who have rights to
or interests in the property. An in rem proceeding is validated essentially through publication. This being
so, the process must strictly be complied with. Otherwise, persons who may be interested or whose
rights may be adversely affected would be barred from contesting an application which they had no
knowledge of. As has been ruled, a party as an owner seeking the inscription of realty in the land
registration court must prove by satisfactory and conclusive evidence not only his ownership thereof but
the identity of the same, for he is in the same situation as one who institutes an action for recovery of
realty.18 He must prove his title against the whole world. This task, which rests upon the applicant, can
best be achieved when all persons concerned — nay, "the whole world" — who have rights to or
interests in the subject property are notified and effectively invited to come to court and show cause
why the application should not be granted. The elementary norms of due process require that before
the claimed property is taken from concerned parties and registered in the name of the applicant, said
parties must be given notice and opportunity to oppose.
It may be asked why publication in a newspaper of general circulation should be deemed mandatory
when the law already requires notice by publication in the Official Gazette as well as by mailing and
posting, all of which have already been complied with in the case at hand. The reason is due process
and the reality that the Official Gazette is not as widely read and circulated as newspapers and is
oftentimes delayed in its circulation, such that the notices published therein may not reach the
interested parties on time, if at all. Additionally, such parties may not be owners of neighboring
properties, and may in fact not own any other real estate. In sum, the all-encompassing in rem nature of
land registration cases, the consequences of default orders issued against the whole world and the
objective of disseminating the notice in as wide a manner as possible demand a mandatory
construction of the requirements for publication, mailing and posting.
Admittedly, there was failure to comply with the explicit publication requirement of the law. Private
respondents did not proffer any excuse; even if they had, it would not have mattered because the
statute itself allows no excuses. Ineludibly, this Court has no authority to dispense with such mandatory
requirement. The law is unambiguous and its rationale clear. Time and again, this Court has declared
that where the law speaks in clear and categorical language, there is no room for interpretation,
vacillation or equivocation; there is room only for application.19 There is no alternative. Thus, the
application for land registration filed by private respondents must be dismissed without prejudice to
reapplication in the future, after all the legal requisites shall have been duly complied with.
WHEREFORE, the petition is GRANTED and the assailed Decision and Resolution are REVERSED
and SET ASIDE. The application of private respondent for land registration is DISMISSED without
prejudice. No costs.
SO ORDERED.
G.R. No. 112371 October 7, 1998
AIDA DOMINGO, petitioner, 
vs.
COMMISSION ON AUDIT, respondent.
PURISIMA, J.:
This is an original petition for certiorari under Rule 65 of the Rules of Court seeking to nullify Decision
No. 93-3081 of respondent Commission on Audit.
The antecedent facts that matter are, as follows:
On March 23, 1987, petitioner Aida Domingo was appointed by the President as Regional Director,
Region V of the Department of Social Welfare and Development, and she assumed office as such.
Several government vehicles were thereafter endorsed to her office for the use of the personnel of the
entire Region V of DSWD. Including a Toyota Land Cruiser Jeep, a Kaiser Cargo Truck, a Trailer Jeep,
a Willy's Army Rebuilt Jeep, and a Nissan Double Cab.
On November 14, 1989, Regional Auditor Manuel Cañares sent a communication to the petitioner
informing her that post-audit reports on the DSWD Regional Office disbursement accounts showed that
officials provided with government vehicles were still collecting transportation allowances. The said
Auditor then requested the petitioner, in her capacity as Regional Director, to instruct all persons
concerned to cease from collecting the transportation allowances in question.
However, despite the assignment to her of a vehicle for her official use, the petitioner asserted
entitlement to a commutable transportation allowance and collected a total amount of P48,600.00 as
transportation allowance for the period from July 1, 1988 to December 31, 1990.
Petitioner asked for reconsideration of the auditor's directive; contending that she should only be
disallowed to claim transportation allowance on the days she actually used a government vehicle.
According to petitioner, she already refunded P1,600.00 for the thirty two (32) days she actually utilized
a government vehicle.
But on May 18, 1990, the auditor denied petitioner's motion for reconsideration, and issued to petitioner
CSB No. 92-003-101, dated July 8, 1992, with the following notation:
A special audit of your TA account was disallowed inaccordance with COA
Decision No. 1745 dated February 26, 1991 by the Commission proper less
payment made under OR No. 7714009 dated December 6, 1990 — P1,600.00.
On August 8, 1992, the petitioner appealed the auditor's action to the Commission on Audit, which
handed down its decision of August 25, 1993, finding petitioner's appeal devoid of merit.
Respondent Commission based its aforesaid decision on an earlier COA decision No. 1745, dated
February 26, 1991, wherein it was held that a government official assigned a vehicle for his/her official
use, is not entitled to collect transportation allowance whether or not he/she actually used such vehicle.
Undaunted, petitioner found her way to this court via the present petition, posing the issue of whether or
not a commutable transporlation allowance may still be claimed by a government official provided with a
government vehicle, for the days the official did not actually use the vehicle.
The provision of law in point is found in Section 28 of Republic Act 6688, otherwise known as the
General Appropriations Act of 1989, to wit:
Sec. 28. Representation and Transportation Allowances — . . . "The transportation
allowance herein authorized shall not be granted to officials who are assigned a
government vehicle or use government motor transportation, except as may be
approved by the President of the Philippines. Unless otherwise provided by law, no
amount appropriated in this Act shall be used to pay for representation and/or
transportation allowances, whether commutable or reimbursable, which exceed the
rates authorized under this Section. Previous administrative authorization not
consistent with the rates and conditions herein specified shall no longer be valid
and payment shall not be allowed.
The General Appropriations Acts of 1998, 1990 and 1991 provide:
The transportation allowance herein authorized shall not be granted to officials who
are assigned a government vehicle or use a government motor transportation,
except as may be approved by the President of the Philippines. (GAA 1988).
The transportation allowance herein authorized shall not be granted to officials who
are assigned a government vehicle or use government transportation, except as
may be approved by the President of the Philippines. (GAA 1990).
The transportation allowance herein authorized shall not be granted to officials who
are assigned a government vehicle or use government motor transportation. (GAA
1991).
The aforesaid provision in the General Appropriations Law is based on Presidential Decree 733 and
Commission on Audit Circular No. 75-6 dated November 7, 1975, regulating the use of government
vehicles, aircrafts and watercrafts. Portion of said circular, reads:
VI Prohibition Against Use of Government Vehicles by Officials provided with
transportation allowance — "No official who has been furnished motor corporation
allowance by any government corporations or other office shall be allowed to use
motor vehicle transportation operated and maintained from funds appropriated in
the abovecited Decree. (Sec. 14, P.D. 733).
In the case of Bustamante vs. Commissioner on Audit, 216 SCRA 134, decided by this Court on
November 27, 1992, COA also disallowed the claim for transportation allowance of the legal counsel of
National Power Corporation because he was already issued a government vehicle. Involving the
circular aforementioned and almost the same facts as in this case, it was therein held that COA Circular
No. 75-6 is categorical in prohibiting the use of government vehicles by officials receiving transportation
allowance and in stressing that the use of government motor vehicle and claim for transportation
allowance are mutually exclusive and incompatible.
The issue need no longer be belabored for no less than this Court ruled in the aforesaid case that a
government official, to whom a motor vehicle has been assigned, cannot, at the sametime claim
transportation allowance.
Furthermore, it is an elementary rule that when the law speaks in clear and categorical language, there
is no need, in the absence of legislative intent to the contrary, for any interpretation. Words and phrases
used in a statute should be given their plain, ordinary, and common usage meaning.1
In the case under consideration, it must be noted that the provisions of law referred to in the General
Appropriations Acts of 1988, 1989, 1990 and 1991, utilized the word "assigned" and not "used".
Webster's Dictionary defines the word "assign" as "to transfer (property) to another in trust". Had
legislative intent been that government officials issued an official vehicle could still collect transportation
allowance if they do not actually use subject vehicle, the word "use" instead of "assign" should have
been employed.
As correctly pointed out by the Solicitor General, there are two instances when transportation allowance
cannot be granted to a government official, as when a government official is assigned a vehicle, and
when a government official uses government transportation facilities. It is undeniable that several
government vehicles were issued to the Regional Office of DSWD in Region V. That the vehicles
thereat were issued not to petitioner herself, as Regional Director, but to the Regional Office itself, is of
no moment. What is important and decisive is that such vehicles were intended primarily for the official
use of subject office and its officials and employees. As maintained by the Solicitor General, whether or
not the herein petitioner used the vehicle assigned to her office, is not an issue, as it is undeniable that
she could have used the said vehicle whenever she wanted to since it was assigned to her office.
In the case of Ursua vs. Court of Appeals, 256 SCRA 147, it was held that there is a valid presumption
that undesirable consequences were never intended by a legislative measure and a construction of
which the statute is fairly susceptible is favored which will avoid objectionable, mischievous,
indefensible, wrongful, evil, and injurious consequences. It is abundantly clear that the evil sought to be
remedied by the legislative prohibition is the collection of additional transportation allowance despite the
availability of free transportation supplied by a government motor vehicle assigned to the office.
WHEREFORE, the appealed decision of the Commission on Audit is hereby AFFIRMED. No
pronouncement as to costs.
SO ORDERED.
G.R. No. 149417             June 4, 2004
GLORIA SANTOS DUEÑAS, petitioner, 
vs.
SANTOS SUBDIVISION HOMEOWNERS ASSOCIATION, respondent.
DECISION
QUISUMBING, J.:
For review on certiorari is the Decision1 dated December 29, 2000, of the Court of Appeals in CA-G.R.
SP No. 51601, setting aside the Decision2 of the Housing and Land Use Regulatory Board (HLURB) in
HLURB Case No. REM-A-980227-0032 which earlier affirmed the Decision3 of the HLURB-NCR
Regional Field Office in HLURB Case No. REM-070297-9821. Said Regional Field Office dismissed the
petition of herein respondent Santos Subdivision Homeowners Association (SSHA) seeking to require
herein petitioner, Gloria Santos Dueñas, to provide for an open space in the subdivision for recreational
and community activities. In its assailed decision, the CA remanded the case to the HLURB for
determination of a definitive land area for open space.4 Petitioner assails also the Court of Appeals’
Resolution5 dated July 31, 2001, denying her motion for reconsideration.
The facts of this case are as follows:
Petitioner Gloria Santos Dueñas is the daughter of the late Cecilio J. Santos who, during his
lifetime, owned a parcel of land with a total area of 2.2 hectares located at General T. De
Leon, Valenzuela City, Metro Manila. In 1966, Cecilio had the realty subdivided into smaller
lots, the whole forming the Cecilio J. Santos Subdivision (for brevity, Santos Subdivision).
The then Land Registration Commission (LRC) approved the project and the National
Housing Authority (NHA) issued the required Certificate of Registration and License to Sell.
At the time of Cecilio’s death in 1988, there were already several residents and homeowners
in Santos Subdivision.
Sometime in 1997, the members of the SSHA submitted to the petitioner a resolution asking her to
provide within the subdivision an open space for recreational and other community activities, in
accordance with the provisions of P.D. No. 957,6 as amended by P.D. No. 1216.7 Petitioner, however,
rejected the request, thus, prompting the members of SSHA to seek redress from the NHA.
On April 25, 1997, the NHA General Manager forwarded the SSHA resolution to Romulo Q. Fabul,
Commissioner and Chief Executive Officer of the HLURB in Quezon City.8
In a letter dated May 29, 1997, the Regional Director of the Expanded NCR Field Office, HLURB,
opined that the open space requirement of P.D. No. 957, as amended by P.D. No. 1216, was not
applicable to Santos Subdivision.9
SSHA then filed a petition/motion for reconsideration,10 docketed as HLURB Case No. REM-070297-
9821, which averred among others that: (1) P.D. No. 957 should apply retroactively to Santos
Subdivision, notwithstanding that the subdivision plans were approved in 1966 and (2) Gloria Santos
Dueñas should be bound by the verbal promise made by her late father during his lifetime that an open
space would be provided for in Phase III of Santos Subdivision, the lots of which were at that time
already for sale.
Petitioner denied any knowledge of the allegations of SSHA. She stressed that she was not a party to
the alleged transactions, and had neither participation nor involvement in the development of Santos
Subdivision and the sale of the subdivision’s lots. As affirmative defenses, she raised the following: (a)
It was her late father, Cecilio J. Santos, who owned and developed the subdivision, and she was
neither its owner nor developer; (b) that this suit was filed by an unauthorized entity against a non-
existent person, as SSHA and Santos Subdivision are not juridical entities, authorized by law to institute
or defend against actions; (c) that P.D. No. 957 cannot be given retroactive effect to make it applicable
to Santos Subdivision as the law does not expressly provide for its retroactive applicability; and (d) that
the present petition is barred by laches.
On January 14, 1998, HLURB-NCR disposed of HLURB Case No. REM-070297-9821 in this wise:
In view of the foregoing, the complaint is hereby dismissed.
It is So Ordered.11
In dismissing the case, the HLURB-NCR office ruled that while SSHA failed to present evidence
showing that it is an association duly organized under Philippine law with capacity to sue, nonetheless,
the suit could still prosper if viewed as a suit filed by all its members who signed and verified the
petition. However, the petition failed to show any cause of action against herein petitioner as (1) there is
no evidence showing Santos-Dueñas as the owner/developer or successor-in-interest of Cecilio
Santos, who was the owner/developer and sole proprietor of Santos Subdivision; (2) the LRC-approved
subdivision plan was bereft of any proviso indicating or identifying an open space, as required by P.D.
No. 957, as amended, hence there was no legal basis to compel either Cecilio or his daughter Santos-
Dueñas, as his purported successor, to provide said space; and (3) the alleged verbal promise of the
late Cecilio Santos was inadmissible as evidence under the dead man’s statute.12
SSHA then appealed the NCR office’s ruling to the HLURB Board of Commissioners. The latter body,
however, affirmed the action taken by the HLURB-NCR office, concluding thus:
WHEREFORE, premises considered, the Petition for Review is hereby DISMISSED and the
decision of the Office below is hereby AFFIRMED IN TOTO.
13
SO ORDERED.
The HLURB Board decreed that there was no basis to compel the petitioner to provide an open space
within Santos Subdivision, inasmuch as the subdivision plans approved on July 8, 1966, did not provide
for said space and there was no law requiring the same at that time. It further ruled that P.D. No. 957
could not be given retroactive effect in the absence of an express provision in the law. Finally, it found
the action time-barred since it was filed nine (9) years after the death of Cecilio. The Board noted that
SSHA sought to enforce an alleged oral promise of Cecilio, which should have been done within the
six-year prescriptive period provided for under Article 114514 of the Civil Code.
Dissatisfied, respondent sought relief from the Court of Appeals via a petition for review under Rule 43
of the 1997 Rules of Civil Procedure. The petition, docketed as CA-G.R. SP No. 51601, was decided by
the appellate court in this manner:
WHEREFORE, the petition is GRANTED--and the decision, dated January 20, 1999, of the
Housing and Land Use Regulatory Board (HLURB) in HLURB Case No. REM-A-980227-
0032 is hereby REVERSED and SET ASIDE. Accordingly, this case is ordered REMANDED
to the HLURB for the determination of the definitive land area that shall be used for open
space in accordance with law and the rules and standards prescribed by the HLURB. No
pronouncement as to costs.
SO ORDERED.15
In finding for SSHA, the appellate court relied upon Eugenio v. Exec. Sec. Drilon,16 which held that while
P.D. No. 957 did not expressly provide for its retroactive application, nonetheless, it can be plainly
inferred from its intent that it was to be given retroactive effect so as to extend its coverage even to
those contracts executed prior to its effectivity in 1976. The Court of Appeals also held that the action
was neither barred by prescription nor laches as the obligation of a subdivision developer to provide an
open space is not predicated upon an oral contract, but mandated by law, hence, an action may be
brought within ten (10) years from the time the right of action accrues under Article 114417 of the Civil
Code. Moreover, the equitable principle of laches will not apply when the claim was filed within the
reglementary period.
Petitioner duly moved for reconsideration, which the Court of Appeals denied on July 31, 2001.
Hence, this petition grounded on the following assignment of errors:
I. THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW BY TAKING
COGNIZANCE OF RESPONDENTS’ PETITION (WHICH ASSAILS THE DECISION OF THE
BOARD OF COMMISSIONERS OF THE HLURB) WHEN JURISDICTION THEREON IS
WITH THE OFFICE OF THE PRESIDENT, AS CLEARLY MANDATED BY SEC. 2, RULE
XVIII OF THE 1996 RULES OF PROCEDURE OF THE HOUSING AND LAND USE
REGULATORY BOARD.
II. IT WAS GRAVE ERROR FOR THE COURT OF APPEALS TO HAVE ASSUMED
JURISDICTION OVER THE PETITION BELOW WHEN RESPONDENTS CLEARLY FAILED
TO EXHAUST THE ADMINISTRATIVE REMEDIES AVAILABLE TO THEM UNDER THE
LAW.
III. THE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING THAT RESPONDENT
SANTOS SUBDIVISION HOMEOWNERS ASSOCIATION, A NON-REGISTERED
ORGANIZATION, LACKED THE LEGAL PERSONALITY TO SUE.
IV. THE COURT OF APPEALS SERIOUSLY ERRED IN NOT HOLDING THAT
RESPONDENT SANTOS SUBDIVISION HOMEOWNERS ASSOCIATION HAS NO CAUSE
OF ACTION AGAINST PETITIONER; NEITHER WAS SANTOS SUBDIVISION, A NON-
ENTITY, POSSESSED WITH CAPACITY TO BE SUED NOR IS PETITIONER GLORIA
SANTOS-DUEÑAS A PROPER PARTY TO THE CASE, THE LATTER NOT BEING THE
OWNER OR DEVELOPER OF SANTOS SUBDIVISION.
V. THE COURT OF APPEALS SERIOUSLY ERRED IN SUBSTITUTING ITS FINDINGS
WITH THAT OF THE ADJUDICATION BOARD AND BOARD OF COMMISSIONERS OF
THE HLURB WHEN THEIR DECISION IS BASED ON SUBSTANTIAL EVIDENCE AND NO
GRAVE ABUSE OF DISCRETION CAN BE ATTRIBUTED TO THEM.
VI. THE COURT OF APPEALS DEVIATED FROM THE EXISTING LAW AND
JURISPRUDENCE WHEN IT RULED THAT P.D. 957 HAS RETROACTIVE APPLICATION --
WHEN THE LAW ITSELF DOES NOT PROVIDE FOR ITS RETROACTIVITY AND THE
EXISTING JURISPRUDENCE THEREON CLEARLY PRONOUNCED THAT IT HAS NO
RETROACTIVE APPLICATION. TO PROVIDE RETROACTIVITY TO P.D. 957 WOULD
CAUSE IMPAIRMENT OF VESTED RIGHTS.
VII. WHILE AS A GENERAL RULE, THE FACTUAL FINDINGS OF THE COURT OF
APPEALS IS BINDING ON THE SUPREME COURT, THE SAME IS NOT TRUE WHEN THE
FORMER’S CONCLUSION IS BASED ON SPECULATION, SURMISES AND
CONJECTURES, THE INFERENCE MADE IS MANIFESTLY MISTAKEN OR ABSURD,
THERE IS GRAVE ABUSE OF DISCRETION, JUDGMENT IS BASED ON
MISAPPREHENSION OF FACTS CONTRARY TO THOSE OF THE ADMINISTRATIVE
AGENCY CONCERNED, AND IT WENT BEYOND THE ISSUES OF THE CASE AND THE
SAME IS CONTRARY TO THE ADMISSIONS OF BOTH PARTIES.18
To our mind, the foregoing may be reduced into the following issues: (1) the applicability of the doctrine
of non-exhaustion of administrative remedies; (2) the legal capacity of respondent to sue the petitioner
herein; and (3) the retroactivity of P.D. No. 957, as amended by P.D. No. 1216.
On the first issue, the petitioner contends that the filing of CA-G.R. SP No. 51601 was premature as
SSHA failed to exhaust all administrative remedies. Petitioner submits that since Section 1,19 Rule 43 of
the 1997 Rule of Civil Procedure does not mention the HLURB, the respondent should have appealed
the decision of the HLURB Board in HLURB Case No. REM-A-980227-0032 to the Office of the
President prior to seeking judicial relief. In other words, it is the decision of the Office of the
President,20 and not that of the HLURB Board, which the Court of Appeals may review.
We find petitioner’s contentions bereft of merit. The principle of non-exhaustion of administrative Although it may seem that this particular issue, given our ruling on the first issue regarding the lack of
remedies is, under the factual circumstances of this case, inapplicable. While this Court has held that capacity of SSHA to bring any action in its name, is now moot and academic, we are constrained to still
before a party is allowed to seek intervention of the courts, it is a pre condition that he avail himself of address it.
all administrative processes afforded him,21nonetheless, said rule is not without exceptions.22 The
doctrine is a relative one and is flexible depending on the peculiarity and uniqueness of the factual and
This petition was brought to us not by respondent SSHA but by Gloria Santos Dueñas who assails the
circumstantial settings of each case.23
appellate court’s finding that our ruling in Eugenio v. Exec. Sec. Drilon29 allows P.D. No. 957, as
amended, to apply retroactively.
In the instant case, the questions posed are purely legal, namely: (1) whether the respondent had any
right to demand an open space and the petitioner had any legal obligation to provide said open space
We find merit in petitioner’s contention.
within Santos Subdivision under P.D. No. 957, as amended by P.D. No. 1216, and (2) whether the
action had already prescribed under Article 1145 of the Civil Code. Moreover, the Court of Appeals
found that SSHA had sought relief from the Office of the President, but the latter forwarded the case to Eugenio v. Exec. Sec. Drilon is inapplicable. It is not on all fours with the instant case. The issue
the HLURB. In view of the foregoing, we find that in this particular case, there was no need for SSHA to in Eugenio was the applicability of P.D. No. 957 to purchase agreements on lots entered into prior to its
exhaust all administrative remedies before seeking judicial relief. enactment where there was non-payment of amortizations, and failure to develop the subdivision. We
held therein that although P.D. No. 957 does not provide for any retroactive application, nonetheless,
the intent of the law of protecting the helpless citizens from the manipulations and machinations of
On the second issue, the petitioner claims that respondent SSHA failed to present any evidence
unscrupulous subdivision and condominium sellers justify its retroactive application to contracts entered
showing that it is a legally organized juridical entity, authorized by law to sue or be sued in its own
into prior to its enactment. Hence, we ruled that the non-payment of amortizations was justified under
name. Thus, pursuant to Section 1, Rule 324 of the 1997 Rules of Civil Procedure, it has no legal
Section 23 of the said decree in view of the failure of the subdivision owner to develop the subdivision
capacity to file this suit before the HLURB and the Court of Appeals.
project.

SSHA counters that it has the capacity to sue as an association, since it is a member of the Federation
Unlike Eugenio, non-development of the subdivision is not present in this case, nor any allegation of
of Valenzuela Homeowners Association, Inc., which is registered with the Securities and Exchange
non-payment of amortizations. Further, we have held in a subsequent case30 that P.D. No. 957, as
Commission. In the alternative, the individual members of SSHA who signed both the resolution and the
amended, cannot be applied retroactively in view of the absence of any express provision on its
complaint in this case may, as natural persons, pursue the action.
retroactive application. Thus:

There is merit in petitioner’s contention. Under Section 1, Rule 3 of the Revised Rules of Court, only
…Article 4 of the Civil Code provides that laws shall have no retroactive effect, unless the
natural or juridical persons, or entities authorized by law may be parties in a civil action. Article 4425 of
contrary is provided. Thus, it is necessary that an express provision for its retroactive
the Civil Code enumerates the various classes of juridical persons. Under said Article, an association is
application must be made in the law. There being no such provision in both P.D. Nos. 957
considered a juridical person if the law grants it a personality separate and distinct from that of its
and 1344, these decrees cannot be applied to a situation that occurred years before their
members.26 The records of the present case are bare of any showing by SSHA that it is an association
promulgation….
duly organized under Philippine law. It was thus an error for the HLURB-NCR Office to give due course
to the complaint in HLURB Case No. REM-070297-9821, given the SSHA’s lack of capacity to sue in its
own name. Nor was it proper for said agency to treat the complaint as a suit by all the parties who At any rate, our principal concern in this case is Section 31 of P.D. No. 957, an amendment
signed and verified the complaint. The members cannot represent their association in any suit without introduced by P.D. No. 1216. Properly, the question should focus on the retroactivity of P.D.
valid and legal authority. Neither can their signatures confer on the association any legal capacity to No. 1216 and not P.D. No. 957 per se.
sue. Nor will the fact that SSHA belongs to the Federation of Valenzuela Homeowners Association,
Inc., suffice to endow SSHA with the personality and capacity to sue. Mere allegations of membership
We have examined the text of P.D. No. 1216 and nowhere do we find any clause or provision expressly
in a federation are insufficient and inconsequential. The federation itself has a separate juridical
providing for its retroactive application. Basic is the rule that no statute, decree, ordinance, rule or
personality and was not impleaded as a party in HLURB Case No. REM-070297-9821 nor in this case.
regulation shall be given retrospective effect unless explicitly stated.31 Hence, there is no legal basis to
Neither was it shown that the federation was authorized to represent SSHA. Facts showing the capacity
hold that P.D. No. 1216 should apply retroactively.
of a party to sue or be sued or the authority of a party to sue or be sued in a representative capacity or
the legal existence of an organized association of persons that is made a party, must be
averred.27 Hence, for failing to show that it is a juridical entity, endowed by law with capacity to bring WHEREFORE, the petition is GRANTED. The assailed Decision and Resolution of the Court of
suits in its own name, SSHA is devoid of any legal capacity, whatsoever, to institute any action. Appeals in CA-G.R. SP No. 51601 are REVERSED and SET ASIDE. The Decision of the HLURB dated
January 20, 1999 sustaining that of its Regional Office is AFFIRMED and REINSTATED. No
pronouncement as to costs.
Anent the third issue, the petitioner ascribes error to the appellate court for holding that P.D. No. 957
has retroactive application. She points out that there is no retroactivity provision in the said decree.
Hence, it cannot be applied retroactively pursuant to Article 428 of the Civil Code of the Philippines. The SO ORDERED.
same holds true for P.D. No. 1216, which amended Section 31 of P.D. No. 957 and imposed the open
space requirement in subdivisions. Petitioner stresses that P.D. No. 1216 only took effect on October
14, 1977 or more than ten (10) years after the approval of the subdivision plans of Cecilio Santos.

G.R. No. 154213               August 23, 2012

EASTERN MEDITERRANEAN MARITIME LTD. AND AGEMAR MANNING AGENCY, On May 23, 1996, the POEA dismissed the complaint for disciplinary action. Petitioners received the
INC., Petitioners,  order of dismissal on July 24, 1996.2
vs.
EST ANISLAO SURIO, FREDDIE PALGUIRAN, GRACIANO MORALES, HENRY CASTILLO,
Relying on Section 1, Rule V, Book VII of the 1991 POEA Rules, petitioners filed a partial appeal on
ARISTOTLE ARREOLA, ALEXANDER YGOT, ANRIQUE BA TTUNG, GREGORIO ALDOVINO,
August 2, 1996 in the NLRC, still maintaining that respondents should be administratively sanctioned
NARCISO FRIAS, VICTOR FLORES, SAMUEL MARCIAL, CARLITO PALGUIRAN, DUQUE
for their conduct while they were on board MT Seadance.
VINLUAN, .JESUS MENDEGORIN, NEIL FLORES, ROMEO MANGALIAG, JOE GARFIN and
SALESTINO SUSA, Respondents.
On March 21, 1997, the NLRC dismissed petitioners’ appeal for lack of jurisdiction,3 thus:
*PEREZ
We dismiss the partial appeal.
DECISION
The Commission has no jurisdiction to review cases decided by the POEA Administrator involving
disciplinary actions. Under the Migrant Workers and Overseas Filipinos Act of 1995, the Labor Arbiter
BERSAMIN, J.:
shall have jurisdiction over money claims involving employer-employee relationship (sec. 10, R.A.
8042). Said law does not provide that appeals from decisions arising from complaint for disciplinary
On appeal is the decision the Court of Appeals (CA) promulgated on December 21, 2001 affirming the action rest in the Commission.
resolution of the National Labor Relations Commission (NLRC) declaring itself to be without appellate
jurisdiction to review the decision of the Philippine Overseas Employment Administration (POEA)
PREMISES CONSIDERED, instant appeal from the Order of May 23, 1996 is hereby DISMISSED for
involving petitioners’ complaint for disciplinary action against respondents.1
lack of jurisdiction.

Respondents were former crewmembers of MT Seadance, a vessel owned by petitioner Eastern

Mediterranean Maritime Ltd. and manned and operated by petitioner Agemar Manning Agency, Inc.
While respondents were still on board the vessel, they experienced delays in the payment of their
wages and in the remittance of allotments, and were not paid for extra work and extra overtime work.
They complained about the vessel’s inadequate equipment, and about the failure of the petitioners to
heed their repeated requests for the improvement of their working conditions. On December 19, 1993,
when MT Seadance docked at the port of Brofjorden, Sweden to discharge oil, representatives of the
International Transport Federation (ITF) boarded the vessel and found the wages of the respondents to
be below the prevailing rates. The ensuing negotiations between the ITF and the vessel owner on the
increase in respondents’ wages resulted in the payment by the vessel owner of wage differentials and
the immediate repatriation of respondents to the Philippines.
Subsequently, on December 23, 1993, the petitioners filed against the newly-repatriated respondents a
complaint for disciplinary action based on breach of discipline and for the reimbursement of the wage
increases in the Workers Assistance and Adjudication Office of the POEA.
During the pendency of the administrative complaint in the POEA, Republic Act No. 8042 (Migrant
Workers and Overseas Filipinos Act of 1995) took effect on July 15, 1995. Section 10 of Republic Act
No. 8042 vested original and exclusive jurisdiction over all money claims arising out of employer-
employee relationships involving overseas Filipino workers in the Labor Arbiters, to wit:
Section 10. Money Claims. – Notwithstanding any provision of law to the contrary, the Labor Arbiters of
the National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to
hear and decide, within ninety (90) calendar days after the filing of the complaint, the claims arising out
of an employer-employee relationship or by virtue of any law or contract involving Filipino workers for
overseas deployment including claims for actual, moral, exemplary and other forms of damages.
The jurisdiction over such claims was previously exercised by the POEA under the POEA Rules and
Regulations of 1991 (1991 POEA Rules).
SO ORDERED.
Not satisfied, petitioners moved for reconsideration, but the NLRC denied their motion. They received
the denial on July 8, 1997.4
Petitioners then commenced in this Court a special civil action for certiorari and mandamus. Citing St.
Martin Funeral Homes v. National Labor Relations Commission,5 however, the Court referred the
petition to the CA on November 25, 1998.
Petitioners contended in their petition that:
THE NLRC GRAVELY ABUSED ITS DISCRETION AND/OR GRAVELY ERRED IN DISMISSING
PETITIONERS’ APPEAL AND MOTION FOR RECONSIDERATION WHEN IT REFUSED TO TAKE
COGNIZANCE OF PETITIONERS’ APPEAL DESPITE BEING EMPOWERED TO DO SO UNDER THE
LAW.6
On December 21, 2001, the CA dismissed the petition for certiorari and mandamus, holding that the
inclusion and deletion of overseas contract workers from the POEA blacklist/watchlist were within the
exclusive jurisdiction of the POEA to the exclusion of the NLRC, and that the NLRC had no appellate
jurisdiction to review the matter, viz:
Section 10 of RA 8042, otherwise known as the Migrant Workers and Overseas Filipinos Act of 1995,
provides that:
"Money Claims – Notwithstanding any provision of law to the contrary, the Labor Arbiters of the National
Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear and
decide, within ninety (90) calendar days after the filing of the complaint, the claims arising out of an
employer-employee relationship or by virtue of any law or contract involving Filipino workers for
overseas deployment including claims for actual, moral, exemplary and other forms of damages.
xxxx
Likewise, the Rules and Regulations implementing RA 8042 reiterate the jurisdiction of POEA, thus:
"Section 28. Jurisdiction of the POEA. – The POEA shall exercise original and exclusive jurisdiction to
hear and decide:
a) All cases, which are administrative in character, involving or arising out of violations of rules and
regulations relating to licensing and registration of recruitment and employment agencies or entities;
and
b) Disciplinary action cases and other special cases, which are administrative in character, involving
employers, principals, contracting partners and Filipino migrant workers."
Further, Sections 6 and 7 Rule VII, Book VII of the POEA Rules & Regulations (1991) provide:
"Sec. 6. Disqualification of Contract Workers. Contract workers, including seamen, against whom have
been imposed or with pending obligations imposed upon them through an order, decision or resolution
shall be included in the POEA Blacklist Workers shall be disqualified from overseas employment unless
properly cleared by the Administration or until their suspension is served or lifted.
Sec. 7. Delisting of the Contract Worker’s Name from the POEA Watchlist. The name of an overseas
worker may be excluded, deleted and removed from the POEA Watchlist only after disposition of the
case by the Administration."
Thus, it can be concluded from the afore-quoted law and rules that, public respondent has no
jurisdiction to review disciplinary cases decided by the POEA involving contract workers. Clearly, the
matter of inclusion and deletion of overseas contract workers in the POEA Blacklist/Watchlist is within
the exclusive jurisdiction of the POEA to the exclusion of the public respondent. Nor has the latter
appellate jurisdiction to review the findings of the POEA involving such cases.
xxx
In fine, we find and so hold, that, no grave abuse of discretion can be imputed to the public respondent
when it issued the assailed Decision and Order, dated March 21, 1997 and June 13, 1997, respectively,
dismissing petitioners’ appeal from the decision of the POEA.
WHEREFORE, finding the instant petition not impressed with merit, the same is hereby DENIED DUE
COURSE. Costs against petitioners.
SO ORDERED.7
Issue
Petitioners still appeal, submitting to the Court the sole issue of:
WHETHER OR NOT THE NLRC HAS JURISDICTION TO REVIEW ON APPEAL CASES DECIDED
BY THE POEA ON MATTERS PERTAINING TO DISCIPLINARY ACTIONS AGAINST PRIVATE
RESPONDENTS.
They contend that both the CA and the NLRC had no basis to rule that the NLRC had no jurisdiction to
entertain the appeal only because Republic Act No. 8042 had not provided for its retroactive
application.
Respondents counter that the appeal should have been filed with the Secretary of Labor who had
exclusive jurisdiction to review cases involving administrative matters decided by the POEA.
Ruling
The petition for review lacks merit.
Petitioners’ adamant insistence that the NLRC should have appellate authority over the POEA’s
decision in the disciplinary action because their complaint against respondents was filed in 1993 was
unwarranted. Although Republic Act No. 8042, through its Section 10, transferred the original and
exclusive jurisdiction to hear and decide money claims involving overseas Filipino workers from the
POEA to the Labor Arbiters, the law did not remove from the POEA the original and exclusive
jurisdiction to hear and decide all disciplinary action cases and other special cases administrative in
character involving such workers. The obvious intent of Republic Act No. 8042 was to have the POEA
focus its efforts in resolving all administrative matters affecting and involving such workers. This intent
was even expressly recognized in the Omnibus Rules and Regulations Implementing the Migrant
Workers and Overseas Filipinos Act of 1995 promulgated on February 29, 1996, viz:
Section 28. Jurisdiction of the POEA. – The POEA shall exercise original and exclusive jurisdiction to
hear and decide:
(a) all cases, which are administrative in character, involving or arising out of violations or rules and
regulations relating to licensing and registration of recruitment and employment agencies or entities;
and
(b) disciplinary action cases and other special cases, which are administrative in character, involving
employers, principals, contracting partners and Filipino migrant workers.
Section 29. Venue – The cases mentioned in Section 28(a) of this Rule, may be filed with the POEA
Adjudication Office or the DOLE/POEA regional office of the place where the complainant applied or
was recruited, at the option of the complainant. The office with which the complaint was first filed shall
take cognizance of the case.
Disciplinary action cases and other special cases, as mentioned in the preceding Section, shall be filed
with the POEA Adjudication Office.
It is clear to us, therefore, that the NLRC had no appellate jurisdiction to review the decision of the
POEA in disciplinary cases involving overseas contract workers.
Petitioners’ position that Republic Act No. 8042 should not be applied retroactively to the review of the
POEA’s decision dismissing their complaint against respondents has no support in jurisprudence.
Although, as a rule, all laws are prospective in application unless the contrary is expressly provided,8 or
unless the law is procedural or curative in nature,9 there is no serious question about the retroactive
applicability of Republic Act No. 8042 to the appeal of the POEA’s decision on petitioners’ disciplinary
action against respondents. In a way, Republic Act No. 8042 was a procedural law due to its providing
or omitting guidelines on appeal. A law is procedural, according to De Los Santos v. Vda. De
Mangubat,10 when it –
Refers to the adjective law which prescribes rules and forms of procedure in order that courts may be
able to administer justice. Procedural laws do not come within the legal conception of a retroactive law,
or the general rule against the retroactive operation of statues ― they may be given retroactive effect
on actions pending and undetermined at the time of their passage and this will not violate any right of a
person who may feel that he is adversely affected, insomuch as there are no vested rights in rules of
procedure.
Republic Act No. 8042 applies to petitioners’ complaint by virtue of the case being then still pending or
undetermined at the time of the law’s passage, there being no vested rights in rules of
procedure.11 They could not validly insist that the reckoning period to ascertain which law or rule should
apply was the time when the disciplinary complaint was originally filed in the POEA in 1993. Moreover,
Republic Act No. 8042 and its implementing rules and regulations were already in effect when
petitioners took their appeal. A statute that eliminates the right to appeal and considers the judgment
rendered final and unappealable only destroys the right to appeal, but not the right to prosecute an
appeal that has been perfected prior to its passage, for, at that stage, the right to appeal has already
vested and cannot be impaired.12 Conversely and by analogy, an appeal that is perfected when a new
statute affecting appellate jurisdiction comes into effect should comply with the provisions of the new
law, unless otherwise provided by the new law. Relevantly, petitioners need to be reminded that the
right to appeal from a decision is a privilege established by positive laws, which, upon authorizing the
taking of the appeal, point out the cases in which it is proper to present the appeal, the procedure to be
observed, and the courts by which the appeal is to be proceeded with and resolved.13 This is why we
consistently hold that the right to appeal is statutory in character, and is available only if granted by law
or statute.14
When Republic Act No. 8042 withheld the appellate jurisdiction of the NLRC in respect of cases
decided by the POEA, the appellate jurisdiction was vested in the Secretary of Labor in accordance
with his power of supervision and control under Section 38(1), Chapter 7, Title II, Book III of
the Revised Administrative Code of 1987, to wit:
Section 38. Definition of Administrative Relationship. – Unless otherwise expressly stated in the Code
or in other laws defining the special relationships of particular agencies, administrative relationships
shall be categorized and defined as follows:
Supervision and Control. – Supervision and control shall include authority to act directly whenever a
specific function is entrusted by law or regulation to a subordinate; direct the performance of duty;
restrain the commission of acts; review, approve, reverse or modify acts and decisions of subordinate
officials or units; determine priorities in the execution of plans and programs. Unless a different
meaning is explicitly provided in the specific law governing the relationship of particular agencies, the
word "control" shall encompass supervision and control as defined in this paragraph. xxx.
Thus, Section 1, Part VII, Rule V of the 2003 POEA Rules and Regulations specifically provides, as
follows:
Section 1. Jurisdiction. – The Secretary shall have the exclusive and original jurisdiction to act on
appeals or petition for review of disciplinary action cases decided by the Administration.
In conclusion, we hold that petitioners should have appealed the adverse decision of the POEA to the
Secretary of Labor instead of to the NLRC. Consequently, the CA, being correct on its conclusions,
committed no error in upholding the NLRC.
WHEREFORE, we AFFIRM the decision promulgated on December 21, 2001 by the Court of Appeals;
and ORDERthe petitioners to pay the costs of suit.
SO ORDERED.
G.R. No. 108310 September 1, 1994
RUFINO O. ESLAO, in his capacity as President of Pangasinan State University, petitioner, 
vs.
COMMISSION ON AUDIT, respondent.
Mehol K. Sadain for petitioner.
FELICIANO, J.:
In this Petition for Certiorari, Rufino O. Eslao in his capacity as President of the Pangasinan State
University ("PSU") asks us to set aside Commission on Audit ("COA") Decisions Nos. 1547 (1990) and
2571 (1992) which denied honoraria and per diems claimed under National Compensation Circular No.
53 by certain PSU personnel including petitioner.
On 9 December 1988, PSU entered into a Memorandum of Agreement ("MOA") 1 with the Department
of Environment and Natural Resources ("DENR") for the evaluation of eleven (11) government
reforestation operations in Pangasinan. 2 The evaluation project was part of the commitment of the
Asian Development Bank ("ADB") under the ADB/OECF Forestry Sector Program Loan to the Republic
of the Philippines and was one among identical project agreements entered into by the DENR with
sixteen (16) other state universities.
On 9 December 1988, a notice to proceed 3 with the review and evaluation of the eleven (11)
reforestation operations was issued by the DENR to PSU. The latter complied with this notice and did
proceed.
On 16 January 1989, per advice of the PSU Auditor-in-Charge with respect to the payment
of honoraria and per diems of PSU personnel engaged in the review and evaluation project, PSU Vice
President for Research and Extension and Assistant Project Director Victorino P. Espero requested the
Office of the President, PSU, to have the University's Board of Regents ("BOR") confirm the
appointments or designations of involved PSU personnel including the rates of honoraria and per
diems corresponding to their specific roles and functions. 4
The BOR approved the MOA on 30 January 1989 5 and on 1 February 1989, PSU issued Voucher No.
8902007 6representing the amount of P70,375.00 for payment of honoraria to PSU personnel engaged
in the project. Later, however, the approved honoraria rates were found to be somewhat higher than the
rates provided for in the guidelines of National Compensation Circular ("NCC") No. 53. Accordingly, the
amounts were adjusted downwards to conform to NCC No. 53. Adjustments were made by deducting
amounts from subsequent disbursements of honoraria. By June 1989, NCC No. 53 was being complied
with. 7
On 6 July 1989, Bonifacio Icu, COA resident auditor at PSU, alleging that there were excess payments
of honoraria, issued a "Notice of Disallowance" 8 disallowing P64,925.00 from the amount of
P70,375.00 stated in Voucher No. 8902007, mentioned earlier. The resident auditor based his action on
the premise that Compensation Policy Guidelines ("CPG") No. 80-4, dated 7 August 1980, issued by
the Department of Budget and Management which provided for lower rates than NCC No. 53 dated 21
June 1988, also issued by the Department of Budget and Management, was the schedule
for honoraria and per diems applicable to work done under the MOA of 9 December 1988 between the
PSU and the DENR.
On 18 October 1989, a letter 9 was sent by PSU Vice President and Assistant Project Director Espero
to the Chairman of the COA requesting reconsideration of the action of its resident auditor. In the
meantime, the Department of Budget and Management ("DBM"), upon request by PSU, issued a
letter 10 clarifying that the basis for the project's honoraria should not be CPG No. 80-4 which pertains to
locally funded projects but rather NCC No. 53 which pertains to foreign-assisted projects. A copy of this
clarification was sent to the COA upon request by PSU.
On 18 September 1990, COA Decision No. 1547 11 was issued denying reconsideration of the decision
of its resident auditor. The COA ruled that CPG. No. 80-4 is the applicable guideline in respect of
the honoraria as CPG No. 80-4 does not distinguish between projects locally funded and projects
funded or assisted with monies of foreign-origin.
PSU President Eslao sent a letter 12 dated 20 March 1991 requesting reconsideration of COA Decision
No. 1547 (1990) alleging that (a) COA had erred in applying CPG No. 80-4 and not NCC No. 53 as the
project was foreign-assisted and (b) the decision was discriminatory — honoraria based on NCC No.
53 having been approved and granted by COA resident auditors in two (2) other state universities
engaged in the same reforestation project. PSU then submitted to the COA (a) a certification 13 from the
DENR to the effect that the DENR evaluation project was foreign- assisted and (b) the letter of the DBM
quoted in the margin supra.
On 16 November 1992, COA Decision No. 2571 (1992) 14 was issued denying reconsideration.
In the meantime, in December 1990, the DENR informed petitioner of its acceptance of the PSU final
reports on the review and evaluation of the government reforestation
projects. 15 Subsequently, honoraria for the period from January 1989 to January 1990 were disbursed
in accordance with NCC No. 53. A Certificate of Settlement and Balances (CSB No. 92-0005-184
[DENR]) 16 was then issued by the COA resident auditor of PSU showing disallowance of alleged
excess payment of honoraria which petitioner was being required to return.
The instant Petition prays that (a) COA Decision Nos. 1547 (1990) and 2571 (1992) be set aside; (b)
the COA be ordered to pass in audit the grant of honoraria for the entire duration of the project based
on the provisions and rates contained in NCC No. 53; and (c) the COA be held liable for actual
damages as well as petitioner's legal expenses and attorney's fees.
The resolution of the dispute lies in the determination of the circular or set of provisions applicable in
respect of the honoraria to be paid to PSU personnel who took part in the evaluation project, i.e., NCC
No. 53 or CPG No. 80-4.
In asserting that NCC No. 53 supplies the applicable guideline and that the COA erred in applying CPG
No. 80-4 as the pertinent standard, petitioner contends that:
(a) CPG No. 80-4 applies to "special projects" the definition and scope of which do not
embrace the evaluation project undertaken by petitioner for the DENR;
(b) NCC No. 53 applies to foreign-assisted projects ("FAPs") while CPG No. 80-4 applies to
locally-funded projects as no reference to any foreign component characterizing the projects
under its coverage is made;
(c) the DENR evaluation project is a foreign-assisted project per certification and clarification
of the DENR and DBM respectively as well as the implied admission of the COA in its
Comment; and
(d) the DBM's position on the matter should be respected since the DBM is vested with
authority to (i) classify positions and determine appropriate salaries for specific position
classes, (ii) review the compensation benefits programs of agencies and (iii) design job
evaluation programs.
The Office of the Solicitor General, in lieu of a Comment on the Petition, filed a Manifestation 17 stating
that (a) since, per certification of the DENR and Letter/Opinion of the DBM that the project undertaken
by PSU is foreign-assisted, NCC No. 53 should apply; and (b) respondent COA's contention that CPG
No. 80-4 does not distinguish between projects which are foreign-funded from locally-funded projects
deserves no merit, since NCC No. 53, a special guideline, must be construed as an exception to CPG
No. 80-4, a general guideline. The Solicitor General, in other words, agreed with the position of
petitioner.
Upon the other hand, respondent COA filed its own comment, asserting that:
(a) while the DBM is vested with the authority to issue rules and regulations
pertaining to compensation, this authority is regulated by Sec. 2 (2) of Art. IX-D of
the 1987 Constitution which vests respondent COA with the power to "promulgate
accounting and auditing rules and regulations, including those for the prevention
and disallowance of irregular, unnecessary, excessive, extravagant or
unconscionable expenditures, or uses of government funds and properties;
(b) the Organizational Arrangement and Obligations of the Parties sections of the
MOA clearly show that the evaluation project is an "inter-agency activity" between
the DENR and PSU and therefore a "special project";
(c) the issue as to whether the evaluation project is in fact a "special project" has
become moot in view of the DBM's clarification/ruling that the evaluation project is
foreign-assisted and therefore NCC No. 53, not CPG No. 80-4 which applies only
to locally-funded projects, should apply;
(d) the DBM issuance notwithstanding, respondent COA applied CPG No. 80-4 to
effectively rationalize the rates of additional compensation assigned to or detailed
in "special projects" as its application is without distinction as to the source of
funding and any payment therefore in excess of that provided by CPG No. 80-4 is
unnecessary, excessive and disadvantageous to the government;
(e) respondent COA's previous allowance of payment of honoraria based on NCC
No. 53 or the fact that a full five years had already elapsed since NCC No. 53's
issuance does not preclude COA from assailing the circular's validity as "it is the
responsibility of any public official to rectify every error he encounters in the
performance of his function" and "he is not duty- bound to pursue the same
mistake for the simple reason that such mistake had been continuously committed
in the past";
(f) the DBM ruling classifying the evaluation project as foreign-assisted does not
rest on solid ground since loan proceeds, regardless of source, eventually become
 public funds for which the government is accountable, hence, any project under the
loan agreement is to be considered locally-funded;
(g) the DBM ruling constitutes an unreasonable classification, highly discriminatory
and violative of the equal protection clause of the Constitution; and
(h) granting arguendo NCC No. 53 is the applicable criterion, petitioner
received honoraria in excess of what was provided in the MOA.
We consider the Petition meritorious.
Sec. 2.1 of CPG No. 80-4 defines "special project" as
The DENR shall have the following obligations:
1. Provide the funds necessary for the review and reevaluation of eleven (11)
reforestation projects.
xxx xxx xxx
2. Undertake the monitoring of the study to ascertain its progress and the proper
utilization of funds in conformity with the agreed work and financial plan.
3. Reserve the right to accept or reject the final report and in the latter case, DENR
may request PSU to make some revisions/modifications on the same.

an inter-agency or inter-committee activity or an undertaking by a composite group Obligations of the PSU:

of officials/employees from various agencies which [activity or undertaking] is not
among the regular and primary functions of the agencies involved. (Emphasis and
The PSU shall have the following obligations:
brackets supplied)

1. Undertake the review and evaluation of the eleven (11) DENR-funded

Respondent COA maintains that the sections of the MOA detailing the "Organizational Arrangement
reforestation projects in accordance with the attached TOR;
and Obligations of the Parties" clearly show that the evaluation project is an "inter-agency activity." The
pertinent sections of the MOA are as follows:
2. Submit regularly to DENR financial status reports apart from the progress report
required to effect the second release of funds;
ORGANIZATIONAL ARRANGEMENTS

3. Submit the final report to DENR fifteen (15) days after the completion of the
A Coordinating Committee shall be created which shall be responsible for the
work. The report should at least contain the information which appears in Annex D;
overall administration and coordination of the evaluation, to be chaired by a senior
officer of the DENR. The Committee shall [be] composed [of] the following:
4. Return to DENR whatever balance is left of the funds after the completion of
work.
Chairman : Undersecretary for Planning,
Policy and Project Management
[DENR] Simply stated, respondent COA argues that since the Coordinating Committee is composed of
personnel from the DENR and PSU, the evaluation project is an "inter-agency activity" within the
purview of the definition of a "special project".
Co-Chairman : Vice-President for Research
and Development [PSU]
We are unable to agree with respondent COA.
Members : Director of FMB
Dean, PSU Infanta Campus Examination of the definition in CPG No. 80-4 of a "special project" reveals that definition has two (2)
Associate Dean, PSU Infanta components: firstly, there should be an inter-agency or inter-committee activity or undertaking by a
Campus group of officials or employees who are drawn from various agencies; and secondly, the activity or
Chief, Reforestation undertaking involved is not part of the "regular or primary" functions of the participating agencies.
Division Examination of the MOA and its annexes reveals that two (2) groups were actually created. The first
Project Director of the ADB group consisted of the coordinating committee, the membership of which was drawn from officials of the
Program Loan for Forestry DENR and of the PSU; and the second, the evaluation project team itself which was, in
Sector contrast, composed exclusively of PSU personnel. 18 We believe that the first component of the CPU
No. 80-4's definition of "special project" is applicable in respect of the group which is charged with the
actual carrying out of the project itself, rather than to the body or group which coordinates the task of
OBLIGATIONS OF THE PARTIES
the operating or implementing group. To construe the administrative definition of "special project"
otherwise would create a situation, which we deem to be impractical and possibly even absurd, under
Obligations of DENR: which any undertaking entered into between the senior officials of government agencies would have to
be considered an "inter-agency or inter-committee activity," even though the actual undertaking or
operation would be carried out not by the coordinating body but rather by an separate group which
might not (as in the present case) be drawn from the agencies represented in the coordinating group. In
other words, an "inter-agency or inter-committee activity or . . . undertaking" must be one which is
actually carried out by a composite group of officials and employees from the two (2) or more
participating agencies.
As already noted, in the case at hand, the project team actually tasked with carrying out the evaluation
of the DENR reforestation activity is composed exclusively of personnel from PSU; the project team's
responsibility and undertaking are quite distinct from the responsibilities of the coordinating [DENR and
PSU] committee. Thus, the project team is not a "composite group" as required by the definition of CPG
No. 80-4 of "special projects." It follows that the evaluation projects here involved do not fall within the
ambit of a "special project" as defined and regulated by CPG No. 80-4.
We do not consider it necessary to rule on whether the project at hand involved an undertaking "which
is not among the regular and primary functions of the agencies involved" since the reforestation activity
evaluation group is not, as pointed out above, a "special project" within the meaning of CPG No. 80-4.
In any case, this particular issue was not raised by any of the parties here involved.
It is true, as respondent COA points out, that the provisions of CPG No. 80-4 do not distinguish
between "a special project" which is funded by monies of local or Philippine origin and "a special
project" which is funded or assisted by monies originating from international or foreign agencies. As
earlier noted, CPG No. 80-4 was issued by the Department of Budget and Management back in 7
August 1980. Upon the other hand, NCC No. 53 was issued also by the Department of Budget and
Management more than eight (8) years later, i.e., 9 December 1988. Examination of the provisions of
NCC No. 53 makes it crystal clear that the circular is applicable to foreign-assisted projects only. The
explicit text of NCC No. 53 states that it was issued to
prescribe/authorize the classification and compensation rates of positions in
foreign-assisted projects(FAPs) including honoraria rates for personnel detailed to
FAPs and guidelines in the implementation thereof pursuant to Memorandum No.
173 dated 16 May 1988 19 (Emphasis supplied)
and which apply to all positions in foreign-assisted projects only. Clearly, NCC No. 53 amended the
earlier CPG No. 80-4 by carving out from the subject matter originally covered by CPG No. 80-4 all
"foreign-assisted [special] projects." CPG No. 80-4 was, accordingly, modified so far as "foreign-
assisted [special] projects (FAPs)" are concerned. It is this fact or consequence of NCC No. 53 that
respondent COA apparently failed to grasp. Thus, CPG No. 80-4 does not control, nor even relate to,
the DENR evaluation project for at least two (2) reasons: firstly, the evaluation project was not a
"special project" within the meaning of CPG No. 80-4; secondly, that same evaluation project was a
Foreign-Assisted Project to which NCC No. 53 is specifically applicable.
That the instant evaluation project is a Foreign-Assisted Project is borne out by the records: (a) the
MOA states that the project is "part of the commitment with the Asian Development Bank (ADB) under
the Forestry Sector Program Loan"; (b) the certification issued by the DENR certifies that
. . . the review and evaluation of DENR reforestation projects undertaken by State
Universities and Colleges, one of which is Pangasinan State University, is one of
the components of the ADB/OECF Forestry Sector Program Loan which is funded
by the loan. It is therefore a 
foreign-assisted project (Underscoring supplied); and
(c) the clarification issued by the DBM stating that
The honoraria rates of the detailed personnel should not be based on
Compensation Policy Guidelines No. 80-4, which pertains to locally funded
projects. Since the funding source for this activity come from loan proceeds,
National Compensation Circular No. 53 should apply.
Even in its Comment respondent COA submits that
. . . the issue as to whether or not the project was special already became moot in
the face of the opinion/ruling of the DBM that since it (the project) is "foreign-
assisted" NCC 53 should apply, for CPG No. 80-4 applies only to "locally-funded
projects. 20
Under the Administration Code of 1987, the Compensation and Position Classification Bureau of the
DBM "shall classify positions and determine appropriate salaries for specific position classes and
review appropriate salaries for specific position classes and review the compensation benefits
programs of agencies and shall design job evaluation programs." 21 In Warren Manufacturing Workers
Union (WMWU) v. Bureau of Labor Relations, 22 the Court held that "administrative regulations and
policies enacted by administrative bodies to interpret the law have the force of law and are entitled to
great respect." It is difficult for the Court to understand why, despite these certifications, respondent
COA took such a rigid and uncompromising posture that CPG No. 80-4 was the applicable criterion
for honoraria to be given members of the reforestation evaluation project team of the PSU.
Respondent COA's contention that the DBM clarification is unconstitutional as that ruling does not fulfill
the requisites of a valid classification 23 is, in the Court's perception, imaginative but nonetheless an
after-thought and a futile attempt to justify its action. As correctly pointed out by petitioner, the
constitutional arguments raised by respondent COA here were never even mentioned, much less
discussed, in COA Decisions Nos. 1547 (1990) and 2571 (1992) or in any of the proceedings
conducted before it.
Petitioner also argues that the project's duration stipulated in the MOA was implicitly extended by the
parties. The DENR's acceptance, without any comment or objection, of PSU's (a) letter explaining the
delay in its submission of the final project report and (b) the final project report itself brought about,
according to petitioner, an implied agreement between the parties to extend the project duration. It is
also contended that by the very nature of an evaluation project, the project's duration is difficult to fix
and as in the case at bar, the period fixed in the MOA is merely an initial estimate subject to extension.
Lastly, petitioner argues that whether the project was impliedly extended is an inconsequential
consideration; the material consideration being that the project stayed within its budget. The project
having been extended, petitioner concludes that the evaluation team should be paid honorariafrom the
time it proceeded with the project and up to the time the DENR accepted its final report.
Mindful of the detailed provisions of the MOA and Project Proposal governing project duration and
project financing as regulated by NCC No. 53, the Court is not persuaded that petitioner can so casually
assume implicit consent on the part of the DENR to an extension of the evaluation project's duration.
The "Duration of Work" clause of the MOA provides that
PSU shall commence the work 10 days from receipt of the Notice to Proceed
and shall be completed five months thereafter. (Emphasis supplied)
On 9 December 1988, the DENR advised PSU President Rufino Eslao that PSU "may now
proceed with the review and reevaluation as stipulated" in the MOA. The Notice to Proceed
further stated that
 Your institution is required to complete the work within five months starting ten (10) 2. Silviculturist 3 -do- 15,000
days upon receipt of this notice. (Emphasis supplied)
3. Forestry Economist 4 -do- 20,000
In respect of the financial aspects of the project, the MOA provides that
4. Soils Expert 2 -do- 10,000
The DENR shall have the following obligations:
5. Social Forestry Expert 4 -do- 20,000
1. Provide the funds necessary for the review and reevaluation of the eleven (11)
reforestation projects . . . in the amount not more than FIVE HUNDRED SIX
6. Management Expert 2 -do- 10,000
THOUSAND TWO HUNDRED TWENTY FOUR PESOS (P506,224.00) which shall
be spent in accordance with the work and financial plan which attached as Annex
C. Fund remittances shall be made on a staggered basis with the following 7. Horticulturist 2 -do- 10,000
schedule:
8. Agricultural Engineer 2 -do- 10,000
a. FIRST RELEASE
9. Systems Analysts/Programer 2 -do- 10,000
Twenty percent (20%) of the total cost to be remitted within fifteen (15) working
days upon submission of work plan;
10. Statistician 2 -do- 10,000

b. SECOND RELEASE
11. Shoreline Resources Expert 2 -do- 10,000

Forty percent of the total cost upon submission of a progress report of the activities
12. Animal Science Specialist 2 -do- 10,000
that were so far undertaken;

13. Policy/Administrative 4 -do- 20,000

c. THIRD RELEASE

Expert
Thirty percent (30%) of the total amount upon submission of the draft final report;

T O T A L P175,000
d. FOURTH RELEASE

 
Ten percent of the total amount [upon submission] of the final report. (Underscoring
supplied)
Support Services
Annex "C" referred to in the MOA is the Project Proposal. Per the Proposal's "Budget Estimate,"
P175,000.00 and P92,500.00 were allotted for "Expert Services" and "Support Services" respectively Research Associates (2) P8,000
itemized as follows: Honorarium P1,000/mo. for 4 months
Special Disbursing Officer (1) 4,000
Honorarium P1,000/mo. for 4 months
PERSONAL SERVICES
Enumerators/Data Gatheres 36,000
EXPERT SERVICES
360 mandays at P100/manday
including COLA
Duration Coders/Encoders 30,000
300 mandays at P100/manday
including COLA
Expert of Service Rate/ Total
Cartographer/Illustrator 5,000
50 mandays at P100/manday
(mo.) mo. including COLA
Documentalist 4,500
45 mandays at P100/manday
1. Ecologist 4 P5,000 P20,000
including COLA
 Typist 5,000 3.7 Payment of honoraria shall be made out of project funds and in no case shall
50 mandays at P100/manday payment thereof be made out of regular agency fund.
including COLA
xxx xxx xxx
T O T A L P92,500
————
3.10 The total amount of compensation to be paid shall not exceed the original
amount allocated for personal services of the individual foreign-assisted
In addition, the Proposal already provided a list of identified experts: projects. Any disbursement in excess of the original amount allotted for personal
services of the individual projects shall be the personal liability and responsibility of
the officials and employees authorizing or making such payment. (Underscoring
EXPERTS
supplied)

1. Dr. Victorino P. Espero Enviromental Science

Attachment II of NCC No. 53 prescribes the monthly rates allowed for officials/employees on
2. Dean Antonio Q. Repollo Silviculture
assignment to foreign- assisted special projects:
3. Prof. Artemio M. Rebugio Forestry Economics
4. Ms. Naomenida Olermo Soils
5. Dr. Elvira R. Castillo Social Forestry A. Position Level — Project Manager/Project
6. Dr. Alfredo F. Aquino Management Director
7. Dr. Lydio Calonge Horticulture
8. Engr. Manolito Bernabe Engineering
Responsibility — . . .
9. Dr. Elmer C. Vingua Animal Science
10. Prof. Rolando J. Andico Systems Analysts
Programming Parttime — P2,000.00
11. Dr. Eusebio Miclat, Jr. Statistics/
Instrumentation
B. Position Level — Assistant Project
12. Dr. Porferio Basilio Shoreline Resources
Director
13. Dr. Rufino O. Eslao Policy Administration

Responsibility — . . .
who, together with six (6) staff members namely Henedina M. Tantoco, Alicia Angelo Yolanda
Z. Sotelo, Gregoria Q. Calela, Nora A. Caburnay and Marlene S. Bernebe composed the
evaluation project team. At this point, it should be pointed out that the " Budget Estimate even Parttime — P1,500.00
provides a duration for the participation of each and every person whether rendering expert
or support services.
C. Position Level — Project Consultant

 
Responsibility — . . .

On the other hand, NCC No. 53 provides:

Parttime — P1,000.00

3.3.1 The approved 0rganization and staffing shall be valid up to project completion
except for modifications deemed necessary by the Project Manager. The Project D. Position Level — Supervisor/Senior Staff
Manager shall be given the flexibility to determine the timing of hiring Member
personnel provided the approved man-years for a given position for the duration of
the project is not exceeded. Responsibility — . . .

xxx xxx xxx Parttime — P1,000.00

3.6 A regular employee who may detailed to any FAPs on a part-time basis shall E. Position Level — Staff Member
be entitled to receive honoraria in accordance with the schedule shown in
Attachment II hereof.
Responsibility — . . .

xxx xxx xxx

Parttime — P700.00
 Administrative and Clerical Support WHEREFORE, for all the foregoing, the Petition for Certiorari is hereby GRANTED. COA
Decisions Nos. 1547 and 2571, respectively dated 18 September 1990 and 16 November
1992, are hereby SET ASIDE. The instant evaluation project being a Foreign-Assisted
A. Position Level — Administrative Assistant
Project, the following PSU personnel involved in the project shall be paid according to the
Budget Estimate schedule of the MOA as aligned with NCC No. 53:
Responsibility — . . .
A. A. For Experts
Parttime — P500.00
Duration Rate/
B. Position Level — Administrative Support Expert of month Total
Staff Service (NCC 
(mo.) No. 53)
Responsibility — . . .
1. Dr. Rufino O. Eslao Policy/Admi- 4 P2,000 P8,000 nistrative
expert*-
Parttime — P400.00 2. Dr. Victorino P. Espero Ecologist** 4 1,500 6,000
3. Dean Antonio Q. Repollo Silvicul- 3 1,000 3,000
From the clear and detailed provisions of the MOA and Project Proposal in relation to NCC No. 53, turist***
consent to any extension of the evaluation project, in this instance, must be more concrete than the 4. Prof. Artemio M. Rebugio Forestry 4 1,000 4,000
alleged silence or lack of protest on the part of the DENR. Although tacit acceptance is recognized in Economist
our jurisdiction, 24 as a rule, silence is not equivalent to consent since its ambiguity lends itself to error. 5. Ms. Naomenida Olermo Soils Expert 2 1,000 2,000
And although under the Civil Code there are instances when silence amounts to consent, 25 these 6. Dr. Elvira R. Castillo Social 4 1,000 4,000
circumstances are wanting in the case at bar. Furthermore, as correctly pointed out by the respondent Forestry
COA, the date when the DENR accepted the final project report is by no means conclusive as to the Expert
terminal date of the evaluation project. Examination of the MOA (quoted earlier on pages 19-20) reveals 7. Dr. Alfredo F. Aquino Management 2 1,000 2,000
that the submission of reports merely served to trigger the phased releases of funds. There being no Expert
explicit agreement between PSU and the DENR to extend the duration of the evaluation project, the 8. Dr. Lydio Calonge Horticul 2 1,000 2,000
MOA's "Budget Estimate" which, among others, provides in detail the duration of service for each turist
member of the evaluation project as amended by the rates provided by NCC No. 53 must be the basis 9. Engr. Manolito Bernabe Agricultural 2 1,000 2,000
of the honoraria due to the evaluation team. Engineer
10. Prof. Rolando J. Andico Systems 2 1,000 2,000
Analysts/
The other arguments of respondent COA appear to us to be insubstantial and as, essentially, Programmer
afterthoughts. The COA apparently does not agree with the policy basis of NCC No. 53 in 11. Dr. Eusebio Miclat, Jr. Statistician 2 1,000 2,000
relation to CPG No. 80-4 since COA argues that loan proceeds regardless of source 12. Dr. Porferio Basilio Shoreline 2 1,000 2,000
eventually become public funds for which the government is accountable. The result would Resources
be that any provisions under any [foreign] loan agreement should be considered locally- Expert
funded. We do not consider that the COA is, under its constitutional mandate, authorized to 13. Dr. Elmer C. Vingua Animal 2 1,000 2,000
substitute its own judgment for any applicable law or administrative regulation with the Science
wisdom or propriety of which, however, it does not agree, at least not before such law or Specialist
regulation is set aside by the authorized agency of government — i.e., the courts — as
unconstitutional or illegal and void. The COA, like all other government agencies, must
respect the presumption of legality and constitutionality to which statutes and administrative 41,000
regulations are entitled 26 until such statute or regulation is repealed or amended, or until set ———
aside in an appropriate case by a competent court (and ultimately this Court).
* Project Manager/ Project Director
Finally, we turn to petitioner's claim for moral damages and reimbursement of legal expenses. ** Assistant Project Director
We consider that this claim cannot be granted as petitioner has failed to present evidence of *** Project Consultants
bad faith or tortious intent warranting an award thereof. The presumption of regularity in the
performance of duty must be accorded to respondent COA; its action should be seen as its B. For Support Staff
effort to exercise (albeit erroneously, in the case at bar) its constitutional power and duty in
respect of uses of government funds and properties.
Duration Rate/
Expert of month Total
 Service (NCC  prohibited foreign nationals from engaging in the retail trade business. R.A. 8762 now allows them to do
(mo.) No. 53) so under four categories:

1 Henedina M. Tantoco Research 4 700 2,800 Category A Less than  Exclusively for Filipino citizens and corpo
Associate** US$2,500,000.00 by Filipino citizens.
2 Alicia Angelo Research 4 700 2,800
3 Yolanda Z. Sotelo Documentalist 2.04 700 1,428 Category B US$2,500,000.00 up but less than For the first two years of R.A. 8762’s effe
4 Gregoria Q. Calela Special 4 700 2,800 US$7,500,000.00 ownership is allowed up to 60%. After the
Disbursing 100% foreign equity shall be allowed.
Officer
5 Nora A. Caburnay Typist 2.27 500 1,135 Category C US$7,500,000.00 or more May be wholly owned by foreigners. Fore
6 Marlene S. Bernebe Cashier 2.27 500 1,135 establishing a store in Categories B and C
than the equivalent in Philippine Pesos of
——— Category D US$250,000.00 per store of foreign May be wholly owned by foreigners.
12,098 enterprises specializing in high-end or
luxury products
* Per Attachment to DBM Clarification dated 10
November 1989, Rollo, p. 59.
** Staff Member R.A. 8762 also allows natural-born Filipino citizens, who had lost their citizenship and now reside in the
*** Administrative Assistants. Philippines, to engage in the retail trade business with the same rights as Filipino citizens.

No pronouncement as to costs. On October 11, 2000 petitioners ***Magtanggol T. Gunigundo I, Michael T. Defensor, Gerardo S.
Espina, Benjamin S. Lim, Orlando Fua, Jr., Prospero Amatong, Sergio Apostol, Robert Ace S. Barbers,
Enrique Garcia, Jr., Raul M. Gonzales, Jaime Jacob, Apolinario Lozada, Jr., Leonardo Montemayor,
SO ORDERED. Ma. Elena Palma-Gil, Prospero Pichay, Juan Miguel Zubiri and Franklin Bautista, all members of the
House of Representatives, filed the present petition, assailing the constitutionality of R.A. 8762 on the
G.R. No. 143855               September 21, 2010 following grounds:

REPRESENTATIVES GERARDO S. ESPINA, ORLANDO FUA, JR., PROSPERO AMATONG, First, the law runs afoul of Sections 9, 19, and 20 of Article II of the Constitution which enjoins
ROBERT ACE S. BARBERS, RAUL M. GONZALES, PROSPERO PICHAY, JUAN MIGUEL ZUBIRI the State to place the national economy under the control of Filipinos to achieve equal
and FRANKLIN BAUTISTA,Petitioners,  distribution of opportunities, promote industrialization and full employment, and protect
vs. Filipino enterprise against unfair competition and trade policies.
HON. RONALDO ZAMORA, JR. (Executive Secretary), HON. MAR ROXAS (Secretary of Trade
and Industry), HON. FELIPE MEDALLA (Secretary of National Economic and Development Second, the implementation of R.A. 8762 would lead to alien control of the retail trade, which
Authority), GOV. RAFAEL BUENAVENTURA (Bangko Sentral ng Pilipinas) and HON. LILIA taken together with alien dominance of other areas of business, would result in the loss of
BAUTISTA (Chairman, Securities and Exchange Commission), Respondents. effective Filipino control of the economy.

DECISION
ABAD, J.:
This case calls upon the Court to exercise its power of judicial review and determine the
constitutionality of the Retail Trade Liberalization Act of 2000, which has been assailed as in breach of
the constitutional mandate for the development of a self-reliant and independent national economy
effectively controlled by Filipinos.
Third, foreign retailers like Walmart and K-Mart would crush Filipino retailers and sari-sari
store vendors, destroy self-employment, and bring about more unemployment.
Fourth, the World Bank-International Monetary Fund had improperly imposed the passage of
R.A. 8762 on the government as a condition for the release of certain loans.
Fifth, there is a clear and present danger that the law would promote monopolies or
combinations in restraint of trade.

The Facts and the Case Respondents Executive Secretary Ronaldo Zamora, Jr., Trade and Industry Secretary Mar Roxas,
National Economic and Development Authority (NEDA) Secretary Felipe Medalla, Bangko Sentral ng
On March 7, 2000 President Joseph E. Estrada signed into law Republic Act (R.A.) 8762, also known Pilipinas Gov. Rafael Buenaventura, and Securities and Exchange Commission Chairman Lilia Bautista
as the Retail Trade Liberalization Act of 2000. It expressly repealed R.A. 1180, which absolutely countered that:
 First, petitioners have no legal standing to file the petition. They cannot invoke the fact that
they are taxpayers since R.A. 8762 does not involve the disbursement of public funds. Nor
can they invoke the fact that they are members of Congress since they made no claim that
the law infringes on their right as legislators.
Second, the petition does not involve any justiciable controversy. Petitioners of course claim
that, as members of Congress, they represent the small retail vendors in their respective
districts but the petition does not allege that the subject law violates the rights of those
vendors.
They invoke the provisions of the Declaration of Principles and State Policies under Article II of the
1987 Constitution, which read as follows:
Section 9. The State shall promote a just and dynamic social order that will ensure the prosperity and
independence of the nation and free the people from poverty through policies that provide adequate
social services, promote full employment, a rising standard of living, and an improved quality of life for
all.
xxxx

Third, petitioners have failed to overcome the presumption of constitutionality of R.A. 8762.
Section 19. The State shall develop a self-reliant and independent national economy effectively
Indeed, they could not specify how the new law violates the constitutional provisions they
controlled by Filipinos.
cite. Sections 9, 19, and 20 of Article II of the Constitution are not self-executing provisions
that are judicially demandable.
Section 20. The State recognizes the indispensable role of the private sector, encourages private
enterprise, and provides incentives to needed investments.
Fourth, the Constitution mandates the regulation but not the prohibition of foreign
investments. It directs Congress to reserve to Filipino citizens certain areas of investments
upon the recommendation of the NEDA and when the national interest so dictates. But the Petitioners also invoke the provisions of the National Economy and Patrimony under Article XII of the
Constitution leaves to the discretion of the Congress whether or not to make such 1987 Constitution, which reads:
reservation. It does not prohibit Congress from enacting laws allowing the entry of foreigners
into certain industries not reserved by the Constitution to Filipino citizens.
Section 10. The Congress shall, upon recommendation of the economic and planning agency, when the
national interest dictates, reserve to citizens of the Philippines or to corporations or associations at least
The Issues Presented sixty per centum of whose capital is owned by such citizens, or such higher percentage as Congress
may prescribe, certain areas of investments. The Congress shall enact measures that will encourage
the formation and operation of enterprises whose capital is wholly owned by Filipinos.
Simplified, the case presents two issues:

In the grant of rights, privileges, and concessions covering the national economy and patrimony, the
1. Whether or not petitioner lawmakers have the legal standing to challenge the
State shall give preference to qualified Filipinos.
constitutionality of R.A. 8762; and

The State shall regulate and exercise authority over foreign investments within its national jurisdiction
2. Whether or not R.A. 8762 is unconstitutional.
and in accordance with its national goals and priorities.

The Court’s Ruling

xxxx

One. The long settled rule is that he who challenges the validity of a law must have a standing to do
Section 12. The State shall promote the preferential use of Filipino labor, domestic materials and locally
so.1 Legal standing or locus standi refers to the right of a party to come to a court of justice and make
produced goods, and adopt measures that help make them competitive.
such a challenge. More particularly, standing refers to his personal and substantial interest in that he
has suffered or will suffer direct injury as a result of the passage of that law.2 To put it another way, he
must show that he has been or is about to be denied some right or privilege to which he is lawfully Section 13. The State shall pursue a trade policy that serves the general welfare and utilizes all forms
entitled or that he is about to be subjected to some burdens or penalties by reason of the law he and arrangements of exchange on the basis of equality and reciprocity.
complains of.3
But, as the Court explained in Tañada v. Angara,7 the provisions of Article II of the 1987 Constitution,
Here, there is no clear showing that the implementation of the Retail Trade Liberalization Act prejudices the declarations of principles and state policies, are not self-executing. Legislative failure to pursue
petitioners or inflicts damages on them, either as taxpayers4 or as legislators.5 Still the Court will resolve such policies cannot give rise to a cause of action in the courts.
the question they raise since the rule on standing can be relaxed for nontraditional plaintiffs like
ordinary citizens, taxpayers, and legislators when as in this case the public interest so requires or the
The Court further explained in Tañada that Article XII of the 1987 Constitution lays down the ideals of
matter is of transcendental importance, of overarching significance to society, or of paramount public
economic nationalism: (1) by expressing preference in favor of qualified Filipinos in the grant of rights,
interest.6
privileges and concessions covering the national economy and patrimony and in the use of Filipino
labor, domestic materials and locally-produced goods; (2) by mandating the State to adopt measures
Two. Petitioners mainly argue that R.A. 8762 violates the mandate of the 1987 Constitution for the that help make them competitive; and (3) by requiring the State to develop a self-reliant and
State to develop a self-reliant and independent national economy effectively controlled by Filipinos. independent national economy effectively controlled by Filipinos.8ten.lihpwal
In other words, while Section 19, Article II of the 1987 Constitution requires the development of a self-
reliant and independent national economy effectively controlled by Filipino entrepreneurs, it does not
impose a policy of Filipino monopoly of the economic environment. The objective is simply to prohibit
foreign powers or interests from maneuvering our economic policies and ensure that Filipinos are given
preference in all areas of development.
Indeed, the 1987 Constitution takes into account the realities of the outside world as it requires the
pursuit of a trade policy that serves the general welfare and utilizes all forms and arrangements of
exchange on the basis of equality and reciprocity; and speaks of industries which are competitive in
both domestic and foreign markets as well as of the protection of Filipino enterprises against unfair
foreign competition and trade practices. Thus, while the Constitution mandates a bias in favor of Filipino
goods, services, labor and enterprises, it also recognizes the need for business exchange with the rest
of the world on the bases of equality and reciprocity and limits protection of Filipino enterprises only
against foreign competition and trade practices that are unfair.9
In other words, the 1987 Constitution does not rule out the entry of foreign investments, goods, and
services. While it does not encourage their unlimited entry into the country, it does not prohibit them
either. In fact, it allows an exchange on the basis of equality and reciprocity, frowning only on foreign
competition that is unfair.10 The key, as in all economies in the world, is to strike a balance between
protecting local businesses and allowing the entry of foreign investments and services.1avvphi1
More importantly, Section 10, Article XII of the 1987 Constitution gives Congress the discretion to
reserve to Filipinos certain areas of investments upon the recommendation of the NEDA and when the
national interest requires. Thus, Congress can determine what policy to pass and when to pass it
depending on the economic exigencies. It can enact laws allowing the entry of foreigners into certain
industries not reserved by the Constitution to Filipino citizens. In this case, Congress has decided to
open certain areas of the retail trade business to foreign investments instead of reserving them
exclusively to Filipino citizens. The NEDA has not opposed such policy.
The control and regulation of trade in the interest of the public welfare is of course an exercise of the
police power of the State. A person’s right to property, whether he is a Filipino citizen or foreign
national, cannot be taken from him without due process of law. In 1954, Congress enacted the Retail
Trade Nationalization Act or R.A. 1180 that restricts the retail business to Filipino citizens. In denying
the petition assailing the validity of such Act for violation of the foreigner’s right to substantive due
process of law, the Supreme Court held that the law constituted a valid exercise of police power.11 The
State had an interest in preventing alien control of the retail trade and R.A. 1180 was reasonably
related to that purpose. That law is not arbitrary.
Here, to the extent that R.A. 8762, the Retail Trade Liberalization Act, lessens the restraint on the
foreigners’ right to property or to engage in an ordinarily lawful business, it cannot be said that the law
amounts to a denial of the Filipinos’ right to property and to due process of law. Filipinos continue to
have the right to engage in the kinds of retail business to which the law in question has permitted the
entry of foreign investors.
Certainly, it is not within the province of the Court to inquire into the wisdom of R.A. 8762 save when it
blatantly violates the Constitution. But as the Court has said, there is no showing that the law has
contravened any constitutional mandate. The Court is not convinced that the implementation of R.A.
8762 would eventually lead to alien control of the retail trade business. Petitioners have not mustered
any concrete and strong argument to support its thesis. The law itself has provided strict safeguards on
foreign participation in that business. Thus –
First, aliens can only engage in retail trade business subject to the categories above-
enumerated; Second, only nationals from, or juridical entities formed or incorporated in countries which
allow the entry of Filipino retailers shall be allowed to engage in retail trade business; and Third,
qualified foreign retailers shall not be allowed to engage in certain retailing activities outside their
accredited stores through the use of mobile or rolling stores or carts, the use of sales representatives,
door-to-door selling, restaurants and sari-sari stores and such other similar retailing activities.
In sum, petitioners have not shown how the retail trade liberalization has prejudiced and can prejudice
the local small and medium enterprises since its implementation about a decade ago.
WHEREFORE, the Court DISMISSES the petition for lack of merit. No costs.
SO ORDERED.
G.R. No. L-32743 February 15, 1974
PRIMITIVO ESPIRITU and LEONORA A. DE ESPIRITU, petitioners, 
vs.
RICARDO CIPRIANO and THE COURT OF FIRST INSTANCE, RIZAL, BRANCH XV, respondents.
Concepcion, Victorino, Sanchez and Associates for petitioners.
Jose G. Ricardo for respondent Ricardo Cipriano.
ESGUERRA, J.:p
In this petition for certiorari, petitioners seek the review and nullification of two orders of the Court of
First Instance of Rizal, Branch XV, the first, dated August 4, 1970 sustaining private respondent
Ricardo Cipriano's motion to dismiss "on the authority of Republic Act 6126", and the second, dated
October 16, 1970, denying the motion for reconsideration of the first order. The question before Us
involves the retroactive application of the provisions of Republic Act 6126, otherwise known as the
Rental Law.
The case originated as one for unlawful detainer instituted on May 30, 1969, by plaintiffs, now
petitioners, in the Municipal Court of Pasig, Rizal, against private respondent Ricardo Cipriano for the
latter's alleged failure to pay rentals. An adverse judgment having been rendered against said
respondent, he appealed to the Court of First Instance of Rizal where the case was docketed as Civil
Case No. 338-M. In the said Court private respondent sought to amend his Answer filed in the
Municipal Court on the grounds that (1) for lack of time he was not able to disclose to his former
counsel all the material facts surrounding his case and, therefore, he was not able to fully determine his
defenses; and (2) that prior to the hearing of the case in the lower court he wanted to cause the filing of
an amended answer but was not able to do so for his alleged failure to contact his counsel. The motion
to file amended answer was denied by the Court. The parties eventually submitted a stipulation of facts,
the salient provisions of which read as follows:
1. The plaintiffs are the owners of the property in question, leased to the defendant
since 1954;
2. The house of the defendant was built on the property with the knowledge and
consent of the plaintiff pursuant to an oral contract of lease;
 3. Before 1969 the lease of the property was on year-to-year arrangement, rentals
being then payable at or before the end of the year;
4. The following are the rates of rentals:
(a) 1954 to 1957 P12.00 a year
(b) 1968 to 1959 P13.20 a year
(c) 1960 to 1961 P14.00 a year
(d) 1962 P16.00 a year
(e) 1963 to 1965 P24.70 a year
(f) 1967 to 1968 P48.00 a year
5. Effective January 1969 the lease was converted to a month-to-month basis and
rental was increased to P30.00 a month by the plaintiffs;
6. The defendant has remained in possession of the property up to the present;
7. Since January 1969 the defendant has not paid rental at the present monthly
rate;
8. A formal notice to vacate, dated March 22, 1969, was sent by registered mail to,
and received by, defendant.
On July 7, 1970, Judge Vivencio Ruiz of the Court of First Instance of Rizal issued an order giving
private respondent herein seven days within which to file his motion to dismiss. Subsequently, on July
13, 1970, respondent moved to dismiss petitioner's complaint, invoking the prohibitory provision of
Republic Act 6126, entitled "An Act To Regulate Rentals of Dwelling Units or of Land On Which
Another's Dwelling Is Located For One Year And Penalizing Violations Thereof.
Petitioners opposed the motion to dismiss but respondent Judge issued an order on August 4, 1970,
which reads:
On the Authority of Republic Act 6126, this Court hereby sustains the Motion for
Dismissal filed by the defendant through counsel, dated July 13, 1970.
A motion for reconsideration of said order was likewise denied by respondent Judge. Hence this
petition.
Thrust upon Us, therefore, for resolution is the problem of whether Republic Act 6126 may be held
applicable the case at bar. For convenience We reproduce the pertinent provisions of law in question:
Section 1. No lessor of a dwelling unit or of land on which another's dwelling is
located shall, during the period of one year from March 31, 1970, increase the
monthly rental agreed upon between the lessor and the lessee prior to the approval
of this Act when said rental does not exceed three hundred pesos (P300.00) a
month.
Section 6. This Act shall take effect upon its approval.
Approved June 17, 1970.
It is the contention of respondent which was upheld by the trial court that the case at bar is covered by
the aforecited law. We rule otherwise. Established and undisputed is the fact that the increase in the
rental of the lot involved was effected in January, 1969,1 while the law in question took effect on June
17, 1970, or after a period of one year and a half after the increase in rentals had been effected. Private
respondent, however, puts forward the argument that there was no perfected contract covering the
increased rate of rentals and conversion thereof into monthly payments of P30.00 effective January
1969, as he did not give his consent thereto. In his brief he alleges:
Defendant (respondent) herein also begs to disagree with the contention of
plaintiffs. We believe and respectfully submit that there would be no impairment of
obligation of contract if Republic Act 6126 were to be applied to the present case.
The alleged new contract of lease and subsequent increase in the amount of rental
were not effected as of January 1969 with respect to the defendant. He did not
accept the new rate of rental. The eloquent testimonies on record to show that
defendant never accepted the new rate of rental imposed upon him by the plaintiffs
were the pretrials on the case wherein defendant offered to accept the increase to
the tone of 100%. Hence, the new contract of lease increasing the rental had never
been agreed upon by both the plaintiffs and the defendant because the defendant
never gave his consent to the new rate of rental. In effect, therefore, the alleged
new contract of lease was not a contract at all since it did not have the consent of
the other party, the defendant.
Private respondent's contention is devoid of merit. There is nothing in the stipulation of facts to show
that his consent to the increase in rentals and change in the manner of payment was essential to its
validity. There was no more subsisting yearly contract of lease at a fixed amount. It had already expired
when the increase and conversion into monthly payments took effect in January, 1969. The lessor was
free to fix a higher amount than that previously paid by the lessee (private respondent herein) and if the
latter did not agree to the increased amount, he could have vacated the premises and thus rendered
himself free from liability. Respondent Cipriano, therefore, cannot invoke lack of consent on his part as
basis for declaring the contract of lease ineffective.
Likewise the claim of private respondent that the act is remedial and may, therefore, be given
retroactive effect is untenable. A close study of the provisions discloses that far from being remedial,
the statute affects substantive rights and hence a strict and prospective construction thereof is in order.
Article 4 of the New Civil Code ordains that laws shall have no retroactive effect unless the contrary is
provided and that where the law is clear, Our duty is equally plain. We must apply it to the facts as
found.2 The law being a "temporary measure designed to meet a temporary situation",3 it had a limited
period of operation as in fact it was so worded in clear and unequivocal language that "No lessor of a
dwelling unit or land ... shall, during the period of one year from March 31, 1970, increase the monthly
rental agreed upon between the lessor and lessee prior to the approval of this Act." Hence the
prohibition against the increase in rentals was effective on March, 1970, up to March, 1971. Outside
and beyond that period, the law did not, by the express mandate of the Act itself, operate. The said law,
did not, by its express terms, purport to give a retroactive operation. It is a well-established rule of
statutory construction that "Expressium facit cessare tacitum"4 and, therefore, no reasonable implication
that the Legislature ever intended to give the law in question a retroactive effect may be accorded to the
same. A perusal of the deliberations of Congress on House Bill 953 which became Republic Act No.
6126, as recorded its Congressional Records of March 5, 1970 reveals the sponsors of the Rental Law
did not entertain for a moment that a retroactive operation would be given to this enactment. We quote
pertinent portions of the discussion:
Remarks of sponsor, Mr. Roces:
Mr. Roces — Mr. Speaker, the President is still observing the effect of the newly
established floating rate. In the meantime we feel that, in line with the policy that
those who have less in life should have more in law, apartment dwellers are
entitled to protection. Therefore this bill proposes that the rentals paid today will not
be increased in the next 18 months.
Under the circumstances of this case, We, therefore, rule that Republic Act 6126 is not applicable to the
case at bar. As the language of the law is clear and unambiguous, it must be held to mean what it
plainly says.
WHEREFORE, the assailed orders of August 4 and October 16, 1970, are hereby nullified and set
aside. The court a quo shall proceed with the prompt disposition of Civil Case No. 338-M (12285) on
the merits in accordance with Republic Act 6031 if applicable, otherwise under the prevailing procedure
prescribed by the Rules of Court.
Costs against respondent.
G.R. No. 172642               June 13, 2012

and on pages 66 and 72 respectively of the same Congressional Record We likewise find the following:
ESTATE OF NELSON R. DULAY, represented by his wife MERRIDY JANE P. DULAY, Petitioner, 
vs.
Mr. Gonzales — Will the gentleman from Manila interpret for us the phrase "during ABOITIZ JEBSEN MARITIME, INC. and GENERAL CHARTERERS, INC., Respondents.
the period of 6 months preceding the approval of this Act" in Section 2?5
DECISION
Mr. Roces. — My interpretation is that the rent being paid during that period not
before will be the one considered.
PERALTA, J.:

Mr. Montano — ... The term moratorium as utilized by the gentleman from Manila
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to
at the start of his sponsorship was applied not in its legal acceptance but generally.
reverse and set aside the Decision1 and Resolution2 dated July 11, 2005 and April 18, 2006 of the Court
For purposes of the bill, the term is construed as suspension of increasing rents in
of Appeals (CA) in CA-G.R. SP No. 76489.
the meantime that we have not yet determined the real value of the currency ... .

Respondent's tenacious insistence On the retroactive operation of Republic Act 6126 represents a last
ditch effort on his part to hold on to the premises while at the same time escaping the obligation to pay
the increased rate. We can not countenance such a situation, for to permit the same to obtain would be
sanctioning a sheer absurdity and causing injustice to the petitioner herein. Well-settled is the principle
that while the Legislature has the power to pass retroactive laws which do not impair the obligation of
contracts, or affect injuriously vested rights, it is equally true that statutes are not to be construed as
intended to have a retroactive effect so as to affect pending proceedings, unless such intent in
expressly declared or clearly and necessarily implied from the language of the enactment,6Similarly, in
the case of La Previsora Filipina, Mutual Building and Loan Association v. Felix Ledda, 66 Phil. 573,
577, this Court said:
It is a principle generally recognized that civil laws have no retroactive effect unless
it is otherwise provided therein (Manila Trading & Supply Co. v. Santos, G.R. No.
43861). Act No. 4118 does not state that its provisions shall have retroactive effect,
wherefore, it follows, as it is hereby declared, that it is not applicable to the
contracts entered into by the parties, and, hence the trial court erred in granting
possession to the petitioner.
The factual and procedural antecedents of the case, as summarized by the CA, are as follows:
Nelson R. Dulay (Nelson, for brevity) was employed by [herein respondent] General Charterers Inc.
(GCI), a subsidiary of co-petitioner [herein co-respondent] Aboitiz Jebsen Maritime Inc. since 1986. He
initially worked as an ordinary seaman and later as bosun on a contractual basis. From September 3,
1999 up to July 19, 2000, Nelson was detailed in petitioners’ vessel, the MV Kickapoo Belle.
On August 13, 2000, or 25 days after the completion of his employment contract, Nelson died due to
acute renal failure secondary to septicemia. At the time of his death, Nelson was a bona fide member of
the Associated Marine Officers and Seaman’s Union of the Philippines (AMOSUP), GCI’s collective
bargaining agent. Nelson’s widow, Merridy Jane, thereafter claimed for death benefits through the
grievance procedure of the Collective Bargaining Agreement (CBA) between AMOSUP and GCI.
However, on January 29, 2001, the grievance procedure was "declared deadlocked" as petitioners
refused to grant the benefits sought by the widow.
On March 5, 2001, Merridy Jane filed a complaint with the NLRC Sub-Regional Arbitration Board in
General Santos City against GCI for death and medical benefits and damages.

The petitioner contends that said law is applicable because when the property in
On March 8, 2001, Joven Mar, Nelson’s brother, received ₱20,000.00 from [respondents] pursuant to
question was sold at public auction said law was already in force. This contention is
article 20(A)2 of the CBA and signed a "Certification" acknowledging receipt of the amount and
in our opinion untenable. The date which should be taken into account in order to
releasing AMOSUP from further liability. Merridy Jane contended that she is entitled to the aggregate
determine the applicability of the law is the date when the contracts were entered
sum of Ninety Thousand Dollars ($90,000.00) pursuant to [A]rticle 20 (A)1 of the CBA x x x
into by the parties and not the date of the public sale, ... .

xxxx
Merridy Jane averred that the P20,000.00 already received by Joven Mar should be considered
advance payment of the total claim of US$90,000.[00].
[Herein respondents], on the other hand, asserted that the NLRC had no jurisdiction over the action on
account of the absence of employer-employee relationship between GCI and Nelson at the time of the
latter’s death. Nelson also had no claims against petitioners for sick leave allowance/medical benefit by
reason of the completion of his contract with GCI. They further alleged that private respondent is not
entitled to death benefits because petitioners are only liable for such "in case of death of the seafarer
during the term of his contract pursuant to the POEA contract" and the cause of his death is not work-
related. Petitioners admitted liability only with respect to article 20(A)2 [of the CBA]. x x x
xxxx
However, as petitioners stressed, the same was already discharged.
The Labor Arbiter ruled in favor of private respondent. It took cognizance of the case by virtue of Article
217 (a), paragraph 6 of the Labor Code and the existence of a reasonable causal connection between
the employer-employee relationship and the claim asserted. It ordered the petitioner to pay
₱4,621,300.00, the equivalent of US$90,000.00 less ₱20,000.00, at the time of judgment x x x
xxxx
The Labor Arbiter also ruled that the proximate cause of Nelson’s death was not work-related.
On appeal, [the NLRC] affirmed the Labor Arbiter’s decision as to the grant of death benefits under the
CBA but reversed the latter’s ruling as to the proximate cause of Nelson’s death.3
Herein respondents then filed a special civil action for certiorari with the CA contending that the NLRC
committed grave abuse of discretion in affirming the jurisdiction of the NLRC over the case; in ruling
that a different provision of the CBA covers the death claim; in reversing the findings of the Labor
Arbiter that the cause of death is not work-related; and, in setting aside the release and quitclaim
executed by the attorney-in-fact and not considering the P20,000.00 already received by Merridy Jane
through her attorney-in-fact.
On July 11, 2005, the CA promulgated its assailed Decision, the dispositive portion of which reads as
follows:
WHEREFORE, in view of the foregoing, the petition is hereby GRANTED and the case is REFERRED
to the National Conciliation and Mediation Board for the designation of the Voluntary Arbitrator or the
constitution of a panel of Voluntary Arbitrators for the appropriate resolution of the issue on the matter
of the applicable CBA provision.
SO ORDERED.4
The CA ruled that while the suit filed by Merridy Jane is a money claim, the same basically involves the
interpretation and application of the provisions in the subject CBA. As such, jurisdiction belongs to the
voluntary arbitrator and not the labor arbiter.
Petitioner filed a Motion for Reconsideration but the CA denied it in its Resolution of April 18, 2006.
Hence, the instant petition raising the sole issue of whether or not the CA committed error in ruling that
the Labor Arbiter has no jurisdiction over the case.
Petitioner contends that Section 10 of Republic Act (R.A.) 8042, otherwise known as the Migrant
Workers and Overseas Filipinos Act of 1995, vests jurisdiction on the appropriate branches of the
NLRC to entertain disputes regarding the interpretation of a collective bargaining agreement involving
migrant or overseas Filipino workers. Petitioner argues that the abovementioned Section amended
Article 217 (c) of the Labor Code which, in turn, confers jurisdiction upon voluntary arbitrators over
interpretation or implementation of collective bargaining agreements and interpretation or enforcement
of company personnel policies.
The pertinent provisions of Section 10 of R.A. 8042 provide as follows:
SEC. 10. Money Claims. - Notwithstanding any provision of law to the contrary, the Labor Arbiters of
the National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to
hear and decide, within ninety (90) calendar days after filing of the complaint, the claims arising out of
an employer-employee relationship or by virtue of any law or contract involving Filipino workers for
overseas deployment including claims for actual, moral, exemplary and other forms of damages.
Article 217(c) of the Labor Code, on the other hand, states that:
xxxx
(c) Cases arising from the interpretation or implementation of collective bargaining
agreements and those arising from the interpretation or enforcement of company personnel
policies shall be disposed by the Labor Arbiter by referring the same to the grievance
machinery and voluntary arbitration as may be provided in said agreements.
On their part, respondents insist that in the present case, Article 217, paragraph (c) as well as Article
261 of the Labor Code remain to be the governing provisions of law with respect to unresolved
grievances arising from the interpretation and implementation of collective bargaining agreements.
Under these provisions of law, jurisdiction remains with voluntary arbitrators.
Article 261 of the Labor Code reads, thus:
ARTICLE 261. Jurisdiction of Voluntary Arbitrators or panel of Voluntary Arbitrators. – The Voluntary
Arbitrator or panel of Voluntary Arbitrators shall have original and exclusive jurisdiction to hear and
decide all unresolved grievances arising from the interpretation or implementation of the Collective
Bargaining Agreement and those arising from the interpretation or enforcement of company personnel
policies referred to in the immediately preceding article. Accordingly, violations of a Collective
Bargaining Agreement, except those which are gross in character, shall no longer be treated as unfair
labor practice and shall be resolved as grievances under the Collective Bargaining Agreement. For
purposes of this article, gross violations of Collective Bargaining Agreement shall mean flagrant and/or
malicious refusal to comply with the economic provisions of such agreement.
The Commission, its Regional Offices and the Regional Directors of the Department of Labor and
Employment shall not entertain disputes, grievances or matters under the exclusive and original
jurisdiction of the Voluntary Arbitrator or panel of Voluntary Arbitrators and shall immediately dispose
and refer the same to the Grievance Machinery or Voluntary Arbitration provided in the Collective
Bargaining Agreement.
The petition is without merit. option submit the claim or dispute to either the original and exclusive jurisdiction of the National Labor
Relations Commission (NLRC), pursuant to Republic Act (RA) 8042, otherwise known as the Migrant
Workers and Overseas Filipinos Act of 1995 or to the original and exclusive jurisdiction of the voluntary
It is true that R.A. 8042 is a special law governing overseas Filipino workers. However, a careful
arbitrator or panel of arbitrators. If there is no provision as to the voluntary arbitrators to be appointed by
reading of this special law would readily show that there is no specific provision thereunder which
the parties, the same shall be appointed from the accredited voluntary arbitrators of the National
provides for jurisdiction over disputes or unresolved grievances regarding the interpretation or
Conciliation and Mediation Board of the Department of Labor and Employment.
implementation of a CBA. Section 10 of R.A. 8042, which is cited by petitioner, simply speaks, in
general, of "claims arising out of an employer-employee relationship or by virtue of any law or contract
involving Filipino workers for overseas deployment including claims for actual, moral, exemplary and The Philippine Overseas Employment Administration (POEA) shall exercise original and exclusive
other forms of damages." On the other hand, Articles 217(c) and 261 of the Labor Code are very jurisdiction to hear and decide disciplinary action on cases, which are administrative in character,
specific in stating that voluntary arbitrators have jurisdiction over cases arising from the interpretation or involving or arising out of violations of recruitment laws, rules and regulations involving employers,
implementation of collective bargaining agreements. Stated differently, the instant case involves a principals, contracting partners and Filipino seafarers. (Emphasis supplied)
situation where the special statute (R.A. 8042) refers to a subject in general, which the general statute
(Labor Code) treats in particular.5 In the present case, the basic issue raised by Merridy Jane in her
It is clear from the above that the interpretation of the DOLE, in consultation with their counterparts in
complaint filed with the NLRC is: which provision of the subject CBA applies insofar as death benefits
the respective committees of the Senate and the House of Representatives, as well as the DFA and the
due to the heirs of Nelson are concerned. The Court agrees with the CA in holding that this issue
POEA is that with respect to disputes involving claims of Filipino seafarers wherein the parties are
clearly involves the interpretation or implementation of the said CBA. Thus, the specific or special
covered by a collective bargaining agreement, the dispute or claim should be submitted to the
provisions of the Labor Code govern.
jurisdiction of a voluntary arbitrator or panel of arbitrators. It is only in the absence of a collective
bargaining agreement that parties may opt to submit the dispute to either the NLRC or to voluntary
In any case, the Court agrees with petitioner's contention that the CBA is the law or contract between arbitration. It is elementary that rules and regulations issued by administrative bodies to interpret the
the parties. Article 13.1 of the CBA entered into by and between respondent GCI and AMOSUP, the law which they are entrusted to enforce, have the force of law, and are entitled to great respect.8 Such
union to which petitioner belongs, provides as follows: rules and regulations partake of the nature of a statute and are just as binding as if they have been
written in the statute itself.9 In the instant case, the Court finds no cogent reason to depart from this
rule.1âwphi1
The Company and the Union agree that in case of dispute or conflict in the interpretation or
application of any of the provisions of this Agreement, or enforcement of Company policies, the
same shall be settled through negotiation, conciliation or voluntary arbitration. The Company The above interpretation of the DOLE, DFA and POEA is also in consonance with the policy of the state
and the Union further agree that they will use their best endeavor to ensure that any dispute will be to promote voluntary arbitration as a mode of settling labor disputes.10
discussed, resolved and settled amicably by the parties hereof within ninety (90) days from the date of
filing of the dispute or conflict and in case of failure to settle thereof any of the parties retain their
No less than the Philippine Constitution provides, under the third paragraph, Section 3, Article XIII,
freedom to take appropriate action.6 (Emphasis supplied)
thereof that "[t]he State shall promote the principle of shared responsibility between workers and
employers and the preferential use of voluntary modes in settling disputes, including conciliation, and
From the foregoing, it is clear that the parties, in the first place, really intended to bring to conciliation or shall enforce their mutual compliance therewith to foster industrial peace."
voluntary arbitration any dispute or conflict in the interpretation or application of the provisions of their
CBA. It is settled that when the parties have validly agreed on a procedure for resolving grievances and
Consistent with this constitutional provision, Article 211 of the Labor Code provides the declared policy
to submit a dispute to voluntary arbitration then that procedure should be strictly observed.7
of the State "[t]o promote and emphasize the primacy of free collective bargaining and negotiations,
including voluntary arbitration, mediation and conciliation, as modes of settling labor or industrial
It may not be amiss to point out that the abovequoted provisions of the CBA are in consonance with disputes."
Rule VII, Section 7 of the present Omnibus Rules and Regulations Implementing the Migrant Workers
and Overseas Filipinos Act of 1995, as amended by Republic Act No. 10022, which states that "[f]or
On the basis of the foregoing, the Court finds no error in the ruling of the CA that the voluntary arbitrator
OFWs with collective bargaining agreements, the case shall be submitted for voluntary arbitration in
has jurisdiction over the instant case.
accordance with Articles 261 and 262 of the Labor Code." The Court notes that the said Omnibus Rules
and Regulations were promulgated by the Department of Labor and Employment (DOLE) and the
Department of Foreign Affairs (DFA) and that these departments were mandated to consult with the WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of Appeals in CA-
Senate Committee on Labor and Employment and the House of Representatives Committee on G.R. SP No. 76489 dated July 11, 2005 and April 18, 2006, respectively, are AFFIRMED.
Overseas Workers Affairs.
SO ORDERED.
In the same manner, Section 29 of the prevailing Standard Terms and Conditions Governing the
Employment of Filipino Seafarers on Board Ocean Going Vessels, promulgated by the Philippine
G.R. No. 148560               November 19, 2001
Overseas Employment Administration (POEA), provides as follows:

JOSEPH EJERCITO ESTRADA, petitioner, 

Section 29. Dispute Settlement Procedures. − In cases of claims and disputes arising from this
vs.
employment, the parties covered by a collective bargaining agreement shall submit the claim or
SANDIGANBAYAN (Third Division) and PEOPLE OF THE PHILIPPINES, respondents.
dispute to the original and exclusive jurisdiction of the voluntary arbitrator or panel of
arbitrators. If the parties are not covered by a collective bargaining agreement, the parties may at their
 DECISION
BELLOSILLO, J.:
JOHN STUART MILL, in his essay On Liberty, unleashes the full fury of his pen in defense of the rights
of the individual from the vast powers of the State and the inroads of societal pressure. But even as he
draws a sacrosanct line demarcating the limits on individuality beyond which the State cannot tread -
asserting that "individual spontaneity" must be allowed to flourish with very little regard to social
interference - he veritably acknowledges that the exercise of rights and liberties is imbued with a civic
obligation, which society is justified in enforcing at all cost, against those who would endeavor to
withhold fulfillment. Thus he says -
The sole end for which mankind is warranted, individually or collectively, in interfering with the liberty of
action of any of their number, is self-protection. The only purpose for which power can be rightfully
exercised over any member of a civilized community, against his will, is to prevent harm to others.
Parallel to individual liberty is the natural and illimitable right of the State to self-preservation. With the
end of maintaining the integrity and cohesiveness of the body politic, it behooves the State to formulate
a system of laws that would compel obeisance to its collective wisdom and inflict punishment for non-
observance.
The movement from Mill's individual liberalism to unsystematic collectivism wrought changes in the
social order, carrying with it a new formulation of fundamental rights and duties more attuned to the
imperatives of contemporary socio-political ideologies. In the process, the web of rights and State
impositions became tangled and obscured, enmeshed in threads of multiple shades and colors, the
skein irregular and broken. Antagonism, often outright collision, between the law as the expression of
the will of the State, and the zealous attempts by its members to preserve their individuality and dignity,
inevitably followed. It is when individual rights are pitted against State authority that judicial conscience
is put to its severest test.
Petitioner Joseph Ejercito Estrada, the highest-ranking official to be prosecuted under RA 7080 (An Act
Defining and Penalizing the Crime of Plunder),1 as amended by RA 7659,2 wishes to impress upon us
that the assailed law is so defectively fashioned that it crosses that thin but distinct line which divides
the valid from the constitutionally infirm. He therefore makes a stringent call for this Court to subject the
Plunder Law to the crucible of constitutionality mainly because, according to him, (a) it suffers from the
vice of vagueness; (b) it dispenses with the "reasonable doubt" standard in criminal prosecutions; and,
(c) it abolishes the element of mens rea in crimes already punishable under The Revised Penal
Code, all of which are purportedly clear violations of the fundamental rights of the accused to due
process and to be informed of the nature and cause of the accusation against him.
Specifically, the provisions of the Plunder Law claimed by petitioner to have transgressed constitutional
boundaries are Secs. 1, par. (d), 2 and 4 which are reproduced hereunder:
Section 1. x x x x (d) "Ill-gotten wealth" means any asset, property, business, enterprise or material
possession of any person within the purview of Section Two (2) hereof, acquired by him directly or
indirectly through dummies, nominees, agents, subordinates and/or business associates by any
combination or series of the following means or similar schemes:
(1) Through misappropriation, conversion, misuse, or malversation of public funds or raids on
the public treasury;
(2) By receiving, directly or indirectly, any commission, gift, share, percentage, kickbacks or
any other form of pecuniary benefit from any person and/or entity in connection with any
government contract or project or by reason of the office or position of the public office
concerned;
(3) By the illegal or fraudulent conveyance or disposition of assets belonging to the National
Government or any of its subdivisions, agencies or instrumentalities, or government owned or
controlled corporations and their subsidiaries;
(4) By obtaining, receiving or accepting directly or indirectly any shares of stock, equity or any
other form of interest or participation including the promise of future employment in any
business enterprise or undertaking;
(5) By establishing agricultural, industrial or commercial monopolies or other combinations
and/or implementation of decrees and orders intended to benefit particular persons or special
interests; or
(6) By taking advantage of official position, authority, relationship, connection or influence to
unjustly enrich himself or themselves at the expense and to the damage and prejudice of the
Filipino people and the Republic of the Philippines.
Section 2. Definition of the Crime of Plunder, Penalties. - Any public officer who, by himself or in
connivance with members of his family, relatives by affinity or consanguinity, business associates,
subordinates or other persons, amasses, accumulates or acquires ill-gotten wealth through
a combination or series of overt or criminal acts as described in Section 1 (d) hereof, in the
aggregate amount or total value of at least fifty million pesos (P50,000,000.00) shall be guilty of the
crime of plunder and shall be punished by reclusion perpetua to death. Any person who participated
with the said public officer in the commission of an offense contributing to the crime of plunder shall
likewise be punished for such offense. In the imposition of penalties, the degree of participation and the
attendance of mitigating and extenuating circumstances as provided by the Revised Penal Code shall
be considered by the court. The court shall declare any and all ill-gotten wealth and their interests and
other incomes and assets including the properties and shares of stocks derived from the deposit or
investment thereof forfeited in favor of the State (underscoring supplied).
Section 4. Rule of Evidence. - For purposes of establishing the crime of plunder, it shall not be
necessary to prove each and every criminal act done by the accused in furtherance of the
scheme or conspiracy to amass, accumulate or acquire ill-gotten wealth, it being sufficient to
establish beyond reasonable doubt a pattern of overt or criminal acts indicative of the overall
unlawful scheme or conspiracy (underscoring supplied).
On 4 April 2001 the Office of the Ombudsman filed before the Sandiganbayan eight (8) separate
Informations, docketed as: (a) Crim. Case No. 26558, for violation of RA 7080, as amended by RA
7659; (b) Crim. Cases Nos. 26559 to 26562, inclusive, for violation of Secs. 3, par. (a), 3, par. (a), 3,
par. (e) and 3, par. (e), of RA 3019 (Anti-Graft and Corrupt Practices Act), respectively; (c) Crim. Case
No. 26563, for violation of Sec. 7, par. (d), of RA 6713 (The Code of Conduct and Ethical Standards for
Public Officials and Employees); (d) Crim. Case No. 26564, for Perjury (Art. 183 of The Revised Penal
Code); and, (e) Crim. Case No. 26565, for Illegal Use Of An Alias (CA No. 142, as amended by RA
6085).
On 11 April 2001 petitioner filed an Omnibus Motion for the remand of the case to the Ombudsman for
preliminary investigation with respect to specification "d" of the charges in the Information in Crim. Case
No. 26558; and, for reconsideration/reinvestigation of the offenses under specifications "a," "b," and "c"
to give the accused an opportunity to file counter-affidavits and other documents necessary to prove petitioner has miserably failed in the instant case to discharge his burden and overcome the
lack of probable cause. Noticeably, the grounds raised were only lack of preliminary investigation, presumption of constitutionality of the Plunder Law.
reconsideration/reinvestigation of offenses, and opportunity to prove lack of probable cause. The
purported ambiguity of the charges and the vagueness of the law under which they are charged were
As it is written, the Plunder Law contains ascertainable standards and well-defined parameters which
never raised in that Omnibus Motion thus indicating the explicitness and comprehensibility of the
would enable the accused to determine the nature of his violation. Section 2 is sufficiently explicit in its
Plunder Law.
description of the acts, conduct and conditions required or forbidden, and prescribes the elements of
the crime with reasonable certainty and particularity. Thus -
On 25 April 2001 the Sandiganbayan, Third Division, issued a Resolution in Crim. Case No. 26558
finding that "a probable cause for the offense of PLUNDER exists to justify the issuance of warrants for
1. That the offender is a public officer who acts by himself or in connivance with members of
the arrest of the accused." On 25 June 2001 petitioner's motion for reconsideration was denied by the
his family, relatives by affinity or consanguinity, business associates, subordinates or other
Sandiganbayan.
persons;

On 14 June 2001 petitioner moved to quash the Information in Crim. Case No. 26558 on the ground
2. That he amassed, accumulated or acquired ill-gotten wealth through a combination or
that the facts alleged therein did not constitute an indictable offense since the law on which it was
series of the following overt or criminal acts: (a) through misappropriation, conversion,
based was unconstitutional for vagueness, and that the Amended Information for Plunder charged more
misuse, or malversation of public funds or raids on the public treasury; (b) by receiving,
than one (1) offense. On 21 June 2001 the Government filed its Opposition to the Motion to Quash, and
directly or indirectly, any commission, gift, share, percentage, kickback or any other form of
five (5) days later or on 26 June 2001 petitioner submitted his Reply to the Opposition. On 9 July 2001
pecuniary benefits from any person and/or entity in connection with any government contract
the Sandiganbayan denied petitioner's Motion to Quash.
or project or by reason of the office or position of the public officer; (c) by the illegal or
fraudulent conveyance or disposition of assets belonging to the National Government or any
As concisely delineated by this Court during the oral arguments on 18 September 2001, the issues for of its subdivisions, agencies or instrumentalities of Government owned or controlled
resolution in the instant petition for certiorari are: (a) The Plunder Law is unconstitutional for being corporations or their subsidiaries; (d) by obtaining, receiving or accepting directly or indirectly
vague; (b) The Plunder Law requires less evidence for proving the predicate crimes of plunder and any shares of stock, equity or any other form of interest or participation including the promise
therefore violates the rights of the accused to due process; and, (c) Whether Plunder as defined in RA of future employment in any business enterprise or undertaking; (e) by establishing
7080 is a malum prohibitum, and if so, whether it is within the power of Congress to so classify it. agricultural, industrial or commercial monopolies or other combinations and/or
implementation of decrees and orders intended to benefit particular persons or special
interests; or (f) by taking advantage of official position, authority, relationship, connection or
Preliminarily, the whole gamut of legal concepts pertaining to the validity of legislation is predicated on
influence to unjustly enrich himself or themselves at the expense and to the damage and
the basic principle that a legislative measure is presumed to be in harmony with the
prejudice of the Filipino people and the Republic of the Philippines; and,
Constitution.3 Courts invariably train their sights on this fundamental rule whenever a legislative act is
under a constitutional attack, for it is the postulate of constitutional adjudication. This strong predilection
for constitutionality takes its bearings on the idea that it is forbidden for one branch of the government 3. That the aggregate amount or total value of the ill-gotten wealth amassed, accumulated or
to encroach upon the duties and powers of another. Thus it has been said that the presumption is acquired is at least ₱50,000,000.00.
based on the deference the judicial branch accords to its coordinate branch - the legislature.
As long as the law affords some comprehensible guide or rule that would inform those who are subject
If there is any reasonable basis upon which the legislation may firmly rest, the courts must assume that to it what conduct would render them liable to its penalties, its validity will be sustained. It must
the legislature is ever conscious of the borders and edges of its plenary powers, and has passed the sufficiently guide the judge in its application; the counsel, in defending one charged with its violation;
law with full knowledge of the facts and for the purpose of promoting what is right and advancing the and more importantly, the accused, in identifying the realm of the proscribed conduct. Indeed, it can be
welfare of the majority. Hence in determining whether the acts of the legislature are in tune with the understood with little difficulty that what the assailed statute punishes is the act of a public officer in
fundamental law, courts should proceed with judicial restraint and act with caution and forbearance. amassing or accumulating ill-gotten wealth of at least ₱50,000,000.00 through a series or combination
Every intendment of the law must be adjudged by the courts in favor of its constitutionality, invalidity of acts enumerated in Sec. 1, par. (d), of the Plunder Law.
being a measure of last resort. In construing therefore the provisions of a statute, courts must first
ascertain whether an interpretation is fairly possible to sidestep the question of constitutionality.
In fact, the amended Information itself closely tracks the language of the law, indicating with reasonable
certainty the various elements of the offense which petitioner is alleged to have committed:
4 
In La Union Credit Cooperative, Inc. v. Yaranon we held that as long as there is some basis for the
decision of the court, the constitutionality of the challenged law will not be touched and the case will be
"The undersigned Ombudsman, Prosecutor and OIC-Director, EPIB, Office of the Ombudsman, hereby
decided on other available grounds. Yet the force of the presumption is not sufficient to catapult a
accuses former PRESIDENT OF THE REPUBLIC OF THE PHILIPPINES, Joseph Ejercito
fundamentally deficient law into the safe environs of constitutionality. Of course, where the law clearly
Estrada, a.k.a. 'ASIONG SALONGA' and a.k.a. 'JOSE VELARDE,' together with Jose 'Jinggoy' Estrada,
and palpably transgresses the hallowed domain of the organic law, it must be struck down on sight lest
Charlie 'Atong' Ang, Edward Serapio, Yolanda T. Ricaforte, Alma Alfaro, JOHN DOE a.k.a. Eleuterio
the positive commands of the fundamental law be unduly eroded.
Tan OR Eleuterio Ramos Tan or Mr. Uy, Jane Doe a.k.a. Delia Rajas, and John DOES & Jane Does, of
the crime of Plunder, defined and penalized under R.A. No. 7080, as amended by Sec. 12 of R.A. No.
Verily, the onerous task of rebutting the presumption weighs heavily on the party challenging the validity 7659, committed as follows:
of the statute. He must demonstrate beyond any tinge of doubt that there is indeed an infringement of
the constitution, for absent such a showing, there can be no finding of unconstitutionality. A doubt, even
if well-founded, will hardly suffice. As tersely put by Justice Malcolm, "To doubt is to sustain."5 And
That during the period from June, 1998 to January 2001, in the Philippines, and within the jurisdiction of
this Honorable Court, accused Joseph Ejercito Estrada, THEN A PRESIDENT OF THE REPUBLIC OF
THE PHILIPPINES, by himself AND/OR in CONNIVANCE/CONSPIRACY with his co-accused, WHO
ARE MEMBERS OF HIS FAMILY, RELATIVES BY AFFINITY OR CONSANGUINITY, BUSINESS
ASSOCIATES, SUBORDINATES AND/OR OTHER PERSONS, BY TAKING UNDUE ADVANTAGE
OF HIS OFFICIAL POSITION, AUTHORITY, RELATIONSHIP, CONNECTION, OR INFLUENCE, did
then and there willfully, unlawfully and criminally amass, accumulate and acquire BY HIMSELF,
DIRECTLY OR INDIRECTLY, ill-gotten wealth in the aggregate amount or TOTAL VALUE of FOUR
BILLION NINETY SEVEN MILLION EIGHT HUNDRED FOUR THOUSAND ONE HUNDRED
SEVENTY THREE PESOS AND SEVENTEEN CENTAVOS (₱4,097,804,173.17), more or
less, THEREBY UNJUSTLY ENRICHING HIMSELF OR THEMSELVES AT THE EXPENSE AND TO
THE DAMAGE OF THE FILIPINO PEOPLE AND THE REPUBLIC OF THE PHILIPPINES,
through ANY OR A combination OR Aseries of overt OR criminal acts, OR SIMILAR SCHEMES OR
MEANS, described as follows:
(a) by receiving OR collecting, directly or indirectly, on SEVERAL INSTANCES, MONEY IN
THE AGGREGATE AMOUNT OF FIVE HUNDRED FORTY-FIVE MILLION PESOS
(₱545,000,000.00), MORE OR LESS, FROM ILLEGAL GAMBLING IN THE FORM OF
GIFT, SHARE, PERCENTAGE, KICKBACK OR ANY FORM OF PECUNIARY BENEFIT,
BY HIMSELF AND/OR in connection with co-accused CHARLIE 'ATONG' ANG, Jose
'Jinggoy' Estrada, Yolanda T. Ricaforte, Edward Serapio, AND JOHN DOES AND JANE
DOES, in consideration OF TOLERATION OR PROTECTION OF ILLEGAL GAMBLING;
(b) by DIVERTING, RECEIVING, misappropriating, converting OR misusing DIRECTLY OR
INDIRECTLY, for HIS OR THEIR PERSONAL gain and benefit, public funds in the amount of
ONE HUNDRED THIRTY MILLION PESOS (₱130,000,000.00), more or less, representing a
portion of the TWO HUNDRED MILLION PESOS (₱200,000,000.00) tobacco excise tax
share allocated for the province of Ilocos Sur under R.A. No. 7171, by himself and/or in
connivance with co-accused Charlie 'Atong' Ang, Alma Alfaro, JOHN DOE a.k.a.Eleuterio
Ramos Tan or Mr. Uy, Jane Doe a.k.a. Delia Rajas, AND OTHER JOHN DOES & JANE
DOES; (italic supplied).
(c) by directing, ordering and compelling, FOR HIS PERSONAL GAIN AND BENEFIT, the
Government Service Insurance System (GSIS) TO PURCHASE 351,878,000 SHARES OF
STOCKS, MORE OR LESS, and the Social Security System (SSS), 329,855,000 SHARES
OF STOCK, MORE OR LESS, OF THE BELLE CORPORATION IN THE AMOUNT OF
MORE OR LESS ONE BILLION ONE HUNDRED TWO MILLION NINE HUNDRED SIXTY
FIVE THOUSAND SIX HUNDRED SEVEN PESOS AND FIFTY CENTAVOS
(₱1,102,965,607.50) AND MORE OR LESS SEVEN HUNDRED FORTY FOUR MILLION
SIX HUNDRED TWELVE THOUSAND AND FOUR HUNDRED FIFTY PESOS
(₱744,612,450.00), RESPECTIVELY, OR A TOTAL OF MORE OR LESS ONE BILLION
EIGHT HUNDRED FORTY SEVEN MILLION FIVE HUNDRED SEVENTY EIGHT
THOUSAND FIFTY SEVEN PESOS AND FIFTY CENTAVOS (₱1,847,578,057.50); AND BY
COLLECTING OR RECEIVING, DIRECTLY OR INDIRECTLY, BY HIMSELF AND/OR IN
CONNIVANCE WITH JOHN DOES AND JANE DOES, COMMISSIONS OR
PERCENTAGES BY REASON OF SAID PURCHASES OF SHARES OF STOCK IN THE
AMOUNT OF ONE HUNDRED EIGHTY NINE MILLION SEVEN HUNDRED THOUSAND
PESOS (₱189,700,000.00) MORE OR LESS, FROM THE BELLE CORPORATION WHICH
BECAME PART OF THE DEPOSIT IN THE EQUITABLE-PCI BANK UNDER THE
ACCOUNT NAME 'JOSE VELARDE;'
(d) by unjustly enriching himself FROM COMMISSIONS, GIFTS, SHARES, PERCENTAGES,
KICKBACKS, OR ANY FORM OF PECUNIARY BENEFITS, IN CONNIVANCE WITH JOHN
DOES AND JANE DOES, in the amount of MORE OR LESS THREE BILLION TWO
HUNDRED THIRTY THREE MILLION ONE HUNDRED FOUR THOUSAND ONE HUNDRED
SEVENTY THREE PESOS AND SEVENTEEN CENTAVOS (₱3,233,104,173.17) AND
DEPOSITING THE SAME UNDER HIS ACCOUNT NAME 'JOSE VELARDE' AT THE
EQUITABLE-PCI BANK."
We discern nothing in the foregoing that is vague or ambiguous - as there is obviously none - that will
confuse petitioner in his defense. Although subject to proof, these factual assertions clearly show that
the elements of the crime are easily understood and provide adequate contrast between the innocent
and the prohibited acts. Upon such unequivocal assertions, petitioner is completely informed of the
accusations against him as to enable him to prepare for an intelligent defense.
Petitioner, however, bewails the failure of the law to provide for the statutory definition of the terms
"combination" and "series" in the key phrase "a combination or series of overt or criminal acts" found in
Sec. 1, par. (d), and Sec. 2, and the word "pattern" in Sec. 4. These omissions, according to petitioner,
render the Plunder Law unconstitutional for being impermissibly vague and overbroad and deny him the
right to be informed of the nature and cause of the accusation against him, hence, violative of his
fundamental right to due process.
The rationalization seems to us to be pure sophistry. A statute is not rendered uncertain and void
merely because general terms are used therein, or because of the employment of terms without
defining them;6 much less do we have to define every word we use. Besides, there is no positive
constitutional or statutory command requiring the legislature to define each and every word in an
enactment. Congress is not restricted in the form of expression of its will, and its inability to so define
the words employed in a statute will not necessarily result in the vagueness or ambiguity of the law so
long as the legislative will is clear, or at least, can be gathered from the whole act, which is distinctly
expressed in the Plunder Law.
Moreover, it is a well-settled principle of legal hermeneutics that words of a statute will be interpreted in
their natural, plain and ordinary acceptation and signification,7 unless it is evident that the legislature
intended a technical or special legal meaning to those words.8 The intention of the lawmakers - who are,
ordinarily, untrained philologists and lexicographers - to use statutory phraseology in such a manner is
always presumed. Thus, Webster's New Collegiate Dictionary contains the following commonly
accepted definition of the words "combination" and "series:"
Combination - the result or product of combining; the act or process of combining. To combine is to
bring into such close relationship as to obscure individual characters.
Series - a number of things or events of the same class coming one after another in spatial and
temporal succession.
That Congress intended the words "combination" and "series" to be understood in their popular
meanings is pristinely evident from the legislative deliberations on the bill which eventually became RA
7080 or the Plunder Law:
DELIBERATIONS OF THE BICAMERAL COMMITTEE ON JUSTICE, 7 May 1991
REP. ISIDRO: I am just intrigued again by our definition of plunder. We say THROUGH A
COMBINATION OR SERIES OF OVERT OR CRIMINAL ACTS AS MENTIONED IN SECTION ONE
HEREOF. Now when we say combination, we actually mean to say, if there are two or more means, we
mean to say that number one and two or number one and something else are included, how about a
series of the same act? For example, through misappropriation, conversion, misuse, will these be
included also?
REP. GARCIA: Yeah, because we say a series. REP. GARCIA: Its not... Two misappropriations will not be combination. Series.

REP. ISIDRO: Series. REP. ISIDRO: So, it is not a combination?

REP. GARCIA: Yeah, we include series. REP. GARCIA: Yes.

REP. ISIDRO: But we say we begin with a combination. REP. ISIDRO: When you say combination, two different?

REP. GARCIA: Yes. REP. GARCIA: Yes.

REP. ISIDRO: When we say combination, it seems that - SEN. TANADA: Two different.

REP. GARCIA: Two. REP. ISIDRO: Two different acts.

REP. ISIDRO: Not only two but we seem to mean that two of the enumerated means not twice of one
enumeration.
REP. GARCIA: No, no, not twice.
REP. ISIDRO: Not twice?
REP. GARCIA: Yes. Combination is not twice - but combination, two acts.
REP. ISIDRO: So in other words, that’s it. When we say combination, we mean, two different acts. It
cannot be a repetition of the same act.
REP. GARCIA: That be referred to series, yeah.
REP. ISIDRO: No, no. Supposing one act is repeated, so there are two.
REP. GARCIA: A series.
REP. ISIDRO: That’s not series. Its a combination. Because when we say combination or series, we
seem to say that two or more, di ba?
REP. GARCIA: Yes, this distinguishes it really from ordinary crimes. That is why, I said, that is a very
good suggestion because if it is only one act, it may fall under ordinary crime but we have here a
combination or series of overt or criminal acts. So x x x x
REP. GARCIA: Series. One after the other eh di....
SEN. TANADA: So that would fall under the term "series?"
REP. GARCIA: For example, ha...
REP. ISIDRO: Now a series, meaning, repetition...
DELIBERATIONS ON SENATE BILL NO. 733, 6 June 1989
SENATOR MACEDA: In line with our interpellations that sometimes "one" or maybe even "two" acts
may already result in such a big amount, on line 25, would the Sponsor consider deleting the words "a
series of overt or," to read, therefore: "or conspiracy COMMITTED by criminal acts such as." Remove
the idea of necessitating "a series." Anyway, the criminal acts are in the plural.
SENATOR TANADA: That would mean a combination of two or more of the acts mentioned in this.
THE PRESIDENT: Probably two or more would be....
SENATOR MACEDA: Yes, because "a series" implies several or many; two or more.
SENATOR TANADA: Accepted, Mr. President x x x x
THE PRESIDENT: If there is only one, then he has to be prosecuted under the particular crime. But
when we say "acts of plunder" there should be, at least, two or more.
SENATOR ROMULO: In other words, that is already covered by existing laws, Mr. President.
Thus when the Plunder Law speaks of "combination," it is referring to at least two (2) acts falling under
different categories of enumeration provided in Sec. 1, par. (d), e.g., raids on the public treasury in Sec.
1, par. (d), subpar. (1), and fraudulent conveyance of assets belonging to the National Government
under Sec. 1, par. (d), subpar. (3).

On the other hand, to constitute a series" there must be two (2) or more overt or criminal acts falling
REP. GARCIA: Series, oo.
under the same category of enumeration found in Sec. 1, par. (d), say, misappropriation, malversation
and raids on the public treasury, all of which fall under Sec. 1, par. (d), subpar. (1). Verily, had the
REP. ISIDRO: Now, if it is a combination, ano, two misappropriations....
legislature intended a technical or distinctive meaning for "combination" and "series," it would have
taken greater pains in specifically providing for it in the law.
As for "pattern," we agree with the observations of the Sandiganbayan9 that this term is sufficiently
defined in Sec. 4, in relation to Sec. 1, par. (d), and Sec. 2 -
x x x x under Sec. 1 (d) of the law, a 'pattern' consists of at least a combination or series of overt or
criminal acts enumerated in subsections (1) to (6) of Sec. 1 (d). Secondly, pursuant to Sec. 2 of the
law, the pattern of overt or criminal acts is directed towards a common purpose or goal which is to
enable the public officer to amass, accumulate or acquire ill-gotten wealth. And thirdly, there must
either be an 'overall unlawful scheme' or 'conspiracy' to achieve said common goal. As commonly
understood, the term 'overall unlawful scheme' indicates a 'general plan of action or method' which the
principal accused and public officer and others conniving with him follow to achieve the aforesaid
common goal. In the alternative, if there is no such overall scheme or where the schemes or methods
used by multiple accused vary, the overt or criminal acts must form part of a conspiracy to attain a
common goal.
Hence, it cannot plausibly be contended that the law does not give a fair warning and sufficient notice of
what it seeks to penalize. Under the circumstances, petitioner's reliance on the "void-for-vagueness"
doctrine is manifestly misplaced. The doctrine has been formulated in various ways, but is most
commonly stated to the effect that a statute establishing a criminal offense must define the offense with
sufficient definiteness that persons of ordinary intelligence can understand what conduct is prohibited
by the statute. It can only be invoked against that specie of legislation that is utterly vague on its face,
i.e., that which cannot be clarified either by a saving clause or by construction.
A statute or act may be said to be vague when it lacks comprehensible standards that men of common
intelligence must necessarily guess at its meaning and differ in its application. In such instance, the
statute is repugnant to the Constitution in two (2) respects - it violates due process for failure to accord
persons, especially the parties targeted by it, fair notice of what conduct to avoid; and, it leaves law
enforcers unbridled discretion in carrying out its provisions and becomes an arbitrary flexing of the
Government muscle.10 But the doctrine does not apply as against legislations that are merely couched
in imprecise language but which nonetheless specify a standard though defectively phrased; or to those
that are apparently ambiguous yet fairly applicable to certain types of activities. The first may be
"saved" by proper construction, while no challenge may be mounted as against the second whenever
directed against such activities.11 With more reason, the doctrine cannot be invoked where the assailed
statute is clear and free from ambiguity, as in this case.
The test in determining whether a criminal statute is void for uncertainty is whether the language
conveys a sufficiently definite warning as to the proscribed conduct when measured by common
understanding and practice.12It must be stressed, however, that the "vagueness" doctrine merely
requires a reasonable degree of certainty for the statute to be upheld - not absolute precision or
mathematical exactitude, as petitioner seems to suggest. Flexibility, rather than meticulous specificity,
is permissible as long as the metes and bounds of the statute are clearly delineated. An act will not be
held invalid merely because it might have been more explicit in its wordings or detailed in its provisions,
especially where, because of the nature of the act, it would be impossible to provide all the details in
advance as in all other statutes.
Moreover, we agree with, hence we adopt, the observations of Mr. Justice Vicente V. Mendoza during
the deliberations of the Court that the allegations that the Plunder Law is vague and overbroad do not
justify a facial review of its validity -
The void-for-vagueness doctrine states that "a statute which either forbids or requires the doing of an
act in terms so vague that men of common intelligence must necessarily guess at its meaning and differ
as to its application, violates the first essential of due process of law."13 The overbreadth doctrine, on
the other hand, decrees that "a governmental purpose may not be achieved by means which sweep
unnecessarily broadly and thereby invade the area of protected freedoms."14
A facial challenge is allowed to be made to a vague statute and to one which is overbroad because of
possible "chilling effect" upon protected speech. The theory is that "[w]hen statutes regulate or
proscribe speech and no readily apparent construction suggests itself as a vehicle for rehabilitating the
statutes in a single prosecution, the transcendent value to all society of constitutionally protected
expression is deemed to justify allowing attacks on overly broad statutes with no requirement that the
person making the attack demonstrate that his own conduct could not be regulated by a statute drawn
with narrow specificity."15 The possible harm to society in permitting some unprotected speech to go
unpunished is outweighed by the possibility that the protected speech of others may be deterred and
perceived grievances left to fester because of possible inhibitory effects of overly broad statutes.
This rationale does not apply to penal statutes. Criminal statutes have general in terrorem effect
resulting from their very existence, and, if facial challenge is allowed for this reason alone, the State
may well be prevented from enacting laws against socially harmful conduct. In the area of criminal law,
the law cannot take chances as in the area of free speech.
The overbreadth and vagueness doctrines then have special application only to free speech cases.
They are inapt for testing the validity of penal statutes. As the U.S. Supreme Court put it, in an opinion
by Chief Justice Rehnquist, "we have not recognized an 'overbreadth' doctrine outside the limited
context of the First Amendment."16 In Broadrick v. Oklahoma,17 the Court ruled that "claims of facial
overbreadth have been entertained in cases involving statutes which, by their terms, seek to regulate
only spoken words" and, again, that "overbreadth claims, if entertained at all, have been curtailed when
invoked against ordinary criminal laws that are sought to be applied to protected conduct." For this
reason, it has been held that "a facial challenge to a legislative act is the most difficult challenge to
mount successfully, since the challenger must establish that no set of circumstances exists under which
the Act would be valid."18 As for the vagueness doctrine, it is said that a litigant may challenge a statute
on its face only if it is vague in all its possible applications. "A plaintiff who engages in some conduct
that is clearly proscribed cannot complain of the vagueness of the law as applied to the conduct of
others."19
In sum, the doctrines of strict scrutiny, overbreadth, and vagueness are analytical tools developed for
testing "on their faces" statutes in free speech cases or, as they are called in American law, First
Amendment cases. They cannot be made to do service when what is involved is a criminal statute. With
respect to such statute, the established rule is that "one to whom application of a statute is
constitutional will not be heard to attack the statute on the ground that impliedly it might also be taken
as applying to other persons or other situations in which its application might be unconstitutional."20 As
has been pointed out, "vagueness challenges in the First Amendment context, like overbreadth
challenges typically produce facial invalidation, while statutes found vague as a matter of due process
typically are invalidated [only] 'as applied' to a particular defendant."21 Consequently, there is no basis
for petitioner's claim that this Court review the Anti-Plunder Law on its face and in its entirety.
Indeed, "on its face" invalidation of statutes results in striking them down entirely on the ground that
they might be applied to parties not before the Court whose activities are constitutionally protected.22 It
constitutes a departure from the case and controversy requirement of the Constitution and permits
decisions to be made without concrete factual settings and in sterile abstract contexts.23 But, as the U.S.
Supreme Court pointed out in Younger v. Harris24
[T]he task of analyzing a proposed statute, pinpointing its deficiencies, and requiring correction of these
deficiencies before the statute is put into effect, is rarely if ever an appropriate task for the judiciary. The
combination of the relative remoteness of the controversy, the impact on the legislative process of the
relief sought, and above all the speculative and amorphous nature of the required line-by-line analysis
of detailed statutes, . . . ordinarily results in a kind of case that is wholly unsatisfactory for deciding
constitutional questions, whichever way they might be decided.
For these reasons, "on its face" invalidation of statutes has been described as "manifestly strong
medicine," to be employed "sparingly and only as a last resort,"25 and is generally disfavored.26 In
determining the constitutionality of a statute, therefore, its provisions which are alleged to have been
violated in a case must be examined in the light of the conduct with which the defendant is charged.27
In light of the foregoing disquisition, it is evident that the purported ambiguity of the Plunder Law, so
tenaciously claimed and argued at length by petitioner, is more imagined than real. Ambiguity, where
none exists, cannot be created by dissecting parts and words in the statute to furnish support to critics
who cavil at the want of scientific precision in the law. Every provision of the law should be construed in
relation and with reference to every other part. To be sure, it will take more than nitpicking to overturn
the well-entrenched presumption of constitutionality and validity of the Plunder Law. A fortiori, petitioner
cannot feign ignorance of what the Plunder Law is all about. Being one of the Senators who voted for its
passage, petitioner must be aware that the law was extensively deliberated upon by the Senate and its
appropriate committees by reason of which he even registered his affirmative vote with full knowledge
of its legal implications and sound constitutional anchorage.
It is not at all difficult to comprehend that what the aforequoted penal provisions penalize is the act of a
public officer, in the discharge of his official, administrative or judicial functions, in giving any private
party benefits, advantage or preference which is unjustified, unauthorized or without justification or
adequate reason, through manifest partiality, evident bad faith or gross inexcusable negligence.
In other words, this Court found that there was nothing vague or ambiguous in the use of the term
"unwarranted" in Sec. 3, par. (e), of The Anti-Graft and Corrupt Practices Act, which was understood in
its primary and general acceptation. Consequently, in that case, petitioners' objection thereto was held
inadequate to declare the section unconstitutional.
On the second issue, petitioner advances the highly stretched theory that Sec. 4 of the Plunder Law
circumvents the immutable obligation of the prosecution to prove beyond reasonable doubt the
predicate acts constituting the crime of plunder when it requires only proof of a pattern of overt or
criminal acts showing unlawful scheme or conspiracy -
SEC. 4. Rule of Evidence. - For purposes of establishing the crime of plunder, it shall not be necessary
to prove each and every criminal act done by the accused in furtherance of the scheme or conspiracy
to amass, accumulate or acquire ill-gotten wealth, it being sufficient to establish beyond reasonable
doubt a pattern of overt or criminal acts indicative of the overall unlawful scheme or conspiracy.

The parallel case of Gallego v. Sandiganbayan28 must be mentioned if only to illustrate and emphasize
The running fault in this reasoning is obvious even to the simplistic mind. In a criminal prosecution for
the point that courts are loathed to declare a statute void for uncertainty unless the law itself is so
plunder, as in all other crimes, the accused always has in his favor the presumption of innocence which
imperfect and deficient in its details, and is susceptible of no reasonable construction that will support
is guaranteed by the Bill of Rights, and unless the State succeeds in demonstrating by proof beyond
and give it effect. In that case, petitioners Gallego and Agoncillo challenged the constitutionality of Sec.
reasonable doubt that culpability lies, the accused is entitled to an acquittal.29 The use of the
3, par. (e), of The Anti-Graft and Corrupt Practices Actfor being vague. Petitioners posited, among
"reasonable doubt" standard is indispensable to command the respect and confidence of the
others, that the term "unwarranted" is highly imprecise and elastic with no common law meaning or
community in the application of criminal law. It is critical that the moral force of criminal law be not
settled definition by prior judicial or administrative precedents; that, for its vagueness, Sec. 3, par. (e),
diluted by a standard of proof that leaves people in doubt whether innocent men are being condemned.
violates due process in that it does not give fair warning or sufficient notice of what it seeks to penalize.
It is also important in our free society that every individual going about his ordinary affairs has
Petitioners further argued that the Information charged them with three (3) distinct offenses, to wit: (a)
confidence that his government cannot adjudge him guilty of a criminal offense without convincing a
giving of "unwarranted" benefits through manifest partiality; (b) giving of "unwarranted" benefits through
proper factfinder of his guilt with utmost certainty. This "reasonable doubt" standard has acquired such
evident bad faith; and, (c) giving of "unwarranted" benefits through gross inexcusable negligence while
exalted stature in the realm of constitutional law as it gives life to the Due Process Clause which
in the discharge of their official function and that their right to be informed of the nature and cause of the
protects the accused against conviction except upon proof beyond reasonable doubt of every fact
accusation against them was violated because they were left to guess which of the three (3) offenses, if
necessary to constitute the crime with which he is charged.30 The following exchanges between Rep.
not all, they were being charged and prosecuted.
Rodolfo Albano and Rep. Pablo Garcia on this score during the deliberations in the floor of the House of
Representatives are elucidating -
In dismissing the petition, this Court held that Sec. 3, par. (e), of The Anti-Graft and Corrupt Practices
Act does not suffer from the constitutional defect of vagueness. The phrases "manifest partiality,"
DELIBERATIONS OF THE HOUSE OF REPRESENTATIVES ON RA 7080, 9 October 1990
"evident bad faith," and "gross and inexcusable negligence" merely describe the different modes by
which the offense penalized in Sec. 3, par. (e), of the statute may be committed, and the use of all
these phrases in the same Information does not mean that the indictment charges three (3) distinct MR. ALBANO: Now, Mr. Speaker, it is also elementary in our criminal law that what is alleged in the
offenses. information must be proven beyond reasonable doubt. If we will prove only one act and find him guilty
of the other acts enumerated in the information, does that not work against the right of the accused
especially so if the amount committed, say, by falsification is less than ₱100 million, but the totality of
The word 'unwarranted' is not uncertain. It seems lacking adequate or official support; unjustified;
the crime committed is ₱100 million since there is malversation, bribery, falsification of public
unauthorized (Webster, Third International Dictionary, p. 2514); or without justification or adequate
document, coercion, theft?
reason (Philadelphia Newspapers, Inc. v. US Dept. of Justice, C.D. Pa., 405 F. Supp. 8, 12, cited in
Words and Phrases, Permanent Edition, Vol. 43-A 1978, Cumulative Annual Pocket Part, p. 19).
MR. GARCIA: Mr. Speaker, not everything alleged in the information needs to be proved beyond
reasonable doubt. What is required to be proved beyond reasonable doubt is every element of the
The assailed provisions of the Anti-Graft and Corrupt Practices Act consider a corrupt practice and
crime charged. For example, Mr. Speaker, there is an enumeration of the things taken by the robber in
make unlawful the act of the public officer in:
the information – three pairs of pants, pieces of jewelry. These need not be proved beyond reasonable
doubt, but these will not prevent the conviction of a crime for which he was charged just because, say,
x x x or giving any private party any unwarranted benefits, advantage or preference in the discharge of instead of 3 pairs of diamond earrings the prosecution proved two. Now, what is required to be proved
his official, administrative or judicial functions through manifest partiality, evident bad faith or gross beyond reasonable doubt is the element of the offense.
inexcusable negligence, x x x (Section 3 [e], Rep. Act 3019, as amended).
MR. ALBANO: I am aware of that, Mr. Speaker, but considering that in the crime of plunder the totality
of the amount is very important, I feel that such a series of overt criminal acts has to be taken singly.
For instance, in the act of bribery, he was able to accumulate only ₱50,000 and in the crime of
extortion, he was only able to accumulate ₱1 million. Now, when we add the totality of the other acts as
required under this bill through the interpretation on the rule of evidence, it is just one single act, so how
can we now convict him?
MR. GARCIA: With due respect, Mr. Speaker, for purposes of proving an essential element of the
crime, there is a need to prove that element beyond reasonable doubt. For example, one essential
element of the crime is that the amount involved is ₱100 million. Now, in a series of defalcations and
other acts of corruption in the enumeration the total amount would be ₱110 or ₱120 million, but there
are certain acts that could not be proved, so, we will sum up the amounts involved in those transactions
which were proved. Now, if the amount involved in these transactions, proved beyond reasonable
doubt, is ₱100 million, then there is a crime of plunder (underscoring supplied).
It is thus plain from the foregoing that the legislature did not in any manner refashion the standard
quantum of proof in the crime of plunder. The burden still remains with the prosecution to prove beyond
any iota of doubt every fact or element necessary to constitute the crime.
The thesis that Sec. 4 does away with proof of each and every component of the crime suffers from a
dismal misconception of the import of that provision. What the prosecution needs to prove beyond
reasonable doubt is only a number of acts sufficient to form a combination or series which would
constitute a pattern and involving an amount of at least ₱50,000,000.00. There is no need to prove
each and every other act alleged in the Information to have been committed by the accused in
furtherance of the overall unlawful scheme or conspiracy to amass, accumulate or acquire ill-gotten
wealth. To illustrate, supposing that the accused is charged in an Information for plunder with having
committed fifty (50) raids on the public treasury. The prosecution need not prove all these fifty (50)
raids, it being sufficient to prove by pattern at least two (2) of the raids beyond reasonable doubt
provided only that they amounted to at least ₱50,000,000.00.31
A reading of Sec. 2 in conjunction with Sec. 4, brings us to the logical conclusion that "pattern of overt
or criminal acts indicative of the overall unlawful scheme or conspiracy" inheres in the very acts of
accumulating, acquiring or amassing hidden wealth. Stated otherwise, such pattern arises where the
prosecution is able to prove beyond reasonable doubt the predicate acts as defined in Sec. 1, par. (d).
Pattern is merely a by-product of the proof of the predicate acts. This conclusion is consistent with
reason and common sense. There would be no other explanation for a combination or series of
overt or criminal acts to stash ₱50,000,000.00 or more, than "a scheme or conspiracy to amass,
accumulate or acquire ill gotten wealth." The prosecution is therefore not required to make a deliberate
and conscious effort to prove pattern as it necessarily follows with the establishment of a series or
combination of the predicate acts.
Relative to petitioner's contentions on the purported defect of Sec. 4 is his submission that "pattern" is
"a very important element of the crime of plunder;" and that Sec. 4 is "two pronged, (as) it contains a
rule of evidence and a substantive element of the crime," such that without it the accused cannot be
convicted of plunder -
JUSTICE BELLOSILLO: In other words, cannot an accused be convicted under the Plunder Law
without applying Section 4 on the Rule of Evidence if there is proof beyond reasonable doubt of the
commission of the acts complained of?
ATTY. AGABIN: In that case he can be convicted of individual crimes enumerated in the Revised Penal
Code, but not plunder.
JUSTICE BELLOSILLO: In other words, if all the elements of the crime are proved beyond reasonable
doubt without applying Section 4, can you not have a conviction under the Plunder Law?
ATTY. AGABIN: Not a conviction for plunder, your Honor.
JUSTICE BELLOSILLO: Can you not disregard the application of Sec. 4 in convicting an accused
charged for violation of the Plunder Law?
ATTY. AGABIN: Well, your Honor, in the first place Section 4 lays down a substantive element of the
law x x x x
JUSTICE BELLOSILLO: What I said is - do we have to avail of Section 4 when there is proof beyond
reasonable doubt on the acts charged constituting plunder?
ATTY. AGABIN: Yes, your Honor, because Section 4 is two pronged, it contains a rule of evidence and
it contains a substantive element of the crime of plunder. So, there is no way by which we can avoid
Section 4.
JUSTICE BELLOSILLO: But there is proof beyond reasonable doubt insofar as the predicate crimes
charged are concerned that you do not have to go that far by applying Section 4?
ATTY. AGABIN: Your Honor, our thinking is that Section 4 contains a very important element of the
crime of plunder and that cannot be avoided by the prosecution. 32
We do not subscribe to petitioner's stand. Primarily, all the essential elements of plunder can be culled
and understood from its definition in Sec. 2, in relation to Sec. 1, par. (d), and "pattern" is not one of
them. Moreover, the epigraph and opening clause of Sec. 4 is clear and unequivocal:
SEC. 4. Rule of Evidence. - For purposes of establishing the crime of plunder x x x x
It purports to do no more than prescribe a rule of procedure for the prosecution of a criminal case for
plunder. Being a purely procedural measure, Sec. 4 does not define or establish any substantive right in
favor of the accused but only operates in furtherance of a remedy. It is only a means to an end, an aid
to substantive law. Indubitably, even without invoking Sec. 4, a conviction for plunder may be had, for
what is crucial for the prosecution is to present sufficient evidence to engender that moral certitude
exacted by the fundamental law to prove the guilt of the accused beyond reasonable doubt. Thus, even
granting for the sake of argument that Sec. 4 is flawed and vitiated for the reasons advanced by
petitioner, it may simply be severed from the rest of the provisions without necessarily resulting in the
demise of the law; after all, the existing rules on evidence can supplant Sec. 4 more than enough.
Besides, Sec. 7 of RA 7080 provides for a separability clause -
Sec. 7. Separability of Provisions. - If any provisions of this Act or the application thereof to any person
or circumstance is held invalid, the remaining provisions of this Act and the application of such
provisions to other persons or circumstances shall not be affected thereby.
Implicit in the foregoing section is that to avoid the whole act from being declared invalid as a result of
the nullity of some of its provisions, assuming that to be the case although it is not really so, all the
provisions thereof should accordingly be treated independently of each other, especially if by doing so,
the objectives of the statute can best be achieved.
As regards the third issue, again we agree with Justice Mendoza that plunder is a malum in se which
requires proof of criminal intent. Thus, he says, in his Concurring Opinion -
x x x Precisely because the constitutive crimes are mala in se the element of mens rea must be proven
in a prosecution for plunder. It is noteworthy that the amended information alleges that the crime of
plunder was committed "willfully, unlawfully and criminally." It thus alleges guilty knowledge on the part
of petitioner.
In support of his contention that the statute eliminates the requirement of mens rea and that is the
reason he claims the statute is void, petitioner cites the following remarks of Senator Tañada made
during the deliberation on S.B. No. 733:
SENATOR TAÑADA . . . And the evidence that will be required to convict him would not be evidence for
each and every individual criminal act but only evidence sufficient to establish the conspiracy or
scheme to commit this crime of plunder.33
However, Senator Tañada was discussing §4 as shown by the succeeding portion of the transcript
quoted by petitioner:
SENATOR ROMULO: And, Mr. President, the Gentleman feels that it is contained in Section 4, Rule of
Evidence, which, in the Gentleman's view, would provide for a speedier and faster process of attending
to this kind of cases?
SENATOR TAÑADA: Yes, Mr. President . . .34
Senator Tañada was only saying that where the charge is conspiracy to commit plunder, the
prosecution need not prove each and every criminal act done to further the scheme or conspiracy, it
being enough if it proves beyond reasonable doubt a pattern of overt or ciminal acts indicative of the
overall unlawful scheme or conspiracy. As far as the acts constituting the pattern are concerned,
however, the elements of the crime must be proved and the requisite mens rea must be shown.
Indeed, §2 provides that -
Any person who participated with the said public officer in the commission of an offense contributing to
the crime of plunder shall likewise be punished for such offense. In the imposition of penalties, the
degree of participation and the attendance of mitigating and extenuating circumstances, as provided by
the Revised Penal Code, shall be considered by the court.
The application of mitigating and extenuating circumstances in the Revised Penal Code to prosecutions
under the Anti-Plunder Law indicates quite clearly that mens rea is an element of plunder since the
degree of responsibility of the offender is determined by his criminal intent. It is true that §2 refers to
"any person who participates with the said public officer in the commission of an offense contributing to
the crime of plunder." There is no reason to believe, however, that it does not apply as well to the public
officer as principal in the crime. As Justice Holmes said: "We agree to all the generalities about not
supplying criminal laws with what they omit, but there is no canon against using common sense in
construing laws as saying what they obviously mean."35
Finally, any doubt as to whether the crime of plunder is a malum in se must be deemed to have been
resolved in the affirmative by the decision of Congress in 1993 to include it among the heinous crimes
punishable by reclusion perpetua to death. Other heinous crimes are punished with death as a straight
penalty in R.A. No. 7659. Referring to these groups of heinous crimes, this Court held in People v.
Echegaray:36
The evil of a crime may take various forms. There are crimes that are, by their very nature, despicable,
either because life was callously taken or the victim is treated like an animal and utterly dehumanized
as to completely disrupt the normal course of his or her growth as a human being . . . . Seen in this
light, the capital crimes of kidnapping and serious illegal detention for ransom resulting in the death of
the victim or the victim is raped, tortured, or subjected to dehumanizing acts; destructive arson resulting
in death; and drug offenses involving minors or resulting in the death of the victim in the case of other
crimes; as well as murder, rape, parricide, infanticide, kidnapping and serious illegal detention, where
the victim is detained for more than three days or serious physical injuries were inflicted on the victim or
threats to kill him were made or the victim is a minor, robbery with homicide, rape or intentional
mutilation, destructive arson, and carnapping where the owner, driver or occupant of the carnapped
vehicle is killed or raped, which are penalized by reclusion perpetua to death, are clearly heinous by
their very nature.
There are crimes, however, in which the abomination lies in the significance and implications of the
subject criminal acts in the scheme of the larger socio-political and economic context in which the state
finds itself to be struggling to develop and provide for its poor and underprivileged masses. Reeling
from decades of corrupt tyrannical rule that bankrupted the government and impoverished the
population, the Philippine Government must muster the political will to dismantle the culture of
corruption, dishonesty, greed and syndicated criminality that so deeply entrenched itself in the
structures of society and the psyche of the populace. [With the government] terribly lacking the money
to provide even the most basic services to its people, any form of misappropriation or misapplication of
government funds translates to an actual threat to the very existence of government, and in turn, the
very survival of the people it governs over. Viewed in this context, no less heinous are the effects and
repercussions of crimes like qualified bribery, destructive arson resulting in death, and drug offenses
involving government officials, employees or officers, that their perpetrators must not be allowed to
cause further destruction and damage to society.
The legislative declaration in R.A. No. 7659 that plunder is a heinous offense implies that it is a malum
in se. For when the acts punished are inherently immoral or inherently wrong, they are mala in se37 and
it does not matter that such acts are punished in a special law, especially since in the case of plunder
the predicate crimes are mainly mala in se. Indeed, it would be absurd to treat prosecutions for plunder
as though they are mere prosecutions for violations of the Bouncing Check Law (B.P. Blg. 22) or of an
ordinance against jaywalking, without regard to the inherent wrongness of the acts.
To clinch, petitioner likewise assails the validity of RA 7659, the amendatory law of RA 7080, on
constitutional grounds. Suffice it to say however that it is now too late in the day for him to resurrect this
long dead issue, the same having been eternally consigned by People v. Echegaray38 to the archives of
jurisprudential history. The declaration of this Court therein that RA 7659 is constitutionally valid stands
as a declaration of the State, and becomes, by necessary effect, assimilated in the Constitution now as
an integral part of it.
Our nation has been racked by scandals of corruption and obscene profligacy of officials in high places
which have shaken its very foundation. The anatomy of graft and corruption has become more
elaborate in the corridors of time as unscrupulous people relentlessly contrive more and more ingenious
ways to bilk the coffers of the government. Drastic and radical measures are imperative to fight the
increasingly sophisticated, extraordinarily methodical and economically catastrophic looting of the
national treasury. Such is the Plunder Law, especially designed to disentangle those ghastly tissues of
grand-scale corruption which, if left unchecked, will spread like a malignant tumor and ultimately
consume the moral and institutional fiber of our nation. The Plunder Law, indeed, is a living testament
to the will of the legislature to ultimately eradicate this scourge and thus secure society against the
avarice and other venalities in public office.
These are times that try men's souls. In the checkered history of this nation, few issues of national
importance can equal the amount of interest and passion generated by petitioner's ignominious fall from
the highest office, and his eventual prosecution and trial under a virginal statute. This continuing saga
has driven a wedge of dissension among our people that may linger for a long time. Only by responding
to the clarion call for patriotism, to rise above factionalism and prejudices, shall we emerge triumphant
in the midst of ferment.
PREMISES CONSIDERED, this Court holds that RA 7080 otherwise known as the Plunder Law, as
amended by RA 7659, is CONSTITUTIONAL. Consequently, the petition to declare the law
unconstitutional is DISMISSED for lack of merit.
SO ORDERED.
G.R. No. 109404             January 22, 1996
FLORENCIO EUGENIO, doing business under the name E & S Delta Village, petitioner, 
vs.
EXECUTIVE SECRETARY FRANKLIN M. DRILON, HOUSING AND LAND USE REGULATORY
BOARD (HLURB) AND PROSPERO PALMIANO, respondents.
RESOLUTION
PANGANIBAN, J.:
Did the failure to develop a subdivision constitute legal justification for the non-payment of amortizations
by a buyer on installment under land purchase agreements entered into prior to the enactment of P.D.
957, "The Subdivision and Condominium Buyers' Protective Decree"? This is the major question raised
in the instant Petition seeking to set aside the Decision of the respondent Executive Secretary dated
March 10, 1992 in O.P. Case No. 3761, which affirmed the order of the respondent HLURB dated
September 1, 1987.
On May 10, 1972, private respondent purchased on installment basis from petitioner and his co-
owner/developer Fermin Salazar, two lots in the E & S Delta Village in Quezon City.
Acting on complaints for non-development docketed as NHA Cases Nos. 2619 and 2620 filed by the
Delta Village Homeowners' Association, Inc., the National Housing Authority rendered a resolution on
January 17, 1979 inter alia ordering petitioner to cease and desist from making further sales of lots in
said village or in any project owned by him.
While NHA Cases Nos. 2619 and 2620 were still pending, private respondent filed with the Office of
Appeals, Adjudication and Legal Affairs (OAALA) of the Human Settlements Regulatory Commission
(HSRC), a complaint (Case No. 80-589) against petitioner and spouses Rodolfo and Adelina Relevo
alleging that, in view of the above NHA resolution, he suspended payment of his amortizations, but that
petitioner resold one of the two lots to the said spouses Relevo, in whose favor title to the said property
was registered. Private respondent further alleged that he suspended his payments because of
petitioner's failure to develop the village.
Private respondent prayed for the annulment of the sale to the Relevo spouses and for reconveyance of
the lot to him.
On October 11, 1983, the OAALA rendered a decision upholding the right of petitioner to cancel the
contract with private respondent and dismissed private respondent's complaint.
On appeal, the Commission Proper of the HSRC reversed the OAALA and, applying P.D. 957, ordered
petitioner to complete the subdivision development and to reinstate private respondent's purchase
contract over one lot, and as to the other, "it appearing that Transfer Certificate of Title No. 269546 has
been issued to . . . spouses Rodolfo and Ad(e)lina Relevo . . . , the management of E & S Delta Village
is hereby ordered to immediately refund to the complainant-appellant (herein private respondent) all
payments made thereon, plus interests computed at legal rates from date of receipt hereof until fully
paid."
The respondent Executive Secretary, on appeal, affirmed the decision of the HSRC and denied the
subsequent Motion for Reconsideration for lack of merit and for having been filed out of time. Petitioner
has now filed this Petition for review before the Supreme Court.
Under Revised Administrative Circular No. 1-95, "appeals from judgments or final orders of the . . .
Office of the President . . . may be taken to the Court of Appeals . . . " However, in order to hasten the
resolution of this case, which was deemed submitted for decision one and a half years ago, the Court
resolved to make an exception to the said Circular in the interest of speedy justice.
In his Petition before this Court, petitioner avers that the Executive Secretary erred in applying P.D. 957
and in concluding that the non-development of the E & S Delta Village justified private respondent's
non-payment of his amortizations. Petitioner avers that inasmuch as the land purchase agreements
were entered into in 1972, prior to the effectivity of P.D. 957 in 1976, said law cannot govern the
transaction.
We hold otherwise, and herewith rule that respondent Executive Secretary did not abuse his discretion,
and that P.D. 957 is to be given retroactive effect so as to cover even those contracts executed prior to
its enactment in 1976.
P.D. 957 did not expressly provide for retroactivity in its entirety, but such can be plainly inferred from
the unmistakable intent of the law.
The intent of the law, as culled from its preamble and from the situation, circumstances and conditions it
sought to remedy, must be enforced. On this point, a leading authority on statutory construction
stressed:
The intent of a statute is the law. . . . The intent is the vital part, the essence of the law, and
the primary rule of construction is to ascertain and give effect to the intent. The intention of
the legislature in enacting a law is the law itself, and must be enforced when ascertained,
although it may not be consistent with the strict letter of the statute. Courts will not follow the
letter of a statute when it leads away from the true intent and purpose of the legislature and
to conclusions inconsistent with the general purpose of the act. . . . In construing statutes the
proper course is to start out and follow the trite intent of the legislature and to adopt that
sense which harmonizes best with the context and promotes in the fullest manner the
apparent policy and objects of the legislature.1 (emphasis supplied.)
It goes without saying that, as an instrument of social justice, the law must favor the weak and the
disadvantaged, including, in this instance, small lot buyers and aspiring homeowners. P.D. 957 was
enacted with no other end in view than to provide a protective mantle over helpless citizens who may
fall prey to the manipulations and machinations of "unscrupulous subdivision and condominium sellers",
and such intent is nowhere expressed more clearly than in its preamble, pertinent portions of which
read as follows:
WHEREAS, it is the policy of the State to afford its inhabitants the requirements of decent
human settlement and to provide them with ample opportunities for improving their quality of
life;
WHEREAS, numerous reports reveal that many real estate subdivision owners, developers,
operators, and/or sellers have reneged on their representations and obligations to provide
and maintain properly subdivision roads, drainage, sewerage, water systems, lighting
systems, and other similar basic requirements, thus endangering the health and safety of
home and lot buyers;
WHEREAS, reports of alarming magnitude also show cases of swindling and fraudulent
manipulations perpetrated by unscrupulous subdivision and condominium sellers and
operators, such as failure to deliver titles to the buyers or titles free from liens and
encumbrances, and to pay real estate taxes, and fraudulent sales of the same subdivision
lots to different innocent purchasers for value;2 (emphasis supplied.)
From a dedicated reading of the preamble, it is manifest and unarguable that the legislative intent must
have been to remedy the alarming situation by having P.D. 957 operate retrospectively even upon
contracts already in existence at the time of its enactment. Indeed, a strictly prospective application of
the statute will effectively emasculate it, for then the State will not be able to exercise its regulatory
functions and curb fraudulent schemes and practices perpetrated under or in connection with those
contracts and transactions which happen to have been entered into prior to P.D. 957, despite obvious
prejudice to the very subdivision lot buyers sought to be protected by said law. It is hardly conceivable
that the legislative authority intended to permit such a loophole to remain and continue to be a source of
misery for subdivision lot buyers well into the future.
Adding force to the arguments for the retroactivity of P.D. 957 as a whole are certain of its
provisions, viz., Sections 20, 21 and 23 thereof, which by their very terms have retroactive effect and
will impact upon even those contracts and transactions entered into prior to P.D. 957's enactment:
Sec. 20. Time of Completion. — Every owner or developer shall construct and provide the
facilities, improvements, infrastructures and other forms of development, including water
supply and lighting facilities, which are offered and indicated in the approved subdivision or
condominium plans, brochures, prospectus, printed matters, letters or in any form of
advertisement, within one year from the date of the issuance of the license for the subdivision
or condominium project or such other period of time as may be fixed by the Authority.
Sec. 21. Sales Prior to Decree. — In cases of subdivision lots or condominium units sold or
disposed of prior to the effectivity of this Decree, it shall be incumbent upon the owner or
developer of the subdivision or condominium project to complete compliance with his or its
obligations as provided in the preceding section within two years from the date of this
Decree unless otherwise extended by the Authority or unless an adequate performance bond
is filed in accordance with Section 6 hereof.
Failure of the owner or, developer to comply with the obligations under this and the preceding
provisions shall constitute a violation punishable under Section 38 and 39 of this Decree.
Sec. 23. Non-Forfeiture of Payments. — No installment payment made by a buyer in a
subdivision or condominium project for the lot or unit he contracted to buy shall be forfeited in
favor of the owner or developer, when the buyer, after due notice to the owner or developer,
desists from further payment due to the failure of the owner or developer to develop the
subdivision or condominium project according to the approved plans and within the time limit
for complying with the same. Such buyer may, at his option, be reimbursed the total amount
paid including amortization interests but excluding delinquency interests, with interest thereon
at the legal rate. (emphasis supplied)
On the other hand, as argued by the respondent Executive Secretary, the application of P.D. 957 to the
contracts in question will be consistent with paragraph 4 of the contracts themselves, which expressly
provides:
(4) The party of the First Part hereby binds himself to subdivide, develop and improve the
entire area covered by Transfer Certificate of Title No. 168119 of which the parcels of lands
subject of this contract is a part in accordance with the provisions of Quezon City Ordinance
No. 6561, S-66 and the Party of the First Part further binds himself to comply with and abide
by all laws, rules and regulations respecting the subdivision and development of lots for
residential purposes as may be presently in force or may hereafter be required by laws
passed by the Congress of the Philippines or required by regulations of the Bureau of Lands,
the General Registration Office and other government agencies. (emphasis supplied)
Moreover, as P.D. 957 is undeniably applicable to the contracts in question, it follows that Section 23
thereof had been properly invoked by private respondent when he desisted from making further
payment to petitioner due to petitioner's failure to develop the subdivision project according to the
approved plans and within the time limit for complying with the same. (Such incomplete development of
the subdivision and non-performance of specific contractual and statutory obligations on the part of the
subdivision-owner had been established in the findings of the HLURB which in turn were confirmed by
the respondent Executive Secretary in his assailed Decision.) Furthermore, respondent Executive
Secretary also gave due weight to the following matters: although private respondent started to default
on amortization payments beginning May 1975, so that by the end of July 1975 he had already incurred
three consecutive arrearages in payments, nevertheless, the petitioner, who had the cancellation option
available to him under the contract, did not exercise or utilize the same in timely fashion but delayed
until May 1979 when he finally made up his mind to cancel the contracts. But by that time the land
purchase agreements had already been overtaken by the provisions of P.D. 957, promulgated on July
12, 1976. (In any event, as pointed out by respondent HLURB and seconded by the Solicitor General,
the defaults in amortization payments incurred by private respondent had been effectively condoned by
the petitioner, by reason of the latter's tolerance of the defaults for a long period of time.)
Likewise, there is no merit in petitioner's contention that respondent Secretary exceeded his jurisdiction
in ordering the refund of private respondent's payments on Lot 12 although (according to petitioner)
only Lot 13 was the subject of the complaint. Respondent Secretary duly noted that the supporting
documents submitted substantiating the claim of non-development justified such order inasmuch as
such claim was also the basis for non-payment of amortizations on said Lot 12.
Finally, since petitioner's motion for reconsideration of the (Executive Secretary's) Decision dated
March 10, 1992 was filed only on the 21st day from receipt thereof, said decision had become final and
executory, pursuant to Section 7 of Administrative Order No. 18 dated February 12, 1987, which
provides that "(d)ecisions/ resolutions/orders of the Office of the President shall, except as otherwise
provided for by special laws, become final after the lapse of fifteen (15) days from receipt of a copy
thereof . . . , unless a motion for reconsideration thereof is filed within such period."

WHEREFORE, there being no showing of grave abuse of discretion, the petition is DENIED due course
and is hereby DISMISSED. No costs.

SO ORDERED.