May 3.

2019

G.R. No. 227670

ALYANSA PARA SA BAGONG PILIPINAS, INC. (ABP), represented by Evelyn V. Jallorina and
Noel Villones, Petitioner
vs.
ENERGY REGULATORY COMMISSION, represented by its Chairman, JOSE VICENTE B.
SALAZAR, DEPARTMENT OF ENERGY, represented by Secretary ALFONSO G. CUSI,
MERALCO, CENTRAL LUZON PREMIERE POWER CORPORATION, ST. RAPHAEL POWER
GENERATION CORPORATION, PANAY ENERGY DEVELOPMENT CORPORATION,
MARIVELES POWER GENERATION CORPORATION, GLOBAL LUZON ENERGY
DEVELOPMENT CORPORATION, ATIMONAN ONE ENERGY, INC., REDONDO PENINSULA
ENERGY, INC., and PHILIPPINE COMPETITION COMMISSION, Respondents

DECISION

CARPIO, J.:

The outcome of this case will greatly affect, for the next two decades, all consumers of electricity in
the Philippines, which include the over 95 million Filipinos living in the Philippines as well as the
millions of business enterprises operating in the Philippines.

Section 19, Article XII of the 1987 Constitution provides: "The State shall regulate or prohibit
monopolies when the public interest so requires. No combinations in restraint of trade or unfair
competition shall be allowed."

The State grants electricity distribution utilities, through legislative franchises, a regulated monopoly
within their respective franchise areas. Competitors are legally barred within the franchise areas of
distribution utilities. Facing no competition, distribution utilities can easily dictate the price of
electricity that they charge consumers. To protect the consuming public from exorbitant or
unconscionable charges by distribution utilities, the State regulates the acquisition cost of electricity
that distribution utilities can pass on to consumers.

As part of its regulation of this monopoly, the State requires distribution utilities to subject
to competitive public bidding their purchases of electricity from power generating companies.
Competitive public bidding is essential since the power cost purchased by distribution utilities is
entirely passed on to consumers, along with other operating expenses of distribution
utilities. Competitive public bidding is the most efficient, transparent, and effective guarantee
that there will be no price gouging by distribution utilities.

Indeed, the requirement of competitive public bidding for power purchases of distribution utilities has
been adopted in the United States, Europe, Latin America, India, and many developing
countries.   This requirement is primarily aimed at ensuring a fair, reasonable, and least-cost
1

generation charge to consumers, under a transparent power sale mechanism between the
generation companies and the distribution utilities.

Section 6, Article XII of the 1987 Constitution provides: "The use of property bears a social function,
and all economic agents shall contribute to the common good. Individuals and private groups,
including corporations, cooperatives, and similar collective organizations, shall have the right to own,
establish, and operate economic enterprises, subject to the duty of the State to promote
distributive justice and to intervene when the common good so demands."

Indisputably, the use of electricity bears a vital social function. The State, in requiring competitive
public bidding in the purchase of power by distribution utilities, has exercised its constitutional "duty x
x x to intervene when the common good so demands." 2

The breakdown of charges in a Manila Electric Company (Meralco) bill contains the
following: Generation Charge, Transmission Charge, System Loss Charge, Distribution Charge
(Meralco), Subsidies, Government Taxes, Universal Charges, FiT-All Charge (Renewable), and
Other Charges. The Power Supply Agreements (PSAs) involved in the present case were
executed in April 2016 and have terms that range from 20 to 21 years.

Section 43 of Republic Act No. 9136, or the Electric Power Industry Reform Act of 2001 (EPIRA),
includes a description, in broad strokes, of the functions of the Energy Regulatory Commission
(ERC): "The ERC shall promote competition, encourage market development, ensure customer
choice and discourage/penalize abuse of market power in the restructured electricity industry."
Moreover, Section 2 of the EPIRA declares it a state policy to "ensure the x x x affordability of the
supply of electric power." Further, Section 45 of the EPIRA mandates the ERC to enforce
safeguards to "promote true market competition and prevent harmful monopoly and market
power abuse." If the ERC violates its statutory functions, this Court, as mandated by Section 1,
Article VIII of the 1987 Constitution,  has the duty to strike down the acts of ERC whenever these are
3

performed with grave abuse of discretion amounting to lack or excess of jurisdiction.

The Case

Alyansa para sa Bagong Pilipinas, Inc. (ABP), represented by Evelyn V. Jallorina and Noel Villones,
filed G.R. No. 227670, a petition for certiorari and prohibition  with an application for a temporary
4

restraining order and/or writ of preliminary injunction. Named as respondents are the ERC, the
Department of Energy (DOE), Meralco, Central Luzon Premiere Power Corporation (CLPPC), St.
Raphael Power Generation Corporation (SRPGC), Panay Energy Development Corporation
(PEDC), Mariveles Power Generation Corporation (MPGC), Global Luzon Energy Development
Corporation (GLEDC), Atimonan One Energy, Inc. (AlE), Redondo Peninsula Energy, Inc. (RPE),
and the Philippine Competition Commission (PCC).

The petition seeks to declare as void ERC Resolution No. 1, Series of 2016 (ERC Clarificatory
Resolution). The petition also seeks that this Court direct the ERC to disapprove the Power Supply
Agreements (PSAs) of the Distribution Utilities (DUs) submitted after 7 November 2015 for failure to
conduct Competitive Selection Process (CSP). The petition further asks the Court to order ERC to
implement CSP in accordance with the Department of Energy (DOE) Circular No. DC2015-06-0008
(2015 DOE Circular) and ERC Resolution No. 13, Series of 2015 (CSP Guidelines). 5

The Facts

On 11 June 2015, the DOE issued the 2015 DOE Circular entitled "Mandating All Distribution
Utilities to Undergo Competitive Selection Process (CSP) in Securing Power Supply
Agreements (PSA)." Sections 3 and 10 of the 2015 DOE Circular provide:

Section 3. Standard Features in the Conduct of the CSP. After the effectivity of this Circular,
all DUs shall procure PSAs only through CSP conducted through a Third Party duly
recognized by the ERC and the DOE. In the case of [Electric Cooperatives (ECs)], the Third Party
shall also be duly recognized by the National Electrification Administration (NEA).
Under this Circular, CSPs for the procurement of PSAs of all DUs shall observe the following:

(a) Aggregation for un-contracted demand requirements of DUs;

(b) Annually conducted; and

(c) Uniform template for the terms and conditions in the PSA to be issued by the ERC in coordination
with the DOE.

Within one hundred twenty (120) days from the effectivity of this Circular, the ERC and [the] DOE
shall jointly issue the guidelines and procedures for the aggregation of the un-contracted demand
requirements of the DUs and the process for the recognition or accreditation of the Third Party that
conducts the CSP as hereto provided. For clarity, the term aggregation as used in this Circular refers
to the wholesale demand and energy requirements of DUs, and not of the Contestable Markets
under Retail Competition and Open Access (RCOA) regime.

As used in this section, the un-contracted demand or energy requirements of the DUs shall refer to
the energy and demand not yet procured individually or collectively by the DUs, excluding those
energy and capacity covered by PSAs that have been filed for approval before the ERC.

xxxx

Section 10. Effectivity. This Circular shall take effect immediately upon its publication in two (2)
newspapers of general circulation and shall remain in effect until otherwise revoked. (Boldfacing
added)

Section 3 of the 2015 DOE Circular expressly and categorically mandates CSP, or competitive
public bidding, whenever DUs secure PSAs. The 2015 DOE Circular took effect on 30 June
2015 upon its publication in two newspapers of general circulation. Section 3 expressly
states that "[a]fter the effectivity of this Circular, all DUs shall procure PSAs only through
CSP

x x x."

On 20 October 2015, Joint Resolution No. 1 (Joint Resolution), executed by the DOE and the ERC,
reiterated the need to adopt a "regime of transparent process in securing Power Supply
Agreements." The fifth Whereas clause of the Joint Resolution provides:

WHEREAS, the DOE and ERC recognize the adoption of competitive selection as a policy that will
encourage investments in the power generation business thereby ensuring electric power supply
availability in a regime of transparent process in securing Power Supply Agreements (PSAs),
which is an integral part of the power sector reform agenda. (Boldfacing added)

Under the Joint Resolution, the DOE and the ERC agreed that ERC shall issue the appropriate
regulation to implement CSP. Section 1 of the Joint Resolution states:

Section 1. Competitive Selection Process. Consistent with their respective mandates, the DOE
and ERC recognize that Competitive Selection Process (CSP) in the procurement of Power Supply
Agreements (PSAs) by the DUs engenders transparency, enhances security of supply, and ensures
stability of electricity prices to captive electricity end-users in the long-term. Consequently, by
agreement of the DOE and ERC, the ERC shall issue the appropriate regulation
to implement the same. (Boldfacing and italicization added)

On the same date, 20 October 2015, the ERC issued the CSP Guidelines, which directed all DUs to
conduct CSP in the procurement of their power supply for their captive markets.

The CSP Guidelines fixed a new date of effectivity for compliance with CSP. This is the first instance
that the ERC unilaterally fixed a different date from 30 June 2015, effectively postponing the date
of effectivity of CSP from 30 June 2015 to 7 November 2015 or by 130 days:

Section 4. Applicability. The CSP requirement herein mandated shall not apply to PSAs
already filed with the ERC as of the effectivity of this Resolution. For PSAs already executed
but are not yet filed or for those that are still in the process of negotiation, the concerned
DUs are directed to comply with the CSP requirement before their PSA applications will be
accepted by the ERC.

This Resolution shall take effect immediately following its publication in a newspaper of general
circulation in the Philippines.

x x x x (Boldfacing and italicization added)

Based on its provisions, the CSP Guidelines took effect on 7 November 2015, following its
publication in the Philippine Daily Inquirer and the Philippine Star. Section 4 of the CSP Guidelines
expressly provides that CSP "shall not apply to PSAs already filed with the ERC as of the
effectivity of this Resolution." Thus, the ERC no longer required CSP for all PSAs already filed
with the ERC on or before 7 November 2015. Section 4 of the CSP Guidelines further states that
"[f]or PSAs already executed but are not yet filed or for those that are still in the process of
negotiation, the concerned DUs are directed to comply with the CSP requirement before their PSA
applications will be accepted by the ERC."

On 15 March 2016, however, the ERC, for the second time, unilaterally postponed the date of
effectivity of CSP. The ERC issued the ERC Clarificatory Resolution, which restated the date
of effectivity of the CSP Guidelines from 7 November 2015 to 30 April 2016. Paragraph 1 of the
ERC Clarificatory Resolution reads:

1. The effectivity of the CSP [Guidelines] is hereby restated to be 30 April 2016. All PSAs
executed on or after the said date shall be required, without exception, to comply with the provisions
of the CSP [Guidelines]. (Boldfacing added)

The second postponement of the effectivity of CSP from 7 November 2015 to 30 April 2016, or
by 175 days, allowed DUs to enter into contracts during the period of postponement to avoid
the mandatory CSP.

The table below shows that the following PSAs between Meralco and its power suppliers were
executed and submitted to the ERC within 10 days prior the restated 30 April 2016 deadline.
According to the ERC Clarificatory Resolution, these PSAs are not required to comply with CSP.

Power Power Amount of Term of Start of Date of Date of

Supplier Purchaser Power Agreement Negotiations PSA Submission
Purchased Execution of
Application
 to ERC

Redondo Manila 225 20 years 7

19 July 20 April 28 April
Peninsula Electric Megawatts 2012 8
2016 9
2016  10

Energy, Inc. Company (MW) 6

(RPE) (Meralco)

Atimonan Meralco 2 x 600 20 years 3rd or 4th 26 April 28 April

One Energy, MW (net)  11
and six quarter of 2016 14
2016 15

Inc. (AlE) months  12

2014 13

St. Raphael Meralco Up to 400 20 years Latter part 26 April 28 April

Power MW 16
and four of 2014  18
2016 19
2016 20

Generation months 17

Corporation
(SRPGC)

Panay Meralco Up to 70 20 years 21 May 26 April 27 April

Energy MW 2014 2016 2016
22
21 23 24 25

Development
Corporation
(PEDC)

Global Luzon Meralco 600 MW 26

20 years 9 December 27 April 29 April
Energy 2014 2016 2016
27
28 29 30

Development
Corporation
(GLEDC)

Central Meralco Up to 528 21 years  32

18 March 26 April 29 April
Luzon MW 31
2015 33
2016 34
2016 35

Premiere
Power
Corporation
(CLPPC)

Mariveles Meralco Up to 528 21 years 11 February 26 April 29 April

Power MW 2015 2016 2016
37
36 38 39 40

Generation
Corporation
(MPGC)

AlE and RPE are subsidiaries or affiliates of Meralco.  In paragraph 3. 71 of its Comment,
41

Meralco stated that "[a]t the time of the signing of the AlE PSA, AlE was wholly-owned by Meralco
PowerGen Corporation ('PowerGen'), a wholly-owned subsidiary of Meralco. On the other hand, at
the time of the signing of the RPE PSA, forty-seven percent (47%) of the total subscribed capital of
RPE was owned by PowerGen, and three percent (3%) of its total subscribed capital was owned by
the Meralco Pension Fund." 42

CLPPC and MPGC are subsidiaries of SMC Global Power Holdings Corp. (SMC Global), the
subsidiary of San Miguel Corporation (SMC) engaged in the construction and operation of various
power projects.43

In its Comment, Meralco admitted that "no actual bidding is conducted,"  and that "the PSAs
44

entered into by Meralco undergo competitive selection and thorough negotiations, taking into
consideration its specific and unique requirements."  In short, no CSP was conducted through a third
45

party recognized by the ERC as mandated in the 2015 DOE Circular.

Meralco also stated that, apart from the seven (7) PSAs between Meralco and its power
suppliers, there are eighty-three (83) other PSAs filed with the ERC during the period from 16
April 2016 to 29 April 2016, bringing the total PSAs excluded from CSP to ninety (90) PSAs.

DATE NO. OF PSAS GENERATION

COMPANIES

16 to 24 April 4 PSAs Mineral Power, Palm

2016 Concepcion, Astroenergy,
GNPower Kauswagan

25 April 2016 5 PSAs GNPower Dinginin

26 April 2016 5 PSAs GNPower Dinginin, Astroenergy

27 April 2016 4 PSAs GNPower Dinginin

28 April 2016 10 PSAs A. Brown, GNPower Dinginin,

Southern Philippines Power,
SMCPC, Surepep, Total Power,
Upper Manupali Hydro

29 April 2016 55 PSAs SMEC, MPGC, SCPC, SMCPC,

LPPC, PEDC, GLEDC, CLPPC,
A. Brown, A1E, Anda,
Astronenergy, Delta P, GNPower
Dinginin, GPower, Isabela
Power, Levan Marketing,
Mapalad Power, Minergy, RPE,
SRPGC, Sunasia Energy, TeaM
Energy, Trans-Asia, Unified
Leyte Geothennal Energy,
Western Power Mindanao 46

Meralco further stated in its Comment:

1.41. Furthermore, apart from MERALCO, the following DUs and electric cooperatives also filed
more than one PSA with the ERC during the second (2nd) half of April 2016: (a) Agusan del Sur
Electric Cooperative, Inc.; (b) Bukidnon Second Electric Cooperative, Inc.; (c) Cagayan Electric
Power & Light Company, Inc.; (d) Cotabato Light and Power Company; (e) Davao del Sur Electric
Cooperative; (t) Iloilo 1 Electric Cooperative; (g) Ilocos Sur Electric Cooperative Incorporation; (h)
Isabela I Electric Cooperative, Inc.; (i) Isabela II Electric Cooperative; (j) Leyte III Electric
Cooperative, Inc.; (k) La Union Electric Cooperative, Inc.; (1) Pangasinan Electric Cooperative III;
(m) Peninsula Electric Cooperative, Inc.; (n) Tarlac II Electric Cooperative, Inc.; (o) Zamboanga City
Electric Cooperative, Inc.; and (p) Zamboanga del Sur Electric Cooperative, Inc. 47

The Issues

ABP raised the following issues:

1. Whether or not the ERC committed grave abuse of discretion in issuing the [ERC Clarificatory
Resolution].

2. Whether or not the separate PSAs of Meralco with respondent generation companies should be
disapproved for their failure to comply with the requirements of the [2015 DOE Circular] and the
[CSP Guidelines]. 48

ABP's petition thus presents a purely legal issue: Does ERC have the statutory authority to postpone
the date of effectivity of CSP, thereby amending the 2015 DOE Circular which required CSP to take
effect on 30 June 2015?

The determination of the extent of the ERC's statutory authority in the present case is a purely legal
question and can be resolved without making any finding of fact. The affirmative or negative
resolution of this purely legal question will necessarily result in legal consequences, thus:

(a) If the Court rules affirmatively (that is, the ERC has the statutory authority to postpone the date of
effectivity of CSP, and thereby ERC can amend the 2015 DOE Circular), then the legal consequence
is that the 90 PSAs submitted to the ERC before the amended effectivity of CSP (30 April 2016) will
serve as basis to pass on the power cost to consumers for the duration of the PSAs, whatever the
duration of these PSAs.

(b) If the Court rules negatively (that is, the ERC does not have the statutory authority to postpone
the date of effectivity of CSP, and thereby cannot amend the 2015 DOE Circular), then the legal
consequence is that the 90 PSAs submitted to the ERC after the effectivity of CSP on or after 30
June 2015 cannot serve as basis to pass on the power cost to consumers. In such a case, the ERC
will have to conduct CSP on all PSA applications submitted on or after 30 June 2015.

Clearly, there is no factual issue in dispute in the present case, and no factual issue has been raised
by any of the parties. Thus, the present case can be resolved purely on the legal issue raised by
ABP even as the resolution of this purely legal issue will necessarily result in legal consequences
either way.
The Court's Ruling

We GRANT ABP's petition. The ERC does not have the statutory authority to postpone the date of
effectivity of CSP, and thereby cannot amend the 2015 DOE Circular. As a result, the 90 PSAs
submitted to the ERC after the effectivity of CSP on or after 30 June 2015 cannot serve as basis to
pass on the power cost to consumers. The ERC must require CSP on all PSA applications submitted
on or after 30 June 2015.
Certiorari and Prohibition
As Remedy

Petitioner ABP correctly filed a petition for certiorari and prohibition before this Court.

[T]he remedies of certiorari and prohibition are necessarily broader in scope and reach, and the writ
of certiorari or prohibition may be issued to correct errors of jurisdiction committed not only by a
tribunal, corporation, board or officer exercising judicial, quasi-judicial or ministerial functions but
also to set right, undo and restrain any act of grave abuse of discretion amounting to lack or excess
of jurisdiction by any branch or instrumentality of the Government, even if the latter does not
exercise judicial, quasi-judicial or ministerial functions. This application is expressly authorized by
the text of the second paragraph of Section 1, [Article 8 of the 1987 Constitution].  (Boldfacing and
49

italicization added)

Not every abuse of discretion can be occasion for this Court to exercise its jurisdiction. Grave abuse
of discretion means "such capricious and whimsical exercise of judgment as is equivalent to lack of
jurisdiction, or, in other words where 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 or to a virtual refusal to perform the 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." 50

The Dissenting Opinion of Justice Andres B. Reyes, Jr. would rather have this Court dismiss the
petition. Justice Reyes asserts that the ERC, in issuing the ERC Clarificatory Resolution, acted
within its jurisdiction  and did not act with grave abuse of discretion amounting to lack or excess of
51

jurisdiction.  Justice Reyes claims that the ERC was exercising its quasi-legislative power, as
52

granted by Sections 43 and 45 of the EPIRA and as defined in Sections 3 and 4 of the 2015 DOE
Circular, when the ERC issued the ERC Clarificatory Resolution. Justice Reyes advances three
reasons to justify his assertion that the ERC did not act with grave abuse of discretion amounting to
lack or excess of jurisdiction.

First, the implementation of ERC Resolution No. 13 caused an avalanche of concerns and confusion
from the stakeholders of the industry regarding the actual implementation of the provisions of the
resolution, so much so that a multitude of [Distribution Utilities] DUs, mostly electric cooperatives,
sought for an exemption from the guidelines in the resolution. xxx.
xxxx

Second, ERC did not "evade" its positive duty as provided for in the Constitution, the EPIRA, [the
2015 DOE Circular], or [the CSP Guidelines] as the petitioners would like the Court to believe.xx x.
xxxx

xx x ERC's action on merely "restating" the date of effectivity of [the ERC Clarificatory Resolution] -
its own resolution that has been in effect since April, 2016 - has not been shown to have been
promulgated with grave abuse of discretion amounting to lack or excess of jurisdiction.

Third, it must also be emphasized that [the ERC Clarificatory Resolution] enjoys a strong
presumption of its validity. x x x.  53

Justice Reyes's Dissenting Opinion also finds no problem with the issuance and the contents of the
ERC Clarificatory Resolution.  According to Justice Reyes, under the Joint Resolution executed by
1âшphi1

the DOE and the ERC on 20 October 2015, the DOE and the ERC agreed that the ERC shall issue
the appropriate regulation to implement CSP. " 54
Justice Reyes is correct - consistent with their respective mandates under EPIRA, the DOE and
the ERC agreed that the ERC shall issue the appropriate regulation to implement CSP in
accordance with the 2015 DOE Circular.   However, the ERC's delegated authority is limited to
55

implementing or executing CSP in accordance with the 2015 DOE Circular, not postponing CSP

so as to freeze CSP for at least 20 years, effectively suspending CSP for one entire generation of
Filipinos. The delegated authority to implement CSP does not include the authority to postpone or
suspend CSP for 20 years, beyond the seven-year terms of office  of the ERC Commissioners
56

postponing or suspending the CSP, and beyond the seven-year terms of office of their next
successors, as well as beyond the six-year terms of office of three Presidents of the Republic.

The ERC's exercise of its quasi-legislative power, which took the form of the issuance of the ERC
Clarificatory Resolution, was done in excess of its jurisdiction. The postponement of the effectivity
of CSP was without the approval, and even without coordination with the DOE, in clear and
blatant violation of Section 4 of the 2015 DOE Circular mandating CSP. The ERC has no power
to postpone the effectivity of the 2015 DOE Circular. Under the 2015 DOE Circular, the ERC can
only issue supplemental guidelines, which means guidelines to implement the 2015 DOE Circular,
and not to amend it. Postponing the effectivity of CSP amends the 2015 DOE Circular, and does not
constitute issuance of mere supplemental guidelines.

The issuance of the ERC Clarificatory Resolution was attended with grave abuse of
discretion amounting to lack or excess of jurisdiction for the following reasons:

(1) Postponing the effectivity of CSP from 30 June 2015 to 7 November 2015, and again
postponing the effectivity of CSP from 7 November 2015 to 30 April 2016, or a total of 305
days, allowed DUs nationwide to avoid the mandatory CSP;

(2) Postponing the effectivity of CSP effectively freezes for at least 20 years the DOE-
mandated CSP to the great prejudice of the public. The purpose of CSP is to compel DUs to
purchase their electric power at a transparent, reasonable, and least-cost basis, since this
cost is entirely passed on to consumers. The ERC's postponement unconscionably placed
this public purpose in deep freeze for at least 20 years.

Indisputably, the ERC committed grave abuse of discretion amounting to lack or excess of
jurisdiction when the ERC postponed the effectivity of CSP. The postponement effectively
prevented for at least 20 years the enforcement of a mechanism intended to
ensure "transparent and reasonable prices in a regime of free and fair competition," as
mandated by law under EPIRA, a mechanism implemented in the 2015 DOE Circular which
took effect on 30 June 2015.

In short, in the absence of CSP, there is no transparency in the purchase by DUs of electric
power, and thus there is no assurance of the reasonableness of the power rates charged to
consumers. As a consequence, all PSA applications submitted to the ERC on or after 30 June
2015 should be deemed not submitted and should be made to comply with CSP.

Why the ERC Acted in Excess of its Jurisdiction:

Purpose of CSP and Significance of the
Postponement of the CSP Deadline

The EPIRA was enacted on 8 June 2001. Among the EPIRA's declared State policies are, as stated
in its Section 2:
57

xxxx
(b) To ensure the quality, reliability, security and affordability of the supply of electric power;

(c) To ensure transparent and reasonable prices of electricity in a regime of free and fair
competition and full public accountability to achieve greater operational and economic
efficiency and enhance the competitiveness of Philippine products in the global market; [and]
xxxx

(f) To protect the public interest as it is affected by the rates and services of electric utilities
and other providers of electric power;

x x x x (Boldfacing and italicization added)

The EPIRA mandates the DOE to "supervise the restructuring of the electricity industry."  The
58

EPIRA amended Section 5 of Republic Act No. 7638, or "The Department of Energy Act of 1992," to
allow the DOE to fulfill this new mandate under the EPIRA.

More importantly, Section 37 of the EPIRA includes the following in its enumeration of the
DOE's powers and functions:

(a) Formulate policies for the planning and implementation of a comprehensive program for
the efficient supply and economical use of energy consistent with the approved national
economic plan x x x and provide a mechanism for the integration, rationalization, and coordination
of the various energy programs of the Government;
xxxx

(d) Ensure the reliability, quality and security of supply of electric power;

xxxx

(e) x x x [T]he DOE shall, among others,

xxxx

(ii) Facilitate and encourage reforms in the structure and operations of distribution utilities for
greater efficiency and lower costs;
xxxx

(h) Exercise supervision and control over all government activities relative to energy projects
in order to attain the goals embodied in Section 2 of RA 7638;
xxxx

(p) Formulate such rules and regulations as may be necessary to implement tile objectives of
this Act; x x x

x x x x (Boldfacing and italicization added)

Under the EPIRA, it is the DOE that issues the rules and regulations to implement the EPIRA,
including the implementation of the policy objectives stated in Section 2  of the EPIRA. Rules
59

and regulations include circulars that have the force and effect of rules or regulations. Thus,
pursuant to its powers and functions under the EPIRA, the DOE issued the 2015 DOE Circular
mandating the conduct of CSP.
The 2015 DOE Circular, as stated in its very provisions, was issued pursuant to the DOE's
power to "formulate such rules and regulations as may be necessary to implement the
objectives of the EPIRA,"  where the State policy is to "[p]rotect the public interest as it is
60

affected by the rates and services of electric utilities and other providers of electric
power."  Under the EPIRA, it is also the State policy to "ensure the x x x affordability of the
61

supply of electric power."  The purpose of the 2015 DOE Circular is to implement the State
62

policies prescribed in the EPIRA. Clearly, the 2015 DOE Circular constitutes a rule or
regulation issued by the DOE pursuant to its rule-making power under Section 37(p) of the
EPIRA.

The EPIRA also provides for the powers and functions of the ERC. Section 43 of the EPIRA
mandates that the ERC "shall be responsible for the following key functions in the restructured
industry:"

(a) Enforce the implementing rules and regulations of this Act.

xxxx

(o) Monitor the activities in the generation and supply of the electric power industry with the end in
view of promoting free market competition and ensuring that the allocation or pass through of
bulk purchase cost by distributors is transparent, non-discriminatory and that any existing
subsidies shall be divided pro-rata among all retail suppliers;

x x x x (Boldfacing and italicization added)

Thus, the very first mandate of the ERC under its charter, the EPIRA, is to "[e]nforce the
implementing rules and regulations" of the EPIRA as formulated and adopted by
DOE. Clearly, under the EPIRA, it is the DOE that formulates the policies, and issues the rules
and regulations, to implement the EPIRA. The function of the ERC is to enforce and
implement the policies formulated, as well as the rules and regulations issued, by the
DOE. The ERC has no power whatsoever to amend the implementing rules and regulations of
the EPIRA as issued by the DOE. The ERC is further mandated under EPIRA to ensure that
the "pass through of bulk purchase cost by distributors is transparent [and] non-
discriminatory." 63

Despite the ERC's characterization as an "independent, quasi-judicial regulatory body,"  it is

64

incorrect to conclude, as Justice Alfredo Benjamin S. Caguioa holds, that the ERC exercises
"inherent and sufficient power,"  and "sufficient power, as the independent regulator of the
65

industry,"  to supplant or change, as it did in the present case, policies, rules, and regulations
66

prescribed by the DOE. The power involved in the ERC's implementation of the 2015 DOE
Circular is not quasi-judicial but executive. There are no adverse parties involved in the
implementation by the ERC of the 2015 DOE Circular. The ERC does not adjudicate rights and
obligations of adverse parties in the present case. The issue presented here involves the propriety of
the exercise of the ERC's executive implementation of the policies, as well as the rules and
regulations of the EPIRA as issued by the DOE.

Moreover, the nature of the power involved in the ERC's postponement of the effectivity of CSP as
mandated in the 2015 DOE Circular is not quasi-judicial but delegated legislative power. Justice
Caguioa states that "the ERC could solely issue"  any resolution changing the dates of effectivity
67

of CSP as set by the CSP Guidelines and the ERC Clarificatory Resolution "because it was
empowered by the law, i.e., the EPIRA." 68
We quote below the entirety of Section 43 of the EPIRA, prescribing the functions of the ERC,
and there is absolutely nothing whatsoever in this complete enumeration of the ERC's
functions that grants the ERC rule-making power to supplant or change the policies, rules,
regulations, or circulars prescribed by the DOE. The ERC's functions, as granted by the EPIRA,
are limited, inter alia, to the enforcement of the implementing rules and regulations of the EPIRA,
and not to amend or revoke them. At most, as stated in paragraph (m) of Section 43, the ERC may
only take any other action delegated to it pursuant to EPIRA. The ERC may not exceed its
delegated authority. Section 43 of the EPIRA provides as follows:

Section 43. Functions of the ERC. - The ERC shall promote competition, encourage market
development, ensure customer choice and discourage/penalize abuse of market power in the
restructured electricity industry. In appropriate cases, the ERC is authorized to issue cease and
desist order after due notice and hearing. Towards this end, it shall be responsible for the following
key functions in the restructured industry:

(a) Enforce the implementing rules and regulations of this Act;

(b) Within six (6) months from the effectivity of this Act, promulgate and enforce, in accordance with
law, a National Grid Code and a Distribution Code which shall include, but not limited to, the
following:

(i) Performance standards for TRANSCO O & M Concessionaire, distribution utilities and
suppliers: Provided, That in the establishment of the performance standards, the nature and function
of the entities shall be considered; and

(ii) Financial capability standards for the generating companies, the TRANSCO, distribution utilities
and suppliers: Provided, That in the formulation of the financial capability standards, the nature and
function of the entity shall be considered: Provided, further, That such standards are set to ensure
that the electric power industry participants meet the minimum financial standards to protect the
public interest. Determine, fix, and approve, after due notice and public hearings the universal
charge, to be imposed on all electricity end-users pursuant to Section 34 hereof;

(c) Enforce the rules and regulations governing the operations of the electricity spot market and the
activities of the spot market operator and other participants in the spot market, for the purpose of
ensuring a greater supply and rational pricing of electricity;

(d) Determine the level of cross subsidies in the existing retail rate until the same is removed
pursuant to Section 7 4 hereof;

(e) Amend or revoke, after due notice and hearing, the authority to operate of any person or entity
which fails to comply with the provisions hereof, the IRR or any order or resolution of the ERC. In the
event a divestment is required, the ERC shall allow the affected party sufficient time to remedy the
infraction or for an orderly disposal, but shall in no case exceed twelve (12) months from the
issuance of the order;

(t) In the public interest, establish and enforce a methodology for setting transmission and
distribution wheeling rates and retail rates for the captive market of a distribution utility, taking into
account all relevant considerations, including the efficiency or inefficiency of the regulated entities.
The rates must be such as to allow the recovery of just and reasonable costs and a reasonable
return on rate base (RORB) to enable the entity to operate viably. The ERC may adopt alternative
forms of internationally accepted rate-resetting methodology as it may deem appropriate. The rate-
setting methodology so adopted and applied must ensure a reasonable price of electricity. The rates
prescribed shall be nondiscriminatory. To achieve this objective and to ensure the complete removal
of cross subsidies, the cap on the recoverable rate of system losses prescribed in Section 10 of
Republic Act No. 7832, is hereby amended and shall be replaced by caps which shall be determined
by the ERC based on load density, sales mix, cost of service, delivery voltage and other technical
considerations it may promulgate. The ERC shall determine such form of rate-setting methodology,
which shall promote efficiency. In case the rate setting methodology used is RORB, it shall be
subject to the following guidelines:

(i) For purposes of determining the rate base, the TRANSCO or any distribution utility may be
allowed to revalue its eligible assets not more than once every three (3) years by an independent
appraisal company: Provided, however, That ERC may give an exemption in case of unusual
devaluation: Provided, further, That the ERC shall exert efforts to minimize price shocks in order to
protect the consumers;

(ii) Interest expenses are not allowable deductions from permissible return on rate base;

(iii) In determining eligible cost of services that will be passed on to the end-users, the ERC shall
establish minimum efficiency performance standards for the TRANSCO and distribution utilities
including systems losses, interruption frequency rates, and collection efficiency;

(iv) Further, in determining rate base, the TRANSCO or any distribution utility shall not be allowed to
include management inefficiencies like cost of project delays not excused by force
majeure, penalties and related interest during construction applicable to these unexcused delays;
and

(v) Any significant operating costs or project investments of TRANSCO and distribution utilities which
shall become part of the rate base shall be subject to verification by the ERC to ensure that the
contracting and procurement of the equipment, assets and services have been subjected to
transparent and accepted industry procurement and purchasing practices to protect the public
interest.

(g) Three (3) years after the imposition of the universal charge, ensure that the charges of the
TRANSCO or any distribution utility shall bear no cross subsidies between grids, within grids, or
between classes of customers, except as provided herein;

(h) Review and approve any changes on the terms and conditions of service of the TRANSCO or
any distribution utility;

(i) Allow TRANSCO to charge user fees for ancillary services to all electric power industry
participants or self-generating entities connected to the grid. Such fees shall be fixed by the ERC
after due notice and public hearing;

(j) Set a lifeline rate for the marginalized end-users;

(k) Monitor and take measures in accordance with this Act to penalize abuse of market power,
cartelization, and anti-competitive or discriminatory behavior by any electric power industry
participant;

(l) Impose fines or penalties for any non-compliance with or breach of this Act, the IRR of this Act
and the rules and regulations which it promulgates or administers;
(m) Take any other action delegated to it pursuant to this Act;

(n) Before the end of April of each year, submit to the Office of the President of the Philippines and
Congress, copy furnished the DOE, an annual report containing such matters or cases which have
been filed before or referred to it during the preceding year, the actions and proceedings undertaken
and its decision or resolution in each case. The ERC shall make copies of such reports available to
any interested party upon payment of a charge which reflects the printing costs. The ERC shall
publish all its decisions involving rates and anti-competitive cases in at least one (1) newspaper of
general circulation, and/or post electronically and circulate to all interested electric power industry
participants copies of its resolutions to ensure fair and impartial treatment;

(o) Monitor the activities of the generation and supply of the electric power industry with the end in
view of promoting free market competition and ensuring that the allocation or pass through of bulk
purchase cost by distributors is transparent, non-discriminatory and that any existing subsidies shall
be divided pro-rata among all retail suppliers;

(p) Act on applications for or modifications of certificates of public convenience and/or necessity,
licenses or permits of franchised electric utilities in accordance with law and revoke, review and
modify such certificates, licenses or permits in appropriate cases, such as in cases of violations of
the Grid Code, Distribution Code and other rules and regulations issued by the ERC in accordance
with law;

(q) Act on applications for cost recovery and return on demand side management projects;

(r) In the exercise of its investigative and quasi-judicial powers, act against any participant or player
in the energy sector for violations of any law, rule and regulation governing the same, including the
rules on cross-ownership, anti-competitive practices, abuse of market positions and similar or related
acts by any participant in the energy sector or by any person, as may be provided by law, and
require any person or entity to submit any report or data relative to any investigation or hearing
conducted pursuant to this Act;

(s) Inspect, on its own or through duly authorized representatives, the premises, books of accounts
and records of any person or entity at any time, in the exercise of its quasi-judicial power for
purposes of determining the existence of any anti-competitive behavior and/or market power abuse
and any violation of rules and regulations issued by the ERC;

(t) Perform such other regulatory functions as are appropriate in order to ensure the successful
restructuring and modernization of the electric power industry, such as, but not limited to, the rules
and guidelines under which generation companies, distribution utilities which are not publicly listed
shall offer and sell to the public a portion not less than fifteen percent ( 15%) of their common shares
of stocks: Provided, however, That generation companies, distribution utilities or their respective
holding companies that are already listed in the PSE are deemed in compliance. For existing
companies, such public offering shall be implemented not later than five (5) years from the effectivity
of this Act. New companies shall implement their respective public offerings not later than five (5)
years from the issuance of their certificate of compliance; and

(u) The ERC shall have the original and exclusive jurisdiction over all cases contesting rates, fees,
fines and penalties imposed by the ERC in the exercise of the abovementioned powers, functions
and responsibilities and over all cases involving disputes between and among participants or players
in the energy sector.
All notices of hearings to be conducted by the ERC for the purpose of fixing rates or fees shall be
published at least twice for two successive weeks in two (2) newspapers of nationwide circulation.

In the present case, where there is no exercise of the ERC's quasijudicial powers, the ERC is legally
bound to enforce the rules and regulations of the DOE as authorized under the EPIRA. The ERC
has no independence or discretion to ignore, waive, amend, postpone, or revoke the rules and
regulations of the DOE pursuant to the EPIRA, as it is horn book doctrine that rules and
regulations issued pursuant to law by administrative agencies, like the DOE, have the force
and effect of law.  In fact, the first duty and function of the ERC under its charter is to "enforce the
69

implementing rules and regulations" of the EPIRA as issued by the DOE. Certainly, the ERC has
no power to ignore, waive, amend, postpone, or revoke the policies, rules, regulations, and
circulars issued by the DOE pursuant to the EPIRA.

In any event, even in quasi-judicial cases, the ERC is bound to apply the policies, rules,
regulations, and circulars issued by the DOE as the ERC has no power to ignore, waive,
amend, postpone, or revoke the policies, rules, regulations, and circulars issued by the DOE
pursuant to the EPIRA. To repeat, the DOE's rules, regulations, and circulars issued pursuant
to the DOE's rule-making power under the EPIRA have the force and effect of law which the
ERC is legally bound to follow, whether the ERC is exercising executive, quasi-legislative, or
quasi-judicial powers.

Pursuant to the DOE's mandate under the EPIRA,  the 2015 DOE Circular required all DUs to
70

undergo CSP in procuring PSAs. The DOE issued on 11 June 2015 the 2015 DOE Circular which
took effect upon its publication on 30 June 2015.

The 2015 DOE Circular recognized that under the EPIRA, the DOE has the mandate to "formulate
such rules and regulations as may be necessary to implement the objectives of the
EPIRA,"  where the State policy is to "[p]rotect the public interest as it is affected by the rates
71

and services of electric utilities and other providers of electric power."  The 2015 DOE Circular
72

reiterated the EPIRA's mandate that "all Distribution Utilities (DUs) shall have the obligation to
supply electricity in the least-cost manner to their Captive Market, subject to the collection of
retail rate du[l]y approved by the [ERC]."
73

The 2015 DOE Circular mandated that DUs, including electric cooperatives, obtain their PSAs
through CSP. Section 1 of the 2015 DOE Circular states the principles behind CSP:

Section 1. General Principles. Consistent with its mandate, the DOE recognizes that Competitive
Selection Process (CSP) in the procurement of PSAs by the DUs ensures security and certainty of
electricity prices of electric power to end-users in the long-term. Towards this end, all CSPs
undertaken by the DUs shall be guided by the following principles:

(a) Increase the transparency needed in the procurement process to reduce risks;

(b) Promote and instill competition in the procurement and supply of electric power to all end-
users;

(c) Ascertain least-cost outcomes that are unlikely to be challenged in the future as the
political and institutional scenarios should change; and

(d) Protect the interest of the general public. (Boldfacing added)

In sum, the raison d'etre of CSP is to ensure transparency and competition in the procurement of
power supply by DUs so as to provide the least-cost electricity to the consuming public.

The clear text of Section 3 of the 2015 DOE Circular mandates the conduct of CSP after the
Circular's effectivity on 30 June 2015.

Section 3. Standard Features in the Conduct of CSP. After the effectivity of this Circular, all
DUs shall procure PSAs only through CSP conducted through a Third Party duly recognized
by the ERC and the DOE. In case of the [Electric Cooperatives (ECs)], the Third Party shall also be
duly recognized by the National Electrification Administration (NEA).

x x x x (Boldfacing and italicization added)

Section 5 of the 2015 DOE Circular states the non-retroactivity of the Circular's effect.

Section 5. Non-Retroactivity. This Circular shall have prospective application and will not apply to
PSAs with tariff rates already approved and/or have been filed for approval by the ERC before the
effectivity of this Circular. (Boldfacing added)

Clearly, PSAs filed with the ERC after the effectivity of the 2015 DOE Circular must comply with
CSP as only PSAs filed "before the effectivity" of the Circular are excluded from CSP.

Section 10 of the 2015 DOE Circular provides for its effectivity:

Section 10. Effectivity. This Circular shall take effect immediately upon its publication in two
(2) newspapers of general circulation and shall remain in effect until otherwise revoked. (Boldfacing
added)

The 2015 DOE Circular took effect upon its publication on 30 June 2015 in the Philippine Daily
Inquirer and the Philippine Star.  Section 10 expressly declares that the "Circular x x x shall
74

remain in effect until otherwise revoked." Indisputably, CSP became mandatory as of 30 June
2015. Taking all these provisions together, all PSAs submitted to the ERC after the effectivity
of the 2015 DOE Circular, on or after 30 June 2015, are required to undergo CSP.

Since the 2015 DOE Circular was issued solely by the DOE, it is solely the DOE that can amend,
postpone, or revoke the 2015 DOE Circular unless a higher authority, like the Congress or the
President, amends or revokes it. Certainly, the ERC has no authority to amend, postpone, or
revoke the 2015 DOE Circular, including its date of effectivity.

The Joint Resolution executed by DOE and the ERC on 20 October 2015 reiterated that the ERC
shall issue the appropriate regulation to implement CSP. The Joint Resolution did not authorize
the ERC to change the date of effectivity of the mandatory CSP. The Joint Resolution
expressly mandated that the "ERC shall issue the appropriate regulation to implement" CSP.
The power "to implement" CSP does not include the power to postpone the date of effectivity of
CSP, which is expressly mandated in the 2015 DOE Circular to take effect upon the publication of
the Circular. In fact, to postpone is the opposite of "to implement."

On the same date, 20 October 2015, the ERC issued the CSP Guidelines, which directed all DUs to
conduct CSP in the procurement of their power supply for their captive markets. While the 2015
DOE Circular mandated CSP to take effect on 30 June 2015, the ERC under the CSP Guidelines
unilaterally postponed the date of effectivity of CSP from 30 June 2015 to 7 November 2015 or
by 130 days. This marks the first postponement by ERC of the effectivity of the mandatory CSP.

On 15 March 2016, however, the ERC, for the second time, unilaterally postponed the date of
effectivity of the mandatory CSP. On this date the ERC issued the ERC Clarificatory
Resolution, which restated the date of effectivity of CSP from 7 November 2015 to 30 April
2016. The second postponement of the effectivity of CSP from 7 November 2015 to 30 April
2016, or by 175 days, allowed DUs to enter into contracts during the period of postponement
to avoid the mandatory CSP.

Why the ERC Acted in Excess of its Jurisdiction:

Required Coordination Between
the DOE and the ERC

The 2015 DOE Circular explicitly stated the instances that required joint action of the DOE and the
ERC:

1. Recognition of the Third Party that will conduct the CSP for the procurement of PSAs by the DUs;

2. Issuance of guidelines and procedures for the aggregation of the un-contracted demand
requirements of the DUs;

3. Issuance of guidelines and procedures for the recognition or accreditation of the Third Party that
conducts the CSP; and

4. Issuance of supplemental guidelines and procedures to properly guide the DUs and the Third
Party in the design and execution of the CSP.

These instances are in Sections 3 and 4 of the 2015 DOE Circular:

Section 3. Standard Features in the Conduct of CSP. After the effectivity of this Circular, all DUs
shall procure PSAs only through CSP conducted through a Third Party duly recognized by
the ERC and the DOE. In case of the [Electric Cooperatives (ECs)], the Third Party shall also be
duly recognized by the National Electrification Administration (NEA).
xxxx

Within one hundred twenty (120) days from the effectivity of this Circular, the ERC and [the] DOE
shall jointly issue guidelines and procedures for the aggregation of the un-contracted
demand requirements of the DUs and the process for the recognition or accreditation of the
Third Party that conducts the CSP as hereto provided. x x x.
xxxx

Section 4. Supplemental Guidelines. To ensure efficiency and transparency of the CSP Process
[sic], the ERC, upon its determination and in coordination with the DOE shall issue
supplemental guidelines and procedures to properly guide the DUs and the Third Party in the
design and execution of the CSP. The supplemental guidelines should ensure that any CSP and
its outcome shall redound to greater transparency in the procurement of electric supply, and promote
greater private sector participation in the generation and supply sectors, consistent with the declared
policies under EPIRA. (Boldfacing and italicization added)
In all the foregoing instances, the ERC is mandated to act jointly with the DOE. All these instances
merely implement CSP, and do not postpone CSP or amend the 2015 DOE Circular, which are
beyond mere implementation of CSP. If the ERC cannot act by itself on certain instances in the mere
implementation of CSP, then the ERC certainly cannot act by itself in the postponement of CSP or in
the amendment of the 2015 DOE Circular.

We reiterate that the ERC unilaterally postponed the effectivity of the mandatory CSP twice. The
ERC made the first unilateral postponement on 20 October 2015, when it stated that PSAs already
filed with the ERC on or before 7 November 2015 were not required to undergo CSP. This first
unilateral postponement was from 30 June 2015 to 7 November 2015, or a period of postponement
of 130 days. The ERC made a second unilateral postponement on 15 March 2016, when it restated
the effectivity of the CSP Guidelines from 7 November 2015 to 30 April 2016, or a postponement of
175 days. All in all, the ERC, by itself and without authorization from or coordination with the
DOE, postponed the effectivity of the mandatory CSP for 305 days.

The ERC thus amended, and not merely supplemented, the "guidelines and procedures to properly
guide the DUs and the Third Party in the design and execution of the CSP."  This is contrary to what
75

the 2015 DOE Circular clearly intended - that CSP shall take effect upon the Circular's publication on
30 June 2015.

In its Comment to the present petition,   the DOE denied any responsibility in the ERC's
76

restatement of the effective date in the ERC Clarificatory Resolution. The DOE stated:

15. DOE is not aware of the cut-off date shift. There is nothing on record that shows that ERC,
contrary to Section 4 of the [2015] DOE Circular, coordinated with DOE in "restating" the date of
effectivity to a later date, or from 7 November 2015 to 30 April 2016 for a period of one-hundred and
seventy-five (175) days.   (Boldfacing added)
77

In contrast, there is nothing in the ERC's 60-page Comment  which disavowed DOE's allegation of
78

non-coordination. If anything, the ERC's Comment underscored its assertion that the ERC
Clarificatory Resolution was solely issued by the ERC supposedly as "a legitimate exercise of its
quasi-legislative powers granted by law." 79

We do not doubt that the ERC has the power to issue the appropriate regulation to implement CSP.
This is clear from the EPIRA and the 2015 DOE Circular. Indeed, Justice Reyes in his Dissenting
Opinion belabored this delegated power by underscoring the existence of the Joint Resolution.
Justice Reyes misunderstood the delegation of power to mean that the Joint Resolution, by itself, is
the required "coordination" in the implementation of CSP. Under this theory of Justice Reyes, the
required "coordination" could take place only once upon the issuance of the Joint Resolution, and
there can be no other coordination required in the future even if the ERC issues additional guidelines
or regulations to implement CSP. This interpretation is obviously erroneous.

Moreover, the ERC's power is neither absolute nor unbridled. The ERC can only promulgate
rules, but only insofar as it is authorized. Section 4(b) of Rule 3 of the Implementing Rules and
Regulations of the EPIRA states:

Pursuant to Sections 43 and 45 of the Act, the ERC shall promulgate such rules and
regulations as autltorized tltereby, including but not limited to Competition Rules and limitations
on recovery of system losses, and shall impose fines or penalties for any non-compliance with or
breach of the Act, these Rules and the rules and regulations which it promulgates or administers.
(Boldfacing and italicization added)
The 2015 DOE Circular specifically stated that the ERC's power to issue CSP guidelines and
procedures should be exercised "in coordination with the DOE." The purpose of such coordination
was "to ensure efficiency and transparency in the CSP." In short, the ERC could not issue CSP
guidelines and procedures without coordination with DOE. The DOE has expressly declared that the
ERC did not coordinate with DOE in issuing the ERC Clarificatory Resolution. The ERC's unilateral
postponement of CSP for 305 days, allowing DUs to avoid the mandatory CSP to the great prejudice
of the public, was clearly without authority and manifestly constituted grave abuse of discretion.
Moreover, the ERC's unilateral postponement of CSP egregiously prevented "transparency" and
resulted in inefficiency by delaying the implementation of CSP.

In their Dissenting Opinions, Justice Reyes  and Justice Caguioa  both use the DOE's letter dated
80 81

18 January 2016,  which requested the ERC to allow an electric cooperative (Abra Electric
82

Cooperative, Inc. [ABRECO]) to directly negotiate with a power supplier despite the mandatory CSP,
to justify the ERC's alleged power to amend the 2015 DOE Circular.

First, Justice Reyes overlooks the direction of the exercise of power in this instance: instead of the
ERC acting alone, the DOE directed the ERC to take action on the matter. This letter proves that the
power to amend the 2015 DOE Circular belongs to the DOE, not to the ERC. There is clearly a
necessity for the ERC to coordinate with the DOE with regard to CSP matters.

Second, the DOE's endorsement to the ERC, as expressly stated in the DOE's letter dated 18
January 2016, "does not preclude the ERC from exercising its authority to evaluate ABRECO's
PSAs and require further action, such as subjecting ABRECO's PSA to a Swiss challenge." A
Swiss challenge is "a hybrid mechanism between the direct negotiation approach and the
competitive bidding route."  It is a system where "[a] third party can bid on a project during a
83

designated period but the original proponent can counter match any superior offer."  In short, a
84

Swiss challenge is a form of public bidding, and is recognized in the implementing rules of laws
such as Republic Act No. 6957, "An Act Authorizing the Financing, Construction, Operation and
Maintenance of Infrastructure Projects by the Private Sector and for Other Purposes," as amended
by Republic Act No. 7718,  and Executive Order No. 146,  "Delegating to the National Economic
85 86

and Development Authority (NEDA) Board the Power of the President to Approve Reclamation
Projects."
87

Third, even assuming that the DOE letter exempted one specific DU from CSP, it did not authorize
ERC to postpone the effectivity of the mandatory CSP for 305 days for all other DUs nationwide.

Fourth, the term of exemption for ABRECO was only for three years, or from 2016 to 2018. The
PSAs executed during ERC's unilateral 305-day postponement had terms that range from 20 to 21
years.

In view of the DOE's explicit assertion that the ERC did not coordinate with the DOE regarding the
issuance of the ERC Clarificatory Resolution, and the ERC's corresponding silence on the same
matter, we hold that the ERC's issuance of the ERC Clarificatory Resolution is void, because it was
issued with grave abuse of discretion and in excess of its rule-making authority.

Why the ERC Gravely Abused its Discretion:

Effective Twenty- Year Freeze
of the Mandatory CSP

The PSAs between Meralco and its power suppliers were executed and submitted to the ERC within
10 days prior to the restated 30 April 2016 deadline. The data collated in the above-mentioned
tables are, as indicated in the footnotes, found in the pleadings submitted by the pertinent parties.
These are judicial admissions, and are not findings of fact. According to the ERC Clarificatory
Resolution, these PSAs are not required to comply with CSP.

Obviously, the rationale behind CSP - to ensure transparency in the purchase by DUs of bulk power
supply so as to provide the consuming public affordable electricity rates - acquires greater force
and urgency when the DU or its parent company holds a significant equity interest in the bulk
power supplier. Such a parent-subsidiary relationship, or even a significant equity interest in the
bulk power supplier, does not lend itself to fair and arms-length transactions between the DU and the
bulk power supplier.

From Meralco's Comment, we see that the effect of the non-implementation of CSP is more
widespread and far-reaching than what petitioners initially presented. Non-implementation of CSP
affects various areas of the country and not just Meralco's extensive service areas.
Postponement of the effectivity of the mandatory CSP resulted in the exemption from CSP of
a total of ninety (90) PSAs covering various areas of the country. Under the ERC Clarificatory
Resolution, the dates of submission put these PSAs outside the ambit of the mandatory CSP for at
least 20 years based on the contract terms of these PSAs.

In effect, the ERC Clarificatory Resolution signaled to DUs to rush the negotiations and finalize their
PSAs with power generation companies. Meeting the extended deadline would then render the
2015 DOE Circular mandating CSP inutile for at least 20 years. We cannot, in conscience,
allow this to happen. To validate the ERC's postponement of CSP under the CSP Guidelines
and the ERC Clarificatory Resolution means to validate ERC's arbitrary and unauthorized act
of putting into deep freeze, for at least 20 years, the principles behind CSP to the great
prejudice of the public. 88

Why the ERC Gravely Abused its Discretion:

The Whereas Clauses of the
CSP Guidelines and of the ERC Clarificatory Resolution

The ERC's Comment states: "It must be emphasized that the considerable amount of time, money,
and effort it took to enter into a PSA would have been wasted if the CSP [Guidelines] took effect
immediately."  Granting that negotiations for the PSAs took considerable time, the issuance of the
89

2015 DOE Circular and of the CSP Guidelines was not conjured on a whim. We find that ERC's
Comment fails to consider the efforts of both the DOE and the ERC prior to the issuance of the 2015
DOE Circular as well as the CSP Guidelines.

As early as 5 December 2003, the DOE issued Department Circular No. 2003-12-011, entitled
"Enjoining All Distribution Utilities to Supply Adequate, Affordable, Quality and Reliable Electricity,"
which reiterated the state policy that "all DUs must x x x take cognizance and assume full
responsibility to forecast, assure and contract for the supply of electric power within their respective
franchise areas to meet their obligations as a DU particularly to their Captive Market."  Moreover,
90

the DOE had conducted a series of nationwide public consultations on the proposed policy
on competitive procurement of electric power for all electricity end-users.  The dates and
91

manner of consultations, as well as the acts of the DOE and the ERC, were specifically mentioned in
the Whereas Clauses of the CSP Guidelines, thus:

xxxx

WHEREAS, on February 19, 2013, the ERC issued a Notice in ERC Case No. 2013-005 RM,
entitled "In the Matter of the Promulgation of the Rules Governing the Execution, Review and
Evaluation of Power Supply Agreements Entered Into by Distribution Utilities for the Supply of
Electricity to their Captive Market" (PSA Rules), which was posted on the ERC's website, directing
all interested parties to submit their respective comments on the first draft of the PSA Rules, not later
than March 22, 2013;

WHEREAS, on various dates, the ERC received comments on the first draft of the PSA Rules from
interested parties, namely: a) Cagayan Electric Power and Light Co., Inc. (CEPALCO); b) Visayan
Electric Company, Inc. (VECO); c) Quezon Power (Philippines) Ltd. Co. (QPL); d) Power Source
Philippines, Inc. (PSPI); e) National Grid Corporation of the Philippines (NGCP); t) Philippine
Independent Power Producers Association, Inc. (PIPPA); g) Next Power Consortium, Inc.; h) SN
Aboitiz Power Group (SNAP); i) Aboitiz Power Corporation (APC); j) Philippine Electricity Market
Corporation (PEMC); k) Manila Electric Company (MERALCO); 1) Department of Energy (DOE); m)
Philippine Rural Electric Cooperatives Associations, Inc. (PHILRECA); and n) National Rural Electric
Cooperative Association (NRECA);

WHEREAS, on October 16, 2013, the ERC issued a Notice of Posting and Publication in the
aforementioned case, which was posted on the ERC's website, directing all interested parties to
submit their respective comments on the second draft of the PSA Rules and setting the same for
public consultations on December 2, 2013 in Pasig City for the Luzon stakeholders and on
December 5, 2013 in Cebu City for the Visayas and Mindanao stakeholders;

WHEREAS, on various dates, the ERC received comments on the second draft of the PSA Rules
from interested parties, namely: a) PHILRECA; b) CEPALCO; c) VECO; d) QPL; e) PSPI; t) NGCP;
g) PIPPA; h) Next Power Consortium, Inc.; i) SNAP; j) APC; k) PEMC; 1) MERALCO; m) DOE; and
n) NRECA;

WHEREAS, on January 27, 2014, the ERC issued a Notice of Posting and Public Consultation
setting the second draft of the PSA Rules for public consultations on February 18, 20 and 24, 2014
in Davao City, Cebu City and Pasig City for the Mindanao, Visayas and Luzon stakeholders,
respectively;

WHEREAS, on February 18, 20 and 24, 2014, the ERC conducted public consultations wherein the
comments of the interested partied were discussed;

WHEREAS, the ERC, likewise, conducted Focus Group Discussions (FGDs) with the stakeholders
on April 22 to 24, 2014 in Pasig City, May 6 to 8, 2014 in Cebu City, May 13 to 14, 2014 in Cagayan
De Oro City and May 20 to 22, 2014 in Pasig City, to thoroughly discuss major issues in relation to
the draft PSA Rules, such as: a) the requirement of Competitive Selection Process (CSP); b) the
proposed PSA template; c) the joint filing of PSA applications by the DUs and generation companies
(GenCos); and d) the "walk-away" provision in the PSA, and the ERC likewise set the deadline for
the submission of additional comments or position papers for May 30, 2014;

WHEREAS, on various dates, the ERC received position papers/additional comments from
interested parties, namely: a) PIPPA; b) APC; c) Mindanao Coalition of Power Consumers; and d)
Association of Mindanao Rural Electric Cooperatives, Inc. (AMRECO);

WHEREAS, Article III of the draft PSA Rules requires the DU to undertake a transparent and
competitive selection process before contracting for the supply of electricity to its captive
market;

WHEREAS, in October 2014, the DOE issued for comments its draft Circular on the proposed
Demand Aggregation and Supply Auctioning Policy (DASAP);
WHEREAS, in the proposed DASAP, all DUS will be mandated to comply with the auction
requirement prescribed therein and other rules and guidelines as may be prescribed in the
implementation of the DASAP;

WHEREAS, by reason of the issuance of the DASAP and pending the finalization thereof, the ERC
held in abeyance its action on ERC Case No. 2013-005 RM and final approval of the draft PSA
Rules;

WHEREAS, on June 11, 2015, the Department of Energy (DOE) issued Department Circular No.
DC2015-06-008, Mandating All Distribution Utilities to Undergo Competitive Selection
Process (CSP) in Securing Power Supply Agreements (PSA);

WHEREAS, the ERC and the DOE are convinced that there is an advantage to be gained by having
a CSP in place, in terms of ensuring transparency in the DUs' supply procurement and providing
opportunities to elicit the best price offers and other PSA terms and conditions from
suppliers[.]  (Boldfacing and italicization added)
92

In stark contrast to the extensive consensus-building which attended the drafting of the 2015
DOE Circular and the CSP Guidelines, the ERC Clarificatory Resolution explicitly admitted
that its issuance was not accompanied by any public consultation or focus group discussion.
Rather, the ERC Clarificatory Resolution was unilaterally issued by the ERC, without
coordinating with DOE, on the basis of "several letters from stakeholders." The stakeholders
had no way of knowing the concerns of their peers as there was no interaction or discussion among
the stakeholders.

WHEREAS, since the publication of the CSP [Guidelines] on 06 November 2015, the [ERC] has
received several letters from stakeholders which raised issues on the constitutionality of the
effectivity of the CSP [Guidelines], sought clarification on the implementation of the CSP and its
applicability to the renewal and extension of PSAs, requested a determination of the accepted forms
of CSP, and submitted grounds for exemption from its applicability, among others.

WHEREAS, after judicious study and due consideration of the different perspectives raised in the
aforementioned letters, with the end in view of ensuring the successful implementation of the CSP
for the benefit of consumers, DUs, and GenCos, the [ERC] has resolved to allow a period of
transition for the full implementation of the CSP [Guidelines] and, as such, restates the effectivity
date of the CSP [Guidelines] to a later date[.]93

The CSP Guidelines did not, in the words of the OSG, "take effect immediately." Rather, it was the
product of years of negotiation. The stakeholders were aware of the contents and the eventual
implementation of CSP. Moreover, the CSP Guidelines, although signed on 20 October 2015, took
effect on 7 November 2015, or 18 days after signing.

Why the ERC Gravely Abused its Discretion:

Obligations of a Distribution Utility in the
Electric Power Industry

The EPIRA divided the electric power industry into four sectors, namely: generation, transmission,
distribution, and supply.  The distribution of electricity to end-users is a regulated common carrier
94

business requiring a franchise.  We reiterate that the EPIRA mandates that a distribution utility has
95

the obligation to supply electricity in the least-cost manner to its captive market, subject to the
collection of distribution retail supply rate duly approved by the ERC.
96
Republic Act No. 9209 granted Meralco a congressional franchise to construct, operate, and
maintain a distribution system for the conveyance of electric power to the end-users in the cities and
municipalities of Metro Manila, Bulacan, Cavite, and Rizal, and certain cities, municipalities, and
barangays in Batangas, Laguna, Quezon, and Pampanga. Meralco's franchise is in the nature of
a monopoly because it does not have any competitor in its designated areas. The actual
monopolistic nature of Meralco's franchise was recognized and addressed by the framers of our
Constitution, thus:

MR. DAVIDE: xx x

Under Section 15 on franchise, certificate, or any other form of authorization for the operation of a
public utility, we notice that the restriction, provided in the 1973 Constitution that it should not be
exclusive in character, is no longer provided. Therefore, a franchise, certificate or any form of
authorization for the operation of a public utility may be exclusive in character.

MR. VILLEGAS: I think, yes.

MR. DAVIDE: It may be "yes." But would it not violate precisely the thrust against monopolies?

MR. VILLEGAS: The question is, we do not include the provision about the franchise being exclusive
in character.

MR. SUAREZ: This matter was taken up during the Committee meetings. The example of the
public utility given was the MERALCO. If there is a proliferation of public utilities engaged in
the servicing of the needs of the public for electric current, this may lead to more problems
for the nation. That is why the Commissioner is correct in saying that that will constitute an
exemption to the general rule that there must be no monopoly of any kind, but it could be
operative in the case of public utilities.

MR. DAVIDE: Does not the Commissioner believe that the other side of the coin may also be
conducive to more keen competition and better public service?

MR. SUAREZ: The Commissioner may be right.

MR. DAVIDE: Does not the Commissioner believe that we should restore the qualification that it
should not be exclusive in character?

MR. SUAREZ: In other words, under the Commissioner's proposal, Metro Manila, for example, could
be serviced by two or more public utilities similar to or identical with what MERALCO is giving to the
public?

MR. DAVIDE: That is correct.

MR. SUAREZ: The Commissioner feels that that may create or generate improvement in the
services?

MR. DAVIDE: Yes, because if we now allow an exclusive grant of a franchise, that might not be
conducive to public service.

MR. SUAREZ: We will consider that in the committee level

MR. MONSOD: With the Commissioner's permission, may I just amplify this.

MR. VILLEGAS: Commissioner Monsod would like to make a clarification.

MR. MONSOD: I believe the Commissioner is addressing himself to a situation where it lends itself
to more than one franchise. For example, electric power, it is possible that within a single grid,
we may have different distribution companies. So the Commissioner is right in that sense
that perhaps in some situations, non-exclusivity may be good for the public. But in the case of
power generation, this may be a natural activity that can only be generated by one company, in
which case, prohibiting exclusive franchise may not be in the public interest.  (Boldfacing added)
97

Section 5 of Republic Act No. 9209 provides that "[t]he retail rates to [Meralco's] captive
market and charges for the distribution of electric power by [Meralco] to its end-users shall
be regulated by and subject to the approval of the ERC." As the holder of a distribution
franchise, Meralco is obligated to provide electricity at the least cost to its consumers. The ERC, as
Meralco's rate regulator, approves the retail rates - comprising of power and distribution costs - to be
charged to end-users. As we have demonstrated above, both Meralco and the ERC have been
remiss in their obligations. Going through competitive public bidding as prescribed in the 2015 DOE
Circular is the only way to ensure a transparent and reasonable cost of electricity to consumers.

Lest we forget, the ERC is expressly mandated in Section 43(o) of the EPIRA of "ensuring that the
x x x pass through of bulk purchase cost by distributors is transparent." The ERC's
postponement of CSP twice, totaling 305 days and enabling 90 PSAs in various areas of the country
to avoid CSP for at least 20 years, directly and glaringly violates this express mandate of the ERC,
resulting in the non-transparent, secretive fixing of prices for bulk purchases of electricity, to the
great prejudice of the 95 million Filipinos living in this country as well as the millions of business
enterprises operating in this country. This ERC action is a most extreme instance of grave abuse of
discretion, amounting to lack or excess of jurisdiction, warranting the strong condemnation by this
Court and the annulment of the ERC's action.

Absent compliance with CSP in accordance with the 2015 DOE Circular, the PSAs shall be valid
only as between the DUs and the power generation suppliers, and shall not bind the DOE, the ERC,
and the public for purposes of determining the transparent and reasonable power purchase cost to
be passed on to consumers.

On 1 February 2018, the DOE issued Circular No. DC2018-02-0003 entitled "Adopting and
Prescribing the Policy for the Competitive Selection Process in the Procurement by the Distribution
Utilities of Power Supply Agreements for the Captive Market" (2018 DOE Circular). The DOE
prescribed, in Annex "A" of this 2018 DOE Circular, the DOE's own CSP Policy in the procurement
of power supply by DUs for their captive market (2018 DOE CSP Policy). Section 16.1 of the 2018
DOE CSP Policy expressly repealed Section 4 of the 2015 DOE Circular authorizing ERC to
issue supplemental guidelines to implement CSP.

In short, the DOE revoked the authority it delegated to the ERC to issue supplemental guidelines to
implement CSP, and the DOE itself issued its own guidelines, the 2018 DOE CSP Policy, to
implement CSP under the 2015 DOE Circular. This means that the CSP Guidelines issued by the
ERC have become functus officio and have been superseded by the 2018 DOE CSP Policy. Under
its Section 15, the 2018 DOE CSP Policy is expressly made to apply
to "all prospective PSAs." The 2018 DOE Circular, including its Annex "A," took effect upon its
publication on 9 February 2018. Thus, the 90 PSAs mentioned in this present case must undergo
CSP in accordance with the 2018 DOE Circular, in particular the 2018 DOE CSP Policy prescribed
in Annex "A" of the 2018 DOE Circular.
WHEREFORE, the petition for certiorari and prohibition is GRANTED. The first paragraph of Section
4 of Energy Regulatory Commission Resolution No. 13, Series of 2015 (CSP Guidelines), and
Energy Regulatory Commission Resolution No. 1, Series of 2016 (ERC Clarificatory Resolution), are
hereby declared VOID ab initio. Consequently, all Power Supply Agreement applications submitted
by Distribution Utilities to the Energy Regulatory Commission on or after 30 June 2015 shall comply
with the Competitive Selection Process in accordance with Department of Energy Circular No.
DC2018-02-0003 (2018 DOE Circular) and its Annex "A." Upon compliance with the Competitive
Selection Process, the power purchase cost resulting from such compliance shall retroact to the date
of effectivity of the complying Power Supply Agreement, but in no case earlier than 30 June 2015,
for purposes of passing on the power purchase cost to consumers.

G.R. No. 182133, June 23, 2015

UNITED OVERSEAS BANK OF THE PHILIPPINES, INC., Petitioner, v. THE BOARD

OF COMMISSIONERS-HLURB, J.O.S. MANAGING BUILDERS, INC., AND
EDUPLAN PHILS., INC., Respondents.

DECISION

PERALTA, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of
Court, assailing the Decision1 and Resolution2 of the Court of Appeals (CA), dated
February 27, 2006 and March 5, 2008, respectively, in CAG.R.SP No. 86401.

The antecedents are as follows: LawlibraryofCRAlaw

Respondent J.O.S. Managing Builders, Inc. (JOS Managing Builders) is the registered
owner and developer of the condominium project Aurora Milestone Tower. On
December 16, 1997, JOS Managing Builders and respondent EDUPLAN Philippines, Inc.
(EDUPLAN) entered into a Contract to Sell covering Condominium Unit E, 10th Floor of
the Aurora Milestone Tower with an area of 149.72 square meters, more or less. In
August 1998, EDUPLAN effected full payment, and in December 1998, JOS Managing
Builders and EDUPLAN executed a Deed of Absolute Sale over the condominium unit.
Notwithstanding the execution of the deed of sale in favor of EDUPLAN, JOS Managing
Builders failed to cause the issuance of a Condominium Certificate of Title over the
condominium unit in the name of EDUPLAN. EDUPLAN learned that the lots on which
the condominium building project Aurora Milestone Tower was erected had been
mortgaged by JOS Managing Builders to petitioner United Overseas Bank of the
Philippines (United Overseas Bank) without the prior written approval of the Housing
and Land Use Regulatory Board (HLURB). Due to the inability of JOS Managing Builders
to deliver the condominium certificate of title covering the unit purchased by EDUPLAN,
the latter filed a complaint for specific performance and damages against JOS Managing
Builders and United Overseas Bank before the HLURB praying that: (a) the mortgage
between JOS Managing Builders and United Overseas Bank be declared null and void;
(b) JOS Managing Builders and United Overseas Bank be compelled to cause the
issuance and release of the Condominium Certificate of Title; and (c) JOS Managing
Builders be ordered to provide emergency power facilities, to refund the monthly
telephone carrier charges, and to permanently cease and desist from further collecting
such charges.

In its defense, JOS Managing Builders alleged that it could not issue an individual
Condominium Certificate of Title in favor of EDUPLAN, because petitioner United
Overseas Bank has custody of the Transfer Certificates of Title covering the
condominium building.

United Overseas Bank, on the other hand, alleged that JOS Managing Builders is the
owner of several parcels of land covered by Transfer Certificate of Title (TCT) Nos. N-
146444, N-146445 and N-143601. On April 3, 1997, JOS Managing Builders executed in
favor of United Overseas Bank a Real Estate Mortgage3 over the said parcels of land
and the improvements existing or to be erected thereon to secure the Two Hundred
Million Peso (PhP200,000,000.00)4 loan it acquired from the bank. The subject
condominium building project Aurora Milestone Tower, which is situated in the said
parcels of land, are part of the properties mortgaged to United Overseas Bank. JOS
Managing Builders defaulted in the payment of its loan obligations to United Overseas
Bank. Hence, United Overseas Bank foreclosed the mortgage constituted over
properties of JOS Managing Builders and the subject properties were sold by public
auction on March 22, 1999 wherein United Overseas Bank was declared as the highest
bidder. Subsequently, a certificate of sale was issued in favor of United Overseas Bank
corresponding to the foreclosed properties, which was registered with the Register of
Deeds of Quezon City on April 27, 1999.

On August 15, 2001, the HLURB Arbiter ruled,5 in favor of EDUPLAN and declared the
mortgage executed between JOS Managing Builders and United Overseas Bank as well
as the foreclosure proceedings null and void, pointing out that the mortgage was
executed without the approval of the HLURB as required under Section 18 of
Presidential Decree (P.D.) No. 957.6 The Arbiter held that that since EDUPLAN has paid
the full purchase price of the condominium unit, JOS Managing Builders and United
Overseas Bank should cause the release from encumbrance of the mother titles to the
condominium building project, and issue the corresponding condominium certificate of
title in favor of EDUPLAN. Further, JOS Managing Builders should provide EDUPLAN with
emergency power facilities and refund it with the monthly telephone carrier charges it
has been collecting since September 1999, and permanently cease and desist from
further imposing and collecting such fees. Moreover, JOS Managing Builders was
directed to pay EDUPLAN damages, attorney's fees and costs of suit. The dispositive
portion of the decision reads:
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Wherefore, the foregoing premises considered and as prayed for, judgment is hereby
rendered in favor of the Complainant and against the Respondents as follows:
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1. Declaring the mortgage executed by Respondent J.O.S. Managing Builders in favor of

Respondent United Overseas Bank (Westmont) as null and void, including the
foreclosure of the mortgage, for being in violation of Section 18 of P.D. 957;

2.  Ordering Respondents to cause the release from the encumbrances of the "mother
titles" to the Condominium Building Project and, issuance of the individual
Condominium Certificate of Title of Complainant to its Condominium Unit, free from any
and all liens and encumbrances;
3.  Ordering Respondent J.O.S. Managing Builders to provide the Complainant with
emergency power facilities, strictly as represented in its sales brochures;

4.  Ordering Respondent J.O.S. Managing Builders to refund to Complainant the

monthly telephone carrier charges it has been collecting since September 1, 1999 and
permanently cease and desist from further imposing and collecting said charges;

5.  Ordering Respondent J.O.S. to pay the complainant P100,000.00 by way of

temperate damages, P50,000.00 by way of exemplary damages, P40,000.00 as and by
way of Attorney's Fees; and the costs of suit.

6.  Ordering Respondent J.O.S. Managing Builders to pay Respondent United Overseas
Bank (Westmont) the loan release value of the subject condominium unit.
United Overseas Bank then filed a petition for review with the HLURB. On August 20,
2004, the HLURB Board of Commissioners affirmed the Arbiter's decision, but deleted
the award of emergency power facilities and refund of the monthly telephone carrier
charges. Hence, United Overseas Bank filed a petition for review under Rule 43 before
the CA.7 redarclaw

On February 27, 2006, the CA dismissed the petition.8 A motion for reconsideration was
filed, but it was denied for lack of merit.9 The CA held that United Overseas Bank did
not exhaust the administrative remedies available to it due to its failure to appeal the
decision of the HLURB Board of Commissioners to the Office of the President before
going to the CA.

Hence, the petition assigning the lone error:

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THE COURT OF APPEALS ERRED IN REFUSING TO APPLY THE EXCEPTION TO THE

DOCTRINE OF EXHAUSTION OF ADMINISTRATIVE REMEDIES.10
Petitioner United Overseas Bank argues that the CA erred when it dismissed the petition
due to its failure to exhaust administrative remedies. It alleges that the question on
whether the HLURB is correct in declaring null and void the entire mortgage constituted
by JOS Managing Builders in favor of United Overseas Bank, as well as the foreclosure
of the entire mortgage, is a legal question which is an exception to the rule on
exhaustion of administrative remedies.

The petition is meritorious.

The doctrine of exhaustion of administrative remedies is a cornerstone of our judicial

system. The thrust of the rule is that courts must allow administrative agencies to carry
out their functions and discharge their responsibilities within the specialized areas of
their respective competence.11 
It has been held, however, that the doctrine of exhaustion of administrative remedies
and the doctrine of primary jurisdiction are not iron-clad rules. In the case of Republic
v. Lacap,12 the Court enumerated the numerous exceptions to these rules, namely: (a)
where there is estoppel on the part of the party invoking the doctrine; (b) where the
challenged administrative act is patently illegal, amounting to lack of jurisdiction; (c)
where there is unreasonable delay or official inaction that will irretrievably prejudice the
complainant; (d) where the amount involved is relatively so small as to make the rule
impractical and oppressive; (e) where the question involved is purely legal and will
ultimately have to be decided by the courts of justice; (f) where judicial intervention is
urgent; (g) where the application of the doctrine may cause great and irreparable
damage; (h) where the controverted acts violate due process; (i) where the issue of
non-exhaustion of administrative remedies has been rendered moot; (j) where there is
no other plain, speedy and adequate remedy; (k) where strong public interest is
involved; and (1) in quo warranto proceedings.13 redarclaw

The situation in paragraph (e) of the foregoing enumeration obtains in this case.

The issue on whether non-compliance with the clearance requirement with the HLURB
would result to the nullification of the entire mortgage contract or only a part of it is
purely legal which will have to be decided ultimately by a regular court of law. It does
not involve an examination of the probative value of the evidence presented by the
parties. There is a question of law when the doubt or difference arises as to what the
law is on a certain state of facts, and not as to the truth or the falsehood of alleged
facts. Said question at best could be resolved only tentatively by the administrative
authorities. The final decision on the matter rests not with them but with the courts of
justice. Exhaustion of administrative remedies does not apply, because nothing of an
administrative nature is to be or can be done. The issue does not require technical
knowledge and experience, but one that would involve the interpretation and
application of law.14 There is, thus, no need to exhaust administrative remedies, under
the premises.

The Court will now proceed to the legal issue on hand.

Petitioner United Overseas Bank alleges that the HLURB erred in declaring null and void
the entire mortgage constituted by JOS Managing Builders in its favor, as EDUPLAN
does not claim ownership over all the properties mortgaged by JOS Managing Builders
in favor of United Overseas Bank, but only over a single condominium unit, i.e., Unit E,
10th Floor of the Aurora Milestone Tower.

We agree with petitioner.

The HLURB erred in declaring null and void the entire mortgage executed between JOS
Managing Builders and United Overseas Bank.

At the onset, it is worthy to note that jurisprudence have varying conclusions of the
issue at hand. In Far East Bank & Trust Co. v Marquez,15 the Court sustained the HLURB
when it declared the mortgage entered into between the subdivision developer and the
bank as unenforceable against the lot buyer for failure of the developer to obtain the
prior written approval of the HLURB. However, we were categorical that the HLURB
acted beyond bounds when it nullified the mortgage covering the entire parcel of land,
of which the lot subject of the buyer's complaint is merely a part of.

In Far East Bank, the Court held that:

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Acts executed against the provisions of mandatory or prohibitory laws shall be void.
Hence, the mortgage over the lot is null and void insofar as private respondent is
concerned.

The remedy granted by the HLURB and sustained by the Office of the President is
proper only insofar as it refers to the lot of respondent. In short, the mortgage contract
is void as against him. Since there is no law stating the specifics of what should be
done under the circumstances, that which is in accord with equity, should be ordered.
The remedy granted by the HLURB in the first and the second paragraphs of the
dispositive portion of its Decision insofar as it referred to respondent's lot is in accord
with equity.

The HLURB, however, went overboard in its disposition in paragraphs 3 and 4, which
pertained not only to the lot but to the entire parcel of land mortgaged. Such ruling was
improper. The subject of this litigation is limited only to the lot that respondent is
buying, not to the entire parcel of land. He has no personality or standing to bring suit
on the whole property, as he has actionable interest over the subject lot only. (Citations
omitted and underscoring ours)16
In Metropolitan Bank and Trust Co., Inc. v. SLGT Holdings, Inc.,17 however, the Court
nullified the entire mortgage contract executed between the subdivision developer and
the bank albeit the fact that only two units or lot buyer/s filed a case for declaration of
nullity of mortgage. In the said case, the entire mortgage contract was nullified on the
basis of the principle of indivisibility of mortgage as provided in Article 208918 of the
New Civil Code.

This notwithstanding, in the fairly recent case of Philippine National Bank v. Lim,19 the
Court reverted to our previous ruling in Far East Bank that a unit buyer has no standing
to seek for the complete nullification of the entire mortgage, because he has an
actionable interest only over the unit he has bought. Hence, in the said case, the
mortgage was nullified only insofar as it affected the unit buyer.

We find the recent view espoused in Philippine National Bank to be in accord with law
and equity. While a mortgage may be nullified if it was in violation of Section 18 of P.D.
No. 957, such nullification applies only to the interest of the complaining buyer. It
cannot extend to the entire mortgage. A buyer of a particular unit or lot has no
standing to ask for the nullification of the entire mortgage.

Since EDUPLAN has an actionable interest only over Unit E, 10th Floor, Aurora Milestone
Tower, it is but logical to conclude that it has no standing to seek for the complete
nullification of the subject mortgage and the HLURB was incorrect when it voided the
whole mortgage between JOS Managing Builders and United Overseas Bank.

Considering that EDUPLAN had already paid the full purchase price of the subject unit,
the latter is entitled to the transfer of ownership of the subject property in its favor.
This right is provided for in Section 25 of P.D. No. 957, 50 wit:
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Issuance of Title. The owner or development shall deliver the title of the lot or unit to
the buyer upon full payment of the lot or unit, x x x.
Verily, JOS Managing Builders has the obligation to cause the delivery of the Title to the
subject condominium unit in favor of EDUPALN.

Nevertheless, despite the fact that the mortgage constituted between JOS Managing
Builders and United Overseas Bank cannot bind EDUPLAN, because of the non-
observance of the provision of P.D. No. 957 by JOS managing Builders, the mortgage
between the former and United Overseas Bank is still valid.

In the present case, it is undisputed that JOS Managing Builders mortgaged several
parcels of land, including all the buildings and improvements therein covered by TCT
Nos. N-146444, N-146445 and N-143601 to United Overseas Bank without prior
clearance from the HLURB. The said omission clearly violates Section 18 of P.D. No. 957
(The Subdivision and condominium Buyers' Protective Decree), which provides as
follows:
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Section 18. Mortgages. - No mortgage on any unit or lot shall be made by the owner or
developer without prior written approval of the [HLURB]. xxx (Word in bracket added)
It should be noted, however, that the failure of JOS Managing Builders to secure prior
approval of the mortgage from the HLURB and United Overseas Bank's failure to inquire
on the status of the property offered for mortgage placed the condominium developer
and the creditor Bank in pari delicto.20 Hence, they cannot ask the courts for relief for
such parties should be left where they are found for being equally at fault.

More importantly, it should be understood that the prior approval requirement is

intended to protect buyers of condominium units from fraudulent manipulations
perpetrated by unscrupulous condominium sellers and operators, such as their failure to
deliver titles to the buyer or titles free from lien and encumbrances.21 This is pursuant
to the intent of P.D. No. 957 to protect hapless buyers from the unjust practices of
unscrupulous developers which may constitute mortgages over condominium projects
sans the knowledge of the former and the consent of the HLURB.22 redarclaw

Thus, failure to secure the HLURB'S prior written approval as required by P.D. No. 957
will not annul the entire mortgage between the condominium developer and the creditor
bank, otherwise the protection intended for condominium buyers will inadvertently be
extended to the condominium developer even though, by failing to secure the
government's prior approval, it is the party at fault.

To rule otherwise would certainly affect the stability of large-scale mortgages, which is
prevalent in the real estate industry. To be sure, mortgagee banks would be indubitably
placed at risk if condominium developers are empowered to unilaterally invalidate
mortgage contracts based on their mere failure to secure prior written approval of the
mortgage by the HLURB, which could be easily caused by inadvertence or by deliberate
intent.

From all the foregoing, the HLURB erred when it declared the entire mortgage
constituted by JOS Managing Builders, Inc. in favor of United Overseas Bank null and
void based solely on the complaint of EDUPLAN which was only claiming ownership over
a single condominium unit of Aurora Milestone Tower. Accordingly, the mortgage
executed between JOS Managing Builders and United Overseas Bank is valid.

WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of
Appeals, dated February 27, 2006 and March 5, 2008, respectively, in CA-G.R. SP No.
86401, are REVERSED and SET ASIDE. The Decision of the HLURB, dated August 20,
2004, is AFFIRMED with MODIFICATION. The mortgage executed and the
succeeding foreclosure proceedings between respondent J.O.S. Managing Builders, Inc.
and petitioner United Overseas Bank of the Philippines, Inc., with respect to respondent
EDUPLAN Philippines, Inc.'s unit E., 10TH Floor, Aurora Milestone Tower, is declared null
and void.

SO ORDERED. cralawlawlibrary
National Federation of Hog Farmers, Inc., v. Board of Investments, G.R.
No. 205835, June 23, 2020

DECISION

LEONEN, J.:

Nationalism is not a mindless ideal. It should not unreasonably exclude people of a different
citizenship from participating in our economy. If it were so, nationalism will not foster social justice;
rather, it will sponsor a kind of racism quite like what our ancestors had suffered from in our colonial
past.

While the Constitution does not bar foreign investors from setting up shop in the Philippines, neither
does it encourage their unbridled entry. Thus, it has empowered Congress to determine which areas
of investment to reserve to Filipinos and which areas may be opened to foreign investors.

The constitutional line demarcating privileges for our citizens over foreigners is a delicate one. We
must adjudicate where such line is drawn only with a grounded consciousness of the facts of an
actual case rather than through fiery passions of general advocacy. We will not evade the
responsibility to adjudicate when that case comes. Sadly, this is not the case.

This Petition should be dismissed. Not only is it not justiciable, but this Court also does not have
original jurisdiction over it. The grounds raised reveal that the invocation of grave abuse of discretion
is mere subterfuge to a claimed "irregular or illegal" grant of an application for registration under
Book I, Chapter III of Executive Order No. 226, or the Omnibus Investments Code of 1987.

This Court resolves the Petition for Certiorari1 filed by members of the agribusiness industry,
assailing the February 28, 2012, April 24, 2012, and November 6, 2012 Resolutions2 issued by the
Board of Governors of the Board of Investments, which granted the applications for registration filed
by Charoen Pokphand Foods Philippines Corporation (Charoen).

On May 24, 2007, Charoen, a 100% foreign-owned company from Thailand, was registered with the
Securities and Exchange Commission.3

On three (3) different occasions, Charoen submitted to the Board of Investments its applications for
registration as a new producer of different products and services. These all went through a two-step
process before they could be published in a newspaper of general circulation and officially filed with
the Board of Investments. First, they underwent check-listing; and second, the Resource-Based
Industries Department of the Board of Investments assessed if they complied with Executive Order
No. 226.4

Charoen's first application was submitted on October 6, 2011.5 It sought registration as a new
producer of aqua feeds on a pioneer status with the Board of Investments for check-listing,
assessment, and publication.

On December 28, 2011,6 the Philippine Star, a daily broadsheet of general circulation, published a
notice of Charoen's application for registration as a "New Producer of Aqua Feeds with an annual
capacity of 84,000 MT - Fish Feeds and 30,000 MT - Shrimp Feeds on a Pioneer Status"7 with the
Board of Investments. The notice stated that any person questioning Charoen's application should
file an objection under oath with the Board of Investments within three (3) days of the notice's
publication.

On February 2, 2012,8 Charoen officially filed its application for registration with the Board of
Investments by paying the requisite application fees.

On February 28, 2012,9 the Board of Investments' Board of Governors approved Charoen's

application under Board Resolution No. 8-3 S'2012:

RESOLVED FURTHER, That the firm's application for registration under Book I of E.O. 226 of (sic)
as New Producer of aqua feeds at an annual production capacity of 114,000 MT per year (84,000
MT per year of fish feeds and 30,000 MT per year of shrimp feeds) on a Pioneer status (based on
magnitude of investments) be APPROVED, as it is hereby APPROVED, subject to the specific terms
and conditions attached as Annex "C1".10 (Emphasis in the original)

On October 14, 2011,11 Charoen submitted its second application for registration as a new producer
of hog parent stocks and slaughter hogs.

On January 5, 2012,12 the Philippine Star published a notice of Charoen's application for registration
as a "New Producer of Hogs ... on a Pioneer Status[.]"13 It contained a similar instruction for people
with objections to file a statement under oath with the Board of Investments within three (3) days of
the notice's publication.

On March 28, 2012,14 Charoen paid the application fees. Later, on April 24, 2012, the Board of
Governors approved Charoen's second application under Board Resolution No. 13-6 S'2012:

RESOLVED, That the application for registration under Book I of E.O. 226 of CHAROEN
POKPHAND FOODS PHILIPPINES CORPORATION as New Producer of the following hog
products:

Annual Capacities

Breeder Hogs 25,453 heads

Slaughter Hogs 3,647 MT

be APPROVED, as it is hereby APPROVED on a Pioneer (with non-pioneer incentives), subject to

the specific terms and conditions attached as Annex "E1".15 (Emphasis in the original)

On October 11, 2012, Charoen submitted its third application for registration for its Integrated Broiler
Project with the Board of Investments. On October 23, 2012,17 it filed the corresponding application
fees.

On October 24, 2012,18 the Philippine Star published a notice of Charoen's application for
registration as a "New Producer of Live Chickens at a capacity of 21,847 MT/year on a Pioneer
Status."19 Again, the notice contained a directive for oppositors to file their objection under oath with
the Board of Investments.

On November 6, 2012, the Board of Governors approved Charoen's application for registration
under Board Resolution No. 35-10 S'2012:
RESOLVED, That the application for registration of CHAROEN POKPHAND FOODS PHILIPPINES
CORPORATION as New Producer of Chickens (Integrated Broiler Project) at a capacity of 21,847
MT per year on a Pioneer status (based on magnitude of investment) be APPROVED, as it is
hereby APPROVED, subject to the specific terms and conditions attached as Annex "11" and to the
usual general terms and conditions.20 (Emphasis in the original)

On November 20, 2012,21 the counsel for some "members of the local swine, poultry and
aquaculture industries"22 wrote the Board of Investments to ask for copies of the documents
Charoen submitted in support of its three (3) applications for registration.

On December 17, 2012,23 the Board of Investments denied the request for the documents, noting
that these were confidential.

Thus, on March 7, 2013, the National Federation of Hog Farmers, Abono Party-list, Alyansa ng mga
Grupong Haligi ng Agham at Teknolohiya Para sa Mamamayan, Inc., Agricultural Sector Alliance of
the Philippines, Inc., Pork Producers Federation of the Philippines, Inc., Sorosoro Ibaba
Development Cooperative, and Association of Philippine Aqua Feeds Millers, Inc., jointly filed before
this Court a Petition for Certiorari24 with prayer for a temporary restraining order. They mainly claim
that the three (3) Board Resolutions of public respondent Board of Investments, which granted
private respondent Charoen's applications for registration, were issued with grave abuse of
discretion.

Petitioners allege that the assailed Board Resolutions violated their constitutional right to be
protected against unfair foreign competition and trade practices.25 They accuse public respondent
of deliberately depriving them of the chance to appeal by refusing to provide them with copies of the
pe1iinent resolutions.26

Petitioners maintain that the assailed Board Resolutions were issued without prior consultation with
the Department of Agriculture, as required by Executive Order No. 226,27 and were contrary to
public policy.28

Petitioners also assert that public respondent wrongly classified private respondent as a new
producer when it had been operating in the Philippines as early as 2009, raising shrimps and
hogs.29

Finally, petitioners stress that they will sustain injury as they do not enjoy incentives similar to what
the issued Board Resolutions have provided. Private respondent was allegedly given preferential
treatment and incentives, which gave it undue advantage to significantly lower its prices.30

On April 10, 2013,31 this Court directed respondents to comment on the Petition. Additionally,
petitioners were instructed to provide copies of the assailed Board Resolutions.

In its Comment,32 public respondent argues that the Petition is dismissible for petitioners' failure to
exhaust all administrative remedies before going to this Court. It points out that they should have first
appealed to the Office of the President, which is the available remedy from its decisions on
applications for registration under Article 36 of Executive Order No. 226.33 It further faults petitioners
for filing the Petition directly before this Court, instead of the Court of Appeals, as required under
Rules 43 and 65 of the Rules of Civil Procedure.34

Public respondent also claims that petitioners were not properly authorized to file the Petition, as the
special powers of attorney issued to them did not include filing an original action before this
Court.35 Additionally, it contends that its Executive Directors Lucita P. Reyes, Felicitas Agoncilio-
Reyes, Efren V. Leaño, and Raul V. Angeles are not proper parties in interest as they were not
members of the Board of Governors who signed the assailed Board Resolutions.36

Public respondent then denies petitioners' claim that it withheld copies of the assailed Board
Resolutions. It avers that petitioners only asked for copies of the supporting documents of private
respondent's applications and not the copies of the resolutions.37

Public respondent emphasizes that it issued the assailed Board Resolutions within its powers under
Executive Order No. 226 and the Investment Priorities Plan then in effect38 which was formulated
through a series of consultations with the Department of Agriculture and other stakeholders.39 It
stresses that private respondent's applications for registration were approved to bridge the gap
between local production and local demand for aqua feeds, pork, and poultry.40

Public respondent then belies petitioners' claim that private respondent was mistakenly classified as
a "New Project" under the Investment Priorities Plan. It explains that registration is made per project;
thus, even if a company is already existing, its new projects can qualify for registration if its activity is
included in the current Investment Priorities Plan. Hence, the projects of private respondent, which
had only begun its commercial operations in aqua feeds, breeder and slaughter hogs, and integrated
broiler chickens, qualified as New Projects.41

Public respondent underscores that the Constitution does not bestow "an automatic mantle of
protection"42 against foreign competition. It asserts that agribusiness is not one of the areas of
investments that require at least a 60% Filipino capitalization. It points out that 100% foreign equity
participation is allowed in agribusiness.43

Finally, public respondent asserts that petitioners failed to show a clear and unmistakable right, or
that they would suffer undue injury, that would merit an injunctive writ against the assailed Board
Resolutions.44

In its Comment,45 private respondent asserts that while the Constitution is guided by economic
nationalism, "Filipino monopoly of the economy is proscribed"46 and foreign investments are
encouraged to boost the Philippine economy,47 as evidenced by the numerous laws48 enacted to
attract foreign investments. Private respondent likewise points out that this Court has repeatedly
declared as constitutional the various statutes that liberalized entry of foreign investors.49

Similar to public respondent, private respondent also adverts to petitioners' procedural mistakes in,
among others, filing an original petition before this Court instead of an appeal to the Office of the
President50 and failing to exhaust the available administrative remedies.51 It also maintains that the
assailed Board Resolutions have long attained finality.52

Private respondent posits that public respondent did not gravely abuse its discretion in approving the
applications for registration. It maintains that public respondent carefully assessed that these
applications adhered to existing rules and regulations.53

Finally, private respondent avers that the findings of fact of public respondent, as a "specialized
government agency tasked with the preparation and formulation of the annual Investment Priorities
Plan as well as the registration of pioneer new products[,]"54 should be respected.55

In their Reply,56 petitioners reiterate that public respondent thwarted their chance at an appeal
before the Office of the President when it failed to provide copies of the Board Resolutions despite
their request for "Letters/Orders informing [private respondent] of [public respondent]'s action on its
application."57 Furthermore, petitioners point out that public respondent's delay in responding to
their request made a timely appeal to the Office of the President impossible.58

Nonetheless, petitioners insist that this Petition for Certiorari is the appropriate remedy to void the
assailed Board Resolutions, which were allegedly issued by public respondent with grave abuse of
discretion.59

Petitioners claim that public respondent gravely abused its discretion in granting private respondent's
applications for registration despite the latter's violation of law. According to them, private
respondent went against Rule III, Section 4 of Executive Order No. 226's Implementing Rules and
Regulations because the date of publication preceded public respondent's official acceptance of
private respondent's application.60

Petitioners likewise point out that private respondent committed misrepresentations in its
applications. They point out how the company alleged that it spent P2,330,892,000.00 for
construction works in its three (3) new projects for 2011, yet its financial statement that year showed
that the value of its property and equipment only amounted to P334,014,644.00.

They argue that public respondent turned a blind eye to these glaring misrepresentations and
approved the applications for registration.61

Further, petitioners maintain that private respondent's swine and chicken projects were not new
projects, as its audited financial statements reveal that it had been selling such products even before
it applied for registration.62

Moreover, contrary to public respondent's stand that inter-agency consultation is only needed in
formulating the Investment Priorities Plan, petitioners insist that it must be made for every application
for registration.63

They then assert that public respondent had no technical knowledge or expertise over the
agricultural industry; hence, it should have consulted with the Department of Agriculture before
granting the applications.64

On this point, petitioners stress that the Department of Agriculture opined that private respondent's
entry will have a negative impact on the agribusiness industry, as echoed by academic experts.65

Finally, petitioners contend that because public respondent gravely abused its discretion, the
assailed Board Resolutions are void, making this case an exception to the general rule of
immutability of judgment.66

On October 1, 2013,67 this Court gave due course to the Petition and directed the parties to file their
respective memoranda.

In their Memorandum,68 petitioners reiterate their right to be protected against unfair competition

and trade practices.69 They emphasize that the local players in the agricultural industry already
satisfy local demand; thus, there is no need for private respondent's entry. Additionally, they warn
that private respondent, a Thai company, had already killed the local poultry industry in Vietnam.70

In its Memorandum,71 public respondent repeats that petitioners never requested copies of the
assailed Board Resolutions.72 Additionally, it stresses that petitioners have known of the resolutions
as early as December 4, 2012, and could have appealed by then. It discusses that during the Joint
Congressional Hearings attended by petitioners Angelo Palmones (Palmones) and Nicanor Briones,
as members of the House of Representatives, public respondent Lucita P. Reyes informed the
House Committee about the assailed Board Resolutions and their dates of issuance.73

In the alternative, public respondent posits that the Petition was belatedly filed. It claims that the 60-
day period for filing a petition for certiorari should be counted from December 4, 2012, which meant
petitioners only had until February 2, 2013 to do so.74

Public respondent likewise repeats that there is no "automatic mantle of protection"75 afforded to

local businesses or industries against foreign competition. It maintains that the Constitution
recognizes the contribution of the private sector and private enterprises to economic growth, hence
the grant of incentives to drive investments towards sectors that need them.76

Public respondent asserts that the applications for registration underwent the usual process,77 and
that it used "an array of criteria"78 to evaluate the applications. It likewise denies that it did not have
the expertise over the agricultural industry, noting that it had a pool of experts from both public and
private sectors which it could readily consult.79

Public respondent points out the benefits that private respondent will bring to the economy on
several areas: technology acquisition, employment generation, lesser importation of feeds, increase
in chicken meat supply that will lead to a price decrease, and the potential to import chicken meat.80

Finally, public respondent emphasizes that private respondent's entry into the local market will not
threaten the local industry; rather, it will stir competition, create efficiency, and stabilize market prices
for chicken, pork, and feeds.81

In its Memorandum,82 private respondent notes how the government has historically neglected the
swine, poultry, and aqua feeds industries, giving little support to the industry players since most of its
attention was focused on the rice industry.83

Private respondent then refutes petitioners' dire prediction that its entry into the local market will
doom the local players. It cites statistics showing an overall improvement in the poultry subsector
during the first semester of 2013.84

Finally, private respondent echoes public respondent's claim that petitioners only had themselves to
blame for failing to timely appeal to the Office of the President. It adds that on November 28, 2012,
petitioner Palmones filed House Resolution No. 292185 which called for an investigation of the fiscal
incentives public respondent granted to private respondent. Moreover, Representative Agapito
Guanlao (Representative Guanlao), in his privilege speech delivered on the same date, urged for an
inquiry into the grant of incentives. These events, private respondent stresses, show that petitioners
had known of the assailed Board Resolutions, and should have moved for their reconsideration or
appealed them to the Office of the President, exhausting the administrative remedies instead of
directly filing the Petition before this Court.86

The two (2) issues for this Court's resolution are:

First, whether or not the Petition for Certiorari filed directly before this Court is the correct remedy;
and
Second, whether or not public respondent Board of Investments committed grave abuse of
discretion when it approved the applications for registration of private respondent Charoen
Pokphand Foods Philippines Corporation.

This Court's power of judicial review finds basis in Article VIII, Section 1 of the Constitution:

SECTION 1. The judicial power shall be vested in one Supreme Court and in such lower courts as
may be established by law.

Judicial power includes the duty of the courts of justice to settle actual controversies involving rights
which are legally demandable and enforceable, and to determine whether pr 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.

On the other hand, jurisdiction over a subject matter, or the power to hear and determine cases, is
conferred by law, which may either be the Constitution or by statute.87 This Court's original and
appellate jurisdiction, as part of its constitutionally mandated powers, is provided in Article VIII,
Section 5(1) and (2):

SECTION 5. The Supreme Court shall have the following powers:

(1) Exercise original jurisdiction over cases affecting ambassadors, other public ministers
and consuls, land over petitions for certiorari, prohibition, mandamus, quo warranto,
and habeas corpus.

(2) Review, revise, reverse, modify, or affirm on appeal or certiorari, as the law or the Rules
of Court may provide, final judgments and orders of lower courts in:

(a) All cases in which the constitutionality or validity of any treaty, international or
executive agreement, law, presidential decree, proclamation, order, instruction,
ordinance, or regulation is in question.

(b) All cases involving the legality of any tax, impost, assessment, or toll, or any
penalty imposed in relation thereto.

(c) All cases in which the jurisdiction of any lower court is in issue.

(d) All criminal cases in which the penalty imposed is reclusion perpetua or higher.

(e) All cases in which only an error or question of law is involved.

Meanwhile, the lower courts derive their jurisdiction from Batas Pambansa Blg. 129, or the Judiciary
Reorganization Act of 1980, and other statutes.

Also deriving jurisdiction from statutes are the administrative agencies, which were created in
recognition of the need for special technical expertise, in light of "the growing complexity of modern
life, the multiplication of the subjects of governmental regulation, and the increased difficulty of
administering the laws[.]"88.
Though executive in nature, administrative agencies can exercise either quasi-legislative or quasi-
judicial powers, or both, depending on the express and implied powers provided in their granting
statute.89

Quasi-legislative power is a delegated power that enables the administrative agency to promulgate
rules and regulations germane and consistent with its granting statute. Meanwhile, quasi-judicial
power is the authority to hear and decide factual issues in accordance with the standards imposed
by the law being administered.90 Smart Communications, Inc. v. National Telecommunications
Commission91 explains further:

The administrative body exercises its quasi-judicial power when it performs in a judicial manner an
act which is essentially of an executive or administrative nature, where the power to act in such
manner is incidental to or reasonably necessary for the performance of the executive or
administrative duty entrusted to it. In carrying out their quasi-judicial functions, the administrative
officers or bodies are required to investigate facts or ascertain the existence of facts, hold hearings,
weigh evidence, and draw conclusions from them as basis for their official action and exercise of
discretion in a judicial nature.92 (Citation omitted)

It is necessary to identify whether the type of administrative action under review is quasi-legislative
or quasi-judicial. This is to determine "when judicial remedies may be properly availed of."93

As part of its judicial power, a court may take cognizance of the rules issued in the exercise of an
administrative agency's quasi-legislative power. The court then possesses jurisdiction to determine
"whether a specific rule or set of rules issued by an administrative agency contravenes the law or the
constitution[.]"94

However, in cases involving an administrative agency's quasi-judicial power, Congress may

empower certain administrative agencies that have the relevant technical expertise to first take
cognizance of the case before judicial remedies are resorted to.95 This is known as the doctrine of
primary administrative jurisdiction, which is anchored on Article VIII, Section 1 of the Constitution.

Katon v. Palanca96 explains that when a court is faced with a case that should have been under an
administrative agency's exclusive jurisdiction, the court is behooved to dismiss it for lack of
jurisdiction.97 Otherwise, any action it renders on a subject matter over which it has no jurisdiction
will be void.98

The doctrine of primary administrative jurisdiction is often interchanged with the doctrine of
exhaustion of administrative remedies, as both doctrines capitalize on an administrative agency's
acknowledged expertise over its field of specialization.

However, the doctrine of exhaustion of administrative remedies is a form of courtesy, where the
court defers to the administrative agency's expertise and waits for its resolution before hearing the
case.99 This doctrine assumes that the matter is within the court's jurisdiction, or the court exercises
concurrent jurisdiction with the administrative agency; however, in its discretion, the court deems the
case not justiciable or declines to exercise jurisdiction.

Meanwhile, under the doctrine of primary administrative jurisdiction, jurisdiction lies exclusively with
the administrative agency to act on a quasi-judicial matter. Hence, the court has no alternative but to
dismiss a case for lack of jurisdiction.
The justiciability of an issue also determines whether a court can take cognizance of a case. A
controversy is deemed justiciable if the following requisites are present: (1) an actual case or
controversy over legal rights which require the exercise of judicial power; (2) standing or locus
standi to bring up the constitutional issue; (3) the constitutionality was raised at the earliest
opportunity; and (4) the constitutionality is essential to the disposition of the case or its lis mota.100

A conflict must be justiciable for this Court to take cognizance of it. Otherwise, our decision will be
nothing more than an advisory opinion on a legislative or executive action, which "is inconsistent with
our role as final arbiter and adjudicator and weakens the entire system of the Rule of Law."101

II

Executive Order No. 226, or the Omnibus Investments Code of 1987, took effect on July 16, 1987,
when President Corazon C. Aquino exercised legislative powers under the Freedom Constitution. It
established the powers and duties of the Board of Investments in its dual role as a policy making
body and a regulatory agency tasked with encouraging investments in the country and facilitating
their growth.102

Executive Order No. 226 provides various remedies from an action or decision of the Board of
Investments, in response to the different issues that may arise from its implementation:

Preliminary Title

....

Chapter II
Board of Investments

....

ARTICLE 7. Powers and Duties of the Board. The Board shall be responsible for the regulation and
promotion of investments in the Philippines. It shall meet as often as may be necessary generally
once a week on such day as it may fix. Notice of regular and special meetings shall be given all
members of the Board. The presence of four (4) governors shall constitute a quorum and the
affirmative vote of four (4) governors in a meeting validly held shall be necessary to exercise its
powers and perform its duties, which shall be as follows:

....

(4) After due hearing, decide controversies concerning the implementation of the relevant books of
this Code that may arise between registered enterprises or investors therein and government
agencies, within thirty (30) days after the controversy has been submitted for decision: Provided,
That the investor or the registered enterprise may appeal the decision of the Board within thirty (30)
days from receipt thereof to the President;103

Book I
Investments with Incentives
Title I -Preferred Areas of Investment
Chapter III - Registration of Enterprises

....
ARTICLE 36. Appeal from Board's Decision. Any order or decision of the Board shall be final and
executory after thirty (30) days from its promulgation. Within the said period of thirty (30) days, said
order or decision may be appealed to the Office of the President. Where an appeal has been filed,
said order or decision shall be final and executory ninety (90) days after the perfection of the appeal,
unless reversed.104

Book II105
Foreign Investments Without Incentives

Title I

Chapter III
License to Do Business

ARTICLE 50. Cause for Cancellation of Certificate of Authority or Payment of Fine. A violation of any
of the requirements set forth in Article 49 or of the terms and conditions which the Board may
impose shall be sufficient cause to cancel the certificate of authority issued pursuant to this Book
and/or subject firms to the payment of fines in accordance with the rules and regulations issued by
the Board: Provided, however, That aliens or foreign firms, associations, partnerships, corporations
or other forms of business organization not organized or existing under the laws of the Philippines
which may have been lawfully licensed to do business in the Philippines prior to the effectivity of
R.A. 5455, shall, with respect to the activities for which they were licensed and actually engaged in
prior to the effectivity of said Act, not be subject to the provisions of Article 48 and 49 but shall be
subject to the reporting requirements prescribed by the Board: Provided, further, That where the
issuance of said license has been irregular or contrary to law, any person adversely affected thereby
may file an action with the Regional Trial Court where said alien or foreign business organization
resides or has its principal office to cancel the said license. In such cases, no injunction shall issue
without notice and hearing; and appeals and other proceedings for review shall be filed directly with
the Supreme Court.106

....

Final Provisions

....

ARTICLE 82. Judicial Relief. All orders or decisions of the Board in cases involving the provisions of
this Code shall immediately be executory. No appeal from the order or decision of the Board by the
party adversely affected shall stay such order or decision: Provided, That all appeals shall be filed
directly with the Supreme Court within thirty (30) days from receipt of the order or
decision.107 (Emphasis supplied)

Phillips Seafood (Philippines) Corporation v. The Board of Investments108 summarizes the

remedies under Executive Order No. 226:

E.O. No. 226 apparently allows two avenues of appeal from an action or decision of the BOI,
depending on the nature of the controversy. One mode is to elevate an appeal to the Office of the
President when the action or decision pertains to either of these two instances: first, in the decisions
of the BOI over controversies concerning the implementation of the relevant provisions of E.O No.
226 that may arise between registered enterprises or investors and government agencies under
Article 7; and second, in an action of the BOI over applications for registration under the investment
priorities plan under Article 36.

Another mode of review is to elevate the matter directly to judicial tribunals. For instance, under
Article 50, E.O. No. 226, a party adversely affected by the issuance of a license to do business in
favor of an alien or a foreign firm may file with the proper Regional Trial Court an action to cancel
said license. Then, there is Article 82, E.O. No. 226, which, in its broad phraseology, authorizes the
direct appeal to the Supreme Court from any order or decision of respondent BOI "involving the
provisions of E.O. No. 226."109 (Citations omitted)

Thus, under Article 36 of Executive Order No. 226, actions made by the Board of Investments over
applications for registration under the Investment Priorities Plan are appealable to the Office of the
President.

Executive Order No. 226 empowers the Board of Governors of the Board of Investments to, among
others, process and approve applications for registration, as seen in Article 7(3):

ARTICLE 7. Powers and Duties of the Board. The Board shall be responsible for the regulation and
promotion of investments in the Philippines. It shall meet as often as may be necessary generally
once a week on such day as it may fix. Notice of regular and special meetings shall be given all
members of the Board. The presence of four (4) governors shall constitute a quorum and the
affirmative vote of four (4) governors in a meeting validly held shall be necessary to exercise its
powers and perform its duties, which shall be as follows:

....

(3) Process and approve applications for registration with the Board, imposing such terms and
conditions as it may deem necessary to promote the objectives of this Code, including refund of
incentives when appropriate, restricting availment of certain incentives not needed by the project in
the determination of the Board, requiring performance bonds and other guarantees, and payment of
application, registration, publication and other necessary fees and when warranted may limit the
availment of the tax holiday incentive to the extent that the investor's country law or treaties with the
Philippines allows a credit for taxes paid in the Philippines[.]

The quasi-judicial power to assess and approve applications for registration was bestowed
exclusively on the Board of Governors, owing to its expertise over which industries need the added
boost of investments110 and its in-depth knowledge on the requirements for registration. After all, it
drafted111 the rules and regulations implementing Executive Order No. 226.

Thus, under the doctrine of primary administrative jurisdiction, jurisdiction over the approval of
applications for registration lies exclusively with the Board of Investments, subject to appeal to the
Office of the President. Hence, this Court is precluded from taking cognizance of the present
Petition.

III

This case is also not justiciable as petitioners failed to prove their legal standing to file the suit.
Standing to sue or locus standi is defined as:

... a personal and substantial interest in the case such that the party has sustained or will sustain a
direct injury as a result of the governmental act that is being challenged. The term "interest" means a
material interest, an interest in issue affected by the decree, as distinguished from mere interest in
the question involved, or a mere incidental interest. 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.112 (Citations omitted)

Petitioners claim that their standing arises from their personalities as stakeholders in the agriculture
industry who would be competing with private respondent.

Petitioners are mistaken.

For organizations to become real parties in interest, the following criteria must first be met so that
actions may be allowed to be brought on behalf of third parties:

[F]irst, "the [party bringing suit] must have suffered an 'injury-in-fact,' thus giving him or her a
'sufficiently concrete interest' in the outcome of the issue in dispute"; second, "the party must have a
close relation to the third party"; and third, "there must exist some hindrance to the third party's
ability to protect his or her own interests."113

Organizations may possess standing to sue on behalf of their members if they sufficiently show that
"the results of the case will affect their vital interests"114 and that their members have suffered or
will stand to suffer from the application of the assailed governmental acts. The petition must likewise
show that a hindrance exists, preventing the members from personally filing the complaint.

In White Light Corporation v. City of Manila,115 hotel and motel operators protested the
implementation of the City of Manila's Ordinance No. 7774, which prohibited short-time admission, or
the admittance of guests for less than 12 hours in motels, inns, hotels, and similar establishments
within the city.116 The petitioners argued, among others, that the Ordinance violated their clients'
right to privacy,117 freedom of movement,118 and equal protection of the laws.119

In White Light, the petitioners were allowed to represent their clients based on third-party standing.
This Court noted the close relationship between hotel and motel operators and their clients, as the
former "rely on the patronage of their customers for their continued viability."120 On the requirement
of hindrance, this Court stated that "[t]he relative silence in constitutional litigation of such special
interest groups in our nation such as the American Civil Liberties Union in the United States may
also be construed as a hindrance for customers to bring suit."121

Here, petitioners-organizations failed to show that they suffered or stood to suffer from private
respondent's registration as a new producer. They likewise failed to show that their members were
hindered from personally asserting their own interests. Thus, petitioners have no third party standing
to rightfully represent their members in a suit.

IV

Petitioners further argue that private respondent's presence in the market as a new producer would
drive them "out of the market due to cut throat competition."122 This claim, however, requires a
definition of the relevant market involved.

Goods or services are said to be in the same relevant market if both factors are present: (1) a
reasonable interchangeability of the offerings to consumers; and (2) a significant cross-elasticity of
demand, such that a price change in one party's goods or services will lead to a price change in the
other party's goods or services.123 Thus, petitioners' alleged injury, purportedly caused by the entry
of new players in the relevant market, still requires a factual finding. The Petition, therefore, is
ultimately premature.

The claim of unfair competition is primarily factual in nature. In a separate opinion concurring with
the well-expounded ponencia of Justice Alexander Gesmundo in Asia Pacific Resources
International Holdings, Ltd. v. Paperone, Inc.,124 it was explained:

There should be objective, scientific, and economic standards to determine whether goods or
services offered by two parties are so related that there is a likelihood of confusion. In a market, the
relatedness of goods or services may be determined by consumer preferences. When two goods are
proved to be perfect substitutes, where the marginal rate of substitution, or the "consumer's
willingness to substitute one good for another while maintaining the same level of satisfaction" is
constant, then it may be concluded that the goods are related for the purposes of determining
likelihood of confusion. Even goods or services, which superficially appear unrelated, may be proved
related if evidence is presented showing that these have significant cross-elasticity of demand, such
that changes of price in one party's goods or services change the price of the other party's goods
and services. Should it be proved that goods or services belong to the same relevant market, they
may be found related even if their classes, physical attributes, or purposes are different

While not binding on this Court, jurisprudence from the United States of America on the
determination of related goods or services provide clues to this approach. In Worthington Foods, Inc.
v. Kellogg Co., both "reasonable interchangeability" of goods and consumer response through cross-
elasticity were factors in the court's assessment on whether the goods were in the same relevant
market:

One analogous body of law sheds light on the issue of direct competition between goods, namely
market definition under section 2 of the Sherman Anti-Trust Act, 15 U.S.C. § 2 (1982). Professor
McCarthy, in his seminal trademark treatise, states that products which are "competitive" for
purposes of trademark analysis are "goods which are reasonably interchangeable by buyers for the
same purposes." Determining whether products are "reasonably interchangeable" is the analysis
which the Court must undertake when defining the relevant product market in an action under
section 2 of the Sherman.Act The Court holds that the same analysis is helpful for determining
whether the parties' goods are "directly competing" for purposes of assessing palming off liability.

A relevant product market includes all products that are either identical or available substitutes for
each other. To determine whether products are "available substitutes" or "reasonably
interchangeable," the Court must first scrutinize the uses of the product. It must assess whether the
products can perform the same function. The second factor to weigh is consumer response, or more
specifically, cross-elasticity. That is, the Court must assess to what extent consumers will choose
substitutes for the parties' goods in response to price increases.

....

The second market factor to be considered is consumer response or cross-elasticity. Unfortunately,

the parties did not present evidence concerning any tendency or lack of tendency of consumers to
switch from the plaintiff's products to the defendant's if Worthington were to raise its prices or vice
versa. Therefore, the Court cannot conclude that the plaintiff has demonstrated cross-elasticity of the
parties' products indicating that their goods are in the same relevant market.

In short, on an examination of the current record, the Court, finds that Worthington's goods are not in
the same relevant market as Kellogg's cereal. The parties' products have different uses or functions.
Also, the Court has no evidence of any degree of cross-elasticity between the plaintiffs foods and the
defendant's cereal ...

The lack of evidence that the parties directly competed in the same marketplace led to a finding that
no likelihood of confusion would ensue in Exxon Corporation v. Exxon Corporation. In Amstar Corp
v. Domino's Pizza, Inc., among the factors used to determine that the parties' goods were unrelated
were: (1) the distribution channels by which their goods were sold; and (2) the demographics of the
predominant purchasers of the goods. In AMF, Inc. v Sleekcraft Boats, competition between the
parties' lines of boats was found negligible despite the potential market overlap, since the respective
lines catered to different kinds of activities. Similarly, in Thompson Tank Mfg. Co., Inc. v. Thompson,
the contested goods represented only one percent (1%) of complainant's business, while ninety
percent (90%) of the defendant's business were in fields that complainant did not engage m. This
also disproves the claim of likelihood of confusion.

We can build on past jurisprudence of this Court. In Shell Co. of the Philippines, Ltd v. In[s].
Petroleum Refining Co., Ltd and CA, this Court did not give credence to a complainant's claim that
the entry into the market of the defendant's products, which were allegedly sold in complainant's
drums, caused a decrease in complainant's sales. Thus, no unfair competition could be imputed to
the defendant:

Petitioner contends that there had been a marked decrease in the volume of sales of low-grade oil of
the company, for which reason it argues that the sale of respondent's low-grade oil in Shell
containers was the cause. We are reluctant to share the logic of the argument. We are more inclined
to believe that several factors contributed to the decrease of such sales. But let us assume, for
purposes of argument, that the presence of respondent's low-grade oil in the market contributed to
such decrease. May such eventuality make respondent liable for unfair competition? There is no
prohibition for respondent to sell its goods, even in places where the goods of petitioner had long
been sold or extensively advertised. Respondent should not be blamed if some of petitioner's
dealers buy Insoil oil, as long as respondent does not deceive said dealers. If petitioner's dealers
pass off Insoil oil as Shell oil, that is their responsibility. If there was any such effort to deceive the
public, the dealers to whom the defendant (respondent) sold its products and not the latter, were
legally responsible for such deception. The passing of said oil, therefore, as product of Shell was not
performed by the respondent or its agent, but petitioner's dealers, which act respondent had no
control whatsoever.

These cases illustrate the many ways by which specialized agencies and courts may objectively
evaluate the relatedness of allegedly competing goods and services. An analysis that ends in a mere
finding of confusing similarity in the general appearance of the goods should not suffice.

After determining the relevant market, the purpose of prosecuting unfair competition is to prohibit
and restrict deception of the consuming public whenever persons or firms attempt to pass off their
goods or services for another's. Underlying the prohibition against unfair competition is that business
competitors cannot do acts which deceive, or which are designed to deceive the public into buying
their goods or availing their services instead.

Even if products are found to be in the same market, in all cases of unfair competition, competition
should be presumed. Courts should take care not to interfere in a free and fair market, or to foster
monopolistic practices. Instead, they should confine themselves to prevent fraud and
misrepresentation on the public. In Alhambra Cigmetc., Co. v. Mojica:

Protection against unfair competition is not intended to create or foster a monopoly and the court
should always be careful not to interfere with free and fair competition, but should confine itself,
rather, to preventing fraud and imposition resulting from some real resemblance in name or dress of
goods. Nothing less than conduct tending to pass off one man's goods or business as that of another
will constitute unfair competition. Actual or probable deception and confusion on the part of
customers by reason of defendant's practices must always appear.

Thus, complainants bear the burden of objectively proving that the deception or fraud has actually or
has probably taken place, or that the defendant had the actual or probable intent to deceive the
public. This will require, in a future case, measurable standards to show that: (1) the goods or
services belong to the same market; and (2) the likelihood of confusion or doubt is adequately and
empirically demonstrated, not merely left to the subjective judgment of an administrative body or this
Court.125 (Citations omitted)

Then, in Gios-Samar, Inc. v. Department of Transportation,126 even claims of monopolization or

abuse of dominant positions in competition law were not treated as fact, and had to be
substantiated. In a separate opinion:

Indeed, the claims made by petitioner GIOS-SAMAR, Inc. require a more contextual appreciation of
the evidence that it may present to support its claims. The nature of its various allegations requires
the presentation of evidence and inferences, which should, at first instance, be done by a trial court.

Monopolization should not be lightly inferred especially since efficient business organizations are
rewarded by the market with growth. Due to the high barriers to economic entry and long gestation
periods, it is reasonable for the government to bundle infrastructure projects. There is, indeed, a
difference between abuse of dominant position in a relevant market and combinations in restraint of
trade. The Petition seems to have confused these two (2) competition law concepts and it has not
made clear which concept it wished to apply.

Further, broad allegations amounting to a generalization that certain corporations allow themselves
to serve as dummies for cartels or foreigners cannot hold ground in this Court. These constitute
criminal acts. The Constitution requires that judicial action proceed carefully and always from a
presumption of innocence. Tall tales of conspiratorial actions — though they may be salacious,
make for interesting fiction, and are fodder for social media — do not deserve any judicial action.
Broad generalizations of facts without corresponding evidence border on the
contemptuous.127 (Citations omitted)

To reiterate, petitioners' alleged injury, which was purportedly caused by unfair competition and the
entry of new players in the market, still requires a factual finding. This makes the Petition ultimately
premature.

Under Article 36 of the Omnibus Investments Code, an order or decision of the Board of Governors
over applications for registration under the investment priorities plan can be appealed to the Office of
the President within 30 days from its promulgation.

Unlike an appeal to the Office of the President under Article 7(4), which may only be availed by the
investor or registered enterprise, an appeal under Article 36 does not contain a similar limitation. It
may be availed even by one not a party to a case, so long as legal interest may be proven.128

Here, petitioners bemoan that they were unable to appeal to the Office of the President because
public respondent refused to provide them with copies of the assailed Board Resolutions.
This Court is not convinced.

Prior to the promulgation of the assailed Board Resolutions, notices of the applications for
registration had been published in the Philippine Star on December 28, 2011,129 January 5,
2012,130 and October 24, 2012,131 respectively. The notices served as warning to the public and
directed that anyone opposed to the applications should file an objection under oath with the Board
of Investments within three (3) days of the notice's publication.

Right at this juncture, petitioners could have already objected to private respondent's applications.
Registering their opposition would have entitled them to a copy of the assailed Board Resolutions
upon their promulgation, and they could have timely appealed them to the Office of the President
under Article 36. Yet, not only did petitioners fail to do so, but they even failed to explain their
inaction.

The assailed Board Resolutions were issued on February 28, 2012,132

April 24, 2012,133 and November 6, 2012,134 respectively. Meanwhile, petitioners only requested

the supporting documents private respondent submitted and the "Letters/Orders informing [private
respondent] of [public respondent]'s action on its application"135 on November 20, 2012. Clearly,
the 30-day period of appeal to the Office of the President had already lapsed for the first two (2)
Board Resolutions, while petitioners only had until December 6, 2012 to appeal the November 6,
2012 Board Resolution.

Further, filing a petition for certiorari under Rule 65 of the Rules of Civil Procedure was not the
correct remedy, as petitioners could have availed of a "plain, speedy, and adequate remedy"136 —
that is, an appeal to the Office of the President.

Even if a petition for certiorari were the correct remedy, the Petition still fails. Under Rule 65, Section
4 of the Rules of Court, a petition for certiorari should be filed within 60 days of notice of the assailed
order or resolution:

SECTION 4. When and where petition filed. — The petition shall be filed not later than sixty (60)
days from notice of the judgment, order or resolution. In case a motion for reconsideration or new
trial is timely filed, whether such motion is required or not, the sixty (60) day period shall be counted
from notice of the denial of said motion.

The petition shall be filed in the Supreme Court or, if it relates to the acts or omissions of a lower
court or of a corporation, board, officer or person, in the Regional Trial Court exercising jurisdiction
over the territorial area as defined by the Supreme Court. It may also be filed in the Cow-t of Appeals
whether or not the same is in aid of its appellate jurisdiction, or in the Sandiganbayan if it is in aid of
its appellate jurisdiction. If it involves the acts or omissions of a quasi-judicial agency, unless
otherwise provided by law or these Rules, the petition shall be filed in and cognizable only by the
Court of Appeals.

No extension of time to file the petition shall be granted except for compelling reason and in no case
exceeding fifteen (15) days.

Here, the records show that on November 28, 2012, petitioner Palmones filed House Resolution No.
2921,137 calling for an investigation of public respondent's grant of income tax holiday and
exemption on taxes and duties to private respondent. On the same day, Representative Guanlao
delivered a privileged speech138 in support of House Resolution No. 2921, directly adverting to the
grant of incentives to private respondent. A few days after, on December 4, 2012, public respondent
informed the Joint Congressional Hearing, which petitioner Palmones attended, when the assailed
Board Resolutions were promulgated.139

Evidently, petitioners had been notified of the assailed Board Resolutions by November 28, 2012
and had learned of their exact dates of promulgation by December 4, 2012. Yet, they only filed their
Petition for Certiorari on March 7, 2013, 99 days after they first had notice of the assailed Board
Resolutions.

As it was filed well beyond the 60-day reglementary period, this Petition must be dismissed.

VI

On the substantive issue, this Court likewise sees no reason to grant the Petition.

While the Constitution mandates that the State should develop a self reliant economy,140 it does not
proscribe the entry of foreign investments in the local market. In fact, it recognizes the need to
develop Filipino labor, domestic materials, and locally produced goods to become competitive.141

A1iicle II, Section 20 of the 1987 Constitution acknowledges the private sector's importance in our
society:

SECTION 20. The State recognizes the indispensable role of the private sector, encourages private
enterprise and provides incentives to needed investments.

In relation, Article XII, Section 13 tasks the State to implement a trade policy that employs all forms
and arrangements of exchange:

SECTION 13. The State shall pursue a trade policy that serves the general welfare and utilizes all
forms and arrangements of exchange on the basis of equality and reciprocity.

In view of these, Article XII, Section 1 implies that foreign investments may participate in the local
market. However, it also tasks the State to shield domestic ventures from unfair foreign competition:

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.142 (Emphasis supplied)

A reading of these constitutional provisions shows that the fundamental law allows the pa1iicipation
of foreign enterprises in the Philippine market. Such latitude is not without restrictions, however, as
the Constitution likewise limits the extent of their participation.

The third paragraph of Article XII, Section 10 of the Constitution mandates the State to oversee
matters regarding foreign investments within its jurisdiction:

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 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.

In the grant of rights, privileges, and concessions covering the national economy and patrimony, the
State shall give preference to qualified Filipinos.

The State shall regulate and exercise authority over foreign investments within its national
jurisdiction and in accordance with its national goals and priorities. (Emphasis supplied)

As such, the State imposes certain conditions and restrictions on foreign investments operating
within the Philippine jurisdiction. For instance, no foreign enterprise is allowed to venture into the
mass media industry.143 This absolute restriction also extends to the use of natural resources found
in the archipelagic waters, territorial sea, and exclusive economic zone of the
Philippines.144 Further, the practice of all professions in the Philippines is reserved for Filipino
citizens, save for statutory exceptions.145

While foreign participation IS absolutely prohibited m some industries, the Constitution allows foreign
participation in certain industries, such as advertising,146 public utilities,147 educational
institutions,148 ownership of private lands,149 and the exploration, development, and utilization of
natural resources.150

Despite these constitutional restrictions, it is not far-fetched to consider that the Philippines adopts a
liberal approach in allowing foreign investments to enter the country. What the Constitution only
restricted from foreign investors were enterprises imbued with public interest, such as public utilities,
mass media, and use of natural resources. These restrictions are necessary to protect the welfare of
Filipino citizens by removing the possibility of exploitation by foreign investors, who are not fully
within the jurisdiction of Philippine laws.

In Tañada v. Angara,151 the petitioners assailed the validity of the World Trade Organization
Agreement ratified by then President Fidel V. Ramos and concurred in by the Senate. They claimed
that it ran counter to the constitutional mandate of developing "a self-reliant and independent
national economy effectively controlled by Filipinos ... (to) give preference to qualified Filipinos (and
to) promote the preferential use of Filipino labor, domestic materials and locally produced
goods."152

Tañada sustained the validity of the World Trade Organization Agreement. Addressing the
petitioners' argument, this Court ruled that Article II, Section 19 of the Constitution, which embodied
the policy of economic independence, is not a self-executing provision. Thus, noncompliance with
Article II, Section 19 does not give rise to a cause of action and is not judicially enforceable.153

Further, this Court rejected the petitioners' contention that the World Trade Organization Agreement
violated Article XII, Section 10 of the Constitution, which mandated the State to give preference to
qualified Filipinos with regard to the grant of rights, privileges, and concessions covering the national
economy and patrimony; and Article XII, Section 12, which tasked the State to promote the
preferential use of Filipino labor, domestic materials, and locally produced goods.154

Rather, this Court declared that Sections 10 and 12 of Article XII should be read in connection with
other provisions of Article XII, such as Section 13, which provided that "[t]he State shall pursue a
trade policy that serves the general welfare and utilizes all forms and arrangements of exchange on
the basis of equality and reciprocity."155 This Court ruled:
All told, while the Constitution indeed mandates a bias in favor of Filipino goods, services, labor and
enterprises, at the same time, it recognizes the need for business exchange with the rest of the
world on the bases of equality and reciprocity and limits protection of Filipino enterprises only
against foreign competition and trade practices that are unfair. In other words, the Constitution did
not intend to pursue an isolationist policy. It did not shut out foreign investments, goods and services
in the development of the Philippine economy. While the Constitution does not encourage the
unlimited entry of foreign goods, services and investments into the country, it does not prohibit them
either. In fact, it allows an exchange on the basis of equality and reciprocity, frowning only on foreign
competition that is unfair.156 (Citation omitted)

This Court also ruled that foreign competition was not proscribed under the Constitution:

[T]he constitutional policy of a "self-reliant and independent national economy" does not necessarily
rule out the entry of foreign investments, goods and services. It contemplates neither "economic
seclusion" nor "mendicancy in the international community."157 (Citation omitted)

Ultimately, this Court dismissed the petition in Tañada, finding that the Senate did not gravely abuse
its discretion by concurring in the ratification of the World Trade Organization Agreement.158

Nonetheless, it must be highlighted that the statements in Tañada, regarding the hortatory nature of
provisions regarding Filipino First policies, were abstractly made, without the participation of real
parties in interest and without showing how foreign investments affect Filipino
enterprises. Tañada should thus be revisited in a proper case, where a justiciable controversy exists
for this Court's resolution.

VII

Created159 by Republic Act No. 5186, or the Investment Incentives Act, the Board of Investments is
the administrative agency tasked to carry out the State's policy of encouraging both local and foreign
investments in the agriculture, mining, and manufacturing industries and promote greater economic
stability by increasing national income and exports.160 It is also mandated with implementing the
provisions of Executive Order No. 226.161

The Board of Investments exercises both quasi-legislative (or rule making) powers and quasi-judicial
(or administrative adjudicatory) functions. Its quasi-legislative functions include, among others,
preparing an annual investment priorities plan that lists the activities that can qualify for
incentives,162 and promulgating rules and regulations163 to give life to the provisions of Executive
Order No. 226. On the other hand, its quasi-judicial functions include, among others, processing and
approving applications for registration,164 deciding controversies arising from the implementation of
Executive Order No. 226,165 and canceling registrations or suspending entitlement to incentives of
registered enterprises.166

Republic Act No. 7042, or the Foreign Investments Act of 1991, declares that as much as 100%
foreign ownership in domestic enterprises may be allowed, except for areas or industries included in
the negative list.167 Espina v. Zamora, Jr.168 expounds that the Constitution does not bar foreign
investors from setting up shop in the Philippines, though neither does it encourage their unbridled
entry. Thus, the Constitution has empowered Congress to determine which areas of investment to
reserve to Filipinos and which areas may be opened to foreign investors:

[T]he 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. 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.

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.169 (Citation omitted)

Notably, "agriculture/agribusiness and fishery" was included in the Board of Investments'

2010170 Investment Priorities Plan. The Department of Agriculture171 likewise recommended its
continued inclusion in the 2011 Investment Priorities Plan and lobbied for the retention of feeds in
the list:

On Feeds

The DA deems that the absence of firms registering to BOI for feeds investments is not a sufficient
reason for dropping it from the list. Feeds remains to be expensive and has been a major cost driver
in the livestock and fisheries production. For instance, feeds for aquaculture constitutes 60% of the
production costs. Hence[,] the DA recommends the retention of feeds in the IPP list to promote the
development of the feeds industry.172

Likewise, the 2011 Investment Priorities Plan173 listed agriculture/agribusiness and fishery as one
of the 13 "priority investment areas that were identified to support the current priority programs of the
govemment[.]"174 Agriculture/agribusiness and fishery covered:

[C]ommercial production and commercial processing of agricultural and fishery products (including
their by-products and wastes). This also covers agriculture- and fishery-related activities such as
irrigation, post harvest, cold storage, blast freezing, and production of fertilizers.175

Agriculture/agribusiness and fishery was also included m the 2012 Investment Priorities Plan.176

Moreover, agriculture and agribusiness were not included in the Eighth Regular Foreign Investment
Negative List177 issued on February 5, 2010, or even in the Ninth Regular Foreign Investment
Negative List178 issued on October 29, 2012. Incidentally, they are still not included in the Eleventh
Regular Foreign Investment Negative List,179 the latest list issued on October 29, 2018.

Clearly, agribusiness was, and still is, not a nationalized or partly nationalized industry. Hence, in
this case, private respondent's status as a 100% foreign-owned corporation would not cause the
denial of its applications for registration with public respondent.

Further, private respondent's applications for registration went through the required process listed
down in Executive Order No. 226.180 Public respondent, in turn, evaluated the applications based
on the following criteria: "compliance with the provisions of the IPP, Net Value-added (NVA), Job
generation, Multiplier Effect, and Measured Capacity."181 It considered the data on the discrepancy
between local production and local demand, which it factored into its decision to approve private
respondent's applications for registration:
 Project Measured Capacity

Aqua Feeds The local production of aqua feeds is not sufficient to meet local
demand.

Actual Production- 340,000 MT Demand- 801,000 MT

Collectively, the aqua feed demand in 2009 as estimated by BAS

[Bureau of Agricultural Statistics] and the proponent's projections
showed that there is [a] demand of about 869,000 MT while the
supply is only about 358,000 MT. The resulting deficit of 511,000
MT was supplied mostly by importations.

New Producer of The local production of pork is estimated to be about 1.92 million
Hog Parent Stocks MT in 2010 while the demand is about 2.106 million MT. The
and Slaughter resulting deficit of about 164,000 MT is supplied by importation.
Hogs Project

2. As shown in Exhibit 2a, the proposed project will have [an]

annual share of about 10% to the country's pork production in
2013 onward. (Source: Bureau of Agricultural Statistics and
proponent's projections)

Integrated Broiler The country has been a net importer of poultry meat. In 2009, the
Project local production of dressed chicken reached 826,677 MT while the
apparent demand [i]s about 883,573 MT. The resulting deficit of
56.896 MT was supplied by imports[.]

The gap between the demand and the local production can be
addressed by new investments in the poultry industry.  This
1âшphi1

proposed project is estimated to increase the country's total broiler

chicken (live) production by 250,000 heads per year. This is
roughly equivalent to only around 250 MT of dressed chicken,
which is less tha[n] 1% of the volume production deficit in
2009.182

It is well established that an administrative agency's findings of fact are entitled to respect and
deference. As the recognized specialist in the field assigned to it, the administrative agency can
resolve issues in its field "with more expertise and dispatch than can be expected from the
legislature or the courts of justice."183 With that in mind, this Court has consistently deferred to their
factual findings.184

Here, considering that the issuance of the assailed Board Resolutions was amply supported by
substantial evidence, there is no weight to petitioners' claim that they were issued with grave abuse
of discretion.

Finally, this Court repeats a statement made in Gios-Samar:

Critically, the nuances of the cases we find justiciable signal our philosophy of adjudication. Even as
we try to filter out and dispose of the cases pending in our docket, this Court's role is not simply to
settle disputes. This Court also performs the important public function of clarifying the values
embedded in our legal order anchored on the Constitution, laws, and other issuances by competent
authorities.

As this Court finds ways to dispose of its cases, it should be sensitive to the quality of the doctrines it
emphasizes and the choice of cases on which it decides. Both of these will facilitate the vibrant
democracy and achievement of social justice envisioned by our Constitution.

Every case filed before this Court has the potential of undoing the act of a majority in one (1) of the
political and co-equal departments of our government. Our Constitution allows that its congealed and
just values be used by a reasonable minority to convince this Court to undo the majority's action. In
doing so, this Court is required to make its reasons precise, transparent, and responsive to the
arguments pleaded by the parties. The trend, therefore, should be to clarify broad doctrines laid
down in the past. The concept of a case with transcendental importance is one (1) of them.

Our democracy, after all, is a reasoned democracy: one with a commitment not only to the majority's
rule, but also to fundamental and social rights.

Even as we recall the canonical doctrines that inform the structure of our Constitution, we should
never lose sight of the innovations that our fundamental law has introduced. We have envisioned a
more engaged citizenry and political forums that welcome formerly marginalized communities and
identities. Hence, we have encoded the concepts of social justice, acknowledged social and human
rights, and expanded the provisions in our Bill of Rights.

We should always be careful that in our desire to achieve judicial efficiency, we do not filter cases
that bring out these values.

This Court, therefore, has a duty to realize this vision. The more guarded but active part of judicial
review pertains to situations where there may have been a deficit in democratic participation,
especially where the hegemony or patriarchy ensures the inability of discrete and insular minorities
to participate fully. While this Court should presume representation in the deliberative and political
forums, it should not be blind to present realities.185

Sadly, this case, with its fiery but empty rhetoric, fell short of these noble expectations.

WHEREFORE, the Petition is DISMISSED. The assailed February 28, 2012, April 24, 2012, and
November 6, 2012 Board Resolutions issued by the Board of Governors of public respondent Board
of Investments, which approved private respondent Charoen Pokphand Foods Philippines
Corporation's applications for registration, are AFFIRMED.

SO ORDERED.