Republic of the Philippines SUPREME COURT Manila EN BANC

G.R. No. 97149 March 31, 1992 FIDENCIO Y. BEJA, SR., petitioner, vs. COURT OF APPEALS, HONORABLE REINERIO O. REYES, in his capacity as Secretary of the Department of Transportation and Communications; COMMODORE ROGELIO A. DAYAN, in his capacity as General Manager of the Philippine Ports Authority; DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS, ADMINISTRATIVE ACTION BOARD; and JUSTICE ONOFRE A. VILLALUZ, in his capacity as Chairman of the Administrative Action Board, DOTC, respondents.

ROMERO, J.: The instant petition for certiorari questions the jurisdiction of the Secretary of the Department of Transportation and Communications (DOTC) and/or its Administrative Action Board (AAB) over administrative cases involving personnel below the rank of Assistant General Manager of the Philippine Ports Authority (PPA), an agency attached to the said Department. Petitioner Fidencio Y. Beja, Sr. was first employed by the PPA as arrastre supervisor in 1975. He became Assistant Port Operations Officer in 1976 and Port Operations Officer in 1977. In February 1988, as a result of the reorganization of the PPA, he was appointed Terminal Supervisor. On October 21, 1988, the PPA General Manager, Rogelio A. Dayan, filed Administrative Case No. 11-04-88 against petitioner Beja and Hernando G. Villaluz for grave dishonesty, grave misconduct, willful violation of reasonable office rules and regulations and conduct prejudicial to the best interest of the service. Beja and Villaluz allegedly erroneously assessed storage fees resulting in the loss of P38,150.77 on the part of the PPA. Consequently, they were preventively suspended for the charges. After a preliminary investigation conducted by the district attorney for Region X, Administrative Case No. 11-04-88 was "considered closed for lack of merit." On December 13, 1988, another charge sheet, docketed as Administrative Case No. 12-01-88, was filed against Beja by the PPA General Manager also for dishonesty, grave misconduct, violation of reasonable office rules and regulations, conduct prejudicial to the best interest of the service and for being notoriously undesirable. The charge consisted of six (6) different specifications of administrative offenses including fraud against the PPA in the total amount of P218,000.00. Beja was also placed under preventive suspension pursuant to Sec. 41 of P.D. No. 807. The case was redocketed as Administrative Case No. PPA-AAB-1-049-89 and thereafter, the PPA general manager indorsed it to the AAB for "appropriate action." At the scheduled hearing, Beja asked for continuance on the ground that he needed time to study the charges against him. The AAB proceeded to hear the case and gave Beja an opportunity to present evidence. However, on February 20, 1989, Beja filed a petition for certiorari with preliminary 2 injunction before the Regional Trial Court of Misamis Oriental. Two days later, he filed with the AAB a manifestation and motion to suspend the hearing of Administrative Case No. PPA-AAB-1-049-89 on account of the pendency of the certiorari proceeding before the court. AAB denied the motion and continued with the hearing of the administrative case. Thereafter, Beja moved for the dismissal of the certiorari case below and proceeded to file before this Court a petition for certiorari with preliminary injunction and/or temporary restraining order. The case was docketed as G.R. No. 87352 captioned "Fidencio Y. Beja v. Hon. Reinerio 0. Reyes, etc., et al." In the en banc resolution of March 30, 3 1989, this Court referred the case to the Court of Appeals for "appropriate action." G.R. No. 87352 was docketed in the Court of Appeals as CA-G.R. SP No. 17270. Meanwhile, a decision was rendered by the AAB in Administrative Case No. PPA-AAB-049-89. Its dispositive portion reads:
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WHEREFORE, judgment is hereby rendered, adjudging the following, namely: a) That respondents Geronimo Beja, Jr. and Hernando Villaluz are exonerated from the charge against them; b) That respondent Fidencio Y. Beja be dismissed from the service; c) That his leave credits and retirement benefits are declared forfeited; d) That he be disqualified from re-employment in the government service; e) That his eligibility is recommended to be cancelled. Pasig, Metro Manila, February 28, 1989. On December 10, 1990, after appropriate proceedings, the Court of Appeals also rendered a decision in CA-G.R. SP No. 17270 dismissing the petition for certiorari for lack of merit. Hence, Beja elevated the case back to this Court through an "appeal by certiorari with preliminary injunction and/or temporary restraining order." We find the pleadings filed in this case to be sufficient bases for arriving at a decision and hence, the filing of memoranda has been dispensed with. In his petition, Beja assails the Court of Appeals for having "decided questions of substance in a way probably not in 5 accord with law or with the applicable decisions" of this Court. Specifically, Beja contends that the Court of Appeals failed to declare that: (a) he was denied due process; (b) the PPA general manager has no power to issue a preventive suspension order without the necessary approval of the PPA board of directors; (c) the PPA general manager has no power to refer the administrative case filed against him to the DOTC-AAB, and (d) the DOTC Secretary, the Chairman of the DOTC-AAB and DOTC-AAB itself as an adjudicatory body, have no jurisdiction to try the administrative case against him. Simply put, Beja challenges the legality of the preventive suspension and the jurisdiction of the DOTC Secretary and/or the AAB to initiate and hear administrative cases against PPA personnel below the rank of Assistant General Manager. Petitioner anchors his contention that the PPA general manager cannot subject him to a preventive suspension on the following provision of Sec. 8, Art. V of Presidential Decree No. 857 reorganizing the PPA: (d) the General Manager shall, subject to the approval of the Board, appoint and remove personnel below the rank of Assistant General Manager. (Emphasis supplied.) Petitioner contends that under this provision, the PPA Board of Directors and not the PPA General Manager is the 6 "proper disciplining authority. As correctly observed by the Solicitor General, the petitioner erroneously equates "preventive suspension" as a remedial measure with "suspension" as a penalty for administrative dereliction. The imposition of preventive suspension on a government employee charged with an administrative offense is subject to the following provision of the Civil Service Law, P.D. No. 807: Sec. 41. Preventive Suspension. The proper disciplining authority may preventively suspend any subordinate officer or employee under his authority pending an investigation, if the charge against such officer or employee involves dishonesty, oppression or grave misconduct, or neglect in the performance of duty, or if there are reasons to believe that the respondent is guilty of charges which would warrant his removal from the service. Imposed during the pendency of an administrative investigation, preventive suspension is not a penalty in itself. It is merely a measure of precaution so that the employee who is charged may be separated, for obvious reasons, from 7 the scene of his alleged misfeasance while the same is being investigated. Thus, preventive suspension is distinct from the administrative penalty of removal from office such as the one mentioned in Sec. 8(d) of P.D. No 857. While the former may be imposed on a respondent during the investigation of the charges against him, the latter is the penalty which may only be meted upon him at the termination of the investigation or the final disposition of the case. The PPA general manager is the disciplining authority who may, by himself and without the approval of the PPA Board of Directors, subject a respondent in an administrative case to preventive suspension. His disciplinary powers are sanctioned, not only by Sec. 8 of P.D. No. 857 aforequoted, but also by Sec. 37 of P.D. No. 807 granting heads of
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agencies the "jurisdiction to investigate and decide matters involving disciplinary actions against officers and employees" in the PPA. Parenthetically, the period of preventive suspension is limited. It may be lifted even if the disciplining authority has not finally decided the administrative case provided the ninety-day period from the effectivity of the preventive suspension has been exhausted. The employee concerned may then be reinstated. 8 However, the said ninety-day period may be interrupted. Section 42 of P.D. No. 807 also mandates that any fault, negligence or petition of a suspended employee may not be considered in the computation of the said period. Thus, when a suspended employee obtains from a court of justice a restraining order or a preliminary injunction inhibiting proceedings in an administrative case, the lifespan of such court order should be excluded in the reckoning of the permissible period of the preventive 9 suspension. With respect to the issue of whether or not the DOTC Secretary and/or the AAB may initiate and hear administrative cases against PPA Personnel below the rank of Assistant General Manager, the Court qualifiedlyrules in favor of petitioner. The PPA was created through P.D. No. 505 dated July 11, 1974. Under that Law, the corporate powers of the PPA were vested in a governing Board of Directors known as the Philippine Port Authority Council. Sec. 5(i) of the same decree gave the Council the power "to appoint, discipline and remove, and determine the composition of the technical staff of the Authority and other personnel." On December 23, 1975, P.D. No. 505 was substituted by P.D. No. 857, See. 4(a) thereof created the Philippine Ports Authority which would be "attached" to the then Department of Public Works, Transportation and Communication. When Executive Order No. 125 dated January 30, 1987 reorganizing the Ministry of Transportation and 10 Communications was issued, the PPA retained its "attached" status. Even Executive Order No. 292 or the Administrative Code of 1987 classified the PPA as an agency "attached" to the Department of Transportation and Communications (DOTC). Sec. 24 of Book IV, Title XV, Chapter 6 of the same Code provides that the agencies attached to the DOTC "shall continue to operate and function in accordance with the respective charters or laws creating them, except when they conflict with this Code." Attachment of an agency to a Department is one of the three administrative relationships mentioned in Book IV, Chapter 7 of the Administrative Code of 1987, the other two being supervision and control and administrative supervision. "Attachment" is defined in Sec. 38 thereof as follows: (3) Attachment. (a) This refers to the lateral relationship between the Department or its equivalent and the attached agency or corporation for purposes of policy and program coordination . The coordination shall be accomplished by having the department represented in the governing board of the attached agency or corporation, either as chairman or as a member, with or without voting rights, if this is permitted by the charter; having the attached corporation or agency comply with a system of periodic reporting which shall reflect the progress of programs and projects; and having the department or its equivalent provide general policies through its representative in the board, which shall serve as the framework for the internal policies of the attached corporation or agency; (b) Matters of day-to-day administration or all those pertaining to internal operations shall he left to the discretion or judgment of the executive officer of the agency or corporation. In the event that the Secretary and the head of the board or the attached agency or corporation strongly disagree on the interpretation and application of policies, and the Secretary is unable to resolve the disagreement, he shall bring the matter to the President for resolution and direction; (c) Government-owned or controlled corporations attached to a department shall submit to the Secretary concerned their audited financial statements within sixty (60) days after the close of the fiscal year; and (d) Pending submission of the required financial statements, the corporation shall continue to operate on the basis of the preceding year's budget until the financial statements shall have been submitted. Should any government-owned or controlled corporation incur an operation deficit at the close of its fiscal year, it shall be subject to administrative supervision of the department; and the corporation's operating and capital budget shall be subject to the department's examination, review, modification and approval. (emphasis supplied.) An attached agency has a larger measure of independence from the Department to which it is attached than one which is under departmental supervision and control or administrative supervision. This is borne out by the "lateral relationship" between the Department and the attached agency. The attachment is merely for "policy and program

coordination." With respect to administrative matters, the independence of an attached agency from Departmental control and supervision is further reinforced by the fact that even an agency under a Department's administrative supervision is free from Departmental interference with respect to appointments and other personnel actions "in 11 accordance with the decentralization of personnel functions" under the Administrative Code of 1987. Moreover, the Administrative Code explicitly provides that Chapter 8 of Book IV on supervision and control shall not apply to 12 chartered institutions attached to a Department. Hence, the inescapable conclusion is that with respect to the management of personnel, an attached agency is, to a certain extent, free from Departmental interference and control. This is more explicitly shown by P.D. No. 857 which provides: Sec. 8. Management and Staff. a) The President shall, upon the recommendation of the Board, appoint the General Manager and the Assistant General Managers. (b) All other officials and employees of the Authority shall be selected and appointed on the basis of merit and fitness based on a comprehensive and progressive merit system to be established by the Authority immediately upon its organization and consistent with Civil Service rules and regulations.The recruitment, transfer, promotion, and dismissal of all personnel of the Authority, including temporary workers, shall be governed by such merit system. (c) The General Manager shall, subject to the approval of the Board, determine the staffing pattern and the number of personnel of the Authority, define their duties and responsibilities, and fix their salaries and emoluments. For professional and technical positions, the General Manager shall recommend salaries and emoluments that are comparable to those of similar positions in other government-owned corporations, the provisions of existing rules and regulations on wage and position classification notwithstanding. (d) The General Manager shall, subject to the approval by the Board, appoint and remove personnel below the rank of Assistant General Manager. xxx xxx xxx (emphasis supplied.) Although the foregoing section does not expressly provide for a mechanism for an administrative investigation of personnel, by vesting the power to remove erring employees on the General Manager, with the approval of the PPA Board of Directors, the law impliedly grants said officials the power to investigate its personnel below the rank of Assistant Manager who may be charged with an administrative offense. During such investigation, the PPA General Manager, as earlier stated, may subject the employee concerned to preventive suspension. The investigation should 13 be conducted in accordance with the procedure set out in Sec. 38 of P.D. No. 807. Only after gathering sufficient facts may the PPA General Manager impose the proper penalty in accordance with law. It is the latter action which 14 requires the approval of the PPA Board of Directors. From an adverse decision of the PPA General Manager and the Board of Directors, the employee concerned mayelevate the matter to the Department Head or Secretary. Otherwise, he may appeal directly to the Civil Service Commission. The permissive recourse to the Department Secretary is sanctioned by the Civil Service Law (P.D. No. 807) under the following provisions: Sec. 37. Disciplinary Jurisdiction. (a) The Commission shall decide upon appeal all administrative disciplinary cases involving the imposition of a penalty of suspension for more than thirty days, or fine in an amount exceeding thirty days salary, demotion in rank or salary or transfer, removal or dismissal from office. A complaint may be filed directly with the Commission by a private citizen against a government official or employee in which case it may hear and decide the case or it may deputize any department or agency or official or group of officials to conduct the investigation. The results of the investigation shall be submitted to the Commission with recommendation as to the penalty to be imposed or other action to be taken. (b) The heads of departments, agencies and instrumentalities, provinces, cities and municipalities shall have jurisdiction to investigate and decide matters involving disciplinary action against officers and employees under their jurisdiction. The decisions shall be final in case the penalty imposed is suspension for not more than thirty days or fine in an amount not exceeding thirty days' salary. In case the decision rendered by a bureau or office head is appealable to the Commission, the same may be initially appealed to the department and finally to the Commission and pending appeal, the

same shall be executory except when the penalty is removal, in which case the same shall be executory only after confirmation by the department head. xxx xxx xxx (Emphasis supplied.) It is, therefore, clear that the transmittal of the complaint by the PPA General Manager to the AAB was premature. The PPA General Manager should have first conducted an investigation, made the proper recommendation for the imposable penalty and sought its approval by the PPA Board of Directors. It was discretionary on the part of the herein petitioner to elevate the case to the then DOTC Secretary Reyes. Only then could the AAB take jurisdiction of the case. The AAB, which was created during the tenure of Secretary Reyes under Office Order No. 88-318 dated July 1, 1988, was designed to act, decide and recommend to him "all cases of administrative malfeasance, irregularities, grafts and acts of corruption in the Department." Composed of a Chairman and two (2) members, the AAB came into being 15 pursuant to Administrative Order No. 25 issued by the President on May 25, 1987. Its special nature as a quasijudicial administrative body notwithstanding, the AAB is not exempt from the observance of due process in its 16 proceedings. We are not satisfied that it did so in this case the respondents protestation that petitioner waived his right to be heard notwithstanding. It should be observed that petitioner was precisely questioning the AAB's jurisdiction when it sought judicial recourse. WHEREFORE, the decision of the Court of Appeals is AFFIRMED insofar as it upholds the power of the PPA General Manager to subject petitioner to preventive suspension and REVERSED insofar as it validates the jurisdiction of the DOTC and/or the AAB to act on Administrative Case No. PPA-AAB-1-049-89 and rules that due process has been accorded the petitioner. The AAB decision in said case is hereby declared NULL and VOID and the case in REMANDED to the PPA whose General Manager shall conduct with dispatch its reinvestigation. The preventive suspension of petitioner shall continue unless after a determination of its duration, it is found that he had served the total of ninety (90) days in which case he shall be reinstated immediately. SO ORDERED. Narvasa, C.J., Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Bidin, Grio-Aquino, Medialdea, Regalado, Davide, Jr. and Nocon JJ., concur. Padilla and Bellosillo, JJ., took no part. Feliciano, J., is on leave.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. Nos. 147706-07 February 16, 2005

PEOPLE OF THE PHILIPPINES, petitioner, vs. THE HONORABLE SANDIGANBAYAN (Fifth Division) and EFREN L. ALAS, respondents. DECISION CORONA, J.: Does the Sandiganbayan have jurisdiction over presidents, directors or trustees, or managers of government-owned or controlled corporations organized and incorporated under the Corporation Code for purposes of the provisions of RA 3019, otherwise known as the Anti-Graft and Corrupt Practices Act? The petitioner, represented by the Office of the Special Prosecutor (OSP), takes the affirmative position in this petition for certiorari under Rule 65 of the Rules of Court. Respondent Efren L. Alas contends otherwise, together with the respondent court. Pursuant to a resolution dated September 30, 1999 of the Office of the Ombudsman, two separate informations for violation of Section 3(e) of RA 3019, otherwise known as the Anti-Graft and Corrupt Practices Act, were filed with the Sandiganbayan on November 17, 1999 against Efren L. Alas. The charges emanated from the alleged anomalous advertising contracts entered into by Alas, in his capacity as President and Chief Operating Officer of the Philippine Postal Savings Bank (PPSB), with Bagong Buhay Publishing Company which purportedly caused damage and prejudice to the government. On October 30, 2002, Alas filed a motion to quash the informations for lack of jurisdiction, which motion was vehemently opposed by the prosecution. After considering the arguments of both parties, the respondent court ruled that PPSB was a private corporation and that its officers, particularly herein respondent Alas, did not fall under Sandiganbayan jurisdiction. According to the Sandiganbayan: After a careful consideration of the arguments of the accused-movant as well as of that of the prosecution, we are of the considered opinion that the instant motion of the accused is well taken. Indeed, it is the basic thrust of Republic Act as well as (sic) Presidential Decree No. 1606 as amended by President Decree No. 1486 and Republic Act No. 7975 and Republic Act No. 8249 that the Sandiganbayan has jurisdiction only over public officers unless private persons are charged with them in the commission of the offenses. The records disclosed that while Philippine Postal Savings Bank is a subsidiary of the Philippine Postal Corporation which is a government owned corporation, the same is not created by a special law. It was organized and incorporated under the Corporation Code which is Batas Pambansa Blg. 68. It was registered with the Securities and Exchange Commission under SEC No. AS094-005593 on June 22, 1994 with a lifetime of fifty (50) years. Under its Articles of Incorporation the purpose for which said entity is formed was primarily for business, xxx Likewise, a scrutiny of the seven (7) secondary purposes of the corporation points to the conclusion that it exists for business.l^vvphi1.net Obviously, it is not involved in the performance of a particular function in the exercise of government power. Thus, its officers and employees are not covered by the GSIS and are under the SSS law, and actions for reinstatement and backwages are not within the jurisdiction of the Civil Service Commission but by the National Labor Relations Commission (NLRC). The Supreme Court, in the case of Trade Unions of the Philippines and Allied Services vs. National Housing Corp., 173 SCRA 33, held that the Civil Service now covers only government owned or controlled corporations with original or legislative charters, those created by an act of Congress or by special law, and not those incorporated under and pursuant to a general legislation. The Highest Court categorically ruled that the Civil Service does not include government-owned or controlled corporation which are organized as subsidiaries of government-owned or controlled corporation under the general corporation law. In Philippine National Oil Company Energy Development Corporation vs. Leogardo, 175 SCRA 26, the Supreme Court emphasized that:
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The test in determining whether a government-owned or controlled corporation is subject to the Civil Service Law is the manner of its creation such that government corporation created by special charter are subject to its provision while those incorporated under the general corporation law are not within its coverage. Likewise in Davao City Water District vs. Civil Service Commission, 201 SCRA 601 it was held that "by governmentowned or controlled corporation with original charter we mean government-owned or controlled corporation created by a special law and not under the Corporation Code of the Philippines" while in Llenes vs. Dicdican, et al., 260 SCRA 207, a public officer has been ruled, as a person whose duties involve the exercise of discretion in the performance of the function of government. Clearly, on the basis of the foregoing pronouncements of the Supreme Court, the accused herein cannot be 2 considered a public officer. Thus, this Court may not exercise jurisdiction over his act. Dissatisfied, the People, through the Office of the Special Prosecutor (OSP), filed this petition arguing, in essence, that the PPSB was a government-owned or controlled corporation as the term was defined under Section 2(13) of the 4 Administrative Code of 1987. Likewise, in further defining the jurisdiction of the Sandiganbayan, RA 8249 did not make a distinction as to the manner of creation of the government-owned or controlled corporations for their officers to fall under its jurisdiction. Hence, being President and Chief Operating Officer of the PPSB at the time of commission of the crimes charged, respondent Alas came under the jurisdiction of the Sandiganbayan. 1awphi1.nt Quoting at length from the assailed resolution dated February 15, 2001, respondent Alas, on the other hand, practically reiterated the pronouncements made by the respondent court in support of his conclusion that the PPSB 5 was not created by special law, hence, its officers did not fall within the jurisdiction of the Sandiganbayan. We find merit in the petition. Section 2(13) of EO 292 defines government-owned or controlled corporations as follows: Sec. 2. General Terms Defined Unless the specific words of the text or the context as a whole or a particular statute, shall require a different meaning: xxx xxx xxx (13) government owned or controlled corporations refer to any agency organized as a stock or non-stock corporation vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the government directly or indirectly or through its instrumentalities either wholly, or where applicable as in the case of stock corporations to the extent of at least 51% of its capital stock: provided, that government owned or controlled corporations maybe further categorized by the department of the budget, the civil service commission and the commission on audit for the purpose of the exercise and discharge of their respective powers, functions and responsibilities with respect to such corporations. From the foregoing, PPSB fits the bill as a government-owned or controlled corporation, and organized and incorporated under the Corporation Code as a subsidiary of the Philippine Postal Corporation (PHILPOST). More than 99% of the authorized capital stock of PPSB belongs to the government while the rest is nominally held by its incorporators who are/were themselves officers of PHILPOST. The creation of PPSB was expressly sanctioned by Section 32 of RA 7354, otherwise known as the Postal Service Act of 1992, for purposes of, among others, "to encourage and promote the virtue of thrift and the habit of savings among the general public, especially the youth and the marginalized sector in the countryside xxx" and to facilitate postal service by "receiving collections and making 7 payments, including postal money orders." It is not disputed that the Sandiganbayan has jurisdiction over presidents, directors or trustees, or managers of government-owned or controlled corporations with original charters whenever charges of graft and corruption are involved. However, a question arises whether the Sandiganbayan has jurisdiction over the same officers in government-owned or controlled corporations organized and incorporated under the Corporation Code in view of the delimitation provided for in Article IX-B Section 2(1) of the 1987 Constitution which states that: SEC. 2. (1) The Civil Service embraces all branches, subdivisions, instrumentalities, and agencies of the government, including government-owned or controlled corporations with original charters. It should be pointed out however, that the jurisdiction of the Sandiganbayan is separate and distinct from the Civil Service Commission. The same is governed by Article XI, Section 4 of the 1987 Constitution which provides that "the present anti-graft court known as the Sandiganbayan shall continue to function and exercise its jurisdiction as now or
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hereafter may be provided by law." This provision, in effect, retained the jurisdiction of the anti-graft court as defined under Article XIII, Section 5 of the 1973 Constitution which mandated its creation, thus: Sec. 5. The Batasang Pambansa shall create a special court, to be known as Sandiganbayan, which shall have jurisdiction over criminal and civil cases involving graft and corrupt practices and such other offense committed by public officers and employees, including those in government-owned or controlled corporations , in relation to their office as may be determined by law. (Italics ours) On March 30, 1995, Congress, pursuant to its authority vested under the 1987 Constitution, enacted RA 7975 8maintaining the jurisdiction of the Sandiganbayan over presidents, directors or trustees, or managers of government-owned or controlled corporations without any distinction whatsoever. Thereafter, on February 5, 1997, Congress enacted RA 8249 9 which preserved the subject provision: Section 4, Jurisdiction. The Sandiganbayan shall exercise exclusive original jurisdiction in all cases involving: a. Violations of Republic Act No. 3019, as amended, otherwise known as the Anti-Graft and Corrupt Practices Act, Republic Act No. 1379, and Chapter II, Section, Title VII, Book II of the Revised Penal Code, where one or more of the accused are officials occupying the following positions in the government, whether in a permanent, acting or interim capacity, at the time of the commission of the offense, (1) Officials of the executive branch occupying the positions of regional director, and higher, otherwise classified as grade "27" and higher, of the Compensation and Position Classification Act of 1989 (Republic Act No. 6758) specifically including: xxx xxx xxx (g) Presidents, directors or trustees, or managers of government-owned or controlled corporations, state universities or educational institutions or foundations. (Italics ours) The legislature, in mandating the inclusion of "presidents, directors or trustees, or managers of government-owned or controlled corporations" within the jurisdiction of the Sandiganbayan, has consistently refrained from making any distinction with respect to the manner of their creation. The deliberate omission, in our view, clearly reveals the intention of the legislature to include the presidents, directors or trustees, or managers of both types of corporations within the jurisdiction of the Sandiganbayan whenever they are involved in graft and corruption. Had it been otherwise, it could have simply made the necessary distinction. But it did not. It is a basic principle of statutory construction that when the law does not distinguish, we should not distinguish. Ubi lex non distinguit nec nos distinguere debemos . Corollarily, Article XI Section 12 of the 1987 Constitution, on the jurisdiction of the Ombudsman (the governments prosecutory arm against persons charged with graft and corruption), includes officers and employees of government-owned or controlled corporations, likewise without any distinction. 1awphi1.nt In Quimpo v. Tanodbayan,10 this Court, already mindful of the pertinent provisions of the 1987 Constitution, ruled that the concerned officers of government-owned or controlled corporations, whether created by special law or formed under the Corporation Code, come under the jurisdiction of the Sandiganbayan for purposes of the provisions of the Anti-Graft and Corrupt Practices Act. Otherwise, as we emphasized therein, a major policy of Government, which is to eradicate, or at the very least minimize, the graft and corruption that has permeated the fabric of the public service like a malignant social cancer, would be seriously undermined. In fact, Section 1 of the Anti-Graft and Corrupt Practices Act embodies this policy of the government, that is, to repress certain acts not only of public officers but also of private persons constituting graft or corrupt practices or which may lead thereto. The foregoing pronouncement has not outlived its usefulness. On the contrary, it has become even more relevant today due to the rampant cases of graft and corruption that erode the peoples faith in government. For indeed, a government -owned or controlled corporation can conceivably create as many subsidiary corporations under the Corporation Code as it might wish, use public funds, disclaim public accountability and escape the liabilities and responsibilities provided by law. By including the concerned officers of government-owned or controlled corporations organized and incorporated under the Corporation Code within the jurisdiction of the Sandiganbayan, the legislature evidently seeks to avoid just that. WHEREFORE, in view of the foregoing, the petition is hereby GRANTED and the assailed resolution dated February 15, 2001 of the respondent court is hereby REVERSED and SET ASIDE. SO ORDERED. Panganiban, (Chairman), Sandoval-Gutierrez, Carpio-Morales, and Garcia, JJ., concur.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 143672 April 24, 2003

COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. GENERAL FOODS (PHILS.), INC., respondent. CORONA, J.: Petitioner Commissioner of Internal Revenue (Commissioner) assails the resolution of the Court of Appeals 2 reversing the decision of the Court of Tax Appeals which in turn denied the protest filed by respondent General Foods (Phils.), Inc., regarding the assessment made against the latter for deficiency taxes. The records reveal that, on June 14, 1985, respondent corporation, which is engaged in the manufacture of beverages such as "Tang," "Calumet" and "Kool-Aid," filed its income tax return for the fiscal year ending February 28, 1985. In said tax return, respondent corporation claimed as deduction, among other business expenses, the amount of P9,461,246 for media advertising for "Tang." On May 31, 1988, the Commissioner disallowed 50% or P4,730,623 of the deduction claimed by respondent corporation. Consequently, respondent corporation was assessed deficiency income taxes in the amount of P2,635, 141.42. The latter filed a motion for reconsideration but the same was denied. On September 29, 1989, respondent corporation appealed to the Court of Tax Appeals but the appeal was dismissed: With such a gargantuan expense for the advertisement of a singular product, which even excludes "other advertising and promotions" expenses, we are not prepared to accept that such amount is reasonable "to stimulate the current sale of merchandise" regardless of Petitioners explanation that such expense "does not connote unreasonableness considering the grave economic situation taking place after the Aquino assassination characterized by capital fight, strong deterioration of the purchasing power of the Philippine peso and the slacking demand for consumer products" (Petitioners Memorandum, CTA Records, p. 273). We are not convinced with such an explanation. The staggering expense led us to believe that such expenditure was incurred "to create or maintain some form of good will for the taxpayers trade or business or for the industry or profession of which the taxpayer is a member." The term "good will" can hardly be said to have any precise signification; it is generally used to denote the benefit arising from connection and reputation (Words and Phrases, Vol. 18, p. 556 citing Douhart vs. Loagan, 86 III. App. 294). As held in the case of Welch vs. Helvering, efforts to establish reputation are akin to acquisition of capital assets and, therefore, expenses related thereto are not business expenses but capital expenditures. ( Atlas Mining and Development Corp. vs. Commissioner of Internal Revenue , supra). For sure such expenditure was meant not only to generate present sales but more for future and prospective benefits. Hence, "abnormally large expenditures for advertising are usually to be spread over the period of years during which the benefits of the expenditures are received" (Mertens, supra, citing Colonial Ice Cream Co., 7 BTA 154). WHEREFORE, in all the foregoing, and finding no error in the case appealed from, we hereby RESOLVE to DISMISS the instant petition for lack of merit and ORDER the Petitioner to pay the respondent Commissioner the assessed amount of P2,635,141.42 representing its deficiency income tax liability for the 3 fiscal year ended February 28, 1985." Aggrieved, respondent corporation filed a petition for review at the Court of Appeals which rendered a decision reversing and setting aside the decision of the Court of Tax Appeals: Since it has not been sufficiently established that the item it claimed as a deduction is excessive, the same should be allowed. WHEREFORE, the petition of petitioner General Foods (Philippines), Inc. is hereby GRANTED. Accordingly, the Decision, dated 8 February 1994 of respondent Court of Tax Appeals is REVERSED and SET ASIDE and the letter, dated 31 May 1988 of respondent Commissioner of Internal Revenue is CANCELLED.
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SO ORDERED.

Thus, the instant petition, wherein the Commissioner presents for the Courts considerat ion a lone issue: whether or not the subject media advertising expense for "Tang" incurred by respondent corporation was an ordinary and necessary expense fully deductible under the National Internal Revenue Code (NIRC). It is a governing principle in taxation that tax exemptions must be construed in strictissimi juris against the taxpayer 5 and liberally in favor of the taxing authority; and he who claims an exemption must be able to justify his claim by the clearest grant of organic or statute law. An exemption from the common burden cannot be permitted to exist upon 6 vague implications. Deductions for income tax purposes partake of the nature of tax exemptions; hence, if tax exemptions are strictly construed, then deductions must also be strictly construed. We then proceed to resolve the singular issue in the case at bar. Was the media advertising expense for "Tang" paid or incurred by respondent corporation for the fiscal year ending February 28, 1985 "necessary and ordinary," hence, fully deductible under the NIRC? Or was it a capital expenditure, paid in order to create "goodwill and reputation" for respondent corporation and/or its products, which should have been amortized over a reasonable period? Section 34 (A) (1), formerly Section 29 (a) (1) (A), of the NIRC provides: (A) Expenses.(1) Ordinary and necessary trade, business or professional expenses .(a) In general.- There shall be allowed as deduction from gross income all ordinary and necessary expenses paid or incurred during the taxable year in carrying on, or which are directly attributable to, the development, management, operation and/or conduct of the trade, business or exercise of a profession. Simply put, to be deductible from gross income, the subject advertising expense must comply with the following requisites: (a) the expense must be ordinary and necessary; (b) it must have been paid or incurred during the taxable year; (c) it must have been paid or incurred in carrying on the trade or business of the taxpayer; and (d) it must be 7 supported by receipts, records or other pertinent papers. The parties are in agreement that the subject advertising expense was paid or incurred within the corresponding taxable year and was incurred in carrying on a trade or business. Hence, it was necessary. However, their views conflict as to whether or not it was ordinary. To be deductible, an advertising expense should not only be necessary but also ordinary. These two requirements must be met. The Commissioner maintains that the subject advertising expense was not ordinary on the ground that it failed the two conditions set by U.S. jurisprudence: first, "reasonableness" of the amount incurred and second, the amount incurred must not be a capital outlay to create "goodwill" for the product and/or private respondents business. Otherwise, the expense must be considered a capital expenditure to be spread out over a reasonable time. We agree. There is yet to be a clear-cut criteria or fixed test for determining the reasonableness of an advertising expense. There being no hard and fast rule on the matter, the right to a deduction depends on a number of factors such as but not limited to: the type and size of business in which the taxpayer is engaged; the volume and amount of its net earnings; the nature of the expenditure itself; the intention of the taxpayer and the general economic conditions. It is the interplay of these, among other factors and properly weighed, that will yield a proper evaluation. In the case at bar, the P9,461,246 claimed as media advertising expense for "Tang" alone was almost one-half of its total claim for "marketing expenses." Aside from that, respondent-corporation also claimed P2,678,328 as "other advertising and promotions expense" and another P1,548,614, for consumer promotion. Furthermore, the subject P9,461,246 media advertising expense for "Tang" was almost double the amount of respondent corporations P4,640,636 general and administrative expenses. We find the subject expense for the advertisement of a single product to be inordinately large. Therefore, even if it is necessary, it cannot be considered an ordinary expense deductible under then Section 29 (a) (1) (A) of the NIRC.

10

Advertising is generally of two kinds: (1) advertising to stimulate the current sale of merchandise or use of services and (2) advertising designed to stimulate the future sale of merchandise or use of services. The second type involves expenditures incurred, in whole or in part, to create or maintain some form of goodwill for the taxpayers trade or business or for the industry or profession of which the taxpayer is a member. If the expenditures are for the advertising of the first kind, then, except as to the question of the reasonableness of amount, there is no doubt such expenditures are deductible as business expenses. If, however, the expenditures are for advertising of the second kind, then normally they should be spread out over a reasonable period of time. We agree with the Court of Tax Appeals that the subject advertising expense was of the second kind. Not only was 8 the amount staggering; the respondent corporation itself also admitted, in its letter protest to the Commissioner of Internal Revenues assessment, that the subject media expense was incurred in order to protect respondent corporations brand franchise, a critical point during the period under review. The protection of brand franchise is analogous to the maintenance of goodwill or title to ones property. This is a 9 capital expenditure which should be spread out over a reasonable period of time. Respondent corporations venture to protect its brand franchise was tantamount to efforts to establish a reputation. This was akin to the acquisition of capital assets and therefore expenses related thereto were not to be considered as 10 business expenses but as capital expenditures. True, it is the taxpayers prerogative to determine the amount of advertising expenses it will incur and where to apply 11 them. Said prerogative, however, is subject to certain considerations. The first relates to the extent to which the expenditures are actually capital outlays; this necessitates an inquiry into the nature or purpose of such 12 expenditures. The second, which must be applied in harmony with the first, relates to whether the expenditures are ordinary and necessary. Concomitantly, for an expense to be considered ordinary, it must be reasonable in amount. The Court of Tax Appeals ruled that respondent corporation failed to meet the two foregoing limitations. We find said ruling to be well founded. Respondent corporation incurred the subject advertising expense in order to protect its brand franchise. We consider this as a capital outlay since it created goodwill for its business and/or product. The P9,461,246 media advertising expense for the promotion of a single product, almost one-half of petitioner corporations entire claim for marketing expenses for that year under review, inclusive of other advertising and promotion expenses of P2,678,328 and P1,548,614 for consumer promotion, is doubtlessly unreasonable. It has been a long standing policy and practice of the Court to respect the conclusions of quasi-judicial agencies such as the Court of Tax Appeals, a highly specialized body specifically created for the purpose of reviewing tax cases. The CTA, by the nature of its functions, is dedicated exclusively to the study and consideration of tax problems. It has necessarily developed an expertise on the subject. We extend due consideration to its opinion unless there is an 13 abuse or improvident exercise of authority. Since there is none in the case at bar, the Court adheres to the findings of the CTA. Accordingly, we find that the Court of Appeals committed reversible error when it declared the subject media advertising expense to be deductible as an ordinary and necessary expense on the ground that "it has not been established that the item being claimed as deduction is excessive." It is not incumbent upon the taxing authority to prove that the amount of items being claimed is unreasonable. The burden of proof to establish the validity of claimed 14 deductions is on the taxpayer. In the present case, that burden was not discharged satisfactorily. WHEREFORE, premises considered, the instant petition is GRANTED. The assailed decision of the Court of Appeals is hereby REVERSED and SET ASIDE. Pursuant to Sections 248 and 249 of the Tax Code, respondent General Foods (Phils.), Inc. is hereby ordered to pay its deficiency income tax in the amount of P2,635,141.42, plus 25% surcharge for late payment and 20% annual interest computed from August 25, 1989, the date of the denial of its protest, until the same is fully paid. SO ORDERED. Puno, (Chairman), Panganiban, Sandoval-Gutierrez, and Carpio-Morales, JJ., concur.

11

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. Nos. L-10123 and L-10355 April 26, 1957

GENARO URSAL, as City Assessor of Cebu, petitioner, vs. COURT OF TAX APPEALS and CONSUELO NOEL, respondents. GENARO URSAL, as City Assessor of Cebu, petitioner, vs. COURT OF TAX APPEALS and JESUSA SAMSON, respondents. City Fiscal of Cebu Jose L. Abad for petitioner. Francisco M. Alonso for respondents. BENGZON, J.: In these two cases Genaro Ursal as City Assessor of Cebu challenges the correctness of the order of the Court of Tax Appeals dismissing his appeals to that body from two rulings of the Cebu Board of Assessment Appeals. The record shows that said city assessors in the exercise of his powers assessed for taxation certain real properties of Consuelo Noel and Jesusa Samson in the City of Cebu, and that upon protest of the taxpayers, the Cebu Board of Assessment Appeals reduced the assessments. It also shows he took the matter to the Court of Tax Appeals insisting on his valuation; but said Court refused to entertain the appeal saying it was late, and, besides, the assessor had no personality to bring the matter before it under section 11 of Republic Act No. 1125, which reads as follows: SEC. 11. Who may appeal; effect of appeal. Any person, association or corporation adversely affected by a decision or ruling of the Collector of Internal Revenue, the Collector of Customs or any provincial or city Board of Assessment Appeals may file an appeal in the Court of Tax Appeals within thirty days after the receipt of such decision or ruling. We share the view that the assessor had no personality to resort to the Court of Tax Appeals. The rulings of the 1 Board of Assessment Appeals did not "adversely affect" him. At most it was the City of Cebu that had been adversely affected in the sense that it could not thereafter collect higher realty taxes from the abovementioned property owners. His opinion, it is true had been overruled; but the overruling inflicted no material damage upon him or his office. And the Court of Tax Appeals was not created to decide mere conflicts of opinion between administrative officers or agencies. Imagine an income tax examiner resorting to the Court of Tax Appeals whenever the Collector of Internal Revenue modifies, or lower his assessment on the return of a tax payer! Republic Act No. 1125 creating the Court of Tax Appeals did not grant it blanket authority to decide any and all tax disputes. Defining such special court's jurisdiction, the Act necessarily limited its authority to those matters enumerated therein. In line with this idea we recently approved said court's order rejecting an appeal to it by Lopez & Sons from the decision of the Collector of Customs, because in our opinion its jurisdiction extended only to a review of the decisions of the Commissioner of Customs, as provided by the statute and not to decisions of theCollector of Customs. (Lopez & Sons vs. The Court of Tax Appeals, 100 Phil., 850, 53 Off. Gaz., [10] 3065). The appellant invites attention to the fact that the Court of Appeals is the successor of the former Central Board of Tax Appeals created by Commonwealth Act No. 530 and of the Board of Tax Appeals established by Executive Order No. 401-A, and that said Commonwealth Act No. 530 (section 2) explicitly authorized the city assessor to appeal to the Central Board of Tax Appeals. Here is precisely another argument against his position: as Republic Act No. 1125 failed to reenact such express permission, it is deemed with held. Oversight could not have been the clause of such withholding, since there were proper grounds therefor: (a) discipline and command responsibility in the executive branches; and (b) instead of being another superior 2 administrative agency as was the former Board of Tax Appeals the Court of Tax Appeals as created by Republic Act No. 1125 is a part of the judicial system presumably to act only on protests of private persons adversely affected by the tax, custom, or assessment.

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There is no merit to the contention that section 2 of Commonwealth Act No. 530 is still in force and justifies Ursal's appeal. Apart from the reasons already advanced, Republic Act No. 1125 is a complete law by itself and expressly enumerates the matters which the Court of Tax Appeals may consider; such enumeration excludes all others by implication. Expressio unius est exclusio alterius. parts of an original act which act omitted from the act as revised are to be considered as annulled and repealed, provided it clearly appears to have been the intention of the legislature to cover the whole subject by the revision. (82 C. J. S. p. 501.) Inasmuch as we agree to the appellant's lack of personality before the Court of Tax Appeals, we find it unnecessary to review the question whether or not his appeal had been perfected in due time. Wherefore, the challenge order is hereby affirmed. Padilla, Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Endencia and Felix, JJ.,concur.

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Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-57883 March 12, 1982 GUALBERTO J. DE LA LLANA Presiding Judge, Branch II of the City Court of Olongapo, ESTANISLAO L. CESA, JR., FIDELA Y. VARGAS, BENJAMIN C. ESCOLANGO, JUANITO C. ATIENZA, MANUEL REYES ROSAPAPAN, JR., VIRGILIO E. ACIERTO, and PORFIRIO AGUILLON AGUILA, petitioners, vs. MANUEL ALBA, Minister of Budget, FRANCISCO TANTUICO, Chairman, Commission on Audit, and RICARDO PUNO, Minister of Justice, Respondents.

FERNANDO, C.J.: This Court, pursuant to its grave responsibility of passing upon the validity of any executive or legislative act in an appropriate cases, has to resolve the crucial issue of the constitutionality of Batas Pambansa Blg. 129, entitled "An act reorganizing the Judiciary, Appropriating Funds Therefor and for Other Purposes." The task of judicial review, aptly characterized as exacting and delicate, is never more so than when a conceded legislative power, that of 1 2 judicial reorganization, may possibly collide with the time-honored principle of the independence of the judiciary as protected and safeguarded by this constitutional provision: "The Members of the Supreme Court and judges of inferior courts shall hold office during good behavior until they reach the age of seventy years or become incapacitated to discharge the duties of their office. The Supreme Court shall have the power to discipline judges of 3 inferior courts and, by a vote of at least eight Members, order their dismissal." For the assailed legislation mandates that Justices and judges of inferior courts from the Court of Appeals to municipal circuit courts, except the occupants of the Sandiganbayan and the Court of Tax Appeals, unless appointed to the inferior courts established by such Act, would be considered separated from the judiciary. It is the termination of their incumbency that for petitioners justifies a suit of this character, it being alleged that thereby the security of tenure provision of the Constitution has been ignored and disregarded, That is the fundamental issue raised in this proceeding, erroneously entitled Petition for Declaratory Relief and/or for 4 Prohibition considered by this Court as an action for prohibited petition, seeking to enjoin respondent Minister of the Budget, respondent Chairman of the Commission on Audit, and respondent Minister of Justice from taking any action 5 implementing Batas Pambansa Blg. 129. Petitioners sought to bolster their claim by imputing lack of good faith in its enactment and characterizing as an undue delegation of legislative power to the President his authority to fix the compensation and allowances of the Justices and judges thereafter appointed and the determination of the date when the reorganization shall be deemed completed. In the very comprehensive and scholarly Answer of Solicitor 6 General Estelito P. Mendoza, it was pointed out that there is no valid justification for the attack on the constitutionality of this statute, it being a legitimate exercise of the power vested in the Batasang Pambansa to reorganize the judiciary, the allegations of absence of good faith as well as the attack on the independence of the judiciary being unwarranted and devoid of any support in law. A Supplemental Answer was likewise filed on October 8, 1981, followed by a Reply of petitioners on October 13. After the hearing in the morning and afternoon of October 7 15, in which not only petitioners and respondents were heard through counsel but also the amici curiae, and thereafter submission of the minutes of the proceeding on the debate on Batas Pambansa Blg. 129, this petition was deemed submitted for decision. The importance of the crucial question raised called for intensive and rigorous study of all the legal aspects of the case. After such exhaustive deliberation in several sessions, the exchange of views being supplemented by memoranda from the members of the Court, it is our opinion and so hold that Batas Pambansa Blg. 129 is not unconstitutional. 1. The argument as to the lack of standing of petitioners is easily resolved. As far as Judge de la Llana is concerned, 8 he certainly falls within the principle set forth in Justice Laurel's opinion in People v. Vera. Thus: "The unchallenged rule is that the person who impugns the validity of a statute must have a personal and substantial interest in the case 9 such that he has sustained, or will sustain, direct injury as a result of its enforcement." The other petitioners as members of the bar and officers of the court cannot be considered as devoid of "any personal and substantial interest" on the matter. There is relevance to this excerpt from a separate opinion in Aquino, Jr. v. Commission on 10 Elections: "Then there is the attack on the standing of petitioners, as vindicating at most what they consider a public right and not protecting their rights as individuals. This is to conjure the specter of the public right dogma as an inhibition to parties intent on keeping public officials staying on the path of constitutionalism. As was so well put by

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Jaffe: 'The protection of private rights is an essential constituent of public interest and, conversely, without a wellordered state there could be no enforcement of private rights. Private and public interests are, both in substantive and procedural sense, aspects of the totality of the legal order.' Moreover, petitioners have convincingly shown that in their capacity as taxpayers, their standing to sue has been amply demonstrated. There would be a retreat from the liberal approach followed in Pascual v. Secretary of Public Works, foreshadowed by the very decision of People v. Vera where the doctrine was first fully discussed, if we act differently now. I do not think we are prepared to take that step. Respondents, however, would hark back to the American Supreme Court doctrine in Mellon v. Frothingham with their claim that what petitioners possess 'is an interest which is shared in common by other people and is comparatively so minute and indeterminate as to afford any basis and assurance that the judicial process can act on it.' That is to speak in the language of a bygone era even in the United States. For as Chief Justice Warren clearly 11 pointed out in the later case of Flast v. Cohen, the barrier thus set up if not breached has definitely been lowered." 2. The imputation of arbitrariness to the legislative body in the enactment of Batas Pambansa Blg. 129 to demonstrate lack of good faith does manifest violence to the facts. Petitioners should have exercised greater care in informing themselves as to its antecedents. They had laid themselves open to the accusation of reckless disregard 12 for the truth, On August 7, 1980, a Presidential Committee on Judicial Reorganization was organized. This Executive Order was later amended by Executive Order No. 619-A., dated September 5 of that year. It clearly specified the task assigned to it: "1. The Committee shall formulate plans on the reorganization of the Judiciary which shall be submitted within seventy (70) days from August 7, 1980 to provide the President sufficient options for the reorganization of the entire Judiciary which shall embrace all lower courts, including the Court of Appeals, the Courts 13 of First Instance, the City and Municipal Courts, and all Special Courts, but excluding the Sandigan Bayan." On October 17, 1980, a Report was submitted by such Committee on Judicial Reorganization. It began with this paragraph: "The Committee on Judicial Reorganization has the honor to submit the following Report. It expresses at the outset its appreciation for the opportunity accorded it to study ways and means for what today is a basic and urgent need, nothing less than the restructuring of the judicial system. There are problems, both grave and pressing, that call for remedial measures. The felt necessities of the time, to borrow a phrase from Holmes, admit of no delay, for if no step be taken and at the earliest opportunity, it is not too much to say that the people's faith in the administration of justice could be shaken. It is imperative that there be a greater efficiency in the disposition of cases and that litigants, especially those of modest means much more so, the poorest and the humblest can vindicate their rights in an expeditious and inexpensive manner. The rectitude and the fairness in the way the courts operate must be manifest to all members of the community and particularly to those whose interests are affected by the exercise of their functions. It is to that task that the Committee addresses itself and hopes that the plans submitted could be a starting point for an institutional reform in the Philippine judiciary. The experience of the Supreme Court, which since 1973 has been empowered to supervise inferior courts, from the Court of Appeals to the municipal courts, has proven that reliance on improved court management as well as training of judges for more efficient administration does not suffice. I hence, to repeat, there is need for a major reform in the judicial so stem it is worth 14 noting that it will be the first of its kind since the Judiciary Act became effective on June 16, 1901." I t went to say: "I t does not admit of doubt that the last two decades of this century are likely to be attended with problems of even greater complexity and delicacy. New social interests are pressing for recognition in the courts. Groups long inarticulate, primarily those economically underprivileged, have found legal spokesmen and are asserting grievances previously ignored. Fortunately, the judicially has not proved inattentive. Its task has thus become even more formidable. For so much grist is added to the mills of justice. Moreover, they are likewise to be quite novel. The need for an innovative approach is thus apparent. The national leadership, as is well-known, has been constantly on the search for solutions that will prove to be both acceptable and satisfactory. Only thus may there be continued national 15 progress." After which comes: "To be less abstract, the thrust is on development. That has been repeatedly stressed and rightly so. All efforts are geared to its realization. Nor, unlike in the past, was it to b "considered as simply the movement towards economic progress and growth measured in terms of sustained increases in per capita 16 income and Gross National Product (GNP). For the New Society, its implication goes further than economic advance, extending to "the sharing, or more appropriately, the democratization of social and economic opportunities, 17 the substantiation of the true meaning of social justice." This process of modernization and change compels the government to extend its field of activity and its scope of operations. The efforts towards reducing the gap between the wealthy and the poor elements in the nation call for more regulatory legislation. That way the social justice and 18 protection to labor mandates of the Constitution could be effectively implemented." There is likelihood then "that some measures deemed inimical by interests adversely affected would be challenged in court on grounds of validity. Even if the question does not go that far, suits may be filed concerning their interpretation and application. ... There could be pleas for injunction or restraining orders. Lack of success of such moves would not, even so, result in their prompt final disposition. Thus delay in the execution of the policies embodied in law could thus be reasonably 19 expected. That is not conducive to progress in development." For, as mentioned in such Report, equally of vital concern is the problem of clogged dockets, which "as is well known, is one of the utmost gravity. Notwithstanding the most determined efforts exerted by the Supreme Court, through the leadership of both retired Chief Justice Querube Makalintal and the late Chief Justice Fred Ruiz Castro, from the time supervision of the courts was vested in it under 20 the 1973 Constitution, the trend towards more and more cases has continued." It is understandable why. With the accelerated economic development, the growth of population, the increasing urbanization, and other similar factors, the judiciary is called upon much oftener to resolve controversies. Thus confronted with what appears to be a crisis situation that calls for a remedy, the Batasang Pambansa had no choice. It had to act, before the ailment became even worse. Time was of the essence, and yet it did not hesitate to be duly mindful, as it ought to be, of the extent of its coverage before enacting Batas Pambansa Blg. 129.

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3. There is no denying, therefore, the need for "institutional reforms," characterized in the Report as "both pressing 21 and urgent." It is worth noting, likewise, as therein pointed out, that a major reorganization of such scope, if it were 22 to take place, would be the most thorough after four generations. The reference was to the basic Judiciary Act 23 generations . enacted in June of 1901, amended in a significant way, only twice previous to the Commonwealth. There was, of course, the creation of the Court of Appeals in 1935, originally composed "of a Presiding Judge and ten appellate Judges, who shall be appointed by the President of the Philippines, with the consent of the Commission on 24 Appointments of the National Assembly, It could "sit en banc, but it may sit in two divisions, one of six and another 25 of five Judges, to transact business, and the two divisions may sit at the same time." Two years after the 26 establishment of independence of the Republic of the Philippines, the Judiciary Act of 1948 was passed. It 27 continued the existing system of regular inferior courts, namely, the Court of Appeals, Courts of First Instance, the Municipal Courts, at present the City Courts, and the Justice of the Peace Courts, now the Municipal Circuit Courts 28 and Municipal Courts. The membership of the Court of Appeals has been continuously increased. Under a 1978 Presidential Decree, there would be forty-five members, a Presiding Justice and forty-four Associate Justices, with 29 30 fifteen divisions. Special courts were likewise created. The first was the Court of Tax Appeals in 1954, next came 31 the Court of Agrarian Relations in 1955, and then in the same year a Court of the Juvenile and Domestic Relations 32 for Manila in 1955, subsequently followed by the creation of two other such courts for Iloilo and Quezon City in 33 1966. In 1967, Circuit Criminal Courts were established, with the Judges having the same qualifications, rank, 34 compensation, and privileges as judges of Courts of First Instance. 4. After the submission of such Report, Cabinet Bill No. 42, which later became the basis of Batas Pambansa Blg. 129, was introduced. After setting forth the background as above narrated, its Explanatory Note continues: "Pursuant to the President's instructions, this proposed legislation has been drafted in accordance with the guidelines of that report with particular attention to certain objectives of the reorganization, to wit, the attainment of more efficiency in disposal of cases, a reallocation of jurisdiction, and a revision of procedures which do not tend to the proper meeting out of justice. In consultation with, and upon a consensus of, the governmental and parliamentary leadership, however, it was felt that some options set forth in the Report be not availed of. Instead of the proposal to confine the jurisdiction of the intermediate appellate court merely to appellate adjudication, the preference has been opted to increase rather than diminish its jurisdiction in order to enable it to effectively assist the Supreme Court. This 35 preference has been translated into one of the innovations in the proposed Bill." In accordance with the parliamentary procedure, the Bill was sponsored by the Chairman of the Committee on Justice, Human Rights and Good Government to which it was referred. Thereafter, Committee Report No. 225 was submitted by such Committee to the Batasang Pambansa recommending the approval with some amendments. In the sponsorship speech of Minister Ricardo C. Puno, there was reference to the Presidential Committee on Judicial Reorganization. Thus: "On October 17, 1980, the Presidential Committee on Judicial Reorganization submitted its report to the President which contained the 'Proposed Guidelines for Judicial Reorganization.' Cabinet Bill No. 42 was drafted substantially in accordance with the options presented by these guidelines. Some options set forth in the aforesaid report were not availed of upon consultation with and upon consensus of the government and parliamentary leadership. Moreover, some amendments to the bill were adopted by the Committee on Justice, Human Rights and Good Government, to which The bill was referred, following the public hearings on the bill held in December of 1980. The hearings consisted of dialogues with the distinguished members of the bench and the bar who had submitted written proposals, suggestions, and position papers on the bill upon the invitation of the Committee on Justice, Human 36 Rights and Good Government." Stress was laid by the sponsor that the enactment of such Cabinet Bill would, firstly, result in the attainment of more efficiency in the disposal of cases. Secondly, the improvement in the quality of justice dispensed by the courts is expected as a necessary consequence of the easing of the court's dockets. Thirdly, the structural changes introduced in the bill, together with the reallocation of jurisdiction and the revision of the rules of procedure, are designated to suit the court system to the exigencies of the present day Philippine society, and 37 hopefully, of the foreseeable future." it may be observed that the volume containing the minutes of the proceedings of the Batasang Pambansa show that 590 pages were devoted to its discussion. It is quite obvious that it took considerable time and effort as well as exhaustive study before the act was signed by the President on August 14, 1981. With such a background, it becomes quite manifest how lacking in factual basis is the allegation that its enactment is tainted by the vice of arbitrariness. What appears undoubted and undeniable is the good faith that characterized its enactment from its inception to the affixing of the Presidential signature. 5. Nothing is better settled in our law than that the abolition of an office within the competence of a legitimate body if 38 done in good faith suffers from no infirmity. The ponencia of Justice J.B.L. Reyes in Cruz v. Primicias, Jr. reiterated such a doctrine: "We find this point urged by respondents, to be without merit. No removal or separation of petitioners from the service is here involved, but the validity of the abolition of their offices. This is a legal issue that is for the Courts to decide. It is well-known rule also that valid abolition of offices is neither removal nor separation of the incumbents. ... And, of course, if the abolition is void, the incumbent is deemed never to have ceased to hold office. The preliminary question laid at rest, we pass to the merits of the case. As well-settled as the rule that the abolition of an office does not amount to an illegal removal of its incumbent is the principle that, in order to be valid, the abolition 39 must be made in good faith." The above excerpt was quoted with approval inBendanillo, Sr. v. Provincial 40 41 Governor, two earlier cases enunciating a similar doctrine having preceded it. As with the offices in the other branches of the government, so it is with the judiciary. The test remains whether the abolition is in good faith. As that element is conspicuously present in the enactment of Batas Pambansa Blg. 129, then the lack of merit of this petition 42 becomes even more apparent. The concurring opinion of Justice Laurel in Zandueta v. De la Costa cannot be any

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clearer. This is a quo warranto proceeding filed by petitioner, claiming that he, and not respondent, was entitled to he office of judge of the Fifth Branch of the Court of First Instance of Manila. There was a Judicial Reorganization Act in 43 1936, a year after the inauguration of the Commonwealth, amending the Administrative Code to organize courts of original jurisdiction known as the Courts of First Instance Prior to such statute, petitioner was the incumbent of such branch. Thereafter, he received an ad interim appointment, this time to the Fourth Judicial District, under the new legislation. Unfortunately for him, the Commission on Appointments of then National Assembly disapproved the same, with respondent being appointed in his place. He contested the validity of the Act insofar as it resulted in his being forced to vacate his position This Court did not rule squarely on the matter. His petition was dismissed on the ground of estoppel. Nonetheless, the separate concurrence of Justice Laurel in the result reached, to repeat, reaffirms in no uncertain terms the standard of good faith to preclude any doubt as to the abolition of an inferior court, with due recognition of the security of tenure guarantee. Thus: " I am of the opinion that Commonwealth Act No. 145 in so far as it reorganizes, among other judicial districts, the Ninth Judicial District, and establishes an entirely new district comprising Manila and the provinces of Rizal and Palawan, is valid and constitutional. This conclusion flows from the fundamental proposition that the legislature may abolish courts inferior to the Supreme Court and therefore may reorganize them territorially or otherwise thereby necessitating new appointments and commissions. Section 2, Article VIII of the Constitution vests in the National Assembly the power to define, prescribe and apportion the jurisdiction of the various courts, subject to certain limitations in the case of the Supreme Court. It is admitted that section 9 of the same article of the Constitution provides for the security of tenure of all the judges. The principles embodied in these two sections of the same article of the Constitution must be coordinated and harmonized. A mere enunciation of a principle will not decide actual cases and controversies of every sort. (Justice Holmes in Lochner vs. 44 New York, 198 U.S., 45; 49 Law. ed; 937)" justice Laurel continued: "I am not insensible to the argument that the National Assembly may abuse its power and move deliberately to defeat the constitutional provision guaranteeing security of tenure to all judges, But, is this the case? One need not share the view of Story, Miller and Tucker on the one hand, or the opinion of Cooley, Watson and Baldwin on the other, to realize that the application of a legal or constitutional principle is necessarily factual and circumstantial and that fixity of principle is the rigidity of the dead and the unprogressive. I do say, and emphatically, however, that cases may arise where the violation of the constitutional provision regarding security of tenure is palpable and plain, and that legislative power of reorganization may be sought to cloak an unconstitutional and evil purpose. When a case of that kind arises, it will be the time to make the hammer fall and heavily. But not until then. I am satisfied that, as to the particular point here discussed, the purpose was the fulfillment of what was considered a great public need by the legislative department and that Commonwealth Act No. 145 was not enacted purposely to affect adversely the tenure of judges or of any particular judge. Under these circumstances, I am for sustaining the power of the legislative department under the Constitution. To be sure, there was greater necessity for reorganization consequent upon the establishment of the new government than at the time Acts Nos. 2347 and 4007 were approved by the defunct Philippine Legislature, and although in the case of these two Acts there was an express provision providing for the vacation by the judges of their offices whereas in the case of Commonwealth Act No. 145 doubt is engendered by its silence, this doubt should be 45 resolved in favor of the valid exercise of the legislative power." 6. A few more words on the question of abolition. In the above-cited opinion of Justice Laurel in Zandueta, reference 46 47 was made to Act No. 2347 on the reorganization of the Courts of First Instance and to Act No. 4007 on the reorganization of all branches of the government, including the courts of first instance. In both of them, the then Courts of First Instance were replaced by new courts with the same appellation. As Justice Laurel pointed out, there was no question as to the fact of abolition. He was equally categorical as to Commonwealth Act No. 145, where also the system of the courts of first instance was provided for expressly. It was pointed out by Justice Laurel that the mere creation of an entirely new district of the same court is valid and constitutional. such conclusion flowing "from the fundamental proposition that the legislature may abolish courts inferior to the Supreme Court and therefore may 48 reorganize them territorially or otherwise thereby necessitating new appointments and commissions." The 49 50 challenged statute creates an intermediate appellate court, regional trial courts, metropolitan trial courts of the 51 52 53 national capital region, and other metropolitan trial courts, municipal trial courts in cities, as well as in 54 55 municipalities, and municipal circuit trial courts. There is even less reason then to doubt the fact that existing inferior courts were abolished. For the Batasang Pambansa, the establishment of such new inferior courts was the appropriate response to the grave and urgent problems that pressed for solution. Certainly, there could be differences of opinion as to the appropriate remedy. The choice, however, was for the Batasan to make, not for this Court, which 56 deals only with the question of power. It bears mentioning that in Brillo v. Eage this Court, in an unanimous opinion penned by the late Justice Diokno, citingZandueta v. De la Costa, ruled: "La segunda question que el recurrrido plantea es que la Carta de Tacloban ha abolido el puesto. Si efectivamente ha sido abolido el cargo, entonces ha quedado extinguido el derecho de recurente a ocuparlo y a cobrar el salario correspodiente. Mc Culley vs. State, 46 LRA, 567. El derecho de un juez de desempenarlo hasta los 70 aos de edad o se incapacite no priva 57 al Congreso de su facultad de abolir, fusionar o reorganizar juzgados no constitucionales." Nonetheless, such wellestablished principle was not held applicable to the situation there obtaining, the Charter of Tacloban City creating a city court in place of the former justice of the peace court. Thus: "Pero en el caso de autos el Juzgado de Tacloban 58 no ha sido abolido. Solo se le ha cambiado el nombre con el cambio de forma del gobierno local." The present case is anything but that. Petitioners did not and could not prove that the challenged statute was not within the bounds of legislative authority.

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7. This opinion then could very well stop at this point. The implementation of Batas Pambansa Blg. 129, concededly a task incumbent on the Executive, may give rise, however, to questions affecting a judiciary that should be kept independent. The all-embracing scope of the assailed legislation as far as all inferior courts from the Courts of Appeals to municipal courts are concerned, with the exception solely of the Sandiganbayan and the Court of Tax 59 Appeals gave rise, and understandably so, to misgivings as to its effect on such cherished Ideal. The first paragraph of the section on the transitory provision reads: "The provisions of this Act shall be immediately carried out in accordance with an Executive Order to be issued by the President. The Court of Appeals, the Courts of First Instance, the Circuit Criminal Courts, the Juvenile and Domestic Relations Courts, the Courts of Agrarian Relations, the City Courts, the Municipal Courts, and the Municipal Circuit Courts shall continue to function as presently constituted and organized, until the completion of the reorganization provided in this Act as declared by the President. Upon such declaration, the said courts shall be deemed automatically abolished and the incumbents thereof shall 60 cease to hold the office." There is all the more reason then why this Court has no choice but to inquire further into the allegation by petitioners that the security of tenure provision, an assurance of a judiciary free from extraneous influences, is thereby reduced to a barren form of words. The amended Constitution adheres even more clearly to the long-established tradition of a strong executive that antedated the 1935 Charter. As noted in the work of former ViceGovernor Hayden, a noted political scientist, President Claro M. Recto of the 1934 Convention, in his closing address, in stressing such a concept, categorically spoke of providing "an executive power which, subject to the fiscalization of the Assembly, and of public opinion, will not only know how to govern, but will actually govern, with a firm and steady hand, unembarrassed by vexatious interferences by other departments, or by unholy alliances with 61 this and that social group." The above excerpt was cited with approval by Justice Laurel in Planas v. 62 Gil. Moreover, under the 1981 Amendments, it may be affirmed that once again the principle of separation of 63 powers, to quote from the same jurist as ponente in Angara v. ElectoralCommission, "obtains not through express 64 provision but by actual division." The president, under Article VII, shall be the head of state and chief executive of 65 the Republic of the Philippines." Moreover, it is equally therein expressly provided that all the powers he possessed under the 1935 Constitution are once again vested in him unless the Batasang Pambansa provides 66 otherwise." Article VII of the 1935 Constitution speaks categorically: "The Executive power shall be vested in a 67 President of the Philippines." As originally framed, the 1973 Constitution created the position of President as the 68 "symbolic head of state." In addition, there was a provision for a Prime Minister as the head of government 69 exercising the executive power with the assistance of the Cabinet Clearly, a modified parliamentary system was established. In the light of the 1981 amendments though, this Court in Free Telephone Workers Union v. Minister of 70 Labor could state: "The adoption of certain aspects of a parliamentary system in the amended Constitution does 71 not alter its essentially presidential character." The retention, however, of the position of the Prime Minister with the Cabinet, a majority of the members of which shall come from the regional representatives of the Batasang Pambansa and the creation of an Executive Committee composed of the Prime Minister as Chairman and not more than fourteen other members at least half of whom shall be members of the Batasang Pambansa, clearly indicate the 72 evolving nature of the system of government that is now operative. What is equally apparent is that the strongest ties bind the executive and legislative departments. It is likewise undeniable that the Batasang Pambansa retains its full authority to enact whatever legislation may be necessary to carry out national policy as usually formulated in a 73 caucus of the majority party. It is understandable then why in Fortun v. Labang it was stressed that with the provision transferring to the Supreme Court administrative supervision over the Judiciary, there is a greater need "to preserve unimpaired the independence of the judiciary, especially so at present, where to all intents and purposes, 74 there is a fusion between the executive and the legislative branches." 8. To be more specific, petitioners contend that the abolition of the existing inferior courts collides with the security of tenure enjoyed by incumbent Justices and judges under Article X, Section 7 of the Constitution. There was a similar provision in the 1935 Constitution. It did not, however, go as far as conferring on this Tribunal the power to supervise 75 administratively inferior courts. Moreover, this Court is em powered "to discipline judges of inferior courts and, by a 76 vote of at least eight members, order their dismissal." Thus it possesses the competence to remove judges. Under 77 the Judiciary Act, it was the President who was vested with such power. Removal is, of course, to be distinguished from termination by virtue of the abolition of the office. There can be no tenure to a non-existent office. After the abolition, there is in law no occupant. In case of removal, there is an office with an occupant who would thereby lose his position. It is in that sense that from the standpoint of strict law, the question of any impairment of security of tenure does not arise. Nonetheless, for the incumbents of inferior courts abolished, the effect is one of separation. As to its effect, no distinction exists between removal and the abolition of the office. Realistically, it is devoid of significance. He ceases to be a member of the judiciary. In the implementation of the assailed legislation, therefore, it would be in accordance with accepted principles of constitutional construction that as far as incumbent justices and judges are concerned, this Court be consulted and that its view be accorded the fullest consideration. No fear need be entertained that there is a failure to accord respect to the basic principle that this Court does not render advisory opinions. No question of law is involved. If such were the case, certainly this Court could not have its say prior to the action taken by either of the two departments. Even then, it could do so but only by way of deciding a case where the matter has been put in issue. Neither is there any intrusion into who shall be appointed to the vacant positions created by the reorganization. That remains in the hands of the Executive to whom it properly belongs. There is no departure therefore from the tried and tested ways of judicial power, Rather what is sought to be achieved by this liberal interpretation is to preclude any plausibility to the charge that in the exercise of the conceded power of reorganizing tulle inferior courts, the power of removal of the present incumbents vested in this Tribunal is ignored or disregarded. The challenged Act would thus be free from any unconstitutional taint, even one not readily discernidble except to those predisposed to view it with distrust. Moreover, such a construction would be in accordance with the

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basic principle that in the choice of alternatives between one which would save and another which would invalidate a 78 statute, the former is to be preferred. There is an obvious way to do so. The principle that the Constitution enters into and forms part of every act to avoid any constitutional taint must be applied Nuez v. 79 Sandiganbayan, promulgated last January, has this relevant excerpt: "It is true that other Sections of the Decree could have been so worded as to avoid any constitutional objection. As of now, however, no ruling is called for. The view is given expression in the concurring and dissenting opinion of Justice Makasiar that in such a case to save the Decree from the direct fate of invalidity, they must be construed in such a way as to preclude any possible erosion on the powers vested in this Court by the Constitution. That is a proposition too plain to be committed. It commends itself 80 for approval." Nor would such a step be unprecedented. The Presidential Decree constituting Municipal Courts into Municipal Circuit Courts, specifically provides: "The Supreme Court shall carry out the provisions of this Decree 81 through implementing orders, on a province-to-province basis." It is true there is no such provision in this Act, but 82 the spirit that informs it should not be ignored in the Executive Order contemplated under its Section 44. Thus 83 Batas Pambansa Blg. 129 could stand the most rigorous test of constitutionality. 9. Nor is there anything novel in the concept that this Court is called upon to reconcile or harmonize constitutional provisions. To be specific, the Batasang Pambansa is expressly vested with the authority to reorganize inferior courts and in the process to abolish existing ones. As noted in the preceding paragraph, the termination of office of their occupants, as a necessary consequence of such abolition, is hardly distinguishable from the practical standpoint from removal, a power that is now vested in this Tribunal. It is of the essence of constitutionalism to assure that neither agency is precluded from acting within the boundaries of its conceded competence. That is why it has long been wellsettled under the constitutional system we have adopted that this Court cannot, whenever appropriate, avoid the task of reconciliation. As Justice Laurel put it so well in the previously cited Angara decision, while in the main, "the Constitution has blocked out with deft strokes and in bold lines, allotment of power to the executive, the legislative and the judicial departments of the government, the overlapping and interlacing of functions and duties between the several departments, however, sometimes makes it hard to say just where the one leaves off and the other 84 begins." It is well to recall another classic utterance from the same jurist, even more emphatic in its affirmation of such a view, moreover buttressed by one of those insights for which Holmes was so famous "The classical separation of government powers, whether viewed in the light of the political philosophy of Aristotle, Locke, or Motesquieu or of the postulations of Mabini, Madison, or Jefferson, is a relative theory of government. There is more truism and actuality in interdependence than in independence and separation of powers, for as observed by Justice Holmes in a case of Philippine origin, we cannot lay down 'with mathematical precision and divide the branches into water-tight compartments' not only because 'the great ordinances of the Constitution do not establish and divide fields of black and white but also because 'even the more specific of them are found to terminate in a penumbra shading gradually 85 from one extreme to the other.'" This too from Justice Tuazon, likewise expressing with force and clarity why the need for reconciliation or balancing is well-nigh unavodiable under the fundamental principle of separation of powers: "The constitutional structure is a complicated system, and overlappings of governmental functions are recognized, 86 unavoidable, and inherent necessities of governmental coordination." In the same way that the academe has noted the existence in constitutional litigation of right versus right, there are instances, and this is one of them, where, without this attempt at harmonizing the provisions in question, there could be a case of power against power. That we should avoid. 10. There are other objections raised but they pose no difficulty. Petitioners would characterize as an undue delegation of legislative power to the President the grant of authority to fix the compensation and the allowances of the Justices and judges thereafter appointed. A more careful reading of the challenged Batas Pambansa Blg. 129 ought to have cautioned them against raising such an issue. The language of the statute is quite clear. The questioned provisions reads as follows: "Intermediate Appellate Justices, Regional Trial Judges, Metropolitan Trial Judges, municipal Trial Judges, and Municipal Circuit Trial Judges shall receive such receive such compensation and allowances as may be authorized by the President along the guidelines set forth in Letter of Implementation No. 93 87 pursuant to Presidential Decree No. 985, as amended by Presidential Decree No. 1597." The existence of a standard is thus clear. The basic postulate that underlies the doctrine of non-delegation is that it is the legislative body which is entrusted with the competence to make laws and to alter and repeal them, the test being the 88 completeness of the statue in all its terms and provisions when enacted. As pointed out in Edu v. Ericta: "To avoid the taint of unlawful delegation, there must be a standard, which implies at the very least that the legislature itself determines matters of principle and lays down fundamental policy. Otherwise, the charge of complete abdication may be hard to repel. A standard thus defines legislative policy, marks its limits, maps out its boundaries and specifies the public agency to apply it. It indicates the circumstances under which the legislative command is to be effected. It is the criterion by which legislative purpose may be carried out. Thereafter, the executive or administrative office designated may in pursuance of the above guidelines promulgate supplemental rules and regulations. The standard may be either express or implied. If the former, the non-delegation objection is easily met. The standard though does not have to be spelled out specifically. It could be implied from the policy and purpose of the act considered as a 89 whole." The undeniably strong links that bind the executive and legislative departments under the amended Constitution assure that the framing of policies as well as their implementation can be accomplished with unity, promptitude, and efficiency. There is accuracy, therefore, to this observation in the Free Telephone Workers Union decision: "There is accordingly more receptivity to laws leaving to administrative and executive agencies the adoption of such means as may be necessary to effectuate a valid legislative purpose. It is worth noting that a highly-respected legal scholar, Professor Jaffe, as early as 1947, could speak of delegation as the 'dynamo of modern

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government.'" He warned against a "restrictive approach" which could be "a deterrent factor to much-needed 91 legislation." Further on this point from the same opinion" "The spectre of the non-delegation concept need not 92 haunt, therefore, party caucuses, cabinet sessions or legislative chambers." Another objection based on the absence in the statue of what petitioners refer to as a "definite time frame limitation" is equally bereft of merit. They ignore the categorical language of this provision: "The Supreme Court shall submit to the President, within thirty (30) days from the date of the effectivity of this act, a staffing pattern for all courts constituted pursuant to this Act which shall be the basis of the implementing order to be issued by the President in accordance with the immediately 93 succeeding section." The first sentence of the next section is even more categorical: "The provisions of this Act 94 shall be immediately carried out in accordance with an Executive Order to be issued by the President." Certainly petitioners cannot be heard to argue that the President is insensible to his constitutional duty to take care that the 95 laws be faithfully executed. In the meanwhile, the existing inferior courts affected continue functioning as before, "until the completion of the reorganization provided in this Act as declared by the President. Upon such declaration, the said courts shall be deemed automatically abolished and the incumbents thereof shall cease to hold 96 office." There is no ambiguity. The incumbents of the courts thus automatically abolished "shall cease to hold office." No fear need be entertained by incumbents whose length of service, quality of performance, and clean record 97 98 justify their being named anew, in legal contemplation without any interruption in the continuity of their service. It is equally reasonable to assume that from the ranks of lawyers, either in the government service, private practice, or law professors will come the new appointees. In the event that in certain cases a little more time is necessary in the appraisal of whether or not certain incumbents deserve reappointment, it is not from their standpoint undesirable. Rather, it would be a reaffirmation of the good faith that will characterize its implementation by the Executive. There is pertinence to this observation of Justice Holmes that even acceptance of the generalization that courts ordinarily should not supply omissions in a law, a generalization qualified as earlier shown by the principle that to save a statute that could be done, "there is no canon against using common sense in construing laws as saying what they obviously 99 mean." Where then is the unconstitutional flaw 11. On the morning of the hearing of this petition on September 8, 1981, petitioners sought to have the writer of this opinion and Justices Ramon C. Aquino and Ameurfina Melencio-Herrera disqualified because the first-named was the chairman and the other two, members of the Committee on Judicial Reorganization. At the hearing, the motion was denied. It was made clear then and there that not one of the three members of the Court had any hand in the framing or in the discussion of Batas Pambansa Blg. 129. They were not consulted. They did not testify. The 100 challenged legislation is entirely the product of the efforts of the legislative body. Their work was limited, as set forth in the Executive Order, to submitting alternative plan for reorganization. That is more in the nature of scholarly studies. That the undertook. There could be no possible objection to such activity. Ever since 1973, this Tribunal has had administrative supervision over interior courts. It has had the opportunity to inform itself as to the way judicial business is conducted and how it may be improved. Even prior to the 1973 Constitution, it is the recollection of the writer of this opinion that either the then Chairman or members of the Committee on Justice of the then Senate of the 101 Philippines consulted members of the Court in drafting proposed legislation affecting the judiciary. It is not inappropriate to cite this excerpt from an article in the 1975 Supreme Court Review: "In the twentieth century the Chief Justice of the United States has played a leading part in judicial reform. A variety of conditions have been responsible for the development of this role, and foremost among them has been the creation of explicit institutional 102 structures designed to facilitate reform." Also: "Thus the Chief Justice cannot avoid exposure to and direct involvement in judicial reform at the federal level and, to the extent issues of judicial federalism arise, at the state 103 level as well." 12. It is a cardinal article of faith of our constitutional regime that it is the people who are endowed with rights, to secure which a government is instituted. Acting as it does through public officials, it has to grant them either expressly or impliedly certain powers. Those they exercise not for their own benefit but for the body politic. The Constitution 104 does not speak in the language of ambiguity: "A public office is a public trust." That is more than a moral adjuration It is a legal imperative. The law may vest in a public official certain rights. It does so to enable them to perform his functions and fulfill his responsibilities more efficiently. It is from that standpoint that the security of tenure provision to assure judicial independence is to be viewed. It is an added guarantee that justices and judges can administer justice undeterred by any fear of reprisal or untoward consequence. Their judgments then are even more likely to be inspired solely by their knowledge of the law and the dictates of their conscience, free from the corrupting influence of base or unworthy motives. The independence of which they are assured is impressed with a significance transcending that of a purely personal right. As thus viewed, it is not solely for their welfare. The challenged legislation Thus subject d to the most rigorous scrutiny by this Tribunal, lest by lack of due care and circumspection, it allow the erosion of that Ideal so firmly embedded in the national consciousness There is this farther thought to consider. independence in thought and action necessarily is rooted in one's mind and heart. As emphasized by 105 former Chief Justice Paras in Ocampo v. Secretary of Justice, there is no surer guarantee of judicial independence than the God-given character and fitness of those appointed to the Bench. The judges may be guaranteed a fixed tenure of office during good behavior, but if they are of such stuff as allows them to be subservient to one administration after another, or to cater to the wishes of one litigant after another, the independence of the judiciary will be nothing more than a myth or an empty Ideal. Our judges, we are confident, can be of the type of Lord Coke, regardless or in spite of the power of Congress we do not say unlimited but as herein exercised to reorganize 106 inferior courts." That is to recall one of the greatest Common Law jurists, who at the cost of his office made clear that he would not just blindly obey the King's order but "will do what becomes [him] as a judge." So it was pointed out

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in the first leading case stressing the independence of the judiciary, Borromeo v. Mariano, The ponencia of Justice Malcolm Identified good judges with "men who have a mastery of the principles of law, who discharge their duties in accordance with law, who are permitted to perform the duties of the office undeterred by outside influence, and who are independent and self-respecting human units in a judicial system equal and coordinate to the other two 108 departments of government." There is no reason to assume that the failure of this suit to annul Batas Pambansa Blg. 129 would be attended with deleterious consequences to the administration of justice. It does not follow that the abolition in good faith of the existing inferior courts except the Sandiganbayan and the Court of Tax Appeals and the creation of new ones will result in a judiciary unable or unwilling to discharge with independence its solemn duty or one recreant to the trust reposed in it. Nor should there be any fear that less than good faith will attend the exercise be of the appointing power vested in the Executive. It cannot be denied that an independent and efficient judiciary is something to the credit of any administration. Well and truly has it been said that the fundamental principle of separation of powers assumes, and justifiably so, that the three departments are as one in their determination to pursue the Ideals and aspirations and to fulfilling the hopes of the sovereign people as expressed in the Constitution. There is wisdom as well as validity to this pronouncement of Justice Malcolm in Manila Electric Co. v. Pasay 109 Transportation Company, a decision promulgated almost half a century ago: "Just as the Supreme Court, as the guardian of constitutional rights, should not sanction usurpations by any other department or the government, so should it as strictly confine its own sphere of influence to the powers expressly or by implication conferred on it by the 110 Organic Act." To that basic postulate underlying our constitutional system, this Court remains committed. WHEREFORE, the unconstitutionality of Batas Pambansa Blg. 129 not having been shown, this petition is dismissed. No costs. Makasiar and Escolin, JJ., concur. Concepcion, Jr., concur in the result.

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Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-27811 November 17, 1967

LACSON-MAGALLANES CO., INC., plaintiff-appellant, vs. JOSE PAO, HON. JUAN PAJO, in his capacity as Executive Secretary, and HON. JUAN DE G. RODRIGUEZ, in his capacity as Secretary of Agriculture and Natural Resources, defendants-appellees. Leopoldo M. Abellera for plaintiff-appellant. Victorio Advincula for defendant Jose Pao. Office of the Solicitor General for defendant Secretary of Agriculture and Natural Resources and Executive Secretary. SANCHEZ, J.: The question May the Executive Secretary, acting by authority of the President, reverse a decision of the Director of Lands that had been affirmed by the Executive Secretary of Agriculture and Natural Resources yielded an 1 affirmative answer from the lower court. Hence, this appeal certified to this Court by the Court of Appeals upon the provisions of Sections 17 and 31 of the Judiciary Act of 1948, as amended. The undisputed controlling facts are: In 1932, Jose Magallanes was a permittee and actual occupant of a 1,103-hectare pasture land situated in Tamlangon, Municipality of Bansalan, Province of Davao. On January 9, 1953, Magallanes ceded his rights and interests to a portion (392,7569 hectares) of the above public land to plaintiff. On April 13, 1954, the portion Magallanes ceded to plaintiff was officially released from the forest zone as pasture land and declared agricultural land. On January 26, 1955, Jose Pao and nineteen other claimants applied for the purchase of ninety hectares of the released area. On March 29, 1955, plaintiff corporation in turn filed its own sales application covering the entire released area. This was protested by Jose Pao and his nineteen companions upon the averment that they are actual occupants of the part thereof covered by their own sales application. The Director of Lands, following an investigation of the conflict, rendered a decision on July 31, 1956 giving due course to the application of plaintiff corporation, and dismissing the claim of Jose Pao and his companions. A move to reconsider failed. On July 5, 1957, the Secretary of Agriculture and Natural Resources on appeal by Jose Pao for himself and his companions held that the appeal was without merit and dismissed the same. The case was elevated to the President of the Philippines. On June 25, 1958, Executive Secretary Juan Pajo, "[b]y authority of the President" decided the controversy, modified the decision of the Director of Lands as affirmed by the Secretary of Agriculture and Natural Resources, and (1) declared that "it would be for the public interest that appellants, who are mostly landless farmers who depend on the land for their existence, be allocated that portion on which they have made improvements;" and (2) directed that the controverted land (northern portion of Block I, LC Map 1749, Project No. 27, of Bansalan, Davao, with Latian River as the dividing line) "should be subdivided into lots of convenient sizes and allocated to actual occupants, without prejudice to the corporation's right to reimbursement for the cost of surveying this portion." It may be well to state, at
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this point, that the decision just mentioned, signed by the Executive Secretary, was planted upon the facts as found in said decision. Plaintiff corporation took the foregoing decision to the Court of First Instance praying that judgment be rendered declaring: (1) that the decision of the Secretary of Agriculture and Natural Resources has full force and effect; and (2) that the decision of the Executive Secretary is contrary to law and of no legal force and effect. And now subject of this appeal is the judgment of the court a quo dismissing plaintiff's case. 1. Plaintiff's mainstay is Section 4 of Commonwealth Act 141. The precept there is that decisions of the Director of Lands "as to questions of facts shall be conclusive when approved" by the Secretary of Agriculture and Natural Resources. Plaintiff's trenchment claim is that this statute is controlling not only upon courts but also upon the President. Plaintiff's position is incorrect. The President's duty to execute the law is of constitutional origin. So, too, is his control 4 of all executive departments. Thus it is, that department heads are men of his confidence. His is the power to appoint them; his, too, is the privilege to dismiss them at pleasure. Naturally, he controls and directs their acts. Implicit then is his authority to go over, confirm, modify or reverse the action taken by his department secretaries. In this context, it may not be said that the President cannot rule on the correctness of a decision of a department secretary. Particularly in reference to the decisions of the Director of Lands, as affirmed by the Secretary of Agriculture and 5 Natural Resources, the standard practice is to allow appeals from such decisions to the Office of the President. This Court has recognized this practice in several cases. In one, the decision of the Lands Director as approved by the 6 Secretary was considered superseded by that of the President's appeal. In other cases, failure to pursue or resort to this last remedy of appeal was considered a fatal defect, warranting dismissal of the case, for non-exhaustion of all 7 administrative remedies. Parenthetically, it may be stated that the right to appeal to the President reposes upon the President's power of 8 control over the executive departments. And control simply means "the power of an officer to alter or modify or nullify or set aside what a subordinate officer had done in the performance of his duties and to substitute the judgment of 9 the former for that of the latter." This unquestionably negates the assertion that the President cannot undo an act of his department secretary. 2. Plaintiff next submits that the decision of the Executive Secretary herein is an undue delegation of power. The Constitution, petitioner asserts, does not contain any provision whereby the presidential power of control may be delegated to the Executive Secretary. It is argued that it is the constitutional duty of the President to act personally upon the matter. It is correct to say that constitutional powers there are which the President must exercise in person. Not as correct, however, is it so say that the Chief Executive may not delegate to his Executive Secretary acts which the Constitution 11 does not command that he perform in person. Reason is not wanting for this view. The President is not expected to perform in person all the multifarious executive and administrative functions. The Office of the Executive Secretary is an auxiliary unit which assists the President. The rule which has thus gained recognition is that "under our constitutional setup the Executive Secretary who acts for and in behalf and by authority of the President has an undisputed jurisdiction to affirm, modify, or even reverse any order" that the Secretary of Agriculture and Natural 12 Resources, including the Director of Lands, may issue. 3. But plaintiff underscores the fact that the Executive Secretary is equal in rank to the other department heads, no higher than anyone of them. From this, plaintiff carves the argument that one department head, on the pretext that he is an alter ego of the President, cannot intrude into the zone of action allocated to another department secretary. This argument betrays lack of appreciation of the fact that where, as in this case, the Executive Secretary acts "[b]y authority of the President," his decision is that of the President's. Such decision is to be given full faith and credit by our courts. The assumed authority of the Executive Secretary is to be accepted. For, only the President may rightfully say that the Executive Secretary is not authorized to do so. Therefore, unless the action taken is "disapproved or 13 reprobated by the Chief Executive," that remains the act of the Chief Executive, and cannot be successfully 14 assailed. No such disapproval or reprobation is even intimated in the record of this case. For the reasons given, the judgment under review is hereby affirmed. Costs against plaintiff. So ordered. Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P., Zaldivar, Castro and Angeles, JJ., concur.
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Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-10759 May 20, 1957

LEONARDO MONTES, petitioner-appellant, vs. THE CIVIL SERVICE BOARD OF APPEALS and THE SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS, respondents-appellees. Gonzalo U. Garcia for appellant. Office of the Solicitor General Ambrosia Padilla and Solicitor Eriberto D. Ignacio for appellees. LABRADOR, J.: Petitioner-appellant was on and before January, 1953, a watchman of the Floating Equipment Section, Ports and Harbors Division, Bureau of Public Works. In Administrative Case No. R-8182 instituted against him for negligence in the performance of duty (Dredge No. 6 under him had sunk because of water in the bilge, which he did not pump out while under his care), the Commissioner of Civil Service exonerated him, on the basis of findings made by a committee. But the Civil Service Board of Appeals modified the decision, finding petitioner guilty of contributory negligence in not pumping the water from the bilge, and ordered that he be considered resigned effective his last day of duty with pay, without prejudice to reinstatement at the discretion of the appointing officer. Petitioner filed an action in the Court of First Instance of Manila to review the decision, but the said court dismissed the action on a motion to dismiss, on the ground that petitioner had not exhausted all his administrative remedies before he instituted the action. The case is now before us on appeal against the order of dismissal. The law which was applied by the lower court is Section 2 of Commonwealth Act No. 598, which provides: The Civil Service Board of Appeals shall have the power and authority to hear and decide all administrative cases brought before it on appeal, and its decisions in such cases shall be final, unless revised or modified by the President of the Philippines. It is urged on the appeal that there is no duty imposed on a party against whom a decision has been rendered by the Civil Service Board of Appeals to appeal to the President, and that the tendency of the courts has been not to subject the decision of the President to judicial review. It is further argued that if decisions of the Auditor General may be appealed to the courts, those of the Civil Service Board of Appeals need not be acted upon by the President also, before recourse may be had to the courts because such a courts. It is also argued that if a case is appealed to the President, his action should be final and not reviewable by the courts because such a course of action, would be derogatory to the high office of the President. The objection to a judicial review of a Presidential act arises from a failure to recognize the most important principle in our system of government, i.e., the separation of powers into three co-equal departments, the executive, the legislative and the judicial, each supreme within its own assigned powers and duties. When a presidential act is challenged before the courts of justice, it is not to be implied therefrom that the Executive is being made subject and subordinate to the courts. The legality of his acts are under judicial review, not because the Executive is inferior to the courts, but because the law is above the Chief Executive himself, and the courts seek only to interpret, apply or implement it (the law). A judicial review of the President's decision on a case of an employee decided by the Civil Service Board of Appeals should be viewed in this light and the bringing of the case to the courts should be governed by the same principles as govern the judicial review of all administrative acts of all administrative officers. The doctrine of exhaustion, of administrative remedies requires where an administrative remedy is provided by statute, as in this case, relief must be sought by exhausting this remedy before the courts will act. (42 Am. Jur. 580581.) The doctrine is a device based on considerations of comity and convenience. If a remedy is still available within the administrative machinery, this should be resorted to before resort can be made to the courts, not only to give the administrative agency opportunity to decide the matter by itself correctly, but also to prevent unnecessary and premature resort to the courts. (Ibid.) Section 2 of Commonwealth Act No. 598 above-quoted is a clear expression of the policy or principle of exhaustion of administrative remedies. If the President, under whom the Civil Service directly falls in our administrative system as

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head of the executive department, may be able to grant the remedy that petitioner pursues, reasons of comity and orderly procedure demand that resort be made to him before recourse can be had to the courts. We have applied this same rule in De la Paz, vs. Alcaraz, et al., 99 Phil., 130, 52 Off. Gaz., 3037, Miguel et al., vs. Reyes, et al., 93 Phil., 542, and especially in Ang Tuan Kai & Co. vs. The Import Control Commission, 91 Phil., 143, and we are loathe to deviate from the rule we have consistently followed, especially in view of the express provision of the law (section 2, Commonwealth Act No. 598). The judgment appealed from is affirmed, with costs against appellant. Bengzon, Padilla, Montemayor, Reyes, A., Bautista Angelo, Concepcion, Reyes, J.B.L., Endencia and Felix, JJ.,concur.

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Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 151908 August 12, 2003

SMART COMMUNICATIONS, INC. (SMART) and PILIPINO TELEPHONE CORPORATION (PILTEL), petitioners, vs. NATIONAL TELECOMMUNICATIONS COMMISSION (NTC), respondent. x---------------------------------------------------------x G.R. No. 152063 August 12, 2003 GLOBE TELECOM, INC. (GLOBE) and ISLA COMMUNICATIONS CO., INC. (ISLACOM), petitioners, vs. COURT OF APPEALS (The Former 6th Division) and the NATIONAL TELECOMMUNICATIONS COMMISSION, respondents. YNARES-SANTIAGO, J.: Pursuant to its rule-making and regulatory powers, the National Telecommunications Commission (NTC) issued on June 16, 2000 Memorandum Circular No. 13-6-2000, promulgating rules and regulations on the billing of telecommunications services. Among its pertinent provisions are the following: (1) The billing statements shall be received by the subscriber of the telephone service not later than 30 days from the end of each billing cycle. In case the statement is received beyond this period, the subscriber shall have a specified grace period within which to pay the bill and the public telecommunications entity (PTEs) shall not be allowed to disconnect the service within the grace period. (2) There shall be no charge for calls that are diverted to a voice mailbox, voice prompt, recorded message or similar facility excluding the customer's own equipment. (3) PTEs shall verify the identification and address of each purchaser of prepaid SIM cards. Prepaid call cards and SIM cards shall be valid for at least 2 years from the date of first use. Holders of prepaid SIM cards shall be given 45 days from the date the prepaid SIM card is fully consumed but not beyond 2 years and 45 days from date of first use to replenish the SIM card, otherwise the SIM card shall be rendered invalid. The validity of an invalid SIM card, however, shall be installed upon request of the customer at no additional charge except the presentation of a valid prepaid call card. (4) Subscribers shall be updated of the remaining value of their cards before the start of every call using the cards. (5) The unit of billing for the cellular mobile telephone service whether postpaid or prepaid shall be reduced from 1 minute per pulse to 6 seconds per pulse. The authorized rates per minute shall thus be divided by 1 10. The Memorandum Circular provided that it shall take effect 15 days after its publication in a newspaper of general circulation and three certified true copies thereof furnished the UP Law Center. It was published in the newspaper, 2 The Philippine Star, on June 22, 2000. Meanwhile, the provisions of the Memorandum Circular pertaining to the sale and use of prepaid cards and the unit of billing for cellular mobile telephone service took effect 90 days from the effectivity of the Memorandum Circular. On August 30, 2000, the NTC issued a Memorandum to all cellular mobile telephone service (CMTS) operators which contained measures to minimize if not totally eliminate the incidence of stealing of cellular phone units. The Memorandum directed CMTS operators to: a. strictly comply with Section B(1) of MC 13-6-2000 requiring the presentation and verification of the identity and addresses of prepaid SIM card customers;

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b. require all your respective prepaid SIM cards dealers to comply with Section B(1) of MC 13-6-2000; c. deny acceptance to your respective networks prepaid and/or postpaid customers using stolen cellphone units or cellphone units registered to somebody other than the applicant when properly informed of all information relative to the stolen cellphone units; d. share all necessary information of stolen cellphone units to all other CMTS operators in order to prevent the use of stolen cellphone units; and e. require all your existing prepaid SIM card customers to register and present valid identification cards. This was followed by another Memorandum dated October 6, 2000 addressed to all public telecommunications entities, which reads: This is to remind you that the validity of all prepaid cards sold on 07 October 2000 and beyond shall be valid for at least two (2) years from date of first use pursuant to MC 13-6-2000. In addition, all CMTS operators are reminded that all SIM packs used by subscribers of prepaid cards sold on 07 October 2000 and beyond shall be valid for at least two (2) years from date of first use. Also, the billing unit shall be on a six (6) seconds pulse effective 07 October 2000. For strict compliance.
4 3

On October 20, 2000, petitioners Isla Communications Co., Inc. and Pilipino Telephone Corporation filed against the National Telecommunications Commission, Commissioner Joseph A. Santiago, Deputy Commissioner Aurelio M. Umali and Deputy Commissioner Nestor C. Dacanay, an action for declaration of nullity of NTC Memorandum Circular No. 13-6-2000 (the Billing Circular) and the NTC Memorandum dated October 6, 2000, with prayer for the issuance of a writ of preliminary injunction and temporary restraining order. The complaint was docketed as Civil 5 Case No. Q-00-42221 at the Regional Trial Court of Quezon City, Branch 77. Petitioners Islacom and Piltel alleged, inter alia, that the NTC has no jurisdiction to regulate the sale of consumer goods such as the prepaid call cards since such jurisdiction belongs to the Department of Trade and Industry under the Consumer Act of the Philippines; that the Billing Circular is oppressive, confiscatory and violative of the constitutional prohibition against deprivation of property without due process of law; that the Circular will result in the impairment of the viability of the prepaid cellular service by unduly prolonging the validity and expiration of the prepaid SIM and call cards; and that the requirements of identification of prepaid card buyers and call balance announcement are unreasonable. Hence, they prayed that the Billing Circular be declared null and void ab initio. Soon thereafter, petitioners Globe Telecom, Inc and Smart Communications, Inc. filed a joint Motion for Leave to 6 Intervene and to Admit Complaint-in-Intervention. This was granted by the trial court. On October 27, 2000, the trial court issued a temporary restraining order enjoining the NTC from implementing 7 Memorandum Circular No. 13-6-2000 and the Memorandum dated October 6, 2000. In the meantime, respondent NTC and its co-defendants filed a motion to dismiss the case on the ground of petitioners' failure to exhaust administrative remedies. Subsequently, after hearing petitioners' application for preliminary injunction as well as respondent's motion to dismiss, the trial court issued on November 20, 2000 an Order, the dispositive portion of which reads: WHEREFORE, premises considered, the defendants' motion to dismiss is hereby denied for lack of merit. The plaintiffs' application for the issuance of a writ of preliminary injunction is hereby granted. Accordingly, the defendants are hereby enjoined from implementing NTC Memorandum Circular 13-6-2000 and the NTC Memorandum, dated October 6, 2000, pending the issuance and finality of the decision in this case. The plaintiffs and intervenors are, however, required to file a bond in the sum of FIVE HUNDRED THOUSAND PESOS (P500,000.00), Philippine currency. SO ORDERED.
8

Defendants filed a motion for reconsideration, which was denied in an Order dated February 1, 2001.

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Respondent NTC thus filed a special civil action for certiorari and prohibition with the Court of Appeals, which was docketed as CA-G.R. SP. No. 64274. On October 9, 2001, a decision was rendered, the decretal portion of which reads: WHEREFORE, premises considered, the instant petition for certiorari and prohibition is GRANTED, in that, the order of the court a quo denying the petitioner's motion to dismiss as well as the order of the court a quogranting the private respondents' prayer for a writ of preliminary injunction, and the writ of preliminary injunction issued thereby, are hereby ANNULLED and SET ASIDE. The private respondents' complaint and complaint-in-intervention below are hereby DISMISSED, without prejudice to the referral of the private respondents' grievances and disputes on the assailed issuances of the NTC with the said agency. SO ORDERED.
10

Petitioners' motions for reconsideration were denied in a Resolution dated January 10, 2002 for lack of merit.

11

Hence, the instant petition for review filed by Smart and Piltel, which was docketed as G.R. No. 151908, anchored on the following grounds: A. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE NATIONAL TELECOMMUNICATIONS COMMISSION (NTC) AND NOT THE REGULAR COURTS HAS JURISDICTION OVER THE CASE. B. THE HONORABLE COURT OF APPEALS ALSO GRAVELY ERRED IN HOLDING THAT THE PRIVATE RESPONDENTS FAILED TO EXHAUST AN AVAILABLE ADMINISTRATIVE REMEDY. C. THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE BILLING CIRCULAR ISSUED BY THE RESPONDENT NTC IS UNCONSTITUTIONAL AND CONTRARY TO LAW AND PUBLIC POLICY. D. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PRIVATE RESPONDENTS FAILED TO SHOW THEIR CLEAR POSITIVE RIGHT TO WARRANT THE ISSUANCE OF A WRIT OF 12 PRELIMINARY INJUNCTION. Likewise, Globe and Islacom filed a petition for review, docketed as G.R. No. 152063, assigning the following errors: 1. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED BECAUSE THE DOCTRINES OF PRIMARY JURISDICTION AND EXHAUSTION OF ADMINISTRATIVE REMEDIES DO NOT APPLY SINCE THE INSTANT CASE IS FOR LEGAL NULLIFICATION (BECAUSE OF LEGAL INFIRMITIES AND VIOLATIONS OF LAW) OF A PURELY ADMINISTRATIVE REGULATION PROMULGATED BY AN AGENCY IN THE EXERCISE OF ITS RULE MAKING POWERS AND INVOLVES ONLY QUESTIONS OF LAW. 2. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED BECAUSE THE DOCTRINE ON EXHAUSTION OF ADMINISTRATIVE REMEDIES DOES NOT APPLY WHEN THE QUESTIONS RAISED ARE PURELY LEGAL QUESTIONS. 3. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED BECAUSE THE DOCTRINE OF EXHAUSTION OF ADMINISTRATIVE REMEDIES DOES NOT APPLY WHERE THE ADMINISTRATIVE ACTION IS COMPLETE AND EFFECTIVE, WHEN THERE IS NO OTHER REMEDY, AND THE PETITIONER STANDS TO SUFFER GRAVE AND IRREPARABLE INJURY. 4. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED BECAUSE PETITIONERS IN FACT EXHAUSTED ALL ADMINISTRATIVE REMEDIES AVAILABLE TO THEM.

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5. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED IN ISSUING ITS QUESTIONED 13 RULINGS IN THIS CASE BECAUSE GLOBE AND ISLA HAVE A CLEAR RIGHT TO AN INJUNCTION. The two petitions were consolidated in a Resolution dated February 17, 2003.
14

On March 24, 2003, the petitions were given due course and the parties were required to submit their respective 15 memoranda. We find merit in the petitions. Administrative agencies possess quasi-legislative or rule-making powers and quasi-judicial or administrative adjudicatory powers. Quasi-legislative or rule-making power is the power to make rules and regulations which results in delegated legislation that is within the confines of the granting statute and the doctrine of non-delegability and 16 separability of powers. The rules and regulations that administrative agencies promulgate, which are the product of a delegated legislative power to create new and additional legal provisions that have the effect of law, should be within the scope of the statutory authority granted by the legislature to the administrative agency. It is required that the regulation be germane to the objects and purposes of the law, and be not in contradiction to, but in conformity with, the standards 17 prescribed by law. They must conform to and be consistent with the provisions of the enabling statute in order for such rule or regulation to be valid. Constitutional and statutory provisions control with respect to what rules and regulations may be promulgated by an administrative body, as well as with respect to what fields are subject to regulation by it. It may not make rules and regulations which are inconsistent with the provisions of the Constitution or a statute, particularly the statute it is administering or which created it, or which are in derogation of, or defeat, the 18 purpose of a statute. In case of conflict between a statute and an administrative order, the former must prevail. Not to be confused with the quasi-legislative or rule-making power of an administrative agency is its quasi-judicial or administrative adjudicatory power. This is the power to hear and determine questions of fact to which the legislative policy is to apply and to decide in accordance with the standards laid down by the law itself in enforcing and administering the same law. 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 19 official action and exercise of discretion in a judicial nature. In questioning the validity or constitutionality of a rule or regulation issued by an administrative agency, a party need not exhaust administrative remedies before going to court. This principle applies only where the act of the administrative agency concerned was performed pursuant to its quasi-judicial function, and not when the assailed act pertained to its rule-making or quasi-legislative power. In Association of Philippine Coconut Dessicators v. Philippine 20 Coconut Authority, it was held: The rule of requiring exhaustion of administrative remedies before a party may seek judicial review, so strenuously urged by the Solicitor General on behalf of respondent, has obviously no application here. The resolution in question was issued by the PCA in the exercise of its rule- making or legislative power. However, only judicial review of decisions of administrative agencies made in the exercise of their quasi-judicial function is subject to the exhaustion doctrine. Even assuming arguendo that the principle of exhaustion of administrative remedies apply in this case, the records reveal that petitioners sufficiently complied with this requirement. Even during the drafting and deliberation stages leading to the issuance of Memorandum Circular No. 13-6-2000, petitioners were able to register their protests to the proposed billing guidelines. They submitted their respective position papers setting forth their objections and 21 submitting proposed schemes for the billing circular. After the same was issued, petitioners wrote successive letters 22 23 dated July 3, 2000 and July 5, 2000, asking for the suspension and reconsideration of the so-called Billing Circular. These letters were not acted upon until October 6, 2000, when respondent NTC issued the second assailed Memorandum implementing certain provisions of the Billing Circular. This was taken by petitioners as a clear denial of the requests contained in their previous letters, thus prompting them to seek judicial relief. In like manner, the doctrine of primary jurisdiction applies only where the administrative agency exercises its quasijudicial or adjudicatory function. Thus, in cases involving specialized disputes, the practice has been to refer the same to an administrative agency of special competence pursuant to the doctrine of primary jurisdiction. The courts will not determine a controversy involving a question which is within the jurisdiction of the administrative tribunal prior to the resolution of that question by the administrative tribunal, where the question demands the exercise of sound administrative discretion requiring the special knowledge, experience and services of the administrative tribunal to

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determine technical and intricate matters of fact, and a uniformity of ruling is essential to comply with the premises of the regulatory statute administered. The objective of the doctrine of primary jurisdiction is to guide a court in determining whether it should refrain from exercising its jurisdiction until after an administrative agency has determined some question or some aspect of some question arising in the proceeding before the court. It applies where the claim is originally cognizable in the courts and comes into play whenever enforcement of the claim requires the resolution of issues which, under a regulatory scheme, has been placed within the special competence of an administrative body; in such case, the judicial process is suspended pending referral of such issues to the 24 administrative body for its view. However, where what is assailed is the validity or constitutionality of a rule or regulation issued by the administrative agency in the performance of its quasi-legislative function, the regular courts have jurisdiction to pass upon the same. The determination of whether a specific rule or set of rules issued by an administrative agency contravenes the law or the constitution is within the jurisdiction of the regular courts. Indeed, the Constitution vests the power of judicial review or the power to declare a law, treaty, international or executive agreement, presidential decree, order, 25 instruction, ordinance, or regulation in the courts, including the regional trial courts. This is within the scope of judicial power, which includes the authority of the courts to determine in an appropriate action the validity of the acts 26 of the political departments. Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of 27 the Government. In the case at bar, the issuance by the NTC of Memorandum Circular No. 13-6-2000 and its Memorandum dated October 6, 2000 was pursuant to its quasi-legislative or rule-making power. As such, petitioners were justified in invoking the judicial power of the Regional Trial Court to assail the constitutionality and validity of the said issuances. 28 In Drilon v. Lim, it was held: We stress at the outset that the lower court had jurisdiction to consider the constitutionality of Section 187, this authority being embraced in the general definition of the judicial power to determine what are the valid and binding laws by the criterion of their conformity to the fundamental law. Specifically, B.P. 129 vests in the regional trial courts jurisdiction over all civil cases in which the subject of the litigation is incapable of pecuniary estimation, even as the accused in a criminal action has the right to question in his defense the constitutionality of a law he is charged with violating and of the proceedings taken against him, particularly as they contravene the Bill of Rights. Moreover, Article X, Section 5(2), of the Constitution vests in the Supreme Court appellate jurisdiction over final judgments and orders of lower courts in all cases in which the constitutionality or validity of any treaty, international or executive agreement, law, presidential decree, 29 proclamation, order, instruction, ordinance, or regulation is in question. In their complaint before the Regional Trial Court, petitioners averred that the Circular contravened Civil Code provisions on sales and violated the constitutional prohibition against the deprivation of property without due process of law. These are within the competence of the trial judge. Contrary to the finding of the Court of Appeals, the issues raised in the complaint do not entail highly technical matters. Rather, what is required of the judge who will resolve this issue is a basic familiarity with the workings of the cellular telephone service, including prepaid SIM and call cards and this is judicially known to be within the knowledge of a good percentage of our population and expertise in fundamental principles of civil law and the Constitution. Hence, the Regional Trial Court has jurisdiction to hear and decide Civil Case No. Q-00-42221. The Court of Appeals erred in setting aside the orders of the trial court and in dismissing the case. WHEREFORE, in view of the foregoing, the consolidated petitions are GRANTED. The decision of the Court of Appeals in CA-G.R. SP No. 64274 dated October 9, 2001 and its Resolution dated January 10, 2002 are REVERSED and SET ASIDE. The Order dated November 20, 2000 of the Regional Trial Court of Quezon City, Branch 77, in Civil Case No. Q-00-42221 is REINSTATED. This case is REMANDED to the court a quo for continuation of the proceedings. SO ORDERED. Davide, Jr., C.J., Vitug, and Carpio, JJ., concur. Azcuna, J., took no part.

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Republic of the Philippines SUPREME COURT Manila SPECIAL FIRST DIVISION G.R. No. 112526 March 16, 2005

STA. ROSA REALTY DEVELOPMENT CORPORATION, Petitioner, vs. JUAN B. AMANTE, FRANCISCO L. ANDAL, LUCIA ANDAL, ANDREA P. AYENDE, LETICIA P. BALAT, FILOMENA B. BATINO, ANICETO A. BURGOS, JAIME A. BURGOS, FLORENCIA CANUBAS, LORETO A. CANUBAS, MAXIMO A. CANUBAS, REYNALDO CARINGAL, QUIRINO C. CASALME, BENIGNO A. CRUZAT, ELINO A. CRUZAT, GREGORIO F. CRUZAT, RUFINO C. CRUZAT, SERGIO CRUZAT, SEVERINO F. CRUZAT, VICTORIA DE SAGUN, SEVERINO DE SAGUN, FELICISIMO A. GONZALES, FRANCISCO A. GONZALES, GREGORIO A. GONZALES, LEODEGARIO N. GONZALES, PASCUAL P. GONZALES, ROLANDO A. GONZALES, FRANCISCO A. JUANGCO, GERVACIO A. JUANGCO, LOURDES U. LUNA, ANSELMO M. MANDANAS, CRISANTO MANDANAS, EMILIO M. MANDANAS, GREGORIO A. MANDANAS, MARIO G. MANDANAS, TEODORO MANDANAS, CONSTANCIO B. MARQUEZ, EUGENIO B. MARQUEZ, ARMANDO P. MATIENZO, DANIEL D. MATIENZO, MAXIMINO MATIENZO, PACENCIA P. MATIENZO, DOROTEA L. PANGANIBAN, JUANITO T. PEREZ, MARIANITO T. PEREZ, SEVERO M. PEREZ, INOCENCIA S. PASQUIZA, BIENVENIDO F. PETATE, IGNACIO F. PETATE, JUANITO PETATE, PABLO A. PLATON, PRECILLO V. PLATON, AQUILINO B. SUBOL, CASIANO T. VILLA, DOMINGO VILLA, JUAN T. VILLA, MARIO C. VILLA, NATIVIDAD B. VILLA, JACINTA S. ALVARADO, RODOLFO ANGELES, DOMINGO A. CANUBAS, EDGARDO L. CASALME, QUIRINO DE LEON, LEONILO M. ENRIQUEZ, CLAUDIA P. GONZALES, FELISA R. LANGUE, QUINTILLANO LANGUE, REYNALDO LANGUE, ROMEO S. LANGUE, MARIANITO T. PEREZ, INOCENCIA S. PASQUIZA, AQUILINO B. SUBOL, BONIFACIO VILLA, ROGELIO AYENDE, ANTONIO B. FERNANDEZ, ZACARIAS HERRERA, REYNARIO U. LAZO, AGAPITO MATIENZO, DIONISIO F. PETATE, LITO G. REYES, JOSE M. SUBOL, CELESTINO G. TOPI NO, ROSA C. AMANTE, SOTERA CASALME, REMIGIO M. SILVERIO, THE COURT OF APPEALS, THE SECRETARY OF AGRARIAN REFORM, DEPARTMENT OF AGRARIAN REFORM ADJUDICATION BOARD, LAND BANK OF THE PHILIPPINES, REGISTER OF DEEDS OF LAGUNA, DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES REGIONAL EXECUTIVE DIRECTOR FOR REGION IV and REGIONAL AGRARIAN REFORM OFFICER FOR REGION IV., Respondents. x-------------------x G.R. No. 118838 March 16, 2005

JUAN B. AMANTE, IGNACIO PETATE, DOMINGO CANUBAS, FLORENCIO CANUBAS, CRESENCIO AMANTE, QUIRINO CASALME, LEODEGARIO GONZALES, DOMINGO VILLA, JAIME BURGOS, NICOMEDES PETATE, MAXIMINO MATIENZO, MAXIMO CANUBAS, ELINO CRUZAT, RUFINO CRUZAT, FELICISIMO GONZALES, QUINTILLANO LANGUE, TEODORO MANDANAS, SERGIO CRUZAT, AGAPITO MATIENZO and SEVERINO DE SAGUM, Petitioner, vs. LUIS YULO, JESUS MIGUEL YULO, C-J YULO & SONS, INC., STA. ROSA REALTY DEVELOPMENT CORPORATION, JOSE LAMBATIN, LAUREANO LAUREL, GALICANO MAILOM, JR., REYNALDO OPENA, AGAPITO PRECILLA, DANILO SUMADSAD, ALFREDO SUMADSAD, JUAN CANTAL, INIGO MENDOZA, ALEJANDRO SANCHEZ, SENADOR RODRIGUEZ, VICTOR MOLINAR, DANILO CANLOBO, RESTING CARAAN, IGNACIO VERGARA, HANDO MERCADO, FAUSTINO MAILOM, CONRADO BARRIENTOS, RENATO VISAYA, DANTE BATHAN, SERAPIO NATIVIDAD, HONESTO TENORIO, NESTOR MERCADO, BIENVENIDO OLFATO, RENE LIRAZAN, RUDY CANLOBO, BASIOLIO MULINGTAPANG, ITO GONZALES, RENATO RINO, TINOY MABAGA, PACIO PADILLA, JOHNNY REAMILLO, ROLANDO CARINGAL, IGNOY VILLAMAYOR, ROMEO TANTENGCO, LODRING CARAAN, FREDO MERCADO, TOMMY MENDOZA, RAFAEL ONTE, REY MANAIG, DICK GASPAR, ANTONIO MALLARI, ALFREDO ANIEL, BARIT, ALBERTO MANGUE, AGATON LUCIDO, ONYONG CANTAL, BAYANI LACSON, ISKO CABILION, MANGUIAT, IGME OPINA, VILARETE, PEDRO BENEDICTO, HECTOR BICO, RUFO SANCHEZ, LARRY DE LEON, BARIVAR SAMSON and ROMEO NAVARRO, Respondents. DECISION AUSTRIA-MARTINEZ, J.: By virtue of the En Banc Resolution issued on January 13, 2004, the Court authorized the Special First Division to suspend the Rules so as to allow it to consider and resolve the second Motion for Reconsideration of

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respondents, after the motion was heard on oral arguments on August 13, 2003. On July 9, 2004, the Court resolved to submit for resolution the second Motion for Reconsideration in G.R. No. 112526 together with G.R. No. 3 118338 in view of the Resolution of the Court dated January 15, 2001 issued in G.R. No. 118838, consolidating the 4 latter case with G.R. No. 112526, the issues therein being interrelated. Hence, the herein Amended Decision. The factual background of the two cases is as follows: The Canlubang Estate in Laguna is a vast landholding previously titled in the name of the late Speaker and Chief Justice Jose Yulo, Sr. Within this estate are two parcels of land (hereinafter referred to as the "subject property") covered by TCT Nos. 81949 and 84891 measuring 254.766 hectares and part of Barangay Casile, subsequently titled in the name of Sta. Rosa Realty Development Corporation (SRRDC), the majority stockholder of which is C.J. Yulo and Sons, Inc. The subject property was involved in civil suits and administrative proceedings that led to the filing of G.R. Nos. 112526 and 118838, thus: Injunction Case Filed by Amante, et al. On December 6, 1985, Amante, et al., who are the private respondents in G.R. No. 112526 and petitioners in G.R. No. 118838, instituted an action for injunction with damages in the Regional Trial Court of Laguna (Branch 24) against Luis Yulo, SRRDC, and several SRRDC security personnel, docketed as Civil Case No. B-2333. Amante, et al. alleged that: they are residents of Barangay Casile, Cabuyao, Laguna, which covers an area of around 300 hectares; in 1910, their ancestors started occupying the area, built their houses and planted fruit-bearing trees thereon, and since then, have been peacefully occupying the land; some time in June 3, 1985, SRRDCs security people illegally entered Bgy. Casile and fenced the area; SRRDCs men also entered the barangay on November 4, 1985, cut down the trees, burned their huts, and barred the lone jeepney from entering the Canlubang Sugar Estate; as a result of these acts, Amante, et al. were deprived of possession and cultivation of their lands. Thus, they claimed 5 damages, sought the issuance of permanent injunction and proposed that a right of way be declared. In their Answer, the defendants denied the allegations and disclaimed any control and supervision over its security personnel. Defendant SRRDC also alleged that as the real owner of the property, it was the one that suffered 6 damages due to the encroachment on the property. A writ of preliminary injunction was issued by the trial court on August 17, 1987, but this was subsequently dissolved 8 by the Court of Appeals (CA) on April 22, 1988 in its decision in CA-G.R. SP No. 13908. After trial on the merits, the trial court, on January 20, 1992, rendered a decision ordering Amante, et al. to vacate the property, the dispositive portion of which reads: WHEREFORE, premises considered, judgment is hereby rendered in favor of the defendants and against the plaintiffs hereby dismissing the complaint and amended complaint. The plaintiffs are hereby ordered to vacate the parcels of land belonging to the defendants Luis Yulo and Sta. Rosa Realty. They are likewise enjoined from entering the subject parcels of land. Although attorneys fees and expenses of litigation are recoverable in case of a clearly unfounded civil actio n against the plaintiff (Enervida vs. De la Torre, 55 SCRA 339), this Court resolves not to award attorneys fees etc. in favor of the defendants because the plaintiffs appear to have acted in good faith in filing the present civil action (Salao vs. Salao, 70 SCRA 65) and that it would not be just and equitable to award the same in the case at bar. (Liwanag vs. Court of Appeals, 121 SCRA 354) Accordingly, the other reliefs prayed for by the defendants are hereby dismissed. SO ORDERED.
9 7

Amante, et al. appealed the aforesaid decision to the CA, docketed as CA-G.R. CV No. 38182. On June 28, 1994, the CA affirmed with modification the decision of the trial court in the injunction case. The 10 dispositive portion of the appellate courts decision reads as follows: WHEREFORE, the judgment herein appealed from is hereby AFFIRMED, with the modification that the defendants-appellees are hereby ordered, jointly and severally, to pay the plaintiffs-appellants nominal damages in the amount of P5,000.00 per plaintiff. No pronouncement as to costs.

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SO ORDERED.

11

Nominal damages were awarded by the CA because it found that SRRDC violated Amante, et al.s rights as 12 possessors of the subject property. Amante, et al. filed a motion for reconsideration thereof, pointing out the DARABs decision placing the property 13 under compulsory acquisition, and the CA decision in CA-G.R. SP No. 27234, affirming the same. The CA, however, denied the motion, with the modification that only SRRDC and the defendants-security guards should be held jointly and severally liable for the nominal damages awarded. It also made the clarification that the decision should not preempt any judgment or prejudice the right of any party in the agrarian reform case pending before the 14 Supreme Court (G.R. No. 112526). Thus, Amante, et al. filed on March 2, 1995, herein petition, docketed as G.R. No. 118838 on the following grounds: 4.1. The Court of Appeals decided the case contrary to law or applicable Supreme Court decisions because: 4.1.1 First, petitioners may not be lawfully evicted from their landholdings considering that: -- (a) Petitioners are already the registered owners under the torrens system of the properties in question since February 26, 1992 by virtue of RA 6657 or the Comprehensive Agrarian Reform Law; -- (b) The Court of Appeals has affirmed the Regional Trial Court of Lagunas dismissal of the ejectment cases filed by respondent SRRDC against petitionerS; and -- (c) Assuming for the sake of argument only that petitioners are not yet the registered owners of the properties in question, respondents may not raise the issue of ownership in this case for injunction with damages, the same to be ventilated in a separate action, not in this case brought to prevent respondents from committing further acts of dispossession [Bacar v. del Rosario et al., 171 SCRA 451 (1989)]. 4.1.2 Second, petitioners are entitled to moral, exemplary damages and attorneys fees, instead of mere nominal damages, considering that the Court of Appeals found respondents to have unlawfully and illegally 15 disturbed petitioners peaceful and continuous possession. Ejectment Cases Filed by SRRDC Between October 1986 and August 1987, after the injunction case was filed by Amante, et al., SRRDC filed with the Municipal Trial Court (MTC) of Cabuyao, Laguna, several complaints for forcible entry with preliminary injunction and damages against Amante, et al., docketed as Civil Cases Nos. 250, 258, 260, 262 and 266. SRRDC alleged that some time in July 1987, they learned that Amante, et al., without their authority and through stealth and strategy, were clearing, cultivating and planting on the subject property; and that despite requests from SRRDCs counsel, 16 Amante, et al. refused to vacate the property, prompting them to file the ejectment cases. Amante, et al. denied that SRRDC are the absolute owners of the property, stating that they have been in peaceful possession thereof, through 17 their predecessors-in-interest, since 1910. On May 24, 1991, the MTC-Cabuyao rendered its decision in favor of SRRDC. Amante, et al. were ordered to surrender possession and vacate the subject property. The decision was appealed to the Regional Trial Court of Bian, Laguna (Assisting Court). On February 18, 1992, the RTC dismissed the ejectment cases on the ground that the subject property is an agricultural land being tilled by Amante, et al., hence it is the Department of Agrarian Reform (DAR), which has 18 jurisdiction over the dispute. The RTCs dismissal of the complaints was brought to the CA via a petition for review, 19 docketed as CA-G.R. SP No. 33382. In turn, the CA dismissed the petition per its Decision dated January 17, 1995 on the ground that SRRDC failed to show any prior physical possession of the subject property that would have 20 justified the filing of the ejectment cases. Also, the CA did not sustain the RTCs finding that the subject properties are agricultural lands and Amante, et al. are tenant/farmers thereof, as the evidence on record does not support such finding. The parties did not file any motion for reconsideration from the Court of Appe als dismissal, hence, it became 21 final and executory. Administrative Proceedings

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While the injunction and ejectment cases were still in process, it appears that in August, 1989, the Municipal Agrarian Reform Office (MARO) issued a Notice of Coverage to SRRDC, informing petitioners that the property covered by TCT Nos. T-81949, T-84891 and T-92014 is scheduled for compulsory acquisition under the Comprehensive 22 Agrarian Reform Program (CARP). SRRDC filed its "Protest and Objection" with the MARO on the grounds that the area was not appropriate for agricultural purposes, as it was rugged in terrain with slopes of 18% and above, and that 23 the occupants of the land were squatters, who were not entitled to any land as beneficiaries. Thereafter, as narrated in the Decision of the Court dated October 12, 2001 in G.R. No. 112526, the following proceedings ensued: On August 29, 1989, the farmer beneficiaries together with the BARC chairman answered the protest and objection stating that the slope of the land is not 18% but only 5-10% and that the land is suitable and economically viable for agricultural purposes, as evidenced by the Certification of the Department of Agriculture, municipality of Cabuyao, Laguna. On September 8, 1989, MARO Belen dela Torre made a summary investigation report and forwarded the Compulsory Acquisition Folder Indorsement (CAFI) to the Provincial Agrarian Reform Officer (hereafter, PARO). On September 21, 1989, PARO Durante Ubeda forwarded his endorsement of the compulsory acquisition to the Secretary of Agrarian Reform. On November 23, 1989, Acting Director Eduardo C. Visperas of the Bureau of Land Acquisition and Development, DAR forwarded two (2) Compulsory Acquisition Claim Folders covering the landholding of SRRDC, covered by TCT Nos. T-81949 and T-84891 to the President, Land Bank of the Philippines for further review and evaluation. On December 12, 1989, Secretary of Agrarian Reform Miriam Defensor Santiago sent two (2) notices of acquisition to petitioner, stating that petitioners landholdings covered by TCT Nos. T -81949 and T-84891, containing an area of 188.2858 and 58.5800 hectares, valued at P4,417,735.65 and P1,220,229.93, respectively, had been placed under the Comprehensive Agrarian Reform Program. On February 6, 1990, petitioner SRRDC in two letters separately addressed to Secretary Florencio B. Abad and the Director, Bureau of Land Acquisition and Distribution, sent its formal protest, protesting not only the amount of compensation offered by DAR for the property but also the two (2) notices of acquisition. On March 17, 1990, Secretary Abad referred the case to the DARAB for summary proceedings to determine just compensation under R.A. No. 6657, Section 16. On March 23, 1990, the LBP returned the two (2) claim folders previously referred for review and evaluation to the Director of BLAD mentioning its inability to value the SRRDC landholding due to some deficiencies. On March 28, 1990, Executive Director Emmanuel S. Galvez wrote the Land Bank President Deogracias Vistan to forward the two (2) claim folders involving the property of SRRDC to the DARAB for it to conduct summary proceedings to determine the just compensation for the land. On April 6, 1990, petitioner sent a letter to the Land Bank of the Philippines stating that its property under the aforesaid land titles were exempt from CARP coverage because they had been classified as watershed area and were the subject of a pending petition for land conversion. On May 10, 1990, Director Narciso Villapando of BLAD turned over the two (2) claim folders (CACFs) to the Executive Director of the DAR Adjudication Board for proper administrative valuation. Acting on the CACFs, on September 10, 1990, the Board promulgated a resolution asking the office of the Secretary of Agrarian Reform (DAR) to first resolve two (2) issues before it proceeds with the summary land valuation proceedings. The issues that need to be threshed out were as follows: (1) whether the subject parcels of land fall within the coverage of the Compulsory Acquisition Program of the CARP; and (2) whether the petition for land conversion of the parcels of land may be granted. On December 7, 1990, the Office of the Secretary, DAR, through the Undersecretary for Operations (Assistant Secretary for Luzon Operations) and the Regional Director of Region IV, submitted a report answering the two issues raised. According to them, firstly, by virtue of the issuance of the notice of coverage on August 11, 1989, and notice of acquisition on December 12, 1989, the property is covered under compulsory acquisition. Secondly, Administrative Order No. 1, Series of 1990,

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Section IV D also supports the DAR position on the coverage of the said property. During the consideration of the case by the Board, there was no pending petition for land conversion specifically concerning the parcels of land in question. On February 19, 1991, the Board sent a notice of hearing to all the parties interested, setting the hearing for the administrative valuation of the subject parcels of land on March 6, 1991. However, on February 22, 1991, Atty. Ma. Elena P. Hernandez-Cueva, counsel for SRRDC, wrote the Board requesting for its assistance in the reconstruction of the records of the case because the records could not be found as her co-counsel, Atty. Ricardo Blancaflor, who originally handled the case for SRRDC and had possession of all the records of the case was on indefinite leave and could not be contacted. The Board granted counsels request and moved the hearing on April 4, 1991. On March 18, 1991, SRRDC submitted a petition to the Board for the latter to resolve SRRDCs petition for exemption from CARP coverage before any administrative valuation of their landholding could be had by the Board. On April 4, 1991, the initial DARAB hearing of the case was held and subsequently, different dates of hearing were set without objection from counsel of SRRDC. During the April 15, 1991 hearing, the subdivision plan of subject property at Casile, Cabuyao, Laguna was submitted and marked as Exhibit "5" for SRRDC. At the hearing on April 23, 1991, the Land Bank asked for a period of one month to value the land in dispute. At the hearing on April 23, 1991, certification from Deputy Zoning Administrator Generoso B. Opina was presented. The certification issued on September 8, 1989, stated that the parcels of land subject of the case were classified as "Industrial Park" per Sangguniang Bayan Resolution No. 45-89 dated March 29, 1989. To avert any opportunity that the DARAB might distribute the lands to the farmer beneficiaries, on April 30, 1991, petitioner filed a petition with DARAB to disqualify private respondents as beneficiaries. However, 24 DARAB refused to address the issue of beneficiaries. ... On December 19, 1991, the DARAB promulgated a decision, affirming the dismissal of the protest of SRRDC against the compulsory coverage of the property covered by TCT Nos. 81949 and 84891. The decretal portion of the decision reads: WHEREFORE, based on the foregoing premises, the Board hereby orders: 1. The dismissal for lack of merit of the protest against the compulsory coverage of the landholdings of Sta. Rosa Realty Development Corporation (Transfer Certificates of Title Nos. 81949 and 84891 with an area of 254.766 hectares) in Barangay Casile, Municipality of Cabuyao, Province of Laguna under the Comprehensive Agrarian Reform Program is hereby affirmed; 2. The Land Bank of the Philippines (LBP) to pay Sta. Rosa Realty Development Corporation the amount of Seven Million Eight Hundred Forty-One Thousand, Nine Hundred Ninety Seven Pesos and Sixty-Four centavos (P7,841,997.64) for its landholdings covered by the two (2) Transfer Certificates of Title mentioned above. Should there be a rejection of the payment tendered, to open, if none has yet been made, a trust account for said amount in the name of Sta. Rosa Realty Development Corporation; 3. The Register of Deeds of the Province of Laguna to cancel with dispatch Transfer Certificate of Title Nos. 84891 and 81949 and new one be issued in the name of the Republic of the Philippines, free from liens and encumbrances; 4. The Department of Environment and Natural Resources either through its Provincial Office in Laguna or the Regional Office, Region IV, to conduct a final segregation survey on the lands covered by Transfer Certificate of Title Nos. 84891 and 81949 so the same can be transferred by the Register of Deeds to the name of the Republic of the Philippines; 5. The Regional Office of the Department of Agrarian Reform through its Municipal and Provincial Agrarian Reform Office to take immediate possession on the said landholding after Title shall have been transferred to the name of the Republic of the Philippines, and distribute the same to the immediate issuance of Emancipation Patents to the farmer-beneficiaries as determined by the Municipal Agrarian Reform Office of 25 Cabuyao, Laguna.

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On July 11, 1991, DAR Secretary Benjamin T. Leong issued a memorandum directing the Land Bank of the Philippines (LBP) to open a trust account in favor of SRRDC, for P5,637,965.55, as valuation for the SRRDC property. The titles in the name of SRRDC were cancelled and corresponding TCTs were issued in the name of the 26 Republic of the Philippines on February 11, 1992, after which Certificates of Land Ownership Award (CLOA) 27 were issued in the name of the farmers-beneficiaries on February 26, 1992. In the meantime, SRRDC had filed with the CA a petition for review of the DARABs decision, docketed as CA -G.R. SP No. 27234. On November 5, 1993, the CA affirmed the decision of DARAB, to wit: WHEREFORE, premises considered, the DARAB decision dated December 19, 1991 is AFFIRMED, without prejudice to petitioner Sta. Rosa Realty Development Corporation ventilating its case with the Special 28 Agrarian Court on the issue of just compensation. Hence, SRRDC filed on November 24, 1993, herein petition, docketed as G.R. No. 112526 on the following grounds: I THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OR EXCESS OF ITS JURISDICTION IN RULING THAT THE SRRDC PROPERTIES, DESPITE THE UNDISPUTED FACT OF THEIR NON-AGRICULTURAL CLASSIFICATION PRIOR TO RA 6657, ARE COVERED BY THE CARP CONTRARY TO THE NATALIA REALTY DECISION OF THIS HONORABLE COURT. i. The SRRDC properties have been zoned and approved as PARK since 1979. ii. The SRRDC properties form part of a watershed area. II THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OR EXCESS OF ITS JURISDICTION IN DISREGARDING ECOLOGICAL CONSIDERATIONS AS MANDATED BY LAW. III THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OR EXCESS OF ITS JURISDICTION IN AFFIRMING THE DISTRIBUTION OF THE SRRDC PROPERTIES TO PRIVATE RESPONDENTS WHO HAVE BEEN JUDICIALLY DECLARED AS SQUATTERS AND THEREFORE ARE NOT QUALIFIED BENEFICIARIES PURSUANT TO THE CENTRAL MINDANAO UNIVERSITY DECISION OF THIS HONORABLE COURT. i. The acquisition of the SRRDC properties cannot be valid for future beneficiaries. ii. Section 22 of RA 6657 insofar as it expands the coverage of the CARP to landless residents is unconstitutional. IV THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OR EXCESS OF ITS JURISDICTION IN HOLDING THAT THE DARAB HAS JURISDICTION TO PASS 29 UPON THE ISSUE OF WHETHER THE SRRDC PROPERTIES ARE SUBJECT TO CARP COVERAGE. On October 12, 2001, the Court rendered its Decision in G.R. No. 112526 only, setting aside the decision of the CA in CA-G.R. SP No. 27234 and ordering the remand of the case to the DARAB for re-evaluation and determination of the nature of the land. The dispositive portion of the Decision reads as follows:

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IN VIEW WHEREOF, the Court SETS ASIDE the decision of the Court of Appeals in CA-G.R. SP No. 27234. In lieu thereof, the Court REMANDS the case to the DARAB for re-evaluation and determination of the nature of the parcels of land involved to resolve the issue of its coverage by the Comprehensive Land Reform Program. In the meantime, the effects of the CLOAs issued by the DAR to supposed farmer beneficiaries shall continue to be stayed by the temporary restraining order issued on December 15, 1993, which shall remain in effect until final decision on the case. No costs. SO ORDERED.
30

It is the opinion of the Court in G.R. No. 112526, that the property is part of a watershed, and that during the hearing at the DARAB, "there was proof that the land may be excluded from the coverage of the CARP because of its high 31 slopes." Thus, the Court concluded that a remand of the case to the DARAB for re-evaluation of the issue of 32 coverage is appropriate in order to resolve the true nature of the subject property. In their Memorandum, Amante, et al. argues that there exist compelling reasons to grant the second motion for reconsideration of the assailed decision of the Court, to wit: 2.1 Only QUESTIONS OF LAW are admittedly and undeniably at issue; yet the Honorable Court reviewed the findings of facts of the Court of Appeals and the DARAB although the case does not fall into any of the well-recognized exceptions to conduct a factual review. Worse, the 12 October 2001 Decision assumed facts not proven before any administrative, quasi-judicial or judicial bodies; 2.2 The DARAB and the Court of Appeals already found the land to be CARPable; yet the Honorable Court remanded the case to DARAB to re-evaluate if the land is CARPable; 2.3 The Decision did not express clearly and distinctly the facts and the law on which it is based; 2.4 The Decision renewed the Temporary Restraining Order issued on 15 December 1993, issuance of which is barred by Sec. 55 of R.A. 6657; and 2.5 This Honorable Court denied private respondents Motion for Reconsideration although issues raised 33 therein were never passed upon in the 12 October 2001 Decision or elsewhere. The DAR and the DARAB, through the Office of the Solicitor General, did not interpose any objection to the second motion for reconsideration. It also maintained that if SRRDCs claim that the property is watershed is true, then it is the DENR that should exercise control and supervision in the disposition, utilization, management, renewal and 34 conservation of the property. SRRDC meanwhile insists that there are no compelling reasons to give due course to the second motion for 35 reconsideration. At the outset, the Court notes that petitioner designated its petition in G.R. No. 112526 as one for review oncertiorari of the decision of the CA. In the same breath, it likewise averred that it was also being filed as a special 36 civil action for certiorari as public respondents committed grave abuse of discretion. Petitioner should not have been 37 allowed, in the first place, to pursue such remedies simultaneously as these are mutually exclusive. It is SRRDCs claim that the CA committed grave abuse of discretion in holding that the subject pr operty is agricultural in nature. In support of its contention, it argued, among others, that the subject property had already been classified as "park" since 1979 under the Zoning Ordinance of Cabuyao, as approved by the Housing and Land Use Regulatory Board (HLURB); that it forms part of a watershed; and that the CA disregarded ecological 38 39 considerations. SRRDC also claimed that Amante, et al. are not qualified beneficiaries. Clearly, these issues are factual in nature, which the Court, as a rule, should not have considered in this case. However, there are recognized exceptions, e.g., when the factual inferences of the appellate court are manifestly mistaken; the judgment is based on a misapprehension of facts; or the CA manifestly overlooked certain relevant and

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undisputed facts that, if properly considered, would justify a different legal conclusion. the above exceptions.

40

The present cases fall under

Thus, in order to finally set these cases to rest, the Court shall resolve the substantive matters raised, which in effect comes down to the issue of the validity of the acquisition of the subject property by the Government under Republic Act (R.A.) No. 6657, or the Comprehensive Agrarian Reform Law of 1988 (CARL). As noted earlier, the DARAB made its finding regarding the nature of the property in question, i.e., the parcels of land are agricultural and may be the subject of compulsory acquisition for distribution to farmer-beneficiaries, thus: Ocular inspections conducted by the Board show that the subject landholdings have been under the possession and tillage of the DAR identified potential beneficiaries which they inherited from their forebears (workers of the Yulo Estate). They are bonafide residents and registered voters (DARAB Exhibits "C" and "J") of Barangay Casile, Cabuyao, Laguna. There is a barangay road leading toward the barangay school and sites and the settlement has a barangay hall, church, elementary school buildings (DARAB Exhibit "Q"), Comelec precincts (DARAB Exhibits "J-1" and J-2"), and other structures extant in progressive communities. The barangay progressive development agencies, like the DECS, DA, COMELEC, DAR and Support Services of Land Bank, DPWH, DTI and the Cooperative Development Authority have extended support services to the community (DARAB Exhibits "I", "K" to "K-3", "L", "M", "N", "O", "P" to "P-6"). More importantly, subject landholdings are suitable for agriculture. Their topography is flat to undulating 3-15% slope. (Testimony of Rosalina Jumaquio, Agricultural Engineer, DAR, TSN, June 21, 1991, DARAB Exhibits "F" and "H"). Though some portions are over 18% slope, nevertheless, clearly visible thereat are fruit-bearing trees, like coconut, coffee, and pineapple plantations, etc. (see Petitioners Exhibits "A" to "YYY" and DARAB Exhibits "A" to "S", Records). In other words, they are already productive and fully developed. ... As the landholdings of SRRDC subject of the instant proceedings are already developed not only as a community but also as an agricultural farm capable of sustaining daily existence and growth, We find no infirmity in placing said parcels of land under compulsory coverage. They do not belong to the exempt class of lands. The claim that the landholding of SRRDC is a watershed; hence, belonging to the exempt class of lands is literally "throwing punches at the moon" because the DENR certified that "the only declared watershed in Laguna Province and San Pablo City is the Caliraya-Lumot Rivers (Petitioners Exhibit "A"). A sensu contrario, the landholdings subject herein 41 are not. (Emphasis supplied) The evidence on record supports these findings, to wit: 1. Certification dated January 16, 1989 by the OIC Provincial Environment and Natural Resources Office of Laguna that the only declared watershed in the Laguna province and San Pablo City is the Caliraya-Lumot 42 Rivers No. 1570 dated September 1, 1976; 2. Map prepared by Agricultural Engineer Rosalina H. Jumaquio showing that: a) the topography of the property covered by TCT No. T-84891 topography is flat to undulating with a 5 to 10% slope; (b) it is suitable 43 to agricultural crops; and (c) the land is presently planted with diversified crops; 3. Certification dated August 28, 1989 by APT Felicito Buban of the Department of Agriculture of Laguna that, per his ocular inspection, the subject property is an agricultural area, and that the inhabitants main 44 occupation is farming; 4. Pictures taken by MARO Belen La Torre of Cabuyao, Laguna, showing that the property is cultivated and 45 inhabited by the farmer-beneficiaries; SRRDC however, insists that the property has already been classified as a "municipal park" and beyond the scope of CARP. To prove this, SRRDC submitted the following: 1. Certification dated March 1, 1991 by the Municipality of Cabuyao, Laguna that the entire barangay of 46 Casile is delineated as Municipal Park; 2. Certification dated March 11, 1991 by the Housing and Land Use Regulatory Board that the parcels of land located in Barangay Casile are within the Municipal Park, based on the municipalitys approved General

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Land Use Plan ratified by the Housing and Land Use Regulatory Board as per Resolution No. 38-2 dated 47 June 25, 1980; 3. Photocopies of pictures taken by Mr. Ernesto Garcia, Officer-in-Charge of the Special Project Section of 48 CJ Yulo and Sons, Inc., of portions of Barangay Casile; The Court recognizes the power of a local government to reclassify and convert lands through local ordinance, 49 especially if said ordinance is approved by the HLURB. Municipal Ordinance No. 110-54 dated November 3, 1979, enacted by the Municipality of Cabuyao, divided the municipality into residential, commercial, industrial, agricultural 50 and institutional districts, and districts and parks for open spaces. It did not convert, however, existing agricultural lands into residential, commercial, industrial, or institutional. While it classified Barangay Casile into a municipal park, as shown in its permitted uses of land map, the ordinance did not provide for the retroactivity of its classification. 51 In Co vs. Intermediate Appellate Court, it was held that an ordinance converting agricultural lands into residential or light industrial should be given prospective application only, and should not change the nature of existing agricultural lands in the area or the legal relationships existing over such lands. Thus, it was stated: A reading of Metro Manila Zoning Ordinance No. 81-01, series of 1981, does not disclose any provision converting existing agricultural lands in the covered area into residential or light industrial. While it declared that after the passage of the measure, the subject area shall be used only for residential or light industrial purposes, it is not provided therein that it shall have retroactive effect so as to discontinue all rights previously acquired over lands located within the zone which are neither residential nor light industrial in nature. This simply means that, if we apply the general rule, as we must, the ordinance should be given prospective operation only. The further implication is that it should not change the nature of existing agricultural lands in the area or the legal relationships existing over such 52 lands (Emphasis supplied) Under Section 3 (c) of R.A. No. 6657, agricultural land is defined as land devoted to agricultural activity and not classified as mineral, forest, residential, commercial or industrial land. Section 3 (b) meanwhile defines agricultural activity as the cultivation of the soil, planting of crops, growing of fruit trees, raising of livestock, poultry or fish, including the harvesting of such products, and other farm activities, and practices performed by a farmer in conjunction with such farming operations done by persons whether natural or juridical. Before Barangay Casile was classified into a municipal park by the local government of Cabuyao, Laguna in November 1979, it was part of a vast property popularly known as the Canlubang Sugar Estate. SRRDC claimed that in May 1979, "the late Miguel Yulo allowed the employees of the Yulo group of companies to cultivate a maximum area of one hectare each subject to the condition that they should not plant crops being grown by the Canlubang 53 Sugar Estate, like coconuts and coffee, to avoid confusion as to ownership of crops." The consolidation and 54 subdivision plan surveyed for SRRDC on March 10-15, 1984 also show that the subject property is sugar land. Evidently, the subject property is already agricultural at the time the municipality of Cabuyao enacted the zoning ordinance, and such ordinance should not affect the nature of the land. More so since the municipality of Cabuyao did not even take any step to utilize the property as a park. SRRDC cites the case of Natalia Realty, Inc. vs. DAR, wherein it was ruled that lands not devoted to agricultural activity and not classified as mineral or forest by the DENR and its predecessor agencies, and not classified in town plans and zoning ordinances as approved by the HLURB and its preceding competent authorities prior to the enactment of R.A. No. 6657 on June 15, 1988, are outside the coverage of the CARP. Said ruling, however, finds no application in the present case. As previously stated, Municipal Ordinance No. 110-54 of the Municipality of Cabuyao did not provide for any retroactive application nor did it convert existing agricultural lands into residential, commercial, industrial, or institutional. Consequently, the subject property remains agricultural in nature and therefore within the coverage of the CARP. Only on March 9, 2004, SRRDC filed with the Court a Manifestation pointing out DAR Order No. (E)4-03-507-309 dated February 17, 2004, exempting from CARP coverage two parcels of land owned by SRRDC and covered by 56 TCT Nos. T-85573 and T-92014. The DAR found that these properties have been re-classified into Municipal Parks by the Municipal Ordinance of Cabuyao, Laguna, and are part of the Kabangaan-Casile watershed, as certified by the 57 DENR. The Court notes however that the said DAR Order has absolutely no bearing on these cases. The herein subject property is covered by TCT Nos. 81949 and 34891, totally different, although adjacent, from the property referred to in said DAR Order. SRRDC also contends that the property has an 18% slope and over and therefore exempt from acquisition and distribution under Section 10 of R.A. No. 6657. What SRRDC opted to ignore is that Section 10, as implemented by DAR Administrative Order No. 13 dated August 30, 1990, also provides that those with 18% slope and over
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but already developed for agricultural purposes as of June 15, 1988, may be allocated to qualified 58 occupants. Hence, even assuming that the property has an 18% slope and above, since it is already developed for agricultural purposes, then it cannot be exempt from acquisition and distribution. Moreover, the topography maps prepared by Agricultural Engineer Rosalina H. Jumaquio show that the property to be acquired has a 5-10% flat to 59 60 61 undulating scope; that it is suitable to agricultural crops; and it is in fact already planted with diversified crops. Also, the Certification dated July 1, 1991 by Geodetic Engineer Conrado R. Rigor that the top portion of Barangay 62 Casile has a 0 to 18% slope while the side of the hill has a 19 to 75% slope, was presented by SRRDC only during the proceedings before the CA which had no probative value in a petition for review proceedings. The Court notes that SRRDC had been given ample time and opportunity by the DARAB to prove the grounds for its protest and 63 objection but miserably failed to take advantage of such time and opportunity in the DARAB proceedings. SRRDC also contends that the property is part of a watershed, citing as evidence, the Certification dated June 26, 1991 by the Laguna Lake Development Authority that Barangay Casile is part of the watershed area of the Laguna 64 Lake Basin, and the Final Report for Watershed Area Assessment Study for the Canlubang Estate dated July 1991 65 undertaken by the Engineering & Development Corporation of the Philippines. It must be noted, however, that these pieces of evidence were likewise brought to record only when petitioner filed its petition for review with the CA. The DARAB never had the opportunity to assess these pieces of evidence. The DARAB stated: Noting the absence of evidence which, in the nature of things, should have been submitted by landowner SRRDC and to avoid any claim of deprivation of its right to prove its claim to just compensation (Uy v. Genato, 57 SCRA 123). We practically directed its counsel in not only one instance, during the series of hearings conducted, to do so. We even granted continuances to give it enough time to prepare and be ready with the proof and documents. To Our dismay, none was submitted and this constrained Us to take the failure/refusal of SRRDC to present evidence as a waiver or, at least, an implied acceptance of the valuation 66 made by the DAR. The same goes with the CA, which did not have the discretion to consider evidence in a petition for certiorari or petition for review on certiorari outside than that submitted before the DARAB. The CA noted petition ers failure to present evidence in behalf of its arguments, thus: . . . It must be recalled that petitioner Sta. Rosa Realty itself had asked the DARAB in a petition dated March 18, 1991 to allow it to adduce evidence in support of its position that the subject parcels of land are not covered by the CARP beginning on the scheduled hearing dated April 4, 1991. And DARAB obliged as in fact the petitioner commenced to introduce evidence. If petitioner failed to complete the presentation of evidence to support its claim of exemption from CARP coverage, it has only itself to blame for which DARAB 67 cannot be accused of not being impartial. Consequently, there is no need to order the remand of the case to the DARAB "for re-evaluation and determination of the nature of the parcels of land involved." It runs contrary to orderly administration of justice and would give petitioner undue opportunity to present evidence in support of its stance, an opportunity it already had during the DARAB proceedings, and which opportunity it regrettably failed to take advantage of. More significantly however, it is the DAR Secretary that originally declared the subject property as falling under the coverage of the CARP. Moreover, DAR Administrative Order No. 13, Series of 1990 (Rules and Procedure Governing Exemption of Lands from CARP Coverage under Section 10, R.A. No. 6657) provides: I. LEGAL MANDATE The general policy under CARP is to cover as much lands suitable for agriculture as possible. However, Section 10, RA 6657 excludes and exempts certain types of lands from the coverage of CARP, to wit: A. Lands actually, directly and exclusively used and found to be necessary for parks, wildlife, forest reserves, reforestation, fish sanctuaries and breeding grounds, watersheds and mangroves, national defense, school sites and campuses including experimental farm stations operated by public or private schools for educational purposes, seeds and seedlings research and pilot production centers, church sites and convents appurtenant thereto, mosque sites and Islamic centers appurtenant thereof, communal burial grounds and cemeteries, penal colonies and penal farms actually worked by the inmates, government and private research and quarantine centers; and

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... II. POLICIES In the application of the aforecited provision of law, the following guidelines shall be observed: A. For an area in I.A to be exempted from CARP coverage, it must be "actually, directly and exclusively used and found to be necessary" for the purpose so stated. ... C. Lands which have been classified or proclaimed, and/or actually directly and exclusively used and found to be necessary for parks, wildlife, forest reserves, fish sanctuaries and breeding grounds, and watersheds and mangroves shall be exempted from the coverage of CARP until Congress, taking into account ecological, developmental and equity considerations, shall have determined by law, the specific limits of public domain, as provided for under Sec. 4(a) of RA 6657, and a reclassification of the said areas or portions thereof as alienable and disposable has been approved. (Emphasis supplied) In order to be exempt from coverage, the land must have been classified or proclaimed and actually, directly and 68 exclusively used and found to be necessary for watershed purposes. In this case, at the time the DAR issued the Notices of Coverage up to the time the DARAB rendered its decision on the dispute, the subject property is yet to be officially classified or proclaimed as a watershed and has in fact long been used for agricultural purposes. SRRDC 69 relies on the case of Central Mindanao University (CMU) vs. DARAB, wherein the Court ruled that CMU is in the best position to determine what property is found necessary for its use. SRRDC claims that it is in the best position to 70 determine whether its properties are "necessary" for development as park and watershed area. But SRRDCs reliance on the CMU case is flawed. In the CMU case, the subject property from the very beginning was not alienable and disposable because Proclamation No. 476 issued by the late President Carlos P. Garcia already reserved the property for the use of the school. Besides, the subject property in the CMU case was actually, directly and exclusively used and found to be necessary for educational purposes. In the present case, the property is agricultural and was not actually and exclusively used for watershed purposes. As 71 records show, the subject property was first utilized for the purposes of the Canlubang Sugar Estate. Later, petitioner claimed that the occupants were allowed to cultivate the area so long as they do not plant crops being 72 grown by the Canlubang Sugar Estate in order to avoid confusion as to ownership thereof. Thus, based on its own assertions, it appears that it had benefited from the fruits of the land as agricultural land. Now, in a complete turnaround, it is claiming that the property is part of a watershed. Furthermore, in a belated attempt to prove that the subject property is part of a watershed that must be environmentally protected, SRRDC submitted before the Court a Final Report dated February 1994 undertaken by the Ecosystems Research and Development Bureau (ERDB) of the DENR entitled, "Environmental Assessment of 73 the Casile and Kabanga-an River Watersheds." The study, according to SRRDC, was made pursuant to a handwritten instruction issued by then President Fidel V. Ramos. The study noted that, "the continuing threat of widespread deforestation and unwise land use practices have resulted in the deteriorating condition of the 74 watersheds." But the Court also notes the Memorandum for the President dated September 1993 by then DENR Secretary Angel C. Alcala that, after a field inspection conducted by the DENRs Regional Executive Director and the Provincial and Community Natural Resource Officers, it was found that: ... 2. Many bankal trees were found growing in the watershed/CARP areas, including some which have been coppiced, and that water conduits for domestic and industrial uses were found installed at the watershed area claimed by the Yulos. Records further show that in the 1970s, a Private Land Timber Permit was issued to Canlubang Sugar Estate thru its marketing arm, the Sta. Rosa Realty Devpt. Corp. 3. Resident farmers denied that they have been cutting bankal trees and volunteered the information that one of the Estates security guards was dismissed for cutting and transporting bankal trees. The trees cut by the dismissed security guard were found stacked adjacent to the Canlubang Security Agencys 75 headquarters. Evidently, SRRDC had a hand in the degradation of the area, and now wants to put the entire blame on the farmerbeneficiaries. It is reasonable to conclude that SRRDC is merely using "ecological considerations" to avert any disposition of the property adverse to it.

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SRRDC also objects to the identification of Amante, et al. as beneficiaries of the subject property. Suffice it to say that under Section 15 of R.A. No. 6657, the identification of beneficiaries is a matter involving strictly the administrative implementation of the CARP, a matter which is exclusively vested in the Secretary of Agrarian Reform, through its authorized offices. Section 15 reads: SECTION 15. Registration of Beneficiaries. The DAR in coordination with the Barangay Agrarian Reform Committee (BARC) as organized in this Act, shall register all agricultural lessees, tenants and farmworkers who are qualified to be beneficiaries of the CARP. These potential beneficiaries with the assistance of the BARC and the DAR shall provide the following data: (a) names and members of their immediate farm household; (b) owners or administrators of the lands they work on and the length of tenurial relationship; (c) location and area of the land they work; (d) crops planted; and (e) their share in the harvest or amount of rental paid or wages received. A copy of the registry or list of all potential CARP beneficiaries in the barangay shall be posted in the barangay hall, school or other public buildings in the barangay where it shall be open to inspection by the public at all reasonable hours. Meanwhile, Administrative Order No. 10 (Rules and Procedures Governing the Registration of Beneficiaries), Series of 1989, provides: SUBJECT: I. PREFATORY STATEMENT Pursuant to Section 15, Chapter IV, of the Comprehensive Agrarian Reform Law of 1988, the DAR, in coordination with the Barangay Agrarian Reform Committee (BARC), as organized pursuant to RA 6657, shall register all agricultural lessees, tenants and farmworkers who are qualified beneficiaries of the CARP. This Administrative Order provides the Implementing Rules and Procedures for the said registration. ... B. Specific 1. Identify the actual and potential farmer-beneficiaries of the CARP. In Lercana vs. Jalandoni,
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the Court categorically stated that:

the identification and selection of CARP beneficiaries are matters involving strictly the administrative implementation of the CARP, a matter exclusively cognizable by the Secretary of the Department of 77 Agrarian Reform, and beyond the jurisdiction of the DARAB. The farmer-beneficiaries have already been identified in this case. Also, the DAR Secretary has already issued Notices of Coverage and Notices of Acquisition pertaining to the subject property. It behooves the courts to exercise great caution in substituting its own determination of the issue, unless there is grave abuse of discretion committed by 78 the administrative agency, which in these cases the Court finds none. SRRDC questions the constitutionality of Section 22 of R.A. No. 6657, which reads in part: SECTION 22. Qualified Beneficiaries. The lands covered by the CARP shall be distributed as much as possible to landless residents of the same barangay, or in the absence thereof, landless residents of the same municipality in the following order of priority. (a) agricultural lessees and share tenants; (b) regular farmworkers;

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(c) seasonal farmworkers; (d) other farmworkers; (e) actual tillers or occupants of public lands; (f) collectives or cooperatives of the above beneficiaries; and (g) others directly working on the land. ... SRRDC argues that Section 22 "sweepingly declares landless residents as beneficiaries of the CARP (to mean also squatters)," in violation of Article XIII, Section 4 of the Constitution, which aims to benefit only the landless farmers 79 and regular farmworkers. The Court cannot entertain such constitutional challenge. The requirements before a litigant can challenge the constitutionality of a law are well-delineated, viz.: (1) The existence of an actual and appropriate case; (2) A personal and substantial interest of the party raising the constitutional question; (3) The exercise of judicial review is pleaded at the earliest opportunity; and (4) The constitutional question is the lis mota of the case.
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(Emphasis supplied)

Earliest opportunity means that the question of unconstitutionality of the act in question should have been 81 immediately raised in the proceedings in the court below, in this case, the DAR Secretary. It must be pointed out that all controversies on the implementation of the CARP fall under the jurisdiction of the DAR, even though they 82 raise questions that are also legal or constitutional in nature . The earliest opportunity to raise a constitutional issue is to raise it in the pleadings before a competent court that can resolve the same, such that, "if it is not raised in the pleadings, it cannot be considered at the trial, and, if not considered at the trial, it cannot be considered on 83 appeal." Records show that SRRDC raised such constitutional challenge only before this Court despite the fact that it had the opportunity to do so before the DAR Secretary. The DARAB correctly refused to deal on this issue as it is the DAR Secretary who, under the law, has the authority to determine the beneficiaries of the CARP. This Court will not entertain questions on the invalidity of a statute where that issue was not specifically raised, insisted upon, and 84 adequately argued in the DAR. Likewise, the constitutional question raised by SRRDC is not the very lis mota in the present case. Basic is the rule that every law has in its favor the presumption of constitutionality, and to justify its nullification, there must be a clear 85 and unequivocal breach of the Constitution, and not one that is doubtful, speculative or argumentative. The controversy at hand is principally anchored on the coverage of the subject property under the CARP, an issue that can be determined without delving into the constitutionality of Section 22 of R.A. No. 6657. While the identification of Amante, et al. as farmer-beneficiaries is a corollary matter, yet, the same may be resolved by the DAR. SRRDC questions the DARABs jurisdiction to entertain the question of whether the subject property is subject to CARP coverage. According to SRRDC, such authority is vested with the DAR Secretary who has the exclusive prerogative to resolve 86 matters involving the administrative implementation of the CARP and agrarian laws and regulations. There is no question that the power to determine whether a property is subject to CARP coverage lies with the DAR Secretary. Section 50 of R.A. No. 6657 provides that: SEC. 50. Quasi-Judicial Powers of the DAR. - The DAR is hereby vested with primary jurisdiction to determine and adjudicate agrarian reform matters and shall have exclusive original jurisdiction over all matters involving the implementation of agrarian reform, except those falling under the exclusive jurisdiction of the Department of Agriculture (DA) and the Department of Environment and Natural Resources (DENR). ...

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The DARs jurisdiction under Section 50 of R.A. No. 6657 is two-fold. The first is essentially executive and pertains to the enforcement and administration of the laws, carrying them into practical operation and enforcing their due 87 observance, while the second is judicial and involves the determination of rights and obligations of the parties. Pursuant to its judicial mandate of achieving a just, expeditious and inexpensive determination of every action or 88 proceeding before it, the DAR adopted the DARAB Revised Rules, Rule II (Jurisdiction of the Adjudication Board) of which provides: SECTION 1. Primary, Original and Appellate Jurisdiction . The Agrarian Reform Adjudication Board shall have primary jurisdiction, both original and appellate, to determine and adjudicate all agrarian disputes, cases, controversies, and matters or incidents involving the implementation of the Comprehensive Agrarian Reform Program under Republic Act No. 6657, Executive Order Nos. 229, 228 and 129-A, Republic Act No. 3844 as amended by Republic Act No. 6389, Presidential Decree No. 27 and other agrarian laws and their implementing rules and regulations. Specifically, such jurisdiction shall extend over but not be limited to the following: a) Cases involving the rights and obligations of persons engaged in the cultivation and use of agricultural land covered by the Comprehensive Agrarian Reform Program (CARP) and other agrarian laws; b) Cases involving the valuation of land, and determination and payment of just compensation, fixing and collection of lease rentals, disturbance compensation, amortization payments, and similar disputes concerning the functions of the Land Bank; c) Cases involving the annulment or cancellation of orders or decisions of DAR officials other than the Secretary, lease contracts or deeds of sale or their amendments under the administration and disposition of the DAR and LBP; d) Cases arising from, or connected with membership or representation in compact farms, farmers cooperatives and other registered farmers associations or organizations, related to land covered by the CARP and other agrarian laws; e) Cases involving the sale, alienation, mortgage, foreclosure, pre-emption and redemption of agricultural lands under the coverage of the CARP or other agrarian laws; f) Cases involving the issuance of Certificate of Land Transfer (CLT), Certificate of Land Ownership Award (CLOA) and Emancipation Patent (EP) and the administrative correction thereof; g) And such other agrarian cases, disputes, matters or concerns referred to it by the Secretary of the DAR. Provided, however, that matters involving strictly the administrative implementation of the CARP and other agrarian laws and regulations, shall be the exclusive prerogative of and cognizable by the Secretary of the DAR. (Emphasis supplied) On the other hand, Administrative Order No. 06-00, which provides for the Rules of Procedure for Agrarian Law Implementation (ALI) Cases, govern the administrative function of the DAR. Under said Rules of Procedure, the DAR Secretary has exclusive jurisdiction over classification and identification of landholdings for coverage under the CARP, including protests or oppositions thereto and petitions for lifting of coverage. Section 2 of the said Rules specifically provides, inter alia, that: SECTION 2. Cases Covered. - These Rules shall govern cases falling within the exclusive jurisdiction of the DAR Secretary which shall include the following: (a) Classification and identification of landholdings for coverage under the Comprehensive Agrarian Reform Program (CARP), including protests or oppositions thereto and petitions for lifting of coverage; (b) Identification, qualification or disqualification of potential farmer-beneficiaries; (c) Subdivision surveys of lands under CARP;
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(d) Issuance, recall or cancellation of Certificates of Land Transfer (CLTs) and CARP Beneficiary Certificates (CBCs) in cases outside the purview of Presidential Decree (PD) No. 816, including the issuance, recall or cancellation of Emancipation Patents (EPs) or Certificates of Land Ownership Awards (CLOAs) not yet registered with the Register of Deeds; (e) Exercise of the right of retention by landowner; . . . (Emphasis supplied) Thus, the power to determine whether a property is agricultural and subject to CARP coverage together with the 90 identification, qualification or disqualification of farmer-beneficiaries lies with the DAR Secretary. Significantly, the DAR had already determined that the properties are subject to expropriation under the CARP and has distributed the same to the farmer-beneficiaries. Initially, the LBP forwarded the two Compulsory Acquisition Claim Folders (CACF) covering the subject properties to the DARAB for summary proceedings for the sole purpose of determining just compensation. SRRDC then sent a letter to the LBP claiming that the subject properties were exempt from CARP coverage and subject of a pending petition for land conversion. As a consequence, the DARAB asked the DAR Secretary to first resolve the issues raised by SRRDC before it can proceed with the land valuation proceedings. In response, the DAR, through the Undersecretary for Operations and the Regional Director of Region IV, submitted its report stating that: (1) the property is subject to compulsory acquisition by virtue of the Notice of Coverage issued on August 11, 1989, and Notice of Acquisition issued on December 12, 1989, and that it was subject to CARP coverage per Section IV D of DAR Administrative Order No. 1, Series of 1990; and (2) there was no pending petition for land conversion involving the subject property. When SRRDC petitioned the DARAB to resolve the issue of exemption from coverage, it was 91 only then that the DARAB took cognizance of said issue. As the DARAB succinctly pointed out, it was SRRDC that initiated and invoked the DARABs jurisdiction to pass upon the question of CARP coverage. As stated by the DARAB: 4.5.2.2. The ISSUE ON CARP COVERAGE was initiated and incorporated in said proceeding, at the instance of petitioner itself, by filing a petition dated March 18, 1991, Prayed therein were t hat DARAB: 1. Take cognizance and assume jurisdiction over the question of CARP coverage of the subject parcels of land; 2. Defer or hold in abeyance the proceedings for administrative valuation of the subject properties pending determination of the question of CARP coverage; 3. Allow respondent SRRDC to adduce evidence in support of its position that the subject parcels of land are not covered by the CARP beginning on the scheduled hearing date of April 4, 1991" (p.3; emphasis and underscoring supplied). Upon persistent request of petitioner SRRDC, it was accommodated by DARAB and a counsel of SRRDC even took the witness stand. Its lawyers were always in attendance during the scheduled hearings until it was time for SRRDC to present its own evidence. 4.5.2.3. But, as earlier stated, despite the open session proddings by DARAB for SRRDC to submit evidence and the rescheduling for, allegedly, they are still collating the evidence, nay, the request that it be allowed to adduce evidence, none was adduced and this constrained public respondent to declare SRRDC as having waived its right to present evidence. And, after the remaining parties were heard, the hearing was formally terminated. ... 4.5.3. Needless to state, the jurisdictional objection (CARP coverage), now being raised herein was not one of the original matters in issue. Principally, DARAB was called upon under Section 16 of Republic Act No. 6657 to resolve a land valuation case. But SRRDC itself insisted that DARAB should take cognizance thereof in the same land valuation proceeding. And, SRRDC, through its lawyers, actively participated in the hearings conducted. 4.5.4. It was only when an adverse decision was rendered by DARAB that the jurisdictional issue was raised in the petition for review it filed with the Honorable Court of Appeals. It was also only then that petitioner presented proof/evidence.

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... 4.5.6. Public respondents (DAR/DARAB) are not unmindful of the rule that matter of jurisdiction may be raised at any stage of the proceeding. But for two serious considerations, the applicability thereof in the case at bar should not be allowed. 4.5.6.1. The fact [part (municipal/industrial) and/or watershed] upon which the jurisdictional issue interchangeably hinges were not established during the hearing of the case. No proof was adduced. That the matter of CARP coverage is strictly administrative implementation of CARP and, therefore, beyond the competence of DARAB, belonging, as it does, to the DAR Secretary, was not even alleged, either before DARAB or the Honorable Court of Appeals, the numerous petitions/incidents filed notwithstanding. Be it that as it may, the records of the case show that initially DARAB refused to take cognizance thereof and, in fact, forwarded the issue of CARP coverage to the office of the DAR Secretary. It was only when it was returned to DARAB by said office that proceedings thereon commenced pursuant to Section 1(g) of Rule II of the DARAB Revised Rules of Procedure. 4.5.6.2. Petitioner is now estopped from assailing the jurisdiction of DARAB. First, it expressly acknowledged the same, in fact invoked it, when it filed its petition (Annex "4"); and, second, during the scheduled hearings, SRRDC, through its counsel, actively participated, one of its counsel (sic) even testifying. It may not now be allowed to impugn the jurisdiction of public 92 respondent (Emphasis supplied) In CA-G.R. SP No. 27234, the CA likewise found that it was SRRDC that called upon the DARAB to determine the 93 issue and it, in fact, actively participated in the proceedings before it. It was SRRDCs own act of summoning the DARABs authority that cured whatever jurisdictional defect it now raises. It is elementary that the active participation of a party in a case pending against him before a court or a quasi-judicial body, is tantamount to a recognition of that courts or bodys jurisdiction and a willingness to abide by the resolution of the case and will bar said party from later 94 on impugning the courts or bodys jurisdiction. Moreover, the issue of jurisdiction was raised by SRRDC only before the CA. It was never presented or discussed before the DARAB for obvious reasons, i.e., it was SRRDC itself that invoked the latters jurisdiction. As a rule, when a party adopts a certain theory, and the case is tried and decided upon that theory in the court below, he will not be 95 permitted to change his theory on appeal. Points of law, theories, issues and arguments not brought to the attention of the lower court need not be, and ordinarily will not be, considered by a reviewing court, as these cannot be raised 96 for the first time at such late stage. To permit SRRDC to change its theory on appeal would not only be unfair to 97 Amante, et al. but would also be offensive to the basic scales of fair play, justice and due process. Finally, the Court notes that then DAR Secretary Benjamin T. Leong issued a Memorandum on July 11, 1991, ordering the opening of a trust account in favor of SRRDC. In Land Bank of the Philippines vs. Court of Appeals , this Court struck down as void DAR Administrative Circular No. 9, Series of 1990, providing for the opening of trust accounts in lieu of the deposit in cash or in bonds contemplated in Section 16 (e) of R.A. No. 6657. As a result, the DAR issued Administrative Order No. 2, Series of 1996, converting trust accounts in the name of landowners into 98 deposit accounts. Thus, the trust account opened by the LBP per instructions of DAR Secretary Benjamin T. Leong should be converted to a deposit account, to be retroactive in application in order to rectify the error committed by the DAR in opening a trust account and to grant the landowners the benefits concomitant to payment in cash or LBP bonds prior to the ruling of the Court in Land Bank of the Philippines vs. Court of Appeals. The account shall earn a 12% interest per annum from the time the LBP opened a trust account up to the time said account was actually converted into cash and LBP bonds deposit accounts. Given the foregoing conclusions, the petition filed in G.R. No. 118838, which primarily rests on G.R. No. 112526, should be granted. The judgments of the trial court in the injunction case (Civil Case No. B-2333) and the CA in CA-G.R. SP No. 38182 were premised on SRRDCs transfer certificates of title over the subject property. The trial court and the CA cannot be faulted for denying the writ of injunction prayed for by Amante, et al. since at the time the trial court rendered its decision in the injunction case on January 20, 1992, SRRDC was still the holder of the titles covering the subject property. The titles in its name were cancelled and corresponding TCTs were issued in the name of the Republic of the Philippines on February 11, 1992, and CLOAs were issued to the farmer-beneficiaries on February 26, 1992. When Amante, et al., in their motion for reconsideration filed in CA-G.R. SP No. 38182, brought to the CAs attention the issuance of the CLOAs, the CA, per Resolution dated January 19, 1995, reiterated its ruling that "whether or not the subject property is covered by the Comprehensive Agrarian Reform Law (R.A. No. 6657) is the subject matter of a separate case, and we cannot interfere with the same at the present time." The CA further stated that "(O)ur present decision is, therefore, not intended to preempt any judgment or prejudice the right of any party in 99 the said case." It must be noted that at that juncture, the DARAB Decision and the CA decision in CA-G.R. SP No.

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27234, finding the subject property covered by the CARP Law, is yet to be finally resolved by this Court in G.R. No. 112526 and in fact, a temporary restraining order was issued by the Court on December 15, 1993, enjoining the DARAB from enforcing the effects of the CLOAs. Amante, et al. was likewise restrained from further clearing the 100 subject property. Hence, the decision of the trial court and the CA denying the writ of injunction was warranted. Nevertheless, considering that the subject property is agricultural and may be acquired for distribution to farmerbeneficiaries identified by the DAR under the CARP, the transfer certificates of title issued in the name of the 101 Republic of the Philippines and the CLOAs issued by the DAR in the names of Amante, et al., are valid titles and therefore must be upheld. By virtue thereof, Amante, et al. who have been issued CLOAs are now the owners of the subject property. Consequently, the decisions of the trial court in the injunction case and the CA in CA-G.R. SP No. 38182 must now be set aside, insofar as it orders Amante, et al. to vacate and/or enjoins them from entering the subject property. The Court, however, agrees with the CA that Amante, et al. is not entitled to actual, moral and exemplary damages, as well as attorneys fees. SRRDCs right of possession over the subject property was predicated on its claim of ownership, and it cannot be sanctioned in exercising its rights or protecting its interests thereon. As was ruled by the 102 CA, Amante, et al. is merely entitled to nominal damages as a result of SRRDCs acts. All is not lost in this case. In its Memorandum dated September 29, 1993, to the DAR Secretary, the DENR manifested that: . . . the farmers themselves could be tapped to undertake watershed management and protection. This community-based approach in natural resource management, is in fact, being used in numerous watershed management projects nationwide. Adopting the same approach in the area is deemed the best possible solution to the case since it will not prejudice the CLOAs issued to the farmer-beneficiaries. They should, however, be required to undertake the necessary reforestation and other watershed management/rehabilitation measures in the area. In view of the foregoing, we recommend that a watershed management plan for the area espousing the community103 based approach be drawn-up jointly by the DAR and DENR. . . . If SRRDC sincerely wants to preserve the property for ecological considerations, it can be done regardless of who owns it. After all, we are all stewards of this earth, and it rests on all of us to tend to it. WHEREFORE, the Second Motion for Reconsideration is GRANTED. The Courts Decision dated October 12, 2001 in G.R. No. 112526 is SET ASIDE and the Decision of the Court of Appeals dated November 5, 1993 in CA-G.R. SP No. 27234 is AFFIRMED with MODIFICATION, in that the Land Bank of the Philippines is ordered to convert the trust account in the name of Sta. Rosa Realty Development Corporation to a deposit account, subject to a 12% interest per annum from the time the LBP opened a trust account up to the time said account was actually converted into cash and LBP bonds deposit accounts. The temporary restraining order issued by the Court on December 15, 1993, is LIFTED. The petition filed by Amante, et al. in G.R. No. 118838 is GRANTED in that Sta. Rosa Realty Development Corporation is hereby ENJOINED from disturbing the peaceful possession of the farmer-beneficiaries with CLOAs. The Decision of the Court of Appeals dated June 28, 1994 in CA-G.R. CV No. 38182 is AFFIRMED insofar as the award of nominal damages is concerned. The Department of Environment and Natural Resources and the Department of Agrarian Reform, in coordination with the farmer-beneficiaries identified by the DAR, are URGED to formulate a community-based watershed plan for the management and rehabilitation of Barangay Casile. SO ORDERED. Davide, Jr., C.J., (Chairman), Ynares-Santiago, Corona, and Carpio-Morales, JJ., concur.

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Republic of the Philippines SUPREME COURT Manila THIRD DIVISION

G.R. No. 110120 March 16, 1994 LAGUNA LAKE DEVELOPMENT AUTHORITY, petitioner, vs. COURT OF APPEALS, HON. MANUEL JN. SERAPIO, Presiding Judge RTC, Branch 127, Caloocan City, HON. MACARIO A. ASISTIO, JR., City Mayor of Caloocan and/or THE CITY GOVERNMENT OF CALOOCAN,respondents. Alberto N. Hidalgo and Ma. Teresa T. Oledan for petitioner. The City Legal Officer & Chief, Law Department for Mayor Macario A. Asistio, Jr. and the City Government of Caloocan.

ROMERO, J.: The clash between the responsibility of the City Government of Caloocan to dispose off the 350 tons of garbage it collects daily and the growing concern and sensitivity to a pollution-free environment of the residents of Barangay Camarin, Tala Estate, Caloocan City where these tons of garbage are dumped everyday is the hub of this controversy elevated by the protagonists to the Laguna Lake Development Authority (LLDA) for adjudication. The instant case stemmed from an earlier petition filed with this Court by Laguna Lake Development Authority (LLDA for short) docketed as G.R. No. 107542 against the City Government of Caloocan, et al. In the Resolution of November 10, 1992, this Court referred G.R. No. 107542 to the Court of Appeals for appropriate disposition. Docketed therein as CA-G.R. SP 1 No. 29449, the Court of Appeals, in a decision promulgated on January 29, 1993 ruled that the LLDA has no power and authority to issue a cease and desist order enjoining the dumping of garbage in Barangay Camarin, Tala Estate, Caloocan City. The LLDA now seeks, in this petition, a review of the decision of the Court of Appeals. The facts, as disclosed in the records, are undisputed. On March 8, 1991, the Task Force Camarin Dumpsite of Our Lady of Lourdes Parish, Barangay Camarin, Caloocan 2 City, filed a letter-complaint with the Laguna Lake Development Authority seeking to stop the operation of the 8.6hectare open garbage dumpsite in Tala Estate, Barangay Camarin, Caloocan City due to its harmful effects on the health of the residents and the possibility of pollution of the water content of the surrounding area. On November 15, 1991, the LLDA conducted an on-site investigation, monitoring and test sampling of the 3 leachate that seeps from said dumpsite to the nearby creek which is a tributary of the Marilao River. The LLDA Legal and Technical personnel found that the City Government of Caloocan was maintaining an open dumpsite at the Camarin area without first securing an Environmental Compliance Certificate (ECC) from the Environmental Management Bureau (EMB) of the Department of Environment and Natural Resources, as required under 4 5 Presidential Decree No. 1586, and clearance from LLDA as required under Republic Act No. 4850, as amended by 6 Presidential Decree No. 813 and Executive Order No. 927, series of 1983. After a public hearing conducted on December 4, 1991, the LLDA, acting on the complaint of Task Force Camarin Dumpsite, found that the water collected from the leachate and the receiving streams could considerably affect the quality, in turn, of the receiving waters since it indicates the presence of bacteria, other than coliform, which may have 7 contaminated the sample during collection or handling. On December 5, 1991, the LLDA issued a Cease and Desist 8 Order ordering the City Government of Caloocan, Metropolitan Manila Authority, their contractors, and other entities, to completely halt, stop and desist from dumping any form or kind of garbage and other waste matter at the Camarin dumpsite.

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The dumping operation was forthwith stopped by the City Government of Caloocan. However, sometime in August 1992 the dumping operation was resumed after a meeting held in July 1992 among the City Government of Caloocan, the representatives of Task Force Camarin Dumpsite and LLDA at the Office of Environmental Management Bureau Director Rodrigo U. Fuentes failed to settle the problem. After an investigation by its team of legal and technical personnel on August 14, 1992, the LLDA issued another order reiterating the December 5, 1991, order and issued an Alias Cease and Desist Order enjoining the City Government of Caloocan from continuing its dumping operations at the Camarin area. On September 25, 1992, the LLDA, with the assistance of the Philippine National Police, enforced its Alias Cease and Desist Order by prohibiting the entry of all garbage dump trucks into the Tala Estate, Camarin area being utilized as a dumpsite. Pending resolution of its motion for reconsideration earlier filed on September 17, 1992 with the LLDA, the City Government of Caloocan filed with the Regional Trial Court of Caloocan City an action for the declaration of nullity of the cease and desist order with prayer for the issuance of writ of injunction, docketed as Civil Case No. C-15598. In its complaint, the City Government of Caloocan sought to be declared as the sole authority empowered to promote the health and safety and enhance the right of the people in Caloocan City to a balanced ecology within its territorial 9 jurisdiction. On September 25, 1992, the Executive Judge of the Regional Trial Court of Caloocan City issued a temporary restraining order enjoining the LLDA from enforcing its cease and desist order. Subsequently, the case was raffled to the Regional Trial Court, Branch 126 of Caloocan which, at the time, was presided over by Judge Manuel Jn. Serapio of the Regional Trial Court, Branch 127, the pairing judge of the recently-retired presiding judge. The LLDA, for its part, filed on October 2, 1992 a motion to dismiss on the ground, among others, that under Republic Act No. 3931, as amended by Presidential Decree No. 984, otherwise known as the Pollution Control Law, the cease and desist order issued by it which is the subject matter of the complaint is reviewable both upon the law and the 10 facts of the case by the Court of Appeals and not by the Regional Trial Court. On October 12, 1992 Judge Manuel Jn. Serapio issued an order consolidating Civil Case No. C-15598 with Civil Case No. C-15580, an earlier case filed by the Task Force Camarin Dumpsite entitled "Fr. John Moran, et al. vs. Hon. Macario Asistio." The LLDA, however, maintained during the trial that the foregoing cases, being independent of each other, should have been treated separately. On October 16, 1992, Judge Manuel Jn. Serapio, after hearing the motion to dismiss, issued in the consolidated 11 cases an order denying LLDA's motion to dismiss and granting the issuance of a writ of preliminary injunction enjoining the LLDA, its agent and all persons acting for and on its behalf, from enforcing or implementing its cease and desist order which prevents plaintiff City of Caloocan from dumping garbage at the Camarin dumpsite during the pendency of this case and/or until further orders of the court. On November 5, 1992, the LLDA filed a petition for certiorari, prohibition and injunction with prayer for restraining order with the Supreme Court, docketed as G.R. No. 107542, seeking to nullify the aforesaid order dated October 16, 1992 issued by the Regional Trial Court, Branch 127 of Caloocan City denying its motion to dismiss. The Court, acting on the petition, issued a Resolution on November 10, 1992 referring the case to the Court of Appeals for proper disposition and at the same time, without giving due course to the petition, required the respondents to comment on the petition and file the same with the Court of Appeals within ten (10) days from notice. In the meantime, the Court issued a temporary restraining order, effective immediately and continuing until further orders from it, ordering the respondents: (1) Judge Manuel Jn. Serapio, Presiding Judge, Regional Trial Court, Branch 127, Caloocan City to cease and desist from exercising jurisdiction over the case for declaration of nullity of the cease and desist order issued by the Laguna Lake Development Authority (LLDA); and (2) City Mayor of Caloocan and/or the City Government of Caloocan to cease and desist from dumping its garbage at the Tala Estate, Barangay Camarin, Caloocan City. Respondents City Government of Caloocan and Mayor Macario A. Asistio, Jr. filed on November 12, 1992 a motion for reconsideration and/or to quash/recall the temporary restraining order and an urgent motion for reconsideration alleging that ". . . in view of the calamitous situation that would arise if the respondent city government fails to collect 350 tons of garbage daily for lack of dumpsite (i)t is therefore, imperative that the issue be resolved with dispatch or with sufficient leeway to allow the respondents to find alternative solutions to this garbage problem." On November 17, 1992, the Court issued a Resolution directing the Court of Appeals to immediately set the case for hearing for the purpose of determining whether or not the temporary restraining order issued by the Court should
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be lifted and what conditions, if any, may be required if it is to be so lifted or whether the restraining order should be maintained or converted into a preliminary injunction. The Court of Appeals set the case for hearing on November 27, 1992, at 10:00 in the morning at the Hearing Room, 14 3rd Floor, New Building, Court of Appeals. After the oral argument, a conference was set on December 8, 1992 at 10:00 o'clock in the morning where the Mayor of Caloocan City, the General Manager of LLDA, the Secretary of DENR or his duly authorized representative and the Secretary of DILG or his duly authorized representative were required to appear. It was agreed at the conference that the LLDA had until December 15, 1992 to finish its study and review of respondent's technical plan with respect to the dumping of its garbage and in the event of a rejection of respondent's technical plan or a failure of settlement, the parties will submit within 10 days from notice their respective memoranda 15 on the merits of the case, after which the petition shall be deemed submitted for resolution. Notwithstanding such efforts, the parties failed to settle the dispute. On April 30, 1993, the Court of Appeals promulgated its decision holding that: (1) the Regional Trial Court has no jurisdiction on appeal to try, hear and decide the action for annulment of LLDA's cease and desist order, including the issuance of a temporary restraining order and preliminary injunction in relation thereto, since appeal therefrom is within the exclusive and appellate jurisdiction of the Court of Appeals under Section 9, par. (3), of Batas Pambansa Blg. 129; and (2) the Laguna Lake Development Authority has no power and authority to issue a cease and desist order under its enabling law, Republic Act No. 4850, as amended by P.D. No. 813 and Executive Order No. 927, series of 1983. The Court of Appeals thus dismissed Civil Case No. 15598 and the preliminary injunction issued in the said case was set aside; the cease and desist order of LLDA was likewise set aside and the temporary restraining order enjoining the City Mayor of Caloocan and/or the City Government of Caloocan to cease and desist from dumping its garbage at the Tala Estate, Barangay Camarin, Caloocan City was lifted, subject, however, to the condition that any future dumping of garbage in said area, shall be in conformity with the procedure and protective works contained in the proposal attached to the records of this case and found on pages 152-160 of the Rollo, which was thereby adopted by reference and made an integral part of the decision, until the corresponding restraining and/or injunctive relief is granted by the proper Court upon LLDA's institution of the necessary legal proceedings. Hence, the Laguna Lake Development Authority filed the instant petition for review on certiorari, now docketed as G.R. No. 110120, with prayer that the temporary restraining order lifted by the Court of Appeals be re-issued until after final determination by this Court of the issue on the proper interpretation of the powers and authority of the LLDA under its enabling law. On July, 19, 1993, the Court issued a temporary restraining order enjoining the City Mayor of Caloocan and/or the City Government of Caloocan to cease and desist from dumping its garbage at the Tala Estate, Barangay Camarin, Caloocan City, effective as of this date and containing until otherwise ordered by the Court. It is significant to note that while both parties in this case agree on the need to protect the environment and to maintain the ecological balance of the surrounding areas of the Camarin open dumpsite, the question as to which agency can lawfully exercise jurisdiction over the matter remains highly open to question. The City Government of Caloocan claims that it is within its power, as a local government unit, pursuant to the 17 general welfare provision of the Local Government Code, to determine the effects of the operation of the dumpsite on the ecological balance and to see that such balance is maintained. On the basis of said contention, it questioned, from the inception of the dispute before the Regional Trial Court of Caloocan City, the power and authority of the LLDA to issue a cease and desist order enjoining the dumping of garbage in the Barangay Camarin over which the City Government of Caloocan has territorial jurisdiction. The Court of Appeals sustained the position of the City of Caloocan on the theory that Section 7 of Presidential Decree No. 984, otherwise known as the Pollution Control law, authorizing the defunct National Pollution Control Commission to issue an ex-parte cease and desist order was not incorporated in Presidential Decree No. 813 nor in Executive Order No. 927, series of 1983. The Court of Appeals ruled that under Section 4, par. (d), of Republic Act No. 4850, as amended, the LLDA is instead required "to institute the necessary legal proceeding against any person who shall commence to implement or continue implementation of any project, plan or program within the Laguna de Bay region without previous clearance from the Authority." The LLDA now assails, in this partition for review, the abovementioned ruling of the Court of Appeals, contending that, as an administrative agency which was granted regulatory and adjudicatory powers and functions by Republic Act No. 4850 and its amendatory laws, Presidential Decree No. 813 and Executive Order No. 927, series of 1983, it is
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invested with the power and authority to issue a cease and desist order pursuant to Section 4 par. (c), (d), (e), (f) and (g) of Executive Order No. 927 series of 1983 which provides, thus: Sec. 4. Additional Powers and Functions. The authority shall have the following powers and functions: xxx xxx xxx (c) Issue orders or decisions to compel compliance with the provisions of this Executive Order and its implementing rules and regulations only after proper notice and hearing. (d) Make, alter or modify orders requiring the discontinuance of pollution specifying the conditions and the time within which such discontinuance must be accomplished. (e) Issue, renew, or deny permits, under such conditions as it may determine to be reasonable, for the prevention and abatement of pollution, for the discharge of sewage, industrial waste, or for the installation or operation of sewage works and industrial disposal system or parts thereof. (f) After due notice and hearing, the Authority may also revoke, suspend or modify any permit issued under this Order whenever the same is necessary to prevent or abate pollution. (g) Deputize in writing or request assistance of appropriate government agencies or instrumentalities for the purpose of enforcing this Executive Order and its implementing rules and regulations and the orders and decisions of the Authority. The LLDA claims that the appellate court deliberately suppressed and totally disregarded the above provisions of Executive Order No. 927, series of 1983, which granted administrative quasi-judicial functions to LLDA on pollution abatement cases. In light of the relevant environmental protection laws cited which are applicable in this case, and the corresponding overlapping jurisdiction of government agencies implementing these laws, the resolution of the issue of whether or not the LLDA has the authority and power to issue an order which, in its nature and effect was injunctive, necessarily requires a determination of the threshold question: Does the Laguna Lake Development Authority, under its Charter and its amendatory laws, have the authority to entertain the complaint against the dumping of garbage in the open dumpsite in Barangay Camarin authorized by the City Government of Caloocan which is allegedly endangering the health, safety, and welfare of the residents therein and the sanitation and quality of the water in the area brought about by exposure to pollution caused by such open garbage dumpsite? The matter of determining whether there is such pollution of the environment that requires control, if not prohibition, of the operation of a business establishment is essentially addressed to the Environmental Management Bureau (EMB) 18 of the DENR which, by virtue of Section 16 of Executive Order No. 192, series of 1987, has assumed the powers and functions of the defunct National Pollution Control Commission created under Republic Act No. 3931. Under said Executive Order, a Pollution Adjudication Board (PAB) under the Office of the DENR Secretary now assumes the 19 powers and functions of the National Pollution Control Commission with respect to adjudication of pollution cases. As a general rule, the adjudication of pollution cases generally pertains to the Pollution Adjudication Board (PAB), except in cases where the special law provides for another forum. It must be recognized in this regard that the LLDA, as a specialized administrative agency, is specifically mandated under Republic Act No. 4850 and its amendatory 20 laws to carry out and make effective the declared national policy of promoting and accelerating the development and balanced growth of the Laguna Lake area and the surrounding provinces of Rizal and Laguna and the cities of 21 San Pablo, Manila, Pasay, Quezon and Caloocan with due regard and adequate provisions for environmental management and control, preservation of the quality of human life and ecological systems, and the prevention of undue ecological disturbances, deterioration and pollution . Under such a broad grant and power and authority, the LLDA, by virtue of its special charter, obviously has the responsibility to protect the inhabitants of the Laguna Lake region from the deleterious effects of pollutants emanating from the discharge of wastes from the surrounding areas. In carrying out the aforementioned declared policy, the LLDA is mandated, among others, to pass upon and approve or disapprove all plans, programs, and projects proposed by local government offices/agencies within the region, public corporations, and private persons or enterprises where such plans, programs and/or projects are related to 22 those of the LLDA for the development of the region. In the instant case, when the complainant Task Force Camarin Dumpsite of Our Lady of Lourdes Parish, Barangay Camarin, Caloocan City, filed its letter-complaint before the LLDA, the latter's jurisdiction under its charter was validly invoked by complainant on the basis of its allegation that the open dumpsite project of the City Government of

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Caloocan in Barangay Camarin was undertaken without a clearance from the LLDA, as required under Section 4, par. (d), of Republic Act. No. 4850, as amended by P.D. No. 813 and Executive Order No. 927. While there is also an allegation that the said project was without an Environmental Compliance Certificate from the Environmental Management Bureau (EMB) of the DENR, the primary jurisdiction of the LLDA over this case was recognized by the Environmental Management Bureau of the DENR when the latter acted as intermediary at the meeting among the representatives of the City Government of Caloocan, Task Force Camarin Dumpsite and LLDA sometime in July 1992 to discuss the possibility of re-opening the open dumpsite. Having thus resolved the threshold question, the inquiry then narrows down to the following issue: Does the LLDA have the power and authority to issue a "cease and desist" order under Republic Act No. 4850 and its amendatory laws, on the basis of the facts presented in this case, enjoining the dumping of garbage in Tala Estate, Barangay Camarin, Caloocan City. The irresistible answer is in the affirmative. The cease and desist order issued by the LLDA requiring the City Government of Caloocan to stop dumping its garbage in the Camarin open dumpsite found by the LLDA to have been done in violation of Republic Act No. 4850, 23 as amended, and other relevant environment laws, cannot be stamped as an unauthorized exercise by the LLDA of injunctive powers. By its express terms, Republic Act No. 4850, as amended by P.D. No. 813 and Executive Order No. 927, series of 1983, authorizes the LLDA to "make, alter or modify order requiring the discontinuance or 24 pollution." (Emphasis supplied) Section 4, par. (d) explicitly authorizes the LLDA to makewhatever order may be necessary in the exercise of its jurisdiction. To be sure, the LLDA was not expressly conferred the power "to issue and ex-parte cease and desist order" in a language, as suggested by the City Government of Caloocan, similar to the express grant to the defunct National Pollution Control Commission under Section 7 of P.D. No. 984 which, admittedly was not reproduced in P.D. No. 813 and E.O. No. 927, series of 1983. However, it would be a mistake to draw therefrom the conclusion that there is a denial of the power to issue the order in question when the power "to make, alter or modify orders requiring the discontinuance of pollution" is expressly and clearly bestowed upon the LLDA by Executive Order No. 927, series of 1983. Assuming arguendo that the authority to issue a "cease and desist order" were not expressly conferred by law, there 25 is jurisprudence enough to the effect that the rule granting such authority need not necessarily be express. While it is a fundamental rule that an administrative agency has only such powers as are expressly granted to it by law, it is likewise a settled rule that an administrative agency has also such powers as are necessarily implied in the exercise 26 of its express powers. In the exercise, therefore, of its express powers under its charter as a regulatory and quasijudicial body with respect to pollution cases in the Laguna Lake region, the authority of the LLDA to issue a "cease and desist order" is, perforce, implied. Otherwise, it may well be reduced to a "toothless" paper agency. In this connection, it must be noted that in Pollution Adjudication Board v. Court of Appeals, et al., the Court ruled that the Pollution Adjudication Board (PAB) has the power to issue an ex-parte cease and desist order when there is prima facie evidence of an establishment exceeding the allowable standards set by the anti-pollution laws of the country. The ponente, Associate Justice Florentino P. Feliciano, declared: Ex parte cease and desist orders are permitted by law and regulations in situations like that here presented precisely because stopping the continuous discharge of pollutive and untreated effluents into the rivers and other inland waters of the Philippines cannot be made to wait until protracted litigation over the ultimate correctness or propriety of such orders has run its full course, including multiple and sequential appeals such as those which Solar has taken, which of course may take several years. The relevant pollution control statute and implementing regulations were enacted and promulgated in the exercise of that pervasive, sovereign power to protect the safety, health, and general welfare and comfort of the public, as well as the protection of plant and animal life, commonly designated as the police power. It is a constitutional commonplace that the ordinary requirements of procedural due process yield to the necessities of protecting vital public interests like those here involved, through the exercise of police power. . . . The immediate response to the demands of "the necessities of protecting vital public interests" gives vitality to the statement on ecology embodied in the Declaration of Principles and State Policies or the 1987 Constitution. Article II, Section 16 which provides: The State shall protect and advance the right of the people to a balanced and healthful ecology in accord with the rhythm and harmony of nature.
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As a constitutionally guaranteed right of every person, it carries the correlative duty of non-impairment. This is but in consonance with the declared policy of the state "to protect and promote the right to health of the people and instill 28 health consciousness among them." It is to be borne in mind that the Philippines is party to the Universal Declaration of Human Rights and the Alma Conference Declaration of 1978 which recognize health as a fundamental 29 human right. The issuance, therefore, of the cease and desist order by the LLDA, as a practical matter of procedure under the circumstances of the case, is a proper exercise of its power and authority under its charter and its amendatory laws. Had the cease and desist order issued by the LLDA been complied with by the City Government of Caloocan as it did in the first instance, no further legal steps would have been necessary. The charter of LLDA, Republic Act No. 4850, as amended, instead of conferring upon the LLDA the means of directly enforcing such orders, has provided under its Section 4 (d) the power to institute "necessary legal proceeding against any person who shall commence to implement or continue implementation of any project, plan or program within the Laguna de Bay region without previous clearance from the LLDA." Clearly, said provision was designed to invest the LLDA with sufficiently broad powers in the regulation of all projects initiated in the Laguna Lake region, whether by the government or the private sector, insofar as the implementation of these projects is concerned. It was meant to deal with cases which might possibly arise where decisions or orders issued pursuant to the exercise of such broad powers may not be obeyed, resulting in the thwarting of its laudabe objective. To meet such contingencies, then the writs of mandamus and injunction which are beyond the power of the LLDA to issue, may be sought from the proper courts. Insofar as the implementation of relevant anti-pollution laws in the Laguna Lake region and its surrounding provinces, cities and towns are concerned, the Court will not dwell further on the related issues raised which are more appropriately addressed to an administrative agency with the special knowledge and expertise of the LLDA. WHEREFORE, the petition is GRANTED. The temporary restraining order issued by the Court on July 19, 1993 enjoining the City Mayor of Caloocan and/or the City Government of Caloocan from dumping their garbage at the Tala Estate, Barangay Camarin, Caloocan City is hereby made permanent. SO ORDERED. Feliciano, Bidin, Melo and Vitug, JJ., concur.

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Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-75697 June 18, 1987 VALENTIN TIO doing business under the name and style of OMI ENTERPRISES, petitioner, vs. VIDEOGRAM REGULATORY BOARD, MINISTER OF FINANCE, METRO MANILA COMMISSION, CITY MAYOR and CITY TREASURER OF MANILA, respondents. Nelson Y. Ng for petitioner. The City Legal Officer for respondents City Mayor and City Treasurer.

MELENCIO-HERRERA, J.: This petition was filed on September 1, 1986 by petitioner on his own behalf and purportedly on behalf of other videogram operators adversely affected. It assails the constitutionality of Presidential Decree No. 1987 entitled "An Act Creating the Videogram Regulatory Board" with broad powers to regulate and supervise the videogram industry (hereinafter briefly referred to as the BOARD). The Decree was promulgated on October 5, 1985 and took effect on April 10, 1986, fifteen (15) days after completion of its publication in the Official Gazette. On November 5, 1985, a month after the promulgation of the abovementioned decree, Presidential Decree No. 1994 amended the National Internal Revenue Code providing, inter alia: SEC. 134. Video Tapes. There shall be collected on each processed video-tape cassette, ready for playback, regardless of length, an annual tax of five pesos; Provided, That locally manufactured or imported blank video tapes shall be subject to sales tax. On October 23, 1986, the Greater Manila Theaters Association, Integrated Movie Producers, Importers and Distributors Association of the Philippines, and Philippine Motion Pictures Producers Association, hereinafter collectively referred to as the Intervenors, were permitted by the Court to intervene in the case, over petitioner's opposition, upon the allegations that intervention was necessary for the complete protection of their rights and that their "survival and very existence is threatened by the unregulated proliferation of film piracy." The Intervenors were thereafter allowed to file their Comment in Intervention. The rationale behind the enactment of the DECREE, is set out in its preambular clauses as follows: 1. WHEREAS, the proliferation and unregulated circulation of videograms including, among others, videotapes, discs, cassettes or any technical improvement or variation thereof, have greatly prejudiced the operations of moviehouses and theaters, and have caused a sharp decline in theatrical attendance by at least forty percent (40%) and a tremendous drop in the collection of sales, contractor's specific, amusement and other taxes, thereby resulting in substantial losses estimated at P450 Million annually in government revenues; 2. WHEREAS, videogram(s) establishments collectively earn around P600 Million per annum from rentals, sales and disposition of videograms, and such earnings have not been subjected to tax, thereby depriving the Government of approximately P180 Million in taxes each year; 3. WHEREAS, the unregulated activities of videogram establishments have also affected the viability of the movie industry, particularly the more than 1,200 movie houses and theaters throughout the country, and occasioned industry-wide displacement and unemployment due to the shutdown of numerous moviehouses and theaters; 4. "WHEREAS, in order to ensure national economic recovery, it is imperative for the Government to create an environment conducive to growth and development of all business industries, including the movie industry which has an accumulated investment of about P3 Billion;

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5. WHEREAS, proper taxation of the activities of videogram establishments will not only alleviate the dire financial condition of the movie industry upon which more than 75,000 families and 500,000 workers depend for their livelihood, but also provide an additional source of revenue for the Government, and at the same time rationalize the heretofore uncontrolled distribution of videograms; 6. WHEREAS, the rampant and unregulated showing of obscene videogram features constitutes a clear and present danger to the moral and spiritual well-being of the youth, and impairs the mandate of the Constitution for the State to support the rearing of the youth for civic efficiency and the development of moral character and promote their physical, intellectual, and social well-being; 7. WHEREAS, civic-minded citizens and groups have called for remedial measures to curb these blatant malpractices which have flaunted our censorship and copyright laws; 8. WHEREAS, in the face of these grave emergencies corroding the moral values of the people and betraying the national economic recovery program, bold emergency measures must be adopted with dispatch; ... (Numbering of paragraphs supplied). Petitioner's attack on the constitutionality of the DECREE rests on the following grounds: 1. Section 10 thereof, which imposes a tax of 30% on the gross receipts payable to the local government is a RIDER and the same is not germane to the subject matter thereof; 2. The tax imposed is harsh, confiscatory, oppressive and/or in unlawful restraint of trade in violation of the due process clause of the Constitution; 3. There is no factual nor legal basis for the exercise by the President of the vast powers conferred upon him by Amendment No. 6; 4. There is undue delegation of power and authority; 5. The Decree is an ex-post facto law; and 6. There is over regulation of the video industry as if it were a nuisance, which it is not. We shall consider the foregoing objections in seriatim. 1. The Constitutional requirement that "every bill shall embrace only one subject which shall be expressed in the title thereof" 1 is sufficiently complied with if the title be comprehensive enough to include the general purpose which a statute seeks to achieve. It is not necessary that the title express each and every end that the statute wishes to accomplish. The requirement is satisfied if all the parts of the statute are related, and are germane to the subject matter expressed in the title, or as long as they are not inconsistent with or foreign to the general subject and 2 title. An act having a single general subject, indicated in the title, may contain any number of provisions, no matter how diverse they may be, so long as they are not inconsistent with or foreign to the general subject, and may be considered in furtherance of such subject by providing for the method and means of carrying out the general 3 object." The rule also is that the constitutional requirement as to the title of a bill should not be so narrowly 4 construed as to cripple or impede the power of legislation. It should be given practical rather than technical 5 construction. Tested by the foregoing criteria, petitioner's contention that the tax provision of the DECREE is a rider is without merit. That section reads, inter alia: Section 10. Tax on Sale, Lease or Disposition of Videograms. Notwithstanding any provision of law to the contrary, the province shall collect a tax of thirty percent (30%) of the purchase price or rental rate, as the case may be, for every sale, lease or disposition of a videogram containing a reproduction of any motion picture or audiovisual program. Fifty percent (50%) of the proceeds of the tax collected shall accrue to the province, and the other fifty percent (50%) shall acrrue to the municipality where the tax is collected; PROVIDED, That in Metropolitan Manila, the tax shall be shared equally by the City/Municipality and the Metropolitan Manila Commission. xxx xxx xxx

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The foregoing provision is allied and germane to, and is reasonably necessary for the accomplishment of, the general object of the DECREE, which is the regulation of the video industry through the Videogram Regulatory Board as expressed in its title. The tax provision is not inconsistent with, nor foreign to that general subject and title. As a tool 6 for regulation it is simply one of the regulatory and control mechanisms scattered throughout the DECREE. The express purpose of the DECREE to include taxation of the video industry in order to regulate and rationalize the heretofore uncontrolled distribution of videograms is evident from Preambles 2 and 5, supra. Those preambles explain the motives of the lawmaker in presenting the measure. The title of the DECREE, which is the creation of the Videogram Regulatory Board, is comprehensive enough to include the purposes expressed in its Preamble and reasonably covers all its provisions. It is unnecessary to express all those objectives in the title or that the latter be an 7 index to the body of the DECREE. 2. Petitioner also submits that the thirty percent (30%) tax imposed is harsh and oppressive, confiscatory, and in restraint of trade. However, it is beyond serious question that a tax does not cease to be valid merely because it 8 regulates, discourages, or even definitely deters the activities taxed. The power to impose taxes is one so unlimited in force and so searching in extent, that the courts scarcely venture to declare that it is subject to any restrictions 9 whatever, except such as rest in the discretion of the authority which exercises it. In imposing a tax, the legislature acts upon its constituents. This is, in general, a sufficient security against erroneous and oppressive taxation. 10 The tax imposed by the DECREE is not only a regulatory but also a revenue measure prompted by the realization that earnings of videogram establishments of around P600 million per annum have not been subjected to tax, thereby depriving the Government of an additional source of revenue. It is an end-user tax, imposed on retailers for every videogram they make available for public viewing. It is similar to the 30% amusement tax imposed or borne by the movie industry which the theater-owners pay to the government, but which is passed on to the entire cost of the admission ticket, thus shifting the tax burden on the buying or the viewing public. It is a tax that is imposed uniformly on all videogram operators. The levy of the 30% tax is for a public purpose. It was imposed primarily to answer the need for regulating the video industry, particularly because of the rampant film piracy, the flagrant violation of intellectual property rights, and the proliferation of pornographic video tapes. And while it was also an objective of the DECREE to protect the movie industry, the tax remains a valid imposition. The public purpose of a tax may legally exist even if the motive which impelled the legislature to impose the tax was to favor one industry over another. 11 It is inherent in the power to tax that a state be free to select the subjects of taxation, and it has been repeatedly held that "inequities which result from a singling out of one particular class for taxation or exemption infringe no constitutional limitation". 12 Taxation has been made the implement of the state's police power. 13 At bottom, the rate of tax is a matter better addressed to the taxing legislature. 3. Petitioner argues that there was no legal nor factual basis for the promulgation of the DECREE by the former President under Amendment No. 6 of the 1973 Constitution providing that "whenever in the judgment of the President ... , there exists a grave emergency or a threat or imminence thereof, or whenever the interim Batasang Pambansa or the regular National Assembly fails or is unable to act adequately on any matter for any reason that in his judgment requires immediate action, he may, in order to meet the exigency, issue the necessary decrees, orders, or letters of instructions, which shall form part of the law of the land." In refutation, the Intervenors and the Solicitor General's Office aver that the 8th "whereas" clause sufficiently summarizes the justification in that grave emergencies corroding the moral values of the people and betraying the national economic recovery program necessitated bold emergency measures to be adopted with dispatch. Whatever the reasons "in the judgment" of the then President, considering that the issue of the validity of the exercise of legislative power under the said Amendment still pends resolution in several other cases, we reserve resolution of the question raised at the proper time. 4. Neither can it be successfully argued that the DECREE contains an undue delegation of legislative power. The grant in Section 11 of the DECREE of authority to the BOARD to "solicit the direct assistance of other agencies and units of the government and deputize, for a fixed and limited period, the heads or personnel of such agencies and units to perform enforcement functions for the Board" is not a delegation of the power to legislate but merely a conferment of authority or discretion as to its execution, enforcement, and implementation. "The true distinction is between the delegation of power to make the law, which necessarily involves a discretion as to what it shall be, and conferring authority or discretion as to its execution to be exercised under and in pursuance of the law. The first cannot be done; to the latter, no valid objection can be made." 14 Besides, in the very language of the decree, the authority of the BOARD to solicit such assistance is for a "fixed and limited period" with the deputized agencies

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concerned being "subject to the direction and control of the BOARD." That the grant of such authority might be the source of graft and corruption would not stigmatize the DECREE as unconstitutional. Should the eventuality occur, the aggrieved parties will not be without adequate remedy in law. 5. The DECREE is not violative of the ex post facto principle. An ex post facto law is, among other categories, one which "alters the legal rules of evidence, and authorizes conviction upon less or different testimony than the law required at the time of the commission of the offense." It is petitioner's position that Section 15 of the DECREE in providing that: All videogram establishments in the Philippines are hereby given a period of forty-five (45) days after the effectivity of this Decree within which to register with and secure a permit from the BOARD to engage in the videogram business and to register with the BOARD all their inventories of videograms, including videotapes, discs, cassettes or other technical improvements or variations thereof, before they could be sold, leased, or otherwise disposed of. Thereafter any videogram found in the possession of any person engaged in the videogram business without the required proof of registration by the BOARD, shall be prima facie evidence of violation of the Decree, whether the possession of such videogram be for private showing and/or public exhibition. raises immediately a prima facie evidence of violation of the DECREE when the required proof of registration of any videogram cannot be presented and thus partakes of the nature of an ex post facto law. The argument is untenable. As this Court held in the recent case of Vallarta vs. Court of Appeals, et al. 15 ... it is now well settled that "there is no constitutional objection to the passage of a law providing that the presumption of innocence may be overcome by a contrary presumption founded upon the experience of human conduct, and enacting what evidence shall be sufficient to overcome such presumption of innocence" (People vs. Mingoa 92 Phil. 856 [1953] at 858-59, citing 1 COOLEY, A TREATISE ON THE CONSTITUTIONAL LIMITATIONS, 639-641). And the "legislature may enact that when certain facts have been proved that they shall be prima facie evidence of the existence of the guilt of the accused and shift the burden of proof provided there be a rational connection between the facts proved and the ultimate facts presumed so that the inference of the one from proof of the others is not unreasonable and arbitrary because of lack of connection between the two in common experience". 16 Applied to the challenged provision, there is no question that there is a rational connection between the fact proved, which is non-registration, and the ultimate fact presumed which is violation of the DECREE, besides the fact that the prima facie presumption of violation of the DECREE attaches only after a forty-five-day period counted from its effectivity and is, therefore, neither retrospective in character. 6. We do not share petitioner's fears that the video industry is being over-regulated and being eased out of existence as if it were a nuisance. Being a relatively new industry, the need for its regulation was apparent. While the underlying objective of the DECREE is to protect the moribund movie industry, there is no question that public welfare is at bottom of its enactment, considering "the unfair competition posed by rampant film piracy; the erosion of the moral fiber of the viewing public brought about by the availability of unclassified and unreviewed video tapes containing pornographic films and films with brutally violent sequences; and losses in government revenues due to the drop in theatrical attendance, not to mention the fact that the activities of video establishments are virtually untaxed since mere payment of Mayor's permit and municipal license fees are required to engage in business. 17 The enactment of the Decree since April 10, 1986 has not brought about the "demise" of the video industry. On the contrary, video establishments are seen to have proliferated in many places notwithstanding the 30% tax imposed. In the last analysis, what petitioner basically questions is the necessity, wisdom and expediency of the DECREE. These considerations, however, are primarily and exclusively a matter of legislative concern. Only congressional power or competence, not the wisdom of the action taken, may be the basis for declaring a statute invalid. This is as it ought to be. The principle of separation of powers has in the main wisely allocated the respective authority of each department and confined its jurisdiction to such a sphere. There would then be intrusion not allowable under the Constitution if on a matter left to the discretion of a coordinate branch, the judiciary would substitute its own. If there be adherence to the rule of law, as there ought to be, the last offender should be courts of justice, to which rightly litigants submit their controversy precisely to maintain unimpaired the supremacy of legal norms and prescriptions. The attack on the validity of the challenged provision likewise insofar as there may be objections, even if valid and cogent on its wisdom cannot be sustained. 18

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In fine, petitioner has not overcome the presumption of validity which attaches to a challenged statute. We find no clear violation of the Constitution which would justify us in pronouncing Presidential Decree No. 1987 as unconstitutional and void. WHEREFORE, the instant Petition is hereby dismissed. No costs. SO ORDERED. Teehankee, (C.J.), Yap, Fernan, Narvasa, Gutierrez, Jr., Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin, Sarmiento and Cortes, JJ., concur.

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Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 144109 February 17, 2003

ASSOCIATED COMMUNICATIONS & WIRELESS SERVICES UNITED BROADCASTING NETWORKS,petitioner, vs. NATIONAL TELECOMMUNICATIONS COMMISSION, respondent. DECISION PUNO, J.: For many years now, there has been a "pervading confusion in the state of affairs of the broadcast industry brought about by conflicting laws, decrees, executive orders and other pronouncements promulgated during the Martial Law 1 regime." The question that has taken a long life is whether the operation of a radio or television station requires a congressional franchise. The Court shall now lay to rest the issue. This is a petition for review on certiorari of the Court of Appeals January 31, 2000 decision and February 21, 2000 resolution affirming the January 13, 1999 decision of the National Telecommunications Commission (NTC for brevity). First, the facts. On November 11, 1931, Act No. 3846, entitled "An Act Providing for the Regulation of Radio Stations and Radio Communications in the Philippines and for Other Purposes," was enacted. Sec. 1 of the law reads, viz: "Sec. 1. No person, firm, company, association, or corporation shall construct, install, establish, or operate a radio transmitting station, or a radio receiving station used for commercial purposes, or a radio broadcasting station, without having first obtained a franchise therefor from the Congress of the Philippines..." Pursuant to the above provision, Congress enacted in 1965 R.A. No. 4551, entitled "An Act Granting Marcos J. Villaverde, Jr. and Winfred E. Villaverde a Franchise to Construct, Install, Maintain and Operate Public Radiotelephone and Radiotelegraph Coastal Stations, and Public Fixed and Public Based and Land Mobile Stations within the Philippines for the Reception and Transmission of Radiotelephone and Radiotelegraph for Domestic Communications and Provincial Telephone Systems in Certain Provinces." It gave the grantees a 50-year 2 franchise. In 1969, the franchise was transferred to petitioner Associated Communications & Wireless Services 3 United Broadcasting Network, Inc. (ACWS for brevity) through Congress Concurrent Resolution No. 58. Petitioner ACWS then engaged in the installation and operation of several radio stations around the country. In 1974, P.D. No. 576-A, "Regulating the Ownership and Operation of Radio and Television Stations and for other Purposes" was issued, with the following pertinent provisions on franchise of radio and television broadcasting systems: "Sec. 1. No radio station or television channel may obtain a franchise unless it has sufficient capital on the basis of equity for its operation for at least one year, including purchase of equipment. xxxxxxxxx Sec. 6. All franchises, grants, licenses, permits, certificates or other forms of authority to operate radio or television broadcasting systems shall terminate on December 31, 1981. Thereafter, irrespective of any franchise, grant, license, permit, certificate or other forms of authority to operate granted by any office, agency or person, no radio or television station shall be authorized to operate without the authority of the Board of Communications and the Secretary of Public Works and Communications or their successors who have the right and authority to assign to qualified parties frequencies, channels or other means of identifying broadcasting system; Provided, however, that any conflict over, or disagreement with a decision of the aforementioned authorities may be appealed finally to the Office of the President within fifteen days from the date the decision is received by the party in interest."

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A few years later or in 1979, E.O. No. 546 was issued. It integrated the Board of Communications and the Telecommunications Control Bureau under the Integrated Reorganization Plan of 1972 into the NTC. Among the powers vested in the NTC under Sec. 15 of E.O. No. 546 are the following: "a. Issue Certificate of Public Convenience for the operation of communication utilities and services, radio communications systems, wire or wireless telephone or telegraph system, radio and television broadcasting system and other similar public utilities; xxxxxxxxx c. Grant permits for the use of radio frequencies for wireless telephone and telegraph systems and radio communication systems including amateur radio stations and radio and television broadcasting systems; . . . " Upon termination of petitioners franchise on December 31, 1981 pursuant to P.D. No. 576 -A, it continued operating its radio stations under permits granted by the NTC. As these presidential issuances relating to the radio and television broadcasting industry brought about confusion as to whether the NTC could issue permits to radio and television broadcast stations without legislative franchise, the NTC sought the opinion of the Department of Justice (DOJ) on the matter. On June 20, 1991, the DOJ rendered Opinion No. 98, Series of 1991, viz: "We believe that under P.D. No. 576-A dated November 11, 1974 and prior to the issuance of E.O No. 546 dated July 23, 1979, the NTC, then Board of Communications, had no authority to issue permits or authorizations to operate radio and television broadcasting systems without a franchise first being obtained pursuant to Section 1 of Act No. 3846, as amended. A close reading of the provisions of Sections 1 and 6 of P.D. No. 576-A, supra, does not reveal any indication of a legislative intent to do away with the franchising requirement under Section 1 of Act No. 3846. In fact, a mere reading of Section 1 would readily indicate that a franchise was necessary for the operation of radio and television broadcasting systems as it expressly provided that no such franchise may be obtained unless the radio station or television channel has sufficient capital on the basis of equity for its operation for at least one year, including purchase of equipment. It is believed that the termination of all franchises granted for the operation of radio and television broadcasting systems effective December 31, 1981 and the vesting of the power to authorize the operation of any radio or television station upon the Board of Communications and the Secretary of Public Works and Communications and their successors under Section 6 of P.D. No. 576-A does not necessarily imply the abrogation of the requirement of obtaining a franchise under Section 1 of Act No. 3846, as amended, in the absence of a clear provision in P.D. No. 576-A providing to this effect. It should be noted that under Act No. 3846, as amended, a person, firm or entity desiring to operate a radio broadcasting station must obtain the following: (a) a franchise from Congress (Sec. 1); (b) a permit to construct or install a station from the Secretary of Commerce and Industry (Sec. 2); and (c) a license to operate the station also from the Secretary of Commerce and Industry (id.). The franchise is the privilege granted by the State through its legislative body and is subject to regulation by the State itself by virtue of its police power through its administrative agencies (RCPI vs. NTC, 150 SCRA 450). The permit and license are the administrative authorizations issued by the administrative agency in the exercise of regulation. It is clear that what was transferred to the Board of Communications and the Secretary of Commerce and Industry under Section 6 of P.D. No. 576-A was merely the regulatory powers vested solely in the Secretary of Commerce and Industry under Section 2 of Act No. 3846, as amended. The franchising authority was retained by the then incumbent President as repository of legislative power under Martial Law, as is clearly indicated in the first WHEREAS clause of P.D. No. 576-A to wit: WHEREAS, the President of the Philippines is empowered under the Constitution to review and approve franchises for public utilities. Of course, under the Constitution, said power (the power to review and approve franchises), belongs to the lawmaking body (Sec. 5, Art. XIV, 1973 Constitution; Sec. 11, Art. XII, 1987 Constitution). The corollary question to be resolved is: Has E.O. No 546 (which is a law issued pursuant to P.D. No. 1416, as amended by P.D. No. 1771, granting the then President continuing authority to reorganize the administrative structure of the national government) modified the franchising and licensing arrangement for radio and television broadcasting systems under P.D. No. 576-A? We believe so.

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E.O. No. 546 integrated the Board of Communications and the Telecommunications Bureau into a single entity known as the NTC (See Sec. 14), and vested the new body with broad powers, among them, the power to issue Certificates of Public Convenience for the operation of communications utilities, including radio and televisions broadcasting systems and the power to grant permits for the use of radio frequencies (Sec. 14[a] and [c], supra). Additionally, NTC was vested with broad rule making authority to encourage a larger and more effective use of communications, radio and television broadcasting facilities, and to maintain effective competition among private entities in these activities whenever the Commission finds it reasonably feas ible (Sec. 15[f]). In the recent case of Albano vs. Reyes (175 SCRA 264), the Supreme Court held that franchises issued by Congress are not required before each and every public utility may operate. Administrative agencies may be empowered by law to grant licenses for or to authorize the operation of certain public utilities. The Supreme Court stated that the provision in the Constitution (Art. XII, Sec. 11) that the issuance of a franchise, certificate or other form of authorization for the operation of a public utility shall be subject to amendment, alteration or repeal by Congress, does not necessarily imply . . . that only Congress has the power to grant such authorization. Our statute books are replete with laws granting specified agencies in the Executive Branch the power to issue such authorization for certain classes of public utilities. We believe that E.O. No. 546 is one law which authorizes an administrative agency, the NTC, to issue authorizations for the operation of radio and television broadcasting systems without need of a prior franchise issued by Congress. Based on all the foregoing, we hold the view that NTC is empowered under E.O. No. 546 to issue authorization and 5 permits to operate radio and television broadcasting system." However, on May 3, 1994, the NTC, the Committee on Legislative Franchises of Congress, and the Kapisanan ng mga Brodkaster sa Pilipinas of which petitioner is a member of good standing, entered into a Memorandum of Understanding (MOU) that requires a congressional franchise to operate radio and television stations. The MOU states, viz: "WHEREAS, under the provisions of Section 1 of Act No. 3846 (Radio Laws of the Philippines, as amended), only radio and television broadcast stations with legislative franchise are authorized to operate. WHEREAS, Executive Order No. 546, which created the National Telecommunications Commission (NTC) and abolished the Board of Communications (BOC) and the Telecommunications Control Bureau (TCB), and integrated the functions and prerogative of the latter two agencies into the National Telecommunications Commission (NTC); WHEREAS, the National Telecommunications Commission (NTC) is authorized to issue certificate of public convenience for the operation of radio and television broadcast stations; WHEREAS, there is a pervading confusion in the state of affairs of the broadcast industry brought about by conflicting laws, decrees, executive orders and other pronouncements promulgated during the Martial Law regime, the parties in their common desire to rationalize the broadcast industry, promote the interest of public welfare, avoid a vacuum in the delivery of broadcast services, and foremost to better serve the ends of press freedom, the parties hereto have agreed as follows: The NTC shall continue to issue and grant permits or authorizations to operate radio and television broadcast stations within their mandate under Section 15 of Executive Order No. 546, provided that such temporary permits or authorization to operate shall be valid for two (2) years within which the permittee shall be required to file an application for legislative franchise with Congress not later than December 31, 1994; provided finally, that if the permittee of the temporary permit or authorization to operate fails to secure the legislative franchise with Congress 6 within this period, the NTC shall not extend or renew its permit or authorization to operate any further." Prior to the December 31, 1994 deadline set by the MOU, petitioner filed with Congress an application for a franchise on December 20, 1994. Pending its approval, the NTC issued to petitioner a temporary permit dated July 7, 1995 to 7 operate a television station via Channel 25 of the UHF Band from June 29, 1995 to June 28, 1997. In 1996, the NTC authorized petitioner to increase the power output of Channel 25 from 1.0 kilowatt to 25 kilowatts after finding it 8 financially and technically capable; it also granted petitioner a permit to purchase radio transmitters/transceivers for 9 use in its television Channel 25 broadcasting. Shortly before the expiration of its temporary permit, petitioner applied 10 for its renewal on May 14, 1997. On October 28, 1997, the House Committee on Legislative Franchises of Congress replied to an inquiry of the NTCs Broadcast Division Chief regarding the franchise application of ACWS filed on December 20, 1994. The Committee certified that petitioners franchise application was not deliberated on by the 9th Congress because petitioner failed to 11 submit the required supporting documents. In the next Congress, petitioner did not re-file its application.

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The following month or on November 17, 1997, the NTCs Broadcast Service Department wrote to petitioner ordering it to submit a new congressional franchise for the operation of its seven radio stations and informing it that pending compliance, its application for temporary permits to operate these radio stations would be held in 12 abeyance. Petitioner failed to comply with the franchise requirement; it claims that it did not receive the November 17, 1997 letter. Despite the absence of a congressional franchise, the NTC notified petitioner on January 19, 1998 that its May 14, 1997 application for renewal of its temporary permit to operate television Channel 25 was approved and would be 13 14 released upon payment of the prescribed fee of P3,600.00. After paying said amount, however, the NTC refused to release to petitioner its renewed permit. Instead, the NTC commenced against petitioner Administrative Case No. 98-009 based on the November 17, 1997 letter. On February 26, 1998, the NTC issued an Order directing petitioner to show cause why its assigned frequency, television Channel 25, should not be recalled for lack of the required congressional franchise. Petitioner was also directed to cease and desist from operating Channel 25 unless 15 subsequently authorized by the NTC. In compliance with the February 26, 1998 Order, petitioner filed its Answer on March 17, 1998. In a hearing on April 17 22, 1998, petitioner presented evidence and asked for continuance of the presentation to May 20, 1998. On May 4, 1998, however, petitioner filed before the Court of Appeals a Petition for Mandamus, Prohibition, and Damages to compel the NTC to release its temporary permit to operate Channel 25 which was approved in January 1998. The appellate court denied the petition on September 30, 1998. Meantime, on August 17, 1998, the NTC issued Memorandum Circular No. 14-10-98 which reads, viz: "SUBJECT: Guidelines in the Renewal/Extension of Temporary Permit of Radio/TV Broadcast operators who failed to secure a legislative franchise conformably with the Memorandum of Understanding (MOU) dated May 3, 1994, entered into by and between the National Telecommunications and the Committee on Legislative Franchises, House of Representatives, and the Kapisanan ng mga Brodkaster sa Pilipinas (KBP). In compliance with the MOU and in order to clear the ambiguity surrounding the operation of broadcast operators who were not able to have their legislative franchise approved during the last congress, the following guidelines are hereby issued: 1. Existing broadcast operators who were not able to secure a legislative franchise up to this date are given up to December 31, 1999 within which to have their application for a legislative franchise bill approved by Congress. The franchise bill must be filed immediately but not later than November 30th of this year to give both Houses time to deliberate upon and recommend approval/disapproval thereof. 2. Broadcast operators affected by this circular must file their respective applications for renewal/extension of their Temporary Permits in the prescribed form together with the certification from the Committee on Legislative Franchises, House of Representatives that a franchise bill has indeed been filed prior to 30 November 1998. 3. In the event the permittee will not be able to have its franchise bill approved within the prescribed period, the NTC will no longer renew/extend its Temporary Permit and the Commission shall initiate the recall of its assigned frequency provided that due process of law is observed. 4. Henceforth, no application/petition for Certificate of Public Convenience (CPC) to establish, maintain and operate a broadcast station in the broadcast service shall be accepted for filing without showing that the applicant has an approved Legislative Franchise. This Memorandum Circular shall be published in one (1) newspaper of general circulation in the Philippines and shall take effect thirty (30) days from its publication. August 17, 1998, Quezon City, Philippines."
18 16

The Memorandum Circular was published in the Philippine Star on October 15, 1998. Well within the November 30, 1998 deadline under the Memorandum Circular, House Bill No. 3216, entitled "An Act Granting the ACWS-United Broadcasting Network, Inc. a Franchise to Construct, Install, Operate and Maintain Radio and Television Broadcasting Stations within the Philippines, and for other Purposes," was filed with the Legislative 19 Calendar Section, Bills and Index Division on September 2, 1998.

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On January 13, 1999, the NTC rendered a decision on Administrative Case No. 98-009 against petitioner, the dispositive portion of which reads: "WHEREFORE, for lack of a legal personality to justify the issuance of any permit or license to the respondent (ACWS), the respondent not having a valid legislative franchise, the Commission hereby renders judgment as follows: 1) Channel 25 assigned to herein respondent ACWS is hereby RECALLED; 2) Respondents application for renewal of its temporary permit to operate Channel 25 is hereby DENIED; and 3) Respondent is hereby ordered to CEASE and DESIST from further operating Channel 25." Petitioner sought recourse at the Court of Appeals which affirmed the NTC decision. Hence, this petition for review on certiorari on the following grounds: "I. THE COURT OF APPEALS ERRED IN UPHOLDING THE RULING OF THE NTC THAT A CONGRESSIONAL FRANCHISE IS A CONDITION SINE QUA NON IN THE OPERATION OF A RADIO AND TELEVISION BROADCASTING SYSTEM. II. THE COURT OF APPEALS ERRED IN NOT CONSIDERING OPINION 98 SERIES OF 1991 DATED JUNE 20, 1991 OF THE SECRETARY OF JUSTICE HOLDING THAT THE NTC MAY ISSUE AUTHORIZATION FOR THE OPERATION OF RADIO AND TELEVISION BROADCASTING SYSTEMS, WITHOUT THE NEED OF A PRIOR FRANCHISE ISSUED BY CONGRESS, AS BINDING ON THE NTC WHO REQUESTED FOR SAID OPINION AND IS NOT MERELY ADVISORY, AS IT IS PREDICATED ON A DECISION OF THIS HONORABLE COURT. III. THE COURT OF APPEALS ERRED IN CONSIDERING ACT NO. 3846 AS REQUIRING A FRANCHISE FROM CONGRESS FOR THE LAWFUL OPERATION OF RADIO OR TELEVISION BROADCASTING STATIONS WHEN CLEARLY ITS PROVISIONS COVER ONLY RADIO BUT IT DOES NOT INCLUDE TELEVISION STATIONS. IV. THE COURT OF APPEALS ERRED IN UPHOLDING THE RECALL OF THE FREQUENCY CHANNEL 25 PREVIOUSLY ASSIGNED TO THE PETITIONER AND/OR THE CANCELLATION OF ITS PERMIT TO OPERATE WHICH IS UNREASONABLE, UNFAIR, OPPRESSIVE, WHIMSICAL AND CONFISCATORY WHEN IT PREVIOUSLY ISSUED THE SAID PERMIT WITHOUT REQUIRING A LEGISLATIVE FRANCHISE. V. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT NTC CASE NO. 98-009 HAD BEEN RENDERED MOOT AND ACADEMIC WITH THE ADOPTION AND PROMULGATION BY THE NTC OF MEMORANDUM CIRCULAR NO. 14-10-98 DATED AUGUST 17, 1998 AS PETITIONER FILED THE APPLICATION FOR 21 LEGISLATIVE FRANCHISE PURSUANT THERETO." The petition is devoid of merit. We shall discuss together the first three assigned errors as they are interrelated. Petitioner stresses that Act. No. 3846 covers only the operation of radio and not television stations as Section 1 of the said law does not mention television stations in its coverage, viz:
20

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"Sec. 1. No person, firm, company, association or corporation shall construct, install, establish, or operate a radio transmitting station, or a radio receiving station used for commercial purposes, or a radio broadcasting station, without having first obtained a franchise therefor from the Congress of the Philippines" Petitioner observes that quite understandably, television stations were not included in Act No. 3846 because the law was enacted in 1931 when there was yet no television station in the Philippines. Following the rule in statutory construction that what is not included in the law is deemed excluded, petitioner avers that television stations are not covered by Act No. 3846. Petitioner notes that in fact, the NTC previously issued to it a temporary permit dated July 7, 1995 to operate Channel 25 from June 29, 1995 to June 28, 1997 without requiring a congressional franchise. Likewise, in 1996, the NTC issued to it a permit to increase its television operating power and to purchase a radio transmitter/transceiver for use in its television broadcasting, again without requiring a congressional franchise. Petitioner thus argues that, contrary to the January 19, 1999 decision of the NTC, its application for renewal of its temporary permit to operate television Channel 25 does not require a congressional franchise. In upholding the NTC decision, the Court of Appeals held that a congressional franchise is required for the operation of radio and television broadcasting stations as this requirement under Act No. 3846 was not expressly repealed by 22 P.D. No. 576-A nor E.O. No. 546. Citing Berces, Sr. v. Guingona, it ruled that without an express repeal, a subsequent law cannot be construed as repealing a prior law unless there is an irreconcilable inconsistency and 23 repugnancy in the language of the new and old laws, which petitioner was not able to show. The appellate court correctly ruled that a congressional franchise is necessary for petitioner to operate television Channel 25. Even assuming that Act No. 3846 applies only to radio stations and not to television stations as petitioner adamantly insists, the subsequent P.D. No. 576-A clearly shows in Section 1 that a franchise is required to operate radio as well as television stations, viz: "Sec. 1. No radio station or television channel may obtain a franchise unless it has sufficient capital on the basis of equity for its operation for at least one year, including purchase of equipment." (emphasis supplied) As pointed out in DOJ Opinion No. 98, there is nothing in P.D. No. 576-A that reveals any intention to do away with the requirement of a franchise for the operation of radio and television stations. Section 6 of P.D. No. 576-A merely identifies the regulatory agencies from whom authorizations, in addition to the required congressional franchise, must be secured after December 31, 1981, viz: "Sec. 6. All franchises, grants, licenses, permits, certificates or other forms of authority to operate radio or television broadcasting systems shall terminate on December 31, 1981. Thereafter, irrespective of any franchise, grant, license, permit, certificate or other forms of authority to operate granted by any office, agency or person, no radio or television station shall be authorized to operate without the authority of the Board of Communications and the Secretary of Public Works and Communications or their successors who have the right and authority to assign to qualified parties frequencies, channels or other means of identifying broadcasting system . . ." (emphasis supplied) To understand why it was necessary to identify these agencies, we turn a heedful eye on the laws regarding authorizations for the operation of radio and television stations that preceded P.D. No. 576-A. Act No. 3846 of 1931 provides, viz: "Sec. 1. No person, firm, company, association, or corporation shall construct, install, establish, or operate a radio transmitting station, or a radio receiving station used for commercial purposes, or a radio broadcasting station, without having first obtained a franchise therefor from the Congress of the Philippines: xxxxxxxxx Sec. 1-A. No person, firm, company, association or corporation shall possess or own transmitters or transceivers (combination transmitter-receiver), without registering the same with the Secretary of Public Works and Communications . . . and no person, firm, company, association or corporation shall construct or manufacture, or purchase radio transmitters or transceivers without a permit issued by the Secretary of Public Works and Communications. xxxxxxxxx Sec. 3. The Secretary of Public Works and Communications is hereby empowered to regulate the construction or manufacture, possession, control, sale and transfer of radio transmitters or transceivers (combination transmitterreceiver) and the establishment, use, the operation of all radio stations and of all forms of radio communications and transmissions within the Philippines. In addition to the above, he shall have the following specific powers and duties:

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xxxxxxxxx (c) He shall assign call letter and assign frequencies for each station licensed by him and for each station established by virtue of a franchise granted by the Congress of the Philippines and specify the stations to which each of such frequencies may be used;. . ." Shortly after the declaration of Martial Law, then President Marcos issued P.D. No. 1 dated September 24, 1972, through which the Integrated Reorganization Plan for the executive branch was adopted. Under the Plan, the Public Service Commission was abolished and its functions transferred to special regulatory boards, among which was the Board of Communications with the following functions: "5a. Issue Certificates of Public Convenience for the operation of communications utilities and services, radio communications systems . . ., radio and television broadcasting systems and other similar public utilities; xxxxxxxxx c. Grant permits for the use of radio frequencies for . . . radio and television broadcasting systems including amateur radio stations." With the creation of the Board of Communications under the Plan, it was no longer sufficient to secure authorization from the Secretary of Public Works and Communications as provided in Act No. 3846. The Boards authorization was also necessary. Thus, P.D. No. 576-A provides in Section 6 that radio and television station operators must secure authorization from both the Secretary of Public Works and Communications and the Board of Communications. Dispensing with the requirement of a congressional franchise is not in line with the declared purposes of P.D. No. 576-A, viz: "WHEREAS, it has been observed that some public utilities, especially radio and television stations, have a tendency toward monopoly in ownership and operation to such an extent that a region or section of the country may be covered by any number of such broadcast stations, all or most of which are owned, operated or managed by one person or corporation; xxxxxxxxx WHEREAS, on account of the limited number of frequencies available for broadcasting in the Philippines, it is necessary to regulate the ownership and operation of radio and television stations and provide measures that would enhance quality and viability in broadcasting and help serve the public interests; . . ." A textual interpretation of Section 6 of P.D. No. 576-A yields the same interpretation that after December 31, 1981, a franchise is still necessary to operate radio and television stations. Were it the intention of the law to do away with the requirement of a franchise after said date, then the phrase "(t)hereafter, irrespective of any franchise, grant, license, permit, certificate or other forms of authority to operate granted by any office, agency or person (emphasis supplied)" would not have been necessary because the first sentence of Section 6 already states that "(a)ll franchises, grants, licenses, permits, certificates or other forms of authority to operate radio or television broadcasting systems shall terminate on December 31, 1981." It is therefore already understood that these forms of authority have no more force and effect after December 31, 1981. If the intention were to do away with the franchise requirement, Section 6 would have simply laid down after the first sentence the requirements to operate radio and television stations after December 31, 1981, i.e., "no radio or television station shall be authorized to operate without the authority of the Board of Communications and the Secretary of Public Works and Communications." Instead, however, the phrase "irrespective of any franchise," was inserted to emphasize that a franchise or any other form of authorization from any office, agency or person does not suffice to operate radio and television stations because the authorizations of both the Board of Communications and the Secretary of Public Works and Communications are required as well. This interpretation adheres to the rule in statutory construction that words in a statute should not be construed as 24 surplusage if a reasonable construction which will give them some force and meaning is possible. Contrary to the opinion of the Secretary of Justice in DOJ Opinion No. 98, Series of 1991, the appellate court was correct in ruling that E.O. No. 546 which came after P.D. No. 576-A did not dispense with the requirement of a congressional franchise. It merely abolished the Board of Communications and the Telecommunications Control 25 Bureau under the Reorganization Plan and transferred their functions to the NTC, including the power to issue Certificates of Public Convenience (CPC) and grant permits for the use of frequencies, viz:

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"Sec. 15. a. Issue Certificate of Public Convenience for the operation of communication utilities and services, radio communications systems, wire or wireless telephone or telegraph system, radio and television broadcasting system and other similar public utilities; xxxxxxxxx c. Grant permits for the use of radio frequencies for wireless telephone and telegraph systems and radio communication systems including amateur radio stations and radio and television broadcasting systems; . . . " E.O. No. 546 defines the regulatory and technical aspect of the legal process preparatory to the full exercise of the privilege to operate radio and television stations, which is different from the grant of a franchise from Congress, viz: "The statutory functions of NTC may then be given effect as Congress prerogative to grant franchises under Act No. 3846 is upheld for they are distinct forms of authority. The former covers matters dealing mostly with the technical side of radio or television broadcasting, while the latter involves the exercise by the legislature of an exclusive power resulting in a franchise or a grant under authority of government, conferring a special right to do an act or series of acts of public concern (37 C.J.S., secs. 1, 14, pp. 144, 157). In fine, there being no clear showing that the laws here involved cannot stand together, the presumption is against inconsistency or repugnance, hence, against implied repeal of the earlier law by the later statute (Agujetas v. Court of 26 Appeals, 261 SCRA 17, 1996)." As we held in Radio Communication of the Philippines, Inc. v. National Telecommunications Commission, a franchise is distinguished from a CPC in that the former is a grant or privilege from the sovereign power, while the latter is a form of regulation through the administrative agencies, viz: "A franchise started out as a "royal privilege or (a) branch of the Kings prerogative, subsisting in the hands of a subject." This definition was given by Finch, adopted by Blackstone, and accepted by every authority since (State v. Twin Village Water Co., 98 Me 214, 56 A 763 [1903]). Today, a franchise, being merely a privilege emanating from the sovereign power of the state and owing its existence to a grant, is subject to regulation by the state itself by virtue 28 of its police power through its administrative agencies." Even prior to E.O. No. 546, the NTCs precursor, i.e., the Board of Communications, already had the function of issuing CPC under the Integrated Reorganization Plan. The CPC was required by the Board at the same time that P.D. No. 576-A required a franchise to operate radio and television stations. The function of the NTC to issue CPC under E.O. No. 546 is thus nothing new and exists alongside the requirement of a congressional franchise under P.D. No. 576-A. There is no conflict between E.O. No. 546 and P.D. No 576-A; Section 15 of the former does not dispense with the franchise requirement in the latter. We adhere to the cardinal rule in statutory construction that statutes in pare materia, although in apparent conflict, or containing apparent inconsistencies, should, as far as reasonably 29 possible, be construed in harmony with each other, so as to give force and effect to each. The ruling of this Court in 30 Crusaders Broadcasting System, Inc. v. National Telecommunications Commission, buttresses the interpretation that the requirement of a congressional franchise for the operation of radio and television stations exists alongside the requirement of a CPC. In that case, we held that under E.O. No. 546, the regulation of radio communications is a function assigned to and performed by the NTC and at the same time recognized the requirement of a congressional franchise for the operation of a radio station under Act No. 3846. We did not interpret E.O. No. 546 to have repealed the congressional franchise requirement under Act No. 3846 as these two laws are not inconsistent and can both be given effect. Likewise, in Radio Communication of the Philippines, Inc. v. 31 National Telecommunications Commission, we recognized the necessity of both a congressional franchise under Act No. 3846 and a CPC under E.O. No. 546 to operate a radio communications system. In buttressing its position that a congressional franchise is not required to operate its television station, petitioner banks on DOJ Opinion No. 98, Series of 1991 which states that under E.O. No. 546, the NTC may issue a permit or authorization for the operation of radio and television broadcasting systems without a prior franchise issued by Congress. Petitioner argues that the opinion is binding and conclusive upon the NTC as the NTC itself requested the advisory from the Secretary of Justice who is the legal adviser of government. Petitioner claims that it was precisely because of the above DOJ Opinion No. 98 that the NTC did not previously require a congressional franchise in all of its applications for permits with the NTC. Petitioner, however, cannot rely on DOJ Opinion No. 98 as this opinion is merely persuasive and not necessarily 32 controlling. As shown above, the opinion is erroneous insofar as it holds that E.O. No. 546 dispenses with the requirement of a congressional franchise to operate radio and television stations. The case of Albano v. 33 Reyes cited in the DOJ opinion, which allegedly makes it binding upon the NTC, does not lend support to petitioners cause. In that case, we held, viz:
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"Franchises issued by Congress are not required before each and every public utility may operate. Thus, the law has granted certain administrative agencies the power to grant licenses for or to authorize the operation of certain public utilities. (See E.O. Nos. 172 and 202) That the Constitution provides in Art. XII, Sec. 11 that the issuance of a franchise, certificate or other form of authorization for the operation of a public utility shall be subject to amendment, alteration or repeal by Congress does not necessarily imply, as petitioner posits, that only Congress has the power to grant such authorization. Our statute books are replete with laws granting specified agencies in the Executive Branch the power to issue such 34 authorization for certain classes of public utilities. (footnote omitted)" Our ruling in Albano that a congressional franchise is not required before "each and every public utility may operate" should be viewed in its proper light. Where there is a law such as P.D. No. 576-A which requires a franchise for the operation of radio and television stations, that law must be followed until subsequently repealed. As we have earlier shown, however, there is nothing in the subsequent E.O. No. 546 which evinces an intent to dispense with the franchise requirement. In contradistinction with the case at bar, the law applicable in Albano, i.e., E.O. No. 30, did not require a franchise for the Philippine Ports Authority to take over, manage and operate the Manila International Port Complex and undertake the providing of cargo handling and port related services thereat. Similarly, in Philippine 35 Airlines, Inc. v. Civil Aeronautics Board, et al., we ruled that a legislative franchise is not necessary for the operation of domestic air transport because "there is nothing in the law nor in the Constitution which indicates that a legislative 36 franchise is an indispensable requirement for an entity to operate as a domestic air transport operator." Thus, while it is correct to say that specified agencies in the Executive Branch have the power to issue authorization for certain classes of public utilities, this does not mean that the authorization or CPC issued by the NTC dispenses with the requirement of a franchise as this is clearly required under P.D. No. 576-A. Petitioner contends that the NTC erroneously denied its application for renewal of its temporary permit to operate Channel 25 and recalled its Channel 25 frequency based on the May 3, 1994 MOU that requires a congressional franchise for the operation of television broadcast stations. 1a\^/phi1.net The MOU is not an act of Congress and thus cannot amend Act No. 3846 which requires a congressional franchise for the operation of radio stations alone, and not television stations. We find no merit in petitioners contention. As we have shown, even assuming that Act No. 3846 requires only radio stations to secure a congressional franchise for its operation, P.D. No. 576-A was subsequently issued in 1974, which clearly requires a franchise for both radio and television stations. Thus, the 1994 MOU did not amend any law, but merely clarified the existing law that requires a franchise. That the legislative intent is to continue requiring a franchise for the operation of radio and television broadcasting stations is clear from the franchises granted by Congress after the effectivity of E.O. No. 546 in 1979 for the operation of radio and television stations. Among these are: (1) R.A. No. 9131 dated April 24, 2001, entitled "An Act Granting the Iddes Broadcast Group, Inc., a Franchise to Construct, Install, Establish, Operate and Maintain Radio and Television Broadcasting Stations in the Philippines;" (2) R.A. No. 9148 dated July 31, 2001, entitled "An Act Granting the Hypersonic Broadcasting Center, Inc., a Franchise to Construct, Install, Establish, Operate and Maintain Radio Broadcasting Stations in the Philippines;" and (3) R.A. No. 7678 dated February 17, 1994, entitled "An Act Granting the Digital Telecommunication Philippines, Incorporated, a Franchise to Install, Operate and Maintain Telecommunications Systems Throughout the Philippines." All three franchises require the grantees to secure a CPCN/license/permit to construct and operate their stations/systems. Likewise, the Tax Reform Act of 1997 provides in Section 119 for tax on franchise of radio and/or television broadcasting companies, viz: "Sec. 119. Tax on Franchises. Any provision of general or special law to the contrary notwithstanding, there shall be levied, assessed and collected in respect to all franchises on radio and/or television broadcasting companies whose annual gross receipts of the preceding year does not exceed Ten million pesos (P10,000,000), subject to Section 236 of this Code, a tax of three percent (3%) and on electric, gas and water utilities, a tax of two percent (2%) on the gross receipts derived from the business covered by the law granting the franchise. . . " (emphasis supplied) Undeniably, petitioner is aware that a congressional franchise is necessary to operate its television station Channel 25 as shown by its actuations. Shortly before the December 31, 1994 deadline set in the MOU, petitioner filed an application for a franchise with Congress. It was not, however, acted upon in the 9th Congress for petitioners failure to submit the necessary supporting documents; petitioner failed to re-file the application in the following Congress. Petitioner also filed an application for a franchise with Congress on September 2, 1998, before the November 30, 37 1998 deadline under Memorandum Circular No. 14-10-98. We now come to the fourth assigned error. Petitioner avers that the Court of Appeals erred in upholding the recall of frequency Channel 25 previously assigned to it and the cancellation of its permit to operate which was already approved in January 1998. It claims that these acts of the NTC were unreasonable, unfair, oppressive, whimsical and

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confiscatory considering that the NTC previously issued petitioner a temporary permit without requiring a congressional franchise. On February 26, 1998, the NTC issued a show cause order to petitioner with the following decretal portion: "IN VIEW THEREOF, respondents are hereby directed to show cause in writing within ten (10) days from receipt of this order why their assigned frequency, more specifically Channel 25 in the UHF Band, should not be recalled for lack of the necessary Congressional Franchise as required by Section 1, Act No. 3846, as amended. Moreover, respondent is hereby directed to cease and desist from operating DWQH-TV, unless subsequently 38 authorized by the Commission." The order was supposedly based on a letter of the NTC dated November 17, 1997 informing petitioner that its application for renewal of temporary permits of its seven radio stations were being held in abeyance pending submission of its new congressional franchise. Petitioner was directed to submit the franchise within thirty days from expiration of its temporary permits to be renewed and informed that its failure to do so might constitute denial of its application. Petitioner is correct that the November 17, 1997 letter referred only to its radio stations and not to its television Channel 25. Thus, it could not serve as basis for the February 26, 1998 show cause order which referred solely to its television Channel 25. Besides, petitioner claims that it did not receive the letter. Be that as it may, the NTCs February 26, 1998 order for petitioner to cease and desist from operating Channel 25 was not unreasonable, unfair, oppressive, whimsical and confiscatory. The 1994 MOU states in unmistakable terms that petitioners temporary permit to operate Channel 25 would be valid for only two years, i.e., from June 29, 1995 to June 28, 1997. During these two years, petitioner was supposed to have secured a congressional franchise, otherwise "the NTC shall not 39 extend or renew its permit or authorization to operate any further." Apparently, petitioner did not submit a congressional franchise to the NTC in applying for renewal of this temporary permit on May 14, 1997. The NTCs approval of petitioners application to renew its temporary permit in January 1998 was thus erroneous because und er the 1994 MOU, the NTC could not renew petitioners temporary permit to operate Channel 25 without a congressional franchise. In the absence of a renewed temporary permit, the NTC was correct in ordering petitioner to cease and desist from operating Channel 25, regardless of whether or not petitioner received the November 17, 1997 letter. The NTCs erroneous approval of petitioners application in January 1998 did not estop the NTC from ordering petitioner on February 26, 1998 to cease and desist from operating Channel 25 for failure to comply with the franchise 40 requirement as estoppel does not work against the government. Likewise, the NTCs denial of petitioners application for renewal of its temporary permit to operate Channel 25 and recall of its Channel 25 frequency in its January 13, 1999 decision were not unreasonable, unfair, oppressive, whimsical and confiscatory so as to offend petitioners right to due process. In Crusaders Broadcasting System, Inc. 41 v. National Telecommunications Commission, the Court ruled that although a particular ground for suspending operations of the broadcasting company was not reflected in the show cause order, the NTC could nevertheless raise said ground if any basis therefore was gleaned during the administrative proceedings. In the instant case, the lack of congressional franchise as ground for denial of petitioners application for renewal of temporary permit and recall of its Channel 25 frequency was raised not only during the administrative proceedings against it, but was even stated in the February 26, 1998 show cause order, viz: "IN VIEW THEREOF, respondents are hereby directed to show cause in writing within ten (10) days from receipt of this order why their assigned frequency, more specifically Channel 25 in the UHF Band, should not be recalled for lack of the necessary Congressional Franchise as required by Section 1, Act No. 3846, as amended. Moreover, respondent is hereby directed to cease and desist from operating DWQH-TV, unless subsequently 42 authorized by the Commission." (emphasis supplied) In Eastern Broadcasting Corporation v. Dans, Jr., et al., we held that the requirements of due process in 44 administrative proceedings laid down by this Court in Ang Tibay v. Court of Industrial Relations should be satisfied before a broadcast station may be closed or its operations curtailed. We enumerated these requirements, viz: ". . . (1) the right to a hearing which includes the right to present ones case and submit evidence in support thereof; (2) the tribunal must consider the evidence presented; (3) the decision must have something to support itself; (4) the evidence must be substantial. Substantial evidence means such reasonable evidence as a reasonable mind might accept as adequate to support a conclusion; (5) the decision must be based on the evidence presented at the hearing, or at least contained in the record and disclosed to the parties affected; (6) the tribunal or body or any of its judges must act on its own independent consideration of the law and facts of the controversy and not simply accept the views of a subordinate; (7) the board or body should, in all controversial questions, render its decisions in such a
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manner that the parties to the proceeding can know the various issues involved, and the reasons for the decision 45 rendered." Petitioner had the opportunity to present its case and submit evidence on why its assigned frequency Channel 25 should not be recalled and its application for renewal denied. Petitioner filed its Answer to the show cause order on 46 March 17, 1998. A hearing was held on April 22, 1998 wherein petitioner presented its evidence in compliance with the show cause order. Based on the NTCs findings that petitioner failed to comply with the requirement of a congressional franchise, the NTC denied its application for renewal of its temporary permit to operate Channel 25 and recalled its assigned Channel 25 frequency. The requirements of due process in Ang Tibay were satisfied, thus petitioner cannot say that the NTCs actions were unreasonab le, unfair, oppressive, whimsical and confiscatory. Finally, petitioner contends that the Court of Appeals erred in not holding that Administrative Case No. 98-009, the administrative proceeding against it for failure to secure a congressional franchise to operate its television Channel 25, has been rendered moot and academic by the adoption and promulgation of NTC Memorandum Circular No. 1410-98 dated August 17, 1998 which took effect on November 15, 1998. The Memorandum Circular states, viz: "In compliance with the MOU and in order to clear the ambiguity surrounding the operation of broadcast operators who were not able to have their legislative franchise approved during the last Congress, the following guidelines are hereby issued: 1. Existing broadcast operators who were not able to secure a legislative franchise up to this date (August 17, 1998) are given up to December 31, 1999 within which to have their application for a legislative franchise bill approved by Congress. The franchise bill must be filed immediately but not later than November 30th of this year . . ." Petitioner avers that the NTC erroneously held that this Memorandum Circular is not applicable to it because the words of the circular are clear that it covers "existing broadcasting operators" including petitioner. In compliance with the Memorandum Circular, petitioner filed House Bill No. 32 on September 2, 1998, well within the November 30, 1998 deadline. Thus, petitioner argues that the NTC erred in denying its application for renewal of permit to operate Channel 25 and recalling its assigned Channel 25 frequency on January 13, 1999, long before the Memorandum Circulars December 31, 1999 deadline to secure a congressional franchise. Petitioner posits that the NTCs premature and arbitrary promulgation of its January 13, 1999 decision "slammed the door for the petitioner to secure its legislative franchise. The pending application for legislative franchise of petitioner was effectively struck out by said 47 NTC decision." Whether or not the benefits of the Memorandum Circular extend to petitioner, the fact is, as correctly pointed out by the appellate court, petitioner failed to secure a legislative franchise by December 31, 1999. Consequently, the NTCs recall of petitioners assigned frequency Channel 25 and denial of its application for renewal of its permit to operate the said television channel were proper as the Memorandum Circular provides, viz: "1. Existing broadcast operators who are not able to secure a legislative franchise up to this date (August 17, 1998) are given up to December 31, 1999 within which to have their application for a legislative franchise approved by Congress. The franchise bill must be filed immediately but not later than November 30th of this year . . . xxxxxxxxx 3. In the event the permittee will not be able to have its franchise bill approved within the prescribed period, the NTC will no longer renew/extend its temporary permit and the Commission shall initiate the recall of its assigned frequency provided that due process of law is observed. 4. Henceforth, no application/petition for Certificate of Public Convenience (CPC) to establish, maintain and operate a broadcast station in the broadcast service shall be accepted for filing without showing that the applicant has an approved legislative franchise."(emphasis supplied) Petitioners argument is flawed when it states that the January 13, 1999 decision of the NTC "slammed the door" on its application for a congressional franchise as the process of securing a congressional franchise is separate and distinct from the process of applying for renewal of a temporary permit with the NTC. The latter is not a prerequisite to the former. In fact, in the normal course of securing authorizations to operate a television and radio station, the 48 application for a CPC with the NTC comes after securing a franchise from Congress. The CPC is not a condition for 49 the grant of a congressional franchise. The Court is not unmindful that there is a trend towards delegating the legislative power to authorize the operation of certain public utilities to administrative agencies and dispensing with the requirement of a congressional franchise as

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in the Albano case which involved the provision of cargo handling and port related services at the Manila International Port Complex and the PAL case involving the operation of domestic air transport. The rationale for this trend was explained in the PAL case, viz: ". . . With the growing complexity of modern life, the multiplication of the subjects of governmental regulation, and the increased difficulty of administering the laws, there is a constantly growing tendency towards the delegation of greater powers by the legislature, and towards the approval of the practice by the courts.1awphi1.nt (Pangasinan Transportation Co., Inc. vs. The Public Service Commission, G.R. No. 47065, June 26, 1940, 70 Phil 221.) It is generally recognized that a franchise may be derived indirectly from the state through a duly designated agency, and to this extent, the power to grant franchises has frequently been delegated, even to agencies other than those of a legislative nature. (Dyer vs. Tuskaloosa Bridge Co., 2 Port. 296, 27 Am. D. 655; Christian-Todd Tel. Co. vs. Commonwealth, 161 S.W. 543, 156 Ky. 557, 37 C.J.S. 158) In pursuance of this, it has been held that privileges conferred by grant by local authorities as agents for the state constitute as much a legislative franchise as though the grant had been made by an act of the Legislature. (Superior Water, Light and Power Co. vs. City of Superior, 181 N.W. 113, 174 Wis. 257, affirmed 183 N.W. 254, 37 C.J.S. 158.) The trend of modern legislation is to vest the Public Service Commissioner with the power to regulate and control the operation of public services under reasonable rules and regulations, and as a general rule, courts will not interfere 50 with the exercise of that discretion when it is just and reasonable and founded upon a legal right." 1a\^/phi1.net The criticism against the requirement of a congressional franchise is incisively expressed by a public utilities lawyer, viz: "As will be noted, a legislative franchise is required to install and operate a radio station before an applicant can apply for a Certificate of Public Convenience to operate a radio station based in any part of the country. Under Act No. 3846 of 1929, Sec. 1, it was provided that no one ma y install and operate a radio station without having first obtained a franchise therefore from the Congress of the Philippines. Since then, this has been strictly followed. And this holds true with respect to application for electric, telephone and many other telecommunications services. Before, even mere application for authority to operate an ice plant must have prior congressional franchise. But this was not strictly followed until ice plant operations were eventually deregulated. Right now, the both houses of the legislature are saddled with House Bill Nos. etc. for the grant of legislative franchise to operate this and that public utility services in various places in the Philippines. We hear during sessions in both houses the time wasted on reports and considerations of these house bills for grant of franchises. The legislature is empowered and has created respective regulatory bodies with requisite expertise to handle franchising and regulation of such types of public utility services, why not just entrust all these functions to them? What exactly is the reason or rationale for imposing a prior congressional franchise? There seems to be no valid reason for it except to impose added burden and expenses on the part of the applicant. The justification appears to be simply because this was required in the past so it is now. We are reminded of the forceful denunciation of Justice Holmes of a stubborn adherence to an anachronistic rule of law: It is revolting to have no better reason for a rule of law that so it was laid down in the time of Henry IV. It is still more revolting if the grounds upon which it was laid down have vanished long since, and the rule simply persists from blind imitation of the past. (The Path of the Law, Collected Legal Papers [1920] 210, 212 quoted from The Justice Holmes 51 Reader, Julius N. Marke, 1955 ed., p. 278.)" The call to dispense with the requisite legislative franchise must, however, be addressed to Congress as the lawmaker of the land for the Courts function is to interpret and not to rewrite the law. As long as the law remains unchanged, the requirement of a franchise to operate a television station must be upheld. WHEREFORE, the petition is DENIED and the Court of Appeals January 13, 2000 decision and February 21, 2000 resolution are AFFIRMED. No costs. SO ORDERED. Panganiban, Sandoval-Gutierrez, Corona and Carpio-Morales, JJ., concur.

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Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 17122 February 27, 1922

THE UNITED STATES, plaintiff-appellee, vs. ANG TANG HO, defendant-appellant. Williams & Ferrier for appellant. Acting Attorney-General Tuason for appellee. JOHNS, J.: At its special session of 1919, the Philippine Legislature passed Act No. 2868, entitled "An Act penalizing the monopoly and holding of, and speculation in, palay, rice, and corn under extraordinary circumstances, regulating the distribution and sale thereof, and authorizing the Governor-General, with the consent of the Council of State, to issue the necessary rules and regulations therefor, and making an appropriation for this purpose," the material provisions of which are as follows: Section 1. The Governor-General is hereby authorized, whenever, for any cause, conditions arise resulting in an extraordinary rise in the price of palay, rice or corn, to issue and promulgate, with the consent of the Council of State, temporary rules and emergency measures for carrying out the purpose of this Act, to wit: (a) To prevent the monopoly and hoarding of, and speculation in, palay, rice or corn. (b) To establish and maintain a government control of the distribution or sale of the commodities referred to or have such distribution or sale made by the Government itself. (c) To fix, from time to time the quantities of palay rice, or corn that a company or individual may acquire, and the maximum sale price that the industrial or merchant may demand. (d ) . . . SEC. 2. It shall be unlawful to destroy, limit, prevent or in any other manner obstruct the production or milling of palay, rice or corn for the purpose of raising the prices thereof; to corner or hoard said products as defined in section three of this Act; . . . Section 3 defines what shall constitute a monopoly or hoarding of palay, rice or corn within the meaning of this Act, but does not specify the price of rice or define any basic for fixing the price. SEC. 4. The violations of any of the provisions of this Act or of the regulations, orders and decrees promulgated in accordance therewith shall be punished by a fine of not more than five thousands pesos, or by imprisonment for not more than two years, or both, in the discretion of the court: Provided, That in the case of companies or corporations the manager or administrator shall be criminally liable. SEC. 7. At any time that the Governor-General, with the consent of the Council of State, shall consider that the public interest requires the application of the provisions of this Act, he shall so declare by proclamation, and any provisions of other laws inconsistent herewith shall from then on be temporarily suspended. Upon the cessation of the reasons for which such proclamation was issued, the Governor-General, with the consent of the Council of State, shall declare the application of this Act to have likewise terminated, and all laws temporarily suspended by virtue of the same shall again take effect, but such termination shall not prevent the prosecution of any proceedings or cause begun prior to such termination, nor the filing of any proceedings for an offense committed during the period covered by the Governor-General's proclamation. August 1, 1919, the Governor-General issued a proclamation fixing the price at which rice should be sold.

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August 8, 1919, a complaint was filed against the defendant, Ang Tang Ho, charging him with the sale of rice at an excessive price as follows: The undersigned accuses Ang Tang Ho of a violation of Executive Order No. 53 of the Governor-General of the Philippines, dated the 1st of August, 1919, in relation with the provisions of sections 1, 2 and 4 of Act No. 2868, committed as follows: That on or about the 6th day of August, 1919, in the city of Manila, Philippine Islands, the said Ang Tang Ho, voluntarily, illegally and criminally sold to Pedro Trinidad, one ganta of rice at the price of eighty centavos (P.80), which is a price greater than that fixed by Executive Order No. 53 of the Governor-General of the Philippines, dated the 1st of August, 1919, under the authority of section 1 of Act No. 2868. Contrary to law. Upon this charge, he was tried, found guilty and sentenced to five months' imprisonment and to pay a fine of P500, from which he appealed to this court, claiming that the lower court erred in finding Executive Order No. 53 of 1919, to be of any force and effect, in finding the accused guilty of the offense charged, and in imposing the sentence. The official records show that the Act was to take effect on its approval; that it was approved July 30, 1919; that the Governor-General issued his proclamation on the 1st of August, 1919; and that the law was first published on the 13th of August, 1919; and that the proclamation itself was first published on the 20th of August, 1919. The question here involves an analysis and construction of Act No. 2868, in so far as it authorizes the GovernorGeneral to fix the price at which rice should be sold. It will be noted that section 1 authorizes the Governor-General, with the consent of the Council of State, for any cause resulting in an extraordinary rise in the price of palay, rice or corn, to issue and promulgate temporary rules and emergency measures for carrying out the purposes of the Act. By its very terms, the promulgation of temporary rules and emergency measures is left to the discretion of the GovernorGeneral. The Legislature does not undertake to specify or define under what conditions or for what reasons the Governor-General shall issue the proclamation, but says that it may be issued "for any cause," and leaves the question as to what is "any cause" to the discretion of the Governor-General. The Act also says: "For any cause, conditions arise resulting in an extraordinary rise in the price of palay, rice or corn." The Legislature does not specify or define what is "an extraordinary rise." That is also left to the discretion of the Governor-General. The Act also says that the Governor-General, "with the consent of the Council of State," is authorized to issue and promulgate "temporary rules and emergency measures for carrying out the purposes of this Act." It does not specify or define what is a temporary rule or an emergency measure, or how long such temporary rules or emergency measures shall remain in force and effect, or when they shall take effect. That is to say, the Legislature itself has not in any manner specified or defined any basis for the order, but has left it to the sole judgement and discretion of the GovernorGeneral to say what is or what is not "a cause," and what is or what is not "an extraordinary rise in the price of rice," and as to what is a temporary rule or an emergency measure for the carrying out the purposes of the Act. Under this state of facts, if the law is valid and the Governor-General issues a proclamation fixing the minimum price at which rice should be sold, any dealer who, with or without notice, sells rice at a higher price, is a criminal. There may not have been any cause, and the price may not have been extraordinary, and there may not have been an emergency, but, if the Governor-General found the existence of such facts and issued a proclamation, and rice is sold at any higher price, the seller commits a crime. By the organic law of the Philippine Islands and the Constitution of the United States all powers are vested in the Legislative, Executive and Judiciary. It is the duty of the Legislature to make the law; of the Executive to execute the law; and of the Judiciary to construe the law. The Legislature has no authority to execute or construe the law, the Executive has no authority to make or construe the law, and the Judiciary has no power to make or execute the law. Subject to the Constitution only, the power of each branch is supreme within its own jurisdiction, and it is for the Judiciary only to say when any Act of the Legislature is or is not constitutional. Assuming, without deciding, that the Legislature itself has the power to fix the price at which rice is to be sold, can it delegate that power to another, and, if so, was that power legally delegated by Act No. 2868? In other words, does the Act delegate legislative power to the Governor-General? By the Organic Law, all Legislative power is vested in the Legislature, and the power conferred upon the Legislature to make laws cannot be delegated to the Governor-General, or any one else. The Legislature cannot delegate the legislative power to enact any law. If Act no 2868 is a law unto itself and within itself, and it does nothing more than to authorize the Governor-General to make rules and regulations to carry the law into effect, then the Legislature itself created the law. There is no delegation of power and it is valid. On the other hand, if the Act within itself does not define crime, and is not a law, and some legislative act remains to be done to make it a law or a crime, the doing of which is vested in the Governor-General, then the Act is a delegation of legislative power, is unconstitutional and void. The Supreme Court of the United States in what is known as the Granger Cases (94 U.S., 183-187; 24 L. ed., 94), first laid down the rule:

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Railroad companies are engaged in a public employment affecting the public interest and, under the decision in Munn vs. Ill., ante, 77, are subject to legislative control as to their rates of fare and freight unless protected by their charters. The Illinois statute of Mar. 23, 1874, to establish reasonable maximum rates of charges for the transportation of freights and passengers on the different railroads of the State is not void as being repugnant to the Constitution of the United States or to that of the State. It was there for the first time held in substance that a railroad was a public utility, and that, being a public utility, the State had power to establish reasonable maximum freight and passenger rates. This was followed by the State of Minnesota in enacting a similar law, providing for, and empowering, a railroad commission to hear and determine what was a just and reasonable rate. The constitutionality of this law was attacked and upheld by the Supreme Court of Minnesota in a learned and exhaustive opinion by Justice Mitchell, in the case of State vs. Chicago, Milwaukee & St. Paul ry. Co. (38 Minn., 281), in which the court held: Regulations of railway tariffs Conclusiveness of commission's tariffs. Under Laws 1887, c. 10, sec. 8, the determination of the railroad and warehouse commission as to what are equal and reasonable fares and rates for the transportation of persons and property by a railway company is conclusive, and, in proceedings by mandamus to compel compliance with the tariff of rates recommended and published by them, no issue can be raised or inquiry had on that question. Same constitution Delegation of power to commission. The authority thus given to the commission to determine, in the exercise of their discretion and judgement, what are equal and reasonable rates, is not a delegation of legislative power. It will be noted that the law creating the railroad commission expressly provides That all charges by any common carrier for the transportation of passengers and property shall be equal and reasonable. With that as a basis for the law, power is then given to the railroad commission to investigate all the facts, to hear and determine what is a just and reasonable rate. Even then that law does not make the violation of the order of the commission a crime. The only remedy is a civil proceeding. It was there held That the legislative itself has the power to regulate railroad charges is now too well settled to require either argument or citation of authority. The difference between the power to say what the law shall be, and the power to adopt rules and regulations, or to investigate and determine the facts, in order to carry into effect a law already passed, is apparent. The true distinction is between the delegation of power to make the law, which necessarily involves a discretion as to what it shall be, and the conferring an authority or discretion to be exercised under and in pursuance of the law. The legislature enacts that all freights rates and passenger fares should be just and reasonable. It had the undoubted power to fix these rates at whatever it deemed equal and reasonable. They have not delegated to the commission any authority or discretion as to what the law shall be, which would not be allowable, but have merely conferred upon it an authority and discretion, to be exercised in the execution of the law, and under and in pursuance of it, which is entirely permissible. The legislature itself has passed upon the expediency of the law, and what is shall be. The commission is intrusted with no authority or discretion upon these questions. It can neither make nor unmake a single provision of law. It is merely charged with the administration of the law, and with no other power. The delegation of legislative power was before the Supreme Court of Wisconsin in Dowling vs. Lancoshire Ins. Co. (92 Wis., 63). The opinion says: "The true distinction is between the delegation of power to make the law, which necessarily involves a discretion as to what it shall be, and conferring authority or discretion as to its execution, to be exercised under and in pursuance of the law. The first cannot be done; to the latter no valid objection can be made." The act, in our judgment, wholly fails to provide definitely and clearly what the standard policy should contain, so that it could be put in use as a uniform policy required to take the place of all others, without the determination of the

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insurance commissioner in respect to maters involving the exercise of a legislative discretion that could not be delegated, and without which the act could not possibly be put in use as an act in confirmity to which all fire insurance policies were required to be issued. The result of all the cases on this subject is that a law must be complete, in all its terms and provisions, when it leaves the legislative branch of the government, and nothing must be left to the judgement of the electors or other appointee or delegate of the legislature, so that, in form and substance, it is a law in all its details in presenti, but which may be left to take effect in futuro, if necessary, upon the ascertainment of any prescribed fact or event. The delegation of legislative power was before the Supreme Court in United States vs. Grimaud (220 U.S., 506; 55 L. ed., 563), where it was held that the rules and regulations of the Secretary of Agriculture as to a trespass on government land in a forest reserve were valid constitutional. The Act there provided that the Secretary of Agriculture ". . . may make such rules and regulations and establish such service as will insure the object of such reservations; namely, to regulate their occupancy and use, and to preserve the forests thereon from destruction; and any violation of the provisions of this act or such rules and regulations shall be punished , . . ." The brief of the United States Solicitor-General says: In refusing permits to use a forest reservation for stock grazing, except upon stated terms or in stated ways, the Secretary of Agriculture merely assert and enforces the proprietary right of the United States over land which it owns. The regulation of the Secretary, therefore, is not an exercise of legislative, or even of administrative, power; but is an ordinary and legitimate refusal of the landowner's authorized agent to allow person having no right in the land to use it as they will. The right of proprietary control is altogether different from governmental authority. The opinion says: From the beginning of the government, various acts have been passed conferring upon executive officers power to make rules and regulations, not for the government of their departments, but for administering the laws which did govern. None of these statutes could confer legislative power. But when Congress had legislated power. But when Congress had legislated and indicated its will, it could give to those who were to act under such general provisions "power to fill up the details" by the establishment of administrative rules and regulations, the violation of which could be punished by fine or imprisonment fixed by Congress, or by penalties fixed by Congress, or measured by the injury done. That "Congress cannot delegate legislative power is a principle universally recognized as vital to the integrity and maintenance of the system of government ordained by the Constitution." If, after the passage of the act and the promulgation of the rule, the defendants drove and grazed their sheep upon the reserve, in violation of the regulations, they were making an unlawful use of the government's property. In doing so they thereby made themselves liable to the penalty imposed by Congress. The subjects as to which the Secretary can regulate are defined. The lands are set apart as a forest reserve. He is required to make provisions to protect them from depredations and from harmful uses. He is authorized 'to regulate the occupancy and use and to preserve the forests from destruction.' A violation of reasonable rules regulating the use and occupancy of the property is made a crime, not by the Secretary, but by Congress." The above are leading cases in the United States on the question of delegating legislative power. It will be noted that in the "Granger Cases," it was held that a railroad company was a public corporation, and that a railroad was a public utility, and that, for such reasons, the legislature had the power to fix and determine just and reasonable rates for freight and passengers. The Minnesota case held that, so long as the rates were just and reasonable, the legislature could delegate the power to ascertain the facts and determine from the facts what were just and reasonable rates,. and that in vesting the commission with such power was not a delegation of legislative power. The Wisconsin case was a civil action founded upon a "Wisconsin standard policy of fire insurance," and the court held that "the act, . . . wholly fails to provide definitely and clearly what the standard policy should contain, so that it could be put in use as a uniform policy required to take the place of all others, without the determination of the insurance commissioner in respect to matters involving the exercise of a legislative discretion that could not be delegated."

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The case of the United States Supreme Court, supra dealt with rules and regulations which were promulgated by the Secretary of Agriculture for Government land in the forest reserve. These decisions hold that the legislative only can enact a law, and that it cannot delegate it legislative authority. The line of cleavage between what is and what is not a delegation of legislative power is pointed out and clearly defined. As the Supreme Court of Wisconsin says: That no part of the legislative power can be delegated by the legislature to any other department of the government, executive or judicial, is a fundamental principle in constitutional law, essential to the integrity and maintenance of the system of government established by the constitution. Where an act is clothed with all the forms of law, and is complete in and of itself, it may be provided that it shall become operative only upon some certain act or event, or, in like manner, that its operation shall be suspended. The legislature cannot delegate its power to make a law, but it can make a law to delegate a power to determine some fact or state of things upon which the law makes, or intends to make, its own action to depend. The Village of Little Chute enacted an ordinance which provides: All saloons in said village shall be closed at 11 o'clock P.M. each day and remain closed until 5 o'clock on the following morning, unless by special permission of the president. Construing it in 136 Wis., 526; 128 A. S. R., 1100, the Supreme Court of that State says: We regard the ordinance as void for two reasons; First, because it attempts to confer arbitrary power upon an executive officer, and allows him, in executing the ordinance, to make unjust and groundless discriminations among persons similarly situated; second, because the power to regulate saloons is a lawmaking power vested in the village board, which cannot be delegated. A legislative body cannot delegate to a mere administrative officer power to make a law, but it can make a law with provisions that it shall go into effect or be suspended in its operations upon the ascertainment of a fact or state of facts by an administrative officer or board. In the present case the ordinance by its terms gives power to the president to decide arbitrary, and in the exercise of his own discretion, when a saloon shall close. This is an attempt to vest legislative discretion in him, and cannot be sustained. The legal principle involved there is squarely in point here. It must be conceded that, after the passage of act No. 2868, and before any rules and regulations were promulgated by the Governor-General, a dealer in rice could sell it at any price, even at a peso per "ganta," and that he would not commit a crime, because there would be no law fixing the price of rice, and the sale of it at any price would not be a crime. That is to say, in the absence of a proclamation, it was not a crime to sell rice at any price. Hence, it must follow that, if the defendant committed a crime, it was because the Governor-General issued the proclamation. There was no act of the Legislature making it a crime to sell rice at any price, and without the proclamation, the sale of it at any price was to a crime. The Executive order provides: (5) The maximum selling price of palay, rice or corn is hereby fixed, for the time being as follows: In Manila Palay at P6.75 per sack of 57 kilos, or 29 centavos per ganta. Rice at P15 per sack of 57 kilos, or 63 centavos per ganta. Corn at P8 per sack of 57 kilos, or 34 centavos per ganta.
2 1

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In the provinces producing palay, rice and corn, the maximum price shall be the Manila price less the cost of transportation from the source of supply and necessary handling expenses to the place of sale, to be determined by the provincial treasurers or their deputies. In provinces, obtaining their supplies from Manila or other producing provinces, the maximum price shall be the authorized price at the place of supply or the Manila price as the case may be, plus the transportation cost, from the place of supply and the necessary handling expenses, to the place of sale, to be determined by the provincial treasurers or their deputies. (6) Provincial treasurers and their deputies are hereby directed to communicate with, and execute all instructions emanating from the Director of Commerce and Industry, for the most effective and proper enforcement of the above regulations in their respective localities. The law says that the Governor-General may fix "the maximum sale price that the industrial or merchant may demand." The law is a general law and not a local or special law. The proclamation undertakes to fix one price for rice in Manila and other and different prices in other and different provinces in the Philippine Islands, and delegates the power to determine the other and different prices to provincial treasurers and their deputies. Here, then, you would have a delegation of legislative power to the Governor-General, and a delegation by him of that power to provincial treasurers and their deputies, who "are hereby directed to communicate with, and execute all instructions emanating from the Director of Commerce and Industry, for the most effective and proper enforcement of the above regulations in their respective localities." The issuance of the proclamation by the Governor-General was the exercise of the delegation of a delegated power, and was even a sub delegation of that power. Assuming that it is valid, Act No. 2868 is a general law and does not authorize the Governor-General to fix one price of rice in Manila and another price in Iloilo. It only purports to authorize him to fix the price of rice in the Philippine Islands under a law, which is General and uniform, and not local or special. Under the terms of the law, the price of rice fixed in the proclamation must be the same all over the Islands. There cannot be one price at Manila and another at Iloilo. Again, it is a mater of common knowledge, and of which this court will take judicial notice, that there are many kinds of rice with different and corresponding market values, and that there is a wide range in the price, which varies with the grade and quality. Act No. 2868 makes no distinction in price for the grade or quality of the rice, and the proclamation, upon which the defendant was tried and convicted, fixes the selling price of rice in Manila "at P15 per sack of 57 kilos, or 63 centavos per ganta," and is uniform as to all grades of rice, and says nothing about grade or quality. Again, it will be noted that the law is confined to palay, rice and corn. They are products of the Philippine Islands. Hemp, tobacco, coconut, chickens, eggs, and many other things are also products. Any law which single out palay, rice or corn from the numerous other products of the Islands is not general or uniform, but is a local or special law. If such a law is valid, then by the same principle, the Governor-General could be authorized by proclamation to fix the price of meat, eggs, chickens, coconut, hemp, and tobacco, or any other product of the Islands. In the very nature of things, all of that class of laws should be general and uniform. Otherwise, there would be an unjust discrimination of property rights, which, under the law, must be equal and inform. Act No. 2868 is nothing more than a floating law, which, in the discretion and by a proclamation of the Governor-General, makes it a floating crime to sell rice at a price in excess of the proclamation, without regard to grade or quality. When Act No. 2868 is analyzed, it is the violation of the proclamation of the Governor-General which constitutes the crime. Without that proclamation, it was no crime to sell rice at any price. In other words, the Legislature left it to the sole discretion of the Governor-General to say what was and what was not "any cause" for enforcing the act, and what was and what was not "an extraordinary rise in the price of palay, rice or corn," and under certain undefined conditions to fix the price at which rice should be sold, without regard to grade or quality, also to say whether a proclamation should be issued, if so, when, and whether or not the law should be enforced, how long it should be enforced, and when the law should be suspended. The Legislature did not specify or define what was "any cause," or what was "an extraordinary rise in the price of rice, palay or corn," Neither did it specify or define the conditions upon which the proclamation should be issued. In the absence of the proclamation no crime was committed. The alleged sale was made a crime, if at all, because the Governor-General issued the proclamation. The act or proclamation does not say anything about the different grades or qualities of rice, and the defendant is charged with the sale "of one ganta of rice at the price of eighty centavos (P0.80) which is a price greater than that fixed by Executive order No. 53." We are clearly of the opinion and hold that Act No. 2868, in so far as it undertakes to authorized the GovernorGeneral in his discretion to issue a proclamation, fixing the price of rice, and to make the sale of rice in violation of the price of rice, and to make the sale of rice in violation of the proclamation a crime, is unconstitutional and void. It may be urged that there was an extraordinary rise in the price of rice and profiteering, which worked a severe hardship on the poorer classes, and that an emergency existed, but the question here presented is the

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constitutionality of a particular portion of a statute, and none of such matters is an argument for, or against, its constitutionality. The Constitution is something solid, permanent an substantial. Its stability protects the life, liberty and property rights of the rich and the poor alike, and that protection ought not to change with the wind or any emergency condition. The fundamental question involved in this case is the right of the people of the Philippine Islands to be and live under a republican form of government. We make the broad statement that no state or nation, living under republican form of government, under the terms and conditions specified in Act No. 2868, has ever enacted a law delegating the power to any one, to fix the price at which rice should be sold. That power can never be delegated under a republican form of government. In the fixing of the price at which the defendant should sell his rice, the law was not dealing with government property. It was dealing with private property and private rights, which are sacred under the Constitution. If this law should be sustained, upon the same principle and for the same reason, the Legislature could authorize the Governor-General to fix the price of every product or commodity in the Philippine Islands, and empower him to make it a crime to sell any product at any other or different price. It may be said that this was a war measure, and that for such reason the provision of the Constitution should be suspended. But the Stubborn fact remains that at all times the judicial power was in full force and effect, and that while that power was in force and effect, such a provision of the Constitution could not be, and was not, suspended even in times of war. It may be claimed that during the war, the United States Government undertook to, and did, fix the price at which wheat and flour should be bought and sold, and that is true. There, the United States had declared war, and at the time was at war with other nations, and it was a war measure, but it is also true that in doing so, and as a part of the same act, the United States commandeered all the wheat and flour, and took possession of it, either actual or constructive, and the government itself became the owner of the wheat and flour, and fixed the price to be paid for it. That is not this case. Here the rice sold was the personal and private property of the defendant, who sold it to one of his customers. The government had not bought and did not claim to own the rice, or have any interest in it, and at the time of the alleged sale, it was the personal, private property of the defendant. It may be that the law was passed in the interest of the public, but the members of this court have taken on solemn oath to uphold and defend the Constitution, and it ought not to be construed to meet the changing winds or emergency conditions. Again, we say that no state or nation under a republican form of government ever enacted a law authorizing any executive, under the conditions states, to fix the price at which a price person would sell his own rice, and make the broad statement that no decision of any court, on principle or by analogy, will ever be found which sustains the constitutionality of the particular portion of Act No. 2868 here in question. By the terms of the Organic Act, subject only to constitutional limitations, the power to legislate and enact laws is vested exclusively in the Legislative, which is elected by a direct vote of the people of the Philippine Islands. As to the question here involved, the authority of the Governor-General to fix the maximum price at which palay, rice and corn may be sold in the manner power in violation of the organic law. This opinion is confined to the particular question here involved, which is the right of the Governor-General, upon the terms and conditions stated in the Act, to fix the price of rice and make it a crime to sell it at a higher price, and which holds that portions of the Act unconstitutional. It does not decide or undertake to construe the constitutionality of any of the remaining portions of the Act. The judgment of the lower court is reversed, and the defendant discharged. So ordered. Araullo, C.J., Johnson, Street and Ostrand, JJ., concur. Romualdez, J., concurs in the result.

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Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 74457 March 20, 1987 RESTITUTO YNOT, petitioner, vs. INTERMEDIATE APPELLATE COURT, THE STATION COMMANDER, INTEGRATED NATIONAL POLICE, BAROTAC NUEVO, ILOILO and THE REGIONAL DIRECTOR, BUREAU OF ANIMAL INDUSTRY, REGION IV, ILOILO CITY, respondents. Ramon A. Gonzales for petitioner.

CRUZ, J.: The essence of due process is distilled in the immortal cry of Themistocles to Alcibiades "Strike but hear me first!" It is this cry that the petitioner in effect repeats here as he challenges the constitutionality of Executive Order No. 626A. The said executive order reads in full as follows: WHEREAS, the President has given orders prohibiting the interprovincial movement of carabaos and the slaughtering of carabaos not complying with the requirements of Executive Order No. 626 particularly with respect to age; WHEREAS, it has been observed that despite such orders the violators still manage to circumvent the prohibition against inter-provincial movement of carabaos by transporting carabeef instead; and WHEREAS, in order to achieve the purposes and objectives of Executive Order No. 626 and the prohibition against interprovincial movement of carabaos, it is necessary to strengthen the said Executive Order and provide for the disposition of the carabaos and carabeef subject of the violation; NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the Constitution, do hereby promulgate the following: SECTION 1. Executive Order No. 626 is hereby amended such that henceforth, no carabao regardless of age, sex, physical condition or purpose and no carabeef shall be transported from one province to another. The carabao or carabeef transported in violation of this Executive Order as amended shall be subject to confiscation and forfeiture by the government, to be distributed to charitable institutions and other similar institutions as the Chairman of the National Meat Inspection Commission may ay see fit, in the case of carabeef, and to deserving farmers through dispersal as the Director of Animal Industry may see fit, in the case of carabaos. SECTION 2. This Executive Order shall take effect immediately. Done in the City of Manila, this 25th day of October, in the year of Our Lord, nineteen hundred and eighty. (SGD.) FERDINAND E. MARCOS Presiden t Republic of the Philippines

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The petitioner had transported six carabaos in a pump boat from Masbate to Iloilo on January 13, 1984, when they were confiscated by the police station commander of Barotac Nuevo, Iloilo, for violation of the above measure. 1The petitioner sued for recovery, and the Regional Trial Court of Iloilo City issued a writ of replevin upon his filing of a supersedeas bond of P12,000.00. After considering the merits of the case, the court sustained the confiscation of the carabaos and, since they could no longer be produced, ordered the confiscation of the bond. The court also declined to rule on the constitutionality of the executive order, as raise by the petitioner, for lack of authority and also 2 for its presumed validity. The petitioner appealed the decision to the Intermediate Appellate Court, * which upheld the trial court, ** and he has now come before us in this petition for review on certiorari. The thrust of his petition is that the executive order is unconstitutional insofar as it authorizes outright confiscation of the carabao or carabeef being transported across provincial boundaries. His claim is that the penalty is invalid because it is imposed without according the owner a right to be heard before a competent and impartial court as guaranteed by due process. He complains that the measure should not have been presumed, and so sustained, as constitutional. There is also a challenge to the improper exercise of the legislative power by the former President 4 under Amendment No. 6 of the 1973 Constitution. While also involving the same executive order, the case of Pesigan v. Angeles is not applicable here. The question raised there was the necessity of the previous publication of the measure in the Official Gazette before it could be considered enforceable. We imposed the requirement then on the basis of due process of law. In doing so, however, this Court did not, as contended by the Solicitor General, impliedly affirm the constitutionality of Executive Order No. 626-A. That is an entirely different matter. This Court has declared that while lower courts should observe a becoming modesty in examining constitutional questions, they are nonetheless not prevented from resolving the same whenever warranted, subject only to review 6 by the highest tribunal. We have jurisdiction under the Constitution to "review, revise, reverse, modify or affirm on appeal or certiorari, as the law or rules of court may provide," final judgments and orders of lower courts in, among 7 others, all cases involving the constitutionality of certain measures. This simply means that the resolution of such cases may be made in the first instance by these lower courts. And while it is true that laws are presumed to be constitutional, that presumption is not by any means conclusive and in fact may be rebutted. Indeed, if there be a clear showing of their invalidity, and of the need to declare them so, then 8 "will be the time to make the hammer fall, and heavily," to recall Justice Laurel's trenchant warning. Stated otherwise, courts should not follow the path of least resistance by simply presuming the constitutionality of a law when it is questioned. On the contrary, they should probe the issue more deeply, to relieve the abscess, paraphrasing 9 another distinguished jurist, and so heal the wound or excise the affliction. Judicial power authorizes this; and when the exercise is demanded, there should be no shirking of the task for fear of retaliation, or loss of favor, or popular censure, or any other similar inhibition unworthy of the bench, especially this Court. The challenged measure is denominated an executive order but it is really presidential decree, promulgating a new rule instead of merely implementing an existing law. It was issued by President Marcos not for the purpose of taking care that the laws were faithfully executed but in the exercise of his legislative authority under Amendment No. 6. It was provided thereunder that whenever in his judgment there existed a grave emergency or a threat or imminence thereof or whenever the legislature failed or was unable to act adequately on any matter that in his judgment required immediate action, he could, in order to meet the exigency, issue decrees, orders or letters of instruction that were to have the force and effect of law. As there is no showing of any exigency to justify the exercise of that extraordinary power then, the petitioner has reason, indeed, to question the validity of the executive order. Nevertheless, since the determination of the grounds was supposed to have been made by the President "in his judgment, " a phrase that will lead to protracted discussion not really necessary at this time, we reserve resolution of this matter until a more appropriate occasion. For the nonce, we confine ourselves to the more fundamental question of due process. It is part of the art of constitution-making that the provisions of the charter be cast in precise and unmistakable language to avoid controversies that might arise on their correct interpretation. That is the Ideal. In the case of the due process clause, however, this rule was deliberately not followed and the wording was purposely kept ambiguous. In fact, a proposal to delineate it more clearly was submitted in the Constitutional Convention of 1934, but it was rejected by Delegate Jose P. Laurel, Chairman of the Committee on the Bill of Rights, who forcefully argued against it. He was sustained by the body. 10 The due process clause was kept intentionally vague so it would remain also conveniently resilient. This was felt necessary because due process is not, like some provisions of the fundamental law, an "iron rule" laying down an implacable and immutable command for all seasons and all persons. Flexibility must be the best virtue of the
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guaranty. The very elasticity of the due process clause was meant to make it adapt easily to every situation, enlarging or constricting its protection as the changing times and circumstances may require. Aware of this, the courts have also hesitated to adopt their own specific description of due process lest they confine themselves in a legal straitjacket that will deprive them of the elbow room they may need to vary the meaning of the clause whenever indicated. Instead, they have preferred to leave the import of the protection open-ended, as it were, to be "gradually ascertained by the process of inclusion and exclusion in the course of the decision of cases as they arise." 11 Thus, Justice Felix Frankfurter of the U.S. Supreme Court, for example, would go no farther than to define due process and in so doing sums it all up as nothing more and nothing less than "the embodiment of the sporting Idea of fair play." 12 When the barons of England extracted from their sovereign liege the reluctant promise that that Crown would thenceforth not proceed against the life liberty or property of any of its subjects except by the lawful judgment of his peers or the law of the land, they thereby won for themselves and their progeny that splendid guaranty of fairness that is now the hallmark of the free society. The solemn vow that King John made at Runnymede in 1215 has since then resounded through the ages, as a ringing reminder to all rulers, benevolent or base, that every person, when confronted by the stern visage of the law, is entitled to have his say in a fair and open hearing of his cause. The closed mind has no place in the open society. It is part of the sporting Idea of fair play to hear "the other side" before an opinion is formed or a decision is made by those who sit in judgment. Obviously, one side is only one-half of the question; the other half must also be considered if an impartial verdict is to be reached based on an informed appreciation of the issues in contention. It is indispensable that the two sides complement each other, as unto the bow the arrow, in leading to the correct ruling after examination of the problem not from one or the other perspective only but in its totality. A judgment based on less that this full appraisal, on the pretext that a hearing is unnecessary or useless, is tainted with the vice of bias or intolerance or ignorance, or worst of all, in repressive regimes, the insolence of power. The minimum requirements of due process are notice and hearing 13 which, generally speaking, may not be dispensed with because they are intended as a safeguard against official arbitrariness. It is a gratifying commentary on our judicial system that the jurisprudence of this country is rich with applications of this guaranty as proof of our fealty to the rule of law and the ancient rudiments of fair play. We have consistently declared that every person, faced by the awesome power of the State, is entitled to "the law of the land," which Daniel Webster described almost two hundred years ago in the famous Dartmouth College Case, 14 as "the law which hears before it condemns, which proceeds upon inquiry and renders judgment only after trial." It has to be so if the rights of every person are to be secured beyond the reach of officials who, out of mistaken zeal or plain arrogance, would degrade the due process clause into a worn and empty catchword. This is not to say that notice and hearing are imperative in every case for, to be sure, there are a number of admitted exceptions. The conclusive presumption, for example, bars the admission of contrary evidence as long as such presumption is based on human experience or there is a rational connection between the fact proved and the fact ultimately presumed therefrom. 15 There are instances when the need for expeditions action will justify omission of these requisites, as in the summary abatement of a nuisance per se, like a mad dog on the loose, which may be killed on sight because of the immediate danger it poses to the safety and lives of the people. Pornographic materials, contaminated meat and narcotic drugs are inherently pernicious and may be summarily destroyed. The passport of a person sought for a criminal offense may be cancelled without hearing, to compel his return to the country he has fled. 16 Filthy restaurants may be summarily padlocked in the interest of the public health and bawdy houses to protect the public morals. 17 In such instances, previous judicial hearing may be omitted without violation of due process in view of the nature of the property involved or the urgency of the need to protect the general welfare from a clear and present danger. The protection of the general welfare is the particular function of the police power which both restraints and is restrained by due process. The police power is simply defined as the power inherent in the State to regulate liberty and property for the promotion of the general welfare. 18 By reason of its function, it extends to all the great public needs and is described as the most pervasive, the least limitable and the most demanding of the three inherent powers of the State, far outpacing taxation and eminent domain. The individual, as a member of society, is hemmed in by the police power, which affects him even before he is born and follows him still after he is dead from the womb to beyond the tomb in practically everything he does or owns. Its reach is virtually limitless. It is a ubiquitous and often unwelcome intrusion. Even so, as long as the activity or the property has some relevance to the public welfare, its regulation under the police power is not only proper but necessary. And the justification is found in the venerable Latin maxims, Salus populi est suprema lex and Sic utere tuo ut alienum non laedas, which call for the subordination of individual interests to the benefit of the greater number. It is this power that is now invoked by the government to justify Executive Order No. 626-A, amending the basic rule in Executive Order No. 626, prohibiting the slaughter of carabaos except under certain conditions. The original measure was issued for the reason, as expressed in one of its Whereases, that "present conditions demand that the

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carabaos and the buffaloes be conserved for the benefit of the small farmers who rely on them for energy needs." We affirm at the outset the need for such a measure. In the face of the worsening energy crisis and the increased dependence of our farms on these traditional beasts of burden, the government would have been remiss, indeed, if it had not taken steps to protect and preserve them. A similar prohibition was challenged in United States v. Toribio, 19 where a law regulating the registration, branding and slaughter of large cattle was claimed to be a deprivation of property without due process of law. The defendant had been convicted thereunder for having slaughtered his own carabao without the required permit, and he appealed to the Supreme Court. The conviction was affirmed. The law was sustained as a valid police measure to prevent the indiscriminate killing of carabaos, which were then badly needed by farmers. An epidemic had stricken many of these animals and the reduction of their number had resulted in an acute decline in agricultural output, which in turn had caused an incipient famine. Furthermore, because of the scarcity of the animals and the consequent increase in their price, cattle-rustling had spread alarmingly, necessitating more effective measures for the registration and branding of these animals. The Court held that the questioned statute was a valid exercise of the police power and declared in part as follows: To justify the State in thus interposing its authority in behalf of the public, it must appear, first, that the interests of the public generally, as distinguished from those of a particular class, require such interference; and second, that the means are reasonably necessary for the accomplishment of the purpose, and not unduly oppressive upon individuals. ... From what has been said, we think it is clear that the enactment of the provisions of the statute under consideration was required by "the interests of the public generally, as distinguished from those of a particular class" and that the prohibition of the slaughter of carabaos for human consumption, so long as these animals are fit for agricultural work or draft purposes was a "reasonably necessary" limitation on private ownership, to protect the community from the loss of the services of such animals by their slaughter by improvident owners, tempted either by greed of momentary gain, or by a desire to enjoy the luxury of animal food, even when by so doing the productive power of the community may be measurably and dangerously affected. In the light of the tests mentioned above, we hold with the Toribio Case that the carabao, as the poor man's tractor, so to speak, has a direct relevance to the public welfare and so is a lawful subject of Executive Order No. 626. The method chosen in the basic measure is also reasonably necessary for the purpose sought to be achieved and not unduly oppressive upon individuals, again following the above-cited doctrine. There is no doubt that by banning the slaughter of these animals except where they are at least seven years old if male and eleven years old if female upon issuance of the necessary permit, the executive order will be conserving those still fit for farm work or breeding and preventing their improvident depletion. But while conceding that the amendatory measure has the same lawful subject as the original executive order, we cannot say with equal certainty that it complies with the second requirement, viz., that there be a lawful method. We note that to strengthen the original measure, Executive Order No. 626-A imposes an absolute ban not on theslaughter of the carabaos but on their movement, providing that "no carabao regardless of age, sex, physical condition or purpose (sic) and no carabeef shall be transported from one province to another." The object of the prohibition escapes us. The reasonable connection between the means employed and the purpose sought to be achieved by the questioned measure is missing We do not see how the prohibition of the inter-provincial transport of carabaos can prevent their indiscriminate slaughter, considering that they can be killed anywhere, with no less difficulty in one province than in another. Obviously, retaining the carabaos in one province will not prevent their slaughter there, any more than moving them to another province will make it easier to kill them there. As for the carabeef, the prohibition is made to apply to it as otherwise, so says executive order, it could be easily circumvented by simply killing the animal. Perhaps so. However, if the movement of the live animals for the purpose of preventing their slaughter cannot be prohibited, it should follow that there is no reason either to prohibit their transfer as, not to be flippant dead meat. Even if a reasonable relation between the means and the end were to be assumed, we would still have to reckon with the sanction that the measure applies for violation of the prohibition. The penalty is outright confiscation of the carabao or carabeef being transported, to be meted out by the executive authorities, usually the police only. In the Toribio Case, the statute was sustained because the penalty prescribed was fine and imprisonment, to be imposed by the court after trial and conviction of the accused. Under the challenged measure, significantly, no such trial is prescribed, and the property being transported is immediately impounded by the police and declared, by the measure itself, as forfeited to the government. In the instant case, the carabaos were arbitrarily confiscated by the police station commander, were returned to the petitioner only after he had filed a complaint for recovery and given a supersedeas bond of P12,000.00, which was

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ordered confiscated upon his failure to produce the carabaos when ordered by the trial court. The executive order defined the prohibition, convicted the petitioner and immediately imposed punishment, which was carried out forthright. The measure struck at once and pounced upon the petitioner without giving him a chance to be heard, thus denying him the centuries-old guaranty of elementary fair play. It has already been remarked that there are occasions when notice and hearing may be validly dispensed with notwithstanding the usual requirement for these minimum guarantees of due process. It is also conceded that summary action may be validly taken in administrative proceedings as procedural due process is not necessarily judicial only. 20 In the exceptional cases accepted, however. there is a justification for the omission of the right to a previous hearing, to wit, the immediacy of the problem sought to be corrected and the urgency of the need to correct it. In the case before us, there was no such pressure of time or action calling for the petitioner's peremptory treatment. The properties involved were not even inimical per se as to require their instant destruction. There certainly was no reason why the offense prohibited by the executive order should not have been proved first in a court of justice, with the accused being accorded all the rights safeguarded to him under the Constitution. Considering that, as we held in Pesigan v. Angeles, 21 Executive Order No. 626-A is penal in nature, the violation thereof should have been pronounced not by the police only but by a court of justice, which alone would have had the authority to impose the prescribed penalty, and only after trial and conviction of the accused. We also mark, on top of all this, the questionable manner of the disposition of the confiscated property as prescribed in the questioned executive order. It is there authorized that the seized property shall "be distributed to charitable institutions and other similar institutions as the Chairman of the National Meat Inspection Commissionmay see fit, in the case of carabeef, and to deserving farmers through dispersal as the Director of Animal Industry may see fit, in the case of carabaos." (Emphasis supplied.) The phrase "may see fit" is an extremely generous and dangerous condition, if condition it is. It is laden with perilous opportunities for partiality and abuse, and even corruption. One searches in vain for the usual standard and the reasonable guidelines, or better still, the limitations that the said officers must observe when they make their distribution. There is none. Their options are apparently boundless. Who shall be the fortunate beneficiaries of their generosity and by what criteria shall they be chosen? Only the officers named can supply the answer, they and they alone may choose the grantee as they see fit, and in their own exclusive discretion. Definitely, there is here a "roving commission," a wide and sweeping authority that is not "canalized within banks that keep it from overflowing," in short, a clearly profligate and therefore invalid delegation of legislative powers. To sum up then, we find that the challenged measure is an invalid exercise of the police power because the method employed to conserve the carabaos is not reasonably necessary to the purpose of the law and, worse, is unduly oppressive. Due process is violated because the owner of the property confiscated is denied the right to be heard in his defense and is immediately condemned and punished. The conferment on the administrative authorities of the power to adjudge the guilt of the supposed offender is a clear encroachment on judicial functions and militates against the doctrine of separation of powers. There is, finally, also an invalid delegation of legislative powers to the officers mentioned therein who are granted unlimited discretion in the distribution of the properties arbitrarily taken. For these reasons, we hereby declare Executive Order No. 626-A unconstitutional. We agree with the respondent court, however, that the police station commander who confiscated the petitioner's carabaos is not liable in damages for enforcing the executive order in accordance with its mandate. The law was at that time presumptively valid, and it was his obligation, as a member of the police, to enforce it. It would have been impertinent of him, being a mere subordinate of the President, to declare the executive order unconstitutional and, on his own responsibility alone, refuse to execute it. Even the trial court, in fact, and the Court of Appeals itself did not feel they had the competence, for all their superior authority, to question the order we now annul. The Court notes that if the petitioner had not seen fit to assert and protect his rights as he saw them, this case would never have reached us and the taking of his property under the challenged measure would have become a fait accompli despite its invalidity. We commend him for his spirit. Without the present challenge, the matter would have ended in that pump boat in Masbate and another violation of the Constitution, for all its obviousness, would have been perpetrated, allowed without protest, and soon forgotten in the limbo of relinquished rights.
The strength of democracy lies not in the rights it guarantees but in the courage of the people to invoke them whenever they are ignored or violated. Rights are but weapons on the wall if, like expensive tapestry, all they do is embellish and impress. Rights, as weapons, must be a promise of protection. They become truly meaningful, and fulfill the role assigned to them in the free society, if they are kept bright and sharp with use by those who are not afraid to assert them. WHEREFORE, Executive Order No. 626-A is hereby declared unconstitutional. Except as affirmed above, the decision of the Court of Appeals is reversed. The supersedeas bond is cancelled and the amount thereof is ordered restored to the petitioner. No costs. SO ORDERED. Teehankee, C.J., Yap, Fernan, Narvasa, Gutierrez, Jr., Paras, Gancayco, Padilla Bidin Sarmiento and Cortes, JJ., concur. Melencio-Herrera and Feliciano, JJ., are on leave.

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Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-23825 December 24, 1965

EMMANUEL PELAEZ, petitioner, vs. THE AUDITOR GENERAL, respondent. Zulueta, Gonzales, Paculdo and Associates for petitioner. Office of the Solicitor General for respondent. CONCEPCION, J.: During the period from September 4 to October 29, 1964 the President of the Philippines, purporting to act pursuant to Section 68 of the Revised Administrative Code, issued Executive Orders Nos. 93 to 121, 124 and 126 to 129; 1 creating thirty-three (33) municipalities enumerated in the margin. Soon after the date last mentioned, or on November 10, 1964 petitioner Emmanuel Pelaez, as Vice President of the Philippines and as taxpayer, instituted the present special civil action, for a writ of prohibition with preliminary injunction, against the Auditor General, to restrain him, as well as his representatives and agents, from passing in audit any expenditure of public funds in implementation of said executive orders and/or any disbursement by said municipalities. Petitioner alleges that said executive orders are null and void, upon the ground that said Section 68 has been impliedly repealed by Republic Act No. 2370 and constitutes an undue delegation of legislative power. Respondent maintains the contrary view and avers that the present action is premature and that not all proper parties referring to the officials of the new political subdivisions in question have been impleaded. Subsequently, the mayors of several municipalities adversely affected by the aforementioned executive orders because the latter have taken away from the former the barrios composing the new political subdivisions intervened in the case. Moreover, Attorneys Enrique M. Fernando and Emma Quisumbing-Fernando were allowed to and did appear as amici curiae. The third paragraph of Section 3 of Republic Act No. 2370, reads: Barrios shall not be created or their boundaries altered nor their names changed except under the provisions of this Act or by Act of Congress. Pursuant to the first two (2) paragraphs of the same Section 3: All barrios existing at the time of the passage of this Act shall come under the provisions hereof. Upon petition of a majority of the voters in the areas affected, a new barrio may be created or the name of an existing one may be changed by the provincial board of the province, upon recommendation of the council of the municipality or municipalities in which the proposed barrio is stipulated. The recommendation of the municipal council shall be embodied in a resolution approved by at least two-thirds of the entire membership of the said council: Provided, however, That no new barrio may be created if its population is less than five hundred persons. Hence, since January 1, 1960, when Republic Act No. 2370 became effective, barrios may "not be created or their boundaries altered nor their names changed" except by Act of Congress or of the corresponding provincial board "upon petition of a majority of the voters in the areas affected" and the "recommendation of the council of the municipality or municipalities in which the proposed barrio is situated." Petitioner argues, accordingly: "If the President, under this new law, cannot even create a barrio, can he create a municipality which is composed of several barrios, since barrios are units of municipalities?" Respondent answers in the affirmative, upon the theory that a new municipality can be created without creating new barrios, such as, by placing old barrios under the jurisdiction of the new municipality. This theory overlooks, however, the main import of the petitioner's argument, which is that the statutory denial of the presidential authority to create a new barrio implies a negation of the bigger power to create municipalities, each of which consists of several barrios. The cogency and force of this argument is too obvious to be denied or even questioned. Founded upon logic and

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experience, it cannot be offset except by a clear manifestation of the intent of Congress to the contrary, and no such manifestation, subsequent to the passage of Republic Act No. 2379, has been brought to our attention. Moreover, section 68 of the Revised Administrative Code, upon which the disputed executive orders are based, provides: The (Governor-General) President of the Philippines may by executive order define the boundary, or boundaries, of any province, subprovince, municipality, [township] municipal district, or other political subdivision, and increase or diminish the territory comprised therein, may divide any province into one or more subprovinces, separate any political division other than a province, into such portions as may be required, merge any of such subdivisions or portions with another, name any new subdivision so created, and may change the seat of government within any subdivision to such place therein as the public welfare may require: Provided, That the authorization of the (Philippine Legislature) Congress of the Philippines shall first be obtained whenever the boundary of any province or subprovince is to be defined or any province is to be divided into one or more subprovinces. When action by the (Governor-General) President of the Philippines in accordance herewith makes necessary a change of the territory under the jurisdiction of any administrative officer or any judicial officer, the (Governor-General) President of the Philippines, with the recommendation and advice of the head of the Department having executive control of such officer, shall redistrict the territory of the several officers affected and assign such officers to the new districts so formed. Upon the changing of the limits of political divisions in pursuance of the foregoing authority, an equitable distribution of the funds and obligations of the divisions thereby affected shall be made in such manner as may be recommended by the (Insular Auditor) Auditor General and approved by the (Governor-General) President of the Philippines. Respondent alleges that the power of the President to create municipalities under this section does not amount to an undue delegation of legislative power, relying upon Municipality of Cardona vs. Municipality of Binagonan (36 Phil. 547), which, he claims, has settled it. Such claim is untenable, for said case involved, not the creation of a new municipality, but a mere transfer of territory from an already existing municipality (Cardona) to another municipality (Binagonan), likewise, existing at the time of and prior to said transfer (See Gov't of the P.I. ex rel. Municipality of Cardona vs. Municipality, of Binagonan [34 Phil. 518, 519-5201) in consequence of the fixing and definition, pursuant to Act No. 1748, of the common boundaries of two municipalities. It is obvious, however, that, whereas the power to fix such common boundary, in order to avoid or settle conflicts of jurisdiction between adjoining municipalities, may partake of an administrative nature involving, as it does, the adoption of means and ways to carry into effect the law creating said municipalities the authority to create municipal corporations is essentially legislative in nature. In the language of other courts, it is "strictly a legislative function" (State ex rel. Higgins vs. Aicklen, 119 S. 425, January 2, 1959) or "solely and exclusively the exercise oflegislative power" (Udall vs. Severn, May 29, 1938, 79 P. 2d 347-349). As the Supreme Court of Washington has put it (Territory ex rel. Kelly vs. Stewart, February 13, 1890, 23 Pac. 405, 409), "municipal corporations are purely the creatures of statutes." Although Congress may delegate to another branch of the Government the power to fill in the details in the execution, enforcement or administration of a law, it is essential, to forestall a violation of the principle of separation of powers, that said law: (a) be complete in itself it must set forth therein the policy to be executed, carried out or 2 implemented by the delegate and (b) fix a standard the limits of which are sufficiently determinate or 2a determinable to which the delegate must conform in the performance of his functions. Indeed, without a statutory declaration of policy, the delegate would in effect, make or formulate such policy, which is the essence of every law; and, without the aforementioned standard, there would be no means to determine, with reasonable certainty, whether 2b the delegate has acted within or beyond the scope of his authority. Hence, he could thereby arrogate upon himself the power, not only to make the law, but, also and this is worse to unmake it, by adopting measures inconsistent with the end sought to be attained by the Act of Congress, thus nullifying the principle of separation of powers and the system of checks and balances, and, consequently, undermining the very foundation of our Republican system. Section 68 of the Revised Administrative Code does not meet these well settled requirements for a valid delegation of the power to fix the details in the enforcement of a law. It does not enunciate any policy to be carried out or implemented by the President. Neither does it give a standard sufficiently precise to avoid the evil effects above referred to. In this connection, we do not overlook the fact that, under the last clause of the first sentence of Section 68, the President: ... may change the seat of the government within any subdivision to such place therein as the public welfare may require.
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It is apparent, however, from the language of this clause, that the phrase "as the public welfare may require" qualified, not the clauses preceding the one just quoted, but only the place to which the seat of the government may be transferred. This fact becomes more apparent when we consider that said Section 68 was originally Section 1 of 3 Act No. 1748, which provided that, "whenever in the judgment of the Governor-General the public welfare requires, he may, by executive order," effect the changes enumerated therein (as in said section 68), including the change of the seat of the government "to such place ... as the public interest requires." The opening statement of said Section 1 of Act No. 1748 which was not included in Section 68 of the Revised Administrative Code governed the time at which, or the conditions under which, the powers therein conferred could be exercised; whereas the last part of the first sentence of said section referred exclusively to the place to which the seat of the government was to be transferred. At any rate, the conclusion would be the same, insofar as the case at bar is concerned, even if we assumed that the phrase "as the public welfare may require," in said Section 68, qualifies all other clauses thereof. It is true that in Calalang vs. Williams (70 Phil. 726) and People vs. Rosenthal (68 Phil. 328), this Court had upheld "public welfare" and "public interest," respectively, as sufficient standards for a valid delegation of the authority to execute the law. But, the doctrine laid down in these cases as all judicial pronouncements must be construed in relation to the specific facts and issues involved therein, outside of which they do not constitute precedents and have no binding 4 effect. The law construed in the Calalang case conferred upon the Director of Public Works, with the approval of the Secretary of Public Works and Communications, the power to issue rules and regulations topromote safe transit upon national roads and streets. Upon the other hand, the Rosenthal case referred to the authority of the Insular Treasurer, under Act No. 2581, to issue and cancel certificates or permits for the sale ofspeculative securities. Both cases involved grants to administrative officers of powers related to the exercise of their administrative functions, calling for the determination of questions of fact. Such is not the nature of the powers dealt with in section 68. As above indicated, the creation of municipalities, is not an administrative function, but one which is essentially and eminently legislative in character. The question of whether or not "public interest" demands the exercise of such power is not one of fact. it is "purely a legislativequestion "(Carolina-Virginia Coastal Highway vs. Coastal Turnpike Authority, 74 S.E. 2d. 310-313, 315-318), or apolitical question (Udall vs. Severn, 79 P. 2d. 347-349). As the Supreme Court of Wisconsin has aptly characterized it, "the question as to whether incorporation is for the best interest of the community in any case is emphatically a question of public policy and statecraft" (In re Village of North Milwaukee, 67 N.W. 1033, 1035-1037). For this reason, courts of justice have annulled, as constituting undue delegation of legislative powers, state laws granting the judicial department, the power to determine whether certain territories should be annexed to a particular municipality (Udall vs. Severn, supra, 258-359); or vesting in a Commission the right to determine the plan and frame of government of proposed villages and what functions shall be exercised by the same, although the powers and functions of the village are specifically limited by statute (In re Municipal Charters, 86 Atl. 307-308); or conferring upon courts the authority to declare a given town or village incorporated, and designate its metes and bounds, upon petition of a majority of the taxable inhabitants thereof, setting forth the area desired to be included in such village (Territory ex rel Kelly vs. Stewart, 23 Pac. 405-409); or authorizing the territory of a town, containing a given area and population, to be incorporated as a town, on certain steps being taken by the inhabitants thereof and on certain determination by a court and subsequent vote of the inhabitants in favor thereof, insofar as the court is allowed to determine whether the lands embraced in the petition "ought justly" to be included in the village, and whether the interest of the inhabitants will be promoted by such incorporation, and to enlarge and diminish the boundaries of the proposed village "as justice may require" (In re Villages of North Milwaukee, 67 N.W. 1035-1037); or creating a Municipal Board of Control which shall determine whether or not the laying out, construction or operation of a toll road is in the "public interest" and whether the requirements of the law had been complied with, in which case the board shall enter an order creating a municipal corporation and fixing the name of the same (Carolina-Virginia Coastal Highway vs. Coastal Turnpike Authority, 74 S.E. 2d. 310). Insofar as the validity of a delegation of power by Congress to the President is concerned, the case of Schechter Poultry Corporation vs. U.S. (79 L. Ed. 1570) is quite relevant to the one at bar. The Schechter case involved the constitutionality of Section 3 of the National Industrial Recovery Act authorizing the President of the United States to approve "codes of fair competition" submitted to him by one or more trade or industrial associations or corporations which "impose no inequitable restrictions on admission to membership therein and are truly representative," provided that such codes are not designed "to promote monopolies or to eliminate or oppress small enterprises and will not operate to discriminate against them, and will tend to effectuate the policy" of said Act. The Federal Supreme Court held: To summarize and conclude upon this point: Sec. 3 of the Recovery Act is without precedent. It supplies no standards for any trade, industry or activity. It does not undertake to prescribe rules of conduct to be applied to particular states of fact determined by appropriate administrative procedure. Instead of prescribing rules of conduct, it authorizes the making of codes to prescribe them. For that legislative undertaking, Sec. 3 sets up no standards, aside from the statement of the general aims of rehabilitation, correction and expansion described in Sec. 1. In view of the scope of that broad declaration, and of the nature of the few restrictions

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that are imposed, the discretion of the President in approving or prescribing codes, and thus enacting laws for the government of trade and industry throughout the country, is virtually unfettered. We think that the code making authority thus conferred is an unconstitutional delegation of legislative power. If the term "unfair competition" is so broad as to vest in the President a discretion that is "virtually unfettered." and, consequently, tantamount to a delegation of legislative power, it is obvious that "public welfare," which has even a broader connotation, leads to the same result. In fact, if the validity of the delegation of powers made in Section 68 were upheld, there would no longer be any legal impediment to a statutory grant of authority to the President to do anything which, in his opinion, may be required by public welfare or public interest. Such grant of authority would be a virtual abdication of the powers of Congress in favor of the Executive, and would bring about a total collapse of the democratic system established by our Constitution, which it is the special duty and privilege of this Court to uphold. It may not be amiss to note that the executive orders in question were issued after the legislative bills for the creation of the municipalities involved in this case had failed to pass Congress . A better proof of the fact that the issuance of said executive orders entails the exercise of purely legislative functions can hardly be given. Again, Section 10 (1) of Article VII of our fundamental law ordains: The President shall have control of all the executive departments, bureaus, or offices, exercise general supervision over all local governments as may be provided by law, and take care that the laws be faithfully executed. The power of control under this provision implies the right of the President to interfere in the exercise of such discretion as may be vested by law in the officers of the executive departments, bureaus, or offices of the national government, as well as to act in lieu of such officers. This power is denied by the Constitution to the Executive, insofar as local governments are concerned. With respect to the latter, the fundamental law permits him to wield no more authority than that of checking whether said local governments or the officers thereof perform their duties as provided by statutory enactments. Hence, the President cannot interfere with local governments, so long as the same or its officers act Within the scope of their authority. He may not enact an ordinance which the municipal council has failed or refused to pass, even if it had thereby violated a duty imposed thereto by law, although he may see to it that the corresponding provincial officials take appropriate disciplinary action therefor. Neither may he vote, set aside or annul an ordinance passed by said council within the scope of its jurisdiction, no matter how patently unwise it may be. He may not even suspend an elective official of a regular municipality or take any disciplinary action against him, 5 except on appeal from a decision of the corresponding provincial board. Upon the other hand if the President could create a municipality, he could, in effect, remove any of its officials, by creating a new municipality and including therein the barrio in which the official concerned resides, for his office would 6 thereby become vacant. Thus, by merely brandishing the power to create a new municipality (if he had it), without actually creating it, he could compel local officials to submit to his dictation, thereby, in effect, exercising over them the power of control denied to him by the Constitution. Then, also, the power of control of the President over executive departments, bureaus or offices implies no morethan the authority to assume directly the functions thereof or to interfere in the exercise of discretion by its officials. Manifestly, such control does not include the authority either to abolish an executive department or bureau, or to create a new one. As a consequence, the alleged power of the President to create municipal corporations would necessarily connote the exercise by him of an authority even greater than that of control which he has over the executive departments, bureaus or offices. In other words, Section 68 of the Revised Administrative Code does not merely fail to comply with the constitutional mandate above quoted. Instead of giving the President less power over local governments than that vested in him over the executive departments, bureaus or offices, it reverses the process and does the exact opposite, by conferring upon him more power over municipal corporations than that which he has over said executive departments, bureaus or offices. In short, even if it did entail an undue delegation of legislative powers, as it certainly does, said Section 68, as part of the Revised Administrative Code, approved on March 10, 1917, must be deemed repealed by the subsequent 7 adoption of the Constitution, in 1935, which is utterly incompatible and inconsistent with said statutory enactment. There are only two (2) other points left for consideration, namely, respondent's claim (a) that "not all the proper parties" referring to the officers of the newly created municipalities "have been impleaded in this case," and (b) that "the present petition is premature." As regards the first point, suffice it to say that the records do not show, and the parties do not claim, that the officers of any of said municipalities have been appointed or elected and assumed office. At any rate, the Solicitor General, who has appeared on behalf of respondent Auditor General, is the officer authorized by law "to act and represent the Government of the Philippines, its offices and agents, in any official investigation, proceeding or matter requiring the

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services of a lawyer" (Section 1661, Revised Administrative Code), and, in connection with the creation of the aforementioned municipalities, which involves a political, not proprietary, function, said local officials, if any, are mere agents or representatives of the national government. Their interest in the case at bar has, accordingly, been, in 8 effect, duly represented. With respect to the second point, respondent alleges that he has not as yet acted on any of the executive order & in question and has not intimated how he would act in connection therewith. It is, however, a matter of common, public knowledge, subject to judicial cognizance, that the President has, for many years, issued executive orders creating municipal corporations and that the same have been organized and in actual operation, thus indicating, without peradventure of doubt, that the expenditures incidental thereto have been sanctioned, approved or passed in audit by the General Auditing Office and its officials. There is no reason to believe, therefore, that respondent would adopt a different policy as regards the new municipalities involved in this case, in the absence of an allegation to such effect, and none has been made by him. WHEREFORE, the Executive Orders in question are hereby declared null and void ab initio and the respondent permanently restrained from passing in audit any expenditure of public funds in implementation of said Executive Orders or any disbursement by the municipalities above referred to. It is so ordered. Bengzon, C.J., Bautista Angelo, Reyes, J.B.L., Barrera and Dizon, JJ., concur. Zaldivar, J., took no part.

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Republic of the Philippines SUPREME COURT EN BANC G.R. No. 168056 September 1, 2005 ABAKADA GURO PARTY LIST (Formerly AASJAS) OFFICERS SAMSON S. ALCANTARA and ED VINCENT S. ALBANO, Petitioners, vs. THE HONORABLE EXECUTIVE SECRETARY EDUARDO ERMITA; HONORABLE SECRETARY OF THE DEPARTMENT OF FINANCE CESAR PURISIMA; and HONORABLE COMMISSIONER OF INTERNAL REVENUE GUILLERMO PARAYNO, JR., Respondent. x-------------------------x G.R. No. 168207 AQUILINO Q. PIMENTEL, JR., LUISA P. EJERCITO-ESTRADA, JINGGOY E. ESTRADA, PANFILO M. LACSON, ALFREDO S. LIM, JAMBY A.S. MADRIGAL, AND SERGIO R. OSMEA III, Petitioners, vs. EXECUTIVE SECRETARY EDUARDO R. ERMITA, CESAR V. PURISIMA, SECRETARY OF FINANCE, GUILLERMO L. PARAYNO, JR., COMMISSIONER OF THE BUREAU OF INTERNAL REVENUE, Respondent. x-------------------------x G.R. No. 168461 ASSOCIATION OF PILIPINAS SHELL DEALERS, INC. represented by its President, ROSARIO ANTONIO; PETRON DEALERS ASSOCIATION represented by its President, RUTH E. BARBIBI; ASSOCIATION OF CALTEX DEALERS OF THE PHILIPPINES represented by its President, MERCEDITAS A. GARCIA; ROSARIO ANTONIO doing business under the name and style of "ANB NORTH SHELL SERVICE STATION"; LOURDES MARTINEZ doing business under the name and style of "SHELL GATE N. DOMINGO"; BETHZAIDA TAN doing business under the name and style of "ADVANCE SHELL STATION"; REYNALDO P. MONTOYA doing business under the name and style of "NEW LAMUAN SHELL SERVICE STATION"; EFREN SOTTO doing business under the name and style of "RED FIELD SHELL SERVICE STATION"; DONICA CORPORATION represented by its President, DESI TOMACRUZ; RUTH E. MARBIBI doing business under the name and style of "R&R PETRON STATION"; PETER M. UNGSON doing business under the name and style of "CLASSIC STAR GASOLINE SERVICE STATION"; MARIAN SHEILA A. LEE doing business under the name and style of "NTE GASOLINE & SERVICE STATION"; JULIAN CESAR P. POSADAS doing business under the name and style of "STARCARGA ENTERPRISES"; ADORACION MAEBO doing business under the name and style of "CMA MOTORISTS CENTER"; SUSAN M. ENTRATA doing business under the name and style of "LEONAS GASOLINE STATION and SERVICE CENTER"; CARMELITA BALDONADO doing business under the name and style of "FIRST CHOICE SERVICE CENTER"; MERCEDITAS A. GARCIA doing business under the name and style of "LORPED SERVICE CENTER"; RHEAMAR A. RAMOS doing business under the name and style of "RJRAM PTT GAS STATION"; MA. ISABEL VIOLAGO doing business under the name and style of "VIOLAGO-PTT SERVICE CENTER"; MOTORISTS HEART CORPORATION represented by its Vice-President for Operations, JOSELITO F. FLORDELIZA; MOTORISTS HARVARD CORPORATION represented by its Vice-President for Operations, JOSELITO F. FLORDELIZA; MOTORISTS HERITAGE CORPORATION represented by its Vice-President for Operations, JOSELITO F. FLORDELIZA; PHILIPPINE STANDARD OIL CORPORATION represented by its Vice-President for Operations, JOSELITO F. FLORDELIZA; ROMEO MANUEL doing business under the name and style of "ROMMAN GASOLINE STATION"; ANTHONY ALBERT CRUZ III doing business under the name and style of "TRUE SERVICE STATION", Petitioners, vs. CESAR V. PURISIMA, in his capacity as Secretary of the Department of Finance and GUILLERMO L. PARAYNO, JR., in his capacity as Commissioner of Internal Revenue, Respondent. x-------------------------x G.R. No. 168463 FRANCIS JOSEPH G. ESCUDERO, VINCENT CRISOLOGO, EMMANUEL JOEL J. VILLANUEVA, RODOLFO G. PLAZA, DARLENE ANTONINO-CUSTODIO, OSCAR G. MALAPITAN, BENJAMIN C. AGARAO, JR. JUAN EDGARDO M. ANGARA, JUSTIN MARC SB. CHIPECO, FLORENCIO G. NOEL, MUJIV S. HATAMAN, RENATO B.

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MAGTUBO, JOSEPH A. SANTIAGO, TEOFISTO DL. GUINGONA III, RUY ELIAS C. LOPEZ, RODOLFO Q. AGBAYANI and TEODORO A. CASIO, Petitioners, vs. CESAR V. PURISIMA, in his capacity as Secretary of Finance, GUILLERMO L. PARAYNO, JR., in his capacity as Commissioner of Internal Revenue, and EDUARDO R. ERMITA, in his capacity as Executive Secretary, Respondent. x-------------------------x G.R. No. 168730 BATAAN GOVERNOR ENRIQUE T. GARCIA, JR. Petitioner, vs. HON. EDUARDO R. ERMITA, in his capacity as the Executive Secretary; HON. MARGARITO TEVES, in his capacity as Secretary of Finance; HON. JOSE MARIO BUNAG, in his capacity as the OIC Commissioner of the Bureau of Internal Revenue; and HON. ALEXANDER AREVALO, in his capacity as the OIC Commissioner of the Bureau of Customs, Respondent. DECISION AUSTRIA-MARTINEZ, J.: The expenses of government, having for their object the interest of all, should be borne by everyone, and the more man enjoys the advantages of society, the more he ought to hold himself honored in contributing to those expenses. -Anne Robert Jacques Turgot (1727-1781) French statesman and economist Mounting budget deficit, revenue generation, inadequate fiscal allocation for education, increased emoluments for health workers, and wider coverage for full value-added tax benefits these are the reasons why Republic Act No. 1 9337 (R.A. No. 9337) was enacted. Reasons, the wisdom of which, the Court even with its extensive constitutional power of review, cannot probe. The petitioners in these cases, however, question not only the wisdom of the law, but also perceived constitutional infirmities in its passage. Every law enjoys in its favor the presumption of constitutionality. Their arguments notwithstanding, petitioners failed to justify their call for the invalidity of the law. Hence, R.A. No. 9337 is not unconstitutional. LEGISLATIVE HISTORY R.A. No. 9337 is a consolidation of three legislative bills namely, House Bill Nos. 3555 and 3705, and Senate Bill No. 1950. House Bill No. 3555 was introduced on first reading on January 7, 2005. The House Committee on Ways and Means approved the bill, in substitution of House Bill No. 1468, which Representative (Rep.) Eric D. Singson introduced on August 8, 2004. The President certified the bill on January 7, 2005 for immediate enactment. On January 27, 2005, the House of Representatives approved the bill on second and third reading. House Bill No. 3705 on the other hand, substituted House Bill No. 3105 introduced by Rep. Salacnib F. Baterina, and House Bill No. 3381 introduced by Rep. Jacinto V. Paras. Its "mother bill" is House Bill No. 3555. The House Committee on Ways and Means approved the bill on February 2, 2005. The President also certified it as urgent on February 8, 2005. The House of Representatives approved the bill on second and third reading on February 28, 2005. Meanwhile, the Senate Committee on Ways and Means approved Senate Bill No. 1950 on March 7, 2005, "in substitution of Senate Bill Nos. 1337, 1838 and 1873, taking into consideration House Bill Nos. 3555 and 3705." Senator Ralph G. Recto sponsored Senate Bill No. 1337, while Senate Bill Nos. 1838 and 1873 were both sponsored by Sens. Franklin M. Drilon, Juan M. Flavier and Francis N. Pangilinan. The President certified the bill on March 11, 2005, and was approved by the Senate on second and third reading on April 13, 2005. On the same date, April 13, 2005, the Senate agreed to the request of the House of Representatives for a committee conference on the disagreeing provisions of the proposed bills.
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Before long, the Conference Committee on the Disagreeing Provisions of House Bill No. 3555, House Bill No. 3705, and Senate Bill No. 1950, "after having met and discussed in full free and conference," recommended the approval of its report, which the Senate did on May 10, 2005, and with the House of Representatives agreeing thereto the next day, May 11, 2005. On May 23, 2005, the enrolled copy of the consolidated House and Senate version was transmitted to the President, who signed the same into law on May 24, 2005. Thus, came R.A. No. 9337. July 1, 2005 is the effectivity date of R.A. No. 9337. When said date came, the Court issued a temporary restraining order, effective immediately and continuing until further orders, enjoining respondents from enforcing and implementing the law. Oral arguments were held on July 14, 2005. Significantly, during the hearing, the Court speaking through Mr. Justice Artemio V. Panganiban, voiced the rationale for its issuance of the temporary restraining order on July 1, 2005, to wit: J. PANGANIBAN : . . . But before I go into the details of your presentation, let me just tell you a little background. You know when the law took effect on July 1, 2005, the Court issued a TRO at about 5 oclock in the af ternoon. But before that, there was a lot of complaints aired on television and on radio. Some people in a gas station were complaining that the gas prices went up by 10%. Some people were complaining that their electric bill will go up by 10%. Other times people riding in domestic air carrier were complaining that the prices that theyll have to pay would have to go up by 10%. While all that was being aired, per your presentation and per our own understanding of the law, thats not true. Its not true that the e-vat law necessarily increased prices by 10% uniformly isnt it? ATTY. BANIQUED : No, Your Honor. J. PANGANIBAN : It is not? ATTY. BANIQUED : Its not, because, Your Honor, there is an Executive Order that granted the Petroleum companies some subsidy . . . interrupted J. PANGANIBAN : Thats correct . . . ATTY. BANIQUED : . . . and therefore that was meant to temper the impact . . . interrupted J. PANGANIBAN : . . . mitigating measures . . . ATTY. BANIQUED : Yes, Your Honor. J. PANGANIBAN : As a matter of fact a part of the mitigating measures would be the elimination of the Excise Tax and the import duties. That is why, it is not correct to say that the VAT as to petroleum dealers increased prices by 10%. ATTY. BANIQUED : Yes, Your Honor. J. PANGANIBAN : And therefore, there is no justification for increasing the retail price by 10% to cover the E-Vat tax. If you consider the excise tax and the import duties, the Net Tax would probably be in the neighborhood of 7%? We are not going into exact figures I am just trying to deliver a point that different industries, different products, different services are hit differently. So its not correct to say that all prices must go up by 10%. ATTY. BANIQUED : Youre right, Your Honor. J. PANGANIBAN : Now. For instance, Domestic Airline companies, Mr. Counsel, are at present imposed a Sales Tax of 3%. When this E-Vat law took effect the Sales Tax was also removed as a mitigating measure. So, therefore, there is no justification to increase the fares by 10% at best 7%, correct? ATTY. BANIQUED : I guess so, Your Honor, yes. J. PANGANIBAN : There are other products that the people were complaining on that first day, were being increased arbitrarily by 10%. And thats one reason among many others this Court ha d to issue TRO because of the confusion in the implementation. Thats why we added as an issue in this case, even if its tangentially taken up by the pleadings of the parties, the confusion in the implementation of the E-vat. Our people were subjected to the mercy of
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that confusion of an across the board increase of 10%, which you yourself now admit and I think even the Government will admit is incorrect. In some cases, it should be 3% only, in some cases it should be 6% depending on these mitigating measures and the location and situation of each product, of each service, of each company, isnt it? ATTY. BANIQUED : Yes, Your Honor. J. PANGANIBAN : Alright. So thats one reason why we had to issue a TRO pending the clarification of all these and we wish the government will take time to clarify all these by means of a more detailed implementing rules, in case the 6 law is upheld by this Court. . . . The Court also directed the parties to file their respective Memoranda. G.R. No. 168056 Before R.A. No. 9337 took effect, petitioners ABAKADA GURO Party List, et al., filed a petition for prohibition on May 27, 2005. They question the constitutionality of Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108, respectively, of the National Internal Revenue Code (NIRC). Section 4 imposes a 10% VAT on sale of goods and properties, Section 5 imposes a 10% VAT on importation of goods, and Section 6 imposes a 10% VAT on sale of services and use or lease of properties. These questioned provisions contain a uniform provisoauthorizing the President, upon recommendation of the Secretary of Finance, to raise the VAT rate to 12%, effective January 1, 2006, after any of the following conditions have been satisfied, to wit: . . . That the President, upon the recommendation of the Secretary of Finance, shall, effective January 1, 2006, raise the rate of value-added tax to twelve percent (12%), after any of the following conditions has been satisfied: (i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous year exceeds two and four-fifth percent (2 4/5%); or (ii) National government deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1 %). Petitioners argue that the law is unconstitutional, as it constitutes abandonment by Congress of its exclusive authority to fix the rate of taxes under Article VI, Section 28(2) of the 1987 Philippine Constitution. G.R. No. 168207 On June 9, 2005, Sen. Aquilino Q. Pimentel, Jr., et al., filed a petition for certiorari likewise assailing the constitutionality of Sections 4, 5 and 6 of R.A. No. 9337. Aside from questioning the so-called stand-by authority of the President to increase the VAT rate to 12%, on the ground that it amounts to an undue delegation of legislative power, petitioners also contend that the increase in the VAT rate to 12% contingent on any of the two conditions being satisfied violates the due process clause embodied in Article III, Section 1 of the Constitution, as it imposes an unfair and additional tax burden on the people, in that: (1) the 12% increase is ambiguous because it does not state if the rate would be returned to the original 10% if the conditions are no longer satisfied; (2) the rate is unfair and unreasonable, as the people are unsure of the applicable VAT rate from year to year; and (3) the increase in the VAT rate, which is supposed to be an incentive to the 4 President to raise the VAT collection to at least 2 /5 of the GDP of the previous year, should only be based on fiscal adequacy. Petitioners further claim that the inclusion of a stand-by authority granted to the President by the Bicameral Conference Committee is a violation of the "no-amendment rule" upon last reading of a bill laid down in Article VI, Section 26(2) of the Constitution. G.R. No. 168461 Thereafter, a petition for prohibition was filed on June 29, 2005, by the Association of Pilipinas Shell Dealers, Inc.,et al., assailing the following provisions of R.A. No. 9337: 1) Section 8, amending Section 110 (A)(2) of the NIRC, requiring that the input tax on depreciable goods shall be amortized over a 60-month period, if the acquisition, excluding the VAT components, exceeds One Million Pesos (P1, 000,000.00);

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2) Section 8, amending Section 110 (B) of the NIRC, imposing a 70% limit on the amount of input tax to be credited against the output tax; and 3) Section 12, amending Section 114 (c) of the NIRC, authorizing the Government or any of its political subdivisions, instrumentalities or agencies, including GOCCs, to deduct a 5% final withholding tax on gross payments of goods and services, which are subject to 10% VAT under Sections 106 (sale of goods and properties) and 108 (sale of services and use or lease of properties) of the NIRC. Petitioners contend that these provisions are unconstitutional for being arbitrary, oppressive, excessive, and confiscatory. Petitioners argument is premised on the constitutional right of non-deprivation of life, liberty or property without due process of law under Article III, Section 1 of the Constitution. According to petitioners, the contested sections impose limitations on the amount of input tax that may be claimed. Petitioners also argue that the input tax partakes the nature of a property that may not be confiscated, appropriated, or limited without due process of law. Petitioners further contend that like any other property or property right, the input tax credit may be transferred or disposed of, and that by limiting the same, the government gets to tax a profit or value-added even if there is no profit or valueadded. Petitioners also believe that these provisions violate the constitutional guarantee of equal protection of the law under Article III, Section 1 of the Constitution, as the limitation on the creditable input tax if: (1) the entity has a high ratio of input tax; or (2) invests in capital equipment; or (3) has several transactions with the government, is not based on real and substantial differences to meet a valid classification. Lastly, petitioners contend that the 70% limit is anything but progressive, violative of Article VI, Section 28(1) of the Constitution, and that it is the smaller businesses with higher input tax to output tax ratio that will suffer the consequences thereof for it wipes out whatever meager margins the petitioners make. G.R. No. 168463 Several members of the House of Representatives led by Rep. Francis Joseph G. Escudero filed this petition forcertiorari on June 30, 2005. They question the constitutionality of R.A. No. 9337 on the following grounds: 1) Sections 4, 5, and 6 of R.A. No. 9337 constitute an undue delegation of legislative power, in violation of Article VI, Section 28(2) of the Constitution; 2) The Bicameral Conference Committee acted without jurisdiction in deleting the no pass on provisions present in Senate Bill No. 1950 and House Bill No. 3705; and 3) Insertion by the Bicameral Conference Committee of Sections 27, 28, 34, 116, 117, 119, 121, 125, 148, 151, 236, 237 and 288, which were present in Senate Bill No. 1950, violates Article VI, Section 24(1) of the Constitution, which provides that all appropriation, revenue or tariff bills shall originate exclusively in the House of Representatives G.R. No. 168730 On the eleventh hour, Governor Enrique T. Garcia filed a petition for certiorari and prohibition on July 20, 2005, alleging unconstitutionality of the law on the ground that the limitation on the creditable input tax in effect allows VATregistered establishments to retain a portion of the taxes they collect, thus violating the principle that tax collection and revenue should be solely allocated for public purposes and expenditures. Petitioner Garcia further claims that allowing these establishments to pass on the tax to the consumers is inequitable, in violation of Article VI, Section 28(1) of the Constitution. RESPONDENTS COMMENT The Office of the Solicitor General (OSG) filed a Comment in behalf of respondents. Preliminarily, respondents contend that R.A. No. 9337 enjoys the presumption of constitutionality and petitioners failed to cast doubt on its validity. Relying on the case of Tolentino vs. Secretary of Finance, 235 SCRA 630 (1994), respondents argue that the procedural issues raised by petitioners, i.e., legality of the bicameral proceedings, exclusive origination of revenue measures and the power of the Senate concomitant thereto, have
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already been settled. With regard to the issue of undue delegation of legislative power to the President, respondents contend that the law is complete and leaves no discretion to the President but to increase the rate to 12% once any of the two conditions provided therein arise. Respondents also refute petitioners argument that the increase to 12%, as well as the 70% limitation on the creditable input tax, the 60-month amortization on the purchase or importation of capital goods exceedingP1,000,000.00, and the 5% final withholding tax by government agencies, is arbitrary, oppressive, and confiscatory, and that it violates the constitutional principle on progressive taxation, among others. Finally, respondents manifest that R.A. No. 9337 is the anc hor of the governments fiscal reform agenda. A reform in the value-added system of taxation is the core revenue measure that will tilt the balance towards a sustainable macroeconomic environment necessary for economic growth. ISSUES The Court defined the issues, as follows: PROCEDURAL ISSUE Whether R.A. No. 9337 violates the following provisions of the Constitution: a. Article VI, Section 24, and b. Article VI, Section 26(2) SUBSTANTIVE ISSUES 1. Whether Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108 of the NIRC, violate the following provisions of the Constitution: a. Article VI, Section 28(1), and b. Article VI, Section 28(2) 2. Whether Section 8 of R.A. No. 9337, amending Sections 110(A)(2) and 110(B) of the NIRC; and Section 12 of R.A. No. 9337, amending Section 114(C) of the NIRC, violate the following provisions of the Constitution: a. Article VI, Section 28(1), and b. Article III, Section 1 RULING OF THE COURT As a prelude, the Court deems it apt to restate the general principles and concepts of value-added tax (VAT), as the confusion and inevitably, litigation, breeds from a fallacious notion of its nature. The VAT is a tax on spending or consumption. It is levied on the sale, barter, exchange or lease of goods or 8 properties and services. Being an indirect tax on expenditure, the seller of goods or services may pass on the 9 10 amount of tax paid to the buyer, with the seller acting merely as a tax collector. The burden of VAT is intended to fall on the immediate buyers and ultimately, the end-consumers. In contrast, a direct tax is a tax for which a taxpayer is directly liable on the transaction or business it engages in, 11 without transferring the burden to someone else. Examples are individual and corporate income taxes, transfer 12 taxes, and residence taxes. In the Philippines, the value-added system of sales taxation has long been in existence, albeit in a different mode. Prior to 1978, the system was a single-stage tax computed under the "cost deduction method" and was payable only by the original sellers. The single-stage system was subsequently modified, and a mixture of the "cost deduction 13 method" and "tax credit method" was used to determine the value-added tax payable. Under the "tax credit

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method," an entity can credit against or subtract from the VAT charged on its sales or outputs the VAT paid on its 14 purchases, inputs and imports. It was only in 1987, when President Corazon C. Aquino issued Executive Order No. 273, that the VAT system was 15 rationalized by imposing a multi-stage tax rate of 0% or 10% on all sales using the "tax credit method." E.O. No. 273 was followed by R.A. No. 7716 or the Expanded VAT Law, R.A. No. 8241 or the Improved VAT 17 18 Law, R.A. No. 8424 or the Tax Reform Act of 1997, and finally, the presently beleaguered R.A. No. 9337, also referred to by respondents as the VAT Reform Act. The Court will now discuss the issues in logical sequence. PROCEDURAL ISSUE I. Whether R.A. No. 9337 violates the following provisions of the Constitution: a. Article VI, Section 24, and b. Article VI, Section 26(2) A. The Bicameral Conference Committee Petitioners Escudero, et al., and Pimentel, et al., allege that the Bicameral Conference Committee exceeded its authority by: 1) Inserting the stand-by authority in favor of the President in Sections 4, 5, and 6 of R.A. No. 9337; 2) Deleting entirely the no pass-on provisions found in both the House and Senate bills; 3) Inserting the provision imposing a 70% limit on the amount of input tax to be credited against the output tax; and 4) Including the amendments introduced only by Senate Bill No. 1950 regarding other kinds of taxes in addition to the value-added tax. Petitioners now beseech the Court to define the powers of the Bicameral Conference Committee. It should be borne in mind that the power of internal regulation and discipline are intrinsic in any legislative body for, as unerringly elucidated by Justice Story, "[i]f the power did not exist, it would be utterly impracticable to 19 transact the business of the nation, either at all, or at least with decency, deliberation, and order. " Thus, Article VI, Section 16 (3) of the Constitution provides that "each House may determine the rules of its proceedings." Pursuant to this inherent constitutional power to promulgate and implement its own rules of procedure, the respective rules of each house of Congress provided for the creation of a Bicameral Conference Committee. Thus, Rule XIV, Sections 88 and 89 of the Rules of House of Representatives provides as follows: Sec. 88. Conference Committee. In the event that the House does not agree with the Senate on the amendment to any bill or joint resolution, the differences may be settled by the conference committees of both chambers. In resolving the differences with the Senate, the House panel shall, as much as possible, adhere to and support the House Bill. If the differences with the Senate are so substantial that they materially impair the House Bill, the panel shall report such fact to the House for the latters appropriate action. Sec. 89. Conference Committee Reports. . . . Each report shall contain a detailed, sufficiently explicit statement of the changes in or amendments to the subject measure. ...
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The Chairman of the House panel may be interpellated on the Conference Committee Report prior to the voting thereon. The House shall vote on the Conference Committee Report in the same manner and procedure as it votes on a bill on third and final reading. Rule XII, Section 35 of the Rules of the Senate states: Sec. 35. In the event that the Senate does not agree with the House of Representatives on the provision of any bill or joint resolution, the differences shall be settled by a conference committee of both Houses which shall meet within ten (10) days after their composition. The President shall designate the members of the Senate Panel in the conference committee with the approval of the Senate. Each Conference Committee Report shall contain a detailed and sufficiently explicit statement of the changes in, or amendments to the subject measure, and shall be signed by a majority of the members of each House panel, voting separately. A comparative presentation of the conflicting House and Senate provisions and a reconciled version thereof with the explanatory statement of the conference committee shall be attached to the report. ... The creation of such conference committee was apparently in response to a problem, not addressed by any constitutional provision, where the two houses of Congress find themselves in disagreement over changes or amendments introduced by the other house in a legislative bill. Given that one of the most basic powers of the legislative branch is to formulate and implement its own rules of proceedings and to discipline its members, may the Court then delve into the details of how Congress complies with its internal rules or how it conducts its business of passing legislation? Note that in the present petitions, the issue is not whether provisions of the rules of both houses creating the bicameral conference committee are unconstitutional, but whether the bicameral conference committee has strictly complied with the rules of both houses, thereby remaining within the jurisdiction conferred upon it by Congress. In the recent case of Farias vs. The Executive Secretary, the Court En Banc, unanimously reiterated and emphasized its adherence to the "enrolled bill doctrine," thus, declining therein petitioners plea for the Court to go behind the enrolled copy of the bill. Assailed in said case was Congresss creation of two sets of b icameral conference committees, the lack of records of said committees proceedings, the alleged violation of said committees of the rules of both houses, and the disappearance or deletion of one of the provisions in the compromise bill submitted by the bicameral conference committee. It was argued that such irregularities in the passage of the law nullified R.A. No. 9006, or the Fair Election Act. Striking down such argument, the Court held thus: Under the "enrolled bill doctrine," the signing of a bill by the Speaker of the House and the Senate President and the certification of the Secretaries of both Houses of Congress that it was passed are conclusive of its due enactment. A review of cases reveals the Courts consistent adherence to the rule. The Court finds no reason to deviate from the salutary rule in this case where the irregularities alleged by the petitioners mostly involved the internal rd rules of Congress, e.g., creation of the 2nd or 3 Bicameral Conference Committee by the House. This Court is not the proper forum for the enforcement of these internal rules of Congress, whether House or Senate. Parliamentary rules are merely procedural and with their observance the courts have no concern. Whatever doubts there may be as to the formal validity of Rep. Act No. 9006 must be resolved in its favor. The Court reiterates its ruling in Arroyo vs. De Venecia, viz.: But the cases, both here and abroad, in varying forms of expression, all deny to the courts the power to inquire into allegations that, in enacting a law, a House of Congress failed to comply with its own rules, in the absence of showing that there was a violation of a constitutional provision or the rights of private individuals. In Osmea v. Pendatun, it was held: "At any rate, courts have declared that the rules adopted by deliberative bodies are subject to revocation, modification or waiver at the pleasure of the body adopting them. And it has been said that "Parliamentary rules are merely procedural, and with their observance, the courts have no concern. They may be waived or disregarded by the legislative body." Consequently, "mere failure to conform to parliamentary usage will not invalidate the action (taken by a deliberative body) when the 21 requisite number of members have agreed to a particular measure." (Emphasis supplied) The foregoing declaration is exactly in point with the present cases, where petitioners allege irregularities committed by the conference committee in introducing changes or deleting provisions in the House and Senate bills. Akin to 22 the Farias case, the present petitions also raise an issue regarding the actions taken by the conference committee
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on matters regarding Congress compliance with its own internal rules. As stated earlier, one of the most basic and inherent power of the legislature is the power to formulate rules for its proceedings and the discipline of its members. Congress is the best judge of how it should conduct its own business expeditiously and in the most orderly manner. It is also the sole concern of Congress to instill discipline among the members of its conference committee if it believes that said members violated any of its rules of proceedings. Even the expanded jurisdiction of this Court cannot apply to questions regarding only the internal operation of Congress, thus, the Court is wont to deny a review of the internal proceedings of a co-equal branch of government. Moreover, as far back as 1994 or more than ten years ago, in the case of Tolentino vs. Secretary of Finance, the Court already made the pronouncement that "[i]f a change is desired in the practice [of the Bicameral Conference Committee] it must be sought in Congress since this question is not covered by any 24 constitutional provision but is only an internal rule of each house." To date, Congress has not seen it fit to make such changes adverted to by the Court. It seems, therefore, that Congress finds the practices of the bicameral conference committee to be very useful for purposes of prompt and efficient legislative action. Nevertheless, just to put minds at ease that no blatant irregularities tainted the proceedings of the bicameral conference committees, the Court deems it necessary to dwell on the issue. The Court observes that there was a necessity for a conference committee because a comparison of the provisions of House Bill Nos. 3555 and 3705 on one hand, and Senate Bill No. 1950 on the other, reveals that there were indeed disagreements. As pointed out in the petitions, said disagreements were as follows: House Bill No.3705 Senate Bill No. 1950 With regard to "Stand-By Authority" in favor of President Provides for 12% VAT on every Provides for 12% VAT in general on Provides for a single rate of 10% sale of goods or properties sales of goods or properties and VAT on sale of goods or properties (amending Sec. 106 of NIRC); reduced rates for sale of certain (amending Sec. 106 of NIRC), 12% VAT on importation of goods locally manufactured goods and 10% VAT on sale of services (amending Sec. 107 of NIRC); petroleum products and raw materials including sale of electricity by and 12% VAT on sale of services to be used in the manufacture thereof generation companies, and use or lease of properties (amending Sec. 106 of NIRC); 12% transmission and distribution (amending Sec. 108 of NIRC) VAT on importation of goods and companies, and use or lease of reduced rates for certain imported properties (amending Sec. 108 of products including petroleum products NIRC) (amending Sec. 107 of NIRC); and 12% VAT on sale of services and use or lease of properties and a reduced rate for certain services including power generation (amending Sec. 108 of NIRC) With regard to the "no pass-on" provision No similar provision Provides that the VAT imposed on Provides that the VAT imposed on power generation and on the sale of sales of electricity by generation petroleum products shall be absorbed companies and services of by generation companies or sellers, transmission companies and respectively, and shall not be passed distribution companies, as well as on to consumers those of franchise grantees of electric utilities shall not apply to residential end-users. VAT shall be absorbed by generation, transmission, and distribution companies. Provides that the input tax credit for capital goods on which a VAT has been paid shall be equally distributed over 5 years or the depreciable life of such capital goods; the input tax credit for goods and services other than capital goods shall not exceed 5% of the total amount of such With regard to 70% limit on input tax credit No similar provision Provides that the input tax credit for capital goods on which a VAT has been paid shall be equally distributed over 5 years or the depreciable life of such capital goods; the input tax credit for goods and services other than capital goods shall not exceed 90% of the output VAT. House Bill No. 3555
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goods and services; and for persons engaged in retail trading of goods, the allowable input tax credit shall not exceed 11% of the total amount of goods purchased. With regard to amendments to be made to NIRC provisions regarding income and excise taxes No similar provision No similar provision Provided for amendments to several NIRC provisions regarding corporate income, percentage, franchise and excise taxes The disagreements between the provisions in the House bills and the Senate bill were with regard to (1) what rate of VAT is to be imposed; (2) whether only the VAT imposed on electricity generation, transmission and distribution companies should not be passed on to consumers, as proposed in the Senate bill, or both the VAT imposed on electricity generation, transmission and distribution companies and the VAT imposed on sale of petroleum products should not be passed on to consumers, as proposed in the House bill; (3) in what manner input tax credits should be limited; (4) and whether the NIRC provisions on corporate income taxes, percentage, franchise and excise taxes should be amended. There being differences and/or disagreements on the foregoing provisions of the House and Senate bills, the Bicameral Conference Committee was mandated by the rules of both houses of Congress to act on the same by settling said differences and/or disagreements. The Bicameral Conference Committee acted on the disagreeing provisions by making the following changes: 1. With regard to the disagreement on the rate of VAT to be imposed, it would appear from the Conference Committee Report that the Bicameral Conference Committee tried to bridge the gap in the difference between the 10% VAT rate proposed by the Senate, and the various rates with 12% as the highest VAT rate proposed by the House, by striking a compromise whereby the present 10% VAT rate would be retained until certain conditions arise, i.e., the value-added tax collection as a percentage of gross domestic product (GDP) of the previous year exceeds 2 4/5%, or National Government deficit as a percentage of GDP of the previous year exceeds 1%, when the President, upon recommendation of the Secretary of Finance shall raise the rate of VAT to 12% effective January 1, 2006. 2. With regard to the disagreement on whether only the VAT imposed on electricity generation, transmission and distribution companies should not be passed on to consumers or whether both the VAT imposed on electricity generation, transmission and distribution companies and the VAT imposed on sale of petroleum products may be passed on to consumers, the Bicameral Conference Committee chose to settle such disagreement by altogether deleting from its Report any no pass-on provision. 3. With regard to the disagreement on whether input tax credits should be limited or not, the Bicameral Conference Committee decided to adopt the position of the House by putting a limitation on the amount of input tax that may be credited against the output tax, although it crafted its own language as to the amount of the limitation on input tax credits and the manner of computing the same by providing thus: (A) Creditable Input Tax. . . . ... Provided, The input tax on goods purchased or imported in a calendar month for use in trade or business for which deduction for depreciation is allowed under this Code, shall be spread evenly over the month of acquisition and the fifty-nine (59) succeeding months if the aggregate acquisition cost for such goods, excluding the VAT component thereof, exceeds one million Pesos (P1,000,000.00): PROVIDED, however, that if the estimated useful life of the capital good is less than five (5) years, as used for depreciation purposes, then the input VAT shall be spread over such shorter period: . . . (B) Excess Output or Input Tax. If at the end of any taxable quarter the output tax exceeds the input tax, the excess shall be paid by the VAT-registered person. If the input tax exceeds the output tax, the excess shall be carried over to the succeeding quarter or quarters: PROVIDED that the input tax inclusive of input VAT carried over from the previous quarter that may be credited in every quarter shall not exceed seventy percent (70%) of the output VAT: PROVIDED, HOWEVER, THAT any input tax attributable to zero-rated sales by a VAT-registered person may at his option be refunded or credited against other internal revenue taxes, . . .

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4. With regard to the amendments to other provisions of the NIRC on corporate income tax, franchise, percentage and excise taxes, the conference committee decided to include such amendments and basically adopted the provisions found in Senate Bill No. 1950, with some changes as to the rate of the tax to be imposed. Under the provisions of both the Rules of the House of Representatives and Senate Rules, the Bicameral Conference Committee is mandated to settle the differences between the disagreeing provisions in the House bill and the Senate 25 bill. The term "settle" is synonymous to "reconcile" and "harmonize." To reconcile or harmonize disagreeing provisions, the Bicameral Conference Committee may then (a) adopt the specific provisions of either the House bill or Senate bill, (b) decide that neither provisions in the House bill or the provisions in the Senate bill would be carried into the final form of the bill, and/or (c) try to arrive at a compromise between the disagreeing provisions. In the present case, the changes introduced by the Bicameral Conference Committee on disagreeing provisions were meant only to reconcile and harmonize the disagreeing provisions for it did not inject any idea or intent that is wholly foreign to the subject embraced by the original provisions. The so-called stand-by authority in favor of the President, whereby the rate of 10% VAT wanted by the Senate is retained until such time that certain conditions arise when the 12% VAT wanted by the House shall be imposed, appears to be a compromise to try to bridge the difference in the rate of VAT proposed by the two houses of Congress. Nevertheless, such compromise is still totally within the subject of what rate of VAT should be imposed on taxpayers. The no pass-on provision was deleted altogether. In the transcripts of the proceedings of the Bicameral Conference Committee held on May 10, 2005, Sen. Ralph Recto, Chairman of the Senate Panel, explained the reason for deleting the no pass-on provision in this wise: . . . the thinking was just to keep the VAT law or the VAT bill simple. And we were thinking that no sector should be a beneficiary of legislative grace, neither should any sector be discriminated on. The VAT is an indirect tax. It is a pass on-tax. And lets keep it plain and simple. Lets not confuse the bill and put a no pass -on provision. Two-thirds of the world have a VAT system and in this two-thirds of the globe, I have yet to see a VAT with a no pass-though provision. 26 So, the thinking of the Senate is basically simple, lets keep the VAT simple. (Emphasis supplied) Rep. Teodoro Locsin further made the manifestation that the no pass-on provision "never really enjoyed the support 27 of either House." With regard to the amount of input tax to be credited against output tax, the Bicameral Conference Committee came to a compromise on the percentage rate of the limitation or cap on such input tax credit, but again, the change introduced by the Bicameral Conference Committee was totally within the intent of both houses to put a cap on input tax that may be credited against the output tax. From the inception of the subject revenue bill in the House of Representatives, one of the major objectives was to "plug a glaring loophole in the tax policy and administration by creating vital restrictions on the claiming of input VAT tax credits . . ." and "[b]y introducing limitations on the claiming of tax credit, we are 28 capping a major leakage that has placed our collection efforts at an apparent disadvantage." As to the amendments to NIRC provisions on taxes other than the value-added tax proposed in Senate Bill No. 1950, since said provisions were among those referred to it, the conference committee had to act on the same and it basically adopted the version of the Senate. Thus, all the changes or modifications made by the Bicameral Conference Committee were germane to subjects of the provisions referred to it for reconciliation. Such being the case, the Court does not see any grave abuse of discretion amounting to lack or excess of jurisdiction committed by the Bicameral Conference Committee. In the earlier cases of Philippine Judges 29 30 Association vs. Prado and Tolentino vs. Secretary of Finance, the Court recognized the long-standing legislative practice of giving said conference committee ample latitude for compromising differences between the Senate and the House. Thus, in the Tolentino case, it was held that: . . . it is within the power of a conference committee to include in its report an entirely new provision that is not found either in the House bill or in the Senate bill. If the committee can propose an amendment consisting of one or two provisions, there is no reason why it cannot propose several provisions, collectively considered as an "amendment in the nature of a substitute," so long as such amendment is germane to the subject of the bills before the committee. After all, its report was not final but needed the approval of both houses of Congress to become valid as an act of the

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legislative department. The charge that in this case the Conference Committee acted as a third legislative 31 chamber is thus without any basis. (Emphasis supplied) B. R.A. No. 9337 Does Not Violate Article VI, Section 26(2) of the Constitution on the "No-Amendment Rule" Article VI, Sec. 26 (2) of the Constitution, states: No bill passed by either House shall become a law unless it has passed three readings on separate days, and printed copies thereof in its final form have been distributed to its Members three days before its passage, except when the President certifies to the necessity of its immediate enactment to meet a public calamity or emergency. Upon the last reading of a bill, no amendment thereto shall be allowed, and the vote thereon shall be taken immediately thereafter, and the yeas and nays entered in the Journal. Petitioners argument that the practice where a bicameral conference committee is allowed to add or delete provisions in the House bill and the Senate bill after these had passed three readings is in effect a circumvention of the "no amendment rule" (Sec. 26 (2), Art. VI of the 1987 Constitution), fails to convince the Court to deviate from its ruling in the Tolentino case that: Nor is there any reason for requiring that the Committees Report in these cases must have undergone three readings in each of the two houses. If that be the case, there would be no end to negotiation since each house may seek modification of the compromise bill. . . . Art. VI. 26 (2) must, therefore, be construed as referring only to bills introduced for the first time in either 32 house of Congress, not to the conference committee report. (Emphasis supplied) The Court reiterates here that the "no-amendment rule" refers only to the procedure to be followed by each house of Congress with regard to bills initiated in each of said respective houses, before said bill is transmitted to the other house for its concurrence or amendment. Verily, to construe said provision in a way as to proscribe any further changes to a bill after one house has voted on it would lead to absurdity as this would mean that the other house of Congress would be deprived of its constitutional power to amend or introduce changes to said bill. Thus, Art. VI, Sec. 26 (2) of the Constitution cannot be taken to mean that the introduction by the Bicameral Conference Committee of amendments and modifications to disagreeing provisions in bills that have been acted upon by both houses of Congress is prohibited. C. R.A. No. 9337 Does Not Violate Article VI, Section 24 of the Constitution on Exclusive Origination of Revenue Bills Coming to the issue of the validity of the amendments made regarding the NIRC provisions on corporate income taxes and percentage, excise taxes. Petitioners refer to the following provisions, to wit: Section 27 28(A)(1) 28(B)(1) 34(B)(1) 116 117 119 121 148 151 236 237 288 Rates of Income Tax on Domestic Corporation Tax on Resident Foreign Corporation Inter-corporate Dividends Inter-corporate Dividends Tax on Persons Exempt from VAT Percentage Tax on domestic carriers and keepers of Garage Tax on franchises Tax on banks and Non-Bank Financial Intermediaries Excise Tax on manufactured oils and other fuels Excise Tax on mineral products Registration requirements Issuance of receipts or sales or commercial invoices Disposition of Incremental Revenue

Petitioners claim that the amendments to these provisions of the NIRC did not at all originate from the House. They aver that House Bill No. 3555 proposed amendments only regarding Sections 106, 107, 108, 110 and 114 of the NIRC, while House Bill No. 3705 proposed amendments only to Sections 106, 107,108, 109, 110 and 111 of the NIRC; thus, the other sections of the NIRC which the Senate amended but which amendments were not found in the House bills are not intended to be amended by the House of Representatives. Hence, they argue that since the proposed amendments did not originate from the House, such amendments are a violation of Article VI, Section 24 of the Constitution.

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The argument does not hold water. Article VI, Section 24 of the Constitution reads: Sec. 24. All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of local application, and private bills shall originate exclusively in the House of Representatives but the Senate may propose or concur with amendments. In the present cases, petitioners admit that it was indeed House Bill Nos. 3555 and 3705 that initiated the move for amending provisions of the NIRC dealing mainly with the value-added tax. Upon transmittal of said House bills to the Senate, the Senate came out with Senate Bill No. 1950 proposing amendments not only to NIRC provisions on the value-added tax but also amendments to NIRC provisions on other kinds of taxes. Is the introduction by the Senate of provisions not dealing directly with the value- added tax, which is the only kind of tax being amended in the House bills, still within the purview of the constitutional provision authorizing the Senate to propose or concur with amendments to a revenue bill that originated from the House? The foregoing question had been squarely answered in the Tolentino case, wherein the Court held, thus: . . . To begin with, it is not the law but the revenue bill which is required by the Constitution to "originate exclusively" in the House of Representatives. It is important to emphasize this, because a bill originating in the House may undergo such extensive changes in the Senate that the result may be a rewriting of the whole. . . . At this point, what is important to note is that, as a result of the Senate action, a distinct bill may be produced. To insist that a revenue statute and not only the bill which initiated the legislative process culminating in the enactment of the law must substantially be the same as the House bill would be to deny the Senates power not only to "concur with amendments" but also to "propose amendments." It would be to violate the coequality of legislative power of the two houses of Congress and in fact make the House superior to the Senate. Given, then, the power of the Senate to propose amendments, the Senate can propose its own version even with respect to bills which are required by the Constitution to originate in the House . ... Indeed, what the Constitution simply means is that the initiative for filing revenue, tariff or tax bills, bills authorizing an increase of the public debt, private bills and bills of local application must come from the House of Representatives on the theory that, elected as they are from the districts, the members of the House can be expected to be more sensitive to the local needs and problems. On the other hand, the senators, who are elected at large, are expected to approach the same problems from the national perspective. Both views are thereby made to bear 33 on the enactment of such laws. (Emphasis supplied) Since there is no question that the revenue bill exclusively originated in the House of Representatives, the Senate was acting within its constitutional power to introduce amendments to the House bill when it included provisions in Senate Bill No. 1950 amending corporate income taxes, percentage, excise and franchise taxes. Verily, Article VI, Section 24 of the Constitution does not contain any prohibition or limitation on the extent of the amendments that may be introduced by the Senate to the House revenue bill. Furthermore, the amendments introduced by the Senate to the NIRC provisions that had not been touched in the House bills are still in furtherance of the intent of the House in initiating the subject revenue bills. The Explanatory Note of House Bill No. 1468, the very first House bill introduced on the floor, which was later substituted by House Bill No. 3555, stated: One of the challenges faced by the present administration is the urgent and daunting task of solving the countrys serious financial problems. To do this, government expenditures must be strictly monitored and controlled and revenues must be significantly increased. This may be easier said than done, but our fiscal authorities are still optimistic the government will be operating on a balanced budget by the year 2009. In fact, several measures that will result to significant expenditure savings have been identified by the administration. It is supported with a credible package of revenue measures that include measures to improve tax administration and control the leakages in revenues from income taxes and the value-added tax (VAT). (Emphasis supplied)

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Rep. Eric D. Singson, in his sponsorship speech for House Bill No. 3555, declared that: In the budget message of our President in the year 2005, she reiterated that we all acknowledged that on top of our agenda must be the restoration of the health of our fiscal system. In order to considerably lower the consolidated public sector deficit and eventually achieve a balanced budget by the year 2009, we need to seize windows of opportunities which might seem poignant in the beginning, but in the long run prove effective and beneficial to the overall status of our economy. One such opportunity is a 34 review of existing tax rates, evaluating the relevance given our present conditions . (Emphasis supplied) Notably therefore, the main purpose of the bills emanating from the House of Representatives is to bring in sizeable revenues for the government to supplement our countrys serious financial problems, and improve tax administration and control of the leakag es in revenues from income taxes and value-added taxes. As these house bills were transmitted to the Senate, the latter, approaching the measures from the point of national perspective, can introduce amendments within the purposes of those bills. It can provide for ways that would soften the impact of the VAT measure on the consumer, i.e., by distributing the burden across all sectors instead of putting it entirely on the shoulders of the consumers. The sponsorship speech of Sen. Ralph Recto on why the provisions on income tax on corporation were included is worth quoting: All in all, the proposal of the Senate Committee on Ways and Means will raise P64.3 billion in additional revenues annually even while by mitigating prices of power, services and petroleum products. However, not all of this will be wrung out of VAT. In fact, only P48.7 billion amount is from the VAT on twelve goods and services. The rest of the tab P10.5 billion- will be picked by corporations. What we therefore prescribe is a burden sharing between corporate Philippines and the consumer. Why should the latter bear all the pain? Why should the fiscal salvation be only on the burden of the consumer? The corporate worlds equity is in form of the increase in the corporate income tax from 32 t o 35 percent, but up to 2008 only. This will raise P10.5 billion a year. After that, the rate will slide back, not to its old rate of 32 percent, but two notches lower, to 30 percent. Clearly, we are telling those with the capacity to pay, corporations, to bear with this emergency provision that will be in effect for 1,200 days, while we put our fiscal house in order. This fiscal medicine will have an expiry date. For their assistance, a reward of tax reduction awaits them. We intend to keep the length of their sacrifice brief. We would like to assure them that not because there is a light at the end of the tunnel, this government will keep on making the tunnel long. The responsibility will not rest solely on the weary shoulders of the small man. Big business will be there to share the 35 burden. As the Court has said, the Senate can propose amendments and in fact, the amendments made on provisions in the tax on income of corporations are germane to the purpose of the house bills which is to raise revenues for the government. Likewise, the Court finds the sections referring to other percentage and excise taxes germane to the reforms to the VAT system, as these sections would cushion the effects of VAT on consumers. Considering that certain goods and services which were subject to percentage tax and excise tax would no longer be VAT-exempt, the consumer would be burdened more as they would be paying the VAT in addition to these taxes. Thus, there is a need to amend these sections to soften the impact of VAT. Again, in his sponsorship speech, Sen. Recto said: However, for power plants that run on oil, we will reduce to zero the present excise tax on bunker fuel, to lessen the effect of a VAT on this product. For electric utilities like Meralco, we will wipe out the franchise tax in exchange for a VAT. And in the case of petroleum, while we will levy the VAT on oil products, so as not to destroy the VAT chain, we will however bring down the excise tax on socially sensitive products such as diesel, bunker, fuel and kerosene.

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... What do all these exercises point to? These are not contortions of giving to the left hand what was taken from the right. Rather, these sprang from our concern of softening the impact of VAT, so that the people can cushion the blow 36 of higher prices they will have to pay as a result of VAT. The other sections amended by the Senate pertained to matters of tax administration which are necessary for the implementation of the changes in the VAT system. To reiterate, the sections introduced by the Senate are germane to the subject matter and purposes of the house bills, which is to supplement our countrys fiscal deficit, among others. Thus, the Senate acted within its power to propose those amendments. SUBSTANTIVE ISSUES I. Whether Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108 of the NIRC, violate the following provisions of the Constitution: a. Article VI, Section 28(1), and b. Article VI, Section 28(2) A. No Undue Delegation of Legislative Power Petitioners ABAKADA GURO Party List, et al., Pimentel, Jr., et al., and Escudero, et al. contend in common that Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108, respectively, of the NIRC giving the President the stand-by authority to raise the VAT rate from 10% to 12% when a certain condition is met, constitutes undue delegation of the legislative power to tax. The assailed provisions read as follows: SEC. 4. Sec. 106 of the same Code, as amended, is hereby further amended to read as follows: SEC. 106. Value-Added Tax on Sale of Goods or Properties. (A) Rate and Base of Tax. There shall be levied, assessed and collected on every sale, barter or exchange of goods or properties, a value-added tax equivalent to ten percent (10%) of the gross selling price or gross value in money of the goods or properties sold, bartered or exchanged, such tax to be paid by the seller or transferor:provided, that the President, upon the recommendation of the Secretary of Finance, shall, effective January 1, 2006, raise the rate of value-added tax to twelve percent (12%), after any of the following conditions has been satisfied. (i) value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous year exceeds two and four-fifth percent (2 4/5%) or (ii) national government deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1 %). SEC. 5. Section 107 of the same Code, as amended, is hereby further amended to read as follows: SEC. 107. Value-Added Tax on Importation of Goods. (A) In General. There shall be levied, assessed and collected on every importation of goods a value-added tax equivalent to ten percent (10%) based on the total value used by the Bureau of Customs in determining tariff and customs duties, plus customs duties, excise taxes, if any, and other charges, such tax to be paid by the importer prior to the release of such goods from customs custody: Provided, That where the customs duties are determined on the basis of the quantity or volume of the goods, the value-added tax shall be based on the landed cost plus excise taxes, if any: provided, further, that the President, upon the recommendation of the Secretary of Finance,

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shall, effective January 1, 2006, raise the rate of value-added tax to twelve percent (12%) after any of the following conditions has been satisfied. (i) value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous year exceeds two and four-fifth percent (2 4/5%) or (ii) national government deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1 %). SEC. 6. Section 108 of the same Code, as amended, is hereby further amended to read as follows: SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties (A) Rate and Base of Tax. There shall be levied, assessed and collected, a value-added tax equivalent to ten percent (10%) of gross receipts derived from the sale or exchange of services: provided, that the President, upon the recommendation of the Secretary of Finance, shall, effective January 1, 2006, raise the rate of valueadded tax to twelve percent (12%), after any of the following conditions has been satisfied. (i) value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous year exceeds two and four-fifth percent (2 4/5%) or (ii) national government deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1 %). (Emphasis supplied) Petitioners allege that the grant of the stand-by authority to the President to increase the VAT rate is a virtual abdication by Congress of its exclusive power to tax because such delegation is not within the purview of Section 28 (2), Article VI of the Constitution, which provides: The Congress may, by law, authorize the President to fix within specified limits, and may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts within the framework of the national development program of the government. They argue that the VAT is a tax levied on the sale, barter or exchange of goods and properties as well as on the sale or exchange of services, which cannot be included within the purview of tariffs under the exempted delegation as the latter refers to customs duties, tolls or tribute payable upon merchandise to the government and usually imposed on goods or merchandise imported or exported. Petitioners ABAKADA GURO Party List, et al., further contend that delegating to the President the legislative power to tax is contrary to republicanism. They insist that accountability, responsibility and transparency should dictate the actions of Congress and they should not pass to the President the decision to impose taxes. They also argue that the law also effectively nullified the Presidents power of control, which includes the authority to set aside and nullify the acts of her subordinates like the Secretary of Finance, by mandating the fixing of the tax rate by the President upon the recommendation of the Secretary of Finance. Petitioners Pimentel, et al. aver that the President has ample powers to cause, influence or create the conditions provided by the law to bring about either or both the conditions precedent. On the other hand, petitioners Escudero, et al. find bizarre and revolting the situation that the imposition of the 12% rate would be subject to the whim of the Secretary of Finance, an unelected bureaucrat, contrary to the principle of no taxation without representation. They submit that the Secretary of Finance is not mandated to give a favorable recommendation and he may not even give his recommendation. Moreover, they allege that no guiding standards are provided in the law on what basis and as to how he will make his recommendation. They claim, nonetheless, that any recommendation of the Secretary of Finance can easily be brushed aside by the President since the former is a mere alter ego of the latter, such that, ultimately, it is the President who decides whether to impose the increased tax rate or not. A brief discourse on the principle of non-delegation of powers is instructive. The principle of separation of powers ordains that each of the three great branches of government has exclusive 37 cognizance of and is supreme in matters falling within its own constitutionally allocated sphere. A logical

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corollary to the doctrine of separation of powers is the principle of non-delegation of powers, as expressed in the Latin maxim: potestas delegata non delegari potest which means "what has been delegated, cannot be 38 delegated." This doctrine is based on the ethical principle that such as delegated power constitutes not only a right but a duty to be performed by the delegate through the instrumentality of his own judgment and not through the 39 intervening mind of another. With respect to the Legislature, Section 1 of Article VI of the Constitution provides that "the Legislative power shall be vested in the Congress of the Philippines which shall consist of a Senate and a House of Representatives ." The powers which Congress is prohibited from delegating are those which are strictly, or inherently and exclusively, legislative. Purely legislative power, which can never be delegated, has been described as the authority to make a complete law complete as to the time when it shall take effect and as to whom it shall be applicable and 40 to determine the expediency of its enactment. Thus, the rule is that in order that a court may be justified in holding a statute unconstitutional as a delegation of legislative power, it must appear that the power involved is purely legislative in nature that is, one appertaining exclusively to the legislative department. It is the nature of the power, and not the liability of its use or the manner of its exercise, which determines the validity of its delegation. Nonetheless, the general rule barring delegation of legislative powers is subject to the following recognized limitations or exceptions: (1) Delegation of tariff powers to the President under Section 28 (2) of Article VI of the Constitution; (2) Delegation of emergency powers to the President under Section 23 (2) of Article VI of the Constitution; (3) Delegation to the people at large; (4) Delegation to local governments; and (5) Delegation to administrative bodies. In every case of permissible delegation, there must be a showing that the delegation itself is valid. It is valid only if the law (a) is complete in itself, setting forth therein the policy to be executed, carried out, or implemented by the 41 delegate; and (b) fixes a standard the limits of which are sufficiently determinate and determinable to which 42 the delegate must conform in the performance of his functions. A sufficient standard is one which defines legislative policy, marks its limits, maps out its boundaries and specifies the public agency to apply it. It indicates the 43 circumstances under which the legislative command is to be effected. Both tests are intended to prevent a total transference of legislative authority to the delegate, who is not allowed to step into the shoes of the legislature and 44 exercise a power essentially legislative. In People vs. Vera, the Court, through eminent Justice Jose P. Laurel, expounded on the concept and extent of delegation of power in this wise: In testing whether a statute constitutes an undue delegation of legislative power or not, it is usual to inquire whether the statute was complete in all its terms and provisions when it left the hands of the legislature so that nothing was left to the judgment of any other appointee or delegate of the legislature. ... The true distinction, says Judge Ranney, is between the delegation of power to make the law, which necessarily involves a discretion as to what it shall be, and conferring an authority or discretion as to its execution, to be exercised under and in pursuance of the law. The first cannot be done; to the latter no valid objection can be made. ... It is contended, however, that a legislative act may be made to the effect as law after it leaves the hands of the legislature. It is true that laws may be made effective on certain contingencies, as by proclamation of the executive or the adoption by the people of a particular community. In Wayman vs. Southard, the Supreme Court of the United States ruled that the legislature may delegate a power not legislative which it may itself rightfully exercise. The power to ascertain facts is such a power which may be delegated. There is nothing essentially legislative in ascertaining the existence of facts or conditions as the basis of the taking into effect of a law. That is a mental process common to all branches of the government. Notwithstanding the apparent tendency, however, to relax the rule prohibiting delegation of legislative authority on account of the complexity arising from social and
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economic forces at work in this modern industrial age, the orthodox pronouncement of Judge Cooley in his work on Constitutional Limitations finds restatement in Prof. Willoughby's treatise on the Constitution of the United States in the following language speaking of declaration of legislative power to administrative agencies: The principle which permits the legislature to provide that the administrative agent may determine when the circumstances are such as require the application of a law is defended upon the ground that at the time this authority is granted, the rule of public policy, which is the essence of the legislative act, is determined by the legislature. In other words, the legislature, as it is its duty to do, determines that, under given circumstances, certain executive or administrative action is to be taken, and that, under other circumstances, different or no action at all is to be taken. What is thus left to the administrative official is not the legislative determination of what public policy demands, but simply the ascertainment of what the facts of the case require to be done according to the terms of the law by which he is governed. The efficiency of an Act as a declaration of legislative will must, of course, come from Congress, but the ascertainment of the contingency upon which the Act shall take effect may be left to such agencies as it may designate. The legislature, then, may provide that a law shall take effect upon the happening of future specified contingencies leaving to some other 46 person or body the power to determine when the specified contingency has arisen.(Emphasis supplied). In Edu vs. Ericta,
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the Court reiterated:

What cannot be delegated is the authority under the Constitution to make laws and to alter and repeal them; the test is the completeness of the statute in all its terms and provisions when it leaves the hands of the legislature. To determine whether or not there is an undue delegation of legislative power, the inquiry must be directed to the scope and definiteness of the measure enacted. The legislative does not abdicate its functions when it describes what job must be done, who is to do it, and what is the scope of his authority. For a complex economy, that may be the only way in which the legislative process can go forward. A distinction has rightfully been made between delegation of power to make the laws which necessarily involves a discretion as to what it shall be, which constitutionally may not be done, and delegation of authority or discretion as to its execution to be exercised under and in pursuance of the law, to which no valid objection can be made. The Constitution is thus not to be 48 regarded as denying the legislature the necessary resources of flexibility and practicability. (Emphasis supplied). Clearly, the legislature may delegate to executive officers or bodies the power to determine certain facts or conditions, or the happening of contingencies, on which the operation of a statute is, by its terms, made to depend, 49 but the legislature must prescribe sufficient standards, policies or limitations on their authority. While the power to tax cannot be delegated to executive agencies, details as to the enforcement and administration of an exercise of such power may be left to them, including the power to determine the existence of facts on which its operation 50 depends. The rationale for this is that the preliminary ascertainment of facts as basis for the enactment of legislation is not of itself a legislative function, but is simply ancillary to legislation. Thus, the duty of correlating information and making recommendations is the kind of subsidiary activity which the legislature may perform through its members, or which it may delegate to others to perform. Intelligent legislation on the complicated problems of modern society is impossible in the absence of accurate information on the part of the legislators, and any reasonable method of securing such 51 information is proper. The Constitution as a continuously operative charter of government does not require that Congress find for itself every fact upon which it desires to base legislative action or that it make for itself detailed determinations which it has declared to be prerequisite to application of legislative policy to particular facts and circumstances impossible for 52 Congress itself properly to investigate. In the present case, the challenged section of R.A. No. 9337 is the common proviso in Sections 4, 5 and 6 which reads as follows: That the President, upon the recommendation of the Secretary of Finance, shall, effective January 1, 2006, raise the rate of value-added tax to twelve percent (12%), after any of the following conditions has been satisfied: (i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous year exceeds two and four-fifth percent (2 4/5%); or (ii) National government deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1 %). The case before the Court is not a delegation of legislative power. It is simply a delegation of ascertainment of facts upon which enforcement and administration of the increase rate under the law is contingent. The legislature has made the operation of the 12% rate effective January 1, 2006, contingent upon a specified fact or condition. It leaves the entire operation or non-operation of the 12% rate upon factual matters outside of the control of the executive.

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No discretion would be exercised by the President. Highlighting the absence of discretion is the fact that the wordshall is used in the common proviso. The use of the word shall connotes a mandatory order. Its use in a statute 53 denotes an imperative obligation and is inconsistent with the idea of discretion. Where the law is clear and unambiguous, it must be taken to mean exactly what it says, and courts have no choice but to see to it that the 54 mandate is obeyed. Thus, it is the ministerial duty of the President to immediately impose the 12% rate upon the existence of any of the conditions specified by Congress. This is a duty which cannot be evaded by the President. Inasmuch as the law specifically uses the word shall, the exercise of discretion by the President does not come into play. It is a clear directive to impose the 12% VAT rate when the specified conditions are present. The time of taking into effect of the 12% VAT rate is based on the happening of a certain specified contingency, or upon the ascertainment of certain facts or conditions by a person or body other than the legislature itself. The Court finds no merit to the contention of petitioners ABAKADA GURO Party List, et al. that the law effectively nullified the Presidents power of control over the Secretary of Finance by mandating the fixing of the tax rate by the President upon the recommendation of the Secretary of Finance. The Court cannot also subscribe to the position of petitioners Pimentel, et al. that the word shall should be interpreted to mean may in view of the phrase "upon the recommendation of the Secretary of Finance." Neither does the Court find persuasive the submission of petitioners Escudero, et al. that any recommendation by the Secretary of Finance can easily be brushed aside by the President since the former is a mere alter ego of the latter. When one speaks of the Secretary of Finance as the alter ego of the President, it simply means that as head of the Department of Finance he is the assistant and agent of the Chief Executive. The multifarious executive and administrative functions of the Chief Executive are performed by and through the executive departments, and the acts of the secretaries of such departments, such as the Department of Finance, performed and promulgated in the regular course of business, are, unless disapproved or reprobated by the Chief Executive, presumptively the acts of the Chief Executive. The Secretary of Finance, as such, occupies a political position and holds office in an advisory capacity, and, in the language of Thomas Jefferson, "should be of the President's bosom confidence" and, in the 55 language of Attorney-General Cushing, is "subject to the direction of the President." In the present case, in making his recommendation to the President on the existence of either of the two conditions, the Secretary of Finance is not acting as the alter ego of the President or even her subordinate. In such instance, he is not subject to the power of control and direction of the President. He is acting as the agent of the legislative 56 department, to determine and declare the event upon which its expressed will is to take effect. The Secretary of Finance becomes the means or tool by which legislative policy is determined and implemented, considering that he possesses all the facilities to gather data and information and has a much broader perspective to properly evaluate them. His function is to gather and collate statistical data and other pertinent information and verify if any of the two conditions laid out by Congress is present. His personality in such instance is in reality but a projection of that of Congress. Thus, being the agent of Congress and not of the President, the President cannot alter or modify or nullify, or set aside the findings of the Secretary of Finance and to substitute the judgment of the former for that of the latter. Congress simply granted the Secretary of Finance the authority to ascertain the existence of a fact, namely, whether by December 31, 2005, the value-added tax collection as a percentage of Gross Domestic Product (GDP) of the 4 previous year exceeds two and four-fifth percent (2 /5%) or the national government deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1%). If either of these two instances has occurred, the Secretary of Finance, by legislative mandate, must submit such information to the President. Then the 12% VAT rate must be imposed by the President effective January 1, 2006. There is no undue delegation of legislative power 57 but only of the discretion as to the execution of a law. This is constitutionally permissible . Congress does not abdicate its functions or unduly delegate power when it describes what job must be done, who must do it, and what is the scope of his authority; in our complex economy that is frequently the only way in which the legislative 58 process can go forward. As to the argument of petitioners ABAKADA GURO Party List, et al. that delegating to the President the legislative power to tax is contrary to the principle of republicanism, the same deserves scant consideration. Congress did not delegate the power to tax but the mere implementation of the law. The intent and will to increase the VAT rate to 12% came from Congress and the task of the President is to simply execute the legislative policy. That Congress chose to 59 do so in such a manner is not within the province of the Court to inquire into, its task being to interpret the law. The insinuation by petitioners Pimentel, et al. that the President has ample powers to cause, influence or create the conditions to bring about either or both the conditions precedent does not deserve any merit as this argument is highly speculative. The Court does not rule on allegations which are manifestly conjectural, as these may not exist at

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all. The Court deals with facts, not fancies; on realities, not appearances. When the Court acts on appearances instead of realities, justice and law will be short-lived. B. The 12% Increase VAT Rate Does Not Impose an Unfair and Unnecessary Additional Tax Burden Petitioners Pimentel, et al. argue that the 12% increase in the VAT rate imposes an unfair and additional tax burden on the people. Petitioners also argue that the 12% increase, dependent on any of the 2 conditions set forth in the contested provisions, is ambiguous because it does not state if the VAT rate would be returned to the original 10% if the rates are no longer satisfied. Petitioners also argue that such rate is unfair and unreasonable, as the people are unsure of the applicable VAT rate from year to year. Under the common provisos of Sections 4, 5 and 6 of R.A. No. 9337, if any of the two conditions set forth therein are satisfied, the President shall increase the VAT rate to 12%. The provisions of the law are clear. It does not provide for a return to the 10% rate nor does it empower the President to so revert if, after the rate is increased to 12%, the VAT 4 collection goes below the 2 /5 of the GDP of the previous year or that the national government deficit as a percentage of GDP of the previous year does not exceed 1%. Therefore, no statutory construction or interpretation is needed. Neither can conditions or limitations be introduced 60 where none is provided for. Rewriting the law is a forbidden ground that only Congress may tread upon. Thus, in the absence of any provision providing for a return to the 10% rate, which in this case the Court finds none, petitioners argument is, at best, purely speculative. There is no basis for petitioners fear of a fluctuating VAT rate because the law itself does not provide that the rate should go back to 10% if the conditions provided in Sections 4, 5 and 6 are no longer present. The rule is that where the provision of the law is clear and unambiguous, so that there is no occasion for the court's seeking the legislative intent, the law must be taken as it is, devoid of judicial addition or 61 subtraction. Petitioners also contend that the increase in the VAT rate, which was allegedly an incentive to the President to raise 4 the VAT collection to at least 2 /5 of the GDP of the previous year, should be based on fiscal adequacy. Petitioners obviously overlooked that increase in VAT collection is not the only condition. There is another condition, i.e., the national government deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1 %). Respondents explained the philosophy behind these alternative conditions: 1. VAT/GDP Ratio > 2.8% The condition set for increasing VAT rate to 12% have economic or fiscal meaning. If VAT/GDP is less than 2.8%, it means that government has weak or no capability of implementing the VAT or that VAT is not effective in the function of the tax collection. Therefore, there is no value to increase it to 12% because such action will also be ineffectual. 2. Natl Govt Deficit/GDP >1.5% The condition set for increasing VAT when deficit/GDP is 1.5% or less means the fiscal condition of government has reached a relatively sound position or is towards the direction of a balanced budget position. Therefore, there is no need to increase the VAT rate since the fiscal house is in a relatively healthy position. Otherwise stated, if the ratio is 62 more than 1.5%, there is indeed a need to increase the VAT rate. That the first condition amounts to an incentive to the President to increase the VAT collection does not render it unconstitutional so long as there is a public purpose for which the law was passed, which in this case, is mainly to raise revenue. In fact, fiscal adequacy dictated the need for a raise in revenue. The principle of fiscal adequacy as a characteristic of a sound tax system was originally stated by Adam Smith in his Canons of Taxation (1776), as: IV. Every tax ought to be so contrived as both to take out and to keep out of the pockets of the people as little as 63 possible over and above what it brings into the public treasury of the state. It simply means that sources of revenues must be adequate to meet government expenditures and their variations.
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The dire need for revenue cannot be ignored. Our country is in a quagmire of financial woe. During the Bicameral Conference Committee hearing, then Finance Secretary Purisima bluntly depicted the countrys gloomy state of economic affairs, thus: First, let me explain the position that the Philippines finds itself in right now. We are in a position where 90 percent of our revenue is used for debt service. So, for every peso of revenue that we currently raise, 90 goes to debt service. Thats interest plus amortization of our debt. So clearly, this is not a sustainable situation. Thats the first fact. The second fact is that our debt to GDP level is way out of line compared to other peer countries that borrow money from that international financial markets. Our debt to GDP is approximately equal to our GDP. Again, that shows you that this is not a sustainable situation. The third thing that Id like to point out is the environment that we are presently operating in is not as benign as what it used to be the past five years. What do I mean by that? In the past five years, weve been lucky because we were operating in a period of basically global growth and low interest rates. The past few months, we have seen an inching up, in fact, a rapid increase in the interest rates in the leading economies of the world. And, therefore, our ability to borrow at reasonable prices is going to be challenged. In fact, ultimately, the question is our ability to access the financial markets. When the President made her speech in July last year, the environment was not as bad as it is now, at least based on the forecast of most financial institutions. So, we were assuming that raising 80 billion would put us in a position where we can then convince them to improve our ability to borrow at lower rates. But conditions have changed on us because the interest rates have gone up. In fact, just within this room, we tried to access the market for a billion dollars because for this year alone, the Philippines will have to borrow 4 billion dollars. Of that amount, we have borrowed 1.5 billion. We issued last January a 25-year bond at 9.7 percent cost. We were trying to access last week and the market was not as favorable and up to now we have not accessed and we might pull back because the conditions are not very good. So given this situation, we at the Department of Finance believe that we really need to front-end our deficit reduction. Because it is deficit that is causing the increase of the debt and we are in what we call a debt spiral. The more debt you have, the more deficit you have because interest and debt service eats and eats more of your revenue. We need to get out of this debt spiral. And the only way, I think, we can get out of this debt spiral is really have a front-end 65 adjustment in our revenue base. The image portrayed is chilling. Congress passed the law hoping for rescue from an inevitable catastrophe. Whether the law is indeed sufficient to answer the states economic dilemma is not for the Court to judge. In the Farias case, the Court refused to consider the various arguments raised therein that dwelt on the wisdom of Section 14 of R.A. No. 9006 (The Fair Election Act), pronouncing that: . . . policy matters are not the concern of the Court. Government policy is within the exclusive dominion of the political branches of the government. It is not for this Court to look into the wisdom or propriety of legislative determination. Indeed, whether an enactment is wise or unwise, whether it is based on sound economic theory, whether it is the best means to achieve the desired results, whether, in short, the legislative discretion within its prescribed limits should be exercised in a particular manner are matters for the judgment of the legislature, and the serious conflict of opinions 66 does not suffice to bring them within the range of judicial cognizance. In the same vein, the Court in this case will not dawdle on the purpose of Congress or the executive policy, given that 67 it is not for the judiciary to "pass upon questions of wisdom, justice or expediency of legislation." II. Whether Section 8 of R.A. No. 9337, amending Sections 110(A)(2) and 110(B) of the NIRC; and Section 12 of R.A. No. 9337, amending Section 114(C) of the NIRC, violate the following provisions of the Constitution: a. Article VI, Section 28(1), and b. Article III, Section 1 A. Due Process and Equal Protection Clauses

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Petitioners Association of Pilipinas Shell Dealers, Inc., et al. argue that Section 8 of R.A. No. 9337, amending Sections 110 (A)(2), 110 (B), and Section 12 of R.A. No. 9337, amending Section 114 (C) of the NIRC are arbitrary, oppressive, excessive and confiscatory. Their argument is premised on the constitutional right against deprivation of life, liberty of property without due process of law, as embodied in Article III, Section 1 of the Constitution. Petitioners also contend that these provisions violate the constitutional guarantee of equal protection of the law. The doctrine is that where the due process and equal protection clauses are invoked, considering that they are not fixed rules but rather broad standards, there is a need for proof of such persuasive character as would lead to such a 68 conclusion. Absent such a showing, the presumption of validity must prevail. Section 8 of R.A. No. 9337, amending Section 110(B) of the NIRC imposes a limitation on the amount of input tax that may be credited against the output tax. It states, in part: "[ P]rovided, that the input tax inclusive of the input VAT carried over from the previous quarter that may be credited in every quarter shall not exceed seventy percent (70%) of the output VAT: " Input Tax is defined under Section 110(A) of the NIRC, as amended, as the value-added tax due from or paid by a VAT-registered person on the importation of goods or local purchase of good and services, including lease or use of property, in the course of trade or business, from a VAT-registered person, and Output Tax is the value-added tax due on the sale or lease of taxable goods or properties or services by any person registered or required to register under the law. Petitioners claim that the contested sections impose limitations on the amount of input tax that may be claimed. In effect, a portion of the input tax that has already been paid cannot now be credited against the output tax. Petitioners argument is not absolute. It assumes that the input tax exceeds 70% of the output tax, and therefore, the input tax in excess of 70% remains uncredited. However, to the extent that the input tax is less than 70% of the output tax, then 100% of such input tax is still creditable. More importantly, the excess input tax, if any, is retained in a businesss books of accounts and remains creditable in the succeeding quarter/s. This is explicitly allowed by Section 110(B), which provides that "if the input tax exceeds the output tax, the excess shall be carried over to the succeeding quarter or quarters." In addition, Section 112(B) allows a VAT-registered person to apply for the issuance of a tax credit certificate or refund for any unused input taxes, to the extent that such input taxes have not been applied against the output taxes. Such unused input tax may be used in payment of his other internal revenue taxes. The non-application of the unutilized input tax in a given quarter is not ad infinitum, as petitioners exaggeratedly contend. Their analysis of the effect of the 70% limitation is incomplete and one-sided. It ends at the net effect that there will be unapplied/unutilized inputs VAT for a given quarter. It does not proceed further to the fact that such unapplied/unutilized input tax may be credited in the subsequent periods as allowed by the carry-over provision of Section 110(B) or that it may later on be refunded through a tax credit certificate under Section 112(B). Therefore, petitioners argument must be rejected. On the other hand, it appears that petitioner Garcia failed to comprehend the operation of the 70% limitation on the input tax. According to petitioner, the limitation on the creditable input tax in effect allows VAT-registered establishments to retain a portion of the taxes they collect, which violates the principle that tax collection and revenue should be for public purposes and expenditures As earlier stated, the input tax is the tax paid by a person, passed on to him by the seller, when he buys goods. Output tax meanwhile is the tax due to the person when he sells goods. In computing the VAT payable, three possible scenarios may arise: First, if at the end of a taxable quarter the output taxes charged by the seller are equal to the input taxes that he paid and passed on by the suppliers, then no payment is required; Second, when the output taxes exceed the input taxes, the person shall be liable for the excess, which has to be paid 69 to the Bureau of Internal Revenue (BIR); and Third, if the input taxes exceed the output taxes, the excess shall be carried over to the succeeding quarter or quarters. Should the input taxes result from zero-rated or effectively zero-rated transactions, any excess over the

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output taxes shall instead be refunded to the taxpayer or credited against other internal revenue taxes, at the 70 taxpayers option. Section 8 of R.A. No. 9337 however, imposed a 70% limitation on the input tax. Thus, a person can credit his input tax only up to the extent of 70% of the output tax. In laymans term, the value-added taxes that a person/taxpayer paid and passed on to him by a seller can only be credited up to 70% of the value-added taxes that is due to him on a taxable transaction. There is no retention of any tax collection because the person/taxpayer has already previously paid the input tax to a seller, and the seller will subsequently remit such input tax to the BIR. The party directly liable 71 for the payment of the tax is the seller. What only needs to be done is for the person/taxpayer to apply or credit these input taxes, as evidenced by receipts, against his output taxes. Petitioners Association of Pilipinas Shell Dealers, Inc., et al. also argue that the input tax partakes the nature of a property that may not be confiscated, appropriated, or limited without due process of law. The input tax is not a property or a property right within the constitutional purview of the due process clause. A VATregistered persons entitlement to the creditable input tax is a mere statutory privilege. The distinction between statutory privileges and vested rights must be borne in mind for persons have no vested rights in statutory privileges. The state may change or take away rights, which were created by the law of the state, 72 although it may not take away property, which was vested by virtue of such rights. Under the previous system of single-stage taxation, taxes paid at every level of distribution are not recoverable from the taxes payable, although it becomes part of the cost, which is deductible from the gross revenue. When Pres. Aquino issued E.O. No. 273 imposing a 10% multi-stage tax on all sales, it was then that the crediting of the input tax paid on purchase or importation of goods and services by VAT-registered persons against the output tax was 73 74 introduced. This was adopted by the Expanded VAT Law (R.A. No. 7716), and The Tax Reform Act of 1997 (R.A. 75 No. 8424). The right to credit input tax as against the output tax is clearly a privilege created by law, a privilege that also the law can remove, or in this case, limit. Petitioners also contest as arbitrary, oppressive, excessive and confiscatory, Section 8 of R.A. No. 9337, amending Section 110(A) of the NIRC, which provides: SEC. 110. Tax Credits. (A) Creditable Input Tax. Provided, That the input tax on goods purchased or imported in a calendar month for use in trade or business for which deduction for depreciation is allowed under this Code, shall be spread evenly over the month of acquisition and the fifty-nine (59) succeeding months if the aggregate acquisition cost for such goods, excluding the VAT component thereof, exceeds One million pesos (P1,000,000.00): Provided, however, That if the estimated useful life of the capital goods is less than five (5) years, as used for depreciation purposes, then the input VAT shall be spread over such a shorter period: Provided, finally, That in the case of purchase of services, lease or use of properties, the input tax shall be creditable to the purchaser, lessee or license upon payment of the compensation, rental, royalty or fee. The foregoing section imposes a 60-month period within which to amortize the creditable input tax on purchase or importation of capital goods with acquisition cost of P1 Million pesos, exclusive of the VAT component. Such spread out only poses a delay in the crediting of the input tax. Petitioners argument is without basis because the taxpayer is not permanently deprived of his privilege to credit the input tax. It is worth mentioning that Congress admitted that the spread-out of the creditable input tax in this case amounts to a 76 4-year interest-free loan to the government. In the same breath, Congress also justified its move by saying that the 77 provision was designed to raise an annual revenue of 22.6 billion. The legislature also dispelled the fear that the provision will fend off foreign investments, saying that foreign investors have other tax incentives provided by law, and citing the case of China, where despite a 17.5% non-creditable VAT, foreign investments were not 78 deterred. Again, for whatever is the purpose of the 60-month amortization, this involves executive economic policy and legislative wisdom in which the Court cannot intervene. With regard to the 5% creditable withholding tax imposed on payments made by the government for taxable transactions, Section 12 of R.A. No. 9337, which amended Section 114 of the NIRC, reads: SEC. 114. Return and Payment of Value-added Tax.

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(C) Withholding of Value-added Tax. The Government or any of its political subdivisions, instrumentalities or agencies, including government-owned or controlled corporations (GOCCs) shall, before making payment on account of each purchase of goods and services which are subject to the value-added tax imposed in Sections 106 and 108 of this Code, deduct and withhold a final value-added tax at the rate of five percent (5%) of the gross payment thereof: Provided, That the payment for lease or use of properties or property rights to nonresident owners shall be subject to ten percent (10%) withholding tax at the time of payment. For purposes of this Section, the payor or person in control of the payment shall be considered as the withholding agent. The value-added tax withheld under this Section shall be remitted within ten (10) days following the end of the month the withholding was made. Section 114(C) merely provides a method of collection, or as stated by respondents, a more simplified VAT withholding system. The government in this case is constituted as a withholding agent with respect to their payments for goods and services. Prior to its amendment, Section 114(C) provided for different rates of value-added taxes to be withheld -- 3% on gross payments for purchases of goods; 6% on gross payments for services supplied by contractors other than by public works contractors; 8.5% on gross payments for services supplied by public work contractors; or 10% on payment for the lease or use of properties or property rights to nonresident owners. Under the present Section 114(C), these different rates, except for the 10% on lease or property rights payment to nonresidents, were deleted, and a uniform rate of 5% is applied. The Court observes, however, that the law the used the word final. In tax usage, final, as opposed to creditable, means full. Thus, it is provided in Section 114(C): "final value-added tax at the rate of five percent (5%)." In Revenue Regulations No. 02-98, implementing R.A. No. 8424 (The Tax Reform Act of 1997), the concept of final withholding tax on income was explained, to wit: SECTION 2.57. Withholding of Tax at Source (A) Final Withholding Tax. Under the final withholding tax system the amount of income tax withheld by the withholding agent is constituted as full and final payment of the income tax due from the payee on the said income. The liability for payment of the tax rests primarily on the payor as a withholding agent. Thus, in case of his failure to withhold the tax or in case of underwithholding, the deficiency tax shall be collected from the payor/withholding agent. (B) Creditable Withholding Tax. Under the creditable withholding tax system, taxes withheld on certain income payments are intended to equal or at least approximate the tax due of the payee on said income. Taxes withheld on income payments covered by the expanded withholding tax (referred to in Sec. 2.57.2 of these regulations) and compensation income (referred to in Sec. 2.78 also of these regulations) are creditable in nature. As applied to value-added tax, this means that taxable transactions with the government are subject to a 5% rate, which constitutes as full payment of the tax payable on the transaction. This represents the net VAT payable of the seller. The other 5% effectively accounts for the standard input VAT (deemed input VAT), in lieu of the actual input 79 VAT directly or attributable to the taxable transaction. The Court need not explore the rationale behind the provision. It is clear that Congress intended to treat differently 80 taxable transactions with the government. This is supported by the fact that under the old provision, the 5% tax withheld by the government remains creditable against the tax liability of the seller or contractor, to wit: SEC. 114. Return and Payment of Value-added Tax. (C) Withholding of Creditable Value-added Tax. The Government or any of its political subdivisions, instrumentalities or agencies, including government-owned or controlled corporations (GOCCs) shall, before making payment on account of each purchase of goods from sellers and services rendered by contractors which are subject to the value-added tax imposed in Sections 106 and 108 of this Code, deduct and withhold the value-added tax due at the rate of three percent (3%) of the gross payment for the purchase of goods and six percent (6%) on gross receipts for services rendered by contractors on every sale or installment payment which shall be creditable against the value-added tax liability of the seller or contractor: Provided, however, That in the case of government public works contractors, the withholding rate shall be eight and one-half percent (8.5%): Provided, further, That the payment for lease or use of properties or property rights to nonresident owners shall be subject to ten percent (10%) withholding tax at the time of payment. For this purpose, the payor or person in control of the payment shall be considered as the withholding agent.

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The valued-added tax withheld under this Section shall be remitted within ten (10) days following the end of the month the withholding was made. (Emphasis supplied) As amended, the use of the word final and the deletion of the word creditable exhibits Congresss intention to treat transactions with the government differently. Since it has not been shown that the class subject to the 5% final withholding tax has been unreasonably narrowed, there is no reason to invalidate the provision. Petitioners, as petroleum dealers, are not the only ones subjected to the 5% final withholding tax. It applies to all those who deal with the government. Moreover, the actual input tax is not totally lost or uncreditable, as petitioners believe. Revenue Regulations No. 142005 or the Consolidated Value-Added Tax Regulations 2005 issued by the BIR, provides that should the actual input tax exceed 5% of gross payments, the excess may form part of the cost. Equally, should the actual input tax be less 81 than 5%, the difference is treated as income. Petitioners also argue that by imposing a limitation on the creditable input tax, the government gets to tax a profit or value-added even if there is no profit or value-added. Petitioners stance is purely hypothetical, argumentative, and again, one -sided. The Court will not engage in a legal joust where premises are what ifs, arguments, theoretical and facts, uncertain. Any disquisition by the Court on this 82 point will only be, as Shakespeare describes life in Macbeth, "full of sound and fury, signifying nothing." Whats more, petitioners contention assumes the proposition that there is no profit or value -added. It need not take an astute businessman to know that it is a matter of exception that a business will sell goods or services without profit or value-added. It cannot be overstressed that a business is created precisely for profit. The equal protection clause under the Constitution means that "no person or class of persons shall be deprived of the same protection of laws which is enjoyed by other persons or other classes in the same place and in like 83 circumstances." The power of the State to make reasonable and natural classifications for the purposes of taxation has long been established. Whether it relates to the subject of taxation, the kind of property, the rates to be levied, or the amounts to be raised, the methods of assessment, valuation and collection, the States power is entitled to p resumption of validity. As a rule, the judiciary will not interfere with such power absent a clear showing of unreasonableness, 84 discrimination, or arbitrariness. Petitioners point out that the limitation on the creditable input tax if the entity has a high ratio of input tax, or invests in capital equipment, or has several transactions with the government, is not based on real and substantial differences to meet a valid classification. The argument is pedantic, if not outright baseless. The law does not make any classification in the subject of taxation, the kind of property, the rates to be levied or the amounts to be raised, the methods of assessment, valuation and collection. Petitioners alleged distinctions are based on variables that bear different consequences. While the implementation of the law may yield varying end results depending on ones profit margin and value -added, the Court cannot go beyond what the legislature has laid down and interfere with the affairs of business. The equal protection clause does not require the universal application of the laws on all persons or things without distinction. This might in fact sometimes result in unequal protection. What the clause requires is equality among equals as determined according to a valid classification. By classification is meant the grouping of persons or things 85 similar to each other in certain particulars and different from all others in these same particulars. Petitioners brought to the Courts attention the introduction of Senate Bill No. 2038 by Sens. S.R. Osmea III and Ma. Ana Consuelo A.S. Madrigal on June 6, 2005, and House Bill No. 4493 by Rep. Eric D. Singson. The proposed legislation seeks to amend the 70% limitation by increasing the same to 90%. This, according to petitioners, supports their stance that the 70% limitation is arbitrary and confiscatory. On this score, suffice it to say that these are still proposed legislations. Until Congress amends the law, and absent any unequivocal basis for its unconstitutionality, the 70% limitation stays. B. Uniformity and Equitability of Taxation Article VI, Section 28(1) of the Constitution reads: The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system of taxation.

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Uniformity in taxation means that all taxable articles or kinds of property of the same class shall be taxed at the same rate. Different articles may be taxed at different amounts provided that the rate is uniform on the same class 86 everywhere with all people at all times. In this case, the tax law is uniform as it provides a standard rate of 0% or 10% (or 12%) on all goods and services. Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108, respectively, of the NIRC, provide for a rate of 10% (or 12%) on sale of goods and properties, importation of goods, and sale of services and use or lease of properties. These same sections also provide for a 0% rate on certain sales and transaction. Neither does the law make any distinction as to the type of industry or trade that will bear the 70% limitation on the creditable input tax, 5-year amortization of input tax paid on purchase of capital goods or the 5% final withholding tax by the government. It must be stressed that the rule of uniform taxation does not deprive Congress of the power to 87 classify subjects of taxation, and only demands uniformity within the particular class. R.A. No. 9337 is also equitable. The law is equipped with a threshold margin. The VAT rate of 0% or 10% (or 12%) 88 does not apply to sales of goods or services with gross annual sales or receipts not exceeding P1,500,000.00. Also, 89 basic marine and agricultural food products in their original state are still not subject to the tax, thus ensuring that prices at the grassroots level will remain accessible. As was stated in Kapatiran ng mga Naglilingkod sa Pamahalaan 90 ng Pilipinas, Inc. vs. Tan: The disputed sales tax is also equitable. It is imposed only on sales of goods or services by persons engaged in business with an aggregate gross annual sales exceeding P200,000.00. Small corner sari-sari stores are consequently exempt from its application. Likewise exempt from the tax are sales of farm and marine products, so that the costs of basic food and other necessities, spared as they are from the incidence of the VAT, are expected to be relatively lower and within the reach of the general public. It is admitted that R.A. No. 9337 puts a premium on businesses with low profit margins, and unduly favors those with high profit margins. Congress was not oblivious to this. Thus, to equalize the weighty burden the law entails, the law, under Section 116, imposed a 3% percentage tax on VAT-exempt persons under Section 109(v), i.e., transactions with gross annual sales and/or receipts not exceeding P1.5 Million. This acts as a equalizer because in effect, bigger businesses that qualify for VAT coverage and VAT-exempt taxpayers stand on equal-footing. Moreover, Congress provided mitigating measures to cushion the impact of the imposition of the tax on those 91 92 previously exempt. Excise taxes on petroleum products and natural gas were reduced. Percentage tax on 93 94 domestic carriers was removed. Power producers are now exempt from paying franchise tax. Aside from these, Congress also increased the income tax rates of corporations, in order to distribute the burden of taxation. Domestic, foreign, and non-resident corporations are now subject to a 35% income tax rate, from a previous 95 32%. Intercorporate dividends of non-resident foreign corporations are still subject to 15% final withholding tax but 96 the tax credit allowed on the corporations domicile was increase d to 20%. The Philippine Amusement and Gaming 97 Corporation (PAGCOR) is not exempt from income taxes anymore. Even the sale by an artist of his works or services performed for the production of such works was not spared. All these were designed to ease, as well as spread out, the burden of taxation, which would otherwise rest largely on the consumers. It cannot therefore be gainsaid that R.A. No. 9337 is equitable. C. Progressivity of Taxation Lastly, petitioners contend that the limitation on the creditable input tax is anything but regressive. It is the smaller business with higher input tax-output tax ratio that will suffer the consequences. Progressive taxation is built on the principle of the taxpayers ability to pay. This principle was also lifted from Adam Smiths Canons of Taxation, and it states: I. The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state. Taxation is progressive when its rate goes up depending on the resources of the person affected.
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The VAT is an antithesis of progressive taxation. By its very nature, it is regressive. The principle of progressive taxation has no relation with the VAT system inasmuch as the VAT paid by the consumer or business for every goods bought or services enjoyed is the same regardless of income. In other words, the VAT paid eats the same portion of an income, whether big or small. The disparity lies in the income earned by a person or profit margin marked by a business, such that the higher the income or profit margin, the smaller the portion of the income or profit that is eaten by VAT. A converso, the lower the income or profit margin, the bigger the part that the VAT eats away. At the end of the day, it is really the lower income group or businesses with low-profit margins that is always hardest hit. Nevertheless, the Constitution does not really prohibit the imposition of indirect taxes, like the VAT. What it simply provides is that Congress shall "evolve a progressive system of taxation." The Court stated in the Tolentino case, thus: The Constitution does not really prohibit the imposition of indirect taxes which, like the VAT, are regressive. What it simply provides is that Congress shall evolve a progressive system of taxation. The constitutional provision has been interpreted to mean simply that direct taxes are . . . to be preferred [and] as much as possible, indirect taxes should be minimized. (E. FERNANDO, THE CONSTITUTION OF THE PHILIPPINES 221 (Second ed. 1977)) Indeed, the mandate to Congress is not to prescribe, but to evolve, a progressive tax system. Otherwise, sales taxes, which perhaps are the oldest form of indirect taxes, would have been prohibited with the proclamation of Art. VIII, 17 (1) of the 1973 Constitution from which the present Art. VI, 28 (1) was taken. Sales taxes are also regressive. Resort to indirect taxes should be minimized but not avoided entirely because it is difficult, if not impossible, to avoid them by imposing such taxes according to the taxpayers' ability to pay. In the case of the VAT, the law minimizes the regressive effects of this imposition by providing for zero rating of certain transactions (R.A. No. 7716, 3, amending 102 (b) of the NIRC), while granting exemptions to other transactions. (R.A. No. 7716, 4 amending 103 of the 99 NIRC) CONCLUSION It has been said that taxes are the lifeblood of the government. In this case, it is just an enema, a first-aid measure to resuscitate an economy in distress. The Court is neither blind nor is it turning a deaf ear on the plight of the masses. But it does not have the panacea for the malady that the law seeks to remedy. As in other cases, the Court cannot strike down a law as unconstitutional simply because of its yokes. Let us not be overly influenced by the plea that for every wrong there is a remedy, and that the judiciary should stand ready to afford relief. There are undoubtedly many wrongs the judicature may not correct, for instance, those involving political questions. . . . Let us likewise disabuse our minds from the notion that the judiciary is the repository of remedies for all political or social ills; We should not forget that the Constitution has judiciously allocated the powers of government to three distinct and separate compartments; and that judicial interpretation has tended to the preservation of the independence of the three, and a zealous regard of the prerogatives of each, knowing full well that one is not the guardian of the others and that, for official wrong-doing, each may be brought to account, either by impeachment, trial 100 or by the ballot box. The words of the Court in Vera vs. Avelino holds true then, as it still holds true now. All things considered, there is no raison d'tre for the unconstitutionality of R.A. No. 9337. WHEREFORE, Republic Act No. 9337 not being unconstitutional, the petitions in G.R. Nos. 168056, 168207, 168461, 168463, and 168730, are hereby DISMISSED. There being no constitutional impediment to the full enforcement and implementation of R.A. No. 9337, the temporary restraining order issued by the Court on July 1, 2005 is LIFTED upon finality of herein decision. SO ORDERED. MA. ALICIA AUSTRIA-MARTINEZ Associate Justice WE CONCUR:
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HILARIO G. DAVIDE, JR. Chief Justice REYNATO S. PUNO Associate Justice LEONARDO A. QUISUMBING Associate Justice ANGELINA SANDOVAL-GUTIERREZ Associate Justice RENATO C. CORONA Associate Justice ROMEO J. CALLEJO, SR. Associate Justice DANTE O. TINGA Associate Justice CANCIO C. GARCIA Associate Justice CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. HILARIO G. DAVIDE, JR. Chief Justice ARTEMIO V. PANGANIBAN Associate Justice CONSUELO YNARES-SANTIAGO Associate Justice ANTONIO T. CARPIO Associate Justice CONCHITA CARPIO-MORALES Associate Justice ADOLFO S. AZCUNA Associate Justice MINITA V. CHICO-NAZARIO Associate Justice

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Republic of the Philippines SUPREME COURT SECOND DIVISION A.C. No. 5708 November 11, 2005 BERNARDO A. TADLIP, Complainant, vs. ATTY. FIDEL H. BORRES, JR., Respondent. RESOLUTION Tinga, J.: Lawyers in government service should be more sensitive in their adherence to their professional obligations under the Code of Professional Responsibility, for their disreputable conduct is more likely to be magnified in the public 1 eye. The actuations of respondent brought to light in this case bring disrepute not only to his good name, but to the government and to the State. Restoration of public trust cannot ensue without an equivocal statement from this Court that such behavior will not stand unpunished. We consider the administrative liability of Atty. Fidel H. Borres, Jr. (respondent), a Provincial Agrarian Reform Adjudicator (PARAD) of the Department of Agrarian Reform Regional Arbitration Board (DARAB) for rendering a blatantly irregular decision. The facts of the case are as follows: On 3 October 1987, by virtue of Presidential Decree No. 27 (PD 27), the Ministry of Agrarian Reform issued Original Certificate of Title No. P-106 (OCT No. P-106), Emancipation Patent No. A-028380 to Eusebio E. Arce conveying to him Three Thousand Nine Hundred Eight (3,908) square meters of agricultural land situated in Mambajao, Camiguin. 2 The land was formerly owned by Angel Madarieta. Subsequently, on 14 December 1987, a Deed of Transfer under PD 27 was executed by Angel Madarieta, as 3 represented by his wife, Pelagia Madarieta (Madarieta) and Eusebio E. Arce. The parties agreed that the land would 4 be given to Arce in consideration of Seven Hundred Fifty (750) kerosene cans of palay. Arce died on 23 December 1993. As he was succeeded by two minor daughters ages 5 and 6 years old, herein complainant Tadlip, who is his nephew, assumed the responsibility of tilling the land. Tadlip caused the reallocation of the disputed land through the aid of the Bureau of Legal Assistance, Department of Agrarian Reform, Yuming, 5 Mambajao, Camiguin (BLA-DAR) in a petition dated 9 October 1997 and docketed as DARAB Case No. X-861. Respondent, as PARAD of the DARAB, issued an Order dated 3 April 1998 granting the petition of complainant reallocating the land to him and the heirs of Arce. However, the title to the parcels of land was never transferred to complainant and the heirs of Arce because unknown 7 to them, respondent rendered another Order dated 26 January 1999 canceling the registration of the same OCT No. P-106 and ordering the issuance of a transfer certificate of title ex parte in favor of Madarieta in DARAB Case No. X99-02. As borne out by the records of the case, Madarieta filed two pleadings on 22 January 1999. The first was 8 aPetition entitled "In the Matter of Cancellation of Original Certificate of Title No. EP-106/Emancipation Patent No. A028380 and Retention Right" docketed as DARAB Case No. X-99-02. Madarieta based her Petition on the ground that she was not able to exercise her right of retention, the land is idle, abandoned, unattended and unproductive and that the late Eusebio Arce did not comply with the agreed monthly amortization as payment for the lot. By the nature of the pleadings filed, Madarieta obviously executed an ex parte proceeding. Hence, no attempt was made to implead Tadlip or the Arce heirs, despite the existence of their legal interest over the property and reality that a clear deprivation of such right would ensue should the petition be granted. The second was a Complaint entitled Pelagia Madarieta v. Heirs of Eusebio Arce/Bernardo A. Tadlip, docketed as DARAB Case No. X-99-04 for Cancellation of Original Certificate of Title No. EP 106 and Retention. In the said complaint, Madarieta substantially alleged the same facts and prayed for the same remedies except that she included one more allegation, that which pertains to the reallocation of the land to complainant.
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Complainant alleged that the Complaint was filed by Madarieta upon the instruction of respondent, to correct the 10 procedural flaw attending to her initial Petition. Interestingly, complainant also asserts that the filing of the petition and complaint of Madarieta was not simultaneously done albeit it would seem as if they were. According to him, respondent PARAD, after rendering the Order dated 26 January 1999, advised Madarieta to file a complaint impleading complainant and the heirs of Arce so as to make it appear that the cancellation of the title of the 11 emancipated land was regular and legal. In effect, complainant maintains that the filing of the petition and the 12 complaint by Madarieta on 22 January 1999 was not simultaneous but successive, where after respondent rendered the Order for the petition, Madarieta thereafter filed the complaint at a later date but made it appear that the same was also filed on 22 January 1999. In any event, the Petition, despite its obvious flaws, was decided by respondent in favor of Madrieta just four (4) days after it had been filed. Thus, OCT No. P-106 was ordered cancelled even before Tadlip or the heirs of Arce had any possible opportunity to be heard. Complainant discovered this fact only when the DARAB-Camiguin furnished the BLA-DAR a copy of the Order in 13 DARAB Case No. X-99-02 on 25 February 1999. Complainant filed an Urgent Motion for Reconsideration but this 14 was denied by respondent in an Order dated 19 March 1999. As if complainants travails in the hands of respondent 15 were not enough, respondent also rendered on 17 May 1999 a Decision on the Complaint in DARAB Case No. X99-04 also adverse to complainant. Matters were aggravated when Madarieta filed a motion for execution pending appeal on 25 May 1999. The same 17 18 was granted by respondent on 11 June 1999 despite the vehement opposition of complainant who cited procedural irregularities according to the DARAB Rules of Procedure, particularly the rule that any motion for 19 execution of the decision of the Adjudicator pending appeal shall be filed with the DARAB, and not the adjudicator. Hence, on 20 March 2002, complainant filed this instant administrative complaint. On 7 August 2002, this Court required respondent to comment on the complaint. Respondent, in his comment dated 9 December 2002, denied all the accusations hurled against him. He related that complainant filed an "appeal and certiorari" case relative to the land dispute but instead of waiting for the result, the latter filed another case before the Ombudsman and subsequently this administrative case. In a resolution dated 19 February 2003, the Court referred the case to the Integrated Bar of the Philippines (IBP) for investigation, report and recommendation. The IBP found that respondent violated Canon I of the Code of Professional Responsibility by disregarding and failing 20 to apply the specific provisions of the 1994 New Rules of Procedure (DARAB Rules) in disposing of DARAB Case Nos. X-99-02 and X-99-04 and recommended that respondent be suspended from the practice of law for a period of 21 two (2) months with a warning that a repetition of the same or similar act will be dealt with more severely. We agree with the findings of the IBP but hold that the recommended penalty is quite slight for the infractions done by respondent. This Court cannot delve into the factual or legal questions raised by complainant. We can only rule on its administrative aspect. However, for us to fully dispose of the case, the multiple violations of respondent must be subjected to scrutiny and scorn. Respondent is not only a lawyer practicing his profession, but also a provincial adjudicator, a public officer tasked with the duty of deciding conflicting claims of the parties. He is part of the quasi-judicial system of our government. Thus, by analogy, the present dispute may be likened to administrative cases of judges whose manner of deciding cases was similarly subject of respective administrative cases. To hold the judge liable, this Court has time and again ruled that the error must be "so gross and patent as to produce 22 an inference of ignorance or bad faith or that the judge knowingly rendered an unjust decision." It must be "so grave and on so fundamental a point as to warrant condemnation of the judge as patently ignorant or 23 negligent." Otherwise, to hold a judge administratively accountable for every erroneous ruling or decision he 24 renders, assuming that the judge erred, would be nothing short of harassment and that would be intolerable. However, it has also been held that when the law violated is elementary, the failure to know or observe it constitutes gross ignorance of the law. The disregard of established rule of law which amounts to gross ignorance of law makes 25 a judge subject to disciplinary action. In Pesayco v. Layague,
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the Court had the opportunity to declare that:

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A judge must be acquainted with legal norms and precepts as well as with procedural rules. When a judge displays an utter lack of familiarity with the rules, he erodes the publics confidence in the competence of our courts. Such is gross ignorance of the law. One who accepts the exalted position of a judge owes the public and the court the duty to 27 be proficient in the law. . . . Basic rules of procedure must be at the palm of a judges hands. Needless to say, respondent was sorely remiss in his duties as the PARAD of Camiguin in the disposition of cases filed by Madarieta. He violated Rule VI of the DARAB Rules, to wit: SECTION 1. Issuance of Summons, Time to Answer and Submission of Evidence. Upon the filing of the complaint or petition, the hour/time, day, month, and year when it was filed shall be stamped thereon. The corresponding summons and notice of hearing to the adverse party, attaching therewith a copy of such complaint or petition, affidavit and documentary evidence if any, shall be served by personal delivery or registered mail to the defendant or respondent within two (2) days therefrom. The summons and notice of hearing shall direct the defendant or respondent to file an answer to the complaint or petition and submit counter affidavit and other documentary evidence, if any, within a non-extendible period of ten (10) days from receipt thereof furnishing a copy to the petitioner or the complainant. The summons shall also specify the date, time and place of the hearing and order the parties and their witnesses to appear at the scheduled date of hearing. The aforementioned affidavits and counter-affidavits of the witnesses shall take the place of their direct testimony. Failure of any party to submit his affidavits or counter affidavits as herein directed will be interpreted by the Adjudicator or Board as a waiver to present evidence or that he has more evidence to submit and the case could be considered submitted for decision. Clearly, complainant was a party in interest in the two DARAB cases filed by Madarieta as he stood to be adversely affected by the decision of respondent. Yet, he was never summoned in DARAB Case No. X-99-02, which was decided against him just four (4) days after it was filed. Evidently complainant had no reasonable opportunity to be heard before he was divested of the land over which respondent, just a few months earlier, had affirmed complainants rights thereto. It would be absurd to accept the reasoning of respondent that since complainant was not impleaded as a party to DARAB Case No. X-99-02, the latter was not entitled to be notified of the hearing and the eventual disposition of the case. The DARAB Rules requires the joinder of all parties-in-interest whether as defendants or respondents. Partiesin-interest are defined as "(a)ll persons who claim an interest in the dispute or subject matter thereof adverse to complainant or petitioner, or who are necessary to a complete determination or settlement of the issue involved 28 therein." Complainant, as the holder of title and possession of the property sought to be reconveyed, is ineluctably a party-in-interest. Respondent should have dismissed Madarietas p etition for failure to implead complainant, the heirs of Arce, and all 29 others who derive title from them. Complainant intimates that the Complaint was instituted precisely to cure the defect attending the Petition. The Court cannot conclude definitively that this remedial measure was instigated on the suggestion of the respondent. But assuming this were true, respondents undue haste in granting the Petition just four days after it was filed practically obviated whatever curative effect the Complaint may have served, since the relief sought in the latter was the same already granted in the former. Whatever proceedings may have transpired in the hearing of theComplaint, these were a redundancy, considering that the relief prayed for had already been granted. Furthermore, as correctly observed by the IBP Commissioner, complainants urgent motion for reconsideration may very well be considered by respondent as a motion for intervention and yet respondent denied the same. Remarkably, respondent, nine months prior to his Order dated 26 January 1999, has rendered an Order dated 3 April 1998 reallocating the land in question from Arce to complainant. Respondent himself had vested complainant with an interest in the lot with all the rights therewith accompanying the order of reallocation. He, therefore, cannot afterwards deny such right or interest from complainant to defend the latters claim and subsequently cance l OCT No. P-106 unilaterally. In doing so, complainants possession, if not ownership of the land has been adversely affected. Complainant has also alleged that he was able to obtain positive action on his petition for reallocation only after 30 paying the respondent One Thousand (P1,000.00) pesos. He also categorically states that "there was a rumored 31 pay-off between respondent and the Madarieta Family." Admittedly through, no other evidence was given to corroborate the alleged "pay-off" and his payment of P1,000.00. Thus, we cannot deem these serious allegations as proven. Still, the dubious nature of the decisions is inescapable, and on that basis administrative liability can ensue.

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Compounding respondents liability is the fact that in granting execution pending appeal, he also disregarded Rule XII of the DARAB Rules, which states: SECTION 2. Execution pending appeal. Any motion for execution of the decision of the Adjudicator pending appeal shall be filed before the Board, and the same may be granted upon showing good reasons under conditions which the Board may require. (Emphasis ours.) It is unmistakably stated in unequivocal terms that execution pending appeal must be filed before the Adjudication Board. Respondent violated this rule in rendering an order of execution pending appeal when such authority has been given to the Board alone. Even the respondent cited the said provision of the DARAB Rules in his position 32 paper and yet it seems that he merely dispensed of the rules and replaced it with his own system of procedure contrary to the DARAB Rules. In addition, on 14 May 1993, the DAR Region X, Macanhan, Carmen, Cagayan de Oro received an advisory through an official radiophone message addressed to all Regional Agrarian Reform Adjudicators (RARADs) and PARADs of the DAR from the then Undersecretary Lorenzo Reyes not to execute any ejection proceedings promptly appealed to 33 the DARAB. On 15 September 1993, the same undersecretary issued another official radiophone message addressed to RARAD Jimmy Tapangan of DAR Region X, Cagayan de Oro which is faithfully reproduced as follows: "HELLO, PLEASE ADVISE OUR ADJUDICATORS NOT TO EXECUTE DECISIONS WHERE NOTICE OF APPEAL WAS FILED WITHIN THE REGLEMENTARY PERIOD INSTEAD THE RECORDS OF THE CASE SHOULD BE IMMEDIATELY FORWARDED TO THE BOARD PD SOME MEMBERS OF THE BOARD ARE CONTEMPLATING OF THROWING THE BOOKS TO THOSE WHO INSIST ON EXECUTING DECISIONS THAT ARE PROMPTLY INSPITE OF OUR PREVIOUS ADVISES NOT TO DO SO PD THE BOARD HAS CONSISTENTLY RULED IN SO MANY DECISIONS ALREADY THAT DECISIONS THAT ARE PROMPTLY APPEALED CAN NO LONGER BE EXECUTED BY THE ADJUDICATOR CONCERENED PD THESE RADIOMESSAGE IS THE OFFICIAL ADVISE 34 VERBAL OF THE BOARD PD KEEP UP THE GOOD WORK WARMEST REGARDS END. . . ." Hence, as early as 1993, the RARADs and PARADs have been aware that executions pending appeal was to be acted upon by the DARAB and not by them. Respondents non-observance of the DARAB Rules on notice and hearing and his grant to Madarieta of her motion for execution pending appeal in effect deprived complainant of the land he tills and the source of his income. Complainant woke up one day not knowing that the emancipated land which he thought was already reallocated to him was lost by order of respondent. He was not given the chance to defend his claim over the property. This is tantamount to deprivation of property without due process of law, a constitutional guarantee available to every individual. The actual review of the subject issuance of the respondent should be undertaken in the proper judicial proceedings, and not by this Court at this time via an administrative action. Nevertheless, respondents culpability under the Code of Professional Responsibility is indubitable. As a lawyer, the IBP determined, and we subscribe to such determination, that respondent violated Canon 1 of the Code of Professional Responsibility which states: Canon 1A lawyer shall uphold the Constitution, obey the laws of the land and promote respect for law and for legal processes. While the duty to uphold the Constitution and obey the laws is an obligation imposed upon every citizen, a lawyer assumes responsibilities well beyond the basic requirements of good citizenship. As a servant of the law, a lawyer 35 should moreover make himself an exemplar of others to emulate. A member of the bar who assumes public office does not shed his professional obligations. Hence the Code of Professional Responsibility, promulgated on 21 June 1988, was not meant to govern the conduct of private practitioners alone, but of all lawyers including those in government service. This is clear from Canon 6 of the said Code. Lawyers in government service are public servants who owe the utmost fidelity to the public service. Thus they should be more sensitive in the performance of their professional obligations, as their conduct is subject to the ever36 constant scrutiny of the public. Respondent, as a Provincial Adjudicator of the DARAB, was reposed with a higher gravamen of responsibility than a lawyer in private practice. The recommended penalty of two months suspension is too light under the circumstances, and a penalty of six (6) months suspension more appropriate. As held in recent cases, the penalty for a judge found to be guilty of gross ignorance of the law is six (6) months. In the case at bar, after due consideration of the facts involved, the Court believes and so holds that the same penalty
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should be imposed upon respondent as he disregarded pertinent rules of procedure of the DARAB that led to the unjust deprivation of complainant of his property. WHEREFORE, premises considered, respondent is hereby SUSPENDED from the practice of law for a period of six (6) months. Let a copy of this Resolution be furnished the Bar Confidant for appropriate annotation in the record of respondent. SO ORDERED. DANTE O. TINGA Associate Justice WE CONCUR: REYNATO S. PUNO Acting Chief Justice Chairman MA. ALICIA AUSTRIA-MARTINEZ, ROMEO J. CALLEJO, SR. Associate Justice Associate Justice MINITA V. CHICO-NAZARIO Associate Justice

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