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THE CITY OF DAVAO, CITY

TREASURER AND THE


CITY ASSESSOR OF DAVAO
CITY,
Petitioners,

- versus -

G.R. No. 127383


Present:
PUNO, J.,
Chairman,
AUSTRIA-MARTINEZ,
CALLEJO, SR.,
TINGA, and
CHICO-NAZARIO, JJ.

A Davao City Regional Trial Court (RTC) upheld the tax-exempt


status of the Government Service Insurance System (GSIS) for the years
1992 to 1994 in contravention of the mandate under the Local
Government Code of 1992,[1] the precedent set by this Court in MactanCebu International Airport Authority v. Hon. Marcos,[2] and the public
policy on local autonomy enshrined in the Constitution.[3]

The matter was elevated to this Court directly from the trial court
THE REGIONAL TRIAL
Promulgated:
COURT, BRANCH XII, DAVAO
CITY AND THE GOVERNMENT
August 18, 2005
SERVICE INSURANCE SYSTEM
(GSIS),
Respondents.
x-------------------------------------------------------------------x

on a pure question of law.[4] The facts are uncontroverted.

On 8 April 1994, the GSIS Davao City branch office received a


Notice of Public Auction scheduling the public bidding of GSIS properties
located in Matina and Ulas, Davao City for non-payment of realty taxes
for the years 1992 to 1994 totaling Two Hundred Ninety Five Thousand

DECISION
TINGA, J.:

Seven Hundred Twenty One Pesos and Sixty One Centavos


(P295,721.61).[5] The auction was subsequently reset by virtue of a
deadline extension allowed by Davao City for the payment of delinquent
real property taxes.[6]

At the pre-trial, it was agreed that the sole issue for resolution was
purely a question of law, that is, whether Sections 234 and 534 of the
Local Government Code, which have withdrawn real property tax
On 28 July 1994, the GSIS received Warrants of Levy and Notices

exemptions of government owned and controlled corporations (GOCCs),

of Levy on three parcels of land owned by the GSIS. Another Notice of

have also withdrawn from the GSIS its right to be exempted from

Public Auction was received by the GSIS on 29 August 1994, setting the

payment of the realty taxes sought to be levied by Davao City.[9] The

date of auction sale for 20 September 1994.

parties submitted their respective memoranda.

On 13 September 1994, the GSIS filed a Petition for Certiorari,

On 28 May 1996, the RTC rendered the Decision[10] now assailed

Prohibition, Mandamus And/Or Declaratory Relief with the RTC of Davao

before this Court. It concluded that notwithstanding the enactment of

City. It also sought the issuance of a temporary restraining order. The

the Local Government Code, the GSIS retained its exemption from all

case was raffled to Branch 12, presided by Judge Maximo Magno Libre.

taxes, including real estate taxes. The RTC cited Section 33 of

On 13 September 1994, the RTC issued a temporary restraining order for

Presidential Decree (P.D.) No. 1146, the Revised Government Service

a period of twenty (20) days,[7] effectively enjoining the auction sale

Insurance Act of 1977, as amended by P. D. No. 1981, which mandated

scheduled seven days later. Following exchange of arguments, the RTC

such exemption.

issued an Order dated 3 April 1995 issuing a writ of preliminary


injunction effective for the duration of the suit.[8]

The RTC conceded that the tax exempting statute, P.D. No. 1146,
was enacted prior to the Local Government Code. However, it noted
that the earlier law had prescribed two conditions in order that the tax

exemption provided therein could be withdrawn by future enactments,


namely: (1) that Section 33 be expressly and categorically repealed by
law; and (2) that a provision be enacted to substitute the declared policy
of exemption from any and all taxes as an essential factor for the
solvency of the GSIS fund.[11] The RTC concluded that

both conditions had not been satisfied by the Local Government Code.
The RTC likewise accorded weight to Legal Opinion No. 165 of the
Secretary of Justice dated 16 December 1996 concluding that Section 33
was not repealed by the Local Government Code, and a memorandum

payment of realty tax and if the warrants and levies issued by the
City Treasurer had been annotated in the memorandum of
encumbrance on the certificates of title of petitioners
properties, to cancel such annotation so that the certificates of
titles of petitioners will be free from such liens and
encumbrances.
SO ORDERED.[13]

emanating from the Office of the President dated 14 February 1995


expressing the same opinion.[12]
The dispositive portion of the assailed Decision reads:
Now then, in light of the foregoing observation, the court perceives,
that the cause of action asseverated by petitioner in its petition has been
well established by law and jurisprudence, and therefore the following
relief should be granted:

Petitioners Motion for Reconsideration was denied by the RTC in


an Order dated 30 October 1996, hence the present petition.

Petitioners argue that the exemption granted in Section 33 of P.D.


No. 1146, as amended, was effectively withdrawn upon the enactment
of the Local Government Code, particularly Sections 193 and 294

a) The tax exemption privilege of petitioner should be upheld and


continued and that the warrants of levy and notices of levy
issued by the respondent Treasurer is hereby voided and
declared of no effect;
b) Let a writ of prohibition be issued restraining the City Treasurer
from proceeding with the auction sale of the subject properties,
as well as the respondents Register of Deeds from annotating
the warrants/notices of levy on the certificate of titles of
petitioners real properties subject of this suit; and
c) Compelling the City Assessor of Davao City to include the
properties of petitioner in the list of properties exempt from

thereof. These provisions made the GSIS, along with all other GOCCs,
subject to realty taxes. Petitioners point out that under Section 534(f) of
the Local Government Code, even special laws, such as PD No. 1146,
which are inconsistent with the Local Government Code, are repealed or
modified accordingly.

On the other hand, GSIS contends, as the RTC held, that the

repeals are not favored. Consequently with its position that it remains

requisites for repeal are laid down in Section 33 of P.D. No. 1146, as

exempt from realty taxation, the GSIS argues that the Notices of

amended, namely that it be done expressly and categorically by law, and

Assessment, Warrants and Notices of Levy, Notices of Public Auction

that a provision be enacted to substitute the declared policy of

Sale and the Annotations of the Notice of Levy are void ab initio.

exemption from taxes as an essential factor for the solvency of the


GSIS fund. It stresses that it had been exempt from taxation as far back

A review of the relevant statutory provisions is in order.

as 1936, when its original charter was enacted through Commonwealth


Act No. 186.[14] It asserts further that this Court had previously

Presidential Decree No. 1146 was enacted in 1977 by President

recognized the extraordinary exemption of GSIS in Testate Estate of

Marcos in the exercise of his legislative powers. Section 33, as originally

Concordia T. Lim v. City of Manila,[15] and such exemption has similarly

enacted, read:

been affirmed by the Secretary of Justice and the Office of the President
in the aforementioned issuances also cited by the RTC.[16]

GSIS likewise notes that had it been the intention of the legislature
to repeal Section 33 of P.D. No. 1146 through the Local Government
Code, said law would have included the appropriate retraction in its
repealing clause found in Section 534(f). However, said section,
according to the GSIS, partakes the nature of a general repealing
provision which is accorded less weight in light of the rule that implied

Sec. 33. Exemption from tax, Legal Process and Lien.- It is


hereby declared to be the policy of the State that the actuarial
solvency of the funds of the System shall be preserved and
maintained at all times and that the contribution rates necessary to
sustain the benefits under this Act shall be kept as low as possible in
order not to burden the members of the system and/or their
employees. . . . Accordingly, notwithstanding any laws to the
contrary, the System, its assets, revenues including the accruals
thereto, and benefits paid, shall be exempt from all taxes. These
exemptions shall continue unless expressly and specifically revoked
and any assessment against the System as of the approval of this Act
are hereby considered paid.

It bears noting though, and it is perhaps key to understanding the


As it stood then, Section 33 merely provided a general rule
exempting the GSIS from all taxes. However, Section 33 of P.D. No. 1146
was amended in 1985 by President Marcos, again in the exercise of his
legislative powers, through P.D. No. 1981. It was through this latter
decree that a second paragraph was added to Section 33 delineating the
requisites for repeal of the tax exemption enjoyed by the GSIS by

necessity of the addendum provided under P.D. No. 1981, that a


presidential decree enacted a year earlier, P.D. No. 1931, effectively
withdrew all tax exemption privileges granted to GOCCs.[18] In fact, P.D.
No. 1931 was specifically named in the afore-quoted addendum as
among those laws which, despite passage, would not affect the tax
exempt status of GSIS. Section 1 of P.D. No. 1931 states:

incorporating the following:

Moreover, these exemptions shall not be affected by


subsequent laws to the contrary, such as the provisions of
Presidential Decree No. 1931 and other similar laws that
have been or will be enacted, unless this section is
expressly and categorically repealed by law and a provision
is enacted to substitute the declared policy of exemption
from any and all taxes as an essential factor for the
solvency of the fund.[17]

Sec. 1. The provisions of special or general law to the


contrary notwithstanding, all exemptions from the payment of
duties, taxes, fees, imposts and other charges heretofore granted
in favor of government-owned or controlled corporations
including their subsidiaries, are hereby withdrawn.

There is no doubt that the GSIS which was established way back in
1937 is a GOCC, a fact that GSIS itself admits in its petition for certiorari
before the RTC.[19] It thus clear that Section 1 of P.D. No. 1931 expressly
withdrew those exemptions granted to the GSIS. Presidential Decree No.
1931 did allow the exemption to be restored in special cases through an
application for restoration with the Secretary of Finance, but otherwise,

the exemptions granted to the GSIS prior to the enactment of P.D. No.

containing the restrictions relied upon by the RTC and presently invoked

1931 were withdrawn.

by the GSIS before this Court.

Notably, P.D. No. 1931 was also an exercise of legislative powers

These laws have to be weighed against the Local Government

then accorded to President Marcos by virtue of Amendment No. 6 to the

Code of 1992, a landmark law which implemented the constitutional

1973 Constitution. Whether he was aware of the effect of P.D. No. 1931

aspirations for a more extensive breadth of local autonomy. The Court,

on the GSISs tax-exempt status or the ramifications of the decree

in Mactan, was asked to consider the effect of the Local Government

thereon is unknown; but apparently, he immediately reconsidered the

Code on the taxability by local governments of GOCCs such as the

withdrawal of the exemptions on the GSIS. Thus, P.D. No. 1981 was

Mactan Cebu International Airport Authority (MCIAA). Particularly,

enacted, expressly stating that the tax-exempt status of the GSIS under

MCIAA invoked Section 133(o) of the Local Government Code as the

Section 33 of P.D. No. 1146 remained in place, notwithstanding the

basis for its claimed exemption, the provision reading:

passage of P.D. No. 1931.

However, P.D. No. 1981 did not stop there, serving merely as it

SECTION 133. Common Limitations on the Taxing Powers of Local


Government Units. Unless otherwise provided herein, the exercise of
the taxing powers of provinces, cities, municipalities, and barangays shall
not extend to the levy of the following:

should to restore the previous exemptions on the GSIS. It also attempted


to proscribe future attempts to alter the tax-exempt status of the GSIS
by imposing unorthodox conditions for its future repeal. Thus, as
intimated earlier, a second paragraph was added to Section 33,

....
(o) Taxes, fees or charges of any kind on the National
Government, its agencies and instrumentalities and
local government units.

However, the Court, in ruling MCIAA non-exempt from realty

(b)

taxes, considered that Section 133 qualified the exemption of the


National Government, its agencies and instrumentalities from local

(c)

taxation with the phrase unless otherwise provided herein. The Court
then considered the other relevant provisions of the Local Government

(d)

Code, particularly the following:


(e)

Charitable institutions, churches, parsonages or convents


appurtenant thereto, mosques, non-profit or religious cemeteries
and all lands, buildings, and improvements actually, directly, and
exclusively used for religious charitable or educational purposes;
All machineries and equipment that are actually, directly and
exclusively used by local water districts and government-owned
and controlled corporations engaged in the distribution of water
and/or generation and transmission of electric power;
All real property owned by duly registered cooperatives as
provided for under R.A. No. 6938; and
Machinery and equipment used for pollution control and
environmental protection.

SECTION 193. Withdrawal of Tax Exemption Privileges. Unless


otherwise provided in this Code, tax exemption or incentives granted to,
or enjoyed by all persons, whether natural or juridical, including
government-owned and controlled corporations, except local water
districts, cooperatives duly registered under R.A. No. 6938, non-stock and
non-profit hospitals and educational institutions, are hereby withdrawn
upon the effectivity of this Code.

Except as provided herein, any exemption from payment of real


property tax previously granted to, or presently enjoyed by, all persons,
whether natural or juridical, including all government-owned or
controlled corporations are hereby withdrawn upon the effectivity of
this Code. (Emphasis supplied.)

SECTION 232. Power to Levy Real Property Tax. A province or city or a


municipality within the Metropolitan Manila area may levy an annual ad
valorem tax on real property such as land, building, machinery, and other
improvements not hereafter specifically exempted.

Evidently, Section 133 was not intended to be so absolute a

SECTION 234. Exemptions from Real Property Tax. -- The following are
exempted from payment of the real property tax:
(a)

Real property owned by the Republic of the Philippines or any of


its political subdivisions except when the beneficial use thereof
has been granted, for consideration or otherwise, to a taxable
person;

prohibition on the power of LGUs to tax the National Government, its


agencies and instrumentalities, as evidenced by these cited provisions
which otherwise provided. But what was the extent of the limitation
under Section 133? This is how the Court, in a discussion of far-reaching
consequence, defined the parameters in Mactan:

The foregoing sections of the LGC speak of: (a) the


limitations on the taxing powers of local government units
and the exceptions to such limitations; and (b) the rule on tax
exemptions and the exceptions thereto. The use of exceptions or
provisos in these sections, as shown by the following clauses:
(1) "unless otherwise provided herein" in the opening
paragraph of Section 133;
(2) "Unless otherwise provided in this Code" in Section 193;
(3) "not hereafter specifically exempted" in Section 232;
and
(4) "Except as provided herein" in the last paragraph of
Section 234
initially hampers a ready understanding of the sections. Note, too,
that the aforementioned clause in Section 133 seems to be
inaccurately worded. Instead of the clause "unless otherwise
provided herein," with the "herein" to mean, of course, the
section, it should have used the clause "unless otherwise provided
in this Code." The former results in absurdity since the section
itself enumerates what are beyond the taxing powers of local
government units and, where exceptions were intended, the
exceptions are explicitly indicated in the next. For instance, in item
(a) which excepts income taxes "when levied on banks and other
financial institutions"; item (d) which excepts "wharfage on
wharves constructed and maintained by the local government unit
concerned"; and item (1) which excepts taxes, fees and charges
for the registration and issuance of licenses or permits for the
driving of "tricycles." It may also be observed that within the body
itself of the section, there are exceptions which can be found only

in other parts of the LGC, but the section interchangeably uses


therein the clause, "except as otherwise provided herein" as in
items (c) and (i), or the clause "except as provided in this Code" in
item (j). These clauses would be obviously unnecessary or mere
surplusages if the opening clause of the section were "Unless
otherwise provided in this Code" instead of "Unless otherwise
provided herein." In
any event, even if the latter is used, since under Section 232 local
government units have the power to levy real property tax, except
those exempted therefrom under Section 234, then Section 232
must be deemed to qualify Section 133.
Thus, reading together Sections 133, 232, and 234 of the
LGC, we conclude that as a general rule, as laid down in Section
133, the taxing powers of local government units cannot extend
to the levy of, inter alia, "taxes, fees and charges of any kind on
the National Government, its agencies and instrumentalities,
and local government units"; however, pursuant to Section 232,
provinces, cities, and municipalities in the Metropolitan Manila
Area may impose the real property tax except on, inter alia,
"real property owned by the Republic of the Philippines or any
of its political subdivisions except when the beneficial use
thereof has been granted, for consideration or otherwise, to a
taxable person," as provided in item (a) of the first paragraph of
Section 234.
As to tax exemptions or incentives granted to or presently
enjoyed by natural or judicial persons, including governmentowned and controlled corporations, Section 193 of the LGC
prescribes the general rule, viz., they are withdrawn upon the
effectivity of the LGC, except those granted to local water

districts, cooperatives duly registered under R.A. No. 6938, nonstock and non-profit hospitals and educational institutions, and
unless otherwise provided in the LGC. The latter proviso could
refer to Section 234 which enumerates the properties exempt
from real property tax. But the last paragraph of Section 234
further qualifies the retention of the exemption insofar as real
property taxes are concerned by limiting the retention only to
those enumerated therein; all others not included in the
enumeration lost the privilege upon the effectivity of the LGC.
Moreover, even as to real property owned by the Republic of the
Philippines or any of its political subdivisions covered by item (a)
of the first paragraph of Section 234, the exemption is withdrawn
if the beneficial use of such property has been granted to a
taxable person for consideration or otherwise.

This Court, in Mactan, acknowledged that under Section 133,


instrumentalities were generally exempt from all forms of local
government taxation, unless otherwise provided in the Code. On the
other hand, Section 232 otherwise provides insofar as it allowed local
government units to levy an ad valorem real property tax, irrespective of
who owned the property. At the same time, the imposition of real
property taxes under Section 232 is in turn qualified by the phrase not
hereinafter specifically exempted. The exemptions from real property
taxes are enumerated in Section 234, which specifically states that only

Since the last paragraph of Section 234 unequivocally


withdrew, upon the effectivity of the LGC, exemptions from
payment of real property taxes granted to natural or juridical
persons, including government-owned or controlled corporations,
except as provided in the said section, and the petitioner is,
undoubtedly, a government-owned corporation, it necessarily
follows that its exemption from such tax granted it in Section 14
of its Charter, R.A. No. 6958, has been withdrawn. Any claim to
the contrary can only be justified if the petitioner can seek refuge
under any of the exceptions provided in Section 234, but not
under Section 133, as it now asserts, since, as shown above, the
said section is qualified by Sections 232 and 234.[20] (Emphasis
supplied.)

real properties owned by the Republic of the Philippines or any of its


political subdivisions are exempted from the payment of the tax.
Clearly, instrumentalities or GOCCs do not fall within the exceptions
under Section 234.
Worth reckoning, however, is an essential difference between the
situation of the MCIAA (and most other GOCCs, for that matter) and that
of the GSIS. Unlike most other GOCCs, there is a statutory provision
Section 33 of P.D. No. 1146, as amendedwhich imposes conditions on
the subsequent withdrawal of the GSISs tax exemptions. The RTC

justified the affirmance of the tax exemptions based on the non-

Concededly, it does not appear that at the very least, the second

compliance by the Local Government Code with these conditionalities,

conditionality of Section 33 has been met. No provision has been

and not by reason of a general proposition that GOCCs or

enacted to substitute the declared policy of exemption from any and all

instrumentalities remain exempt from local government taxation.

taxes as an essential factor for the solvency of the fund.[22] Yet the Court
is averse to employing this framework, in the first place as utilized by the
RTC, for we recognize a fundamental flaw in Section 33, particularly the
amendatory second paragraph introduced by P.D. No. 1981.

Absent Section 33 of P.D. No. 1146, as amended, there would be no


impediment in squarely applying the express provisions of Sections 193,
232 and 234 of the Local Government Code, as the Court did
in Mactan and

recently

in Philippine

Rural

Electric

The second paragraph of Section 33 of P.D. No. 1146, as amended,

Cooperatives

effectively imposes restrictions on the competency of the Congress to

Association, Inc. et al. v. Secretary of Interior And Local Government, et

enact future legislation on the taxability of the GSIS. This places an

al. [21] and in ruling that the tax exemptions of GSIS were withdrawn by

undue restraint on the plenary power of the legislature to amend or

the Code. Thus, the crucial proposition is whether the GSIS tax

repeal laws, especially considering that it is a lawmakers act that

exemptions can be deemed as withdrawn by the Local Government Code

imposes such burden. Only the Constitution may operate to preclude or

notwithstanding Section 33 of P.D. No. 1146 as amended.

place restrictions on the amendment or repeal of laws. Constitutional


dicta is of higher order than legislative statutes, and the latter should
always yield to the former in cases of irreconcilable conflict.

It is a basic precept that among the implied substantive limitations

It might be argued that Section 33 of P.D. No. 1146, as amended,

on the legislative powers is the prohibition against the passage of

does not preclude the repeal of the tax-exempt status of GSIS, but

irrepealable laws.[23] Irrepealable laws deprive succeeding legislatures of

merely imposes conditions for such to validly occur. Yet these

the fundamental best senses carte blanche in crafting laws appropriate

conditions, if honored, have the precise effect of limiting the powers of

to the operative milieu. Their allowance promotes an unhealthy stasis in

Congress. Thus, the same rationale for prohibiting irrepealable laws

the legislative front and dissuades dynamic democratic impetus that may

applies in prohibiting restraints on future amendatory laws. President

be responsive to the times. As Senior Associate Justice Reynato S. Puno

Marcos, who exercised his legislative powers in amending P.D. No. 1146,

once observed, *t+o be sure, there are no irrepealable laws just as there

could not have demanded obeisance from future legislators by imposing

are no irrepealable Constitutions. Change is the predicate of progress

restrictions on their ability to legislate amendments or repeals. The

and we should not fear change.[24]

concerns that may have militated his enactment of these restrictions


need not necessarily be shared by subsequent Congresses.

Moreover, it would be noxious anathema to democratic principles


for a legislative body to have the ability to bind the actions of future

We do not mean to trivialize the need to ensure the solvency of the

legislative body, considering that both assemblies are regarded with

GSIS fund, a concern that has seen legislative expression, even with the

equal footing, exercising as they do the same plenary powers. Perpetual

most recently enacted Government Service Insurance System Act of

infallibility is not one of the attributes desired in a legislative body, and a

1997.[25] Yet at the same time, we recognize that Congress has the

legislature which attempts to forestall future amendments or repeals of

putative authority, through valid legislation, to diminish such fund, or

its enactments labors under delusions of omniscience.

even abolish the GSIS itself if it so desires. The GSIS may provide vital

services and security to employees of the civil service, yet it is not a


sacred cow that is beyond abolition by Congress if, for example, more
innovative methods are devised to ensure stable pension funds for
government employees. If Congress has the inherent power to abrogate
the GSIS itself, then it necessarily has the ability to inflict less detrimental
burdens, such as abolishing its tax-exempt status. If there could be legal

prohibited expressly or by implication by the federal constitution or


limited or restrained by its own. It cannot bind itself or its successors by
enacting irrepealable laws except when so restrained. Every legislative
body may modify or abolish the acts passed by itself or its predecessors.
This power of repeal may be exercised at the same session at which the
original act was passed; and even while a bill is in its progress and
before it becomes a law. This legislature cannot bind a future
legislature to a particular mode of repeal. It cannot declare in advance
the intent of subsequent legislatures or the effect of subsequent
legislation upon existing statutes. (Emphasis supplied.)[27]

authority proscribing the Congress from enacting such legislation, such


should be sourced from the Constitution itself, and not from antecedent
statutes which were themselves enacted by legislative power.

The citation is particularly apropos to our present task, since the


question for resolution is primarily one of statutory construction, i.e.,
whether or not Section 33 of P.D. No. 1146 has been repealed by the
Local Government Code. It is evident that we cannot render effective
the amendatory second paragraph of Section 33

The Courts position is aligned with entrenched norms of statutory


construction. In Duarte v. Dade,[26] the Court cited with approval Lewis
Southerland on Statutory Construction, which states:
A state legislature has a plenary law-making power over all
subjects, whether pertaining to persons or things, within its territorial
jurisdiction, either to introduce new laws or repeal the old, unless

as the RTC did, for by doing so, we would be giving sanction to a


disingenuous means employed through legislative power to bind
subsequent legislators to a particular mode of repeal.

existence of the power shall be interpreted in favor of the local


government unit concerned;

Thus, the two conditionalities of Section 33 cannot bear relevance


on whether the Local Government Code removed the tax-exempt status

(b) In case of doubt, any tax ordinance or revenue measure shall be


construed strictly against the local government unit enacting it, and
liberally in favor of the taxpayer. Any tax exemption, incentive or relief
granted by any local government unit pursuant to the provisions of this
Code shall be construed strictly against the person claiming it;
(Emphasis supplied.)

of the GSIS. The express withdrawal of all tax exemptions accorded to all
persons, natural or juridical, as stated in Section 193 of the Local
Government Code, applies without impediment to the present case.
Such position is bolstered by the other cited provisions of the Local
Government Code, and by the Mactan ruling.

Also worthy of note is that the Constitution itself promotes the


There are other reasons that guide us to construe the Local

principles of local autonomy as embodied in the Local Government Code.

Government Code in favor of the City of Davaos position. Section 5 of

The

the Local Government Code provides the guidelines on how to construe

governments,[28] and local governments are empowered to levy taxes,

the Codes provisions in cases of doubt, and they are self-explanatory,

fees and charges that accrue exclusively to them, subject to

thus:

congressional guidelines and limitations.[29] The principle of local

State

is

mandated

to

ensure

the

autonomy

of

local

autonomy is no mere passing dalliance but a constitutionally enshrined


Section 5. Rules of Interpretation. In the interpretation of the
provisions of this Code, the following rules shall apply:
(a) Any provision on a power of a local government unit shall be
liberally interpreted in its favor, and in case of doubt, any question
thereon shall be resolved in favor of devolution of powers and of the
lower local government unit. Any fair and reasonable doubt as to the

precept that deserves respect and appropriate enforcement by this


Court.

We are aware that this stance runs contrary to that which was

WHEREFORE, premises considered, the Petition for Review is

adopted by the Secretary of Justice in his Opinion dated 22 July 1993, as

hereby

GRANTED.

The

appealed Decision of

well as the memorandum from the Office of the President dated 14

the Regional Trial Court ofDavao City, Branch 12 is REVERSED and SET

February 1995, expressing the same opinion. However, statutory

ASIDE.

interpretations of these executive bodies do not hold decisive sway upon


the judiciary but are merely persuasive. These issuances cannot derogate
from the binding precept that one legislature cannot enact irrepealable

Costs de oficio.
SO ORDERED.

legislation or limit or restrict its own power or the power of its


successors as to the repeal of statutes.[30] The act of one legislature is
not binding upon and does not tie the hands of future legislatures.[31]

The GSISs tax-exempt status, in sum, was withdrawn in 1992 by


the Local Government Code but restored by the Government Service
Insurance System
Act of 1997, the operative provision of which is Section
39.[32] The subject real property taxes for the years 1992 to 1994 were
assessed against GSIS while the Local Government Code provisions
prevailed and, thus, may be collected by the City of Davao.

KIDA VS. SENATE

We resolve: (a) the motion for reconsideration filed by petitioners Datu Michael Abas
Kida, et al. in G.R. No. 196271; (b) the motion for reconsideration filed by petitioner
Rep. Edcel Lagman in G.R. No. 197221; (c) the ex abundante ad cautelam motion for
reconsideration filed by petitioner Basari Mapupuno in G.R. No. 196305; (d) the motion
for reconsideration filed by petitioner Atty. Romulo Macalintal in G.R. No. 197282; (e)
the motion for reconsideration filed by petitioners Almarim Centi Tillah, Datu Casan
Conding Cana and Partido Demokratiko Pilipino Lakas ng Bayan in G.R. No. 197280; (f)
the manifestation and motion filed by petitioners Almarim Centi Tillah, et al. in G.R. No.
197280; and (g) the very urgent motion to issue clarificatory resolution that the
temporary restraining order (TRO) is still existing and effective.
These motions assail our Decision dated October 18, 2011, where we upheld the
constitutionality of Republic Act (RA) No. 10153. Pursuant to the constitutional mandate
of synchronization, RA No. 10153 postponed the regional elections in the Autonomous
Region in Muslim Mindanao (ARMM) (which were scheduled to be held on the second
Monday of August 2011) to the second Monday of May 2013 and recognized the

Presidents power to appoint officers-in-charge (OICs) to temporarily assume these


positions upon the expiration of the terms of the elected officials.
The Motions for Reconsideration
The petitioners in G.R. No. 196271 raise the following grounds in support of their
motion:
I. THE HONORABLE COURT ERRED IN CONCLUDING THAT THE ARMM ELECTIONS
ARE LOCAL ELECTIONS, CONSIDERING THAT THE CONSTITUTION GIVES THE
ARMM A SPECIAL STATUS AND IS SEPARATE AND DISTINCT FROM ORDINARY
LOCAL GOVERNMENT UNITS.
II. R.A. 10153 AND R.A. 9333 AMEND THE ORGANIC ACT.
III. THE SUPERMAJORITY PROVISIONS OF THE ORGANIC ACT (R.A. 9054) ARE NOT
IRREPEALABLE LAWS.
IV. SECTION 3, ARTICLE XVII OF R.A. 9054 DOES NOT VIOLATE SECTION 18,
ARTICLE X OF THE CONSTITUTION.
V. BALANCE OF INTERESTS TILT IN FAVOR OF THE DEMOCRATIC PRINCIPLE[.]1
The petitioner in G.R. No. 197221 raises similar grounds, arguing that:
I. THE ELECTIVE REGIONAL EXECUTIVE AND LEGISLATIVE OFFICIALS OF ARMM
CANNOT BE CONSIDERED AS OR EQUATED WITH THE TRADITIONAL LOCAL
GOVERNMENT OFFICIALS IN THE LOCAL GOVERNMENT UNITS (LGUs) BECAUSE
(A) THERE IS NO EXPLICIT CONSTITUTIONAL PROVISION ON SUCH PARITY; AND
(B) THE ARMM IS MORE SUPERIOR THAN LGUs IN STRUCTURE, POWERS AND
AUTONOMY, AND CONSEQUENTLY IS A CLASS OF ITS OWN APART FROM
TRADITIONAL LGUs.

II. THE UNMISTAKABLE AND UNEQUIVOCAL CONSTITUTIONAL MANDATE FOR


AN ELECTIVE AND REPRESENTATIVE EXECUTIVE DEPARTMENT AND LEGISLATIVE
ASSEMBLY IN ARMM INDUBITABLY PRECLUDES THE APPOINTMENT BY THE
PRESIDENT OF OFFICERS-IN-CHARGE (OICs), ALBEIT MOMENTARY OR
TEMPORARY, FOR THE POSITIONS OF ARMM GOVERNOR, VICE GOVERNOR AND
MEMBERS OF THE REGIONAL ASSEMBLY.
III. THE PRESIDENTS APPOINTING POWER IS LIMITED TO APPOINTIVE OFFICIALS
AND DOES NOT EXTEND TO ELECTIVE OFFICIALS EVEN AS THE PRESIDENT IS
ONLY VESTED WITH SUPERVISORY POWERS OVER THE ARMM, THEREBY
NEGATING THE AWESOME POWER TO APPOINT AND REMOVE OICs OCCUPYING
ELECTIVE POSITIONS.
IV. THE CONSTITUTION DOES NOT PROSCRIBE THE HOLDOVER OF ARMM
ELECTED OFFICIALS PENDING THE ELECTION AND QUALIFICATION OF THEIR
SUCCESSORS.
V. THE RULING IN OSMENA DOES NOT APPLY TO ARMM ELECTED OFFICIALS
WHOSE TERMS OF OFFICE ARE NOT PROVIDED FOR BY THE CONSTITUTION BUT
PRESCRIBED BY THE ORGANIC ACTS.
VI. THE REQUIREMENT OF A SUPERMAJORITY OF VOTES IN THE HOUSE OF
REPRESENTATIVES AND THE SENATE FOR THE VALIDITY OF A SUBSTANTIVE
AMENDMENT OR REVISION OF THE ORGANIC ACTS DOES NOT IMPOSE AN
IRREPEALABLE LAW.
VII. THE REQUIREMENT OF A PLEBISCITE FOR THE EFFECTIVITY OF A
SUBSTANTIVE AMENDMENT OR REVISION OF THE ORGANIC ACTS DOES NOT
UNDULY EXPAND THE PLEBISCITE REQUIREMENT OF THE CONSTITUTION.
VIII. SYNCHRONIZATION OF THE ARMM ELECTION WITH THE NATIONAL AND
LOCAL ELECTIONS IS NOT MANDATED BY THE CONSTITUTION.

IX. THE COMELEC HAS THE AUTHORITY TO HOLD AND CONDUCT SPECIAL
ELECTIONS IN ARMM, AND THE ENACTMENT OF AN IMPROVIDENT AND
UNCONSTITUTIONAL STATUTE IS AN ANALOGOUS CAUSE WARRANTING
COMELECS HOLDING OF SPECIAL ELECTIONS.2 (italics supplied)

IV. THE HONORABLE COURT MAY HAVE COMMITTED A SERIOUS ERROR IN


HOLDING THAT A PLEBISCITE IS NOT NECESSARY IN AMENDING THE ORGANIC
ACT.
xxxx

The petitioner in G.R. No. 196305 further asserts that:


I. BEFORE THE COURT MAY CONSTRUE OR INTERPRET A STATUTE, IT IS A
CONDITION SINE QUA NON THAT THERE BE DOUBT OR AMBIGUITY IN ITS
LANGUAGE.
THE TRANSITORY PROVISIONS HOWEVER ARE CLEAR AND UNAMBIGUOUS: THEY
REFER TO THE 1992 ELECTIONS AND TURN-OVER OF ELECTIVE OFFICIALS.
IN THUS RECOGNIZING A SUPPOSED "INTENT" OF THE FRAMERS, AND APPLYING
THE SAME TO ELECTIONS 20 YEARS AFTER, THE HONORABLE SUPREME COURT
MAY HAVE VIOLATED THEFOREMOST RULE IN STATUTORY CONSTRUCTION.
xxxx
II. THE HONORABLE COURT SHOULD HAVE CONSIDERED THAT RA 9054, AN
ORGANIC ACT, WAS COMPLETE IN ITSELF. HENCE, RA 10153 SHOULD BE
CONSIDERED TO HAVE BEEN ENACTED PRECISELY TO AMEND RA 9054.
xxxx
III. THE HONORABLE COURT MAY HAVE COMMITTED A SERIOUS ERROR IN
DECLARING THE 2/3 VOTING REQUIREMENT SET FORTH IN RA 9054 AS
UNCONSTITUTIONAL.
xxxx

V. THE HONORABLE COURT COMMITTED A SERIOUS ERROR IN DECLARING THE


HOLD-OVER OF ARMM ELECTIVE OFFICIALS UNCONSTITUTIONAL.
xxxx
VI. THE HONORABLE COURT COMMITTED A SERIOUS ERROR IN UPHOLDING THE
APPOINTMENT OF OFFICERS-IN-CHARGE.3 (italics and underscoring supplied)
The petitioner in G.R. No. 197282 contends that:
A.
ASSUMING WITHOUT CONCEDING THAT THE APPOINTMENT OF OICs FOR THE
REGIONAL GOVERNMENT OF THE ARMM IS NOT UNCONSTITUTIONAL TO BEGIN
WITH, SUCH APPOINTMENT OF OIC REGIONAL OFFICIALS WILL CREATE A
FUNDAMENTAL CHANGE IN THE BASIC STRUCTURE OF THE REGIONAL
GOVERNMENT SUCH THAT R.A. NO. 10153 SHOULD HAVE BEEN SUBMITTED TO
A PLEBISCITE IN THE ARMM FOR APPROVAL BY ITS PEOPLE, WHICH PLEBISCITE
REQUIREMENT CANNOT BE CIRCUMVENTED BY SIMPLY CHARACTERIZING THE
PROVISIONS OF R.A. NO. 10153 ON APPOINTMENT OF OICs AS AN "INTERIM
MEASURE".
B.
THE HONORABLE COURT ERRED IN RULING THAT THE APPOINTMENT BY THE
PRESIDENT OF OICs FOR THE ARMM REGIONAL GOVERNMENT IS NOT VIOLATIVE
OF THE CONSTITUTION.

C.
THE HOLDOVER PRINCIPLE ADOPTED IN R.A. NO. 9054 DOES NOT VIOLATE THE
CONSTITUTION, AND BEFORE THEIR SUCCESSORS ARE ELECTED IN EITHER AN
ELECTION TO BE HELD AT THE SOONEST POSSIBLE TIME OR IN MAY 2013, THE
SAID INCUMBENT ARMM REGIONAL OFFICIALS MAY VALIDLY CONTINUE
FUNCTIONING AS SUCH IN A HOLDOVER CAPACITY IN ACCORDANCE WITH
SECTION 7, ARTICLE VII OF R.A. NO. 9054.

e) the President only has the power of supervision over autonomous regions,
which does not include the power to appoint OICs to take the place of ARMM
elective officials; and
f) it would be better to hold the ARMM elections separately from the national
and local elections as this will make it easier for the authorities to implement
election laws.
In essence, the Court is asked to resolve the following questions:

D.
WITH THE CANCELLATION OF THE AUGUST 2011 ARMM ELECTIONS, SPECIAL
ELECTIONS MUST IMMEDIATELY BE HELD FOR THE ELECTIVE REGIONAL
OFFICIALS OF THE ARMM WHO SHALL SERVE UNTIL THEIR SUCCESSORS ARE
ELECTED IN THE MAY 2013 SYNCHRONIZED ELECTIONS.4
Finally, the petitioners in G.R. No. 197280 argue that:
a) the Constitutional mandate of synchronization does not apply to the ARMM
elections;
b) RA No. 10153 negates the basic principle of republican democracy which, by
constitutional mandate, guides the governance of the Republic;
c) RA No. 10153 amends the Organic Act (RA No. 9054) and, thus, has to comply
with the 2/3 vote from the House of Representatives and the Senate, voting
separately, and be ratified in a plebiscite;
d) if the choice is between elective officials continuing to hold their offices even
after their terms are over and non-elective individuals getting into the vacant
elective positions by appointment as OICs, the holdover option is the better
choice;

(a) Does the Constitution mandate the synchronization of ARMM regional


elections with national and local elections?
(b) Does RA No. 10153 amend RA No. 9054? If so, does RA No. 10153 have to
comply with the supermajority vote and plebiscite requirements?
(c) Is the holdover provision in RA No. 9054 constitutional?
(d) Does the COMELEC have the power to call for special elections in ARMM?
(e) Does granting the President the power to appoint OICs violate the elective
and representative nature of ARMM regional legislative and executive offices?
(f) Does the appointment power granted to the President exceed the Presidents
supervisory powers over autonomous regions?
The Courts Ruling
We deny the motions for lack of merit.
Synchronization mandate includes ARMM elections

The Court was unanimous in holding that the Constitution mandates the
synchronization of national and local elections. While the Constitution does not
expressly instruct Congress to synchronize the national and local elections, the intention
can be inferred from the following provisions of the Transitory Provisions (Article XVIII)
of the Constitution, which state:
Section 1. The first elections of Members of the Congress under this Constitution shall
be held on the second Monday of May, 1987.

MR. MAAMBONG. For purposes of identification, I will now read a section which we will
temporarily indicate as Section 14. It reads: "THE SENATORS, MEMBERS OF THE HOUSE
OF REPRESENTATIVES AND THE LOCAL OFFICIALS ELECTED IN THE FIRST ELECTION SHALL
SERVE FOR FIVE YEARS, TO EXPIRE AT NOON OF JUNE 1992."
This was presented by Commissioner Davide, so may we ask that Commissioner Davide
be recognized.
THE PRESIDING OFFICER (Mr. Rodrigo). Commissioner Davide is recognized.

The first local elections shall be held on a date to be determined by the President, which
may be simultaneous with the election of the Members of the Congress. It shall include
the election of all Members of the city or municipal councils in the Metropolitan Manila
area.
Section 2. The Senators, Members of the House of Representatives, and the local
officials first elected under this Constitution shall serve until noon of June 30, 1992.
Of the Senators elected in the elections in 1992, the first twelve obtaining the highest
number of votes shall serve for six years and the remaining twelve for three years.
xxxx
Section 5. The six-year term of the incumbent President and Vice-President elected in
the February 7, 1986 election is, for purposes of synchronization of elections, hereby
extended to noon of June 30, 1992.
The first regular elections for the President and Vice-President under this Constitution
shall be held on the second Monday of May, 1992.
To fully appreciate the constitutional intent behind these provisions, we refer to the
discussions of the Constitutional Commission:

MR. DAVIDE. Before going to the proposed amendment, I would only state that in view
of the action taken by the Commission on Section 2 earlier, I am formulating a new
proposal. It will read as follows: "THE SENATORS, MEMBERS OF THE HOUSE OF
REPRESENTATIVES AND THE LOCAL OFFICIALS FIRST ELECTED UNDER THIS
CONSTITUTION SHALL SERVE UNTIL NOON OF JUNE 30, 1992."
I proposed this because of the proposed section of the Article on Transitory Provisions
giving a term to the incumbent President and Vice-President until 1992. Necessarily
then, since the term provided by the Commission for Members of the Lower House and
for local officials is three years, if there will be an election in 1987, the next election for
said officers will be in 1990, and it would be very close to 1992. We could never attain,
subsequently, any synchronization of election which is once every three years.
So under my proposal we will be able to begin actual synchronization in 1992, and
consequently, we should not have a local election or an election for Members of the
Lower House in 1990 for them to be able to complete their term of three years each.
And if we also stagger the Senate, upon the first election it will result in an election in
1993 for the Senate alone, and there will be an election for 12 Senators in 1990. But for
the remaining 12 who will be elected in 1987, if their term is for six years, their election
will be in 1993. So, consequently we will have elections in 1990, in 1992 and in 1993.
The later election will be limited to only 12 Senators and of course to the local officials
and the Members of the Lower House. But, definitely, thereafter we can never have an
election once every three years, therefore defeating the very purpose of the

Commission when we adopted the term of six years for the President and another six
years for the Senators with the possibility of staggering with 12 to serve for six years and
12 for three years insofar as the first Senators are concerned. And so my proposal is the
only way to effect the first synchronized election which would mean, necessarily, a
bonus of two years to the Members of the Lower House and a bonus of two years to
the local elective officials.

MR. GUINGONA. What will be synchronized, therefore, is the election of the incumbent
President and Vice-President in 1992.
MR. DAVIDE. Yes.
MR. GUINGONA. Not the reverse. Will the committee not synchronize the election of
the Senators and local officials with the election of the President?

THE PRESIDING OFFICER (Mr. Rodrigo). What does the committee say?
MR. DAVIDE. It works both ways, Mr. Presiding Officer. The attempt here is on the
assumption that the provision of the Transitory Provisions on the term of the incumbent
President and Vice-President would really end in 1992.

MR. DE CASTRO. Mr. Presiding Officer.


THE PRESIDING OFFICER (Mr. Rodrigo). Commissioner de Castro is recognized.

MR. GUINGONA. Yes.


MR. DE CASTRO. Thank you.
During the discussion on the legislative and the synchronization of elections, I was the
one who proposed that in order to synchronize the elections every three years, which
the body approved the first national and local officials to be elected in 1987 shall
continue in office for five years, the same thing the Honorable Davide is now proposing.
That means they will all serve until 1992, assuming that the term of the President will be
for six years and continue beginning in 1986. So from 1992, we will again have national,
local and presidential elections. This time, in 1992, the President shall have a term until
1998 and the first 12 Senators will serve until 1998, while the next 12 shall serve until
1995, and then the local officials elected in 1992 will serve until 1995. From then on,
we shall have an election every three years.
So, I will say that the proposition of Commissioner Davide is in order, if we have to
synchronize our elections every three years which was already approved by the body.
Thank you, Mr. Presiding Officer.
xxxx

MR. DAVIDE. In other words, there will be a single election in 1992 for all, from the
President up to the municipal officials.5 (emphases and underscoring ours)
The framers of the Constitution could not have expressed their objective more clearly
there was to be a single election in 1992 for all elective officials from the President
down to the municipal officials. Significantly, the framers were even willing to
temporarily lengthen or shorten the terms of elective officials in order to meet this
objective, highlighting the importance of this constitutional mandate.
We came to the same conclusion in Osmea v. Commission on Elections,6 where we
unequivocally stated that "the Constitution has mandated synchronized national and
local elections."7 Despite the length and verbosity of their motions, the petitioners have
failed to convince us to deviate from this established ruling.
Neither do we find any merit in the petitioners contention that the ARMM elections are
not covered by the constitutional mandate of synchronization because the ARMM
elections were not specifically mentioned in the above-quoted Transitory Provisions of
the Constitution.

That the ARMM elections were not expressly mentioned in the Transitory Provisions of
the Constitution on synchronization cannot be interpreted to mean that the ARMM
elections are not covered by the constitutional mandate of synchronization. We have to
consider that the ARMM, as we now know it, had not yet been officially organized at the
time the Constitution was enacted and ratified by the people. Keeping in mind that a
constitution is not intended to provide merely for the exigencies of a few years but is to
endure through generations for as long as it remains unaltered by the people as
ultimate sovereign, a constitution should be construed in the light of what actually is a
continuing instrument to govern not only the present but also the unfolding events of
the indefinite future. Although the principles embodied in a constitution remain fixed
and unchanged from the time of its adoption, a constitution must be construed as a
dynamic process intended to stand for a great length of time, to be progressive and not
static.8
To reiterate, Article X of the Constitution, entitled "Local Government," clearly shows
the intention of the Constitution to classify autonomous regions, such as the ARMM, as
local governments. We refer to Section 1 of this Article, which provides:
Section 1. The territorial and political subdivisions of the Republic of the Philippines are
the provinces, cities, municipalities, and barangays. There shall be autonomous regions
in Muslim Mindanao and the Cordilleras as hereinafter provided.
The inclusion of autonomous regions in the enumeration of political subdivisions of the
State under the heading "Local Government" indicates quite clearly the constitutional
intent to consider autonomous regions as one of the forms of local governments.
That the Constitution mentions only the "national government" and the "local
governments," and does not make a distinction between the "local government" and
the "regional government," is particularly revealing, betraying as it does the intention of
the framers of the Constitution to consider the autonomous regions not as separate
forms of government, but as political units which, while having more powers and
attributes than other local government units, still remain under the category of local

governments. Since autonomous regions are classified as local governments, it follows


that elections held in autonomous regions are also considered as local elections.
The petitioners further argue that even assuming that the Constitution mandates the
synchronization of elections, the ARMM elections are not covered by this mandate since
they are regional elections and not local elections.
In construing provisions of the Constitution, the first rule is verba legis, "that is,
wherever possible, the words used in the Constitution must be given their ordinary
meaning except where technical terms are employed."9 Applying this principle to
determine the scope of "local elections," we refer to the meaning of the word "local," as
understood in its ordinary sense. As defined in Websters Third New International
Dictionary Unabridged, "local" refers to something "that primarily serves the needs of a
particular limited district, often a community or minor political subdivision." Obviously,
the ARMM elections, which are held within the confines of the autonomous region of
Muslim Mindanao, fall within this definition.
To be sure, the fact that the ARMM possesses more powers than other provinces, cities,
or municipalities is not enough reason to treat the ARMM regional elections differently
from the other local elections. Ubi lex non distinguit nec nos distinguire debemus. When
the law does not distinguish, we must not distinguish.10
RA No. 10153 does not amend RA No. 9054
The petitioners are adamant that the provisions of RA No. 10153, in postponing the
ARMM elections, amend RA No. 9054.
We cannot agree with their position.
A thorough reading of RA No. 9054 reveals that it fixes the schedule for only
the first ARMM elections;11 it does not provide the date for the succeeding regular
ARMM elections. In providing for the date of the regular ARMM elections, RA No. 9333
and RA No. 10153 clearly do not amend RA No. 9054 since these laws do not change or

revise any provision in RA No. 9054. In fixing the date of the ARMM elections
subsequent to the first election, RA No. 9333 and RA No. 10153 merely filled the gap left
in RA No. 9054.
We reiterate our previous observations:
This view that Congress thought it best to leave the determination of the date of
succeeding ARMM elections to legislative discretion finds support in ARMMs recent
history.
To recall, RA No. 10153 is not the first law passed that rescheduled the ARMM elections.
The First Organic Act RA No. 6734 not only did not fix the date of the subsequent
elections; it did not even fix the specific date of the first ARMM elections, leaving the
date to be fixed in another legislative enactment. Consequently, RA No. 7647, RA No.
8176, RA No. 8746, RA No. 8753, and RA No. 9012 were all enacted by Congress to fix
the dates of the ARMM elections. Since these laws did not change or modify any part or
provision of RA No. 6734, they were not amendments to this latter law. Consequently,
there was no need to submit them to any plebiscite for ratification.
The Second Organic Act RA No. 9054 which lapsed into law on March 31, 2001,
provided that the first elections would be held on the second Monday of September
2001. Thereafter, Congress passed RA No. 9140 to reset the date of the ARMM
elections. Significantly, while RA No. 9140 also scheduled the plebiscite for the
ratification of the Second Organic Act (RA No. 9054), the new date of the ARMM
regional elections fixed in RA No. 9140 was not among the provisions ratified in the
plebiscite held to approve RA No. 9054. Thereafter, Congress passed RA No. 9333,
which further reset the date of the ARMM regional elections. Again, this law was not
ratified through a plebiscite.
From these legislative actions, we see the clear intention of Congress to treat the laws
which fix the date of the subsequent ARMM elections as separate and distinct from the
Organic Acts. Congress only acted consistently with this intent when it passed RA No.

10153 without requiring compliance with the amendment prerequisites embodied in


Section 1 and Section 3, Article XVII of RA No. 9054.12 (emphases supplied)
The petitioner in G.R. No. 196305 contends, however, that there is no lacuna in RA No.
9054 as regards the date of the subsequent ARMM elections. In his estimation, it can be
implied from the provisions of RA No. 9054 that the succeeding elections are to be held
three years after the date of the first ARMM regional elections.
We find this an erroneous assertion. Well-settled is the rule that the court may not, in
the guise of interpretation, enlarge the scope of a statute and include therein situations
not provided nor intended by the lawmakers. An omission at the time of enactment,
whether careless or calculated, cannot be judicially supplied however later wisdom may
recommend the inclusion.13 Courts are not authorized to insert into the law what they
think should be in it or to supply what they think the legislature would have supplied if
its attention had been called to the omission.14Providing for lapses within the law falls
within the exclusive domain of the legislature, and courts, no matter how well-meaning,
have no authority to intrude into this clearly delineated space.
Since RA No. 10153 does not amend, but merely fills in the gap in RA No. 9054, there is
no need for RA No. 10153 to comply with the amendment requirements set forth in
Article XVII of RA No. 9054.
Supermajority vote requirement makes RA No. 9054 an irrepealable law
Even assuming that RA No. 10153 amends RA No. 9054, however, we have already
established that the supermajority vote requirement set forth in Section 1, Article XVII
of RA No. 905415 is unconstitutional for violating the principle that Congress cannot pass
irrepealable laws.
The power of the legislature to make laws includes the power to amend and repeal
these laws. Where the legislature, by its own act, attempts to limit its power to amend
or repeal laws, the Court has the duty to strike down such act for interfering with the
plenary powers of Congress. As we explained in Duarte v. Dade:16

A state legislature has a plenary law-making power over all subjects, whether pertaining
to persons or things, within its territorial jurisdiction, either to introduce new laws or
repeal the old, unless prohibited expressly or by implication by the federal constitution
or limited or restrained by its own. It cannot bind itself or its successors by enacting
irrepealable laws except when so restrained. Every legislative body may modify or
abolish the acts passed by itself or its predecessors. This power of repeal may be
exercised at the same session at which the original act was passed; and even while a bill
is in its progress and before it becomes a law. This legislature cannot bind a future
legislature to a particular mode of repeal. It cannot declare in advance the intent of
subsequent legislatures or the effect of subsequent legislation upon existing statutes.
[emphasis ours]
Under our Constitution, each House of Congress has the power to approve bills by a
mere majority vote, provided there is quorum.17 In requiring all laws which amend RA
No. 9054 to comply with a higher voting requirement than the Constitution provides
(2/3 vote), Congress, which enacted RA No. 9054, clearly violated the very principle
which we sought to establish in Duarte. To reiterate, the act of one legislature is not
binding upon, and cannot tie the hands of, future legislatures.18
We also highlight an important point raised by Justice Antonio T. Carpio in his dissenting
opinion, where he stated: "Section 1, Article XVII of RA 9054 erects a high vote threshold
for each House of Congress to surmount, effectively and unconstitutionally, taking RA
9054 beyond the reach of Congress amendatory powers. One Congress cannot limit or
reduce the plenary legislative power of succeeding Congresses by requiring a higher
vote threshold than what the Constitution requires to enact, amend or repeal laws. No
law can be passed fixing such a higher vote threshold because Congress has no power,
by ordinary legislation, to amend the Constitution."19

Section 18, Article X of the Constitution provides that "[t]he creation of the autonomous
region shall be effective when approved by majority of the votes cast by the constituent
units in a plebiscite called for the purpose[.]" We interpreted this to mean that only
amendments to, or revisions of, the Organic Act constitutionally-essential to the
creation of autonomous regions i.e., those aspects specifically mentioned in the
Constitution which Congress must provide for in the Organic Act21 require ratification
through a plebiscite. We stand by this interpretation.
The petitioners argue that to require all amendments to RA No. 9054 to comply with the
plebiscite requirement is to recognize that sovereignty resides primarily in the people.
While we agree with the petitioners underlying premise that sovereignty ultimately
resides with the people, we disagree that this legal reality necessitates compliance with
the plebiscite requirement for all amendments to RA No. 9054. For if we were to go by
the petitioners interpretation of Section 18, Article X of the Constitution that all
amendments to the Organic Act have to undergo the plebiscite requirement before
becoming effective, this would lead to impractical and illogical results hampering the
ARMMs progress by impeding Congress from enacting laws that timely address
problems as they arise in the region, as well as weighing down the ARMM government
with the costs that unavoidably follow the holding of a plebiscite.
Interestingly, the petitioner in G.R. No. 197282 posits that RA No. 10153, in giving the
President the power to appoint OICs to take the place of the elective officials of the
ARMM, creates a fundamental change in the basic structure of the government, and
thus requires compliance with the plebiscite requirement embodied in RA No. 9054.
Again, we disagree.

Plebiscite requirement in RA No. 9054 overly broad

The pertinent provision in this regard is Section 3 of RA No. 10153, which reads:

Similarly, we struck down the petitioners contention that the plebiscite


requirement20 applies to all amendments of RA No. 9054 for being an unreasonable
enlargement of the plebiscite requirement set forth in the Constitution.

Section 3. Appointment of Officers-in-Charge. The President shall appoint officers-incharge for the Office of the Regional Governor, Regional Vice Governor and Members of
the Regional Legislative Assembly who shall perform the functions pertaining to the said

offices until the officials duly elected in the May 2013 elections shall have qualified and
assumed office.
We cannot see how the above-quoted provision has changed the basic structure of the
ARMM regional government. On the contrary, this provision clearly preserves the basic
structure of the ARMM regional government when it recognizes the offices of the
ARMM regional government and directs the OICs who shall temporarily assume these
offices to "perform the functions pertaining to the said offices."
Unconstitutionality of the holdover provision
The petitioners are one in defending the constitutionality of Section 7(1), Article VII of
RA No. 9054, which allows the regional officials to remain in their positions in a holdover
capacity. The petitioners essentially argue that the ARMM regional officials should be
allowed to remain in their respective positions until the May 2013 elections since there
is no specific provision in the Constitution which prohibits regional elective officials from
performing their duties in a holdover capacity.

The clear wording of Section 8, Article X of the Constitution expresses the intent of the
framers of the Constitution to categorically set a limitation on the period within which
all elective local officials can occupy their offices. We have already established that
elective ARMM officials are also local officials; they are, thus, bound by the three-year
term limit prescribed by the Constitution. It, therefore, becomes irrelevant that the
Constitution does not expressly prohibit elective officials from acting in a holdover
capacity. Short of amending the Constitution, Congress has no authority to extend the
three-year term limit by inserting a holdover provision in RA No. 9054. Thus, the term of
three years for local officials should stay at three (3) years, as fixed by the Constitution,
and cannot be extended by holdover by Congress.
Admittedly, we have, in the past, recognized the validity of holdover provisions in
various laws. One significant difference between the present case and these past
cases22 is that while these past cases all refer to electivebarangay or sangguniang
kabataan officials whose terms of office are not explicitly provided for in the
Constitution, the present case refers to local elective officials - the ARMM Governor, the
ARMM Vice Governor, and the members of the Regional Legislative Assembly - whose
terms fall within the three-year term limit set by Section 8, Article X of the Constitution.

The pertinent provision of the Constitution is Section 8, Article X which provides:


Section 8. The term of office of elective local officials, except barangay officials, which
shall be determined by law, shall be three years and no such official shall serve for more
than three consecutive terms. [emphases ours]
On the other hand, Section 7(1), Article VII of RA No. 9054 provides:
Section 7. Terms of Office of Elective Regional Officials. (1) Terms of Office. The terms
of office of the Regional Governor, Regional Vice Governor and members of the
Regional Assembly shall be for a period of three (3) years, which shall begin at noon on
the 30th day of September next following the day of the election and shall end at noon
of the same date three (3) years thereafter. The incumbent elective officials of the
autonomous region shall continue in effect until their successors are elected and
qualified.

Even assuming that a holdover is constitutionally permissible, and there had been
statutory basis for it (namely Section 7, Article VII of RA No. 9054), the rule of holdover
can only apply as an available option where no express or implied legislative intent to
the contrary exists; it cannot apply where such contrary intent is evident.23
Congress, in passing RA No. 10153 and removing the holdover option, has made it clear
that it wants to suppress the holdover rule expressed in RA No. 9054. Congress, in the
exercise of its plenary legislative powers, has clearly acted within its discretion when it
deleted the holdover option, and this Court has no authority to question the wisdom of
this decision, absent any evidence of unconstitutionality or grave abuse of discretion. It
is for the legislature and the executive, and not this Court, to decide how to fill the
vacancies in the ARMM regional government which arise from the legislature complying
with the constitutional mandate of synchronization.

COMELEC has no authority to hold special elections


Neither do we find any merit in the contention that the Commission on Elections
(COMELEC) is sufficiently empowered to set the date of special elections in the ARMM.
To recall, the Constitution has merely empowered the COMELEC to enforce and
administer all laws and regulations relative to the conduct of an election.24 Although the
legislature, under the Omnibus Election Code (Batas Pambansa Bilang [BP] 881), has
granted the COMELEC the power to postpone elections to another date, this power is
confined to the specific terms and circumstances provided for in the law. Specifically,
this power falls within the narrow confines of the following provisions:
Section 5. Postponement of election. - When for any serious cause such
as violence, terrorism, loss or destruction of election paraphernalia or records, force
majeure, and other analogous causes of such a nature that the holding of a free,
orderly and honest election should become impossible in any political subdivision, the
Commission, motu proprio or upon a verified petition by any interested party, and after
due notice and hearing, whereby all interested parties are afforded equal opportunity to
be heard, shall postpone the election therein to a date which should be reasonably
close to the date of the election not held, suspended or which resulted in a failure to
elect but not later than thirty days after the cessation of the cause for such
postponement or suspension of the election or failure to elect.
Section 6. Failure of election. - If, on account of force
majeure, violence, terrorism, fraud, or other analogous causes the election in any
polling place has not been held on the date fixed, or had been suspended before the
hour fixed by law for the closing of the voting, or after the voting and during the
preparation and the transmission of the election returns or in the custody or canvass
thereof, such election results in a failure to elect, and in any of such cases the failure or
suspension of election would affect the result of the election, the Commission shall, on
the basis of a verified petition by any interested party and after due notice and hearing,
call for the holding or continuation of the election not held, suspended or which
resulted in a failure to elect on a date reasonably close to the date of the election not
held, suspended or which resulted in a failure to elect but not later than thirty days after

the cessation of the cause of such postponement or suspension of the election or failure
to elect. [emphases and underscoring ours]
As we have previously observed in our assailed decision, both Section 5 and Section 6 of
BP 881 address instances where elections have already been scheduled to take place
but do not occur or had to be suspended because
of unexpected and unforeseen circumstances, such as violence, fraud, terrorism, and
other analogous circumstances.
In contrast, the ARMM elections were postponed by law, in furtherance of the
constitutional mandate of synchronization of national and local elections. Obviously,
this does not fall under any of the circumstances contemplated by Section 5 or Section 6
of BP 881.
More importantly, RA No. 10153 has already fixed the date for the next ARMM elections
and the COMELEC has no authority to set a different election date.
Even assuming that the COMELEC has the authority to hold special elections, and this
Court can compel the COMELEC to do so, there is still the problem of having to shorten
the terms of the newly elected officials in order to synchronize the ARMM elections with
the May 2013 national and local elections. Obviously, neither the Court nor the
COMELEC has the authority to do this, amounting as it does to an amendment of Section
8, Article X of the Constitution, which limits the term of local officials to three years.
Presidents authority to appoint OICs
The petitioner in G.R. No. 197221 argues that the Presidents power to appoint pertains
only to appointive positions and cannot extend to positions held by elective officials.
The power to appoint has traditionally been recognized as executive in nature.25 Section
16, Article VII of the Constitution describes in broad strokes the extent of this power,
thus:

Section 16. The President shall nominate and, with the consent of the Commission on
Appointments, appoint the heads of the executive departments, ambassadors, other
public ministers and consuls, or officers of the armed forces from the rank of colonel or
naval captain, and other officers whose appointments are vested in him in this
Constitution. He shall also appoint all other officers of the Government whose
appointments are not otherwise provided for by law, and those whom he may be
authorized by law to appoint. The Congress may, by law, vest the appointment of other
officers lower in rank in the President alone, in the courts, or in the heads of
departments, agencies, commissions, or boards. [emphasis ours]

MR. REGALADO. Madam President, the Committee accepts the proposed amendment
because it makes it clear that those other officers mentioned therein do not have to be
confirmed by the Commission on Appointments.26

The 1935 Constitution contained a provision similar to the one quoted above. Section
10(3), Article VII of the 1935 Constitution provides:

The second group of officials the President can appoint are "all other officers of the
Government whose appointments are not otherwise provided for by law, and those
whom he may be authorized by law to appoint."27The second sentence acts as the
"catch-all provision" for the Presidents appointment power, in recognition of the fact
that the power to appoint is essentially executive in nature.28 The wide latitude given to
the President to appoint is further demonstrated by the recognition of the Presidents
power to appoint officials whose appointments are not even provided for by law. In
other words, where there are offices which have to be filled, but the law does not
provide the process for filling them, the Constitution recognizes the power of the
President to fill the office by appointment.

(3) The President shall nominate and with the consent of the Commission on
Appointments, shall appoint the heads of the executive departments and bureaus,
officers of the Army from the rank of colonel, of the Navy and Air Forces from the rank
of captain or commander, and all other officers of the Government whose appointments
are not herein otherwise provided for, and those whom he may be authorized by law to
appoint; but the Congress may by law vest the appointment of inferior officers, in the
President alone, in the courts, or in the heads of departments. [emphasis ours]
The main distinction between the provision in the 1987 Constitution and its counterpart
in the 1935 Constitution is the sentence construction; while in the 1935 Constitution,
the various appointments the President can make are enumerated in a single sentence,
the 1987 Constitution enumerates the various appointments the President is
empowered to make and divides the enumeration in two sentences. The change in style
is significant; in providing for this change, the framers of the 1987 Constitution clearly
sought to make a distinction between the first group of presidential appointments and
the second group of presidential appointments, as made evident in the following
exchange:
MR. FOZ. Madame President x x x I propose to put a period (.) after "captain" and x x x
delete "and all" and substitute it with HE SHALL ALSO APPOINT ANY.

The first group of presidential appointments, specified as the heads of the executive
departments, ambassadors, other public ministers and consuls, or officers of the Armed
Forces, and other officers whose appointments are vested in the President by the
Constitution, pertains to the appointive officials who have to be confirmed by the
Commission on Appointments.

Any limitation on or qualification to the exercise of the Presidents appointment power


should be strictly construed and must be clearly stated in order to be
recognized.29 Given that the President derives his power to appoint OICs in the ARMM
regional government from law, it falls under the classification of presidential
appointments covered by the second sentence of Section 16, Article VII of the
Constitution; the Presidents appointment power thus rests on clear constitutional basis.
The petitioners also jointly assert that RA No. 10153, in granting the President the
power to appoint OICs in elective positions, violates Section 16, Article X of the
Constitution,30 which merely grants the President the power of supervision over
autonomous regions.

This is an overly restrictive interpretation of the Presidents appointment power. There


is no incompatibility between the Presidents power of supervision over local
governments and autonomous regions, and the power granted to the President, within
the specific confines of RA No. 10153, to appoint OICs.
The power of supervision is defined as "the power of a superior officer to see to it that
lower officers perform their functions in accordance with law."31 This is distinguished
from the power of control or "the power of an officer to alter or modify or set aside
what a subordinate officer had done in the performance of his duties and to substitute
the judgment of the former for the latter."32
The petitioners apprehension regarding the Presidents alleged power of control over
the OICs is rooted in their belief that the Presidents appointment power includes the
power to remove these officials at will. In this way, the petitioners foresee that the
appointed OICs will be beholden to the President, and act as representatives of the
President and not of the people.
Section 3 of RA No. 10153 expressly contradicts the petitioners supposition. The
provision states:
Section 3. Appointment of Officers-in-Charge. The President shall appoint officers-incharge for the Office of the Regional Governor, Regional Vice Governor and Members of
the Regional Legislative Assembly who shall perform the functions pertaining to the said
offices until the officials duly elected in the May 2013 elections shall have qualified and
assumed office.
The wording of the law is clear. Once the President has appointed the OICs for the
offices of the Governor, Vice Governor and members of the Regional Legislative
Assembly, these same officials will remain in office until they are replaced by the duly
elected officials in the May 2013 elections. Nothing in this provision even hints that the
President has the power to recall the appointments he already made. Clearly, the
petitioners fears in this regard are more apparent than real.

RA No. 10153 as an interim measure


We reiterate once more the importance of considering RA No. 10153 not in a vacuum,
but within the context it was enacted in. In the first place, Congress enacted RA No.
10153 primarily to heed the constitutional mandate to synchronize the ARMM regional
elections with the national and local elections. To do this, Congress had to postpone the
scheduled ARMM elections for another date, leaving it with the problem of how to
provide the ARMM with governance in the intervening period, between the expiration
of the term of those elected in August 2008 and the assumption to office twenty-one
(21) months away of those who will win in the synchronized elections on May 13,
2013.
In our assailed Decision, we already identified the three possible solutions open to
Congress to address the problem created by synchronization (a) allow the incumbent
officials to remain in office after the expiration of their terms in a holdover capacity; (b)
call for special elections to be held, and shorten the terms of those to be elected so the
next ARMM regional elections can be held on May 13, 2013; or (c) recognize that the
President, in the exercise of his appointment powers and in line with his power of
supervision over the ARMM, can appoint interim OICs to hold the vacated positions in
the ARMM regional government upon the expiration of their terms. We have already
established the unconstitutionality of the first two options, leaving us to consider the
last available option.
In this way, RA No. 10153 is in reality an interim measure, enacted to respond to the
adjustment that synchronization requires. Given the context, we have to judge RA No.
10153 by the standard of reasonableness in responding to the challenges brought about
by synchronizing the ARMM elections with the national and local elections. In other
words, "given the plain unconstitutionality of providing for a holdover and the
unavailability of constitutional possibilities for lengthening or shortening the term of
the elected ARMM officials, is the choice of the Presidents power to appoint for a
fixed and specific period as an interim measure, and as allowed under Section 16,
Article VII of the Constitution an unconstitutional or unreasonable choice for
Congress to make?"33

We admit that synchronization will temporarily disrupt the election process in a local
community, the ARMM, as well as the communitys choice of leaders. However, we
have to keep in mind that the adoption of this measure is a matter of necessity in order
to comply with a mandate that the Constitution itself has set out for us. Moreover, the
implementation of the provisions of RA No. 10153 as an interim measure is comparable
to the interim measures traditionally practiced when, for instance, the President
appoints officials holding elective offices upon the creation of new local government
units.
The grant to the President of the power to appoint OICs in place of the elective
members of the Regional Legislative Assembly is neither novel nor innovative. The
power granted to the President, via RA No. 10153, to appoint members of the Regional
Legislative Assembly is comparable to the power granted by BP 881 (the Omnibus
Election Code) to the President to fill any vacancy for any cause in the Regional
Legislative Assembly (then called the Sangguniang Pampook).34
Executive is not bound by the principle of judicial courtesy
The petitioners in G.R. No. 197280, in their Manifestation and Motion dated December
21, 2011, question the propriety of the appointment by the President of Mujiv Hataman
as acting Governor and Bainon Karon as acting Vice Governor of the ARMM. They argue
that since our previous decision was based on a close vote of 8-7, and given the
numerous motions for reconsideration filed by the parties, the President, in recognition
of the principle of judicial courtesy, should have refrained from implementing our
decision until we have ruled with finality on this case.
We find the petitioners reasoning specious.
Firstly, the principle of judicial courtesy is based on the hierarchy of courts and applies
only to lower courts in instances where, even if there is no writ of preliminary injunction
or TRO issued by a higher court, it would be proper for a lower court to suspend its
proceedings for practical and ethical considerations.35 In other words, the principle of
"judicial courtesy" applies where there is a strong probability that the issues before the

higher court would be rendered moot and moribund as a result of the continuation of
the proceedings in the lower court or court of origin.36Consequently, this principle
cannot be applied to the President, who represents a co-equal branch of government.
To suggest otherwise would be to disregard the principle of separation of powers, on
which our whole system of government is founded upon.
Secondly, the fact that our previous decision was based on a slim vote of 8-7 does not,
and cannot, have the effect of making our ruling any less effective or binding. Regardless
of how close the voting is, so long as there is concurrence of the majority of the
members of the en banc who actually took part in the deliberations of the case,37a
decision garnering only 8 votes out of 15 members is still a decision of the Supreme
Court en banc and must be respected as such. The petitioners are, therefore, not in any
position to speculate that, based on the voting, "the probability exists that their motion
for reconsideration may be granted."38
Similarly, the petitioner in G.R. No. 197282, in his Very Urgent Motion to Issue
Clarificatory Resolution, argues that since motions for reconsideration were filed by the
aggrieved parties challenging our October 18, 2011 decision in the present case, the
TRO we initially issued on September 13, 2011 should remain subsisting and effective.
He further argues that any attempt by the Executive to implement our October 18, 2011
decision pending resolution of the motions for reconsideration "borders on disrespect if
not outright insolence"39 to this Court.
In support of this theory, the petitioner cites Samad v. COMELEC,40 where the Court held
that while it had already issued a decision lifting the TRO, the lifting of the TRO is not yet
final and executory, and can also be the subject of a motion for reconsideration. The
petitioner also cites the minute resolution issued by the Court in Tolentino v. Secretary
of Finance,41 where the Court reproached the Commissioner of the Bureau of Internal
Revenue for manifesting its intention to implement the decision of the Court, noting
that the Court had not yet lifted the TRO previously issued.42
We agree with the petitioner that the lifting of a TRO can be included as a subject of a
motion for reconsideration filed to assail our decision. It does not follow, however, that

the TRO remains effective until after we have issued a final and executory decision,
especially considering the clear wording of the dispositive portion of our October 18,
2011 decision, which states:
WHEREFORE, premises considered, we DISMISS the consolidated petitions assailing the
validity of RA No. 10153 for lack of merit, and UPHOLD the constitutionality of this law.
We likewise LIFT the temporary restraining order we issued in our Resolution of
September 13, 2011. No costs.43 (emphases ours)
In this regard, we note an important distinction between Tolentino and the present
case. While it may be true that Tolentino and the present case are similar in that, in
both cases, the petitions assailing the challenged laws were dismissed by the Court, an
examination of the dispositive portion of the decision in Tolentino reveals that the Court
did not categorically lift the TRO. In sharp contrast, in the present case, we expressly
lifted the TRO issued on September 13, 2011. There is, therefore, no legal impediment
to prevent the President from exercising his authority to appoint an acting ARMM
Governor and Vice Governor as specifically provided for in RA No. 10153.
1wphi1

Conclusion
As a final point, we wish to address the bleak picture that the petitioner in G.R. No.
197282 presents in his motion, that our Decision has virtually given the President the
power and authority to appoint 672,416 OICs in the event that the elections of barangay
and Sangguniang Kabataan officials are postponed or cancelled.
We find this speculation nothing short of fear-mongering.
This argument fails to take into consideration the unique factual and legal circumstances
which led to the enactment of RA No. 10153. RA No. 10153 was passed in order to
synchronize the ARMM elections with the national and local elections. In the course of
synchronizing the ARMM elections with the national and local elections, Congress had
to grant the President the power to appoint OICs in the ARMM, in light of the fact that:
(a) holdover by the incumbent ARMM elective officials is legally impermissible; and (b)

Congress cannot call for special elections and shorten the terms of elective local officials
for less than three years.
Unlike local officials, as the Constitution does not prescribe a term limit for barangay
and Sangguniang Kabataan officials, there is no legal proscription which prevents these
specific government officials from continuing in a holdover capacity should some
exigency require the postponement of barangay or Sangguniang Kabataan elections.
Clearly, these fears have neither legal nor factual basis to stand on.
For the foregoing reasons, we deny the petitioners motions for reconsideration.
WHEREFORE, premises considered, we DENY with FINALITY the motions for
reconsideration for lack of merit and UPHOLD the constitutionality of RA No. 10153.
SO ORDERED.
LEAGUE OF CITIES 2008

The Case
These are consolidated petitions for prohibition[1] with prayer for
the issuance of a writ of preliminary injunction or temporary restraining
order filed by the League of Cities of the Philippines, City of Iloilo, City of
Calbayog, and Jerry P. Treas[2] assailing the constitutionality of the
subject Cityhood Laws and enjoining the Commission on Elections
(COMELEC) and respondent municipalities from conducting plebiscites
pursuant to the Cityhood Laws.

The Facts
During the 11th Congress,[3] Congress enacted into law 33 bills
converting 33 municipalities into cities. However, Congress did not act
on bills converting 24 other municipalities into cities.
During the 12th Congress,[4] Congress enacted into law
Republic
Act No. 9009 (RA 9009),[5] which took effect on 30 June
2001. RA 9009 amended Section 450 of the Local Government Code by
increasing the annual income requirement for conversion of a
municipality into a city from P20 million to P100 million. The rationale
for the amendment was to restrain, in the words of Senator Aquilino
Pimentel, the mad rush of municipalities to convert into cities solely to
secure a larger share in the Internal Revenue Allotment despite the fact
that they are incapable of fiscal independence.[6]
After the effectivity of RA 9009, the House of Representatives of
the 12th Congress[7] adopted Joint Resolution No. 29,[8] which sought to
exempt from the P100 million income requirement in RA 9009 the 24
municipalities whose cityhood bills were not approved in the
11th Congress. However, the 12th Congress ended without the Senate
approving Joint Resolution No. 29.

During the 13th Congress,[9] the House of Representatives readopted Joint Resolution No. 29 as Joint Resolution No. 1 and forwarded
it to
the Senate for approval. However, the Senate again failed to
approve the Joint Resolution. Following the advice of Senator Aquilino
Pimentel, 16 municipalities filed, through their respective sponsors,
individual cityhood bills. The 16 cityhood bills contained a common
provision exempting all the 16 municipalities from the P100 million
income requirement in RA 9009.
On 22 December 2006, the House of Representatives approved the
cityhood bills. The Senate also approved the cityhood bills in February
2007, except that of Naga, Cebuwhich was passed on 7 June 2007. The
cityhood bills lapsed into law (Cityhood Laws[10]) on various dates from
March to July 2007 without the Presidents signature.[11]
The Cityhood Laws direct the COMELEC to hold plebiscites to
determine whether the voters in each respondent municipality approve
of the conversion of their municipality into a city.
Petitioners filed the present petitions to declare the Cityhood Laws
unconstitutional for violation of Section 10, Article X of the Constitution,
as well as for violation of the equal protection clause.[12] Petitioners also
lament that the wholesale conversion of municipalities into cities will

reduce the share of existing cities in the Internal Revenue Allotment


because more cities will share the same amount of internal revenue set
aside for all cities under Section 285 of the Local Government Code.[13]

First, applying the P100 million income requirement in RA 9009 to


the present case is a prospective, not a retroactive application, because
RA 9009 took effect in 2001 while the cityhood bills became law more
than five years later.

The Issues

Second, the Constitution requires that Congress shall prescribe all


the criteria for the creation of a city in the Local Government Code and
not in any other law, including the Cityhood Laws.

The petitions raise the following fundamental issues:


1. Whether the Cityhood Laws violate Section 10, Article X of
the
Constitution; and
2. Whether the Cityhood Laws violate the equal protection clause.

The Ruling of the Court

Third, the Cityhood Laws violate Section 6, Article X of the


Constitution because they prevent a fair and just distribution of the
national taxes to local government units.
Fourth, the criteria prescribed in Section 450 of the Local
Government Code, as amended by RA 9009, for converting a
municipality into a city are clear, plain and unambiguous, needing no
resort to any statutory construction.

We grant the petitions.


The Cityhood Laws violate Sections 6 and 10, Article X of the
Constitution, and are thus unconstitutional.

Fifth, the intent of members of the 11th Congress to exempt


certain municipalities from the coverage of RA 9009 remained an intent
and was never written into Section 450 of the Local Government Code.

Sixth, the deliberations of the 11th or 12th Congress on


unapproved bills or resolutions are not extrinsic aids in interpreting a
law passed in the 13th Congress.

Treas has legal standing because as Mayor of Iloilo City and as a


taxpayer he has sufficient interest to prevent the unlawful expenditure
of public funds, like the release of more Internal Revenue Allotment to
political units than what the law allows.

Seventh, even if the exemption in the Cityhood Laws were written


in Section 450 of the Local Government Code, the exemption would still
be unconstitutional for violation of the equal protection clause.

Applying RA 9009 is a Prospective Application of the Law


RA 9009 became effective on 30 June 2001 during the
11 Congress. This law specifically amended Section 450 of the Local
Government Code, which now provides:
th

Preliminary Matters
Prohibition is the proper action for testing the constitutionality of
laws administered by the COMELEC,[14] like the Cityhood Laws, which
direct the COMELEC to hold plebiscites in implementation of the
Cityhood Laws. Petitioner League of Cities of the Philippines has legal
standing because Section 499 of the Local Government Code tasks the
League with the primary purpose of ventilating, articulating and
crystallizing issues affecting city government administration and
securing,
through
proper
and
legal
means,
solutions
[15]
[16]
thereto.
Petitioners-in-intervention, which are existing cities,
have legal standing because their Internal Revenue Allotment will be
reduced if the Cityhood Laws are declared constitutional. Mayor Jerry P.

Section 450. Requisites for Creation. (a) A municipality or


a cluster of barangays may be converted into a component
city if it has a locally generated average annual income, as
certified by the Department of Finance, of at least One
hundred million pesos (P100,000,000.00) for the last two (2)
consecutive years based on 2000 constant prices, and if it has
either of the following requisites:
(i)
a
contiguous
territory of at least one hundred (100) square
kilometers, as certified by the Land Management
Bureau; or

(ii) a population of not less than one hundred fifty


thousand (150,000) inhabitants, as certified by the
National Statistics Office.
The creation thereof shall not reduce the land area,
population and income of the original unit or units at the time
of said creation to less than the minimum requirements
prescribed herein.
(b)
The territorial jurisdiction of a newly-created city shall
be properly identified by metes and bounds. The requirement
on land area shall not apply where the city proposed to be
created is composed of one (1) or more islands. The territory
need not be contiguous if it comprises two (2) or more
islands.

Prior to the enactment of RA 9009, a total of 57 municipalities had


cityhood bills pending in Congress. Thirty-three cityhood bills became
law before the enactment of RA 9009. Congress did not act on 24
cityhood bills during the 11th Congress.
During the 12th Congress, the House of Representatives adopted
Joint Resolution No. 29, exempting from the income requirement
of P100 million in RA 9009 the 24 municipalities whose cityhood bills
were not acted upon during the 11th Congress. This Resolution reached
the Senate. However, the 12th Congress adjourned without the Senate
approving Joint Resolution No. 29.

(c)
The average annual income shall include the income
accruing to the general fund, exclusive of special funds,
transfers, and non-recurring income. (Emphasis supplied)

During the 13th Congress, 16 of the 24 municipalities mentioned in


the unapproved Joint Resolution No. 29 filed between November and
December
of
2006, through
theirrespective
sponsors
in
Congress, individual cityhood bills containing a common provision, as
follows:

Thus, RA 9009 increased the income requirement for conversion of a


municipality into a city from P20 million to P100 million. Section 450 of
the Local Government Code, as amended by RA 9009, does not provide
any exemption from the increased income requirement.

Exemption from Republic Act No. 9009. The City of x x x


shall be exempted from the income requirement prescribed
under Republic Act No. 9009.

This common provision exempted each of the 16 municipalities from


the income requirement of P100 million prescribed in Section 450 of
the Local Government Code, as amended by RA 9009. These cityhood
bills lapsed into law on various dates from March to July 2007 after
President Gloria Macapagal-Arroyo failed to sign them.
Indisputably, Congress passed the Cityhood Laws long after the
effectivity of RA 9009. RA 9009 became effective on 30 June 2001 or
during the 11th Congress. The 13th Congress passed in December 2006
the cityhood bills which became law only in 2007. Thus, respondent
municipalities cannot invoke the principle of non-retroactivity of
laws.[17] This basic rule has no application because RA 9009, an earlier
law to the Cityhood Laws, is not being applied retroactively but
prospectively.

Congress Must Prescribe in the Local Government Code All Criteria


Section 10, Article X of the 1987 Constitution provides:
No province, city, municipality, or barangay shall be
created, divided, merged, abolished or its boundary
substantially altered, except in accordance with the criteria
established in the local government code and subject to

approval by a majority of the votes cast in a plebiscite in the


political units directly affected. (Emphasis supplied)

The Constitution is clear. The creation of local government units


must follow the criteria established in the Local Government Code and
not in any other law. There is only one Local Government Code.[18] The
Constitution requires Congress to stipulate in the Local Government
Code all the criteria necessary for the creation of a city, including the
conversion of a municipality into a city. Congress cannot write such
criteria in any other law, like the Cityhood Laws.
The criteria prescribed in the Local Government Code govern
exclusively the creation of a city. No other law, not even the charter of
the city, can govern such creation. The clear intent of the Constitution is
to insure that the creation of cities and other political units must
follow the same uniform, non-discriminatory criteria found solely in
the Local Government Code. Any derogation or deviation from the
criteria prescribed in the Local Government Code violates Section 10,
Article X of the Constitution.

RA 9009 amended Section 450 of the Local Government Code to


increase the income requirement from P20 million to P100 million for
the creation of a city. This took effect on 30 June 2001. Hence, from
that moment the Local Government Code required that any
municipality desiring to become a city must satisfy the P100 million
income requirement. Section 450 of the Local Government Code, as
amended by RA 9009, does not contain any exemption from this income
requirement.

Uniform and non-discriminatory criteria as prescribed in the Local


Government Code are essential to implement a fair and equitable
distribution of national taxes to all local government units. Section 6,
Article X of the Constitution provides:

In enacting RA 9009, Congress did not grant any exemption to


respondent municipalities, even though their cityhood bills were
pending in Congress when Congress passed RA 9009. The Cityhood
Laws, all enacted after the effectivity of RA 9009, explicitly exempt
respondent municipalities from the increased income requirement in
Section 450 of the Local Government Code, as amended by RA
9009. Such exemption clearly violates Section 10, Article X of the
Constitution and is thus patently unconstitutional. To be valid, such
exemption must be written in the Local Government Code and not in
any other law, including the Cityhood Laws.

If the criteria in creating local government units are not uniform and
discriminatory, there can be no fair and just distribution of the national
taxes to local government units.

Cityhood Laws Violate Section 6, Article X of the Constitution

Local government units shall have a just share, as determined


by law, in the national taxes which shall be automatically
released to them. (Emphasis supplied)

A city with an annual income of only P20 million, all other criteria
being equal, should not receive the same share in national taxes as a
city with an annual income of P100 million or more. The criteria of land
area, population and income, as prescribed in Section 450 of the Local
Government Code, must be strictly followed because such criteria,
prescribed by law, are material in determining the just share of local
government units in national taxes. Since the Cityhood Laws do not
follow the income criterion in Section 450 of the Local Government
Code, they prevent the fair and just distribution of the Internal Revenue
Allotment in violation of Section 6, Article X of the Constitution.

Section 450 of the Local Government Code is Clear,


Plain and Unambiguous

There can be no resort to extrinsic aids like deliberations of


Congress if the language of the law is plain, clear and
unambiguous. Courts determine the intent of the law from the literal
language of the law, within the laws four corners.[19] If the language of
the law is plain, clear and unambiguous, courts simply apply the law
according to its express terms. If a literal application of the law results
in absurdity, impossibility or injustice, then courts may resort to
extrinsic aids of statutory construction like the legislative history of the
law.[20]

Congress, in enacting RA 9009 to amend Section 450 of the Local


Government Code, did not provide any exemption from the increased
income requirement, not even to respondent municipalities whose
cityhood bills were then pending when Congress passed RA
9009. Section 450 of the Local Government Code, as amended by RA

9009, contains no exemption whatsoever. Since the law is clear, plain


and unambiguous that any municipality desiring to convert into a city
must meet the increased income requirement, there is no reason to go
beyond the letter of the law in applying Section 450 of the Local
Government Code, as amended by RA 9009.

The 11th Congress Intent was not Written into the Local Government
Code
True, members of Congress discussed exempting respondent
municipalities from RA 9009, as shown by the various deliberations on
the matter during the 11th Congress. However, Congress did not write
this intended exemption into law. Congress could have easily included
such exemption in RA 9009 but Congress did not. This is fatal to the
cause of respondent municipalities because such exemption must
appear in RA 9009 as an amendment to Section 450 of the Local
Government Code. The Constitution requires that the criteria for the
conversion of a municipality into a city, including any exemption from
such criteria, must all be written in the Local Government
Code. Congress cannot prescribe such criteria or exemption from such
criteria in any other law. In short, Congress cannot create a city

through a law that does not comply with the criteria or exemption
found in the Local Government Code.
Section 10 of Article X is similar to Section 16, Article XII of the
Constitution prohibiting Congress from creating private corporations
except by a general law. Section 16 of Article XII provides:
The Congress shall not, except by general law, provide for
the formation, organization, or regulation of private
corporations. Government-owned or controlled corporations
may be created or established by special charters in the
interest of the common good and subject to the test of
economic viability. (Emphasis supplied)

Thus, Congress must prescribe all the criteria for the formation,
organization, or regulation of private corporations in a general
law applicable to all without discrimination.[21] Congress cannot create
a private corporation through a special law or charter.

Deliberations of the 11th Congress on Unapproved Bills Inapplicable

Congress is not a continuing body.[22] The unapproved cityhood


bills filed during the 11th Congress became mere scraps of paper upon
the adjournment of the 11thCongress. All the hearings and deliberations
conducted during the 11th Congress on unapproved bills also became
worthless upon the adjournment of the 11th Congress. These hearings
and deliberations cannot be used to interpret bills enacted into law in
the 13th or subsequent Congresses.
The members and officers of each Congress are different. All
unapproved bills filed in one Congress become functus officio upon
adjournment of that Congress and must be re-filed anew in order to be
taken up in the next Congress. When their respective authors re-filed
the cityhood bills in 2006 during the 13th Congress, the bills had to start
from square one again, going through the legislative mill just like bills
taken up for the first time, from the filing to the approval. Section 123,
Rule XLIV of the Rules of the Senate, on Unfinished Business, provides:
Sec. 123. x x x
All pending matters and proceedings shall terminate
upon the expiration of one (1) Congress, but may be taken by
the succeeding Congress as if presented for the first
time. (Emphasis supplied)

Similarly, Section 78 of the Rules of the House of Representatives,


on Unfinished Business, states:
Section 78. Calendar of Business. The Calendar of Business
shall consist of the following:
a.
Unfinished Business. This is
business being considered by the House at the time of its
last adjournment. Its consideration shall be resumed until
it is disposed of. The Unfinished Business at the end of a
session shall be resumed at the commencement of the
next session as if no adjournment has taken place. At the
end of the term of a Congress, all Unfinished Business are
deemed terminated. (Emphasis supplied)

Thus, the deliberations during the 11th Congress on the


unapproved cityhood bills, as well as the deliberations during the
12th and 13th Congresses on the unapproved resolution exempting from
RA 9009 certain municipalities, have no legal significance. They do not
qualify as extrinsic aids in construing laws passed by subsequent
Congresses.

Applicability of Equal Protection Clause

If Section 450 of the Local Government Code, as amended by RA


9009, contained an exemption to the P100 million annual income
requirement, the criteria for such exemption could be scrutinized for
possible violation of the equal protection clause. Thus, the criteria for
the exemption, if found in the Local Government Code, could be
assailed on the ground of absence of a valid classification. However,
Section 450 of the Local Government Code, as amended by RA 9009,
does not contain any exemption. The exemption is contained in the
Cityhood Laws, which are unconstitutional because such exemption
must be prescribed in the Local Government Code as mandated in
Section 10, Article X of the Constitution.
Even if the exemption provision in the Cityhood Laws were
written in Section 450 of the Local Government Code, as amended by
RA 9009, such exemption would still be unconstitutional for violation of
the equal protection clause. The exemption provision merely states,
Exemption from Republic Act No. 9009 The City of x x x shall be
exempted from the income requirement prescribed under Republic
Act No. 9009. This one sentence exemption provision contains no
classification standards or guidelines differentiating the exempted
municipalities from those that are not exempted.

Even if we take into account the deliberations in the 11th Congress


that municipalities with pending cityhood bills should be exempt from
the P100 million income requirement, there is still no valid classification
to satisfy the equal protection clause. The exemption will be
based solely on the fact that the 16 municipalities had cityhood bills
pending in the 11th Congress when RA 9009 was enacted. This is not a
valid classification between those entitled and those not entitled to
exemption from the P100 million income requirement.

4. The classification must apply equally to all members


of the same
class.[24]

The equal protection clause of the 1987 Constitution


permits a valid classification under the following conditions:

There is no substantial distinction between municipalities with


pending cityhood bills in the 11th Congress and municipalities that did
not have pending bills. The mere pendency of a cityhood bill in the
11th Congress is not a material difference to distinguish one municipality
from another for the purpose of the income requirement. The
pendency of a cityhood bill in the 11th Congress does not affect or
determine the level of income of a municipality. Municipalities with
pending cityhood bills in the 11th Congress might even have lower
annual income than municipalities that did not have pending cityhood
bills. In short, the classification criterion mere pendency of a cityhood
bill in the 11thCongress is not rationally related to the purpose of the
law which is to prevent fiscally non-viable municipalities from
converting into cities.

1. The classification must rest on substantial


distinctions;
2. The classification must be germane to the purpose of
the law;
3. The classification must not be limited to existing
conditions only;
and

Municipalities that did not have pending cityhood bills were not
informed that a pending cityhood bill in the 11th Congress would be a
condition for exemption from the increased P100 million income
requirement. Had they been informed, many municipalities would have
caused the filing of their own cityhood bills. These municipalities, even

To be valid, the classification in the present case must be based


on substantial distinctions, rationally related to a legitimate government
objective which is the purpose of the law,[23] not limited to existing
conditions only, and applicable to all similarly situated. Thus, this Court
has ruled:

if they have bigger annual income than the 16 respondent


municipalities, cannot now convert into cities if their income is less
than P100 million.
The fact of pendency of a cityhood bill in the 11th Congress limits
the exemption to a specific condition existing at the time of passage of
RA 9009. That specific condition will never happen again. This violates
the requirement that a valid classification must not be limited to
existing conditions only. This requirement is illustrated in Mayflower
Farms, Inc. v. Ten Eyck,[25] where the challenged law allowed milk
dealers engaged in business prior to a fixed date to sell at a price lower
than that allowed to newcomers in the same business. In Mayflower,
the U.S. Supreme Court held:
We are referred to a host of decisions to the effect that
a regulatory law may be prospective in operation and may
except from its sweep those presently engaged in the calling
or activity to which it is directed. Examples are statutes
licensing physicians and dentists, which apply only to those
entering the profession subsequent to the passage of the act
and exempt those then in practice, or zoning laws which
exempt existing buildings, or laws forbidding slaughterhouses
within
certain
areas,
but
excepting
existing
establishments. The challenged provision is unlike such laws,
since, on its face, it is not a regulation of a business or an

activity in the interest of, or for the protection of, the public,
but an attempt to give an economic advantage to those
engaged in a given business at an arbitrary date as against
all those who enter the industry after that date. The
appellees do not intimate that the classification bears any
relation to the public health or welfare generally; that the
provision will discourage monopoly; or that it was aimed at
any abuse, cognizable by law, in the milk business. In the
absence of any such showing, we have no right to conjure up
possible situations which might justify the discrimination. The
classification is arbitrary and unreasonable and denies the
appellant the equal protection of the law. (Emphasis
supplied)

In the same vein, the exemption provision in the Cityhood Laws


gives the 16 municipalities a unique advantage based on an arbitrary
date the filing of their cityhood bills before the end of the
11th Congress as against all other municipalities that want to convert
into cities after the effectivity of RA 9009.
Furthermore, limiting the exemption only to the 16 municipalities
violates the requirement that the classification must apply to all
similarly situated. Municipalities with the same income as the 16
respondent municipalities cannot convert into cities, while the 16

respondent municipalities can. Clearly, as worded the exemption


provision found in the Cityhood Laws, even if it were written in Section
450 of the Local Government Code, would still be unconstitutional for
violation of the equal protection clause.
WHEREFORE,
we GRANT the
petitions
and
declare UNCONSTITUTIONAL the Cityhood Laws, namely: Republic Act
Nos. 9389, 9390, 9391, 9392, 9393, 9394, 9398, 9404, 9405, 9407, 9408,
9409, 9434, 9435, 9436, and 9491.
SO ORDERED.
LEAGUE OF CITIES 2009

Ratio legis est anima. The spirit rather than the letter of the law. A
statute must be read according to its spirit or intent,[1] for what is within
the spirit is within the statute although it is not within its letter, and that
which is within the letter but not within the spirit is not within the
statute.[2] Put a bit differently, that which is within the intent of the
lawmaker is as much within the statute as if within the letter; and that
which is within the letter of the statute is not within the statute unless
within the intent of the lawmakers.[3]Withal, courts ought not to

interpret and should not accept an interpretation that would defeat the
intent of the law and its legislators.[4]

So as it is exhorted to pass on a challenge against the validity of an


act of Congress, a co-equal branch of government, it behooves the Court
to have at once one principle in mind: the presumption of
constitutionality of statutes.[5] This presumption finds its roots in the tripartite system of government and the corollary separation of powers,
which enjoins the three great departments of the government to accord
a becoming courtesy for each others acts, and not to interfere
inordinately with the exercise by one of its official functions. Towards
this end, courts ought to reject assaults against the validity of statutes,
barring of course their clear unconstitutionality. To doubt is to sustain,
the theory in context being that the law is the product of earnest studies
by Congress to ensure that no constitutional prescription or concept is
infringed.[6] Consequently, before a law duly challenged is nullified, an
unequivocal breach of, or a clear conflict with, the Constitution, not
merely a doubtful or argumentative one, must be demonstrated in such
a manner as to leave no doubt in the mind of the Court.[7]

BACKGROUND

The consolidated petitions for prohibition commenced by the


League of Cities of the Philippines (LCP), City of Iloilo, City of Calbayog,
and Jerry P. Treas[8] assail the constitutionality of the sixteen (16)
laws,[9] each converting the municipality covered thereby into a city
(cityhood laws, hereinafter) and seek to enjoin the Commission on
Elections (COMELEC) from conducting plebiscites pursuant to subject
laws.

factual premises not contained in the pleadings of the parties, let alone
established, which became the bases of the Decision subject of
reconsideration.[11] By Resolution of March 31, 2009, a divided Court
denied the motion for reconsideration.

A second motion for reconsideration followed in which


respondent LGUs prayed as follows:

By Decision[10] dated November 18, 2008, the Court en banc, by a


6-5 vote, granted the petitions and nullified the sixteen (16) cityhood
laws for being violative of the Constitution, specifically its Section 10,
Article X and the equal protection clause.

Subsequently, respondent local government units (LGUs) moved


for reconsideration, raising, as one of the issues, the validity of the

WHEREFORE, respondents respectfully pray that the


Honorable Court reconsider its Resolution dated March 31, 2009, in
so far as it denies for lack of merit respondents Motion for
Reconsideration dated December 9, 2008 and in lieu thereof,
considering that new and meritorious arguments are raised by
respondents Motion for Reconsideration dated December 9, 2008
to grant afore-mentioned Motion for Reconsideration dated
December 9, 2008 and dismiss the Petitions For Prohibition in the
instant case.

Per Resolution dated April 28, 2009, the Court, voting 6-6,
disposed of the motion as follows:

Per its Resolution of June 2, 2009, the Court declared the May 14,
2009 motion adverted to as expunged in light of the entry of judgment

By a vote of 6-6, the Motion for Reconsideration of the


Resolution of 31 March 2009 is DENIED for lack of merit. The motion
is denied since there is no majority that voted to overturn the
Resolution of 31 March 2009.

made on May 21, 2009. Justice Leonardo-De Castro, however, taking


common cause with Justice Bersamin to grant the motion for

The Second Motion for Reconsideration of the Decision of 18


November 2008 is DENIED for being a prohibited pleading, and the
Motion for Leave to Admit Attached Petition in Intervention x x x filed
by counsel for Ludivina T. Mas, et al. are also DENIED. No further
pleadings shall be entertained. Let entry of judgment be made in due
course. x x x

reconsideration of the April 28, 2009 Resolution and to recall the entry
of judgment, stated the observation, and with reason, that the entry
was effected before the Court could act on the aforesaid motion which
was filed within the 15-day period counted from receipt of the April 28,

On May 14, 2009, respondent LGUs filed a Motion to Amend the


Resolution

of

April

28,

2009

by

Declaring

Instead

that

Respondents Motion for Reconsideration of the Resolution of March


31, 2009 and Motion for Leave to File and to Admit Attached Second
Motion for Reconsideration of the Decision Dated November 18, 2008
Remain Unresolved and to Conduct Further Proceedings Thereon.

2009 Resolution.[12]

Forthwith, respondent LGUs filed a Motion for Reconsideration of


the Resolution of June 2, 2009 to which some of the petitioners and
petitioners-in-intervention filed their respective comments. The Court

will now rule on this incident. But first, we set and underscore some
basic premises:

(2) The aforesaid May 14, 2009 Motion to Amend Resolution of


April 28, 2009 was precipitated by the tie vote which served as basis for
the issuance of said resolution. This May 14, 2009 motionwhich

(1) The initial motion to reconsider the November 18, 2008


Decision, as Justice Leonardo-De Castro noted, indeed raised new and

mainly argued that a tie vote is inadequate to declare a law


unconstitutional remains unresolved; and

substantial issues, inclusive of the matter of the correctness of the


factual premises upon which the said decision was predicated. The 6-6

(3) Pursuant to Sec. 4(2), Art. VIII of the Constitution, all cases

vote on the motion for reconsideration per the Resolution of March 31,

involving the constitutionality of a law shall be heard by the Court en

2009, which denied the motion on the sole ground that the basic issues

banc and decided with the concurrence of a majority of the Members

have already been passed upon reflected a divided Court on the issue

who actually took part in the deliberations on the issues in the case and

of whether or not the underlying Decision of November 18, 2008 had

voted thereon.

indeed passed upon the basic issues raised in the motion for
reconsideration of the said decision;

The basic issue tendered in this motion for reconsideration of the


June 2, 2009 Resolution boils down to whether or not the required vote

set forth in the aforesaid Sec. 4(2), Art. VIII is limited only to the initial

November 18, 2008 had indeed passed upon the issues raised in the

vote on the petition or also to the subsequent voting on the motion for

motion for reconsideration of the said decision. But at the end of the

reconsideration where the Court is called upon and actually votes on the

day, the single issue that matters and the vote that really counts really

constitutionality of a law or like issuances. Or, as applied to this case,

turn on the constitutionality of the cityhood laws. And be it

would a minute resolution dismissing, on a tie vote, a motion for

remembered that the inconclusive 6-6 tie vote reflected in the April 28,

reconsideration on the sole stated groundthat the basic issues have

2009 Resolution was the last vote on the issue of whether or not the

already been passed suffice to hurdle the voting requirement

cityhood laws infringe the Constitution. Accordingly, the motions of the

required for a declaration of the unconstitutionality of the cityhood laws

respondent LGUs, in light of the 6-6 vote, should be deliberated anew

in question?

until the required concurrence on the issue of the validity or invalidity of


the laws in question is, on the merits, secured.

The 6-6 vote on the motion to reconsider the Resolution of March


31, 2009, which denied the initial motion on the sole ground that the

It ought to be clear that a deadlocked vote does not reflect the

basic issues had already been passed upon betrayed an evenly divided

majority of the Members contemplated in Sec. 4 (2) of Art. VIII of the

Court on the issue of whether or not the underlying Decision of

Constitution, which requires that:

determination is made on the main petition or thereafter on a motion


All cases involving the constitutionality of a treaty,
international or executive agreement, or law shall be heard by the
Supreme Court en banc, x x x shall be decided with the concurrence
of a majority of the Members who actually took part in the
deliberations on the issues in the case and voted thereon. (Emphasis
added.)

for reconsideration. This is as it should be, for, to borrow from the late
Justice Ricardo J. Francisco: x x x *E+ven assuming x x x that the
constitutional requirement on the concurrence of the majority was
initially reached in the x x x ponencia, the same is inconclusive as it was

Webster defines majority as a number greater than half of a

still open for review by way of a motion for reconsideration.[15]

total.[13] In plain language, this means 50% plus one. In Lambino v.


Commission on Elections, Justice, now Chief Justice, Puno, in a separate
opinion, expressed the view that a deadlocked vote of six (6) is not a
majority and a non-majority cannot write a rule with precedential

To be sure, the Court has taken stock of the rule on a tie-vote


situation, i.e., Sec. 7, Rule 56 and the complementary A.M. No. 99-1-09SC, respectively, providing that:

value.[14]

As may be noted, the aforequoted Sec. 4 of Art. VIII, as couched,


exacts a majority vote in the determination of a case involving the
constitutionality of a statute, without distinguishing whether such

SEC. 7. Procedure if opinion is equally divided. Where the


court en banc is equally divided in opinion, or the necessary majority
cannot be had, the case shall again be deliberated on, and if after
such deliberation no decision is reached, the original action
commenced in the court shall be dismissed; in appealed cases, the
judgment or order appealed from shall stand affirmed; and on all
incidental matters, the petition or motion shall be denied.

A.M. No. 99-1-09-SC x x x A motion for reconsideration of a


decision or resolution of the Court En Banc or of a Division may be
granted upon a vote of a majority of the En Banc or of a Division, as
the case may be, who actually took part in the deliberation of the
motion.
If the voting results in a tie, the motion for reconsideration is
deemed denied.

But since the instant cases fall under Sec. 4 (2), Art. VIII of the
Constitution, the aforequoted provisions ought to be applied in
conjunction with the prescription of the Constitution that the cases
shall be decided with the concurrence of a majority of the Members
who actually took part in the deliberations on the issues in the instant
cases and voted thereon. To repeat, the last vote on the issue of the
constitutionality of the cityhood bills is that reflected in the April 28,
2009 Resolutiona 6-6 deadlock.

On the postulate then that first, the finality of the November 18,
2008 Decision has yet to set in, the issuance of the precipitate[16] entry
of judgment notwithstanding, andsecond, the deadlocked vote on the
second motion for reconsideration did not definitely settle the
constitutionality of the cityhood laws, the Court is inclined to take
another hard look at the underlying decision. Without belaboring in
their smallest details the arguments for and against the procedural
dimension of this disposition, it bears to stress that the Court has the
power to suspend its own rules when the ends of justice would be
served thereby.[17] In the performance of their duties, courts should not
be shackled by stringent rules which would result in manifest
injustice. Rules of procedure are only tools crafted to facilitate the
attainment of justice. Their strict and rigid application must be
eschewed, if they result in technicalities that tend to frustrate rather
than promote substantial justice. Substantial rights must not be
prejudiced by a rigid and technical application of the rules in the altar of
expediency. When a case is impressed with public interest, a relaxation
of the application of the rules is in order.[18] Time and again, this Court
has suspended its own rules or excepted a particular case from their
operation whenever the higher interests of justice so require.[19]

While perhaps not on all fours with the case, because it involved a

This brings us to the substantive aspect of the case.

purely business transaction, what the Court said in Chuidian v.


Sandiganbayan[20] is most apropos:
To reiterate what the Court has said in Ginete vs. Court of
Appeals and other cases, the rules of procedure should be viewed as
mere instruments designed to facilitate the attainment of justice.
They are not to be applied with severity and rigidity when such
application would clearly defeat the very rationale for their
conception and existence. Even the Rules of Court reflects this
principle. The power to suspend or even disregard rules, inclusive of
the one-motion rule, can be so pervasive and compelling as to alter
even that which this Court has already declared to be final. The
peculiarities of this case impel us to do so now.

The Court, by a vote of 6-4, grants the respondent LGUs motion


for reconsideration of the Resolution of June 2, 2009, as well as their
May 14, 2009 motion to consider the second motion for reconsideration
of the November 18, 2008 Decision unresolved, and also grants said
second motion for reconsideration.

The Undisputed Factual Antecedents in Brief

During the 11th Congress,[21] fifty-seven (57) cityhood bills were


filed before the House of Representatives.[22] Of the fifty-seven (57),
thirty-three (33) eventually became laws. The twenty-four (24) other
bills were not acted upon.

Later developments saw the introduction in the Senate of Senate


Bill (S. Bill) No. 2157[23] to amend Sec. 450 of Republic Act No. (RA) 7160,
otherwise known as the Local Government Code (LGC) of 1991. The
proposed amendment sought to increase the income requirement to
qualify for conversion into a city from PhP 20 million average annual
income to PhP 100 million locally generated income.

In March 2001, S. Bill No. 2157 was signed into law as RA 9009 to
take effect on June 30, 2001. As thus amended by RA 9009, Sec. 450 of
the LGC of 1991 now provides that *a+ municipality x x x may be

converted into a component city if it has a [certified] locally generated


average annual income x x x of at least [PhP 100 million] for the last two
(2) consecutive years based on 2000 constant prices.

After the effectivity of RA 9009, the Lower House of the


12 Congress adopted in July 2001 House (H.) Joint Resolution No.
29[24] which, as its title indicated, sought to exempt from the income
requirement prescribed in RA 9009 the 24 municipalities whose
conversions into cities were not acted upon during the previous
Congress. The 12thCongress ended without the Senate approving H.
Joint Resolution No. 29.
th

requirement imposed under RA 9009 on the municipalities. For this


reason, he suggested the filing by the House of Representatives of
individual bills to pave the way for the municipalities to become cities
and then forwarding them to the Senate for proper action.[25]

Heeding the advice, sixteen (16) municipalities filed, through their


respective sponsors, individual cityhood bills. Common to all 16
measures was a provision exempting the municipality covered from the
PhP 100 million income requirement.

Then came the 13th Congress (July 2004 to June 2007), which saw
the House of Representatives re-adopting H. Joint Resolution No. 29 as
H. Joint Resolution No. 1 and forwarding it to the Senate for approval.

As of June 7, 2007, both Houses of Congress had approved the


individual cityhood bills, all of which eventually lapsed into law on
various dates. Each cityhood law directs the COMELEC, within thirty (30)
days from its approval, to hold a plebiscite to determine whether the
voters approve of the conversion.

The Senate, however, again failed to approve the joint


resolution. During the Senate session held on November 6, 2006,
Senator Aquilino Pimentel, Jr. asserted that passing H. Resolution No. 1
would, in net effect, allow a wholesale exemption from the income

As earlier stated, the instant petitions seek to declare the cityhood


laws unconstitutional for violation of Sec. 10, Art. X of the Constitution,
as well as for violation of the equal-protection clause. The wholesale
conversion of municipalities into cities, the petitioners bemoan, will

reduce the share of existing cities in the Internal Revenue Allotment


(IRA), since more cities will partake of the internal revenue set aside for
all cities under Sec. 285 of the LGC of 1991.[26]

Petitioners-in-intervention, LPC members themselves, would later


seek leave and be allowed to intervene.
Aside from their basic plea to strike down as unconstitutional the
cityhood laws in question, petitioners and petitioners-in-intervention
collectively pray that an order issue enjoining the COMELEC from
conducting plebiscites in the affected areas. An alternative prayer would
urge the Court to restrain the poll body from proclaiming the plebiscite
results.

On July 24, 2007, the Court en banc resolved to consolidate the


petitions and the petitions-in-intervention. On March 11, 2008, it heard
the parties in oral arguments.

The Issues

In the main, the issues to which all others must yield pivot on
whether or not the cityhood laws violate (1) Sec. 10. Art. X of the
Constitution and (2) the equal protection clause.

In the November 18, 2008 Decision granting the petitions, Justice


Antonio T. Carpio, for the Court, resolved the twin posers in the
affirmative and accordingly declared the cityhood laws unconstitutional,
deviating as they do from the uniform and non-discriminatory income
criterion prescribed by the LGC of 1991. In so doing,
the ponencia veritably agreed with the petitioners that the Constitution,
in clear and unambiguous language, requires that all the criteria for the
creation of a city shall be embodied and written in the LGC, and not in
any other law.

After a circumspect reflection, the Court is disposed to reconsider.

Petitioners threshold posture, characterized by a strained


interpretation of the Constitution, if accorded cogency, would veritably
curtail and cripple Congress valid exercise of its authority to create
political subdivisions.

By constitutional design[27] and as a matter of long-established


principle, the power to create political subdivisions or LGUs is essentially
legislative in character.[28] But even without any constitutional grant,
Congress can, by law, create, divide, merge, or altogether abolish or
alter the boundaries of a province, city, or municipality. We said as
much in the fairly recent case, Sema v. CIMELEC.[29] The 1987
Constitution, under its Art. X, Sec. 10, nonetheless provides for the
creation of LGUs, thus:

Section 10. No province, city, municipality,


or barangay shall be created, divided, merged, abolished, or
its boundary substantially altered, except in accordance with
the criteria established in the local government code and
subject to approval by a majority of the votes cast in a
plebiscite in the political units directly affected. (Emphasis
supplied.)

As may be noted, the afore-quoted provision specifically provides


for the creation of political subdivisions in accordance with the criteria
established in the local government code, subject to the approval of

the voters in the unit concerned. The criteria referred to are the
verifiable indicators of viability, i.e., area, population, and income, now
set forth in Sec. 450 of the LGC of 1991, as amended by RA 9009. The
petitioners would parlay the thesis that these indicators or criteria must
be written only in the LGC and not in any other statute. Doubtless, the
code they are referring to is the LGC of 1991. Pushing their point, they
conclude that the cityhood laws that exempted the respondent LGUs
from the income standard spelled out in the amendatory RA 9009
offend the Constitution.

Petitioners posture does not persuade.

The supposedly infringed Art. X, Sec. 10 is not a new


constitutional provision. Save for the use of the term barrio in lieu of
barangay, may be instead of shall, the change of the phrase unit
or units to political unit and the addition of the modifier directly to
the word affected, the aforesaid provision is a substantial
reproduction of Art. XI, Sec. 3 of the 1973 Constitution, which reads:

Section 3. No province, city, municipality, or barrio may


be created, divided, merged, abolished, or its boundary
substantially altered, except in accordance with the criteria
established in the local government code and subject to
approval by a majority of the votes cast in a plebiscite in
the unit or units affected. (Emphasis supplied.)

It bears notice, however, that the code similarly referred to in


the 1973 and 1987 Constitutions is clearly but a law Congress enacted.
This is consistent with the aforementioned plenary power of Congress to
create political units. Necessarily, since Congress wields the vast poser
of creating political subdivisions, surely it can exercise the lesser
authority of requiring a set of criteria, standards, or ascertainable
indicators of viability for their creation. Thus, the only conceivable
reason why the Constitution employs the clause in accordance with
the criteria established in the local government code is to lay stress
that it is Congress alone, and no other, which can impose the criteria.
The eminent constitutionalist, Fr. Joaquin G. Bernas, S.J., in his treatise
on Constitutional Law, specifically on the subject provision, explains:

Prior to 1965, there was a certain lack of clarity with


regard to the power to create, divide, merge, dissolve, or
change the boundaries of municipal corporations. The extent
to which the executive may share in this power was obscured
by Cardona v. Municipality of Binangonan.[30] Pelaez v. Auditor
General subsequently clarified the Cardona case when the
Supreme Court said that the authority to create municipal
corporations is essentially legislative in nature.[31] Pelaez,
however, conceded that 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.[32] Pelaez was silent about division, merger,
and dissolution of municipal corporations. But since division
in effect creates a new municipality, and both dissolution and
merger in effect abolish a legal creation, it may fairly be
inferred that these acts are also legislative in nature.

Section 10 [Art. X of the 1987 Constitution], which is a


legacy from the 1973 Constitution, goes further than the
doctrine in the Pelaez case. It not only makes creation,
division, merger, abolition or substantial alteration of

boundaries of provinces, cities, municipalities x x x subject to


criteria established in the local government code, thereby
declaring these actions properly legislative, but it also makes
creation, division, merger, abolition or substantial alteration
of boundaries subject to approval by a majority of the votes
cast in a plebiscite in the political units directly affected.[33] x
x x (Emphasis added.)

It remains to be observed at this juncture that when the 1987


Constitution speaks of the LGC, the reference cannot be to any specific
statute or codification of laws, let alone the LGC of 1991.[34] Be it noted
that at the time of the adoption of the 1987 Constitution, Batas
Pambansa Blg. (BP) 337, the then LGC, was still in effect. Accordingly,
had the framers of the 1987 Constitution intended to isolate the
embodiment of the criteria only in the LGC, then they would have
actually referred to BP 337. Also, they would then not have provided for
the enactment by Congress of a new LGC, as they did in Art. X, Sec.
3[35] of the Constitution.

Consistent with its plenary legislative power on the matter,


Congress can, via either a consolidated set of laws or a much simpler,
single-subject enactment, impose the said verifiable criteria of viability.
These criteria need not be embodied in the local government code,
albeit this code is the ideal repository to ensure, as much as possible,
the element of uniformity. Congress can even, after making a
codification, enact an amendatory law, adding to the existing layers of
indicators earlier codified, just as efficaciously as it may reduce the
same. In this case, the amendatory RA 9009 upped the already codified
income requirement from PhP 20 million to PhP 100 million. At the end
of the day, the passage of amendatory laws is no different from the
enactment of laws, i.e., the cityhood laws specifically exempting a
particular political subdivision from the criteria earlier mentioned.
Congress, in enacting the exempting law/s, effectively decreased the
already codified indicators.

Petitioners theory that Congress must provide the criteria


solely in the LGC and not in any other law strikes the Court as
illogical. For if we pursue their contention to its logical conclusion,
then RA 9009 embodying the new and increased income criterion
would, in a way, also suffer the vice of unconstitutionality. It is
startling, however, that petitioners do not question the

constitutionality of RA 9009, as they in fact use said law as an


argument for the alleged unconstitutionality of the cityhood laws.

As it were, Congress, through the medium of the cityhood


laws, validly decreased the income criterion vis--vis the respondent
LGUs, but without necessarily being unreasonably discriminatory, as
shall be discussed shortly, by reverting to the PhP 20 million
threshold what it earlier raised to PhP 100 million. The legislative
intent not to subject respondent LGUs to the more stringent
requirements of RA 9009 finds expression in the following uniform
provision of the cityhood laws:
Exemption from Republic Act No. 9009. The City of x x
x shall be exempted from the income requirement prescribed
under Republic Act No. 9009.

In any event, petitioners constitutional objection would still be


untenable even if we were to assume purely ex hypothesi the
correctness of their underlying thesis, viz: that the conversion of a
municipality to a city shall be in accordance with, among other things,
the income criterion set forth in the LGC of 1991, and in no other;
otherwise, the conversion is invalid. We shall explain.

Looking at the circumstances behind the enactment of the laws


subject of contention, the Court finds that the LGC-amending RA 9009,
no less, intended the LGUs covered by the cityhood laws to be exempt
from the PhP 100 million income criterion. In other words, the cityhood
laws, which merely carried out the intent of RA 9009, adhered, in the
final analysis, to the criteria established in the Local Government
Code, pursuant to Sec. 10, Art. X of the 1987 Constitution. We shall
now proceed to discuss this exemption angle.[36]

Among the criteria established in the LGC pursuant to Sec.10,


Art. X of the 1987 Constitution are those detailed in Sec. 450 of the
LGC of 1991 under the heading Requisites for Creation. The section
sets the minimum income qualifying bar before a municipality or a
cluster of barangays may be considered for cityhood. Originally, Sec.
164 of BP 337 imposed an average regular annual income of at least
ten million pesos for the last three consecutive years as a minimum
income standard for a municipal-to-city conversion. The LGC that BP
337 established was superseded by the LGC of 1991 whose then Sec.
450 provided that *a+ municipality or cluster of barangays may be
converted into a component city if it has an average annual income, x

x x of at least twenty million pesos (P20,000,000.00) for at least two


(2) consecutive years based on 1991 constant prices x x x. RA 9009
in turn amended said Sec. 450 by further increasing the income
requirement to PhP 100 million, thus:
Section 450. Requisites for Creation. (a) A
municipality or a cluster of barangays may be converted into
a component city if it has a locally generated average annual
income, as certified by the Department of Finance, of at
least One Hundred Million Pesos (P100,000,000.00) for the
last two (2) consecutive years based on 2000 constant prices,
and if it has either of the following requisites:

xxxx

(c) The average annual income shall include the income


accruing to the general fund, exclusive of special funds,
transfers, and non-recurring income. (Emphasis supplied.)

The legislative intent is not at all times accurately reflected in the


manner in which the resulting law is couched. Thus, applying a verba
legis[37] or strictly literal interpretation of a statute may render it
meaningless and lead to inconvenience, an absurd situation or
injustice.[38] To obviate this aberration, and bearing in mind the principle
that the intent or the spirit of the law is the law itself,[39] resort should
be to the rule that the spirit of the law controls its letter.[40]

It is in this respect that the history of the passage of RA 9009 and


the logical inferences derivable therefrom assume relevancy in
discovering legislative intent.[41]

The rationale behind the enactment of RA 9009 to amend Sec.


450 of the LGC of 1991 can reasonably be deduced from Senator
Pimentels sponsorship speech on S. Bill No. 2157. Of particular
significance is his statement regarding the basis for the proposed
increase from PhP 20 million to PhP 100 million in the income
requirement for municipalities wanting to be converted into cities, viz:

Senator Pimentel. Mr. President, I would have wanted


this bill to be included in the whole set of proposed
amendments that we have introduced to precisely amend the
[LGC]. However, it is a fact that there is a mad rush of
municipalities wanting to be converted into cities. Whereas
in 1991, when the [LGC] was approved, there were only 60
cities, today the number has increased to 85 cities, with 41
more municipalities applying for conversion x x x. At the rate
we are going, I am apprehensive that before long this nation
will be a nation of all cities and no municipalities.

municipalities were qualified under the then obtaining PhP 20 millionincome threshold. These included respondent LGUs. Thus, equally
noteworthy is the ensuing excerpts from the floor exchange between
then Senate President Franklin Drilon and Senator Pimentel, the latter
stopping short of saying that the income threshold of PhP 100 million
under S. Bill No. 2157 would not apply to municipalities that have
pending cityhood bills, thus:

THE PRESIDENT. The Chair would like to ask for some


clarificatory point. x x x
It is for that reason, Mr. President, that we are
proposing among other things, that the financial requirement,
which, under the [LGC], is fixed at P20 million, be raised
to P100 million to enable a municipality to have the right to
be converted into a city, and the P100 million should be
sourced from locally generated funds.

THE PRESIDENT. This is just on the point of the pending


bills in the Senate which propose the conversion of a number
of municipalities into cities and which qualify under the
present standard.

Congress to be sure knew, when RA 9009 was being deliberated


upon, of the pendency of several bills on cityhood, wherein the applying

We would like to know the view of the


sponsor: Assuming that this bill becomes a law, will the
Chamber apply the standard as proposed in this bill to those
bills which are pending for consideration?

SENATOR PIMENTEL, Mr. President, it might not be fair


to make this bill x x x [if] approved, retroact to the bills that are
pending in the Senate for conversion from municipalities to
cities.

THE PRESIDENT. So the understanding is that those bills


which are already pending in the Chamber will not be affected.

SENATOR PIMENTEL. These will not be affected, Mr.


President.[42] (Emphasis and underscoring supplied.)
THE PRESIDENT. Will there be an appropriate language
crafted to reflect that view? Or does it not become a policy of
the Chamber, assuming that this bill becomes a law x x x that it
will apply to those bills which are already approved by the
House under the old version of the [LGC] and are now pending
in the Senate? The Chair does not know if we can craft a
language which will limit the application to those which are not
yet in the Senate. Or is that a policy that the Chamber will
adopt?

SENATOR PIMENTEL. Mr. President, personally, I do not


think it is necessary to put that provision because what we are
saying here will form part of the interpretation of this
bill. Besides, if there is no retroactivity clause, I do not think
that the bill would have any retroactive effect.

What the foregoing Pimental-Drilon exchange eloquently


indicates are the following complementary legislative intentions: (1) the
then pending cityhood bills would be outside the pale of the minimum
income requirement of PhP 100 million that S. Bill No. 2159 proposes;
and (2) RA 9009 would not have any retroactive effect insofar as the
cityhood bills are concerned.

Given the foregoing perspective, it is not amiss to state that the


basis for the inclusion of the exemption clause of the cityhood laws is
the clear-cut intent of Congress of not according retroactive effect to RA
9009. Not only do the congressional records bear the legislative intent
of exempting the cityhood laws from the income requirement of PhP
100 million. Congress has now made its intention to exempt express in
the challenged cityhood laws.

proper course is to start out and follow the true intent of the
legislature x x x.[45] (Emphasis supplied.)

Legislative intent is part and parcel of the law, the controlling


factor in interpreting a statute. In construing a statute, the proper
course is to start out and follow the true intent of the Legislature and to
adopt the sense that best harmonizes with the context and promotes in
the fullest manner the policy and objects of the legislature.[43] In fact,
any interpretation that runs counter to the legislative intent is
unacceptable and invalid.[44] Torres v. Limjap could not have been more
precise:

The intent of a Statute is the Law. If a statute is valid,


it is to have effect according to the purpose and intent of the
lawmaker. The intent is x x x the essence of the law and the
primary rule of construction is to ascertain and give effect to
that intent. The intention of the legislature in enacting a law
is the law itself, and must be enforced when
ascertained, although it may not be consistent with the strict
letter of the statute. Courts will not follow the letter of a
statute when it leads away from the true intent and purpose
of the legislature and to conclusions inconsistent with the
general purpose of the act. Intent is the spirit which gives
life to a legislative enactment. In construing statutes the

As emphasized at the outset, behind every law lies the


presumption of constitutionality.[46] Consequently, to him who would
assert the unconstitutionality of a statute belongs the burden of proving
otherwise. Laws will only be declared invalid if a conflict with the
Constitution is beyond reasonable doubt.[47] Unfortunately for
petitioners and petitioners-in-intervention, they failed to discharge their
heavy burden.

It is contended that the deliberations on the cityhood bills and the


covering joint resolution were undertaken in the 11th and/or the
12th Congress. Accordingly, so the argument goes, such deliberations,
more particularly those on the unapproved resolution exempting from
RA 9009 certain municipalities, are without significance and would not
qualify as extrinsic aids in construing the cityhood laws that were passed
during the 13th Congress, Congress not being a continuing body.

The argument is specious and glosses over the reality that the
cityhood billswhich were already being deliberated upon even

perhaps before the conception of RA 9009were again being


considered during the 13th Congress after being tossed around in the
two previous Congresses. And specific reference to the cityhood bills
was also made during the deliberations on RA 9009. At the end of the
day, it is really immaterial if Congress is not a continuing legislative
body. What is important is that the debates, deliberations, and
proceedings of Congress and the steps taken in the enactment of the
law, in this case the cityhood laws in relation to RA 9009 or vice versa,
were part of its legislative history and may be consulted, if appropriate,
as aids in the interpretation of the law.[48] And of course the earlier
cited Drilon-Pimentel exchange on whether or not the 16 municipalities
in question would be covered by RA 9009 is another vital link to the
historical chain of the cityhood bills. This and other proceedings on the
bills are spread in the Congressional journals, which cannot be
conveniently reduced to pure rhetoric without meaning whatsoever, on
the simplistic and non-sequitur pretext that Congress is not a continuing
body and that unfinished business in either chamber is deemed
terminated at the end of the term of Congress.

This brings us to the challenge to the constitutionality of cityhood


laws on equal protection grounds.

To the petitioners, the cityhood laws, by granting special


treatment to respondent municipalities/LGUs by way of exemption from
the standard PhP 100 million minimum income requirement, violate
Sec.1, Art. III of the Constitution, which in part provides that no person
shall be denied the equal protection of the laws.

Petitioners challenge is not well taken. At its most basic, the


equal protection clause proscribes undue favor as well as hostile
discrimination. Hence, a law need not operate with equal force on all
persons or things to be conformable with Sec. 1, Art. III of the
Constitution.

The equal protection guarantee is embraced in the broader and


elastic concept of due process, every unfair discrimination being an
offense against the requirements of justice and fair play. It has
nonetheless come as a separate clause in Sec. 1, Art. III of the
Constitution to provide for a more specific protection against any undue
discrimination or antagonism from government. Arbitrariness in general
may be assailed on the basis of the due process clause. But if a particular

challenged act partakes of an unwarranted partiality or prejudice, the


sharper weapon to cut it down is the equal protection clause.[49] This
constitutional protection extends to all persons, natural or artificial,
within the territorial jurisdiction. Artificial persons, as the respondent
LGUs herein, are, however, entitled to protection only insofar as their
property is concerned.[50]

In the proceedings at bar, petitioner LCP and the intervenors


cannot plausibly invoke the equal protection clause, precisely because
no deprivation of property results by virtue of the enactment of the
cityhood laws. The LCPs claim that the IRA of its member-cities will be
substantially reduced on account of the conversion into cities of the
respondent LGUs would not suffice to bring it within the ambit of the
constitutional guarantee. Indeed, it is presumptuous on the part of the
LCP member-cities to already stake a claim on the IRA, as if it were their
property, as the IRA is yet to be allocated. For the same reason, the
municipalities that are not covered by the uniform exemption clause in
the cityhood laws cannot validly invoke constitutional protection. For, at
this point, the conversion of a municipality into a city will only affect its
status as a political unit, but not its property as such.

As a matter of settled legal principle, the fundamental right of


equal protection does not require absolute equality. It is enough that all
persons or things similarly situated should be treated alike, both as to
rights or privileges conferred and responsibilities or obligations
imposed. The equal protection clause does not preclude the state from
recognizing and acting upon factual differences between individuals and
classes. It recognizes that inherent in the right to legislate is the right to
classify,[51] necessarily implying that the equality guaranteed is not
violated by a legislation based on reasonable classification.
Classification, to be reasonable, must (1) rest on substantial distinctions;
(2) be germane to the purpose of the law; (3) not be limited to existing
conditions only; and (4) apply equally to all members of the same
class.[52] The Court finds that all these requisites have been met by the
laws challenged as arbitrary and discriminatory under the equal
protection clause.

As things stand, the favorable treatment accorded the sixteen (16)


municipalities by the cityhood laws rests on substantial distinction.
Indeed, respondent LGUs, which are subjected only to the erstwhile PhP
20 million income criterion instead of the stringent income requirement
prescribed in RA 9009, are substantially different from other
municipalities desirous to be cities. Looking back, we note that

respondent LGUs had pending cityhood bills before the passage of RA


9009. There lies part of the tipping difference. And years before the
enactment of the amendatory RA 9009, respondents LGUs had already
met the income criterion exacted for cityhood under the LGC of 1991.
Due to extraneous circumstances, however, the bills for their conversion
remained unacted upon by Congress. As aptly observed by then Senator,
now Manila Mayor, Alfredo Lim in his speech sponsoring H. Joint
Resolution No. 1, or the cityhood bills, respondent LGUs saw themselves
confronted with the changing of the rules in the middle of the
game. Some excerpts of Senator Lims sponsorship speech:

x x x [D]uring the Eleventh Congress, fifty-seven (57)


municipalities applied for city status, confident that each has
met the requisites for conversion under Section 450 of the
[LGC], particularly the income threshold of P20 million. Of the
57 that filed, thirty-two (32) were enacted into law; x x x while
the rest twenty-four (24) in all failed to pass through
Congress. Shortly before the long recess of Congress in
February 2001, to give way to the May elections x x x, Senate
Bill No. 2157, which eventually became [RA] 9009, was passed
into law, effectively raising the income requirement for
creation of cities to a whooping P100 million x x x. Much as
the proponents of the 24 cityhood bills then pending

struggled to beat the effectivity of the law on June 30, 2001,


events that then unfolded were swift and overwhelming
that Congress just did not have the time to act on the
measures.

Some of these intervening events were x x x


the impeachment of President Estrada x x x and the May
2001 elections.

The imposition of a much higher income requirement


for the creation of a city x x x was unfair; like any sport
changing the rules in the middle of the game.

Undaunted, they came back during the [12th] Congress


x x x. They filed House Joint Resolution No. 29 seeking
exemption from the higher income requirement of RA
9009. For the second time, [however], time ran out from
them.

For many of the municipalities whose Cityhood Bills are


now under consideration, this year, at the closing days of the
[13th] Congress, marks their ninth year appealing for fairness
and justice. x x x

each of them from the higher income requirement of RA


9009. x x x This led to the certification issued by the
proponents short-listing fourteen (14) municipalities deemed
to be qualified for city-status.

I, for one, share their view that fairness dictates that


they should be given a legal remedy by which they could be
allowed to prove that they have all the necessary
qualifications for city status using the criteria set forth under
the [LGC] prior to its amendment by RA 9009. Hence, when
House Joint Resolution No. 1 reached the Senate x x x I
immediately set the public hearing x x x. On July 25, 2006, I
filed Committee Report No. 84 x x x. On September 6, I
delivered the sponsorship x x x.

Acting on the suggestion of Senator Pimentel, the


proponents lost no time in working for the approval by the
House of Representatives of their individual Cityhood Bills,
each containing a provision of exemption from the higher
income requirement of RA 9009. On the last session day of
last year, December 21, the House transmitted to the Senate
the Cityhood Bills of twelve out of the 14 pre-qualified
municipalities. Your Committee immediately conducted the
public hearing x x x.

x x x By November 14, the measure had reverted to the


period of individual amendments. This was when the then
acting majority leader, x x x informed the Body that Senator
Pimentel and the proponents of House Joint Resolution No. 1
have agreed to the proposal of the Minority Leader for the
House to first approve the individual Cityhood Bills of the
qualified municipalities, along with the provision exempting

The whole
Congresses x x x.

process

enumerated

[span] three

In essence, the Cityhood Bills now under consideration


will have the same effect as that of House Joint Resolution
No. 1 because each of the 12 bills seeks exemption from the

higher income requirement of RA 9009. The proponents are


invoking the exemption on the basis of justice and fairness.

city status, using the criteria set forth under the LGC of 1991 prior to
its amendment by RA 9009. Truly, the peculiar conditions of
respondent LGUs, which are actual and real, provide sufficient

Each of the 12 municipalities has all the requisites for


conversion into a component city based on the old
requirements set forth under Section 450 of the [LGC], prior
to its amendment by RA 9009, namely: x x x[53] (Emphasis
supplied.)

In hindsight, the peculiar conditions, as depicted in Senator


Lims speech, which respondent LGUs found themselves in were
unsettling. They were qualified cityhood applicants before the
enactment of RA 009. Because of events they had absolutely nothing
to do with, a spoiler in the form of RA 9009 supervened. Now, then,

grounds for legislative classification.

To be sure, courts, regardless of doubts they might be


entertaining, cannot question the wisdom of the congressional
classification, if reasonable, or the motivation underpinning the
classification.[54] By the same token, they do not sit to determine the
propriety or efficacy of the remedies Congress has specifically chosen to
extend. That is its prerogative. The power of the Legislature to make
distinctions and classifications among persons is, to reiterate, neither
curtailed nor denied by the equal protection clause. A law can be
violative of the constitutional limitation only when the classification is
without reasonable basis.

to impose on them the much higher income requirement after what


they have gone through would appear to be indeed unfair, to
borrow from Senator Lim. Thus, the imperatives of fairness dictate
that they should be given a legal remedy by which they would be
allowed to prove that they have all the necessary qualifications for

The classification is also germane to the purpose of the law. The


exemption of respondent LGUs/municipalities from the PhP 100 million
income requirement was meant to reduce the inequality occasioned by
the passage of the amendatory RA 9009. From another perspective, the
exemption was unquestionably designed to insure that fairness and

justice would be accorded respondent LGUs. Let it be noted that what


were then the cityhood bills covering respondent LGUs were part and
parcel of the original 57 conversion bills filed in the 11th Congress, 33 of
those became laws before the adjournment of that Congress. The then
bills of the challenged cityhood laws were not acted upon due, inter alia,
to the impeachment of
then President Estrada, the
related jueteng scandal investigations conducted before, and the EDSA
events that followed the aborted impeachment.

While the equal protection guarantee frowns upon the creation of


a privileged class without justification, inherent in the equality clause is
the exhortation for the Legislature to pass laws promoting equality or
reducing existing inequalities. The enactment of the cityhood laws was
in a real sense an attempt on the part of Congress to address the
inequity dealt the respondent LGUs. These laws positively promoted the
equality and eliminated the inequality, doubtless unintended, between
respondent municipalities and the thirty-three (33) other municipalities
whose
cityhood
bills
were
enacted during
the
11th
Congress. Respondent municipalities and the 33 other municipalities,
which had already been elevated to city status, were all found to be
qualified under the old Sec. 450 of the LGC of 1991 during the
11th Congress. As such, both respondent LGUs and the 33 other former

municipalities are under like circumstances and conditions. There is,


thus, no rhyme or reason why an exemption from the PhP 100 million
requirement cannot be given to respondent LGUs. Indeed, to deny
respondent LGUs/municipalities the same rights and privileges accorded
to the 33 other municipalities when, at the outset they were similarly
situated, is tantamount to denying the former the protective mantle of
the equal protection clause. In effect, petitioners and petitioners-inintervention are creating an absurd situation in which an alleged
violation of the equal protection clause of the Constitution is remedied
by another violation of the same clause. The irony is not lost to the
Court.

Then too the non-retroactive effect of RA 9009 is not limited in


application only to conditions existing at the time of its enactment. It is
intended to apply for all time, as long as the contemplated conditions
obtain. To be more precise, the legislative intent underlying the
enactment of RA 9009 to exclude would-be-cities from the PhP 100
million criterion would hold sway, as long as the corresponding cityhood
bill has been filed before the effectivity of RA 9009 and the concerned
municipality qualifies for conversion into a city under the original
version of Sec. 450 of the LGC of 1991.

plebiscites held in the affected LGUs is now an operative fact. New


Viewed in its proper light, the common exemption clause in the
cityhood laws is an application of the non-retroactive effect of RA 9009
on the cityhood bills. It is not a declaration of certain rights, but a mere
declaration of prior qualification and/or compliance with the nonretroactive effect of RA 9009.

cities appear to have been organized and are functioning accordingly,

Lastly and in connection with the third requisite, the uniform


exemption clause would apply to municipalities that had pending
cityhood bills before the passage of RA 9009 and were compliant with
then Sec. 450 of the LGC of 1991, which prescribed an income
requirement of PhP 20 million. It is hard to imagine, however, if there
are still municipalities out there belonging in context to the same class
as the sixteen (16) respondent LGUs. Municipalities that cannot claim to
belong to the same class as the 16 cannot seek refuge in the cityhood
laws. The former have to comply with the PhP 100 million income
requirement imposed by RA 9009.

In view of the foregoing discussion, the Court ought to

A final consideration. The existence of the cities consequent to


the approval of the creating, but challenged, cityhood laws in the

with new sets of officials and employees. Other resulting events need
not be enumerated. The operative fact doctrine provides another
reason for upholding the constitutionality of the cityhood laws in
question.

abandon as it hereby abandons and sets aside the Decision of


November 18, 2008 subject of reconsideration. And by way of
summing up the main arguments in support of this disposition, the
Court hereby declares the following:

(1) Congress did not intend the increased income requirement in


RA 9009 to apply to the cityhood bills which became the cityhood laws
in question. In other words, Congress intended the subject cityhood
laws to be exempted from the income requirement of PhP 100 million
prescribed by RA 9009;

(2) The cityhood laws merely carry out the intent of RA 9009, now
Sec. 450 of the LGC of 1991, to exempt respondent LGUs from the PhP
100 million income requirement;

(3) The deliberations of the 11th or 12th Congress on unapproved


bills or resolutions are extrinsic aids in interpreting a law passed in the
13th Congress. It is really immaterial if Congress is not a continuing
body. The hearings and deliberations during the 11th and 12th Congress
may still be used as extrinsic reference inasmuch as the same cityhood
bills which were filed before the passage of RA 9009 were being
considered during the 13th Congress. Courts may fall back on the history
of a law, as here, as extrinsic aid of statutory construction if the literal
application of the law results in absurdity or injustice.

million income level exacted under the original Sec. 450 of the 1991
LGC.

And to stress the obvious, the cityhood laws are presumed


constitutional. As we see it, petitioners have not overturned the
presumptive constitutionality of the laws in question.

WHEREFORE, respondent LGUs Motion for Reconsideration


dated June 2, 2009, their Motion to Amend the Resolution of April 28,

(4) The exemption accorded the 16 municipalities is based on the


fact that each had pending cityhood bills long before the enactment of
RA 9009 that substantially distinguish them from other municipalities
aiming for cityhood. On top of this, each of the 16 also met the PhP 20

2009

by

Declaring

Instead

that

Respondents Motion

for

Reconsideration of the Resolution of March 31, 2009 and Motion for


Leave to File and to Admit Attached Second Motion for Reconsideration
of the Decision Dated November 18, 2008 Remain Unresolved and to

Conduct Further Proceedings, dated May 14, 2009, and their second
Motion for Reconsideration of the Decision dated November 18, 2008
are GRANTED. The June 2, 2009, the March 31, 2009, and April 31, 2009

1. Motion for Reconsideration of the Resolution dated August


24, 2010 dated and filed on September 14, 2010 by
respondents Municipality of Baybay, et al.; and
2. Opposition *To the Motion for Reconsideration of the
Resolution dated August 24, 2010+.

Resolutions are REVERSED and SET ASIDE. The entry of judgment made
on May 21, 2009 must accordingly be RECALLED.

Meanwhile, respondents also filed on September 20, 2010 a


Motion to Set Motion for Reconsideration of the Resolution
dated August 24, 2010 for Hearing. This motion was, however, already
denied by the Court En Banc.

The instant consolidated petitions and petitions-in-intervention


are DISMISSED. The cityhood laws, namely Republic Act Nos. 9389,
9390, 9391, 9392, 9393, 9394, 9398, 9404, 9405, 9407, 9408, 9409,
9434, 9435, 9436, and 9491 are declared VALID and CONSTITUTIONAL.

SO ORDERED.
LEAGUE OF CITIES 2011

A brief background
These cases were initiated by the consolidated petitions for
prohibition filed by the League of Cities of the Philippines (LCP), City of
Iloilo, City of Calbayog, and Jerry P. Treas, assailing the constitutionality
of the sixteen (16) laws,[1] each converting the municipality covered
thereby into a component city (Cityhood Laws), and seeking to enjoin
the Commission on Elections (COMELEC) from conducting plebiscites
pursuant to the subject laws.

For consideration of this Court are the following pleadings:


In the Decision dated November 18, 2008, the Court En Banc, by a
6-5 vote,[2] granted the petitions and struck down the Cityhood Laws as

unconstitutional for violating Sections 10 and 6, Article X, and the equal


protection clause.
In the Resolution dated March 31, 2009, the Court En Banc, by a
7-5 vote,[3] denied the first motion for reconsideration.
On April 28, 2009, the Court En Banc issued a Resolution, with a
vote of 6-6,[4] which denied the second motion for reconsideration for
being a prohibited pleading.
In its June 2, 2009 Resolution, the Court En Banc clarified its April
28, 2009 Resolution in this wise
As a rule, a second motion for reconsideration is a
prohibited pleading pursuant to Section 2, Rule 52 of the
Rules of Civil Procedure which provides that: No second
motion for reconsideration of a judgment or final resolution
by the same party shall be entertained. Thus, a decision
becomes final and executory after 15 days from receipt of the
denial of the first motion for reconsideration.
However, when a motion for leave to file and admit a
second motion for reconsideration is granted by the Court,
the Court therefore allows the filing of the second motion for

reconsideration. In such a case, the second motion for


reconsideration is no longer a prohibited pleading.
In the present case, the Court voted on the second
motion for reconsideration filed by respondent cities. In
effect, the Court allowed the filing of the second motion for
reconsideration. Thus, the second motion for reconsideration
was no longer a prohibited pleading. However, for lack of the
required number of votes to overturn the 18 November
2008 Decision and 31 March 2009 Resolution, the Court
denied the second motion for reconsideration in its 28 April
2009 Resolution.[5]

Then, in another Decision dated December 21, 2009, the Court En


Banc, by a vote of 6-4,[6] declared the Cityhood Laws as constitutional.
On August 24, 2010, the Court En Banc, through a Resolution, by a
vote of 7-6,[7] resolved the Ad Cautelam Motion for Reconsideration and
Motion to Annul the Decision of December 21, 2009, both filed by
petitioners, and the Ad Cautelam Motion for Reconsideration filed by
petitioners-in-intervention Batangas City, Santiago City, Legazpi City,
Iriga City, Cadiz City, and Oroquieta City, reinstating the November 18,
2008 Decision. Hence, the aforementioned pleadings.

Considering these circumstances where the Court En Banc has


twice changed its position on the constitutionality of the 16 Cityhood
Laws, and especially taking note of the novelty of the issues involved in
these cases, the Motion for Reconsideration of the Resolution dated
August 24, 2010 deserves favorable action by this Court on the basis of
the following cogent points:
1.
The 16 Cityhood Bills do not violate Article X, Section 10 of
the Constitution.

thereof, as amended by Republic Act (R.A.) No. 9009, which took effect
on June 30, 2001, viz.
Section 450. Requisites for Creation. a) A municipality
or a cluster of barangays may be converted into a component
city if it has a locally generated annual income, as certified by
the Department of Finance, of at least One Hundred Million
Pesos (P100,000,000.00) for at least two (2) consecutive
years based on 2000 constant prices, and if it has either of the
following requisites:
xxxx

Article X, Section 10 provides


Section 10. No province, city, municipality, or barangay
may be created, divided, merged, abolished, or its boundary
substantially altered, except in accordance with the criteria
established in the local government code and subject to
approval by a majority of the votes cast in a plebiscite in the
political units directly affected.

The tenor of the ponencias of the November 18, 2008 Decision


and the August 24, 2010 Resolution is that the exemption clauses in the
16 Cityhood Laws are unconstitutional because they are not written in
the Local Government Code of 1991 (LGC), particularly Section 450

(c) The average annual income shall include the income


accruing to the general fund, exclusive of special funds,
transfers, and non-recurring income. (Emphasis supplied)

Prior to the amendment, Section 450 of the LGC required only an


average annual income, as certified by the Department of Finance, of at
least P20,000,000.00 for the last two (2) consecutive years, based on
1991 constant prices.
Before Senate Bill No. 2157, now R.A. No. 9009, was introduced by
Senator Aquilino Pimentel, there were 57 bills filed for conversion of 57

municipalities into component cities. During the 11th Congress (June


1998-June 2001), 33 of these bills were enacted into law, while 24
remained as pending bills. Among these 24 were the 16 municipalities
that were converted into component cities through the Cityhood Laws.
The rationale for the enactment of R.A. No. 9009 can be gleaned
from the sponsorship speech of Senator Pimentel on Senate Bill No.
2157, to wit
Senator Pimentel. Mr. President, I would have wanted
this bill to be included in the whole set of proposed
amendments that we have introduced to precisely amend the
Local Government Code. However, it is a fact that there is
a mad rush of municipalities wanting to be converted into
cities. Whereas in 1991, when the Local Government was
approved, there were only 60 cities, today the number has
increased to 85 cities, with 41 more municipalities applying
for conversion to the same status. At the rate we are going, I
am apprehensive that before long this nation will be a
nation of all cities and no municipalities.
It is for that reason, Mr. President, that we are
proposing among other things, that the financial requirement,
which, under the Local Government Code, is fixed at P20
million, be raised to P100 million to enable a municipality to

have the right to be converted into a city, and the P100


million should be sourced from locally generated funds.
What has been happening, Mr. President, is, the
municipalities aspiring to become cities say that they qualify
in terms of financial requirements by incorporating the
Internal Revenue share of the taxes of the nation on to their
regularly generated revenue. Under that requirement, it
looks clear to me that practically all municipalities in this
country would qualify to become cities.
It is precisely for that reason, therefore, that we are
seeking the approval of this Chamber to amend, particularly
Section 450 of Republic Act No. 7160, the requisite for the
average annual income of a municipality to be converted into
a city or cluster of barangays which seek to be converted into
a city, raising that revenue requirement from P20 million
to P100 million for the last two consecutive years based on
2000 constant prices.[8]

While R.A. No. 9009 was being deliberated upon, Congress was
well aware of the pendency of conversion bills of several municipalities,
including those covered by the Cityhood Laws, desiring to become
component cities which qualified under the P20 million income
requirement of the old Section 450 of the LGC. The interpellation of
Senate President Franklin Drilon of Senator Pimentel is revealing, thus

THE PRESIDENT. The Chair would like to ask for some


clarificatory point.
SENATOR PIMENTEL. Yes, Mr. President.
THE PRESIDENT. This is just on the point of the pending bills
in the Senate which propose the conversion of a number of
municipalities into cities and which qualify under the
present standard.
We would like to know the view of the
sponsor: Assuming that this bill becomes a law, will the
Chamber apply the standard as proposed in this bill to those
bills which are pending for consideration?
SENATOR PIMENTEL. Mr. President, it might not be fair to
make this bill, on the assumption that it is approved,
retroact to the bills that are pending in the Senate
conversion from municipalities to cities.
THE PRESIDENT. Will there be an appropriate language
crafted to reflect that view? Or does it not become a policy of
the Chamber, assuming that this bill becomes a law
tomorrow, that it will apply to those bills which are already
approved by the House under the old version of the Local
Government Code and are now pending in the Senate? The
Chair does not know if we can craft a language which will limit

the application to those which are not yet in the Senate. Or is


that a policy that the Chamber will adopt?
SENATOR PIMENTEL. Mr. President, personally, I do not think
it is necessary to put that provision because what we are
saying here will form part of the interpretation of this
bill. Besides, if there is no retroactivity clause, I do not think
that the bill would have any retroactive effect.
THE PRESIDENT. So the understanding is that those bills
which are already pending in the Chamber will not be
affected.
SENATOR PIMENTEL. These will not be affected, Mr.
President.
THE PRESIDENT. Thank you Mr. Chairman.[9]

Clearly, based on the above exchange, Congress intended that


those with pending cityhood bills during the 11th Congress would not be
covered by the new and higher income requirement of P100 million
imposed by R.A. No. 9009. When the LGC was amended by R.A. No.
9009, the amendment carried with it both the letter and the intent of
the law, and such were incorporated in the LGC by which the
compliance of the Cityhood Laws was gauged.

Notwithstanding that both the 11th and 12th Congress failed to act
upon the pending cityhood bills, both the letter and intent of Section
450 of the LGC, as amended by R.A. No. 9009, were carried on until the
13th Congress, when the Cityhood Laws were enacted. The exemption
clauses found in the individual Cityhood Laws are the express
articulation of that intent to exempt respondent municipalities from the
coverage of R.A. No. 9009.
Even if we were to ignore the above quoted exchange between
then Senate President Drilon and Senator Pimentel, it cannot be denied
that Congress saw the wisdom of exempting respondent municipalities
from complying with the higher income requirement imposed by the
amendatory R.A. No. 9009. Indeed, these municipalities have proven
themselves viable and capable to become component cities of their
respective provinces. It is also acknowledged that they were centers of
trade and commerce, points of convergence of transportation, rich
havens of agricultural, mineral, and other natural resources, and
flourishing tourism spots. In this regard, it is worthy to mention the
distinctive traits of each respondent municipality, viz
Batac, Ilocos Norte It is the biggest municipality of the
2nd District of Ilocos Norte, 2nd largest and most progressive

town in the province of Ilocos Norte and the natural


convergence point for the neighboring towns to transact their
commercial ventures and other daily activities. A growing
metropolis, Batac is equipped with amenities of modern living
like banking institutions, satellite cable systems,
telecommunications systems. Adequate roads, markets,
hospitals, public transport systems, sports, and entertainment
facilities. [Explanatory Note of House Bill No. 5941,
introduced by Rep. Imee R. Marcos.]
El Salvador, Misamis Oriental It is located at the center of
the Cagayan-Iligan Industrial Corridor and home to a number
of industrial companies and corporations. Investment and
financial affluence ofEl Salvador is aptly credited to its
industrious and preserving people. Thus, it has become the
growing investment choice even besting nearby cities and
municipalities. It is home to Asia Brewery as distribution port
of their product in Mindanao. The Gokongwei Group of
Companies is also doing business in the area. So, the
conversion is primarily envisioned to spur economic and
financial prosperity to this coastal place in North-Western
Misamis Oriental. [Explanatory Note of House Bill No. 6003,
introduced by Rep. Augusto H. Bacullo.]
Cabadbaran, Agusan del Norte It is the largest of the eleven
(11) municipalities in the province of Agusan del Norte. It
plays strategic importance to the administrative and socioeconomic life and development of Agusan del Norte. It is the
foremost in terms of trade, commerce, and industry. Hence,

the municipality was declared as the new seat and capital of


the provincial government of Agusan del Norte pursuant to
Republic Act No. 8811 enacted into law on August 16,
2000. Its conversion will certainly promote, invigorate, and
reinforce the economic potential of the province in
establishing itself as an agro-industrial center in the Caraga
region and accelerate the development of the
area. [Explanatory Note of House Bill No. 3094, introduced by
Rep. Ma. Angelica Rosedell M. Amante.]
Borongan, Eastern Samar It is the capital town of Eastern
Samar and the development of Eastern Samar will depend to
a certain degree of its urbanization. It will serve as a catalyst
for the modernization and progress of adjacent towns
considering the frequent interactions between the
populace. [Explanatory Note of House Bill No. 2640,
introduced by Rep. Marcelino C. Libanan.]
Lamitan, Basilan Before Basilan City was converted into a
separate province, Lamitan was the most progressive part of
the city. It has been for centuries the center of commerce
and the seat of the Sultanate of the Yakan people of
Basilan. The source of its income is agro-industrial and others
notably copra, rubber, coffee and host of income generating
ventures. As the most progressive town in Basilan, Lamitan
continues to be the center of commerce catering to the
municipalities
of
Tuburan,
Tipo-Tipo
and

Sumisip. [Explanatory Note of House Bill No.


introduced by Rep. Gerry A. Salapuddin.]

5786,

Catbalogan, Samar It has always been the socio-economicpolitical capital of the Island of Samar even during the Spanish
era. It is the seat of government of the two congressional
districts of Samar. Ideally located at the crossroad between
Northern and Eastern Samar, Catbalogan also hosts trade and
commerce activates among the more prosperous cities of the
Visayas like Tacloban City, Cebu Cityand the cities of Bicol
region. The numerous banks and telecommunication facilities
showcases the healthy economic environment of the
municipality. The preeminent and sustainable economic
situation of Catbalogan has further boosted the call of
residents for a more vigorous involvement of governance of
the municipal government that is inherent in a city
government. [Explanatory Note of House Bill No. 2088,
introduced by Rep. Catalino V. Figueroa.]
Bogo, Cebu Bogo is very qualified for a city in terms of
income, population and area among others. It has been
elevated to the Hall of Fame being a five-time winner
nationwide in the clean and green program. [Explanatory
Note of House Bill No. 3042, introduced by Rep. Clavel A.
Martinez.]
Tandag, Surigao del Sur This over 350 year old capital town
the province has long sought its conversion into a city that will

pave the way not only for its own growth and advancement
but also help in the development of its neighboring
municipalities and the province as a whole. Furthermore, it
can enhance its role as the provinces trade, financial and
government center. [Explanatory Note of House Bill No.
5940, introduced by Rep. Prospero A. Pichay, Jr.]
Bayugan, Agusan del Sur It is a first class municipality and
the biggest in terms of population in the entire province. It
has the most progressive and thickly populated area among
the 14 municipalities that comprise the province. Thus, it has
become the center for trade and commerce in Agusan del
Sur. It has a more developed infrastructure and facilities than
other municipalities in the province. [Explanatory Note of
House Bill No. 1899, introduced by Rep. Rodolfo Ompong G.
Plaza.]
Carcar, Cebu Through the years, Carcar metamorphosed
from rural to urban and now boast of its manufacturing
industry, agricultural farming, fishing and prawn industry and
its thousands of large and small commercial establishments
contributing to the bulk of economic activities in the
municipality. Based on consultation with multi-sectoral
groups, political and non-government agencies, residents and
common folk in Carcar, they expressed their desire for the
conversion of the municipality into a component
city. [Explanatory Note of House Bill No. 3990, introduced by
Rep. Eduardo R. Gullas.]

Guihulngan, Negros Oriental Its population is second


highest in the province, next only to the provincial capital and
higher
than Canlaon City and Bais City. Agriculture
contributes heavily to its economy. There are very good
prospects in agricultural production brought about by its
favorable climate. It has also the Tanon Strait that provides a
good fishing ground for its numerous fishermen. Its potential
to grow commercially is certain. Its strategic location brought
about by its existing linkage networks and the major
transportation corridors traversing the municipality has
established Guihulngan as the center of commerce and trade
in this part of Negros Oriental with the first congressional
district as its immediate area of influence. Moreover, it has
beautiful tourist spots that are being availed of by local and
foreign tourists. [Explanatory Note of House Bill No. 3628,
introduced by Rep. Jacinto V. Paras.]
Tayabas, Quezon It flourished and expanded into an
important politico-cultural center in [the] Tagalog region. For
131 years (1179-1910), it served as the cabecera of the
province which originally carried the cabeceras own name,
Tayabas. The locality is rich in culture, heritage and trade. It
was at the outset one of the more active centers of
coordination and delivery of basic, regular and diverse goods
and services within the first district of Quezon
Province. [Explanatory Note of House Bill No. 3348,
introduced by Rep. Rafael P. Nantes.]

Tabuk, Kalinga It not only serves as the main hub of


commerce and trade, but also the cultural center of the rich
customs and traditions of the different municipalities in the
province. For the past several years, the income of Tabuk has
been steadily increasing, which is an indication that its
economy is likewise progressively growing. [Explanatory Note
of House Bill No. 3068, introduced by Rep. Laurence P.
Wacnang.]
Available
information
on Baybay, Leyte;
Mati, Davao Oriental; and Naga, Cebu shows their economic
viability, thus:
Covering an area of 46,050 hectares, Baybay [Leyte] is
composed of 92 barangays, 23 of which are in
the poblacion. The
remaining
69
are
rural barangays. Baybay City is classified as a first class
city. It is situated on the western coast of
the province of Leyte. It has a Type 4 climate, which is
generally wet. Its topography is generally mountainous in the
eastern portion as it slopes down west towards the shore
line. Generally an agricultural city, the common means of
livelihood are farming and fishing. Some are engaged in
hunting and in forestall activities. The most common crops
grown are rice, corn, root crops, fruits, and
vegetables. Industries operating include the Specialty
Products Manufacturing, Inc. and the Visayan Oil

Mill. Various cottage industries can also be found in the city


such as bamboo and rattan craft, ceramics, dress-making,
fiber craft, food preservation, mat weaving, metal craft, fine
Philippine furniture manufacturing and other related
activities. Baybay has great potential as a tourist destination,
especially for tennis players. It is not only rich in biodiversity
and history, but it also houses the campus of
the Visayas State University (formerly the Leyte State
University/Visayas State College of Agriculture/Visayas
Agricultural
College/Baybay
National
Agricultural
School/Baybay
Agricultural
High
School
and
the Jungle Valley Park.) Likewise, it has river systems fit for
river cruising, numerous caves for spelunking, forests,
beaches, and marine treasures. This richness, coupled with
the friendly Baybayanos, will be an element of a successful
tourism program. Considering the role of tourism in
development, Baybay City intends to harness its tourism
potential.
(<http://en.wikipedia.org/wiki/Baybay
City>
visited September 19, 2008)
Mati [Davao Oriental] is located on the eastern part of
the island of Mindanao. It is one hundred sixty-five (165)
kilometers away from Davao City, a one and a half-hour drive
from Tagum City. Visitors can travel from Davao City through
the Madaum diversion road, which is shorter than taking the
Davao-Tagum highway. Travels by air and sea are possible,
with the existence of an airport and seaport. Mati boasts of
being the coconut capital of Mindanao if not the whole

country. A large portion of its fertile land is planted to


coconuts, and a significant number of its population is largely
dependent on it. Other agricultural crops such as mango,
banana, corn, coffee and cacao are also being cultivated, as
well as the famous Menzi pomelo and Valencia oranges. Mati
has a long stretch of shoreline and one can find beaches of
pure, powder-like white sand. A number of resorts have been
developed and are now open to serve both local and
international tourists. Some of these resorts are situated
along the coast of Pujada Bay and the Pacific Ocean. Along
the western coast of the bay lies Mt. Hamiguitan, the home of
the pygmy forest, where bonsai plants and trees grow, some
of which are believed to be a hundred years old or more. On
its peak is a lake, called Tinagong Dagat, or hidden sea, so
covered by dense vegetation a climber has to hike trails for
hours to reach it. The mountain is also host to rare species of
flora and fauna, thus becoming a wildlife sanctuary for these
life forms. (<http://mati.wetpain.com/?t=anon> accessed
on September 19, 2008.)
Mati is abundant with nickel, chromite, and
copper. Louie Rabat, Chamber President of the Davao
Oriental Eastern Chamber of Commerce and Industry,
emphasized the big potential of the mining industry in
the province of Davao Oriental. As such, he strongly
recommends Mati as the mining hub in the Region.

(<http://www.pia.gov.ph/default.asp?m=12&sec=reader&rp=
1&fi=p080115.htm&no.=9&date, accessed on September 19,
2008)
Naga [Cebu]: Historical BackgroundIn the early times, the
place now known as Naga was full of huge trees locally called
as Narra. The first settlers referred to this place as Narra,
derived from the huge trees, which later simply became
Naga. Considered as one of the oldest settlements in
the Province of Cebu, Naga became a municipality on June 12,
1829. The municipality has gone through a series of
classifications as its economic development has undergone
changes and growth. The tranquil farming and fishing villages
of the natives were agitated as the Spaniards came and
discovered coal in the uplands. Coal was the first export of
the municipality, as the Spaniards mined and sent it
to Spain. The mining industry triggered the industrial
development of Naga. As the years progressed,
manufacturing and other industries followed, making Naga
one
of
the
industrialized
municipalities
in
the Province of Cebu.
Class of Municipality
Province
Distance from Cebu City
Number of Barangays
No. of Registered Voters
14, 2007

1st class
Cebu
22 kms.
28
44,643 as of May

Total No. of Precincts

237 (as of May 14,

2007)
Ann.

Income

(as

of Dec.
31,
2006) Php112,219,7
18.35

Agricultural, Industrial,
Agro-Industrial,
Mining Product
(<http://www.nagacebu.com/index.php?option=com.content
&view=article id=53:naga-facts-and-figures&catid=51:nagafacts-and-figures&Itemid=75> visited September 19, 2008)

The enactment of the Cityhood Laws is an exercise by Congress of


its legislative power. Legislative power is the authority, under the
Constitution, to make laws, and to alter and repeal them.[10] The
Constitution, as the expression of the will of the people in their original,
sovereign, and unlimited capacity, has vested this power in the Congress
of the Philippines. The grant of legislative power to Congress is broad,
general, and comprehensive. The legislative body possesses plenary
powers for all purposes of civil government. Any power, deemed to be
legislative by usage and tradition, is necessarily possessed by Congress,
unless the Constitution has lodged it elsewhere. In fine, except as
limited by the Constitution, either expressly or impliedly, legislative

power embraces all subjects, and extends to matters of general concern


or common interest.[11]
Without doubt, the LGC is a creation of Congress through its lawmaking powers. Congress has the power to alter or modify it as it did
when it enacted R.A. No. 9009. Such power of amendment of laws was
again exercised when Congress enacted the Cityhood Laws. When
Congress enacted the LGC in 1991, it provided for quantifiable indicators
of economic viability for the creation of local government units
income, population, and land area. Congress deemed it fit to modify the
income requirement with respect to the conversion of municipalities
into component cities when
it enacted R.A. No. 9009, imposing an amount of P100 million,
computed only from locally-generated sources. However, Congress
deemed it wiser to exempt respondent municipalities from such a
belatedly imposed modified income requirement in order to uphold its
higher calling of putting flesh and blood to the very intent and thrust of
the LGC, which is countryside development and autonomy, especially
accounting for these municipalities as engines for economic growth in
their respective provinces.
Undeniably, R.A. No. 9009 amended the LGC. But it is also true
that, in effect, the Cityhood Laws amended R.A. No. 9009 through the

exemption clauses found therein. Since the Cityhood Laws explicitly


exempted the concerned municipalities from the amendatory R.A. No.
9009, such Cityhood Laws are, therefore, also amendments to the LGC
itself. For this reason, we reverse the November 18, 2008 Decision and
the August 24, 2010 Resolution on their strained and stringent view that
the Cityhood Laws, particularly their exemption clauses, are not found in
the LGC.

Upon more profound reflection and deliberation, we declare that


there was valid classification, and the Cityhood Laws do not violate the
equal protection clause.

2.
The Cityhood Laws do not violate Section 6, Article X and
the equal protection clause of the Constitution.

The petitioners argue that there is no substantial distinction


between municipalities with pending cityhood bills in the 11th Congress
and municipalities that did not have pending bills, such that the mere
pendency of a cityhood bill in the 11th Congress is not a material
difference to distinguish one municipality from another for the purpose
of the income requirement. This contention misses the point.

Both the November 18, 2008 Decision and the August 24,
2010 Resolution impress that the Cityhood Laws violate the equal
protection clause enshrined in the Constitution. Further, it was also
ruled that Section 6, Article X was violated because the Cityhood Laws
infringed on the just share that petitioner and petitioners-inintervention shall receive from the national taxes (IRA) to be
automatically released to them.

As this Court has ruled, the equal protection clause of the 1987
Constitution permits a valid classification, provided that it: (1) rests on
substantial distinctions; (2) is germane to the purpose of the law; (3) is
not limited to existing conditions only; and (4) applies equally to all
members of the same class.[12]

It should be recalled from the above quoted portions of the


interpellation by Senate President Drilon of Senator Pimentel that the
purpose of the enactment of R.A. No 9009 was merely to stop the mad
rush of municipalities wanting to be converted into cities and the
apprehension that before long the country will be a country of cities and

without municipalities. It should be pointed out that the imposition of


the P100 million average annual income requirement for the creation of
component cities was arbitrarily made. To be sure, there was no
evidence or empirical data, such as inflation rates, to support the choice
of this amount. The imposition of a very high income requirement
of P100 million, increased from P20 million, was simply to make it
extremely difficult for municipalities to become component cities. And
to highlight such arbitrariness and the absurdity of the situation created
thereby, R.A. No. 9009 has, in effect, placed component cities at a
higher standing than highly urbanized cities under Section 452 of the
LGC, to wit
Section 452. Highly Urbanized Cities. (a) Cities with a
minimum population of two hundred thousand (200,000)
inhabitants, as certified by the National Statistics Office,
and with the latest annual income of at least Fifty Million
Pesos (P50,000,000.00) based on 1991 constant prices, as
certified by the city treasurer, shall be classified as highly
urbanized cities.
(b) Cities which do not meet above requirements
shall be considered component cities of the province in
which they are geographically located. (Emphasis supplied)

The P100 million income requirement imposed by R.A. No. 9009,


being an arbitrary amount, cannot be conclusively said to be the only
amount sufficient, based on acceptable standards, to provide for all
essential government facilities and services and special functi
ons
commensurate with the size of its population, per Section 7[13] of the
LGC. It was imposed merely because it is difficult to comply with. While
it could be argued that P100 million, being more than P20 million, could,
of course, provide the essential government facilities, services, and
special functions vis--vis the population of a municipality wanting to
become a component city, it cannot be said that the minimum amount
of P20 million would be insufficient. This is evident from the existing
cities whose income, up to now, do not comply with the P100 million
income requirement, some of which have lower than the P20 million
average annual income. Consider the list[14] below
CITY
1.
2.
3.
4.
5.
6.

Marawi City
Palayan City
Sipalay City
Canlaon City
Himamaylan City
Isabela City

AVERAGE ANNUAL
INCOME
5,291,522.10
6,714,651.77
9,713,120.00
13,552,493.79
15,808,530.00
16,811,246.79

7. Munoz City
8. Dapitan City
9. Tangub City
10. Bayawan City
11. Island Garden City of Samal
12. Tanjay City
13. Tabaco City
14. Oroquieta City
15. Ligao City
16. Sorsogon City
17. Maasin City
18. Escalante City
19. Iriga City
20. Gapan City
21. Candon City
22. Gingoog City
23. Masbate City
24. Passi City
25. Calbayog City
26. Calapan City
27. Cadiz City
28. Alaminos City
29. Bais City
30. San Carlos City
31. Silay City
32. Bislig City
33. Tacurong City
34. Talisay City (Negros Occidental)
35. Kabankalan City

19,693,358.61
20,529,181.08
20,943,810.04
22,943,810.04
23,034,731.83
23,723,612.44
24,152,853.71
24,279,966.51
28,326,745.86
30,403,324.59
30,572,113.65
32,113,970.00
32,757,871.44
34,254,986.47
36,327,705.86
37,327,705.86
39,454,508.28
40,314,620.00
40,943,128.73
41,870,239.21
43,827,060.00
44,352,501.00
44, 646,826.48
46,306,129.13
47,351,730.00
47,360,716.24
49,026,281.56
52,609,790.00
53,560,580.00

36. Malaybalay City


37. La Carlota City
38. Vigan City
39. Balanga City
40. Sagay City
41. Cavite City
42. Koronadal City
43. Cotabato City
44. Toledo City
45. San Jose City
46. Danao City
47. Bago City
48. Valencia City
49. Victorias City
50. Cauayan City
51. Santiago City
52. Roxas City
53. Dipolog City
54. Trece Martires City
55. Talisay City (Cebu)
56. Ozamis city
57. Surigao City
58. Panabo City
59. Digos City

54,423,408.55
54,760,290.00
56,831,797.19
61,556,700.49
64,266,350.00
64,566,079.05
66,231,717.19
66,302,114.52
70,157,331.12
70,309,233.43
72,621,955.30
74,305,000.00
74,557,298.92
75,757,298.92
82,949,135.46
83,816,025.89
85,397,830.00
85,503,262.85
87,413,786.64
87,964,972.97
89,054,056.12
89,960,971.33
91,425,301.39
92,647,699.13

The undeniable fact that these cities remain viable as component cities
of their respective provinces emphasizes the arbitrariness of the amount

of P100 million as the new income requirement for the conversion of


municipalities into component cities. This arbitrariness can also be
clearly gleaned from the respective distinctive traits and level of
economic development of the individual respondent municipalities as
above submitted.
Verily, the determination of the existence of substantial distinction
with respect to respondent municipalities does not simply lie on the
mere pendency of their cityhood bills during the 11th Congress. This
Court sees the bigger picture. The existence of substantial distinction
with respect to respondent municipalities covered by the Cityhood Laws
is measured by the purpose of the law, not by R.A. No. 9009, but by the
very purpose of the LGC, as provided in its Section 2 (a), thus
SECTION 2. Declaration of Policy.(a) It is hereby
declared the policy of the State that the territorial and
political subdivisions of the State shall enjoy genuine and
meaningful local autonomy to enable them to attain their
fullest development as self-reliant communities and make
them more effective partners in the attainment of national
goals. Toward this end, the State shall provide for a more
responsive and accountable local government structure
instituted through a system of decentralization whereby local
government units shall be given more powers, authority,
responsibilities and resources. The process of decentralization

shall proceed from the National Government to the local


government units.

Indeed, substantial distinction lies in the capacity and viability of


respondent municipalities to become component cities of their
respective provinces. Congress, by enacting the Cityhood Laws,
recognized this capacity and viability of respondent municipalities to
become the States partners in accelerating economic growth and
development in the provincial regions, which is the very thrust of the
LGC, manifested by the pendency of their cityhood bills during the
11th Congress and their relentless pursuit for cityhood up to the
present. Truly, the urgent need to become a component city arose way
back in the 11th Congress, and such condition continues to exist.
Petitioners in these cases complain about the purported reduction
of their just share in the IRA. To be sure, petitioners are entitled to a
just share, not a specific amount. But the feared reduction proved to
be false when, after the implementation of the Cityhood Laws, their
respective shares increased, not decreased. Consider the
table[15]below
CITY

CY 2006 IRA
(Before Implementation of

CY 2008 IRA
(Actual Release After

Bais
Batangas
Bayawan
Cadiz
Calapan
Calbayog
Cauayan
Gen. Santos
Gingoog
Himamaylan
Iloilo
Iriga
Legaspi
Ligao
Oroquieta
Pagadian
San Carlos
San Fernando
Santiago
Silay
Surigao
Tacurong
Tagaytay
Tarlac
Tangub
Urdaneta
Victorias

Sixteen [16] Cityhood


Laws)
219,338,056.00
334,371,984.00
353,150,158.00
329,491,285.00
227,772,199.00
438,603,378.00
250,477,157.00
518,388,557.00
314,425,637.00
248,154,381.00
358,394,268.00
183,132,036.00
235,314,016.00
215,608,112.00
191,803,213.00
292,788,255.00
239,524,249.00
182,320,356.00
508,326,072.00
216,372,314.00
233,968,119.00
179,795,271.00
130,159,136.00
348,186,756.00
162,248,610.00
187,721,031.00
176,367,959.00

Implementation of Sixteen
[16] Cityhood Laws)
242,193,156.00
388,871,770.00
388,840,062.00
361,019,211.00
252,587,779.00
485,653,769.00
277,120,828.00
631,864,977.00
347,207,725.00
277,532,458.00
412,506,278.00
203,072,932.00
266,537,785.00
239,696,441.00
211,449,720.00
327,401,672.00
260,515,711.00
204,140,940.00
563,679,572.00
241,363,845.00
260,708,071.00
197,880,665.00
152,445,295.00
405,611,581.00
180,640,621.00
207,129,386.00
194,162,687.00

Zamboanga

918,013,016.00

1,009,972,704.00

What these petitioner cities were stating as a reduction of their


respective IRA shares was based on a computation of what they would
receive if respondent municipalities were not to become component
cities at all. Of course, that would mean a bigger amount to which they
have staked their claim. After considering these, it all boils down to
money and how much more they would receive if respondent
municipalities remain as municipalities and not share in the 23% fixed
IRA from the national government for cities.
Moreover, the debates in the Senate on R.A. No. 9009, should
prove enlightening:
SENATOR SOTTO. Mr. President, we just want to be
enlightened again on the previous qualification and the
present one being proposed. Before there were three
SENATOR PIMENTEL. There are three requisites for a
municipality to become a city. Let us start with the finance.
SENATOR SOTTO. Will the distinguished sponsor please
refresh us? I used to be the chairman of the Committee on
Local Government, but the new job that was given to me by

the Senate has erased completely my memory as far as the


Local Government Code is concerned.
SENATOR
PIMENTEL. Yes,
Mr.
President,
with
pleasure. There are three requirements. One is financial.
SENATOR SOTTO. All right. It used to be P20 million.
SENATOR PIMENTEL. It is P20 million. Now we are raising it
to P100 million of locally generated funds.
SENATOR SOTTO. In other words, the P20 million before
includes the IRA.
SENATOR PIMENTEL. No, Mr. President.
SENATOR SOTTO. It should not have been included?
SENATOR PIMENTEL. The internal revenue share should
never have been included. That was not the intention when
we first crafted the Local Government Code. The financial
capacity was supposed to be demonstrated by the
municipality wishing to become a city by its own effort,
meaning to say, it should not rely on the internal revenue
share that comes from the government. Unfortunately, I
think what happened in past conversions of municipalities
into cities was, the Department of Budget and
Management, along with the Department of Finance, had

included the internal revenue share as a part of the


municipality, demonstration that they are now financially
capable and can measure up to the requirement of the Local
Government Code of having a revenue of at least P20
million.
SENATOR SOTTO. I am glad that the sponsor, Mr. President,
has spread that into the Record because otherwise, if he did
not mention the Department of Finance and the Department
of Budget and Management, then I would have been blamed
for the misinterpretation. But anyway, the gentleman is
correct. That was the interpretation given to us during the
hearings.
So now, from P20 million, we make it P100
million from locally generated income as far as population is
concerned.
SENATOR PIMENTEL. As far as population is concerned, there
will be no change, Mr. President. Still 150,000.
SENATOR SOTTO. Still 150,000?
SENATOR PIMENTEL. Yes.
SENATOR SOTTO. And then the land area?

SENATOR PIMENTEL. As to the land area, there is no change;


it is still 100 square kilometers.
SENATOR SOTTO. But before it was either/or?

produce more babies. I do not knowexpand their


territories, whatever, by reclamation or otherwise. But the
whole proposal is geared towards making it difficult for
municipalities to convert into cities.

SENATOR PIMENTEL. That is correct. As long as it has one of


the three requirements, basically, as long as it meets the
financial requirement, then it may meet the territorial
requirement or the population requirement.

On the other hand, I would like to advert to the


fact that in the amendments that we are proposing for the
entire Local Government Code, we are also raising the
internal revenue share of the municipalities.

SENATOR SOTTO. So, it remains or?

SENATOR SOTTO. I see.

SENATOR PIMENTEL. We are now changing it into AND.

SENATOR PIMENTEL. So that, more or less, hindi naman sila


dehado in this particular instance.

SENATOR SOTTO. AND?


SENATOR PIMENTEL. Yes.
SENATOR SOTTO. I see.
SENATOR PIMENTEL. That is the proposal, Mr. President. In
other words
SENATOR SOTTO. Does the gentleman not think there will no
longer be any municipality that will qualify, Mr. President?
SENATOR PIMENTEL. There may still be municipalities which
can qualify, but it will take a little time. They will have to

SENATOR SOTTO. Well, then, because of that information,


Mr. President, I throw my full support behind the measure.
Thank you, Mr. President.
SENATOR PIMENTEL. Thank you very much, Mr. President.
(Emphasis supplied)[16]

From the foregoing, the justness in the act of Congress in enacting


the Cityhood Laws becomes obvious, especially considering that 33
municipalities were converted into component cities almost

immediately prior to the enactment of R.A. No. 9009. In the enactment


of the Cityhood Laws, Congress merely took the 16 municipalities
covered thereby from the disadvantaged position brought about by the
abrupt increase in the income requirement of R.A. No. 9009,
acknowledging the privilege that they have already given to those
newly-converted component cities, which prior to the enactment of R.A.
No. 9009, were undeniably in the same footing or class as the
respondent municipalities. Congress merely recognized the capacity and
readiness of respondent municipalities to become component cities of
their respective provinces.
Petitioners complain of the projects that they would not be able
to pursue and the expenditures that they would not be able to meet,
but totally ignored the respondent municipalities obligations arising
from the contracts they have already entered into, the employees that
they have already hired, and the projects that they have already
initiated and completed as component cities. Petitioners have
completely overlooked the need of respondent municipalities to
become effective vehicles intending to accelerate economic growth in
the countryside. It is like the elder siblings wanting to kill the newlyborns so that their inheritance would not be diminished.
Apropos is the following parable:

There was a landowner who went out at dawn to hire workmen


for his vineyard. After reaching an agreement with them for the usual
daily wage, he sent them out to his vineyard. He came out about
midmorning and saw other men standing around the marketplace
without work, so he said to them, You too go along to my vineyard and
I will pay you whatever is fair. They went. He came out again
around noon and mid-afternoon and did the same. Finally, going out in
late afternoon he found still others standing around. To these he said,
Why have you been standing here idle all day? No one has hired us,
they told him. He said, You go to the vineyard too. When evening
came, the owner of the vineyard said to his foreman, Call the workmen
and give them their pay, but begin with the last group and end with the
first. When those hired late in the afternoon came up they received a
full days pay, and when the first group appeared they thought they
would get more, yet they received the same daily wage. Thereupon
they complained to the owner, This last group did only an hours work,
but you have paid them on the same basis as us who have worked a full
day in the scorching heat. My friend, he said to one in reply, I do
you no injustice. You agreed on the usual wage, did you not? Take your
pay and go home. I intend to give this man who was hired last the same
pay as you. I am free to do as I please with my money, am I not? Or are
you envious because I am generous?[17]

Congress, who holds the power of the purse, in enacting the


Cityhood Laws, only sought the well-being of respondent municipalities,
having seen their respective capacities to become component cities of
their provinces, temporarily stunted by the enactment of R.A. No.
9009. By allowing respondent municipalities to convert into component
cities, Congress desired only to uphold the very purpose of the LGC, i.e.,
to make the local government units enjoy genuine and meaningful local
autonomy to enable them to attain their fullest development as selfreliant communities and make them more effective partners in the
attainment of national goals, which is the very mandate of the
Constitution.
Finally, we should not be restricted by technical rules of
procedure at the expense of the transcendental interest of justice and
equity. While it is true that litigation must end, even at the expense of
errors in judgment, it is nobler rather for this Court of last resort, as
vanguard of truth, to toil in order to dispel apprehensions and doubt, as
the following pronouncement of this Court instructs:
The right and power of judicial tribunals to declare
whether enactments of the legislature exceed the
constitutional limitations and are invalid has always been
considered a grave responsibility, as well as a solemn

duty. The courts invariably give the most careful


consideration to questions involving the interpretation and
application of the Constitution, and approach constitutional
questions with great deliberation, exercising their power in
this respect with the greatest possible caution and even
reluctance; and they should never declare a statute void,
unless its invalidity is, in their judgment, beyond reasonable
doubt. To justify a court in pronouncing a legislative act
unconstitutional, or a provision of a state constitution to be in
contravention of the Constitution x x x, the case must be so
clear to be free from doubt, and the conflict of the statute
with the constitution must be irreconcilable, because it is but
a decent respect to the wisdom, the integrity, and the
patriotism of the legislative body by which any law is passed
to presume in favor of its validity until the contrary is shown
beyond reasonable doubt. Therefore, in no doubtful case will
the judiciary pronounce a legislative act to be contrary to the
constitution. To doubt the constitutionality of a law is to
resolve the doubt in favor of its validity.[18]

WHEREFORE, the Motion for Reconsideration of the Resolution


dated August 24, 2010, dated and filed on September 14,
2010 by respondents Municipality of Baybay, et al. is GRANTED. The
Resolution dated August 24, 2010 is REVERSED and SET ASIDE. The
Cityhood LawsRepublic Acts Nos. 9389, 9390, 9391, 9392, 9393, 9394,

9398, 9404, 9405, 9407, 9408, 9409, 9434, 9435, 9436, and 9491are
declared CONSTITUTIONAL.
SO ORDERED.
ABAKADA VS EXEC
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. 9337 (R.A. No. 9337)1 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. 35552 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. 37053 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.
19504 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.
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.

ATTY. BANIQUED : . . . and therefore that was meant to temper the impact . . .
interrupted
J. PANGANIBAN : . . . mitigating measures . . .

July 1, 2005 is the effectivity date of R.A. No. 9337.5 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:

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 : . . . 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 afternoon. 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 : 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?

J. PANGANIBAN : It is not?
ATTY. BANIQUED : I guess so, Your Honor, yes.
ATTY. BANIQUED : Its not, because, Your Honor, there is an Executive Order that
granted the Petroleum companies some subsidy . . . interrupted
J. PANGANIBAN : Thats correct . . .

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 had 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 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?

(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.

ATTY. BANIQUED : Yes, Your Honor.


G.R. No. 168207
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 law is upheld by this Court. . .
.6
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

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 President to raise the VAT collection to at least
2 4/5 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);
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 value-added.
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, 125,7 148, 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 VAT-registered 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 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 anchor 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.

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.

ISSUES
The Court defined the issues, as follows:
PROCEDURAL ISSUE
Whether R.A. No. 9337 violates the following provisions of the Constitution:

The VAT is a tax on spending or consumption. It is levied on the sale, barter, exchange or
lease of goods or properties and services.8 Being an indirect tax on expenditure, the
seller of goods or services may pass on the amount of tax paid to the buyer,9 with the
seller acting merely as a tax collector.10 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, without transferring the burden to someone else.11 Examples
are individual and corporate income taxes, transfer taxes, and residence taxes.12
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
method" and "tax credit method" was used to determine the value-added tax
payable.13 Under the "tax credit method," an entity can credit against or subtract from
the VAT charged on its sales or outputs the VAT paid on its purchases, inputs and
imports.14
It was only in 1987, when President Corazon C. Aquino issued Executive Order No. 273,
that the VAT system was rationalized by imposing a multi-stage tax rate of 0% or 10% on
all sales using the "tax credit method."15
16

E.O. No. 273 was followed by R.A. No. 7716 or the Expanded VAT Law, R.A. No. 8241 or
the Improved VAT Law,17 R.A. No. 8424 or the Tax Reform Act of 1997,18 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 transact the business of the
nation, either at all, or at least with decency, deliberation, and order."19 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.
...
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,20 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
bicameral 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 rules of Congress, e.g., creation of the 2nd or 3rd Bicameral
Conference Committee by the House.This Court is not the proper forum for the

enforcement of these internal rules of Congress, whether House or Senate.


Parliamentary rules are merely procedural and with their observance the courts have
no concern. Whatever doubts there may be as 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 requisite number of members have agreed to a particular
measure."21 (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 theFarias case,22 the present
petitions also raise an issue regarding the actions taken by the conference committee
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,23 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 constitutional provision but is only
an internal rule of each house." 24 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. 3555
House Bill No.3705
Senate Bill No. 1950
With regard to "Stand-By Authority" in favor of President
Provides for 12% VAT on
Provides for 12% VAT in
Provides for a single rate
every sale of goods or
general on sales of goods or
of 10% VAT on sale of
properties (amending
properties and reduced
goods or properties
Sec. 106 of NIRC); 12%
rates for sale of certain
(amending Sec. 106 of
VAT on importation of
locally manufactured goods
NIRC), 10% VAT on sale of
goods (amending Sec.
and petroleum products and
services including sale of
107 of NIRC); and 12%
raw materials to be used in
electricity by generation
VAT on sale of services
the manufacture thereof
companies, transmission
and use or lease of
(amending Sec. 106 of NIRC);
and distribution
properties (amending
12% VAT on importation of
companies, and use or
Sec. 108 of NIRC)
goods and reduced rates for
lease of properties
certain imported products
(amending Sec. 108 of

No similar provision

including petroleum
NIRC)
products (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
Provides that the VAT
Provides that the VAT
imposed on power
imposed on sales of
generation and on the sale
electricity by generation
of petroleum products shall
companies and services of
be absorbed by generation
transmission companies
companies or sellers,
and distribution
respectively, and shall not
companies, as well as
be passed 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.
With regard to 70% limit on input tax credit
Provides that the input
No similar provision
Provides that the input
tax credit for capital
tax credit for capital
goods on which a VAT
goods on which a VAT has
has been paid shall be
been paid shall be equally
equally distributed over
distributed over 5 years

5 years or the
or the depreciable life of
depreciable life of such
such capital goods; the
capital goods; the input
input tax credit for goods
tax credit for goods and
and services other than
services other than
capital goods shall not
capital goods shall not
exceed 90% of the output
exceed 5% of the total
VAT.
amount of such 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 zerorated sales by a VAT-registered person may at his option be refunded or credited against
other internal revenue taxes, . . .
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 bill. The term
"settle" is synonymous to "reconcile" and "harmonize."25 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 passon 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. So, the thinking of the Senate is basically simple,
lets keep the VAT simple.26 (Emphasis supplied)
Rep. Teodoro Locsin further made the manifestation that the no pass-on provision
"never really enjoyed the support of either House."27
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 capping a major leakage that has placed our collection efforts at an apparent
disadvantage."28
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 Association vs.
Prado29 and Tolentino vs. Secretary of Finance,30 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
legislative department. The charge that in this case the Conference Committee acted as
a third legislative chamber is thus without any basis.31 (Emphasis supplied)

B. R.A. No. 9337 Does Not Violate Article VI, Section 26(2) of the Constitution on the "NoAmendment Rule"
Article VI, Sec. 26 (2) of the Constitution, states:

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.

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.

C. R.A. No. 9337 Does Not Violate Article VI, Section 24 of the Constitution on Exclusive
Origination of Revenue Bills

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:

Section 27
28(A)(1)
28(B)(1)
34(B)(1)
116
117
119
121
148
151
236
237
288

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 house of Congress, not to the conference committee
report.32 (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

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:
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.

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.

The argument does not hold water.

Article VI, Section 24 of the Constitution reads:

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.

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

...
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 on the enactment of such
laws.33 (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)
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 review of existing tax rates, evaluating the relevance given our present
conditions.34 (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 leakages 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 to 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 burden.35

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.

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.

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.

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:

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

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.

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:
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 of higher prices they will have to
pay as a result of VAT.36

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.

(ii) national government deficit as a percentage of GDP of the previous year exceeds
one and one-half percent (1 %).

(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 %).

(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 value-added tax to twelve
percent (12%), after any of the following conditions has been satisfied.

SEC. 5. Section 107 of the same Code, as amended, is hereby further amended to read
as follows:

(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

SEC. 107. Value-Added Tax on Importation of Goods.

(ii) national government deficit as a percentage of GDP of the previous year exceeds
one and one-half percent (1 %). (Emphasis supplied)

(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, 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

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

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 cognizance of and is supreme in matters falling within its own
constitutionally allocated sphere.37 A logical

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 delegated."38 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 intervening mind of another.39
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 to determine the expediency of its
enactment.40 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.

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.

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 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 person or body the power to determine when the
specified contingency has arisen. (Emphasis supplied).46

...

In Edu vs. Ericta,47 the Court reiterated:

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

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

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 delegate;41 and (b) fixes a
standard the limits of which are sufficiently determinate and determinable to
which the delegate must conform in the performance of his functions.42 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 circumstances under which
the legislative command is to be effected.43 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 exercise a power essentially legislative.44
In People vs. Vera,45 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.
...

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 regarded as
denying the legislature the necessary resources of flexibility and practicability.
(Emphasis supplied).48
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, but the legislature must
prescribe sufficient standards, policies or limitations on their authority.49 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 depends.50
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 information is
proper.51 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 Congress itself
properly to investigate.52
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.
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 denotes an imperative
obligation and is inconsistent with the idea of discretion.53 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 mandate is obeyed.54
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 language of Attorney-General Cushing, is "subject to the
direction of the President."55
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
department, to determine and declare the event upon which its expressed will is to take
effect.56 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 previous year
exceeds two and four-fifth percent (24/5%) 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 but only of the discretion as to the execution of a law. This is
constitutionally permissible.57 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 process can go forward.58
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 do so in such a manner is not within the province of the
Court to inquire into, its task being to interpret the law.59

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
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 collection goes below the 24/5 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 where none is provided for. Rewriting the law is a forbidden
ground that only Congress may tread upon.60
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
subtraction.61
Petitioners also contend that the increase in the VAT rate, which was allegedly an
incentive to the President to raise the VAT collection to at least 2 4/5 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 more than 1.5%, there is indeed a need to increase the VAT rate.62
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 hisCanons 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 possible over and above what it brings into the public treasury
of the state.63
It simply means that sources of revenues must be adequate to meet government
expenditures and their variations.64
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 adjustment in our revenue base.65
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 Fariascase, 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 does not
suffice to bring them within the range of judicial cognizance.66
In the same vein, the Court in this case will not dawdle on the purpose of Congress or
the executive policy, given that it is not for the judiciary to "pass upon questions of
wisdom, justice or expediency of legislation."67

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 conclusion. Absent such a
showing, the presumption of validity must prevail.68
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: "

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
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.

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 taxdue 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.

refunded to the taxpayer or credited against other internal revenue taxes, at the
taxpayers option.70

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).

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 for the payment of
the tax is the seller.71 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.

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 to the Bureau of Internal Revenue (BIR);69 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 output taxes shall instead be

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 VAT-registered 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, although it may not take away
property, which was vested by virtue of such rights.72
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 introduced.73 This was adopted by the Expanded VAT
Law (R.A. No. 7716),74 and The Tax Reform Act of 1997 (R.A. No. 8424).75 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:

creditable VAT, foreign investments were not deterred.78 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.

SEC. 110. Tax Credits.

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:

(A) Creditable Input Tax.

SEC. 114. Return and Payment of Value-added 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.

(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 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 4-year interest-free loan to the government.76 In the
same breath, Congress also justified its move by saying that the provision was designed
to raise an annual revenue of 22.6 billion.77 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-

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 valueadded 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 VAT directly or attributable to the taxable transaction.79

The Court need not explore the rationale behind the provision. It is clear that Congress
intended to treat differently taxable transactions with the government.80 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 valueadded tax imposed in Sections 106 and 108 of this Code, deduct and withhold the valueadded 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.
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. 14-2005 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 than 5%, the difference is treated as income.81
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 point will only be,
as Shakespeare describes life in Macbeth,82 "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 circumstances."83
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 presumption of
validity. As a rule, the judiciary will not interfere with such power absent a clear showing
of unreasonableness, discrimination, or arbitrariness.84
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
similar to each other in certain particulars and different from all others in these same
particulars.85
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.

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 everywhere with all people
at all times.86
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
classify subjects of taxation, and only demands uniformity within the particular class.87
R.A. No. 9337 is also equitable. The law is equipped with a threshold margin. The VAT
rate of 0% or 10% (or 12%) does not apply to sales of goods or services with gross
annual sales or receipts not exceeding P1,500,000.00.88Also, basic marine and
agricultural food products in their original state are still not subject to the tax,89 thus
ensuring that prices at the grassroots level will remain accessible. As was stated
in Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc. vs. Tan:90
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 previously exempt. Excise taxes on petroleum
products91 and natural gas92 were reduced. Percentage tax on domestic carriers was
removed.93 Power producers are now exempt from paying franchise tax.94
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 32%.95 Intercorporate
dividends of non-resident foreign corporations are still subject to 15% final withholding
tax but the tax credit allowed on the corporations domicile was increased to 20%.96 The
Philippine Amusement and Gaming Corporation (PAGCOR) is not exempt from income
taxes anymore.97 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.98
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 NIRC)99
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 or by the ballot box.100

The words of the Court in Vera vs. Avelino101 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.

KMU VS GARCIA
Public utilities are privately owned and operated businesses whose service are essential
to the general public. They are enterprises which specially cater to the needs of the
public and conduce to their comfort and convenience. As such, public utility services are
impressed with public interest and concern. The same is true with respect to the
business of common carrier which holds such a peculiar relation to the public interest
that there is superinduced upon it the right of public regulation when private properties
are affected with public interest, hence, they cease to be juris privati only. When,
therefore, one devotes his property to a use in which the public has an interest, he, in
effect grants to the public an interest in that use, and must submit to the control by the
public for the common good, to the extent of the interest he has thus created. 1
An abdication of the licensing and regulatory government agencies of their functions as
the instant petition seeks to show, is indeed lamentable. Not only is it an unsound
administrative policy but it is inimical to public trust and public interest as well.
The instant petition for certiorari assails the constitutionality and validity of certain
memoranda, circulars and/or orders of the Department of Transportation and
Communications (DOTC) and the Land Transportation Franchising and Regulatory Board

LTFRB) 2 which, among others, (a) authorize provincial bus and jeepney operators to increase or
decrease the prescribed transportation fares without application therefor with the LTFRB and without
hearing and approval thereof by said agency in violation of Sec. 16(c) of Commonwealth Act No. 146,
as amended, otherwise known as the Public Service Act, and in derogation of LTFRB's duty to fix and
determine just and reasonable fares by delegating that function to bus operators, and (b) establish a
presumption of public need in favor of applicants for certificates of public convenience (CPC) and
place on the oppositor the burden of proving that there is no need for the proposed service, in patent
violation not only of Sec. 16(c) of CA 146, as amended, but also of Sec. 20(a) of the same Act
mandating that fares should be "just and reasonable." It is, likewise, violative of the Rules of Court
3
which places upon each party the burden to prove his own affirmative allegations. The offending
provisions contained in the questioned issuances pointed out by petitioner, have resulted in the
introduction into our highways and thoroughfares thousands of old and smoke-belching buses, many
of which are right-hand driven, and have exposed our consumers to the burden of spiraling costs of
public transportation without hearing and due process.

The following memoranda, circulars and/or orders are sought to be nullified by the
instant petition, viz: (a) DOTC Memorandum Order 90-395, dated June 26, 1990 relative
to the implementation of a fare range scheme for provincial bus services in the country;
(b) DOTC Department Order No.
92-587, dated March 30, 1992, defining the policy framework on the regulation of
transport services; (c) DOTC Memorandum dated October 8, 1992, laying down rules
and procedures to implement Department Order No. 92-587; (d) LTFRB Memorandum
Circular No. 92-009, providing implementing guidelines on the DOTC Department Order
No. 92-587; and (e) LTFRB Order dated March 24, 1994 in Case No. 94-3112.
The relevant antecedents are as follows:
On June 26, 1990; then Secretary of DOTC, Oscar M. Orbos, issued Memorandum
Circular No. 90-395 to then LTFRB Chairman, Remedios A.S. Fernando allowing
provincial bus operators to charge passengers rates within a range of 15% above and
15% below the LTFRB official rate for a period of one (1) year. The text of the
memorandum order reads in full:
One of the policy reforms and measures that is in line with the thrusts
and the priorities set out in the Medium-Term Philippine Development

Plan (MTPDP) 1987 1992) is the liberalization of regulations in the


transport sector. Along this line, the Government intends to move away
gradually from regulatory policies and make progress towards greater
reliance on free market forces.
Based on several surveys and observations, bus companies are already
charging passenger rates above and below the official fare declared by
LTFRB on many provincial routes. It is in this context that some form of
liberalization on public transport fares is to be tested on a pilot basis.
In view thereof, the LTFRB is hereby directed to immediately publicize a
fare range scheme for all provincial bus routes in country (except those
operating within Metro Manila). Transport Operators shall be allowed to
charge passengers within a range of fifteen percent (15%) above and
fifteen percent (15%) below the LTFRB official rate for a period of one
year.
Guidelines and procedures for the said scheme shall be prepared by
LTFRB in coordination with the DOTC Planning Service.
The implementation of the said fare range scheme shall start on 6
August 1990.
For compliance. (Emphasis ours.)
Finding the implementation of the fare range scheme "not legally feasible," Remedios
A.S. Fernando submitted the following memorandum to Oscar M. Orbos on July 24,
1990, to wit:
With reference to DOTC Memorandum Order No. 90-395 dated 26 June
1990 which the LTFRB received on 19 July 1990, directing the Board "to
immediately publicize a fare range scheme for all provincial bus routes in
the country (except those operating within Metro Manila)" that will

allow operators "to charge passengers within a range of fifteen percent


(15%) above and fifteen percent (15%) below the LTFRB official rate for a
period of one year" the undersigned is respectfully adverting the
Secretary's attention to the following for his consideration:
1. Section 16(c) of the Public Service Act prescribes the
following for the fixing and determination of rates (a)
the rates to be approved should be proposed by public
service operators; (b) there should be a publication and
notice to concerned or affected parties in the territory
affected; (c) a public hearing should be held for the fixing
of the rates; hence, implementation of the proposed fare
range scheme on August 6 without complying with the
requirements of the Public Service Act may not be legally
feasible.
2. To allow bus operators in the country to charge fares
fifteen (15%) above the present LTFRB fares in the wake
of the devastation, death and suffering caused by the July
16 earthquake will not be socially warranted and will be
politically unsound; most likely public criticism against
the DOTC and the LTFRB will be triggered by the
untimely motu propioimplementation of the proposal by
the mere expedient of publicizing the fare range scheme
without calling a public hearing, which scheme many as
early as during the Secretary's predecessor know through
newspaper reports and columnists' comments to be
Asian Development Bank and World Bank inspired.
3. More than inducing a reduction in bus fares by fifteen
percent (15%) the implementation of the proposal will
instead trigger an upward adjustment in bus fares by
fifteen percent (15%) at a time when hundreds of

thousands of people in Central and Northern Luzon,


particularly in Central Pangasinan, La Union, Baguio City,
Nueva Ecija, and the Cagayan Valley are suffering from
the devastation and havoc caused by the recent
earthquake.
4. In lieu of the said proposal, the DOTC with its agencies
involved in public transportation can consider measures
and reforms in the industry that will be socially uplifting,
especially for the people in the areas devastated by the
recent earthquake.
In view of the foregoing considerations, the undersigned respectfully
suggests that the implementation of the proposed fare range scheme
this year be further studied and evaluated.
On December 5, 1990, private respondent Provincial Bus Operators Association of the
Philippines, Inc. (PBOAP) filed an application for fare rate increase. An across-the-board
increase of eight and a half centavos (P0.085) per kilometer for all types of provincial
buses with a minimum-maximum fare range of fifteen (15%) percent over and below
the proposed basic per kilometer fare rate, with the said minimum-maximum fare range
applying only to ordinary, first class and premium class buses and a fifty-centavo (P0.50)
minimum per kilometer fare for aircon buses, was sought.
On December 6, 1990, private respondent PBOAP reduced its applied proposed fare to
an across-the-board increase of six and a half (P0.065) centavos per kilometer for
ordinary buses. The decrease was due to the drop in the expected price of diesel.
The application was opposed by the Philippine Consumers Foundation, Inc. and Perla C.
Bautista alleging that the proposed rates were exorbitant and unreasonable and that
the application contained no allegation on the rate of return of the proposed increase in
rates.

On December 14, 1990, public respondent LTFRB rendered a decision granting the fare
rate increase in accordance with the following schedule of fares on a straight
computation method, viz:
AUTHORIZED FARES
LUZON
MIN. OF 5 KMS. SUCCEEDING KM.
REGULAR P1.50 P0.37
STUDENT P1.15 P0.28
VISAYAS/MINDANAO
REGULAR P1.60 P0.375
STUDENT P1.20 P0.285
FIRST CLASS (PER KM.)
LUZON P0.385
VISAYAS/
MINDANAO P0.395
PREMIERE CLASS (PER KM.)
LUZON P0.395
VISAYAS/
MINDANAO P0.405
AIRCON (PER KM.) P0.415. 4
On March 30, 1992, then Secretary of the Department of Transportation and
Communications Pete Nicomedes Prado issued Department Order No.
92-587 defining the policy framework on the regulation of transport services. The full
text of the said order is reproduced below in view of the importance of the provisions
contained therein:

WHEREAS, Executive Order No. 125 as amended, designates the


Department of Transportation and Communications (DOTC) as the
primary policy, planning, regulating and implementing agency on
transportation;

discontinued. The route measured capacity test or other similar tests of


demand for vehicle/vessel fleet on any route shall be used only as a
guide in weighing the merits of each franchise application and not as a
limit to the services offered.

WHEREAS, to achieve the objective of a viable, efficient, and dependable


transportation system, the transportation regulatory agencies under or
attached to the DOTC have to harmonize their decisions and adopt a
common philosophy and direction;

Where there are limitations in facilities, such as congested road space in


urban areas, or at airports and ports, the use of demand management
measures in conformity with market principles may be considered.

WHEREAS, the government proposes to build on the successful


liberalization measures pursued over the last five years and bring the
transport sector nearer to a balanced longer term regulatory framework;
NOW, THEREFORE, pursuant to the powers granted by laws to the DOTC,
the following policies and principles in the economic regulation of land,
air, and water transportation services are hereby adopted:
1. Entry into and exit out of the industry. Following the Constitutional
dictum against monopoly, no franchise holder shall be permitted to
maintain a monopoly on any route. A minimum of two franchise holders
shall be permitted to operate on any route.
The requirements to grant a certificate to operate, or certificate of public
convenience, shall be: proof of Filipino citizenship, financial capability,
public need, and sufficient insurance cover to protect the riding public.
In determining public need, the presumption of need for a service shall be
deemed in favor of the applicant. The burden of proving that there is no
need for a proposed service shall be with the oppositor(s).
In the interest of providing efficient public transport services, the use of
the "prior operator" and the "priority of filing" rules shall be

The right of an operator to leave the industry is recognized as a business


decision, subject only to the filing of appropriate notice and following a
phase-out period, to inform the public and to minimize disruption of
services.
2. Rate and Fare Setting. Freight rates shall be freed gradually from
government controls. Passenger fares shall also be deregulated, except
for the lowest class of passenger service (normally third class passenger
transport) for which the government will fix indicative or reference fares.
Operators of particular services may fix their own fares within a range
15% above and below the indicative or reference rate.
Where there is lack of effective competition for services, or on specific
routes, or for the transport of particular commodities, maximum
mandatory freight rates or passenger fares shall be set temporarily by
the government pending actions to increase the level of competition.
For unserved or single operator routes, the government shall contract
such services in the most advantageous terms to the public and the
government, following public bids for the services. The advisability of
bidding out the services or using other kinds of incentives on such routes
shall be studied by the government.

3. Special Incentives and Financing for Fleet Acquisition. As a matter of


policy, the government shall not engage in special financing and
incentive programs, including direct subsidies for fleet acquisition and
expansion. Only when the market situation warrants government
intervention shall programs of this type be considered. Existing programs
shall be phased out gradually.
The Land Transportation Franchising and Regulatory Board, the Civil
Aeronautics Board, the Maritime Industry Authority are hereby directed
to submit to the Office of the Secretary, within forty-five (45) days of this
Order, the detailed rules and procedures for the Implementation of the
policies herein set forth. In the formulation of such rules, the concerned
agencies shall be guided by the most recent studies on the subjects, such
as the Provincial Road Passenger Transport Study, the Civil Aviation
Master Plan, the Presidential Task Force on the Inter-island Shipping
Industry, and the Inter-island Liner Shipping Rate Rationalization Study.
For the compliance of all concerned. (Emphasis ours)
On October 8, 1992, public respondent Secretary of the Department of Transportation
and Communications Jesus B. Garcia, Jr. issued a memorandum to the Acting Chairman
of the LTFRB suggesting swift action on the adoption of rules and procedures to
implement above-quoted Department Order No. 92-587 that laid down deregulation
and other liberalization policies for the transport sector. Attached to the said
memorandum was a revised draft of the required rules and procedures covering (i)
Entry Into and Exit Out of the Industry and (ii) Rate and Fare Setting, with comments and
suggestions from the World Bank incorporated therein. Likewise, resplendent from the
said memorandum is the statement of the DOTC Secretary that the adoption of the
rules and procedures is a pre-requisite to the approval of the Economic Integration Loan
from the World Bank. 5
On February 17, 1993, the LTFRB issued Memorandum Circular
No. 92-009 promulgating the guidelines for the implementation of DOTC Department

Order No. 92-587. The Circular provides, among others, the following challenged
portions:
xxx xxx xxx
IV. Policy Guidelines on the Issuance of Certificate of Public Convenience.
The issuance of a Certificate of Public Convenience is determined by
public need. The presumption of public need for a service shall be
deemed in favor of the applicant, while burden of proving that there is no
need for the proposed service shall be the oppositor'(s).
xxx xxx xxx
V. Rate and Fare Setting
The control in pricing shall be liberalized to introduce price competition
complementary with the quality of service, subject to prior notice and
public hearing. Fares shall not be provisionally authorized without public
hearing.
A. On the General Structure of Rates
1. The existing authorized fare range system of plus or minus 15 per cent
for provincial buses and jeepneys shall be widened to 20% and -25% limit
in 1994 with the authorized fare to be replaced by an indicative or
reference rate as the basis for the expanded fare range.
2. Fare systems for aircon buses are liberalized to cover first class and
premier services.
xxx xxx xxx

(Emphasis ours).
Sometime in March, 1994, private respondent PBOAP, availing itself of the deregulation
policy of the DOTC allowing provincial bus operators to collect plus 20% and minus 25%
of the prescribed fare without first having filed a petition for the purpose and without
the benefit of a public hearing, announced a fare increase of twenty (20%) percent of
the existing fares. Said increased fares were to be made effective on March 16, 1994.
On March 16, 1994, petitioner KMU filed a petition before the LTFRB opposing the
upward adjustment of bus fares.

Petitioner KMU anchors its claim on two (2) grounds. First, the authority given by
respondent LTFRB to provincial bus operators to set a fare range of plus or minus fifteen
(15%) percent, later increased to plus twenty (20%) and minus twenty-five (-25%)
percent, over and above the existing authorized fare without having to file a petition for
the purpose, is unconstitutional, invalid and illegal. Second, the establishment of a
presumption of public need in favor of an applicant for a proposed transport service
without having to prove public necessity, is illegal for being violative of the Public
Service Act and the Rules of Court.

On March 24, 1994, the LTFRB issued one of the assailed orders dismissing the petition
for lack of merit. The dispositive portion reads:

In its Comment, private respondent PBOAP, while not actually touching upon the issues
raised by the petitioner, questions the wisdom and the manner by which the instant
petition was filed. It asserts that the petitioner has no legal standing to sue or has no
real interest in the case at bench and in obtaining the reliefs prayed for.

PREMISES CONSIDERED, this Board after considering the arguments of


the parties, hereby DISMISSES FOR LACK OF MERIT the petition filed in
the above-entitled case. This petition in this case was resolved with
dispatch at the request of petitioner to enable it to immediately avail of
the legal remedies or options it is entitled under existing laws.

In their Comment filed by the Office of the Solicitor General, public respondents DOTC
Secretary Jesus B. Garcia, Jr. and the LTFRB asseverate that the petitioner does not have
the standing to maintain the instant suit. They further claim that it is within DOTC and
LTFRB's authority to set a fare range scheme and establish a presumption of public need
in applications for certificates of public convenience.

SO ORDERED. 6

We find the instant petition impressed with merit.

Hence, the instant petition for certiorari with an urgent prayer for issuance of a
temporary restraining order.

At the outset, the threshold issue of locus standi must be struck. Petitioner KMU has the
standing to sue.

The Court, on June 20, 1994, issued a temporary restraining order enjoining, prohibiting
and preventing respondents from implementing the bus fare rate increase as well as the
questioned orders and memorandum circulars. This meant that provincial bus fares
were rolled back to the levels duly authorized by the LTFRB prior to March 16, 1994. A
moratorium was likewise enforced on the issuance of franchises for the operation of
buses, jeepneys, and taxicabs.

The requirement of locus standi inheres from the definition of judicial power. Section 1
of Article VIII of the Constitution provides:
xxx xxx xxx
Judicial power includes the duty of the courts of justice to settle actual
controversies involving rights which are legally demandable and
enforceable, and to determine whether or not there has been a grave

abuse of discretion amounting to lack or excess of jurisdiction on the


part of any branch or instrumentality of the Government.
In Lamb v. Phipps, 7 we ruled that judicial power is the power to hear and decide causes pending
between parties who have the right to sue in the courts of law and equity. Corollary to this provision
is the principle of locus standi of a party litigant. One who is directly affected by and whose interest is
immediate and substantial in the controversy has the standing to sue. The rule therefore requires
that a party must show a personal stake in the outcome of the case or an injury to himself that can be
redressed by a favorable decision so as to warrant an invocation of the court's jurisdiction and to
8
justify the exercise of the court's remedial powers in his behalf.

In the case at bench, petitioner, whose members had suffered and continue to suffer
grave and irreparable injury and damage from the implementation of the questioned
memoranda, circulars and/or orders, has shown that it has a clear legal right that was
violated and continues to be violated with the enforcement of the challenged
memoranda, circulars and/or orders. KMU members, who avail of the use of buses,
trains and jeepneys everyday, are directly affected by the burdensome cost of arbitrary
increase in passenger fares. They are part of the millions of commuters who comprise
the riding public. Certainly, their rights must be protected, not neglected nor ignored.
Assuming arguendo that petitioner is not possessed of the standing to sue, this court is
ready to brush aside this barren procedural infirmity and recognize the legal standing of
the petitioner in view of the transcendental importance of the issues raised. And this act
of liberality is not without judicial precedent. As early as the Emergency Powers Cases,
this Court had exercised its discretion and waived the requirement of proper party. In
the recent case ofKilosbayan, Inc., et al. v. Teofisto Guingona, Jr., et al., 9 we ruled in the
same lines and enumerated some of the cases where the same policy was adopted, viz:

. . . A party's standing before this Court is a procedural technicality which


it may, in the exercise of its discretion, set aside in view of the
importance of the issues raised. In the landmark Emergency Powers
Cases, [G.R. No. L-2044 (Araneta v. Dinglasan); G.R. No. L-2756 (Araneta
v. Angeles); G.R. No. L-3054 (Rodriguez v. Tesorero de Filipinas); G.R. No.
L-3055 (Guerrero v. Commissioner of Customs); and G.R. No. L-3056

(Barredo v. Commission on Elections), 84 Phil. 368 (1949)], this Court


brushed aside this technicality because "the transcendental importance
to the public of these cases demands that they be settled promptly and
definitely, brushing aside, if we must, technicalities of procedure.
(Avelino vs. Cuenco, G.R. No. L-2621)." Insofar as taxpayers' suits are
concerned, this Court had declared that it "is not devoid of discretion as
to whether or not it should be entertained," (Tan v. Macapagal, 43 SCRA
677, 680 [1972]) or that it "enjoys an open discretion to entertain the
same or not." [Sanidad v. COMELEC, 73 SCRA 333 (1976)].
xxx xxx xxx
In line with the liberal policy of this Court on locus standi, ordinary
taxpayers, members of Congress, and even association of planters, and
non-profit civic organizations were allowed to initiate and prosecute
actions before this court to question the constitutionality or validity of
laws, acts, decisions, rulings, or orders of various government agencies
or instrumentalities. Among such cases were those assailing the
constitutionality of (a) R.A. No. 3836 insofar as it allows retirement
gratuity and commutation of vacation and sick leave to Senators and
Representatives and to elective officials of both Houses of Congress
(Philippine Constitution Association, Inc. v. Gimenez, 15 SCRA 479
[1965]); (b) Executive Order No. 284, issued by President Corazon C.
Aquino on 25 July 1987, which allowed members of the cabinet, their
undersecretaries, and assistant secretaries to hold other government
offices or positions (Civil Liberties Union v. Executive Secretary, 194 SCRA
317 [1991]); (c) the automatic appropriation for debt service in the
General Appropriations Act (Guingona v. Carague, 196 SCRA 221 [1991];
(d) R.A. No. 7056 on the holding of desynchronized elections (Osmea v.
Commission on Elections, 199 SCRA 750 [1991]); (e) P.D. No. 1869 (the
charter of the Philippine Amusement and Gaming Corporation) on the
ground that it is contrary to morals, public policy, and order (Basco v.
Philippine Amusement and Gaming Corp., 197 SCRA 52 [1991]); and (f)

R.A. No. 6975, establishing the Philippine National Police. (Carpio v.


Executive Secretary, 206 SCRA 290 [1992]).
Other cases where we have followed a liberal policy regarding locus
standi include those attacking the validity or legality of (a) an order
allowing the importation of rice in the light of the prohibition imposed
by R.A. No. 3452 (Iloilo Palay and Corn Planters Association, Inc. v.
Feliciano, 13 SCRA 377 [1965]; (b) P.D. Nos. 991 and 1033 insofar as they
proposed amendments to the Constitution and P.D. No. 1031 insofar as
it directed the COMELEC to supervise, control, hold, and conduct the
referendum-plebiscite on 16 October 1976 (Sanidad v. Commission on
Elections, supra); (c) the bidding for the sale of the 3,179 square meters
of land at Roppongi, Minato-ku, Tokyo, Japan (Laurel v. Garcia, 187 SCRA
797 [1990]); (d) the approval without hearing by the Board of
Investments of the amended application of the Bataan Petrochemical
Corporation to transfer the site of its plant from Bataan to Batangas and
the validity of such transfer and the shift of feedstock from naphtha only
to naphtha and/or liquefied petroleum gas (Garcia v. Board of
Investments, 177 SCRA 374 [1989]; Garcia v. Board of Investments, 191
SCRA 288 [1990]); (e) the decisions, orders, rulings, and resolutions of
the Executive Secretary, Secretary of Finance, Commissioner of Internal
Revenue, Commissioner of Customs, and the Fiscal Incentives Review
Board exempting the National Power Corporation from indirect tax and
duties (Maceda v. Macaraig, 197 SCRA 771 [1991]); (f) the orders of the
Energy Regulatory Board of 5 and 6 December 1990 on the ground that
the hearings conducted on the second provisional increase in oil prices
did not allow the petitioner substantial cross-examination; (Maceda v.
Energy Regulatory Board, 199 SCRA 454 [1991]); (g) Executive Order No.
478 which levied a special duty of P0.95 per liter of imported oil
products (Garcia v. Executive Secretary, 211 SCRA 219 [1992]); (h)
resolutions of the Commission on Elections concerning the
apportionment, by district, of the number of elective members of
Sanggunians (De Guia vs. Commission on Elections, 208 SCRA 420

[1992]); and (i) memorandum orders issued by a Mayor affecting the


Chief of Police of Pasay City (Pasay Law and Conscience Union, Inc. v.
Cuneta, 101 SCRA 662 [1980]).
In the 1975 case of Aquino v. Commission on Elections (62 SCRA 275
[1975]), this Court, despite its unequivocal ruling that the petitioners
therein had no personality to file the petition, resolved nevertheless to
pass upon the issues raised because of the far-reaching implications of
the petition. We did no less in De Guia v. COMELEC (Supra) where,
although we declared that De Guia "does not appear to have locus
standi, a standing in law, a personal or substantial interest," we brushed
aside the procedural infirmity "considering the importance of the issue
involved, concerning as it does the political exercise of qualified voters
affected by the apportionment, and petitioner alleging abuse of
discretion and violation of the Constitution by respondent."
Now on the merits of the case.
On the fare range scheme.
Section 16(c) of the Public Service Act, as amended, reads:
Sec. 16. Proceedings of the Commission, upon notice and hearing. The
Commission shall have power, upon proper notice and hearing in
accordance with the rules and provisions of this Act, subject to the
limitations and exceptions mentioned and saving provisions to the
contrary:
xxx xxx xxx
(c) To fix and determine individual or joint rates, tolls, charges,
classifications, or schedules thereof, as well as commutation, mileage
kilometrage, and other special rates which shall be imposed, observed,

and followed thereafter by any public service: Provided, That the


Commission may, in its discretion, approve rates proposed by public
services provisionally and without necessity of any hearing; but it shall
call a hearing thereon within thirty days thereafter, upon publication and
notice to the concerns operating in the territory affected: Provided,
further, That in case the public service equipment of an operator is used
principally or secondarily for the promotion of a private business, the net
profits of said private business shall be considered in relation with the
public service of such operator for the purpose of fixing the rates.
(Emphasis ours).
xxx xxx xxx
Under the foregoing provision, the Legislature delegated to the defunct Public
Service Commission the power of fixing the rates of public services. Respondent
LTFRB, the existing regulatory body today, is likewise vested with the same
under Executive Order No. 202 dated June 19, 1987. Section 5(c) of the said
executive order authorizes LTFRB "to determine, prescribe, approve and
periodically review and adjust, reasonable fares, rates and other related charges,
relative to the operation of public land transportation services provided by
motorized vehicles."
Such delegation of legislative power to an administrative agency is permitted in order to
adapt to the increasing complexity of modern life. As subjects for governmental
regulation multiply, so does the difficulty of administering the laws. Hence,
specialization even in legislation has become necessary. Given the task of determining
sensitive and delicate matters as
route-fixing and rate-making for the transport sector, the responsible regulatory body is
entrusted with the power of subordinate legislation. With this authority, an
administrative body and in this case, the LTFRB, may implement broad policies laid
down in a statute by "filling in" the details which the Legislature may neither have time
or competence to provide. However, nowhere under the aforesaid provisions of law are

the regulatory bodies, the PSC and LTFRB alike, authorized to delegate that power to a
common carrier, a transport operator, or other public service.
In the case at bench, the authority given by the LTFRB to the provincial bus operators to
set a fare range over and above the authorized existing fare, is illegal and invalid as it is
tantamount to an undue delegation of legislative authority. Potestas delegata non
delegari potest. What has been delegated cannot be delegated. This doctrine is based
on the ethical principle that such a 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 intervening mind of another. 10 A further delegation of such power would
indeed constitute a negation of the duty in violation of the trust reposed in the delegate mandated to
11
discharge it directly. The policy of allowing the provincial bus operators to change and increase
their fares at will would result not only to a chaotic situation but to an anarchic state of affairs. This
would leave the riding public at the mercy of transport operators who may increase fares every hour,
every day, every month or every year, whenever it pleases them or whenever they deem it
12
"necessary" to do so. In Panay Autobus Co. v. Philippine Railway Co., where respondent Philippine
Railway Co. was granted by the Public Service Commission the authority to change its freight rates at
will, this Court categorically declared that:

In our opinion, the Public Service Commission was not authorized by law
to delegate to the Philippine Railway Co. the power of altering its freight
rates whenever it should find it necessary to do so in order to meet the
competition of road trucks and autobuses, or to change its freight rates
at will, or to regard its present rates as maximum rates, and to fix lower
rates whenever in the opinion of the Philippine Railway Co. it would be to
its advantage to do so.
The mere recital of the language of the application of the Philippine
Railway Co. is enough to show that it is untenable. The Legislature has
delegated to the Public Service Commission the power of fixing the rates
of public services, but it has not authorized the Public Service Commission
to delegate that power to a common carrier or other public service. The
rates of public services like the Philippine Railway Co. have been
approved or fixed by the Public Service Commission, and any change in

such rates must be authorized or approved by the Public Service


Commission after they have been shown to be just and reasonable. The
public service may, of course, propose new rates, as the Philippine
Railway Co. did in case No. 31827, but it cannot lawfully make said new
rates effective without the approval of the Public Service Commission,
and the Public Service Commission itself cannot authorize a public
service to enforce new rates without the prior approval of said rates by
the commission. The commission must approve new rates when they are
submitted to it, if the evidence shows them to be just and reasonable,
otherwise it must disapprove them. Clearly, the commission cannot
determine in advance whether or not the new rates of the Philippine
Railway Co. will be just and reasonable, because it does not know what
those rates will be.
In the present case the Philippine Railway Co. in effect asked for
permission to change its freight rates at will. It may change them every
day or every hour, whenever it deems it necessary to do so in order to
meet competition or whenever in its opinion it would be to its
advantage. Such a procedure would create a most unsatisfactory state of
affairs and largely defeat the purposes of the public service
law.13 (Emphasis ours).
One veritable consequence of the deregulation of transport fares is a compounded fare.
If transport operators will be authorized to impose and collect an additional amount
equivalent to 20% over and above the authorized fare over a period of time, this will
unduly prejudice a commuter who will be made to pay a fare that has been computed in
a manner similar to those of compounded bank interest rates.
Picture this situation. On December 14, 1990, the LTFRB authorized provincial bus
operators to collect a thirty-seven (P0.37) centavo per kilometer fare for ordinary buses.
At the same time, they were allowed to impose and collect a fare range of plus or minus
15% over the authorized rate. Thus P0.37 centavo per kilometer authorized fare plus
P0.05 centavos (which is 15% of P0.37 centavos) is equivalent to P0.42 centavos, the

allowed rate in 1990. Supposing the LTFRB grants another five (P0.05) centavo increase
per kilometer in 1994, then, the base or reference for computation would have to be
P0.47 centavos (which is P0.42 + P0.05 centavos). If bus operators will exercise their
authority to impose an additional 20% over and above the authorized fare, then the fare
to be collected shall amount to P0.56 (that is, P0.47 authorized LTFRB rate plus 20% of
P0.47 which is P0.29). In effect, commuters will be continuously subjected, not only to a
double fare adjustment but to a compounding fare as well. On their part, transport
operators shall enjoy a bigger chunk of the pie. Aside from fare increase applied for,
they can still collect an additional amount by virtue of the authorized fare range.
Mathematically, the situation translates into the following:
Year** LTFRB authorized Fare Range Fare to be
rate*** collected per
kilometer
1990 P0.37 15% (P0.05) P0.42
1994 P0.42 + 0.05 = 0.47 20% (P0.09) P0.56
1998 P0.56 + 0.05 = 0.61 20% (P0.12) P0.73
2002 P0.73 + 0.05 = 0.78 20% (P0.16) P0.94
Moreover, rate making or rate fixing is not an easy task. It is a delicate and sensitive
government function that requires dexterity of judgment and sound discretion with the
settled goal of arriving at a just and reasonable rate acceptable to both the public utility
and the public. Several factors, in fact, have to be taken into consideration before a
balance could be achieved. A rate should not be confiscatory as would place an operator
in a situation where he will continue to operate at a loss. Hence, the rate should enable
public utilities to generate revenues sufficient to cover operational costs and provide
reasonable return on the investments. On the other hand, a rate which is too high
becomes discriminatory. It is contrary to public interest. A rate, therefore, must be
reasonable and fair and must be affordable to the end user who will utilize the services.
Given the complexity of the nature of the function of rate-fixing and its far-reaching
effects on millions of commuters, government must not relinquish this important

function in favor of those who would benefit and profit from the industry. Neither
should the requisite notice and hearing be done away with. The people, represented by
reputable oppositors, deserve to be given full opportunity to be heard in their
opposition to any fare increase.
The present administrative procedure, 14 to our mind, already mirrors an orderly and
satisfactory arrangement for all parties involved. To do away with such a procedure and allow just
one party, an interested party at that, to determine what the rate should be, will undermine the right
of the other parties to due process. The purpose of a hearing is precisely to determine what a just
15
and reasonable rate is. Discarding such procedural and constitutional right is certainly inimical to
our fundamental law and to public interest.

On the presumption of public need.


A certificate of public convenience (CPC) is an authorization granted by the LTFRB for
the operation of land transportation services for public use as required by law. Pursuant
to Section 16(a) of the Public Service Act, as amended, the following requirements must
be met before a CPC may be granted, to wit: (i) the applicant must be a citizen of the
Philippines, or a corporation or co-partnership, association or joint-stock company
constituted and organized under the laws of the Philippines, at least 60 per centum of its
stock or paid-up capital must belong entirely to citizens of the Philippines; (ii) the
applicant must be financially capable of undertaking the proposed service and meeting
the responsibilities incident to its operation; and (iii) the applicant must prove that the
operation of the public service proposed and the authorization to do business will
promote the public interest in a proper and suitable manner. It is understood that there
must be proper notice and hearing before the PSC can exercise its power to issue a CPC.
While adopting in toto the foregoing requisites for the issuance of a CPC, LTFRB
Memorandum Circular No. 92-009, Part IV, provides for yet incongruous and
contradictory policy guideline on the issuance of a CPC. The guidelines states:
The issuance of a Certificate of Public Convenience is determined by
public need. The presumption of public need for a service shall be
deemed in favor of the applicant, while the burden of proving that there

is no need for the proposed service shall be the oppositor's. (Emphasis


ours).
The above-quoted provision is entirely incompatible and inconsistent with Section
16(c)(iii) of the Public Service Act which requires that before a CPC will be issued, the
applicant must prove by proper notice and hearing that the operation of the public
service proposed will promote public interest in a proper and suitable manner. On the
contrary, the policy guideline states that the presumption of public need for a public
service shall be deemed in favor of the applicant. In case of conflict between a statute
and an administrative order, the former must prevail.
By its terms, public convenience or necessity generally means something fitting or
suited to the public need. 16 As one of the basic requirements for the grant of a CPC, public
convenience and necessity exists when the proposed facility or service meets a reasonable want of
the public and supply a need which the existing facilities do not adequately supply. The existence or
non-existence of public convenience and necessity is therefore a question of fact that must be
established by evidence, real and/or testimonial; empirical data; statistics and such other means
necessary, in a public hearing conducted for that purpose. The object and purpose of such procedure,
among other things, is to look out for, and protect, the interests of both the public and the existing
transport operators.

Verily, the power of a regulatory body to issue a CPC is founded on the condition that
after full-dress hearing and investigation, it shall find, as a fact, that the proposed
operation is for the convenience of the public. 17 Basic convenience is the primary
consideration for which a CPC is issued, and that fact alone must be consistently borne in mind. Also,
existing operators in subject routes must be given an opportunity to offer proof and oppose the
application. Therefore, an applicant must, at all times, be required to prove his capacity and
capability to furnish the service which he has undertaken to
18
render. And all this will be possible only if a public hearing were conducted for that purpose.

Otherwise stated, the establishment of public need in favor of an applicant reverses


well-settled and institutionalized judicial, quasi-judicial and administrative procedures. It
allows the party who initiates the proceedings to prove, by mere application, his
affirmative allegations. Moreover, the offending provisions of the LTFRB memorandum

circular in question would in effect amend the Rules of Court by adding another
disputable presumption in the enumeration of 37 presumptions under Rule 131, Section
5 of the Rules of Court. Such usurpation of this Court's authority cannot be
countenanced as only this Court is mandated by law to promulgate rules concerning
pleading, practice and procedure. 19
Deregulation, while it may be ideal in certain situations, may not be ideal at all in our
country given the present circumstances. Advocacy of liberalized franchising and
regulatory process is tantamount to an abdication by the government of its inherent
right to exercise police power, that is, the right of government to regulate public utilities
for protection of the public and the utilities themselves.
While we recognize the authority of the DOTC and the LTFRB to issue administrative
orders to regulate the transport sector, we find that they committed grave abuse of
discretion in issuing DOTC Department Order
No. 92-587 defining the policy framework on the regulation of transport services and
LTFRB Memorandum Circular No. 92-009 promulgating the implementing guidelines on
DOTC Department Order No. 92-587, the said administrative issuances being
amendatory and violative of the Public Service Act and the Rules of Court. Consequently,
we rule that the twenty (20%) per centum fare increase imposed by respondent PBOAP
on March 16, 1994 without the benefit of a petition and a public hearing is null and void
and of no force and effect. No grave abuse of discretion however was committed in the
issuance of DOTC Memorandum Order No. 90-395 and DOTC Memorandum dated
October 8, 1992, the same being merely internal communications between
administrative officers.
WHEREFORE, in view of the foregoing, the instant petition is hereby GRANTED and the
challenged administrative issuances and orders, namely: DOTC Department Order No.
92-587, LTFRB Memorandum Circular
No. 92-009, and the order dated March 24, 1994 issued by respondent LTFRB are hereby
DECLARED contrary to law and invalid insofar as they affect provisions therein (a)
delegating to provincial bus and jeepney operators the authority to increase or decrease
the duly prescribed transportation fares; and (b) creating a presumption of public need

for a service in favor of the applicant for a certificate of public convenience and placing
the burden of proving that there is no need for the proposed service to the oppositor.
The Temporary Restraining Order issued on June 20, 1994 is hereby MADE PERMANENT
insofar as it enjoined the bus fare rate increase granted under the provisions of the
aforementioned administrative circulars, memoranda and/or orders declared invalid.
No pronouncement as to costs.
SO ORDERED.

ECHEGARAY VS SECRETARY
On June 25, 1996, this Court affirmed[1] the conviction of petitioner Leo
Echegaray y Pilo for the crime of rape of the 10 year-old daughter of his commonlaw spouse and the imposition upon him of the death penalty for the said crime.
Petitioner duly filed a Motion for Reconsideration raising mainly factual issues,
and on its heels, a Supplemental Motion for Reconsideration raising for the first time
the issue of the constitutionality of Republic Act No. 7659[2] (the death penalty law)
and the imposition of the death penalty for the crime of rape.
On February 7, 1998, this Court denied[3] petitioner's Motion for
Reconsideration and Supplemental Motion for Reconsideration with a finding that
Congress duly complied with the requirements for the reimposition of the death
penalty and therefore the death penalty law is not unconstitutional.
In the meantime, Congress had seen it fit to change the mode of execution of
the death penalty from electrocution to lethal injection, [4] and passed Republic Act
No. 8177, AN ACT DESIGNATING DEATH BY LETHAL INJECTION AS THE METHOD OF
CARRYING OUT CAPITAL PUNISHMENT, AMENDING FOR THE PURPOSE ARTICLE 81
OF THE REVISED PENAL CODE, AS AMENDED BY SECTION 24 OF REPUBLIC ACT NO.
7659.[5] Pursuant to the provisions of said law, the Secretary of Justice promulgated

the Rules and Regulations to Implement Republic Act No. 8177 ("implementing
rules")[6] and directed the Director of the Bureau of Corrections to prepare the Lethal
Injection Manual.[7]
On March 2, 1998, petitioner filed a Petition[8] for Prohibition, Injunction and/or
Temporary Restraining Order to enjoin respondents Secretary of Justice and Director
of the Bureau of Prisons from carrying out the execution by lethal injection of
petitioner under R.A. No. 8177 and its implementing rules as these are
unconstitutional and void for being: (a) cruel, degrading and inhuman
punishment per se as well as by reason of its being (b) arbitrary, unreasonable and a
violation of due process, (c) a violation of the Philippines' obligations under
international covenants, (d) an undue delegation of legislative power by Congress,
(e) an unlawful exercise by respondent Secretary of the power to legislate, and (f) an
unlawful delegation of delegated powers by the Secretary of Justice to respondent
Director.
On March 3, 1998, petitioner, through counsel, filed a Motion for Leave of
Court[9] to Amend and Supplement Petition with the Amended and Supplemental
Petition[10] attached thereto, invoking the additional ground of violation of equal
protection, and impleading the Executive Judge of the Regional Trial Court of
Quezon City and the Presiding Judge of the Regional Trial Court, Branch 104, in order
to enjoin said public respondents from acting under the questioned rules by setting
a date for petitioner's execution.
On March 3, 1998, the Court resolved, without giving due course to the petition,
to require the respondents to COMMENT thereon within a non-extendible period of
ten (10) days from notice, and directed the parties "to MAINTAIN the status
quo prevailing at the time of the filing of this petition."
On March 10, 1998, the Court granted the Motion for Leave of Court to Amend
and Supplement Petition, and required respondents to COMMENT thereon within
ten (10) days from notice.

On March 16, 1998, petitioner filed a Very Urgent Motion (1) To clarify Status
Quo Order, and (2) For the Issuance of a Temporary Restraining Order expressly
enjoining public respondents from taking any action to carry out petitioner's
execution until the petition is resolved.
On March 16, 1998, the Office of the Solicitor General[11] filed a Comment (On
the Petition and the Amended Supplemental Petition)[12] stating that (1) this Court
has already upheld the constitutionality of the Death Penalty Law, and has
repeatedly declared that the death penalty is not cruel, unjust, excessive or unusual
punishment; (2) execution by lethal injection, as authorized under R.A. No. 8177 and
the questioned rules, is constitutional, lethal injection being the most modern, more
humane, more economical, safer and easier to apply (than electrocution or the gas
chamber); (3) the International Covenant on Civil and Political Rights does not
expressly or impliedly prohibit the imposition of the death penalty; (4) R.A. No. 8177
properly delegated legislative power to respondent Director; and that (5) R.A. No.
8177 confers the power to promulgate the implementing rules to the Secretary of
Justice, Secretary of Health and the Bureau of Corrections.
On March 17, 1998, the Court required the petitioner to file a REPLY thereto
within a non-extendible period of ten days from notice.
On March 25, 1998, the Commission on Human Rights[13] filed a Motion for
Leave of Court to Intervene and/or Appear as Amicus Curiae[14] with the attached
Petition to Intervene and/or Appear as Amicus Curiae[15] alleging that the death
penalty imposed under R.A. No. 7659 which is to be implemented by R.A. No. 8177 is
cruel, degrading and outside the limits of civil society standards, and further
invoking (a) Article II, Section 11 of the Constitution which provides: "The State
values the dignity of every human person and guarantees full respect for human
rights."; (b) Article III of the Universal Declaration of Human Rightswhich states that
"Everyone has the right to life, liberty and security of person," and Article V thereof,
which states that "No one shall be subjected to torture or to cruel, inhuman or
degrading treatment or punishment."; (c) The International Covenant on Civil and
Political Rights, in particular, Article 6 thereof, and the Second Optional Protocol to

the International Covenant on Civil and Political Rights Aiming At The Abolition of the
Death Penalty; (d) Amnesty International statistics showing that as of October 1996,
58 countries have abolished the death penalty for all crimes, 15 countries have
abolished the death penalty for ordinary crimes, and 26 countries are
abolitionists de facto, which means that they have retained the death penalty for
ordinary crimes but are considered abolitionists in practice that they have not
executed anyone during the past ten (10) years or more, or in that they have made
an international commitment not to carry out executions, for a total of 99 countries
which are total abolitionists in law or practice, and 95 countries as
retentionists;[16] and (e) Pope John Paul II's encyclical, "Evangelium Vitae." In a
Resolution dated April 3, 1998, the Court duly noted the motion.

DEATH BY LETHAL INJECTION IS UNCONSTITUTIONAL FOR BEING A


CRUEL, DEGRADING AND INHUMAN PUNISHMENT.

On March 27, 1998, petitioner filed a Reply[17] stating that (1) this Court is not
barred from exercising judicial review over the death penalty per se, the death
penalty for rape and lethal injection as a mode of carrying out the death penalty; (2)
capital punishment is a cruel, degrading and inhuman punishment; (3) lethal
injection is cruel, degrading and inhuman punishment, and that being the "most
modern" does not make it less cruel or more humane, and that the Solicitor
General's "aesthetic" criteria is short-sighted, and that the lethal injection is not risk
free nor is it easier to implement; and (4) the death penalty violates
the International Covenant on Civil and Political Rights considering that the
Philippines participated in the deliberations of and voted for the Second Optional
Protocol.

LETHAL INJECTION, AS AUTHORIZED UNDER REPUBLIC ACT NO. 8177


AND THE QUESTIONED RULES, IS UNCONSTITUTIONAL BECAUSE IT IS
AN UNNECESSARY AND WANTON INFLICTION OF PAIN ON A PERSON
AND IS, THUS, A CRUEL, DEGRADING, AND INHUMAN PUNISHMENT.

After deliberating on the pleadings, the Court gave due course to the petition,
which it now resolves on the merits.

RESPONDENT SECRETARY UNLAWFULLY DELEGATED THE LEGISLATIVE


POWERS DELEGATED TO HIM UNDER REPUBLIC ACT NO. 8177 TO
RESPONDENT DIRECTOR.

In the Amended and Supplemental Petition, petitioner assails the


constitutionality of the mode of carrying out his death sentence by lethal injection
on the following grounds:[18]
I.

II.

THE DEATH PENALTY VIOLATES THE INTERNATIONAL COVENANT ON


CIVIL AND POLITICAL RIGHTS, WHICH IS PART OF THE LAW OF THE
LAND.
III.

IV.

REPUBLIC ACT NO. 8177 UNDULY DELEGATES LEGISLATIVE POWER TO


RESPONDENT DIRECTOR.
V.

VI.

RESPONDENT SECRETARY EXCEEDED THE AUTHORITY DELEGATED TO


HIM UNDER REPUBLIC ACT NO. 8177 AND UNLAWFULLY USURPED

THE POWER TO LEGISLATE IN PROMULGATING THE QUESTIONED


RULES.
VII.

SECTION 17 OF THE QUESTIONED RULES IS UNCONSTITUTIONAL FOR


BEING DISCRIMINATORY AS WELL AS FOR BEING AN INVALID
EXERCISE BY RESPONDENT SECRETARY OF THE POWER TO LEGISLATE.
VIII.

INJUCTION MUST ISSUE TO PREVENT IRREPARABLE DAMAGE AND


INJURY TO PETITIONER'S RIGHTS BY REASON OF THE EXISTENCE,
OPERATION AND IMPLEMENTATION OF AN UNCONSTITUTIONAL
STATUTE AND EQUALLY INVALID AND IMPLEMENTING RULES.
Concisely put, petitioner argues that R.A. No. 8177 and its implementing rules
do not pass constitutional muster for: (a) violation of the constitutional proscription
against cruel, degrading or inhuman punishment, (b) violation of our international
treaty obligations, (c) being an undue delegation of legislative power, and (d) being
discriminatory.
The Court shall now proceed to discuss these issues in seriatim.
I. LETHAL INJECTION, NOT CRUEL, DEGRADING OR INHUMAN PUNISHMENT UNDER
SECTION 19, ARTICLE III OF THE 1987 CONSTITUTION.

The main challenge to R.A. 8177 and its implementing rules is anchored on
Article III, Section 19 (1) of the 1987 Constitution which proscribes the imposition of
"cruel, degrading or inhuman" punishment. "The prohibition in the Philippine Bill
against cruel and unusual punishments is an Anglo-Saxon safeguard against
governmental oppression of the subject, which made its first appearance in the
reign of William and Mary of England in 'An Act declaring the rights and liberties of

the subject, and settling the succession of the crown,' passed in the year 1689. It
has been incorporated into the Constitution of the United States (of America) and
into most constitutions of the various States in substantially the same language as
that used in the original statute. The exact language of the Constitution of the
United States is used in the Philippine Bill."[19] "The counterpart of Section 19 (1) in
the 1935 Constitution reads: 'Excessive fines shall not be imposed, nor cruel and
inhuman punishment inflicted.' xxx In the 1973 Constitution the phrase became
'cruel or unusual punishment.' The Bill of Rights Committee of the 1986
Constitutional Commission read the 1973 modification as prohibiting 'unusual'
punishment even if not 'cruel.' It was thus seen as an obstacle to experimentation in
penology. Consequently, the Committee reported out the present text which
prohibits 'cruel, degrading or inhuman punishment' as more consonant with the
meaning desired and with jurisprudence on the subject."[20]
Petitioner contends that death by lethal injection constitutes cruel, degrading
and inhuman punishment considering that (1) R.A. No. 8177 fails to provide for the
drugs to be used in carrying out lethal injection, the dosage for each drug to be
administered, and the procedure in administering said drug/s into the accused; (2)
R.A. No. 8177 and its implementing rules are uncertain as to the date of the
execution, time of notification, the court which will fix the date of execution, which
uncertainties cause the greatest pain and suffering for the convict; and (3) the
possibility of "botched executions" or mistakes in administering the drugs renders
lethal injection inherently cruel.
Before the Court proceeds any further, a brief explanation of the process of
administering lethal injection is in order.
In lethal injection, the condemned inmate is strapped on a hospital gurney and
wheeled into the execution room. A trained technician inserts a needle into a vein
in the inmate's arm and begins an intravenous flow of saline solution. At the
warden's signal, a lethal combination of drugs is injected into the intravenous
line. The deadly concoction typically includes three drugs: (1) a nonlethal dose of
sodium thiopenthotal, a sleep inducing barbiturate; (2) lethal doses of pancuronium

bromide, a drug that paralyzes the muscles; and (3) potassium chloride, which stops
the heart within seconds. The first two drugs are commonly used during surgery to
put the patient to sleep and relax muscles; the third is used in heart bypass
surgery.[21]
Now it is well-settled in jurisprudence that the death penalty per se is not a
cruel, degrading or inhuman punishment.[22] In the oft-cited case of Harden v.
Director of Prisons,[23] this Court held that "[p]unishments are cruel when they
involve torture or a lingering death; but the punishment of death is not cruel, within
the meaning of that word as used in the constitution. It implies there something
inhuman and barbarous, something more than the mere extinguishment of
life." Would the lack in particularity then as to the details involved in the execution
by lethal injection render said law "cruel, degrading or inhuman"? The Court
believes not. For reasons hereafter discussed, the implementing details of R.A. No.
8177 are matters which are properly left to the competence and expertise of
administrative officials.[24]
Petitioner contends that Sec. 16[25] of R.A. No. 8177 is uncertain as to which
"court" will fix the time and date of execution, and the date of execution and time of
notification of the death convict. As petitioner already knows, the "court" which
designates the date of execution is the trial court which convicted the accused, that
is, after this Court has reviewed the entire records of the case [26] and has affirmed
the judgment of the lower court. Thereupon, the procedure is that the "judgment is
entered fifteen (15) days after its promulgation, and 10 days thereafter, the records
are remanded to the court below including a certified copy of the judgment for
execution.[27] Neither is there any uncertainty as to the date of execution nor the
time of notification. As to the date of execution, Section 15 of the implementing
rules must be read in conjunction with the last sentence of Section 1 of R.A. No.
8177 which provides that the death sentence shall be carried out "not earlier than
one (1) year nor later then eighteen (18) months from the time the judgment
imposing the death penalty became final and executory, without prejudice to the
exercise by the President of his executive clemency powers at all times." Hence, the

death convict is in effect assured of eighteen (18) months from the time the
judgment imposing the death penalty became final and executory [28] wherein he can
seek executive clemency[29] and attend to all his temporal and spiritual affairs.[30]
Petitioner further contends that the infliction of "wanton pain" in case of
possible complications in the intravenous injection, considering and as petitioner
claims, that respondent Director is an untrained and untested person insofar as the
choice and administration of lethal injection is concerned, renders lethal injection a
cruel, degrading and inhuman punishment. Such supposition is highly speculative
and unsubstantiated.
First. Petitioner has neither alleged nor presented evidence that lethal injection
required the expertise only of phlebotomists and not trained personnel and that the
drugs to be administered are unsafe or ineffective.[31]Petitioner simply cites
situations in the United States wherein execution by lethal injection allegedly
resulted in prolonged and agonizing death for the convict,[32] without any other
evidence whatsoever.
Second. Petitioner overlooked Section 1, third paragraph of R.A. No. 8177
which requires that all personnel involved in the execution proceedings should be
trained prior to the performance of such task. We must presume that the public
officials entrusted with the implementation of the death penalty (by lethal injection)
will carefully avoid inflicting cruel punishment.[33]
Third. Any infliction of pain in lethal injection is merely incidental in carrying out
the execution of death penalty and does not fall within the constitutional
proscription against cruel, degrading and inhuman punishment. "In a limited sense,
anything is cruel which is calculated to give pain or distress, and since punishment
imports pain or suffering to the convict, it may be said that all punishments are
cruel. But of course the Constitution does not mean that crime, for this reason, is to
go unpunished."[34] The cruelty against which the Constitution protects a convicted
man is cruelty inherent in the method of punishment, not the necessary suffering
involved in any method employed to extinguish life humanely.[35] Numerous federal

and state courts of the United States have been asked to review whether lethal
injections constitute cruel and unusual punishment. No court has found lethal
injections to implicate prisoner's Eighth Amendment rights. In fact, most courts that
have addressed the issue state in one or two sentences that lethal injection clearly is
a constitutional form of execution.[36] A few jurisdictions, however, have addressed
the merits of the Eighth Amendment claims. Without exception, these courts have
found that lethal injection does not constitute cruel and unusual punishment. After
reviewing the medical evidence that indicates that improper doses or improper
administration of the drugs causes severe pain and that prison officials tend to have
little training in the administration of the drugs, the courts have found that the few
minutes of pain does not rise to a constitutional violation.[37]
What is cruel and unusual "is not fastened to the obsolete but may acquire
meaning as public opinion becomes enlightened by a humane justice" and "must
draw its meaning from the evolving standards of decency that mark the progress of
a maturing society."[38] Indeed, "[o]ther (U.S.) courts have focused on 'standards of
decency' finding that the widespread use of lethal injections indicates that it
comports with contemporary norms."[39]the primary indicator of society's standard
of decency with regard to capital punishment is the response of the country's
legislatures to the sanction.[40] Hence, for as long as the death penalty remains in our
statute books and meets the most stringent requirements provided by the
Constitution, we must confine our inquiry to the legality of R.A. No. 8177, whose
constitutionality we duly sustain in the face of petitioner's challenge. We find that
the legislature's substitution of the mode of carrying out the death penalty from
electrocution to lethal injection infringes no constitutional rights of petitioner
herein.
II. REIMPOSITION OF THE DEATH PENALTY LAW DOES NOT VIOLATE
INTERNATIONAL TREATY OBLIGATIONS

Petitioner assiduously argues that the reimposition of the death penalty law
violates our international obligations, in particular, the International Covenant on
Civil And Political Rights, which was adopted by the General Assembly of the United

Nations on December 16, 1996, signed and ratified by the Philippines on December
19, 1966 and October 23, 1986,[41] respectively.
Article 6 of the International Covenant on Civil and Political Rights provides:

"1. Every human being has the inherent right to life. This right shall be
protected by law. No one shall be arbitrarily deprived of his life.
2. In countries which have not abolished the death penalty, sentence of
death may be imposed only for the most serious crimes in accordance with
the law in force at the time of the commission of the crime and not contrary
to the provisions of the present Covenant and to the Convention on the
Prevention and Punishment of the Crime of Genocide. This penalty can only
be carried out pursuant to a final judgment rendered by a competent
court." (emphasis supplied)
3. When deprivation of life constitutes the crime of genocide, it is
understood that nothing in this article shall authorize any State Party to the
present Covenant to derogate in any way from any obligation assumed
under the provisions of the Convention on the Prevention and Punishment
of the Crime of Genocide.
4. Anyone sentenced to death shall have the right to seek pardon or
commutation of the sentence. Amnesty, pardon or commutation of the
sentence of death may be granted in all-cases.
5. Sentence of death shall not be imposed for crimes committed by persons
below eighteen years of age and shall not be carried out on pregnant
women.

6. Nothing in this article shall be invoked to delay or to prevent the


abolition of capital punishment by any State. Party to the present
Covenant."
Indisputably, Article 6 of the Covenant enshrines the individual's right to
life. Nevertheless, Article 6 (2) of the Covenant explicitly recognizes that capital
punishment is an allowable limitation on the right to life, subject to the limitation
that it be imposed for the "most serious crimes". Pursuant to Article 28 of
the Covenant, a Human Rights Committee was established and under Article 40 of
the Covenant, State parties to the Covenantare required to submit an initial report
to the Committee on the measures they have adopted which give effect to the rights
recognized within the Covenant and on the progress made on the enjoyment of
those rights one year of its entry into force for the State Party concerned and
thereafter, after five years. On July 27, 1982, the Human Rights Committee
issued General Comment No. 6 interpreting Article 6 of the Covenant stating that
"(while) it follows from Article 6 (2) to (6) that State parties are not obliged to
abolish the death penalty totally, they are obliged to limit its use and, in particular,
to abolish it for other than the 'most serious crimes.' Accordingly, they ought to
consider reviewing their criminal laws in this light and, in any event, are obliged to
restrict the application of the death penalty to the most serious crimes.' The article
strongly suggests (pars. 2 (2) and (6) that abolition is desirable. xxx The Committee is
of the opinion that the expression 'most serious crimes' must be read restrictively to
mean that the death penalty should be a quite exceptional measure." Further,
theSafeguards Guaranteeing Protection of Those Facing the Death
Penalty[42] adopted by the Economic and Social Council of the United Nations declare
that the ambit of the term 'most serious crimes' should not go beyond intentional
crimes, with lethal or other extremely grave consequences.
The Optional Protocol to the International Covenant on Civil and Political
Rights was adopted by the General Assembly of the United Nations on December 16,
1966, and signed and ratified by the Philippines on December 19, 1966 and August
22, 1989,[43] respectively. The Optional Protocol provides that the Human Rights

Committee shall receive and consider communications from individuals claiming to


be victims of violations of any of the rights set forth in the Covenant.
On the other hand, the Second Optional Protocol to the International Covenant
on Civil and Political Rights, Aiming at the Abolition of the Death Penalty was
adopted by the General Assembly on December 15, 1989. The Philippines neither
signed nor ratified said document.[44] Evidently, petitioner's assertion of our
obligation under the Second Optional Protocol is misplaced.
III. THERE IS NO UNDUE DELEGATION OF LEGISLATIVE POWER IN R.A. NO. 8177 TO
THE SECRETARY OF JUSTICE AND THE DIRECTOR OF BUREAU OF CORRECTIONS,
BUT SECTION 19 OF THE RULES AND REGULATIONS TO IMPLEMENT R.A. NO.
8177 IS INVALID.

The separation of powers is a fundamental principle in our system of


government. It obtains not through express provision but by actual division in the
framing of our Constitution. Each department of the government has exclusive
cognizance of matters placed within its jurisdiction, and is supreme within its own
sphere.[45] Corollary to the doctrine of separation of powers is the principle of nondelegation of powers. "The rule is that what has been delegated, cannot be
delegated or as expressed in a Latin maxim: potestas delegata non
delegari potest."[46] The recognized exceptions to the rule are as follows:
(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.[47]

Empowering the Secretary of Justice in conjunction with the Secretary of Health


and the Director of the Bureau of Corrections, to promulgate rules and regulations

on the subject of lethal injection is a form of delegation of legislative authority to


administrative bodies.
The reason for delegation of authority to administrative agencies is the
increasing complexity of the task of government requiring expertise as well as the
growing inability of the legislature to cope directly with the myriad problems
demanding its attention. The growth of society has ramified its activities and
created peculiar and sophisticated problems that the legislature cannot be expected
to attend to by itself. Specialization even in legislation has become necessary. On
many problems involving day-to-day undertakings, the legislature may not have the
needed competence to provide the required direct and efficacious, not to say,
specific solutions. These solutions may, however, be expected from its delegates,
who are supposed to be experts in the particular fields assigned to them.[48]
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 implemented by the delegate[49] - and (b) fix a standard - the
limits of which are sufficiently determinate or determinable - to which the delegate
must conform in the performance of his functions.[50]
Considering the scope and the definiteness of R.A. No. 8177, which changed the
mode of carrying out the death penalty, the Court finds that the law sufficiently
describes what job must be done, who is to do it, and what is the scope of his
authority.[51]
R.A. No. 8177 likewise provides the standards which define the legislative policy,
mark its limits, map out its boundaries, and specify the public agencies which will
apply it. it indicates the circumstances under which the legislative purpose may be
carried out.[52] R.A. No. 8177 specifically requires that "[t]he death sentence shall be
executed under the authority of the Director of the Bureau of
Corrections, endeavoring so far as possible to mitigate the sufferings of the person

under the sentence during the lethal injection as well as during the proceedings
prior to the execution."[53] Further, "[t]he Director of the Bureau of Corrections shall
take steps to ensure that the lethal injection to be administered is sufficient to
cause the instantaneous death of the convict."[54] The legislature also mandated that
"all personnel involved in the administration of lethal injection shall be trained
prior to the performance of such task."[55] The Court cannot see that any useful
purpose would be served by requiring greater detail.[56] The question raised is not the
definition of what constitutes a criminal offense,[57] but the mode of carrying out the
penalty already imposed by the Courts. In this sense, R.A. No. 8177 is sufficiently
definite and the exercise of discretion by the administrative officials concerned is, to
use the words of Justice Benjamin Cardozo, canalized within banks that keep it from
overflowing.
Thus, the Court finds that the existence of an area for exercise of discretion by
the Secretary of Justice and the Director of the Bureau of Corrections under
delegated legislative power is proper where standards are formulated for the
guidance and the exercise of limited discretion, which though general, are capable of
reasonable application.[58]
It is also noteworthy that Article 81 of the Revised Penal Code which originally
provided for the death penalty by electrocution was not subjected to attack on the
ground that it failed to provide for details such as the kind of chair to be used, the
amount of voltage, volume of amperage or place of attachment of electrodes on the
death convict. Hence, petitioner's analogous argument with respect to lethal
injection must fail.
A careful reading of R.A. No. 8177 would show that there is no undue delegation
of legislative power from the Secretary of Justice to the Director of the Bureau of
Corrections for the simple reason that under the Administrative Code of 1987, the
Bureau of Corrections is a mere constituent unit of the Department of
Justice.[59] Further, the Department of Justice is tasked, among others, to take charge
of the "administration of the correctional system."[60] Hence, the import of the
phraseology of the law is that the Secretary of Justice should supervise the Director

of the Bureau of Corrections in promulgating the Lethal Injection Manual, in


consultation with the Department of Health.[61]
However, the Rules and Regulations to Implement Republic Act No. 8177 suffer
serious flaws that could not be overlooked. To begin with, something basic appears
missing in Section 19 of the implementing rules which provides:

"SEC. 19. EXECUTION PROCEDURE. - Details of the procedure prior


to, during and after administering the lethal injection shall be set forth
in a manual to be prepared by the Director. The manual shall contain
details of, among others, the sequence of events before and after
execution; procedures in setting up the intravenous line; the
administration of the lethal drugs; the pronouncement of death; and
the removal of the intravenous system.
Said manual shall be confidential and its distribution shall be
limited to authorized prison personnel."
Thus, the Courts finds in the first paragraph of Section 19 of the implementing
rules a veritable vacuum. The Secretary of Justice has practically abdicated the
power to promulgate the manual on the execution procedure to the Director of the
Bureau of Corrections, by not providing for a mode of review and approval
thereof. Being a mere constituent unit of the Department of Justice, the Bureau of
Corrections could not promulgate a manual that would not bear the imprimatur of
the administrative superior, the Secretary of Justice as the rule-making authority
under R.A. No. 8177. Such apparent abdication of departmental responsibility
renders the said paragraph invalid.
As to the second paragraph of section 19, the Court finds the requirement of
confidentiality of the contents of the manual even with respect to the convict unduly
suppressive. It sees no legal impediment for the convict, should he so desire, to

obtain a copy of the manual. The contents of the manual are matters of public
concern "which the public may want to know, either because these directly affect
their lives, or simply because such matters naturally arouse the interest of an
ordinary citizen."[62] Section 7 of Article III of the 1987 Constitution provides:

"SEC. 7. The right of the people to information on matters of


public concern shall be recognized. Access to official records, and to
documents and papers pertaining to official acts, transaction, or
decisions, as well as to government research data used as a basis for
policy development, shall be afforded the citizen, subject to such
limitation as may be provided by law."
The incorporation in the Constitution of a guarantee of access to information of
public concern is a recognition of the essentiality of the free flow of ideas and
information in a democracy.[63] In the same way that free discussion enables
members of society to cope with the exigencies of their time,[64] access to
information of general interest aids the people in democratic decision-making[65] by
giving them a better perspective of the vital issues confronting the nation.[66]
D. SECTION 17 OF THE RULES AND REGULATIONS TO IMPLEMENT R.A. NO. 8177 IS
INVALID FOR BEING DISCRIMINATORY AND CONTRARY TO LAW.

Even more seriously flawed than Section 19 is Section of the implementing rules
which provides:

"SEC. 17. SUSPENSION OF THE EXECUTION OF THE DEATH


SENTENCE. Execution by lethal injection shall not be inflicted upon a
woman within the three years next following the date of the sentence
or while she is pregnant, nor upon any person over seventy (70) years
of age. In this latter case, the death penalty shall be commuted to the

penalty of reclusion perpetua with the accessory penalties provided in


Article 40 of the Revised Penal Code."
Petitioner contends that Section 17 is unconstitutional for being discriminatory
as well as for being an invalid exercise of the power to legislate by respondent
Secretary. Petitioner insists that Section 17 amends the instances when lethal
injection may be suspended, without an express amendment of Article 83 of the
Revised Penal Code, as amended by section 25 of R.A. No. 7659.
Article 83 f the Revised Penal Code, as amended by section 25 of R.A. No. 7659
now reads as follows:

"ART. 83, Suspension of the execution of the death sentence.- The


death sentence shall not be inflicted upon a woman while she is
pregnant or within one (1) year after delivery, nor upon any person
over seventy years of age. In this last case, the death sentence shall be
commuted to the penalty of reclusion perpetua with the accessory
penalty provided in Article 40. x x x".
On this point, the Courts finds petitioner's contention impressed with
merit. While Article 83 of the Revised Penal Code, as amended by Section 25 of
Republic Act No. 7659, suspends the implementation of the death penalty while a
woman is pregnant or within one (1) year after delivery, Section 17 of the
implementing rules omits the one (1) year period following delivery as an instance
when the death sentence is suspended, andadds a ground for suspension of
sentence no longer found under Article 83 of the Revised Penal Code as amended,
which is the three-year reprieve after a woman is sentenced. This addition is, in
petitioner's view, tantamount to a gender-based discrimination sans statutory basis,
while the omission is an impermissible contravention of the applicable law.
Being merely an implementing rule, Section 17 aforecited must not override,
but instead remain consistent and in harmony with the law it seeks to apply and

implement. Administrative rules and regulations are intended to carry out, neither
to supplant nor to modify, the law."[67] An administrative agency cannot amend an
act of Congress.[68] In case of discrepancy between a provision of statute and a rule
or regulation issued to implement said statute, the statutory provision
prevails. Since the cited clause in Section 17 which suspends the execution of a
woman within the three (3) years next following the date of sentence finds no
supports in Article 83 of the Revised Penal Code as amended, perforce Section 17
must be declared invalid.
One member of the Court voted to declare Republic Act. No. 8177 as
unconstitutional insofar as it delegates the power to make rules over the same
subject matter to two persons (the Secretary of Justice and the Director of the
Bureau of Corrections) and constitutes a violation of the international norm towards
the abolition of the death penalty. One member of the Court, consistent with his
view in People v. Echegaray, 267 SCRA 682, 734-758 (1997) that the death penalty
law (Republic Act. No. 7659) is itself unconstitutional, believes that Republic Act No.
8177 which provides for the means of carrying out the death sentence, is likewise
unconstitutional. Two other members of the court concurred in the aforesaid
Separate Opinions in that the death penalty law (Republic Act No. 7659) together
with the assailed statute (Republic Act No. 8177) are unconstitutional. In sum, four
members of the Court voted to declare Republic Act. No. 8177 as
unconstitutional. These Separate Opinions are hereto annexed, infra.
WHEREFORE, the petition is DENIED insofar as petitioner seeks to declare the
assailed statute (Republic Act No. 8177) as unconstitutional; but GRANTED insofar as
Sections 17 and 19 of the Rules and Regulations to Implement Republic Act No. 8177
are concerned, which are hereby declared INVALID because (a) Section 17
contravenes Article 83 of the Revised Penal Code, as amended by Section 25 of the
Republic Act No. 7659; and (b) Section 19 fails to provide for review and approval of
the Lethal Injection Manual by the Secretary of Justice, and unjustifiably makes the
manual confidential, hence unavailable to interested parties including the
accused/convict and counsel. Respondents are hereby enjoined from enforcing and

implementing Republic Act No. 8177 until the aforesaid Sections 17 and 19 of the
Rules and Regulations to Implement Republic Act No. 8177 are appropriately
amended, revised and/or corrected in accordance with this Decision.
NO COSTS.
SO ORDERED.

NPCDAMA VS NPC
Before Us is a special civil action for Injunction to enjoin public respondents from
implementing the National Power Board (NPB) Resolutions No. 2002-124 and No. 2002125, both dated 18 November 2002, directing, among other things, the termination of
all employees of the National Power Corporation (NPC) on 31 January 2003 in line with
the restructuring of the NPC.
On 8 June 2001, Republic Act No. 9136, otherwise known as the "Electric Power Industry
Reform Act of 2001" (EPIRA Law), was approved and signed into law by President Gloria
Macapagal-Arroyo, and took effect on 26 June 2001. Section 2(i) and Section 3 of the
EPIRA Law states:
Section 2. Declaration of Policy. It is hereby declared the policy of the State:
xxxx
(i) To provide for an orderly and transparent privatization of the assets and
liabilities of the National Power Corporation (NPC);
xxxx
Section 3. Scope. This Act shall provide a framework for the restructuring of
the electric power industry, including the privatization of the assets of NPC, the
transition to the desired competitive structure, and the definition of the
responsibilities of the various government agencies and private entities.1

Under the EPIRA Law,2 a new National Power Board of Directors was constituted
composed of the Secretary of Finance as Chairman, with the Secretary of Energy, the
Secretary of Budget and Management, the Secretary of Agriculture, the DirectorGeneral of the National Economic and Development Authority, the Secretary of
Environment and Natural Resources, the Secretary of Interior and Local Government,
the Secretary of the Department of Trade and Industry, and the President of the
National Power Corporation as members.
On 27 February 2002, the Secretary of the Department of Energy (DOE) promulgated
the Implementing Rules and Regulations (IRR) of the EPIRA Law, pursuant to Section
773 thereof. Said IRR were approved by the Joint Congressional Power Commission on
even date. Meanwhile, also in pursuant to the provisions of the EPIRA Law, the DOE
created the Energy Restructuring Steering Committee (Restructuring Committee) to
manage the privatization and restructuring of the NPC, the National Transmission
Corporation (TRANSCO), and the Power Sector Assets and Liabilities Corporation
(PSALM).
To serve as the overall organizational framework for the realigned functions of the NPC
mandated under the EPIRA Law, the Restructuring Committee proposed a new NPC
Table of Organization which was approved by the NPB through NPB Resolution No.
2002-53 dated 11 April 2002. Likewise, the Restructuring Committee reviewed the
proposed 2002 NPC Restructuring Plan and assisted in the implementation of Phase I
(Realignment) of said Plan, and thereafter recommended to the NPB for approval the
adoption of measures pertaining to the separation and hiring of NPC personnel. The
NPB, taking into consideration the recommendation of the Restructuring Committee,
thus amended the Restructuring Plan approved under NPB Resolution No. 2002-53.
On 18 November 2002, pursuant to Section 634 of the EPIRA Law and Rule 335 of the
IRR, the NPB passed NPB Resolution No. 2002-124 which provided for the Guidelines on
the Separation Program of the NPC and the Selection and Placement of Personnel in the
NPC Table of Organization. Under said Resolution, all NPC personnel shall be legally
terminated on 31 January 2003, and shall be entitled to separation benefits. On the

same day, the NPB approved NPB Resolution No. 2002-125, whereby a Transition Team
was constituted to manage and implement the NPC's Separation Program.
In a Memorandum dated 21 November 2002, the NPC OIC-President and CEO Rolando S.
Quilala circulated the assailed Resolutions and directed the concerned NPC officials to
disseminate and comply with said Resolutions and implement the same within the
period provided for in the timetable set in NPB Resolution No. 2002-125. As a result
thereof, Mr. Paquito F. Garcia, Manager HRSD and Resources and Administration
Coordinator of NPC, circulated a Memorandum dated 22 November 2002 to all NPC
officials and employees providing for a checklist of the documents required for securing
clearances for the processing of separation benefits of all employees who shall be
terminated under the Restructuring Plan.
Contending that the assailed NPB Resolutions are void and without force and effect,
herein petitioners, in their individual and representative capacities, filed the present
Petition for Injunction to restrain respondents from implementing NPB Resolutions No.
2002-124 and No. 2002-125. In support thereof, petitioners invoke Section 78 of the
EPIRA Law, to wit:
Section 78. Injunction and Restraining Order. The implementation of the
provisions of this Act shall not be restrained or enjoined except by an order
issued by the Supreme Court of the Philippines.
In assailing the validity of NPB Resolutions No. 2002-124 and No. 2002-125, petitioners
maintain that said Resolutions were not passed and issued by a majority of the
members of the duly constituted Board of Directors since only three of its members, as
provided under Section 486 of the EPIRA Law, were present, namely: DOE Secretary
Vincent S. Perez, Jr.; Department of Budget and Management Secretary Emilia T.
Boncodin; and NPC OIC-President Rolando S. Quilala. According to petitioners, the other
four members who were present at the meeting and signed the Resolutions were not
the secretaries of their respective departments but were merely representatives or
designated alternates of the officials who were named under the EPIRA Law to sit as
members of the NPB. Petitioners claim that the acts of these representatives are

violative of the well-settled principle that "delegated power cannot be further


delegated." Thus, petitioners conclude that the questioned Resolutions have been
illegally issued as it were not issued by a duly constituted board since no quorum existed
because only three of the nine members, as provided under Section 48 of the EPIRA
Law, were present and qualified to sit and vote.
It is petitioners' submission that even assuming arguendo that there was no undue
delegation of power to the four representatives who signed the assailed Resolutions,
said Resolutions cannot still be given legal effect because the same did not comply with
the mandatory requirement of endorsement by the Joint Congressional Power
Commission and approval of the President of the Philippines, as provided under Section
47 of the EPIRA Law which states that:
Section 47. NPC Privatization. Except for the assets of SPUG, the generation
assets, real estate, and other disposable assets as well as IPP contracts of NPC
shall be privatized in accordance with this Act. Within six (6) months from
effectivity of this Act, the PSALM Corp. shall submit a plan for the endorsement
by the Joint Congressional Power Commission and the approval of the President
of the Philippines, on the total privatization of the generation assets, real estate,
other disposable assets as well as existing IPP contracts of NPC and thereafter,
implement the same, in accordance with the following guidelines, except as
provided for in paragraph (f) herein: x x x.
Petitioners insist that if ever there exists a valid wholesale abolition of their positions
and their concomitant separation form the service, such a process is an integral part of
"privatization" and "restructuring" as defined under the EPIRA Law and, therefore, must
comply with the above-quoted provision requiring the endorsement of the Joint
Congressional Power Commission and the approval of the President of the Philippines.
Furthermore, petitioner highlight the fact that said Resolutions will have an adverse
effect on about 5,648 employees of the NPC and will result in the displacement of some
2,370 employees, which, petitioners argue, is contrary to the mandate of the
Constitution to promote full employment and security of tenure.

Respondents, on the other hand, uphold the validity of the assailed Resolutions by
arguing that while it is true that four members of the National Power Board of Directors,
particularly the respective Secretaries of the Department of Interior and Local
Government, the Department of Trade and Industry, and the Department of Finance, as
well as the Director-General of the National Economic and Development Authority,
were not the actual signatories in NPB Resolutions No. 2002-124 and No. 2002-125, they
were, however, ably represented by their respective alternates. Respondents claim that
the validity of such administrative practice whereby an authority is exercised by persons
or subordinates appointed by the responsible official has long been settled.
Respondents further contend that Section 48 of the EPIRA Law does not in any way
prohibit any member of the NPB from authorizing his representative to sign resolutions
adopted by the Board.
From the arguments put forward by herein parties, it is evident that the pivotal issue to
be resolved in this Petition for Injunction is whether or not NPB Resolutions No. 2002124 and No. 2002-125 were properly enacted. It is petitioners' contention that the
failure of the four specifically identified department heads7 under Section 48 of the
EPIRA Law to personally approve and sign the assailed Resolutions invalidates the
adoption of said Resolutions. Petitioners maintain that there was undue delegation of
delegated power when only the representatives of certain members of the NPB
attended the board meetings and passed and signed the questioned Resolutions.
We agree with petitioners. In enumerating under Section 48 those who shall compose
the National Power Board of Directors, the legislature has vested upon these persons
the power to exercise their judgment and discretion in running the affairs of the NPC.
Discretion may be defined as "the act or the liberty to decide according to the principles
of justice and one's ideas of what is right and proper under the circumstances, without
willfulness or favor.8 Discretion, when applied to public functionaries, means a power or
right conferred upon them by law of acting officially in certain circumstances, according
to the dictates of their own judgment and conscience, uncontrolled by the judgment or
conscience of others.9 It is to be presumed that in naming the respective department
heads as members of the board of directors, the legislature chose these secretaries of
the various executive departments on the basis of their personal qualifications and

acumen which made them eligible to occupy their present positions as department
heads. Thus, the department secretaries cannot delegate their duties as members of the
NPB, much less their power to vote and approve board resolutions, because it is their
personal judgment that must be exercised in the fulfillment of such responsibility.
There is no question that the enactment of the assailed Resolutions involves the
exercise of discretion and not merely a ministerial act that could be validly performed by
a delegate, thus, the rule enunciated in the case ofBinamira v. Garrucho10 is relevant in
the present controversy, to wit:
An officer to whom a discretion is entrusted cannot delegate it to another, the
presumption being that he was chosen because he was deemed fit and
competent to exercise that judgment and discretion, and unless the power to
substitute another in his place has been given to him, he cannot delegate his
duties to another.
In those cases in which the proper execution of the office requires, on the part
of the officer, the exercise of judgment or discretion, the presumption is that he
was chosen because he was deemed fit and competent to exercise that
judgment and discretion, and, unless power to substitute another in his place
has been given to him, he cannot delegate his duties to another.
Respondents' assertion to the contrary is not tenable. The ruling in the case cited by
respondents to support their contention is not applicable in the case at bar. While it is
true that the Court has determined in the case of American Tobacco Company v.
Director of Patents11 that a delegate may exercise his authority through persons he
appoints to assist him in his functions, it must be stressed that the Court explicitly stated
in the same case that said practice is permissible only when the judgment and
discretion finally exercised are those of the officer authorized by law. According to the
Court, the rule that requires an administrative officer to exercise his own judgment and
discretion does not preclude him from utilizing, as a matter of practical administrative
procedure, the aid of subordinates, so long as it is the legally authorized official who
makes the final decision through the use of his own personal judgment.

In the case at bar, it is not difficult to comprehend that in approving NPB Resolutions
No. 2002-124 and No. 2002-125, it is the representatives of the secretaries of the
different executive departments and not the secretaries themselves who exercised
judgment in passing the assailed Resolution, as shown by the fact that it is the
signatures of the respective representatives that are affixed to the questioned
Resolutions. This, to our mind, violates the duty imposed upon the specifically
enumerated department heads to employ their own sound discretion in exercising the
corporate powers of the NPC. Evidently, the votes cast by these mere representatives in
favor of the adoption of the said Resolutions must not be considered in determining
whether or not the necessary number of votes was garnered in order that the assailed
Resolutions may be validly enacted. Hence, there being only three valid votes cast out of
the nine board members, namely those of DOE Secretary Vincent S. Perez, Jr.;
Department of Budget and Management Secretary Emilia T. Boncodin; and NPC OICPresident Rolando S. Quilala, NPB Resolutions No. 2002-124 and No. 2002-125 are void
and are of no legal effect.
Having determined that the assailed Resolutions are void as they lack the necessary
number of votes for their adoption, We no longer deem it necessary to pass upon the
other issues raised in the instant petition
WHEREFORE, premises considered, National Power Board Resolutions No. 2002-124 and
No. 2002-125 are hereby declared VOID and WITHOUT LEGAL EFFECT. The Petition for
Injunction is hereby GRANTED and respondents are hereby ENJOINED from
implementing said NPB Resolutions No. 2002-124 and No. 2002-125.
SO ORDERED.

REVIEW CENTER ASSOCIATION VS EXEC


The Case

Before the Court is a petition for prohibition and mandamus


assailing Executive Order No. 566 (EO 566)[1] and Commission on Higher
Education (CHED) Memorandum Order No. 30, series of 2007 (RIRR).[2]
The Antecedent Facts
On 11 and 12 June 2006, the Professional Regulation Commission
(PRC) conducted the Nursing Board Examinations nationwide. In June
2006, licensure applicants wrote the PRC to report that handwritten
copies of two sets of examinations were circulated during the
examination period among the examinees reviewing at the R.A. Gapuz
Review Center and Inress Review Center. George Cordero, Inress
Review Centers President, was then the incumbent President of the
Philippine Nurses Association. The examinees were provided with a list
of 500 questions and answers in two of the examinations five subjects,
particularly Tests III (Psychiatric Nursing) and V (Medical-Surgical
Nursing). The PRC later admitted the leakage and traced it to two Board
of Nursing members.[3] On 19 June 2006, the PRC released the results of
the Nursing Board Examinations. On 18 August 2006, the Court of
Appeals restrained the PRC from proceeding with the oath-taking of
the successful examinees set on 22 August 2006.

Consequently, President Gloria Macapagal-Arroyo (President


Arroyo) replaced all the members of the PRCs Board of
Nursing. President Arroyo also ordered the examinees to re-take the
Nursing Board Examinations.
On 8 September 2006, President Arroyo issued EO 566 which
authorized the CHED to supervise the establishment and operation of all
review centers and similar entities in the Philippines.
On 3 November 2006, the CHED, through its then Chairman Carlito
S. Puno (Chairman Puno), approved CHED Memorandum Order No. 49,
series of 2006 (IRR).[4]
In a letter dated 24 November 2006,[5] the Review Center
Association of the Philippines (petitioner), an organization of
independent review centers, asked the CHED to amend, if not
withdraw the IRR arguing, among other things, that giving permits to
operate a review center to Higher Education Institutions (HEIs) or
consortia of HEIs and professional organizations will effectively abolish
independent review centers.
In a letter dated 3 January 2007,[6] Chairman Puno wrote petitioner,
through its President Jose Antonio Fudolig (Fudolig), that to suspend the

implementation of the IRR would be inconsistent with the mandate of


EO 566. Chairman Puno wrote that the IRR was presented to the
stakeholders during a consultation process prior to its finalization and
publication on 13 November 2006. Chairman Puno also wrote that
petitioners comments and suggestions would be considered in the
event of revisions to the IRR.
In view of petitioners continuing request to suspend and reevaluate the IRR, Chairman Puno, in a letter dated 9 February
2007,[7] invited petitioners representatives to a dialogue on 14 March
2007. In accordance with what was agreed upon during the dialogue,
petitioner submitted to the CHED its position paper on the
IRR. Petitioner also requested the CHED to confirm in writing Chairman
Punos statements during the dialogue, particularly on lowering of the
registration fee from P400,000 to P20,000 and the requirement for
reviewers to have five years teaching experience instead of five years
administrative experience. Petitioner likewise requested for a
categorical answer to their request for the suspension of the IRR. The
CHED did not reply to the letter.
On 7 May 2007, the CHED approved the RIRR. On 22 August 2007,
petitioner filed before the CHED a Petition to Clarify/Amend Revised
Implementing Rules and Regulations[8] praying for a ruling:

1. Amending the RIRR by excluding independent review


centers from the coverage of the CHED;
2. Clarifying the meaning of the requirement for existing
review centers to tie-up or be integrated with HEIs,
consortium or HEIs and PRC-recognized professional
associations with recognized programs, or in the
alternative, to convert into schools; and
3. Revising the rules to make it conform with Republic Act
No. 7722 (RA 7722)[9] limiting the CHEDs coverage to public
and private institutions of higher education as well as
degree-granting programs in post-secondary educational
institutions.

On 8 October 2007, the CHED issued Resolution No. 7182007 referring petitioners request to exclude independent review
centers from CHEDs supervision and regulation to the Office of the
President as the matter requires the amendment of EO 566. In a letter
dated 17 October 2007,[11] then CHED Chairman Romulo L. Neri
(Chairman Neri) wrote petitioner regarding its petition to be excluded
from the coverage of the CHED in the RIRR. Chairman Neri stated:
[10]

While it may be true that regulation of review centers is


not one of the mandates of CHED under Republic Act 7722,
however, on September 8, 2006, Her Excellency, President
Gloria Macapagal-Arroyo, issued Executive Order No. 566
directing the Commission on Higher Education to regulate the
establishment and operation of review centers and similar
entities in the entire country.
With the issuance of the aforesaid Executive Order, the
CHED now is the agency that is mandated to regulate the
establishment and operation of all review centers as provided
for under Section 4 of the Executive Order which provides
that No review center or similar entities shall be established
and/or operate review classes without the favorable
expressed indorsement of the CHED and without the issuance
of the necessary permits or authorizations to conduct review
classes. x x x
To exclude the operation of independent review
centers from the coverage of CHED would clearly contradict
the intention of the said Executive Order No. 566.
Considering that the requests requires the amendment
of Executive Order No. 566, the Commission, during its
305th Commission Meeting, resolved that the said request be
directly referred to the Office of the President for appropriate
action.

As to the request to clarify what is meant by tie-up/be


integrated with an HEI, as required under the Revised
Implementing Rules and Regulations, tie-up/be integrated
simply means, to be in partner with an HEI.[12] (Boldfacing and
underscoring in the original)

On 26 October 2007, petitioner filed a petition for Prohibition and


Mandamus before this Court praying for the annulment of the RIRR,
the declaration of EO 566 as invalid and unconstitutional, and the
prohibition against CHED from implementing the RIRR.
Dr. Freddie T. Bernal, Director III, Officer-In-Charge, Office of the
Director IV of CHED, sent a letter[13] to the President of Northcap Review
Center, Inc., a member of petitioner, that it had until 27 November 2007
to comply with the RIRR.
[14]

On 15 February 2008, PIMSAT Colleges (respondent-intervenor)


filed a Motion For Leave to Intervene and To Admit Comment-inIntervention and a Comment-in-Intervention praying for the dismissal of
the petition. Respondent-intervenor alleges that the Office of the
President and the CHED did not commit any act of grave abuse of
discretion in issuing EO 566 and the RIRR. Respondent-intervenor
alleges that the requirements of the RIRR are reasonable, doable, and

are not designed to deprive existing review centers of their review


business. The Court granted the Motion for Leave to Intervene and to
Admit Comment-in-Intervention in its 11 March 2008 Resolution.[15]
On 23 April 2008, a Motion for Leave of Court for Intervention In
Support of the Petition and a Petition In Intervention were filed by CPA
Review School of the Philippines, Inc. (CPAR), Professional Review and
Training Center, Inc. (PRTC), ReSA Review School, Inc. (ReSA), CRC-ACE
Review School, Inc. (CRC-ACE), all independent CPA review
centers operating
in
Manila
(collectively,
petitionersintervenors). Petitioners-intervenors pray for the declaration of EO 566
and the RIRR as invalid on the ground that both constitute an
unconstitutional exercise of legislative power. The Court granted the
intervention in its 29 April 2008 Resolution.[16]
On 21 May 2008, the CHED issued CHED Memorandum
Order No. 21, Series of 2008 (CMO 21, s. 2008)[17] extending the
deadline for six months from 27 May 2008 for all existing independent
review centers to tie-up or be integrated with HEIs in accordance with
the RIRR.

In its 25 November 2008 Resolution, this Court resolved to require


the parties to observe the status quo prevailing before the issuance of
EO 566, the RIRR, and CMO 21, s. 2008.

The Assailed Executive Order and the RIRR


Executive Order No. 566 states in full:
EXECUTIVE ORDER NO. 566
DIRECTING THE COMMISSION ON HIGHER EDUCATION TO
REGULATE THE ESTABLISHMENT AND OPERATION OF REVIEW
CENTERS AND SIMILAR ENTITIES
WHEREAS, the State is mandated to protect the right of
all citizens to quality education at all levels and shall take
appropriate steps to make education accessible to all,
pursuant to Section 1, Article XIV of the 1987 Constitution;
WHEREAS, the State has the obligation to ensure and
promote quality education through the proper supervision
and regulation of the licensure examinations given through
the various Boards of Examiners under the Professional
Regulation Commission;

WHEREAS, the lack of regulatory framework for the


establishment and operation of review centers and similar
entities, as shown in recent events, have adverse
consequences and affect public interest and welfare;
WHEREAS, the overriding necessity to protect the
public against substandard review centers and unethical
practices committed by some review centers demand that a
regulatory framework for the establishment and operation of
review centers and similar entities be immediately instituted;
WHEREAS, Republic Act No. 7722, otherwise known as
the Higher Education Act of 1994, created the Commission on
Higher Education, which is best equipped to carry out the
provisions pertaining to the regulation of the establishment
and operation of review centers and similar entities.
NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO,
the President of the Republic of the Philippines, by virtue of
the powers vested in me by law, do hereby order:
SECTION 1. Establishment of a System of Regulation for
Review Centers and Similar Entities. The Commission on
Higher Education (CHED), in consultation with other
concerned government agencies, is hereby directed to
formulate a framework for the regulation of review centers
and similar entities, including but not limited to the

development and institutionalization of policies, standards,


guidelines for the establishment, operation and accreditation
of review centers and similar entities; maintenance of a
mechanism to monitor the adequacy, transparency and
propriety of their operations; and reporting mechanisms to
review performance and ethical practice.

development. The CHED shall submit the staffing pattern and


budgetary requirements to the Department of Budget and
Management (DBM) for approval.

SEC. 2. Coordination and Support. The Professional


Regulation Commission (PRC), Technical Skills Development
Authority (TESDA), Securities and Exchange Commission
(SEC), the various Boards of Examiners under the PRC, as well
as other concerned non-government organizations life
professional societies, and various government agencies, such
as the Department of Justice (DOJ), National Bureau of
Investigation (NBI), Office of the Solicitor General (OSG), and
others that may be tapped later, shall provide the necessary
assistance and technical support to the CHED in the successful
operationalization of the System of Regulation envisioned by
this Executive Order.

SEC. 4. Indorsement Requirement. No review center


or similar entities shall be established and/or operate review
classes without the favorable expressed indorsement of the
CHED and without the issuance of the necessary permits or
authorizations to conduct review classes. After due
consultation with the stakeholders, the concerned review
centers and similar entities shall be given a reasonable period,
at the discretion of the CHED, to comply with the policies and
standards, within a period not exceeding three (3) years, after
due publication of this Executive Order. The CHED shall see to
it that the System of Regulation including the
implementing mechanisms, policies, guidelines and other
necessary procedures and documentation for the effective
implementation of the System, are completed within sixty
days (60) upon effectivity of this Executive Order.

SEC. 3. Permanent Office and Staff. To ensure the


effective implementation of the System of Regulation, the
CHED shall organize a permanent office under its supervision
to be headed by an official with the rank of Director and to be
composed of highly competent individuals with expertise in
educational assessment, evaluation and testing; policies and
standards development, monitoring, legal and enforcement;
and statistics as well as curriculum and instructional materials

SEC. 5. Funding. The initial amount necessary for the


development and implementation of the System of Regulation
shall be sourced from the CHED Higher Education
Development Fund (HEDF), subject to the usual government
accounting and auditing practices, or from any applicable
funding source identified by the DBM. For the succeeding
fiscal year, such amounts as may be necessary for the
budgetary requirement of implementing the System of

Regulation and the provisions of this Executive Order shall be


provided for in the annual General Appropriations Act in the
budget of the CHED. Whenever necessary, the CHED may tap
its Development Funds as supplemental source of funding for
the effective implementation of the regulatory system. In this
connection, the CHED is hereby authorized to create special
accounts in the HEDF exclusively for the purpose of
implementing the provisions of this Executive Order.

SEC. 9. Effectivity. This Executive Order shall take effect


immediately upon its publication in a national newspaper of
general circulation.
DONE in the City of Manila, this 8th day of September,
in the year of Our Lord, Two Thousand and Six.
(Sgd.) Gloria Macapagal-Arroyo
By the President:

SEC. 6. Review and Reporting. The CHED shall provide


for the periodic review performance of review centers and
similar entities and shall make a report to the Office of the
President of the results of such review, evaluation and
monitoring.
SEC. 7. Separability. Any portion or provision of this
Executive Order that may be declared unconstitutional shall
not have the effect of nullifying other provisions hereof, as
long as such remaining provisions can still subsist and be given
effect in their entirely.
SEC. 8. Repeal. All rules and regulations, other
issuances or parts thereof, which are inconsistent with this
Executive Order, are hereby repealed or modified accordingly.

(Sgd.) Eduardo R. Ermita


Executive Secretary

The pertinent provisions of the RIRR affecting independent review


centers are as follows:
Rule VII
IMPLEMENTING GUIDELINES AND PROCEDURES
Section 1. Authority to Establish and Operate Only CHED
recognized, accredited and reputable HEIs may be authorized
to establish and operate review center/course by the CHED
upon full compliance with the conditions and requirements
provided herein and in other pertinent laws, rules and
regulations. In addition, a consortium or consortia of qualified

schools and/or entities may establish and operate review


centers or conduct review classes upon compliance with the
provisions of these Rules.

Rule XIV
TRANSITORY PROVISIONS
Section 1. Review centers that are existing upon the approval
of Executive Order No. 566 shall be given a grace period of up
to one (1) year, to tie-up/be integrated with existing HEIs[,]
consortium of HEIs and PRC recognized Professional
Associations with recognized programs under the conditions
set forth in this Order and upon mutually acceptable
covenants by the contracting parties. In the alternative, they
may convert as a school and apply for the course covered by
the review subject to rules and regulations of the CHED and
the SEC with respect to the establishment of schools. In the
meantime, no permit shall be issued if there is non-compliance
with these conditions or non-compliance with the
requirements set forth in these rules.

Section 2. Only after full compliance with the requirements


shall a Permit be given by the CHED to review centers
contemplated under this Rule.
Section 3. Failure of existing review centers to fully comply
with the above shall bar them from existing as review centers
and they shall be deemed as operating illegally as such. In
addition, appropriate administrative and legal proceedings
shall be commence[d] against the erring entities that continue
to operate and appropriate sanctions shall be imposed after
due process.

The Issues
The issues raised in this case are the following:
1. Whether EO 566 is an unconstitutional exercise by the
Executive of legislative power as it expands the CHEDs
jurisdiction; and
2. Whether the RIRR is an invalid exercise of the Executives
rule-making power.

The Ruling of this Court

The petition has merit.

Violation of Judicial Hierarchy


The Office of the Solicitor General (OSG) prays for the dismissal of
the petition. Among other grounds, the OSG alleges that petitioner
violated the rule on judicial hierarchy in filing the petition directly with
this Court.
This Courts original jurisdiction to issue a writ of certiorari,
prohibition, mandamus, quo warranto, habeas corpus, and injunction is
not exclusive but is concurrent with the Regional Trial Courts and the
Court of Appeals in certain cases.[18] The Court has explained:
This concurrence of jurisdiction is not, however, to be
taken as according to parties seeking any of the writs an
absolute, unrestrained freedom of choice of the court to
which application therefor will be directed. There is after all a
hierarchy of courts. That hierarchy is determinative of the
venue of appeals, and also serves as a general determinant of
the appropriate forum for petitions for the extraordinary
writs. A becoming regard of that judicial hierarchy most

certainly indicates that petitions for the issuance of


extraordinary writs against first level (inferior) courts should
be filed with the Regional Trial Court, and those against the
latter, with the Court of Appeals. A direct invocation of the
Supreme Courts original jurisdiction to issue these writs
should be allowed only when there are special and important
reasons therefor, clearly and specifically set out in the
petition. This is [an] established policy. It is a policy necessary
to prevent inordinate demands upon the Courts time and
attention which are better devoted to those matters within its
exclusive jurisdiction, and to prevent further over-crowding of
the Courts docket.[19]

The Court has further explained:


The propensity of litigants and lawyers to disregard the
hierarchy of courts in our judicial system by seeking relief
directly from this Court must be put to a halt for two
reasons: (1) it would be an imposition upon the precious time
of this Court; and (2) it would cause an inevitable and
resultant delay, intended or otherwise, in the adjudication of
cases, which in some instances had to be remanded or
referred to the lower court as the proper forum under the
rules of procedure, or as better equipped to resolve the
issues because this Court is not a trier of facts.[20]

The rule, however, is not absolute, as when exceptional and


compelling circumstances justify the exercise of this Court of its primary
jurisdiction. In this case, petitioner alleges that EO 566 expands the
coverage of RA 7722 and in doing so, the Executive Department usurps
the legislative powers of Congress. The issue in this case is not only the
validity of the RIRR. Otherwise, the proper remedy of petitioner and
petitioners-intervenors would have been an ordinary action for the
nullification of the RIRR before the Regional Trial Court.[21] The alleged
violation of the Constitution by the Executive Department when it issued
EO 566 justifies the exercise by the Court of its primary jurisdiction over
the case. The Court is not precluded from brushing aside technicalities
and taking cognizance of an action due to its importance to the public
and in keeping with its duty to determine whether the other branches of
the Government have kept themselves within the limits of the
Constitution.[22]

this Court on behalf of petitioner and to execute any and all documents
necessary to implement the resolution.
The OSG also alleges that the petition should be dismissed for
violation of the 2004 Rules on Notarial Practice because Fudolig only
presented his community tax certificate as competent proof of identity
before the notary public. The Court would have required Fudolig to
comply with the 2004 Rules on Notarial Practice except that Fudolig
already presented his Philippine passport before the notary public when
petitioner submitted its reply to the OSGs comment.
EO 566 Expands the Coverage of RA 7722

OSGs Technical Objections

The OSG alleges that Section 3 of RA 7722 should be read in


conjunction with Section 8, enumerating the CHEDs powers and
functions. In particular, the OSG alleges that the CHED has the power
under paragraphs (e) and (n) of Section 8 to:

The OSG alleges that the petition should be dismissed because the
verification and certification of non-forum shopping were signed only by
Fudolig without the express authority of any board resolution or power
of attorney. However, the records show that Fudolig was authorized
under Board Resolution No. 3, series of 2007[23] to file a petition before

(e) monitor and evaluate the performance of programs


and institutions of higher learning for appropriate incentives
as well as the imposition of sanctions such as, but not limited
to, diminution or withdrawal of subsidy, recommendation on
the downgrading or withdrawal of accreditation, program
termination or school closure;

(n) promulgate such rules and regulations and exercise


such other powers and functions as may be necessary to carry
out effectively the purpose and objectives of this Act[.]

The OSG justifies its stand by claiming that the term programs x x
x of higher learning is broad enough to include programs offered by
review centers.
We do not agree.

Section 3 of RA 7722 provides:


Sec. 3. Creation of Commission on Higher Education. - In
pursuance of the abovementioned policies, the Commission
on Higher Education is hereby created, hereinafter referred to
as the Commission.
The Commission shall be independent and separate
from the Department of Education, Culture and Sports
(DECS), and attached to the Office of the President for
administrative purposes only. Its coverage shall be both

public and private institutions of higher education as well as


degree-granting programs in all post-secondary educational
institutions, public and private. (Emphasis supplied)

Neither RA 7722 nor CHED Order No. 3, series of 1994


(Implementing Rules of RA 7722)[24] defines an institution of higher
learning or a program of higher learning.
Higher education, however, is defined as education beyond the
secondary level[25] or education provided by a college or
university.[26] Under the plain meaning or verba legis rule in statutory
construction, if the statute is clear, plain, and free from ambiguity, it
must be given its literal meaning and applied without
interpretation.[27] The legislature is presumed to know the meaning of
the words, to have used words advisedly, and to have expressed its
intent by use of such words as are found in the statute.[28] Hence, the
term higher education should be taken in its ordinary sense and
should be read and interpreted together with the phrase degreegranting programs in all post-secondary educational institutions, public
and private. Higher education should be taken to mean tertiary
education or that which grants a degree after its completion.

Further, Articles 6 and 7 of the Implementing Rules provide:


Article 6. Scope of Application. - The coverage of the
Commission shall be both public and private institutions of
higher education as well as degree granting programs in all
post-secondary educational institutions, public and private.
These Rules shall apply to all public and private
educational institutions offering tertiary degree programs.
The establishment, conversion, or elevation of degreegranting institutions shall be within the responsibility of the
Commission.
Article 7. Jurisdiction. - Jurisdiction over institutions of
higher
learning
primarily
offering tertiary
degree
programs shall belong to the Commission. (Emphasis
supplied)

Clearly, HEIs refer to degree-granting institutions, or those offering


tertiary degree or post-secondary programs. In fact, Republic Act No.
8292 or the Higher Education Modernization Act of 1997 covers
chartered state universities and colleges. State universities and colleges
primarily offer degree courses and programs.

Sections 1 and 8, Rule IV of the RIRR define a review center and


similar entities as follows:
Section 1. REVIEW CENTER. - refers to a center operated
and owned by a duly authorized entity pursuant to these
Rules intending to offer to the public and/or to specialized
groups whether for a fee or for free a program or course of
study that is intended to refresh and enhance the knowledge
and competencies and skills of reviewees obtained in the
formal school setting in preparation for the licensure
examinations given by the Professional Regulations
Commission (PRC). The term review center as understood in
these rules shall also embrace the operation or conduct of
review classes or courses provided by individuals whether for
a fee or not in preparation for the licensure examinations
given by the Professional Regulations Commission.
xxx

Section 8. SIMILAR ENTITIES the term refer to other


review centers providing review or tutorial services in areas
not covered by licensure examinations given by the

Professional Regulations Commission including but not limited


to college entrance examinations, Civil Service examinations,
tutorial services in specific fields like English, Mathematics
and the like.

The same Rule defines a review course as follows:


Section 3. REVIEW COURSE refers to the set of nondegree instructional program of study and/or instructional
materials/module, offered by a school with a recognized
course/program requiring licensure examination, that are
intended merely to refresh and enhance the knowledge or
competencies and skills of reviewees.

The scopes of EO 566 and the RIRR clearly expand the CHEDs
coverage under RA 7722. The CHEDs coverage under RA 7722 is limited
to public and private institutions of higher education and degreegranting programs in all public and private post-secondary educational
institutions. EO 566 directed the CHED to formulate a framework for
the regulation of review centers and similar entities.
The definition of a review center under EO 566 shows that it refers
to one which offers a program or course of study that is intended to

refresh and enhance the knowledge or competencies and skills of


reviewees obtained in the formal school setting in preparation for the
licensure examinations given by the PRC. It also covers the operation
or conduct of review classes or courses provided by individuals whether
for a fee or not in preparation for the licensure examinations given by
the PRC.
A review center is not an institution of higher learning as
contemplated by RA 7722. It does not offer a degree-granting program
that would put it under the jurisdiction of the CHED. A review course is
only intended to refresh and enhance the knowledge or competencies
and skills of reviewees. A reviewee is not even required to enroll in a
review center or to take a review course prior to taking an examination
given by the PRC. Even if a reviewee enrolls in a review center,
attendance in a review course is not mandatory. The reviewee is not
required to attend each review class. He is not required to take or pass
an examination, and neither is he given a grade. He is also not required
to submit any thesis or dissertation. Thus, programs given by review
centers could not be considered programs x x x of higher learning that
would put them under the jurisdiction of the CHED.
Further, the similar entities in EO 566 cover centers providing
review or tutorial services in areas not covered by licensure

examinations given by the PRC, which include, although not limited to,
college entrance examinations, Civil Services examinations, and tutorial
services. These review and tutorial services hardly qualify as programs
of higher learning.
Usurpation of Legislative Power
The OSG argues that President Arroyo was merely exercising her
executive power to ensure that the laws are faithfully executed. The
OSG further argues that President Arroyo was exercising her residual
powers under Executive Order No. 292 (EO 292),[29] particularly Section
20, Title I of Book III, thus:
Section 20. Residual Powers. - Unless Congress provides
otherwise, the President shall exercise such other powers
and functions vested in the President which are provided for
under the laws and which are not specifically enumerated
above, or which are not delegated by the President in
accordance with law. (Emphasis supplied)

Section 20, Title I of Book III of EO 292 speaks of other powers


vested in the President under the law.[30] The exercise of the Presidents
residual powers under this provision requires legislation,[31] as the
provision clearly states that the exercise of the Presidents other powers
and functions has to be provided for under the law. There is no law
granting the President the power to amend the functions of the
CHED. The President may not amend RA 7722 through an Executive
Order without a prior legislation granting her such power.
The President has no inherent or delegated legislative power to
amend the functions of the CHED under RA 7722. Legislative power is
the authority to make laws and to alter or repeal them,[32] and this
power is vested with the Congress under Section 1, Article VI of the
1987 Constitution which states:
Section 1. The legislative power shall be vested in the
Congress of the Philippines which shall consist of a Senate
and a House of Representatives, except to the extent
reserved to the people by the provision on initiative and
referendum.

In Ople v. Torres,[33] the Court declared void, as a usurpation of


legislative power, Administrative Order No. 308 (AO 308) issued by the

President to create a national identification system. AO 308 mandates


the adoption of a national identification system even in the absence of
an enabling legislation. The Court distinguished between Legislative and
Executive powers, as follows:
The line that delineates Legislative and Executive power
is not indistinct. Legislative power is the authority, under the
Constitution, to make laws, and to alter and repeal
them. The Constitution, as the will of the people in their
original, sovereign and unlimited capacity, has vested this
power in the Congress of the Philippines. The grant of
legislative power to Congress is broad, general and
comprehensive. The legislative body possesses plenary power
for all purposes of civil government. Any power, deemed to
be legislative by usage and tradition, is necessarily possessed
by Congress, unless the Constitution has lodged it
elsewhere. In fine, except as limited by the Constitution,
either expressly or impliedly, legislative power embraces all
subjects and extends to matters of general concern or
common interest.
While Congress is vested with the power to enact
laws, the President executes the laws. The executive power is
vested in the President. It is generally defined as the power to
enforce and administer laws. It is the power of carrying the
laws into practical operation and enforcing their due
observance.

As head of the Executive Department, the President is


the Chief Executive. He represents the government as a
whole and sees to it that all laws are enforced by the officials
and employees of his department. He has control over the
executive department, bureaus and offices. This means that
he has the authority to assume directly the functions of the
executive department, bureau and office, or interfere with the
discretion of its officials. Corollary to the power of control,
the President also has the duty of supervising the
enforcement of laws for the maintenance of general peace
and public order. Thus, he is granted administrative
power over bureaus and offices under his control to enable
him to discharge his duties effectively.
Administrative power is concerned with the work of
applying policies and enforcing orders as determined by proper
governmental organs. It enables the President to fix a uniform
standard of administrative efficiency and check the official
conduct of his agents. To this end, he can issue administrative
orders, rules and regulations.
x x x. An administrative order is:
Sec. 3. Administrative Orders. - Acts of the
President which relate to particular aspects of
governmental operation in pursuance of his duties as

administrative head shall


administrative orders.

be

promulgated

in

An administrative order is an ordinance issued by the


President which relates to specific aspects in the
administrative operation of government. It must be in
harmony with the law and should be for the sole purpose of
implementing the law and carrying out the legislative
policy. x x x.[34]

Administrative agencies exercise their quasi-legislative or rulemaking power through the promulgation of rules and
regulations.[36] The CHED may only exercise its rule-making power
within the confines of its jurisdiction under RA 7722. The RIRR covers
review centers and similar entities which are neither institutions of
higher education nor institutions offering degree-granting programs.
Exercise of Police Power

Just like AO 308 in Ople v. Torres, EO 566 in this case is not


supported by any enabling law. The Court further stated in Ople:
x x x. As well stated by Fisher: x x x Many regulations
however, bear directly on the public. It is here that
administrative legislation must be restricted in its scope and
application. Regulations are not supposed to be a substitute
for the general policy-making that Congress enacts in the form
of a public law. Although administrative regulations are
entitled to respect, the authority to prescribe rules and
regulations is not an independent source of power to make
laws.[35]

Since EO 566 is an invalid exercise of legislative power, the RIRR is


also an invalid exercise of the CHEDs quasi-legislative power.

Police power to prescribe regulations to promote the health,


morals, education, good order or safety, and the general welfare of the
people flows from the recognition thatsalus populi est suprema lex the
welfare of the people is the supreme law.[37] Police power primarily
rests with the legislature although it may be exercised by the President
and administrative boards by virtue of a valid delegation.[38] Here, no
delegation of police power exists under RA 7722 authorizing the
President to regulate the operations of non-degree granting review
centers.

Republic Act No. 8981 is Not the Appropriate Law

It is argued that the President of the Philippines has adequate


powers under the law to regulate review centers and this could have
been done under an existing validly delegated authority, and that the
appropriate law is Republic Act No. 8981[39] (RA 8981). Under Section 5
of RA 8981, the PRC is mandated to establish and maintain a high
standard of admission to the practice of all professions and at all times
ensure
and
safeguard
the
integrity
of
all
licensure
examinations. Section 7 of RA 8981 further states that the PRC shall
adopt measures to preserve the integrity and inviolability of licensure
examinations.
There is no doubt that a principal mandate of the PRC is to
preserve the integrity of licensure examinations. The PRC has the power
to adopt measures to preserve the integrity and inviolability of licensure
examinations. However, this power should properly be interpreted to
refer to the conduct of the examinations. The enumeration of PRCs
powers under Section 7(e) includes among others, the fixing of dates
and places of the examinations and the appointment of supervisors and
watchers. The power to preserve the integrity and inviolability of
licensure examinations should be read together with these
functions. These powers of the PRC have nothing to do at all with the
regulation of review centers.

The PRC has the power to investigate any of the members of the
Professional Regulatory Boards (PRB) for commission of any
irregularities in the licensure examinations which taint or impugn
the integrity and authenticity of the results of the said
examinations.[40] This is an administrative power which the PRC
exercises over members of the PRB. However, this power has nothing to
do with the regulation of review centers. The PRC has the power to bar
PRB members from conducting review classes in review
centers. However, to interpret this power to extend to the power to
regulate review centers is clearly an unwarranted interpretation of RA
8981. The PRC may prohibit the members of the PRB from conducting
review classes at review centers because the PRC has administrative
supervision over the members of the PRB. However, such power does
not extend to the regulation of review centers.
Section 7(y) of RA 8981 giving the PRC the power to perform such
other functions and duties as may be necessary to carry out the
provisions of RA 8981 does not extend to the regulation of review
centers. There is absolutely nothing in RA 8981 that mentions
regulation by the PRC of review centers.
The Court cannot likewise interpret the fact that RA 8981 penalizes
any person who manipulates or rigs licensure examination results,

secretly informs or makes known licensure examination questions prior


to the conduct of the examination or tampers with the grades in the
professional licensure examinations[41] as a grant of power to regulate
review centers. The provision simply provides for the penalties for
manipulation and other corrupt practices in the conduct of the
professional examinations.

Higher Education Memorandum Order No. 30, series of 2007 VOID for
being unconstitutional.

The assailed EO 566 seeks to regulate not only review centers but
also similar entities. The questioned CHED RIRR defines similar
entities as referring to other review centers providing review or
tutorial services in areas not covered by licensure examinations given by
the PRC including but not limited to college entrance examinations, Civil
Service examinations, tutorial services in specific fields like English,
Mathematics and the like.[42] The PRC has no mandate to supervise
review centers that give courses or lectures intended to prepare
examinees for licensure examinations given by the PRC. It is like the
Court regulating bar review centers just because the Court conducts the
bar examinations. Similarly, the PRC has no mandate to regulate
similar entities whose reviewees will not even take any licensure
examination given by the PRC.

Involved in this special civil action is the unique situation, to use an euphemistic
phrase, of an alternative penal sanction of imprisonment imposed by law but
without a specification as to the term or duration thereof.

WHEREFORE, we GRANT the petition and the petition-inintervention. We DECLARE Executive Order No. 566 and Commission on

SO ORDERED.
PEOPLE VS DACUYCUY

As a consequence of such legislative faux pas or oversight, the petition at bar


seeks to set aside the decision of the then Court of First Instance of Leyte,
Branch IV, dated September 8,1976, 1 penned by herein respondent judge and granting
the petition for certiorari and prohibition with preliminary injunction filed by herein private
respondents and docketed therein as Civil Case No. 5428, as well as his resolution of
2
October 19, 1976 denying the motions for reconsideration filed by the parties therein.
Subject of said decision were the issues on jurisdiction over violations of Republic Act No.
4670, otherwise known as the Magna Carta for Public School Teachers, and the
constitutionality of Section 32 thereof.

In a complaint filed by the Chief of Police of Hindang, Leyte on April 4, 1975,


herein private respondents Celestino S. Matondo, Segundino A. Caval and Cirilo
M. Zanoria, public school officials of Leyte, were charged before the Municipal
Court of Hindang, Leyte in Criminal Case No. 555 thereof for violation of
Republic Act No. 4670. The case was set for arraignment and trial on May 29,
1975. At the arraignment, the herein private respondents, as the accused therein,
pleaded not guilty to the charge. Immediately thereafter, they orally moved to
quash the complaint for lack of jurisdiction over the offense allegedly due to the
correctional nature of the penalty of imprisonment prescribed for the offense. The
motion to quash was subsequently reduced to writing on June 13, 1975. 3 On
4

August 21, 1975, the municipal court denied the motion to quash for lack of merit. On

September 2, 1975, private respondents filed a motion for the reconsideration of the
aforesaid denial order on the same ground of lack of jurisdiction, but with the further
allegation that the facts charged do not constitute an offense considering that Section 32 of
Republic Act No. 4670 is null and void for being unconstitutional. In an undated order
received by the counsel for private respondents on October 20,1975, the motion for
5
reconsideration was denied.

On October 26, 1975, private respondents filed a petitions 6 for certiorari and
prohibition with preliminary injunction before the former Court of First Instance of Leyte,
Branch VIII, where it was docketed as Civil Case No. B-622, to restrain the Municipal Judge,
Provincial Fiscal and Chief of Police of Hindang, Leyte from proceeding with the trial of said
Criminal Case No. 555 upon the ground that the former Municipal Court of Hindang had no
7
jurisdiction over the offense charged. Subsequently, an amended petition alleged the
additional ground that the facts charged do not constitute an offense since the penal
provision, which is Section 32 of said law, is unconstitutional for the following reasons: (1) It
imposes a cruel and unusual punishment, the term of imprisonment being unfixed and may
run to reclusion perpetua; and (2) It also constitutes an undue delegation of legislative power,
the duration of the penalty of imprisonment being solely left to the discretion of the court as if
the latter were the legislative department of the Government.

On March 30, 1976, having been advised that the petition of herein private
respondents was related to Criminal Case No. 1978 for violation of Presidential
Decree No. 442 previously transferred from Branch VIII to Branch IV of the
erstwhile Court of First Instance of Leyte, Judge Fortunate B. Cuna of the former
branch transferred the said petition to the latter branch for further proceedings
and where it was subsequently docketed therein as Civil Case No. 5428. 8 On
March 15, 1976, the petitioner herein filed an opposition to the admission of the said
9
amended petitions but respondent judge denied the same in his resolution of April 20,
10
1976. On August 2, 1976, herein petitioner filed a supplementary memorandum in answer
11
to the amended petition.

On September 8, 1976, respondent judge rendered the aforecited challenged


decision holding in substance that Republic Act No. 4670 is valid and
constitutional but cases for its violation fall outside of the jurisdiction of municipal
and city courts, and remanding the case to the former Municipal Court of
Hindang, Leyte only for preliminary investigation.

As earlier stated, on September 25, 1976, petitioner filed a motion for


reconsideration. 12 Likewise, private respondents filed a motion for reconsideration of the
lower court's decision but the same was limited only to the portion thereof which sustains the
13
validity of Section 32 of Republic Act No. 4670. Respondent judge denied both motions for
14
reconsideration in a resolution dated October 19, 1976.

The instant petition to review the decision of respondent judge poses the
following questions of law: (1) Whether the municipal and city courts have
jurisdiction over violations of Republic Act No. 4670; and (2) Whether Section 32
of said Republic Act No. 4670 is constitutional.
We shall resolve said queries in inverse order, since prior determination of the
constitutionality of the assailed provision of the law involved is necessary for the
adjudication of the jurisdictional issue raised in this petition.
1. The disputed section of Republic Act No. 4670 provides:
Sec. 32. Penal Provision. A person who shall wilfully interfere
with, restrain or coerce any teacher in the exercise of his rights
guaranteed by this Act or who shall in any other manner commit
any act to defeat any of the provisions of this Act shall, upon
conviction, be punished by a fine of not less than one hundred
pesos nor more than one thousand pesos, or by imprisonment, in
the discretion of the court. (Emphasis supplied).
Two alternative and distinct penalties are consequently imposed, to wit: (a) a fine
ranging from P100.00 to P1,000.00; or (b) imprisonment. It is apparent that the
law has no prescribed period or term for the imposable penalty of imprisonment.
While a minimum and maximum amount for the penalty of fine is specified, there
is no equivalent provision for the penalty of imprisonment, although both appear
to be qualified by the phrase "in the discretion of the court.
Private respondents contend that a judicial determination of what Congress
intended to be the duration of the penalty of imprisonment would be violative of
the constitutional prohibition against undue delegation of legislative power, and

that the absence of a provision on the specific term of imprisonment constitutes


that penalty into a cruel and unusual form of punishment. Hence, it is vigorously
asserted, said Section 32 is unconstitutional.
The basic principle underlying the entire field of legal concepts pertaining to the
validity of legislation is that in the enactment of legislation a constitutional
measure is thereby created. In every case where a question is raised as to the
constitutionality of an act, the court employs this doctrine in scrutinizing the terms
of the law. In a great volume of cases, the courts have enunciated the
fundamental rule that there is a presumption in favor of the constitutionality of a
legislative enactment. 15
It is contended that Republic Act No. 4670 is unconstitutional on the ground that
the imposable but indefinite penalty of imprisonment provided therein constitutes
a cruel and unusual punishment, in defiance of the express mandate of the
Constitution. This contention is inaccurate and should be rejected.

inflicted.' The prohibition of cruel and unusual


punishments is generally aimed at the form or
character of the punishment rather than its severity
in respect of duration or amount, and apply to
punishments which never existed in America, or
which public sentiment has regarded as cruel or
obsolete (15 Am. Jur., p. 172), for instance there
(sic) inflicted at the whipping post, or in the pillory,
burning at the stake, breaking on the wheel,
disemboweling, and the like (15 Am. Jur. Supra,
Note 35 L.R.A. p. 561). Fine and imprisonment
would not thus be within the prohibition.' (People vs.
de la Cruz, 92 Phil. 906). 16
The question that should be asked, further, is whether the constitutional
prohibition looks only to the form or nature of the penalty and not to the
proportion between the penalty and the crime.

We note with approval the holding of respondent judge that


The rule is established beyond question that a punishment
authorized by statute is not cruel or unusual or disproportionate to
the nature of the offense unless it is a barbarous one unknown to
the law or so wholly disproportionate to the nature of the offense
as to shock the moral sense of the community. Based on the
principle, our Supreme Court has consistently overruled
contentions of the defense that the punishment of fine or
imprisonment authorized by the statute involved is cruel and
unusual. (Legarda vs. Valdez, 1 Phil. 146; U.S. vs. Pico, 18 Phil.
386; People vs. Garay, 2 ACR 149; People vs. Estoista 93 Phil.
647; People vs. Tiu Ua. 96 Phil. 738; People vs. Dionisio, 22 SCRA
1299). The language of our Supreme Court in the first of the cases
it decided after the last world war is appropriate here:
The Constitution directs that 'Excessive fines shall
not be imposed, nor cruel and unusual punishment

The answer thereto may be gathered from the pronouncement in People vs.
Estoista, 17 where an "excessive" penalty was upheld as constitutional and was imposed but
with a recommendation for executive clemency, thus:

... If imprisonment from 5 to 10 years is out of proportion to the


present case in view of certain circumstances, the law is not to be
declared unconstitutional for this reason. The constitutionality of an
act of the legislature is not to be judged in the light of exceptional
cases. Small transgressors for which the heavy net was not spread
are, like small fishes, bound to be caught, and it is to meet such a
situation as this that courts are advised to make a recommendation
to the Chief Executive for clemency or reduction of the penalty...
That the penalty is grossly disproportionate to the crime is an insufficient basis to
declare the law unconstitutional on the ground that it is cruel and unusual. The
fact that the punishment authorized by the statute is severe does not make it
cruel or unusual. 18 In addition, what degree of disproportion the Court will consider as

obnoxious to the Constitution has still to await appropriate determination in due time since, to
the credit of our legislative bodies, no decision has as yet struck down a penalty for being
"cruel and unusual" or "excessive."

We turn now to the argument of private respondents that the entire penal
provision in question should be invalidated as an 49 "undue delegation of
legislative power, the duration of penalty of imprisonment being solely left to the
discretion of the court as if the lattter were the legislative department of the
government."
Petitioner counters that the discretion granted therein by the legislature to the
courts to determine the period of imprisonment is a matter of statutory
construction and not an undue delegation of legislative power. It is contended
that the prohibition against undue delegation of legislative power is concerned
only with the delegation of power to make laws and not to interpret the same. It is
also submitted that Republic Act No. 4670 vests in the courts the discretion, not
to fix the period of imprisonment, but to choose which of the alternative penalties
shall be imposed.
Respondent judge sustained these theses of petitioner on his theory that "the
principle of separation of powers is not violated by vesting in courts discretion as
to the length of sentence or amount of fine between designated limits in
sentencing persons convicted of crime. In such instance, the exercise of judicial
discretion by the courts is not an attempt to use legislative power or to prescribe
and create a law but is an instance of the administration of justice and the
application of existing laws to the facts of particular cases." 19 What respondent
judge obviously overlooked is his own reference to penalties "between designated limits."

In his commentary on the Constitution of the United States, Corwin wrote:


.. At least three distinct ideas have contributed to the development
of the principle that legislative power cannot be delegated. One is
the doctrine of separation of powers: Why go to the trouble of
separating the three powers of government if they can straightway
remerge on their own motion? The second is the concept of due

process of laws which precludes the transfer of regulatory


functions to private persons. Lastly, there is the maxim of agency
"Delegata potestas non potest delegari." 20
An apparent exception to the general rule forbidding the delegation of legislative
authority to the courts exists in cases where discretion is conferred upon said
courts. It is clear, however, that when the courts are said to exercise a discretion,
it must be a mere legal discretion which is exercised in discerning the course
prescribed by law and which, when discerned, it is the duty of the court to
follow. 21
So it was held by the Supreme Court of the United States that the principle of
separation of powers is not violated by vesting in courts discretion as to the
length of sentence or the amount of fine between designated limits in sentencing
persons convicted of a crime. 22
In the case under consideration, the respondent judge erronneously assumed
that since the penalty of imprisonment has been provided for by the legislature,
the court is endowed with the discretion to ascertain the term or period of
imprisonment. We cannot agree with this postulate. It is not for the courts to fix
the term of imprisonment where no points of reference have been provided by
the legislature. What valid delegation presupposes and sanctions is an exercise
of discretion to fix the length of service of a term of imprisonment which must be
encompassed within specific or designated limits provided by law, the absence of
which designated limits well constitute such exercise as an undue delegation, if
not-an outright intrusion into or assumption, of legislative power.
Section 32 of Republic Act No. 4670 provides for an indeterminable period of
imprisonment, with neither a minimum nor a maximum duration having been set
by the legislative authority. The courts are thus given a wide latitude of discretion
to fix the term of imprisonment, without even the benefit of any sufficient
standard, such that the duration thereof may range, in the words of respondent
judge, from one minute to the life span of the accused. Irremissibly, this cannot
be allowed. It vests in the courts a power and a duty essentially legislative in
nature and which, as applied to this case, does violence to the rules on

separation of powers as well as the non-delegability of legislative powers. This


time, the preumption of constitutionality has to yield.

private respondents falls within the original jurisdiction of the Municipal Trial
Court of Hindang, Leyte.

On the foregoing considerations, and by virtue of the separability clause in


Section 34 of Republic Act No. 4670, the penalty of imprisonment provided in
Section 32 thereof should be, as it is hereby, declared unconstitutional.

WHEREFORE, the decision and resolution of respondent judge are hereby


REVERSED and SET ASIDE. Criminal Case No. 555 filed against private
respondents herein is hereby ordered to be remanded to the Municipal Trial
Court of Hindang, Leyte for trial on the merits.

It follows, therefore, that a ruling on the proper interpretation of the actual term of
imprisonment, as may have been intended by Congress, would be pointless and
academic. It is, however, worth mentioning that the suggested application of the
so-called rule or principle of parallelism, whereby a fine of P1,000.00 would be
equated with one year of imprisonment, does not merit judicial acceptance. A
fine, whether imposed as a single or as an alternative penalty, should not and
cannot be reduced or converted into a prison term; it is to be considered as a
separate and independent penalty consonant with Article 26 of the Revised
Penal Code. 23 It is likewise declared a discrete principal penalty in the graduated scales of
penalties in Article 71 of said Code. There is no rule for transmutation of the amount of a fine
into a term of imprisonment. Neither does the Code contain any provision that a fine when
imposed in conjunction with imprisonment is subordinate to the latter penalty. In sum, a fine is
24
as much a principal penalty as imprisonment. Neither is subordinate to the other.

2. It has been the consistent rule that the criminal jurisdiction of the court is
determined by the statute in force at the time of the commencement of the
action. 25
With the deletion by invalidation of the provision on imprisonment in Section 32 of
Republic Act No. 4670, as earlier discussed, the imposable penalty for violations
of said law should be limited to a fine of not less than P100.00 and not more than
P1,000.00, the same to serve as the basis in determining which court may
properly exercise jurisdiction thereover. When the complaint against private
respondents was filed in 1975, the pertinent law then in force was Republic Act
No. 296, as amended by Republic Act No. 3828, under which crimes punishable
by a fine of not more than P 3,000.00 fall under the original jurisdiction of the
former municipal courts. Consequently, Criminal Case No. 555 against herein

SO ORDERED.

PELAEZ VS AUDITOR
During the period from September 4 to October 29, 1964 the President of the
Philippines, purporting to act pursuant to Section 68 of the Revised
Administrative Code, issued Executive Orders Nos. 93 to 121, 124 and 126 to
129; creating thirty-three (33) municipalities enumerated in the margin.1 Soon
after the date last mentioned, or on November 10, 1964 petitioner Emmanuel
Pelaez, as Vice President of the Philippines and as taxpayer, instituted the
present special civil action, for a writ of prohibition with preliminary injunction,
against the Auditor General, to restrain him, as well as his representatives and
agents, from passing in audit any expenditure of public funds in implementation
of said executive orders and/or any disbursement by said municipalities.
Petitioner alleges that said executive orders are null and void, upon the ground
that said Section 68 has been impliedly repealed by Republic Act No. 2370 and
constitutes an undue delegation of legislative power. Respondent maintains the
contrary view and avers that the present action is premature and that not all
proper parties referring to the officials of the new political subdivisions in
question have been impleaded. Subsequently, the mayors of several
municipalities adversely affected by the aforementioned executive orders
because the latter have taken away from the former the barrios composing the
new political subdivisions intervened in the case. Moreover, Attorneys Enrique
M. Fernando and Emma Quisumbing-Fernando were allowed to and did appear
asamici curiae.

The third paragraph of Section 3 of Republic Act No. 2370, reads:


Barrios shall not be created or their boundaries altered nor their names
changed except under the provisions of this Act or by Act of Congress.
Pursuant to the first two (2) paragraphs of the same Section 3:
All barrios existing at the time of the passage of this Act shall come under
the provisions hereof.
Upon petition of a majority of the voters in the areas affected, a new barrio
may be created or the name of an existing one may be changed by the
provincial board of the province, upon recommendation of the council of
the municipality or municipalities in which the proposed barrio is
stipulated. The recommendation of the municipal council shall be
embodied in a resolution approved by at least two-thirds of the entire
membership of the said council: Provided, however, That no new barrio
may be created if its population is less than five hundred persons.
Hence, since January 1, 1960, when Republic Act No. 2370 became effective,
barrios may "not be created or their boundaries altered nor their names changed"
except by Act of Congress or of the corresponding provincial board "upon petition
of a majority of the voters in the areas affected" and the "recommendation of the
council of the municipality or municipalities in which the proposed barrio is
situated." Petitioner argues, accordingly: "If the President, under this new law,
cannot even create a barrio, can he create a municipality which is composed of
several barrios, since barrios are units of municipalities?"
Respondent answers in the affirmative, upon the theory that a new municipality
can be created without creating new barrios, such as, by placing old barrios
under the jurisdiction of the new municipality. This theory overlooks, however, the
main import of the petitioner's argument, which is that the statutory denial of the
presidential authority to create a new barrio implies a negation of the bigger
power to create municipalities, each of which consists of several barrios. The
cogency and force of this argument is too obvious to be denied or even

questioned. Founded upon logic and experience, it cannot be offset except by a


clear manifestation of the intent of Congress to the contrary, and no such
manifestation, subsequent to the passage of Republic Act No. 2379, has been
brought to our attention.
Moreover, section 68 of the Revised Administrative Code, upon which the
disputed executive orders are based, provides:
The (Governor-General) President of the Philippines may by executive
order define the boundary, or boundaries, of any province, subprovince,
municipality, [township] municipal district, or other political subdivision,
and increase or diminish the territory comprised therein, may divide any
province into one or more subprovinces, separate any political division
other than a province, into such portions as may be required, merge any
of such subdivisions or portions with another, name any new subdivision
so created, and may change the seat of government within any
subdivision to such place therein as the public welfare may require:
Provided, That the authorization of the (Philippine Legislature) Congress
of the Philippines shall first be obtained whenever the boundary of any
province or subprovince is to be defined or any province is to be divided
into one or more subprovinces. When action by the (Governor-General)
President of the Philippines in accordance herewith makes necessary a
change of the territory under the jurisdiction of any administrative officer or
any judicial 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."
Although1a Congress may delegate to another branch of the Government the
power to fill in the details in the execution, enforcement or administration of a
law, it is essential, to forestall a violation of the principle of separation of powers,
that said law: (a) be complete in itself it must set forth therein the policy to be
executed, carried out or implemented by the delegate2 and (b) fix a standard
the limits of which are sufficiently determinate or determinable to which the
delegate must conform in the performance of his functions.2a Indeed, without a
statutory declaration of policy, the delegate would in effect, make or formulate
such policy, which is the essence of every law; and, without the aforementioned
standard, there would be no means to determine, with reasonable certainty,
whether the delegate has acted within or beyond the scope of his
authority.2b Hence, he could thereby arrogate upon himself the power, not only to

make the law, but, also and this is worse to unmake it, by adopting
measures inconsistent with the end sought to be attained by the Act of Congress,
thus nullifying the principle of separation of powers and the system of checks and
balances, and, consequently, undermining the very foundation of our Republican
system.
Section 68 of the Revised Administrative Code does not meet these well settled
requirements for a valid delegation of the power to fix the details in the
enforcement of a law. It does not enunciate any policy to be carried out or
implemented by the President. Neither does it give a standard sufficiently precise
to avoid the evil effects above referred to. In this connection, we do not overlook
the fact that, under the last clause of the first sentence of Section 68, the
President:
... may change the seat of the government within any subdivision to such
place therein as the public welfare may require.
It is apparent, however, from the language of this clause, that the phrase "as the
public welfare may require" qualified, not the clauses preceding the one just
quoted, but only the place to which the seat of the government may be
transferred. This fact becomes more apparent when we consider that said
Section 68 was originally Section 1 of Act No. 1748,3 which provided that,
"whenever in the judgment of the Governor-General the public welfare requires,
he may, by executive order," effect the changes enumerated therein (as in said
section 68), including the change of the seat of the government "to such place ...
as the public interest requires." The opening statement of said Section 1 of Act
No. 1748 which was not included in Section 68 of the Revised Administrative
Code governed the time at which, or the conditions under which, the powers
therein conferred could be exercised; whereas the last part of the first sentence
of said section referred exclusively to the place to which the seat of the
government was to be transferred.
At any rate, the conclusion would be the same, insofar as the case at bar is
concerned, even if we assumed that the phrase "as the public welfare may
require," in said Section 68, qualifies all other clauses thereof. It is true that

inCalalang vs. Williams (70 Phil. 726) and People vs. Rosenthal (68 Phil. 328),
this Court had upheld "public welfare" and "public interest," respectively, as
sufficient standards for a valid delegation of the authority to execute the law. But,
the doctrine laid down in these cases as all judicial pronouncements must
be construed in relation to the specific facts and issues involved therein, outside
of which they do not constitute precedents and have no binding effect. 4 The law
construed in the Calalang case conferred upon the Director of Public Works, with
the approval of the Secretary of Public Works and Communications, the power to
issue rules and regulations to promote safe transitupon 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 of speculative securities. Both cases involved grants
to administrative officers of powers related to the exercise of their administrative
functions, calling for the determination of questions of fact.
Such is not the nature of the powers dealt with in section 68. As above indicated,
the creation of municipalities, is not an administrative function, but one which is
essentially and eminently legislative in character. The question of whether or not
"public interest" demands the exercise of such power is not one of fact. it is
"purely a 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 aquestion of public policy
and statecraft" (In re Village of North Milwaukee, 67 N.W. 1033, 1035-1037).
For this reason, courts of justice have annulled, as constituting undue delegation
of legislative powers, state laws granting the judicial department, the power to
determine whether certain territories should be annexed to a particular
municipality (Udall vs. Severn, supra, 258-359); or vesting in a Commission the
right to determine the plan and frame of government of proposed villages and
what functions shall be exercised by the same, although the powers and
functions of the village are specifically limited by statute (In re Municipal
Charters, 86 Atl. 307-308); or conferring upon courts the authority to declare a
given town or village incorporated, and designate its metes and bounds, upon

petition of a majority of the taxable inhabitants thereof, setting forth the area
desired to be included in such village (Territory ex rel Kelly vs. Stewart, 23 Pac.
405-409); or authorizing the territory of a town, containing a given area and
population, to be incorporated as a town, on certain steps being taken by the
inhabitants thereof and on certain determination by a court and subsequent vote
of the inhabitants in favor thereof, insofar as the court is allowed to determine
whether the lands embraced in the petition "ought justly" to be included in the
village, and whether the interest of the inhabitants will be promoted by such
incorporation, and to enlarge and diminish the boundaries of the proposed village
"as justice may require" (In re Villages of North Milwaukee, 67 N.W. 1035-1037);
or creating a Municipal Board of Control which shall determine whether or not the
laying out, construction or operation of a toll road is in the "public interest" and
whether the requirements of the law had been complied with, in which case the
board shall enter an order creating a municipal corporation and fixing the name
of the same (Carolina-Virginia Coastal Highway vs. Coastal Turnpike Authority,
74 S.E. 2d. 310).
Insofar as the validity of a delegation of power by Congress to the President is
concerned, the case of Schechter Poultry Corporation vs. U.S. (79 L. Ed. 1570)
is quite relevant to the one at bar. The Schechter case involved the
constitutionality of Section 3 of the National Industrial Recovery Act authorizing
the President of the United States to approve "codes of fair competition"
submitted to him by one or more trade or industrial associations or corporations
which "impose no inequitable restrictions on admission to membership therein
and are truly representative," provided that such codes are not designed "to
promote monopolies or to eliminate or oppress small enterprises and will not
operate to discriminate against them, and will tend to effectuate the policy" of
said Act. The Federal Supreme Court held:
To summarize and conclude upon this point: Sec. 3 of the Recovery Act is
without precedent. It supplies no standards for any trade, industry or
activity. It does not undertake to prescribe rules of conduct to be applied
to particular states of fact determined by appropriate administrative
procedure. Instead of prescribing rules of conduct, it authorizes the
making of codes to prescribe them. For that legislative undertaking, Sec. 3

sets up no standards, aside from the statement of the general aims of


rehabilitation, correction and expansion described in Sec. 1. In view of the
scope of that broad declaration, and of the nature of the few restrictions
that are imposed, the discretion of the President in approving or
prescribing codes, and thus enacting laws for the government of trade and
industry throughout the country, is virtually unfettered. We think that the
code making authority thus conferred is an unconstitutional delegation of
legislative power.
If the term "unfair competition" is so broad as to vest in the President a discretion
that is "virtually unfettered." and, consequently, tantamount to a delegation of
legislative power, it is obvious that "public welfare," which has even a broader
connotation, leads to the same result. In fact, if the validity of the delegation of
powers made in Section 68 were upheld, there would no longer be any legal
impediment to a statutory grant of authority to the President to do anything which,
in his opinion, may be required by public welfare or public interest. Such grant of
authority would be a virtual abdication of the powers of Congress in favor of the
Executive, and would bring about a total collapse of the democratic system
established by our Constitution, which it is the special duty and privilege of this
Court to uphold.
It may not be amiss to note that the executive orders in question were issued
after the legislative bills for the creation of the municipalities involved in this case
had failed to pass Congress. A better proof of the fact that the issuance of said
executive orders entails the exercise of purely legislative functions can hardly be
given.
Again, Section 10 (1) of Article VII of our fundamental law ordains:
The President shall have control of all the executive departments,
bureaus, or offices, exercise general supervision over all local
governments as may be provided by law, and take care that the laws be
faithfully executed.

The power of control under this provision implies the right of the President to
interfere in the exercise of such discretion as may be vested by law in the officers
of the executive departments, bureaus, or offices of the national government, as
well as to act in lieu of such officers. This power is denied by the Constitution to
the Executive, insofar as local governments are concerned. With respect to the
latter, the fundamental law permits him to wield no more authority than that of
checking whether said local governments or the officers thereof perform their
duties as provided by statutory enactments. Hence, the President cannot
interfere with local governments, so long as the same or its officers act Within the
scope of their authority. He may not enact an ordinance which the municipal
council has failed or refused to pass, even if it had thereby violated a duty
imposed thereto by law, although he may see to it that the corresponding
provincial officials take appropriate disciplinary action therefor. Neither may he
vote, set aside or annul an ordinance passed by said council within the scope of
its jurisdiction, no matter how patently unwise it may be. He may not even
suspend an elective official of a regular municipality or take any disciplinary
action against him, except on appeal from a decision of the corresponding
provincial board.5
Upon the other hand if the President could create a municipality, he could, in
effect, remove any of its officials, by creating a new municipality and including
therein the barrio in which the official concerned resides, for his office would
thereby become vacant.6 Thus, by merely brandishing the power to create a new
municipality (if he had it), without actually creating it, he could compel local
officials to submit to his dictation, thereby, in effect, exercising over them the
power of control denied to him by the Constitution.
Then, also, the power of control of the President over executive departments,
bureaus or offices implies no 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.

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.

In short, even if it did entail an undue delegation of legislative powers, as it


certainly does, said Section 68, as part of the Revised Administrative Code,
approved on March 10, 1917, must be deemed repealed by the subsequent
adoption of the Constitution, in 1935, which is utterly incompatible and
inconsistent with said statutory enactment.7

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.

There are only two (2) other points left for consideration, namely, respondent's
claim (a) that "not all the proper parties" referring to the officers of the newly
created municipalities "have been impleaded in this case," and (b) that "the
present petition is premature."
As regards the first point, suffice it to say that the records do not show, and the
parties do not claim, that the officers of any of said municipalities have been
appointed or elected and assumed office. At any rate, the Solicitor General, who
has appeared on behalf of respondent Auditor General, is the officer authorized
by law "to act and represent the Government of the Philippines, its offices and
agents, in any official investigation, proceeding or matter requiring the services of
a lawyer" (Section 1661, Revised Administrative Code), and, in connection with
the creation of the aforementioned municipalities, which involves a political, not
proprietary, function, said local officials, if any, are mere agents or
representatives of the national government. Their interest in the case at bar has,
accordingly, been, in effect, duly represented.8
With respect to the second point, respondent alleges that he has not as yet acted
on any of the executive order & in question and has not intimated how he would
act in connection therewith. It is, however, a matter of common, public
knowledge, subject to judicial cognizance, that the President has, for many

Zaldivar, J., took no part.

Separate Opinions
BENGZON, J.P., J., concurring and dissenting:
A sign of progress in a developing nation is the rise of new municipalities.
Fostering their rapid growth has long been the aim pursued by all three branches
of our Government.
So it was that the Governor-General during the time of the Jones Law was given
authority by the Legislature (Act No. 1748) to act upon certain details with
respect to said local governments, such as fixing of boundaries, subdivisions and
mergers. And the Supreme Court, within the framework of the Jones Law, ruled
in 1917 that the execution or implementation of such details, did not entail
abdication of legislative power (Government vs. Municipality of Binagonan, 34

Phil. 518; Municipality of Cardona vs. Municipality of Binagonan, 36 Phil. 547).


Subsequently, Act No. 1748's aforesaid statutory authorization was embodied in
Section 68 of the Revised Administrative Code. And Chief Executives since then
up to the present continued to avail of said provision, time and again invoking it
to issue executive orders providing for the creation of municipalities.
From September 4, 1964 to October 29, 1964 the President of the Philippines
issued executive orders to create thirty-three municipalities pursuant to Section
68 of the Revised Administrative Code. Public funds thereby stood to be
disbursed in implementation of said executive orders.
Suing as private citizen and taxpayer, Vice President Emmanuel Pelaez filed in
this Court a petition for prohibition with preliminary injunction against the Auditor
General. It seeks to restrain the respondent or any person acting in his behalf,
from passing in audit any expenditure of public funds in implementation of the
executive orders aforementioned.
Petitioner contends that the President has no power to create a municipality by
executive order. It is argued that Section 68 of the Revised Administrative Code
of 1917, so far as it purports to grant any such power, is invalid or, at the least,
already repealed, in light of the Philippine Constitution and Republic Act 2370
(The Barrio Charter).

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 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.
From such working I believe that power to create a municipality is included: to
"separate any political division other than a province, into such portions as may
be required, merge any such subdivisions or portions with another, name any
new subdivision so created." The issue, however, is whether the legislature can
validly delegate to the Executive such power.

Section 68 is again reproduced hereunder for convenience:


SEC. 68. General authority of [Governor-General) President of the
Philippines to fix boundaries and make new subdivisions. 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

The power to create a municipality is legislative in character. American


authorities have therefore favored the view that it cannot be delegated; that what
is delegable is not the power to create municipalities but only the power to
determine the existence of facts under which creation of a municipality will result
(37 Am. Jur. 628).
The test is said to lie in whether the statute allows any discretion on the delegate
as to whether the municipal corporation should be created. If so, there is an
attempted delegation of legislative power and the statute is invalid (Ibid.). Now
Section 68 no doubt gives the President such discretion, since it says that the

President "may by executive order" exercise the powers therein granted.


Furthermore, Section 5 of the same Code states:
SEC. 5. Exercise of administrative discretion The exercise of the
permissive powers of all executive or administrative officers and bodies is
based upon discretion, and when such officer or body is given authority to
do any act but not required to do such act, the doing of the same shall be
dependent on a sound discretion to be exercised for the good of the
service and benefit of the public, whether so expressed in the statute
giving the authority or not.
Under the prevailing rule in the United States and Section 68 is of American
origin the provision in question would be an invalid attempt to delegate purely
legislative powers, contrary to the principle of separation of powers.
It is very pertinent that Section 68 should be considered with the stream of
history in mind. A proper knowledge of the past is the only adequate background
for the present. Section 68 was adopted half a century ago. Political change, two
world wars, the recognition of our independence and rightful place in the family of
nations, have since taken place. In 1917 the Philippines had for its Organic Act
the Jones Law. And under the setup ordained therein no strict separation of
powers was adhered to. Consequently, Section 68 was not constitutionally
objectionable at the time of its enactment.
The advent of the Philippine Constitution in 1935 however altered the situation.
For not only was separation of powers strictly ordained, except only in specific
instances therein provided, but the power of the Chief Executive over local
governments suffered an explicit reduction.
Formerly, Section 21 of the Jones Law provided that the Governor-General "shall
have general supervision and control of all the departments and bureaus of the
government in the Philippine Islands." Now Section 10 (1), Article VII of the
Philippine Constitution provides: "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.
In short, the power of control over local governments had now been taken away
from the Chief Executive. Again, to fully understand the significance of this
provision, one must trace its development and growth.
As early as April 7, 1900 President McKinley of the United States, in his
Instructions to the Second Philippine Commission, laid down the policy that our
municipal governments should be "subject to the least degree of supervision and
control" on the part of the national government. Said supervision and control was
to be confined within the "narrowest limits" or so much only as "may be
necessary to secure and enforce faithful and efficient administration by local
officers." And the national government "shall have no direct administration except
of matters of purely general concern." (See Hebron v. Reyes, L-9158, July 28,
1958.)
All this had one aim, to enable the Filipinos to acquire experience in the art of
self-government, with the end in view of later allowing them to assume complete
management and control of the administration of their local affairs. Such aim is
the policy now embodied in Section 10 (1), Article VII of the Constitution
(Rodriguez v. Montinola, 50 O.G. 4820).
It is the evident decree of the Constitution, therefore, that the President shall
have no power of control over local governments. Accordingly, Congress cannot
by law grant him such power (Hebron v. Reyes, supra). And any such power
formerly granted under the Jones Law thereby became unavoidably inconsistent
with the Philippine Constitution.
It remains to examine the relation of the power to create and the power to control
local governments. Said relationship has already been passed upon by this Court
in Hebron v. Reyes, supra. In said case, it was ruled that the power to control is
an incident of the power to create or abolish municipalities. Respondent's view,
therefore, that creating municipalities and controlling their local governments are
"two worlds apart," is untenable. And since as stated, the power to control local

governments can no longer be conferred on or exercised by the President, it


follows a fortiori that the power to create them, all the more cannot be so
conferred or exercised.
I am compelled to conclude, therefore, that Section 10 (1), Article VII of the
Constitution has repealed Section 68 of the Revised Administrative Code as far
as the latter empowers the President to create local governments. Repeal by the
Constitution of prior statutes inconsistent with it has already been sustained in De
los Santos v. MaIlare, 87 Phil. 289. And it was there held that such repeal differs
from a declaration of unconstitutionality of a posterior legislation, so much so that
only a majority vote of the Court is needed to sustain a finding of repeal.
Since the Constitution repealed Section 68 as far back as 1935, it is academic to
ask whether Republic Act 2370 likewise has provisions in conflict with Section 68
so as to repeal it. Suffice it to state, at any rate, that statutory prohibition on the
President from creating a barrio does not, in my opinion, warrant the inference of
statutory prohibition for creating a municipality. For although municipalities
consist of barrios, there is nothing in the statute that would preclude creation of
new municipalities out of pre-existing barrios.
It is not contrary to the logic of local autonomy to be able to create larger political
units and unable to create smaller ones. For as long ago observed in President
McKinley's Instructions to the Second Philippine Commission, greater autonomy
is to be imparted to the smaller of the two political units. The smaller the unit of
local government, the lesser is the need for the national government's
intervention in its political affairs. Furthermore, for practical reasons, local
autonomy cannot be given from the top downwards. The national government, in
such a case, could still exercise power over the supposedly autonomous unit,
e.g., municipalities, by exercising it over the smaller units that comprise them,
e.g., the barrios. A realistic program of decentralization therefore calls for
autonomy from the bottom upwards, so that it is not surprising for Congress to
deny the national government some power over barrios without denying it over
municipalities. For this reason, I disagree with the majority view that because the
President could not create a barrio under Republic Act 2370, a fortiori he cannot
create a municipality.

It is my view, therefore, that the Constitution, and not Republic Act 2370,
repealed Section 68 of the Revised Administrative Code's provision giving the
President authority to create local governments. And for this reason I agree with
the ruling in the majority opinion that the executive orders in question are null and
void.
In thus ruling, the Court is but sustaining the fulfillment of our historic desire to be
free and independent under a republican form of government, and exercising a
function derived from the very sovereignty that it upholds. Executive orders
declared null and void.

BELTRAN VS SECRETARY
Before this Court are petitions assailing primarily the
constitutionality of Section 7 of Republic Act No. 7719, otherwise
known as the National Blood Services Act of 1994, and the
validity of Administrative Order (A.O.) No. 9, series of 1995 or the
Rules and Regulations Implementing Republic Act No. 7719.
G.R. No. 133640,[1] entitled Rodolfo S. Beltran, doing
business under the name and style, Our Lady of Fatima Blood
Bank, et al., vs. The Secretary of Health and G.R. No.
133661,[2] entitled Doctors Blood Bank Center vs. Department of
Health are petitions for certiorari and mandamus, respectively,
seeking the annulment of the following: (1)
Section 7 of
Republic Act No. 7719; and, (2) Administrative Order (A.O.) No. 9,
series of 1995. Both petitions likewise pray for the issuance of a

writ of prohibitory injunction enjoining the Secretary of Health


from implementing and enforcing the aforementioned law and its
Implementing Rules and Regulations; and,
for a mandatory
injunction ordering and commanding the Secretary of Health to
grant, issue or renew petitioners license to operate free standing
blood banks (FSBB).
The above cases were consolidated in a resolution of the
Court En Banc dated June 2, 1998.[3]
G.R. No. 139147,[4] entitled Rodolfo S. Beltran, doing
business under the name and style, Our Lady of Fatima Blood
Bank, et al., vs. The Secretary of Health, on the other hand, is a
petition to show cause why respondent Secretary of Health should
not be held in contempt of court.
This case was originally assigned to the Third Division of
this Court and later consolidated with G.R. Nos. 133640 and
133661 in a resolution datedAugust 4, 1999.[5]
Petitioners comprise the majority of the Board of Directors of
the Philippine Association of Blood Banks, a duly registered non-

stock and non-profit association composed of free standing blood


banks.
Public respondent Secretary of Health is being sued in his
capacity as the public official directly involved and charged with
the enforcement and implementation of the law in question.
The facts of the case are as follows:
Republic Act No. 7719 or the National Blood Services Act of
1994 was enacted into law on April 2, 1994. The Act seeks to
provide
an adequate supply of safe blood by promoting voluntary blood
donation and by regulating blood banks in the country. It was
approved by then President Fidel V. Ramos on May 15, 1994 and
was subsequently published in the Official Gazette on August 18,
1994. The law took effect on August 23, 1994.
On April 28, 1995, Administrative Order No. 9, Series of
1995, constituting the Implementing Rules and Regulations of said
law was promulgated by respondent Secretary of the Department
of Health (DOH).[6]

Section 7 of R.A. 7719 [7] provides:


Section 7. Phase-out of Commercial Blood
Banks - All commercial blood banks shall be phased-out
over a period of two (2) years after the effectivity of this
Act, extendable to a maximum period of two (2) years by
the Secretary.

Section 23 of Administrative Order No. 9 provides:


Section 23. Process of Phasing Out. -- The
Department shall effect the phasing-out of all
commercial blood banks over a period of two (2) years,
extendible for a maximum period of two (2) years after
the effectivity of R.A. 7719. The decision to extend shall
be based on the result of a careful study and review of
the blood supply and demand and public safety.[8]

Blood banking and blood transfusion services in the


country have been arranged in four (4) categories: blood centers
run by the Philippine National Red Cross (PNRC), government-

run blood services, private hospital blood banks, and commercial


blood services.
Years prior to the passage of the National Blood Services Act
of 1994, petitioners have already been operating commercial blood
banks under Republic Act No. 1517, entitled An Act Regulating
the Collection, Processing and Sale of Human Blood, and the
Establishment and Operation of Blood Banks and Blood
Processing Laboratories. The law, which was enacted on June 16,
1956, allowed the establishment and operation by licensed
physicians of blood banks and blood processing laboratories. The
Bureau of Research and Laboratories (BRL) was created in 1958
and was given the power to regulate clinical laboratories in 1966
under Republic Act No. 4688. In 1971, the Licensure Section was
created within the BRL. It was given the duty to enforce the
licensure requirements for blood banks as well as clinical
laboratories. Due to this development, Administrative Order No.
156, Series of 1971, was issued. The new rules and regulations
triggered a stricter enforcement of the Blood Banking Law, which
was characterized by frequent spot checks, immediate suspension
and communication of such suspensions to hospitals, a more
systematic record-keeping and frequent communication with
blood
banks
through
monthly
information
bulletins.

Unfortunately, by the 1980s, financial difficulties constrained the


BRL to reduce the frequency of its supervisory visits to the blood
banks.[9]
Meanwhile, in the international scene, concern for the safety
of blood and blood products intensified when the dreaded disease
Acute Immune Deficiency Syndrome (AIDS) was first described in
1979. In 1980, the International Society of Blood Transfusion (ISBT)
formulated the Code of Ethics for Blood Donation and
Transfusion. In 1982, the first case of transfusion-associated AIDS
was described in an infant. Hence, the ISBT drafted in 1984, a
model for a national blood policy outlining certain principles that
should be taken into consideration. By 1985, the ISBT had
disseminated guidelines requiring AIDS testing of blood and
blood products for transfusion.[10]
In 1989, another revision of the Blood Banking Guidelines
was made. The DOH issued Administrative Order No. 57, Series
of 1989, which classified banks into primary, secondary and
tertiary depending on the services they provided. The standards
were adjusted according to this classification. For instance, floor
area requirements varied according to classification level. The new

guidelines likewise required Hepatitis B and HIV testing, and that


the blood bank be headed by a pathologist or a hematologist.[11]
In 1992, the DOH issued Administrative Order No. 118-A
institutionalizing the National Blood Services Program (NBSP).
The BRL was designated as the central office primarily responsible
for the NBSP. The program paved the way for the creation of a
committee that will implement the policies of the program and the
formation of the Regional Blood Councils.
In August 1992, Senate Bill No. 1011, entitled An Act
Promoting Voluntary Blood Donation, Providing for an Adequate
Supply of Safe Blood, Regulating Blood Banks and Providing
Penalties for Violations Thereof, and for other Purposes was
introduced in the Senate.[12]
Meanwhile, in the House of Representatives, House Bills No.
384, 546, 780 and 1978 were being deliberated to address the issue
of safety of the Philippine blood bank system. Subsequently, the
Senate and House Bills were referred to the appropriate
committees and subsequently consolidated.[13]

In January of 1994, the New Tropical Medicine Foundation,


with the assistance of the U.S. Agency for International
Development (USAID) released its final report of a study on the
Philippine blood banking system entitled Project to Evaluate the
Safety of the Philippine Blood Banking System. It was revealed that of
the blood units collected in 1992, 64.4 % were supplied by
commercial blood banks, 14.5% by the PNRC, 13.7% by
government hospital-based blood banks, and 7.4% by private
hospital-based blood banks. During the time the study was made,
there were only twenty-four (24) registered or licensed freestanding or commercial blood banks in the country. Hence, with
these numbers in mind, the study deduced that each commercial
blood bank produces five times more blood than the Red Cross
and fifteen times more than the government-run blood banks. The
study, therefore, showed that the Philippinesheavily relied on
commercial sources of blood. The study likewise revealed that
99.6% of the donors of commercial blood banks and 77.0% of the
donors of private-hospital based blood banks are paid donors.
Paid donors are those who receive remuneration for donating
their blood. Blood donors of the PNRC and government-run
hospitals, on the other hand, are mostly voluntary.[14]

It was further found, among other things, that blood sold by


persons to blood commercial banks are three times more likely to
have any of the four (4) tested infections or blood transfusion
transmissible diseases, namely, malaria, syphilis, Hepatitis B and
Acquired Immune Deficiency Syndrome (AIDS) than those
donated to PNRC.[15]
Commercial blood banks give paid donors varying rates
around P50 to P150, and because of this arrangement, many of
these donors are poor, and often they are students, who need cash
immediately. Since they need the money, these donors are not
usually honest about their medical or social history. Thus, blood
from healthy, voluntary donors who give their true medical and
social history are about three times much safer than blood from
paid donors.[16]
What the study also found alarming is that many Filipino
doctors are not yet fully trained on the specific indications for
blood component transfusion. They are not aware of the lack of
blood supply and do not feel the need to adjust their practices and
use of blood and blood products. It also does not matter to them
where the blood comes from.[17]

On August 23, 1994, the National Blood Services Act


providing for the phase out of commercial blood banks took effect.
On April 28, 1995, Administrative Order No. 9, Series of 1995,
constituting the Implementing Rules and Regulations of said law
was promulgated by DOH.
The phase-out period was extended for two years by the
DOH pursuant to Section 7 of Republic Act No. 7719 and Section
23 of its Implementing Rules and Regulations. Pursuant to said
Act, all commercial blood banks should have been phased out
by May 28, 1998. Hence, petitioners were granted by the Secretary
of Health their licenses to open and operate a blood bank only
until May 27, 1998.
On May 20, 1998, prior to the expiration of the licenses
granted to petitioners, they filed a petition for certiorari with
application for the issuance of a writ of preliminary injunction or
temporary restraining order under Rule 65 of the Rules of Court
assailing the constitutionality and validity of the aforementioned
Act and its Implementing Rules and Regulations. The case was
entitled Rodolfo S. Beltran, doing business under the name and
style, Our Lady of Fatima Blood Bank, docketed as G.R. No.
133640.

On June 1, 1998, petitioners filed an Amended Petition for


Certiorari with Prayer for Issuance of a Temporary Restraining
Order, writ of preliminary mandatory injunction and/or status quo
ante order.[18]
In the aforementioned petition, petitioners assail the
constitutionality of the questioned legal provisions, namely,
Section 7 of Republic Act No. 7719 and Section 23 of
Administrative Order No. 9, Series of 1995, on the following
grounds: [19]
1. The questioned legal provisions of the National Blood
Services Act and its Implementing Rules violate the
equal
protection
clause
for
irrationally
discriminating against free standing blood banks
in a manner which is not germane to the purpose
of the law;
2.

The questioned provisions of the National Blood


Services Act and its Implementing Rules represent
undue delegation if not outright abdication of the
police power of the state; and,

3.

The questioned provisions of the National Blood


Services Act and its Implementing Rules are
unwarranted deprivation of personal liberty.

On May 22, 1998, the Doctors Blood Center filed a similar


petition for mandamus with a prayer for the issuance of a
temporary restraining order, preliminary prohibitory and
mandatory
injunction
before
this
Court
entitled
Doctors Blood Center vs. Department of Health, docketed as
G.R. No. 133661. [20] This was consolidated with G.R. No.
133640.[21]
Similarly, the petition attacked the constitutionality of
Republic Act No. 7719 and its implementing rules and regulations,
thus, praying for the issuance of a license to operate commercial
blood banks beyond May 27, 1998. Specifically, with regard to
Republic Act No. 7719, the petition submitted the following
questions[22] for resolution:
1.

Was it passed in the exercise of police


power, and was it a valid exercise of such power?

2.

Does it not amount to deprivation of


property without due process?

3.

Does it not unlawfully


obligation of contracts?

4.

With the commercial blood banks being abolished


and with no ready machinery to deliver the same
supply and services, does R.A. 7719 truly serve the
public welfare?

impair

the

On June 2, 1998, this Court issued a Resolution directing


respondent DOH to file a consolidated comment. In the same
Resolution, the Court issued a temporary restraining order (TRO)
for respondent to cease and desist from implementing and
enforcing Section 7 of Republic Act No. 7719 and its implementing
rules and regulations until further orders from the Court.[23]
On August 26, 1998, respondent Secretary of Health filed a
Consolidated Comment on the petitions for certiorari and
mandamus in G.R. Nos. 133640 and 133661, with opposition to the
issuance of a temporary restraining order.[24]

In the Consolidated Comment, respondent Secretary of


Health submitted that blood from commercial blood banks is
unsafe and therefore the State, in the exercise of its police power,
can close down commercial blood banks to protect the public. He
cited the record of deliberations on Senate Bill No. 1101 which
later became Republic Act No. 7719, and the sponsorship speech of
Senator Orlando Mercado.
The rationale for the closure of these commercial blood
banks can be found in the deliberations of Senate Bill No. 1011,
excerpts of which are quoted below:
Senator Mercado: I am providing over a period
of two years to phase out all commercial blood banks. So
that in the end, the new section would have a provision
that states:
ALL COMMERCIAL BLOOD BANKS SHALL BE
PHASED OUT OVER A PERIOD OF TWO YEARS
AFTER THE EFFECTIVITY OF THIS ACT. BLOOD
SHALL BE COLLECTED FROM VOLUNTARY
DONORS ONLY AND THE SERVICE FEE TO BE
CHARGED FOR EVERY BLOOD PRODUCT ISSUED
SHALL BE LIMITED TO THE NECESSARY EXPENSES
ENTAILED IN COLLECTING AND PROCESSING OF

BLOOD. THE SERVICE FEE SHALL BE MADE


UNIFORM THROUGH GUIDELINES TO BE SET BY
THE DEPARTMENTOF HEALTH.
I am supporting Mr. President, the finding of a
study called Project to Evaluate the Safety of the
Philippine Blood Banking System. This has been taken
note of. This is a study done with the assistance of the
USAID by doctors under the New Tropical Medicine
Foundation in Alabang.
Part of the long-term measures proposed by this
particular study is to improve laws, outlaw buying and
selling of blood and legally define good manufacturing
processes for blood. This goes to the very heart of my
amendment which seeks to put into law the principle
that blood should not be subject of commerce of man.

The Presiding Officer Senator Aquino: What


does the sponsor say?
Senator Webb: Mr. President, just for clarity, I
would like to find out how the Gentleman defines a
commercial blood bank. I am at a loss at times what a
commercial blood bank really is.

Senator Mercado: We have a definition, I believe,


in the measure, Mr. President.
The Presiding Officer [Senator Aquino]: It is a
business where profit is considered.
Senator Mercado:
If the Chairman of the
Committee would accept it, we can put a provision on
Section 3, a definition of a commercial blood bank,
which, as defined in this law, exists for profit and
engages in the buying and selling of blood or its
components.
Senator Webb: That is a good description, Mr.
President.

Senator Mercado: I refer, Mr. President, to a


letter written by Dr. Jaime Galvez-Tan, the Chief of Staff,
Undersecretary of Health, to the good Chairperson of the
Committee on Health.
In recommendation No. 4, he says:
The need to phase out all commercial blood banks
within a two-year period will give the Department of
Health enough time to build up governments capability

to provide an adequate supply of blood for the needs of


the nation...the use of blood for transfusion is a medical
service and not a sale of commodity.
Taking into consideration the experience of the
National Kidney Institute, which has succeeded in
making the hospital 100 percent dependent on voluntary
blood donation, here is a success story of a hospital that
does not buy blood. All those who are operated on and
need blood have to convince their relatives or have to get
volunteers who would donate blood
If we give the responsibility of the testing of blood
to those commercial blood banks, they will cut corners
because it will protect their profit.
In the first place, the people who sell their blood
are the people who are normally in the high-risk
category. So we should stop the system of selling and
buying blood so that we can go into a national voluntary
blood program.
It has been said here in this report, and I quote:
Why is buying and selling of blood not safe? This
is not safe because a donor who expects payment for his
blood will not tell the truth about his illnesses and will

deny any risky social behavior such as sexual


promiscuity which increases the risk of having syphilis
or AIDS or abuse of intravenous addictive drugs.
Laboratory tests are of limited value and will not detect
early infections. Laboratory tests are required only for
four diseases in the Philippines. There are other blood
transmissible diseases we do not yet screen for and there
could be others where there are no tests available yet.
A blood bank owner expecting to gain profit from
selling blood will also try his best to limit his expenses.
Usually he tries to increase his profit by buying cheaper
reagents or test kits, hiring cheaper manpower or
skipping some tests altogether. He may also try to sell
blood even though these have infections in them.
Because there is no existing system of counterchecking
these, the blood bank owner can usually get away with
many unethical practices.
The experience of Germany, Mr. President is
illustrative of this issue. The reason why contaminated
blood was sold was that there were corners cut by
commercial blood banks in the testing process. They
were protecting their profits.[25]

The sponsorship speech of Senator Mercado further


elucidated his stand on the issue:

Senator Mercado: Today, across the country,


hundreds of poverty-stricken, sickly and weak Filipinos,
who, unemployed, without hope and without money to
buy the next meal, will walk into a commercial blood
bank, extend their arms and plead that their blood be
bought. They will lie about their age, their medical
history. They will lie about when they last sold their
blood. For doing this, they will receive close to a
hundred pesos. This may tide them over for the next few
days. Of course, until the next bloodletting.
This same blood will travel to the posh city
hospitals and urbane medical centers. This same blood
will now be bought by the rich at a price over 500% of
the value for which it was sold. Between this buying and
selling, obviously, someone has made a very fast buck.
Every doctor has handled at least one transfusionrelated disease in an otherwise normal patient. Patients
come in for minor surgery of the hand or whatever and
they leave with hepatitis B. A patient comes in for an
appendectomy and he leaves with malaria. The worst
nightmare: A patient comes in for a Caesarian section
and leaves with AIDS.

We do not expect good blood from donors who


sell their blood because of poverty. The humane
dimension of blood transfusion is not in the act of
receiving blood, but in the act of giving it
For years, our people have been at the mercy of
commercial blood banks that lobby their interests among
medical technologists, hospital administrators and
sometimes even physicians so that a proactive system for
collection of blood from healthy donors becomes
difficult, tedious and unrewarding.
The Department of Health has never
institutionalized a comprehensive national program for
safe blood and for voluntary blood donation even if this
is a serious public health concern and has fallen for the
linen of commercial blood bankers, hook, line and sinker
because it is more convenient to tell the patient to buy
blood.
Commercial blood banks hold us hostage to their
threat that if we are to close them down, there will be no
blood supply. This is true if the Government does not
step in to ensure that safe supply of blood. We cannot
allow commercial interest groups to dictate policy on
what is and what should be a humanitarian effort. This

cannot and will never work because their interest in


blood donation is merely monetary. We cannot expect
commercial blood banks to take the lead in voluntary
blood donation. Only the Government can do it, and the
Government must do it.[26]

On May 5, 1999, petitioners filed a Motion for Issuance of


Expanded Temporary Restraining Order for the Court to order
respondent Secretary of Health to cease and desist from
announcing the closure of commercial blood banks, compelling
the public to source the needed blood from voluntary donors only,
and committing similar acts that will ultimately cause the
shutdown of petitioners blood banks.[27]
On July 8, 1999, respondent Secretary filed his Comment
and/or Opposition to the above motion stating that he has not
ordered the closure of commercial blood banks on account of the
Temporary Restraining Order (TRO) issued on June 2, 1998 by the
Court. In compliance with the TRO, DOH had likewise ceased to
distribute the health advisory leaflets, posters and flyers to the
public which state that blood banks are closed or will be closed.
According to respondent Secretary, the same were printed and
circulated in anticipation of the closure of the commercial blood

banks in accordance with R.A. No. 7719, and were printed and
circulated prior to the issuance of the TRO.[28]
On July 15, 1999, petitioners in G.R. No. 133640 filed a
Petition to Show Cause Why Public Respondent Should Not be
Held in Contempt of Court, docketed as G.R. No. 139147, citing
public respondents willful disobedience of or resistance to the
restraining order issued by the Court in the said case. Petitioners
alleged that respondents act constitutes circumvention of the
temporary restraining order and a mockery of the authority of the
Court and the orderly administration of justice.[29] Petitioners
added that despite the issuance of the temporary restraining order
in G.R. No. 133640, respondent, in his effort to strike down the
existence of commercial blood banks, disseminated misleading
information under the guise of health advisories, press releases,
leaflets, brochures and flyers stating, among others, that this year
[1998] all commercial blood banks will be closed by 27 May. Those
who need blood will have to rely on government blood
banks.[30] Petitioners further claimed that respondent Secretary of
Health announced in a press conference during the Blood Donors
Week that commercial blood banks are illegal and dangerous
and that they are at the moment protected by a restraining order
on the basis that their commercial interest is more important than

the lives of the people. These were all posted in bulletin boards
and other conspicuous places in all government hospitals as well
as other medical and health centers.[31]
In respondent Secretarys Comment to the Petition to Show
Cause Why Public Respondent Should Not Be Held in Contempt
of Court, dated January 3, 2000, it was explained that nothing was
issued by the department ordering the closure of commercial
blood banks. The subject health advisory leaflets pertaining to
said closure pursuant to Republic Act No. 7719 were printed and
circulated prior to the Courts issuance of a temporary restraining
order on June 21, 1998.[32]
Public respondent further claimed that the primary purpose
of the information campaign was to promote the importance and
safety of voluntary blood donation and to educate the public
about the hazards of patronizing blood supplies from commercial
blood banks.[33] In doing so, he was merely performing his
regular functions and duties as the Secretary of Health to protect
the health and welfare of the public. Moreover, the DOH is the
main proponent of the voluntary blood donation program
espoused by Republic Act No. 7719, particularly Section 4 thereof
which provides that, in order to ensure the adequate supply of

human blood, voluntary blood donation shall be promoted


through public education, promotion in schools, professional
education, establishment of blood services network, and walking
blood donors.
Hence, by authority of the law, respondent Secretary
contends that he has the duty to promote the program of
voluntary blood donation. Certainly, his act of encouraging the
public to donate blood voluntarily and educating the people on
the risks associated with blood coming from a paid donor
promotes general health and welfare and which should be given
more importance than the commercial businesses of petitioners.[34]
On July 29, 1999, interposing personal and substantial
interest in the case as taxpayers and citizens, a Petition-inIntervention was filed interjecting the same arguments and issues
as laid down by petitioners in G.R. No. 133640 and 133661,
namely, the unconstitutionality of the Acts, and, the issuance of a
writ of prohibitory injunction. The intervenors are the immediate
relatives of individuals who had died allegedly because of
shortage of blood supply at a critical time.[35]

The intervenors contended that Republic Act No. 7719


constitutes undue delegation of legislative powers and
unwarranted deprivation of personal liberty.[36]
In a resolution, dated September 7, 1999, and without giving
due course to the aforementioned petition, the Court granted the
Motion for Intervention that was filed by the above intervenors
on August 9, 1999.
In his Comment to the petition-in-intervention, respondent
Secretary of Health stated that the sale of blood is contrary to the
spirit and letter of the Act that blood donation is a humanitarian
act and blood transfusion is a professional medical service and
not a sale of commodity (Section 2[a] and [b] of Republic Act No.
7719). The act of selling blood or charging fees other than those
allowed by law is even penalized under Section 12.[37]
Thus, in view of these, the Court is now tasked to pass upon
the constitutionality of Section 7 of Republic Act No. 7719 or the
National Blood Services Act of 1994 and its Implementing Rules
and Regulations.

In resolving the controversy, this Court deems it necessary


to address the issues and/or questions raised by petitioners
concerning the constitutionality of the aforesaid Act in G.R. No.
133640 and 133661 as summarized hereunder:
I
WHETHER OR NOT SECTION 7 OF R.A. 7719
CONSTITUTES
UNDUE
DELEGATION
OF
LEGISLATIVE POWER;
II
WHETHER OR NOT SECTION 7 OF R.A. 7719
AND
ITS
IMPLEMENTING
RULES
AND
REGULATIONS VIOLATE THE EQUAL PROTECTION
CLAUSE;
III
WHETHER OR NOT SECTION 7 OF R.A. 7719
AND
ITS
IMPLEMENTING
RULES
AND
REGULATIONS VIOLATE THE NON-IMPAIRMENT
CLAUSE;

IV
WHETHER OR NOT SECTION 7 OF R.A. 7719
AND
ITS
IMPLEMENTING
RULES
AND
REGULATIONS CONSTITUTE DEPRIVATION OF
PERSONAL LIBERTYAND PROPERTY;
V
WHETHER OR NOT R.A. 7719 IS A VALID
EXERCISE OF POLICE POWER; and,
VI
WHETHER OR NOT SECTION 7 OF R.A. 7719
AND
ITS
IMPLEMENTING
RULES
AND
REGULATIONS TRULY SERVE PUBLIC WELFARE.

As to the first ground upon which the constitutionality of the


Act is being challenged, it is the contention of petitioners that the
phase out of commercial or free standing blood banks is
unconstitutional because it is an improper and unwarranted
delegation of legislative power. According to petitioners, the Act
was incomplete when it was passed by the Legislature, and the
latter failed to fix a standard to which the Secretary of Health must
conform in the performance of his functions. Petitioners also
contend that the two-year extension period that may be granted

by the Secretary of Health for the phasing out of commercial blood


banks pursuant to Section 7 of the Act constrained the Secretary to
legislate, thus constituting undue delegation of legislative power.
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 the administrative body or any other appointee or delegate of
the Legislature.[38] Except as to matters of detail that may be left to
be filled in by rules and regulations to be adopted or promulgated
by executive officers and administrative boards, an act of the
Legislature, as a general rule, is incomplete and hence invalid if it
does not lay down any rule or definite standard by which the
administrative board may be guided in the exercise of the
discretionary powers delegated to it.[39]
Republic Act No. 7719 or the National Blood Services Act of
1994 is complete in itself. It is clear from the provisions of the Act
that the Legislature intended primarily to safeguard the health of
the people and has mandated several measures to attain this
objective. One of these is the phase out of commercial blood banks
in the country. The law has sufficiently provided a definite

standard for the guidance of the Secretary of Health in carrying


out its provisions, that is, the promotion of public health by
providing a safe and adequate supply of blood through voluntary
blood donation. By its provisions, it has conferred the power and
authority to the Secretary of Health as to its execution, to be
exercised under and in pursuance of the law.
Congress may validly delegate to administrative agencies
the authority to promulgate rules and regulations to implement a
given legislation and effectuate its policies.[40] The Secretary of
Health has been given, under Republic Act No. 7719, broad
powers to execute the provisions of said Act. Section 11 of the Act
states:
SEC. 11.
Rules and Regulations. The
implementation of the provisions of the Act shall be in
accordance with the rules and regulations to be
promulgated by the Secretary, within sixty (60) days
from the approval hereof
This is what respondent Secretary exactly did when DOH,
by virtue of the administrative bodys authority and expertise in
the matter, came out with Administrative Order No.9, series of
1995 or the Rules and Regulations Implementing Republic Act No.

7719. Administrative Order. No. 9 effectively filled in the details of


the law for its proper implementation.
Specifically, Section 23 of Administrative Order No. 9
provides that the phase-out period for commercial blood banks
shall be extended for another two years until May 28, 1998 based
on the result of a careful study and review of the blood supply and
demand and public safety. This power to ascertain the existence
of facts and conditions upon which the Secretary may effect a
period of extension for said phase-out can be delegated by
Congress. The true distinction between the power to make laws
and discretion as to its execution is illustrated by the fact that 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.[41]
In this regard, the Secretary did not go beyond the powers
granted to him by the Act when said phase-out period was
extended in accordance with the Act as laid out in Section 2
thereof:

SECTION 2. Declaration of Policy In order to


promote public health, it is hereby declared the policy of
the state:

f)

to mobilize all sectors of the community to


participate in mechanisms for voluntary and
non-profit collection of blood;

a)

to promote and encourage voluntary blood


donation by the citizenry and to instill public
consciousness of the principle that blood
donation is a humanitarian act;

g)

to mandate the Department of Health to


establish and organize a National Blood
Transfusion Service Network in order to
rationalize and improve the provision of
adequate and safe supply of blood;

b)

to lay down the legal principle that the


provision of blood for transfusion is a medical
service and not a sale of commodity;
to provide for adequate, safe, affordable and
equitable distribution of blood supply and
blood products;

h)

to provide for adequate assistance to


institutions
promoting
voluntary
blood
donation and providing non-profit blood
services, either through a system of
reimbursement for costs from patients who can
afford to pay, or donations from governmental
and non-governmental entities;

i)

to require all blood collection units and blood


banks/centers to operate on a non-profit basis;

j)

to establish scientific and professional


standards for the operation of blood collection
units
and
blood
banks/centers
in
the Philippines;

c)

d)

e)

to inform the public of the need for voluntary


blood donation to curb the hazards caused by
the commercial sale of blood;
to teach the benefits and rationale of
voluntary blood donation in the existing health
subjects of the formal education system in all
public and private schools as well as the nonformal system;

k)

to regulate and ensure the safety of all


activities related to the collection, storage and
banking of blood; and,

law; (c) must not be limited to existing conditions only; and, (d)
must apply equally to each member of the class.[43]

l)

to require upgrading of blood banks/centers


to include preventive services and education to
control
spread
of
blood
transfusion
transmissible diseases.

Republic Act No. 7719 or The National Blood Services Act of


1994, was enacted for the promotion of public health and welfare.
In the aforementioned study conducted by the New Tropical
Medicine Foundation, it was revealed that the Philippine blood
banking system is disturbingly primitive and unsafe, and with its
current condition, the spread of infectious diseases such as
malaria, AIDS, Hepatitis B and syphilis chiefly from blood
transfusion is unavoidable. The situation becomes more
distressing as the study showed that almost 70% of the blood
supply in the country is sourced from paid blood donors who are
three times riskier than voluntary blood donors because they are
unlikely to disclose their medical or social history during the
blood screening.[44]

Petitioners also assert that the law and its implementing


rules and regulations violate the equal protection clause enshrined
in the Constitution because it unduly discriminates against
commercial or free standing blood banks in a manner that is not
germane to the purpose of the law.[42]
What may be regarded as a denial of the equal protection of
the laws is a question not always easily determined. No rule that
will cover every case can be formulated. Class legislation,
discriminating against some and favoring others is prohibited but
classification on a reasonable basis and not made arbitrarily or
capriciously is permitted. The classification, however, to be
reasonable: (a) must be based on substantial distinctions which
make real differences; (b) must be germane to the purpose of the

The above study led to the passage of Republic Act No. 7719,
to instill public consciousness of the importance and benefits of
voluntary blood donation, safe blood supply and proper blood
collection from healthy donors. To do this, the Legislature decided
to order the phase out of commercial blood banks to improve the
Philippine blood banking system, to regulate the supply and

proper collection of safe blood, and so as not to derail the


implementation of the voluntary blood donation program of the
government. In lieu of commercial blood banks, non-profit blood
banks or blood centers, in strict adherence to professional and
scientific standards to be established by the DOH, shall be set in
place.[45]
Based on the foregoing, the Legislature never intended for
the law to create a situation in which unjustifiable discrimination
and inequality shall be allowed. To effectuate its policy, a
classification was made between nonprofit blood banks/centers
and commercial blood banks.
We deem the classification to be valid and reasonable for the
following reasons:
One, it was based on substantial distinctions. The former
operates for purely humanitarian reasons and as a medical service
while the latter is motivated by profit. Also, while the former
wholly encourages voluntary blood donation, the latter treats
blood as a sale of commodity.
Two, the classification, and the consequent phase out of
commercial blood banks is germane to the purpose of the law, that

is, to provide the nation with an adequate supply of safe blood by


promoting voluntary blood donation and treating blood
transfusion as a humanitarian or medical service rather than a
commodity. This necessarily involves the phase out of commercial
blood banks based on the fact that they operate as a business
enterprise, and they source their blood supply from paid blood
donors who are considered unsafe compared to voluntary blood
donors as shown by the USAID-sponsored study on the Philippine
blood banking system.
Three, the Legislature intended for the general application of
the law. Its enactment was not solely to address the peculiar
circumstances of the situation nor was it intended to apply only to
the existing conditions.
Lastly, the law applies equally to all commercial blood banks
without exception.
Having said that, this Court comes to the inquiry as to
whether or not Republic Act No. 7719 constitutes a valid exercise
of police power.
The promotion of public health is a fundamental obligation
of the State. The health of the people is a primordial governmental

concern. Basically, the National Blood Services Act was enacted in


the exercise of the States police power in order to promote and
preserve public health and safety.
Police power of the state is validly exercised if (a) the interest
of the public generally, as distinguished from those of a particular
class, requires the interference of the State; and, (b) the means
employed are reasonably necessary to the attainment of the
objective sought to be accomplished and not unduly oppressive
upon individuals.[46]
In the earlier discussion, the Court has mentioned of the
avowed policy of the law for the protection of public health by
ensuring an adequate supply of safe blood in the country through
voluntary blood donation. Attaining this objective requires the
interference of the State given the disturbing condition of the
Philippine blood banking system.
In serving the interest of the public, and to give meaning to
the purpose of the law, the Legislature deemed it necessary to
phase out commercial blood banks. This action may seriously
affect the owners and operators, as well as the employees, of

commercial blood banks but their interests must give way to serve
a higher end for the interest of the public.
The Court finds that the National Blood Services Act is a
valid exercise of the States police power. Therefore, the
Legislature, under the circumstances, adopted a course of action
that is both necessary and reasonable for the common good. Police
power is the State authority to enact legislation that may interfere
with personal liberty or property in order to promote the general
welfare.[47]
It is in this regard that the Court finds the related grounds
and/or issues raised by petitioners, namely, deprivation of
personal liberty and property, and violation of the nonimpairment clause, to be unmeritorious.
Petitioners are of the opinion that the Act is unconstitutional
and void because it infringes on the freedom of choice of an
individual in connection to what he wants to do with his blood
which should be outside the domain of State intervention.
Additionally, and in relation to the issue of classification,
petitioners asseverate that, indeed, under the Civil Code, the
human body and its organs like the heart, the kidney and the liver

are outside the commerce of man but this cannot be made to apply
to human blood because the latter can be replenished by the body.
To treat human blood equally as the human organs would
constitute invalid classification. [48]
Petitioners likewise claim that the phase out of the
commercial blood banks will be disadvantageous to them as it will
affect their businesses and existing contracts with hospitals and
other health institutions, hence Section 7 of the Act should be
struck down because it violates the non-impairment clause
provided by the Constitution.
As stated above, the State, in order to promote the general
welfare, may interfere with personal liberty, with property, and
with business and occupations. Thus, persons may be subjected to
certain kinds of restraints and burdens in order to secure the
general welfare of the State and to this fundamental aim of
government, the rights of the individual may be subordinated.[49]
Moreover, in the case of Philippine Association of Service
Exporters, Inc. v. Drilon,[50] settled is the rule that the nonimpairment clause of the Constitution must yield to the loftier
purposes targeted by the government. The right granted by this

provision must submit to the demands and necessities of the


States power of regulation. While the Court understands the
grave implications of Section 7 of the law in question, the concern
of the Government in this case, however, is not necessarily to
maintain profits of business firms. In the ordinary sequence of
events, it is profits that suffer as a result of government regulation.
Furthermore, the freedom to contract is not absolute; all
contracts and all rights are subject to the police power of the State
and not only may regulations which affect them be established by
the State, but all such regulations must be subject to change from
time to time, as the general well-being of the community may
require, or as the circumstances may change, or as experience may
demonstrate the necessity.[51] This doctrine was reiterated in the
case of Vda. de Genuino v. Court of Agrarian Relations[52] where the
Court held that individual rights to contract and to property have
to give way to police power exercised for public welfare.
As for determining whether or not the shutdown of
commercial blood banks will truly serve the general public
considering the shortage of blood supply in the country as
proffered by petitioners, we maintain that the wisdom of the
Legislature in the lawful exercise of its power to enact laws cannot

be inquired into by the Court. Doing so would be in derogation of


the principle of separation of powers.[53]
That, under the circumstances, proper regulation of all blood
banks without distinction in order to achieve the objective of the
law as contended by petitioners is, of course, possible; but, this
would be arguing on what the law may be or should be and not
what the law is. Between is and ought there is a far cry. The
wisdom and propriety of legislation is not for this Court to pass
upon.[54]
Finally, with regard to the petition for contempt in G.R. No.
139147, on the other hand, the Court finds respondent Secretary of
Healths explanation satisfactory. The statements in the flyers and
posters were not aimed at influencing or threatening the Court in
deciding in favor of the constitutionality of the law.
Contempt of court presupposes a contumacious attitude, a
flouting or arrogant belligerence in defiance of the court.[55] There
is nothing contemptuous about the statements and information
contained in the health advisory that were distributed by DOH
before the TRO was issued by this Court ordering the former to
cease and desist from distributing the same.

In sum, the Court has been unable to find any constitutional


infirmity in the questioned provisions of the National Blood
Services Act of 1994 and its Implementing Rules and Regulations.
The fundamental criterion is that all reasonable doubts
should be resolved in favor of the constitutionality of a statute.
Every law has in its favor the presumption of constitutionality. For
a law to be nullified, it must be shown that there is a clear and
unequivocal breach of the Constitution. The ground for nullity
must be clear and beyond reasonable doubt.[56] Those who petition
this Court to declare a law, or parts thereof, unconstitutional must
clearly establish the basis therefor. Otherwise, the petition must
fail.
Based on the grounds raised by petitioners to challenge the
constitutionality of the National Blood Services Act of 1994 and its
Implementing Rules and Regulations, the Court finds that
petitioners have failed to overcome the presumption of
constitutionality of the law. As to whether the Act constitutes a
wise legislation, considering the issues being raised by petitioners,
is for Congress to determine.[57]

WHEREFORE, premises considered, the Court renders


judgment as follows:
1.

2.

In G.R. Nos. 133640 and 133661, the


Court UPHOLDS THE VALIDITY of Section 7 of
Republic Act No. 7719, otherwise known as the
National Blood Services Act of 1994, and
Administrative Order No. 9, Series of 1995 or the Rules
and Regulations Implementing Republic Act No. 7719.
The petitions are DISMISSED. Consequently, the
Temporary Restraining Order issued by this Court
on June 2, 1998, is LIFTED.
In G.R. No. 139147, the petition seeking to cite
the Secretary of Health in contempt of court
is DENIED for lack of merit.

No costs.
SO ORDERED.
TATAD VS SECRETARY

For resolution are: (1) the motion for reconsideration filed by the public
respondents; and (2) the partial motions for reconsideration filed by petitioner
Enrique T. Garcia and the intervenors. 1
In their Motion for Reconsideration, the public respondents contend:
I
Executive Order No. 392 is not a misapplication of Republic Act No. 8180;
II
Sections 5(b), 6 and 9(b) of Republic Act No. 8180 do not contravene
section 19, Article XII of the Constitution; and
III
Sections 5(b), 6 and 9(b) of R.A. No. 8180 do not permeate the essence
of the said law; hence their nullity will not vitiate the other parts thereof.
In their Motion for Reconsideration, the intervenors argue:
2.1.1 The total nullification of Republic Act No. 8180 restores the
disproportionate advantage of the three big oil firms Caltex, Shell and
Petron over the small oil firms;
2.1.2 The total nullification of Republic Act No. 8180 "disarms" the new
entrants and seriously cripples their capacity to compete and grow; and
2.1.3 Ultimately the total nullification of Republic Act. No. 8180 removes
substantial, albeit imperfect, barriers to monopolistic practices and unfair
competition and trade practices harmful not only to movant-intervernors
but also to the public in general.

In his Partial Motion for Reconsideration, 2 petitioner Garcia prays that only the
provisions of R.A. No. 8180 on the 4% tariff differential, predatory pricing and minimum
inventory be declared unconstitutional. He cites the "pernicious effects" of a total declaration
of unconstitutionality of R.A. No. 8180. He avers that "it is very problematic . . . if Congress
can fastrack an entirely new law."

We find no merit in the motions for reconsideration and partial motion for
reconsideration.
We shall first resolve public respondents' motion for reconsideration. They insist
that there was no misapplication of Republic Act No. 8180 when the Executive
considered the depletion of the OPSF in advancing the date of full deregulation
of the downstream oil industry. They urge that the consideration of this factor did
not violate the rule that the exercise of delegated power must be done strictly in
accord with the standard provided in the law. They contend that the rule prohibits
the Executive from subtracting but not from adding to the standard set by
Congress. This hair splitting is a sterile attempt to make a distinction when there
is no difference. The choice and crafting of the standard to guide the exercise of
delegated power is part of the lawmaking process and lies within the exclusive
jurisdiction of Congress. The standard cannot be altered in any way by the
Executive for the Executive cannot modify the will of the Legislature. To be sure,
public respondents do not cite any authority to support its strange thesis for there
is none in our jurisprudence.
The public respondents next recycle their arguments that sections 5(b), 6 and
9(b) of R.A. No. 8180 do not contravene section 19, Article XII of the
Constitution. 3 They reiterate that the 4% tariff differential would encourage the construction
of new refineries which will benefit the country for they Filipino labor and goods. We have
rejected this submission for a reality check will reveal that this 4% tariff differential gives a
decisive edge to the existing oil companies even as it constitutes a substantial barrier to the
entry of prospective players. We do not agree with the public respondents that there is no
empirical evidence to support this ruling. In the recent hearing of the Senate Committee on
Energy chaired by Senator Freddie Webb, it was established that the 4% tariff differential on
crude oil and refined petroleum importation gives a 20-centavo per liter advantage to the
three big oil companies over the new players. It was also found that said tariff differential
4
serves as a protective shield for the big oil companies. Nor do we approve public
respondents' submission that the entry of new players after deregulation is proof that the 4%

tariff differential is not a heavy disincentive. Acting as the mouthpiece of the new players,
public respondents even lament that "unfortunately, the opportunity to get the answer right
from the 'horses' mouth' eluded this Honorable Court since none of the new players
supposedly adversely affected by the assailed provisions came forward to voice their
5
position." They need not continue their lamentation. The new players represented by
Eastern Petroleum, Seasoil Petroleum Corporation, Subic Bay Distribution, Inc., TWA Inc.,
and DubPhil Gas have intervened in the cases at bar and have spoken for themselves. In
their motion for intervention, they made it crystal clear that it is not their intention ". . . to seek
the reversal of the Court's nullification of the 4% differential in section 5(b) nor of the
inventory requirement of section 6, nor of the prohibition of predatory pricing in section
6
9(b)." They stressed that they only protest the restoration of the 10% oil tariff differential
7
under the Tariff Code. The horse's mouth therefore authoritatively tells us that the new
players themselves consider the 4% tariff differential in R.A. No. 8180 as oppressive and
should be nullified.

To give their argument a new spin, public respondents try to justify the 4% tariff
differential on the ground that there is a substantial difference between a refiner
and an importer just as there is a difference between raw material and finished
product. Obviously, the effort is made to demonstrate that the unequal tariff does
not violate the unequal protection clause of the Constitution. The effort only
proves that the public respondents are still looking at the issue of tariff differential
from the wrong end of the telescope. Our Decision did not hold that the 4% tariff
differential infringed the equal protection clause of the Constitution even as this
was contended by petitioner Tatad. 8 Rather, we held that said tariff differential
substantially occluded the entry point of prospective players in the downstream oil industry.
We further held that its inevitable result is to exclude fair and effective competition and to
enhance the monopolists' ability to tamper with the mechanism of a free market. This
consideration is basic in anti-trust suits and cannot be eroded by belaboring the inapplicable
principle in taxation that different things can be taxed differently.

The public respondents tenaciously defend the validity of the minimum inventory
requirement. They aver that the requirement will not prejudice new players ". . .
during their first year of operation because they do not have yet annual sales
from which the required minimum inventory may be determined. Compliance with
such requirement on their second and succeeding years of operation will not be
difficult because the putting up of storage facilities in proportion to the volume of
their business becomes an ordinary and necessary business undertaking just as

the case of importers of finished products in other industries." 9 The contention is an


old one although it is purveyed with a new lipstick. The contention cannot convince for as well
articulated by petitioner Garcia, "the prohibitive cost of the required minimum inventory will
not be any less burdensome on the second, third, fourth, etc. years of operations. Unlike
most products which can be imported and stored with facility, oil imports require ocean
receiving, storage facilities. Ocean receiving terminals are already very expensive, and to
require new players to put up more than they need is to compound and aggravate their costs,
10
and consequently their great dis-advantage vis-a-vis the Big 3." Again, the argument on
whether the minimum inventory requirement seriously hurts the new players is best settled by
hearing the new players themselves. In their motion for intervention, they implicitly confirmed
that the high cost of meeting the inventory requirement has an inhibiting effect in their
operation and hence, they support the ruling of this Court striking it down as unconstitutional.

Public respondents still maintain that the provision on predatory pricing does not
offend the Constitution. Again, their argument is not fresh though embellished
with citations of cases in the United States sustaining the validity of sales-belowcosts statutes. 11 A quick look at these American cases will show that they are inapplicable.
R.A. No. 8180 has a different cast. As discussed, its provisions on tariff differential and
minimum inventory erected high barriers to the entry of prospective players even as they
raised their new rivals' costs, thus creating the clear danger that the deregulated market in
the downstream oil industry will not operate under an atmosphere of free and fair competition.
It is certain that lack of real competition will allow the present oil oligopolists to dictate
12
prices, and can entice them to engage in predatory pricing to eliminate rivals. The fact that
R.A. No. 8180 prohibits predatory pricing will not dissolve this clear danger. In truth, its
definition of predatory pricing is too loose to be real deterrent. Thus, one of the law's principal
authors, Congressman Dante O. Tinga filed H.B. No. 10057 where he acknowledged in its
explanatory note that "the definition of predatory pricing . . . needs to be tightened up
particularly with respect to the definitive benchmark price and the specific anti-competitive
intent. The definition in the bill at hand which was taken from the Areeda-Turner test in the
United States on predatory pricing resolves the questions." Following the more effective
Areeda-Turner test, Congressman Tinga has proposed to redefine predatory pricing, viz.:
"Predatory pricing means selling or offering to sell any oil product at a price below the
average variable cost for the purpose of destroying competition, eliminating a competitor or
13
discouraging a competitor from entering the market." In light of its loose characterization in
R.A. 8180 and the law's anti-competitive provisions, we held that the provision on predatory
pricing is constitutionally infirmed for it can be wielded more successfully by the oil oligopolist.
Its cumulative effect is to add to the arsenal of power of the dominant oil companies. For as
structured, it has no more than the strength of a spider web it can catch the weak but

cannot catch the strong; it can stop the small oil players but cannot stop the big oil players
from engaging in predatory pricing.

Public respondents insist on their thesis that the cases at bar actually assail the
wisdom of R.A. No. 8180 and that this Court should refrain from examining the
wisdom of legislations. They contend that R.A. No. 8180 involves an economic
policy which this Court cannot review for lack of power and competence. To start
with, no school of scholars can claim any infallibility. Historians with undefiled
learning have chronicled 14 over the years the disgrace of many economists and the fall of
one economic dogma after another. Be that as it may, the Court is aware that the principle of
separation of powers prohibits the judiciary from interferring with the policy setting function of
15
the legislature. For this reason we italicized in our Decision that the Court did not review the
wisdom of R.A. No. 8180 but its compatibility with the Constitution; the Court did not annul
the economic policy of deregulation but vitiated its aspects which offended the constitutional
mandate on fair competition. It is beyond debate that the power of Congress to enact laws
does not include the right to pass unconstitutional laws. In fine, the Court did not usurp the
power of the Congress to enact laws but merely discharged its bounden duty to check the
constitutionality of laws when challenged in appropriate cases. Our Decision annulling R.A
No. 8180 is justified by the principle of check and balance.

We hold that the power and obligation of this Court to pass upon the
constitutionality of laws cannot be defeated by the fact that the challenged law
carries serious economic implications. This Court has struck down laws abridging
the political and civil rights of our people even if it has to offend the other more
powerful branches of government. There is no reason why the Court cannot
strike down R.A. No. 8180 that violates the economic rights of our people even if
it has to bridle the liberty of big business within reasonable bounds. In Alalayan
vs. National Power Corporation 16 the Court, speaking thru Mr. Chief Justice Enrique M.
Fernando, held:

2. Nor is petitioner anymore successful in his plea for the nullification of


the challenged provision on the ground of his being deprived of the liberty
to contract without due process of law.
It is to be admitted of course that property rights find shelter in specific
constitutional provisions, one of which is the due process clause. It is

equally certain that our fundamental law framed at a time of "surging


unrest and dissatisfaction," when there was the fear expressed in many
quarters that a constitutional democracy, in view of its commitment to the
claims of property, would not be able to cope effectively with the problems
of poverty and misery that unfortunately afflict so many of our people, is
not susceptible to the indictment that the government therein established
is impotent to take the necessary remedial measures. The framers saw to
that. The welfare state concept is not alien to the philosophy of our
Constitution. It is implicit in quite a few of its provisions. It suffices to
mention two.
There is the clause on the promotion of social justice to ensure the wellbeing and economic security of all the people, as well as the pledge of
protection to labor with the specific authority to regulate the relations
between landowners and tenants and between labor and capital. This
particularized reference to the rights of working men whether in industry
and agriculture certainly cannot preclude attention to and concern for the
rights of consumers, who are the objects of solicitude in the legislation
now complained of. The police power as an attribute to promote the
common weal would be diluted considerably of its reach and effectiveness
if on the mere plea that the liberty to contract would be restricted, the
statute complained of may be characterized as a denial of due process.
The right to property cannot be pressed to such an unreasonable
extreme.
It is understandable though why business enterprises, not unnaturally
evincing lack of enthusiasm for police power legislation that affect them
adversely and restrict their profits could predicate alleged violation of their
rights on the due process clause, which as interpreted by them is a bar to
regulatory measures. Invariably, the response from this Court, from the
time the Constitution was enacted, has been far from sympathetic. Thus,
during the Commonwealth, we sustained legislations providing for
collective bargaining, security of tenure, minimum wages, compulsory
arbitration, and tenancy regulation. Neither did the objections as to the

validity of measures regulating the issuance of securities and public


services prevail.
The Constitution gave this Court the authority to strike down all laws that violate
the Constitution. 17 It did not exempt from the reach of this authority laws with economic
dimension. A 20-20 vision will show that the grant by the Constitution to this Court of this all
important power of review is written without any fine print.

The next issue is whether the Court should only declare as unconstitutional the
provisions of R.A. No. 8180 on 4% tariff differential, minimum inventory and
predatory pricing.
Positing the affirmative view, petitioner Garcia proffered the following arguments:
5. Begging the kind indulgence and benign patience of the Court, we
humbly submit that the unconstitutionality of the aforementioned
provisions of R.A. No. 8180 implies that the other provisions are
constitutional. Thus, said constitutional provisions of R.A. No. 8180 may
and can very well be spared.
5.1 With the striking down of "ultimately full
deregulation," we will simply go back to the transition period
under R.A. 8180 which will continue until Congress enacts
an amendatory law for the start of full oil deregulation in due
time, when free market forces are already in place. In turn,
themonthly automatic price control mechanism based on
Singapore Posted Prices (SPP) will be revived. The energy
Regulatory Board (ERB), which still exist, would re-acquire
jurisdiction and would easily compute the monthly price
ceiling, based on SPP, of each and every petroleum fuel
product, effective upon finality of this Court's favorable
resolution on this motion for partial reconsideration.
5.2 Best of all, the oil deregulation can continue
uninterrupted without the three other assailed provisions,

namely, the 4% tariff differential, predatory pricing and


minimum inventory.
6. We further humbly submit that a favorable resolution on this motion for
partial reconsideration would be consistent with public interest.
6.1 In consequence, new players that have already come
in can uninterruptedly continue their operations more
competitively and bullishly with an even playing field.
6.2 Further, an even playing field will attract many more
new players to come in in a much shorter time.
6.3 Correspondingly, Congress does not anymore have to
pass a new deregulation law, thus it can immediately
concentrate on just amending R.A. No. 8180 to abolish the
OPSF, on the government's assumption that it is necessary
to do so. Parenthetically, it is neither correct nor fair for high
government officials to criticize and blame the Honorable
Court on the OPSF, considering that said OPSF is not
inherent in nor necessary to the transition period and may
be removed at any time.
6.4 In as much as R.A. No. 8180 would continue to be in
place (sans its unconstitutional provisions), only the
Comprehensive Tax Reform Package (CTRP) would be
needed for the country to exit from IMF by December 1997.
7. The Court, in declaring the entire R.A. No. 8180 unconstitutional, was
evidently expecting that Congress "can fasttrack the writing of a new law
on oil deregulation in accord with the Constitution" (Decision p. 38)
However, it is very problematic, to say the least, if Congress can fasttrack
an entirely new law.

7.1 There is already limited time for Congress to pass such


a new law before it adjourns for the 1998 elections.
7.2 At the very least, whether or not Congress will be able
to fasttrack the enactment of a new oil deregulation law
consistent with the Honorable Court's ruling, would depend
on many unforseeable and uncontrollable factors. Already,
several statements from legislators, senators and
congressmen alike, say that the new law can wait because
of other pending legislative matters, etc. Given the
"realities" of politics, especially with the 1998 presidential
polls six months away, it is not far-fetched that the general
welfare could be sacrificed to gain political mileage, thus
further unduly delaying the enactment of a new oil
deregulation law.
8. Furthermore, if the entire R.A. No. 8180 remains nullified as
unconstitutional, the following pernicious effects will happen:
8.1 Until the new oil deregulation law is enacted, we would
have to go back to the old law. This means full regulation,
i.e., higher tariff differential of 10%, higher petroleum
product price ceilings based on transfer prices of imported
crude oil, and restrictions on the importation of refined
petroleum products that would be allowed only if there are
shortages, etc.
8.2 In consequence of the above, the existing new
players, would have to totally stop their operations.
8.3 The existing new players would find themselves in a
bind on how to fulfill their contractual obligations, especially
on their delivery commitments of petroleum fuel
products. They will be in some sort of "limbo" upon the
nullification of the entire R.A. No. 8180.

8.4 The investments that existing new players have already


made would become idle and unproductive. All their
planned additional investments would be put on hold.
8.5 Needless to say, all this would translate
into tremendous losses for them.
8.6 And obviously, prospective new players cannot and will
not come in.
8.7 On top of everything, public interest will suffer. Firstly,
the oil deregulation program will bedelayed. Secondly, the
prices of petroleum products will be higher because of price
ceilings based on transfer prices of imported crude.
9. When it passed R.A. No. 8180, Congress provided a safeguard against
the possibility that any of its provisions could be declared unconstitutional,
thus the separability clause thereof, which the Court noted (Decision, p.
29). We humbly submit that this is another reason to grant this motion for
partial reconsideration.

imported refined petroleum products [10%-20%], (b) the uncertainty


regarding R.A. 8184, or the "Oil Tariff Law," which simplified tax
administration by lowering the tax rates for socially-sensitive products
such as LPG, diesel, fuel oil and kerosene, and increasing tax rates of
gasoline products which are used mostly by consumers who belong to the
upper income group, and (c) the issue of wiping out the deficit of P2.6
billion and creating a subsidy fund in the Oil Price Stabilization Fund;
2. Importers, traders, and industrial end-users like the National Power
Corporation will be constrained to source their oil requirement only from
existing oil companies because of the higher tariff on imported refined
petroleum products and restrictions on such importation that would be
allowed only if there are shortages;
3. Government control and regulation of all the activities of the oil industry
will discourage prospective investors and drive away the existing new
players;
4. All expansion and investment programs of the oil companies and new
players will be shelved indefinitely;

In his Supplement to Urgent Motion for Partial Reconsideration, petitioner Garcia


amplified his contentions.

5. Petitions for price adjustments should be filed and approved by the


ERB.

In a similar refrain, the public respondents contend that the "unmistakable


intention of Congress" is to make each and every provision of R.A. No. 8180
"independent and separable from one another." To bolster this proposition, they
cite the separability clause of the law and the pending bills in Congress
proposing to repeal said offensive provisions but not the entire law itself. They
also recite the "inevitable consequences of the declaration of unconstitutionality
of R.A. No. 8180" as follows:

Joining the chorus, the intervenors contend that:

1. There will be bigger price adjustments in petroleum products due to (a)


the reimposition of the higher tariff rates for imported crude oil and

2.1.1 The total nullification of Republic Act No. 8180 restores the
disproportionate advantage of the three big oil firms Caltex, Shell and
Petron over the small oil firms;
2.1.2 The total nullification of Republic Act No. 8180 "disarms" the new
entrants and seriously cripples their capacity to compete and grow; and

2.1.3 Ultimately, the total nullification of Republic Act No. 8180 removes
substantial, albeit imperfect, barriers to monopolistic practices and unfair
competition and trade practices harmful not only to movant-intervenors
but also to the public in general.
The intervenors further aver that under a regime of regulation, (1) the big oil firms
can block oil importation by the small oil firms; (2) the big oil firms can block the
expansion and growth of the small oil firms. They likewise submit that the
provisions on tariff differential, minimum inventory, and predatory pricing are
separable from the body of R.A. No. 8180 because of its separability clause.
They also allege that their separability is further shown by the pending bills in
Congress which only seek the partial repeal of R.A. No. 8180.
We shall first resolve petitioner Garcia's linchpin contention that the full
deregulation decreed by R.A. No. 8180 to start at the end of March 1997 is
unconstitutional. For prescinding from this premise, petitioner suggests that "we
simply go back to the transition period under R.A. No. 8180. Under the transition
period, price control will be revived through the automatic pricing mechanism
based on Singapore Posted Prices. The Energy Regulatory Board . . . would play
a limited and ministerial role of computing the monthly price ceiling of each and
every petroleum fuel product, using the automatic pricing formula. While the
OPSF would return, this coverage would be limited to monthly price increases in
excess of P0.50 per liter."
We are not impressed by petitioner Garcia's submission. Petitioner has no basis
in condemning as unconstitutionalper se the date fixed by Congress for the
beginning of the full deregulation of the downstream oil industry. Our Decision
merely faulted the Executive for factoring the depletion of OPSF in advancing the
date of full deregulation to February 1997. Nonetheless, the error of the
Executive is now a non-issue for the full deregulation set by Congress itself at the
end of March 1997 has already come to pass. March 1997 is not an arbitrary
date. By that date, the transition period has ended and it was expected that the
people would have adjusted to the role of market forces in shaping the prices of
petroleum and its products. The choice of March 1997 as the date of full

deregulation is a judgment of Congress and its judgment call cannot be


impugned by this Court.
We come to the submission that the provisions on 4% tariff differential, minimum
inventory and predatory pricing are separable from the body of R.A. No. 8180,
and hence, should alone be declared as unconstitutional. In taking this position,
the movants rely heavily on the separability provision of R.A. No. 8180. We
cannot affirm the movants for the determine whether or not a particular provision
is separable, the courts should consider the intent of the legislature. It is true that
the most of the time, such intent is expressed in a separability clause stating that
the invalidity or unconstitutionality of any provision or section of the law will not
affect the validity or constitutionality of the remainder. Nonetheless, the
separability clause only creates a presumption that the act is severable. It is
merely an aid in statutory construction. It is not an inexorable command. 18 A
separability clause does not clothe the valid parts with immunity from the invalidating effect
the law gives to the inseparable blending of the bad with the good.The separability clause
19
cannot also be applied if it will produce an absurd result. In sum, if the separation of the
statute will defeat the intent of the legislature, separation will not take place despite the
20
inclusion of a separability clause in the law.

In the case of the Republic Act No. 8180, the unconstitutionality of the provisions
on tariff differential, minimum inventory and predatory pricing cannot but result in
the unconstitutionality of the entire law despite its separability clause. These
provisions cannot be struck down alone for they were the ones intended to carry
out the policy of the law embodied in section 2 thereof which reads:
Sec. 2. Declaration of Policy It shall be the policy of the State to
deregulate the downstream oil industry to foster a truly competitive market
which can better achieve the social policy objectives of fair prices and
adequate, continuous supply of environmentally-clean and high-quality
petroleum products.
They actually set the stage for the regime of deregulation where government will
no longer intervene in fixing the price of oil and the operations of oil companies. It
is conceded that the success of deregulation lies in a truly competitive market

and there can be no competitive market without the easy entry and exit of
competitors. No less than President Fidel V. Ramos recognized this matrix when
he declared the need is to ". . . recast our laws on trust, monopolies, oligopolies,
cartels and combinations injurious to public welfare to restore competition
where it has disappeared and to preserve it where it still exists. In a word, we
need to perpetuate competition as a system to regulate the economy and
achieve global product quality." 21
We held in our Decision that the provisions on 4% tariff differential, minimum
inventory and predatory pricing are anti-competition, and they are the key
provisions of R.A. No. 8180. Without these provisions in place, Congress could
not have deregulated the downstream oil industry. Consider the 4% tariff
differential on crude oil and refined petroleum. Before R.A. No. 8180, 22 there was a
ten-point difference between the tariff imposed on crude oil and that on refined petroleum.
Section 5(b) of R.A. No. 8180 lowered the difference to four by imposing a 3% tariff on crude
oil and a 7% tariff on refined petroleum. We ruled, however, that this reduced tariff differential
is unconstitutional for it still posed a substantial barrier to the entry of new players and
enhanced the monopolistic power of the three existing oil companies. The ruling that the 4%
differential is unconstitutional will unfortunately revive the 10% tariff differential of the Tariff
and Customs Code. The high 10% tariff differential will certainly give a bigger edge to the
three existing oil companies, will form an insuperable barrier to prospective players, and will
drive out of business the new players. Thus, there can be no question that Congress will not
allow deregulation if the tariff is 10% on crude oil and 20% on refined petroleum. To decree
the partial unconstitutionality of R.A. No. 8180 will bring about an absurdity a fully
deregulated downstream oil industry where government is impotent to regulate run away
prices, where the oil oligopolists can engage in cartelization without competition, where
prospective players cannot come in, and where new players will close shop.

We also reject the argument that the bills pending in Congress merely seek to
remedy the partial defects of R.A No. 8180, and that this is proof that R.A. No.
8180 can be declared unconstitutional minus its offensive provisions. We referred
to the pending bills in Congress in our Decision only to show that Congress itself
is aware of the various defects of the law and not to prove the inseparability of
the offending provisions from the body of R.A. No. 8180. To be sure, movants
even overlooked the fact that resolutions have been filed in both House of
Congress calling for atotal review of R.A. No. 8180.

The movants warn that our Decision will throw us back to the undesirable regime
of regulation. They emphasize its pernicious consequences the revival of the
10% tariff differential which will wipe out the new players, the return of the OPSF
which is too burdensome to government, the unsatisfactory scheme of price
regulation by the ERB, etc. To stress again, it is not the will of the Court to return
even temporarily to the regime of regulation. If we return to the regime of
regulation, it is because it is the inevitable consequence of the enactment by
Congress of an unconstitutional law, R.A. No. 8180. It is settled jurisprudence
that the declaration of a law as unconstitutional revives the laws that it has
repealed. Stated otherwise, an unconstitutional law returns us to the status quo
ante and this return is beyond the power of the Court to stay. Under our scheme
of government, however, the remedy to prevent the revival of an unwanted status
quo ante or stop its continuation by immediately enacting the necessary remedial
legislation. We emphasize that in the cases at bar, the Court did not condemn
the economic policy of deregulation as unconstitutional. It merely held that as
crafted, the law runs counter to the constitutional provision calling for fair
competition. 23 Thus, there is no impediment in re-enacting R.A. No. 8180 minus its
provisions which are anti-competition. The Court agrees that our return to the regime of
regulation has pernicious consequences and it specially symphatizes with the intervenors. Be
that as it may, the Court is powerless to prevent this return just as it is powerless to repeal
24
the 10% tariff differential of the Tariff Code. It is Congress that can give all these remedies.

Petitioner Garcia, however, injects a non-legal argument in his motion for partial
reconsideration. He avers that "given the 'realities' of politics, especially with the
1998 presidential polls six months away, it is not far-fetched that the general
welfare could be sacrificed to gain political mileage, thus further unduly delaying
the enactment of a new oil deregulation law." The short answer to petitioner
Garcia's argument is that when the Court reviews the constitutionality of a law, it
does not deal with the realities of politics nor does it delve into the mysticism of
politics. The Court has no partisan political theology for as an institution it is at
best apolitical, and at worse, politically agnostic. In any event, it should not take a
long time for Congress to enact a new oil deregulation law given its interest for
the welfare of our people. Petitioner Garcia himself has been quoted as saying
that ". . . with the Court's decision, it would now be easy for Congress to craft
new law, considering that lawmakers will be guided by the Court's points." 25 Even

before our Decision, bills amending the offensive provisions of R.A. No. 8180 have already
been filed in the Congress and under consideration by its committees. Speaker Jose de
Venecia has assured after a meeting of the Legislative-Executive Advisory Council (LEDAC)
that: "I suppose before Christmas, we should be able to pass a new oil deregulation
26
law. The Chief Executive himself has urged the immediate passage of a new and better oil
27
deregulation law.

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

interdicts unfair competition. Thus, the Constitution provides a shield to the


economic rights of our people, especially the poor. It is the unyielding duty of this
Court to uphold the supremacy of the Constitution not with a mere wishbone but
with a backbone that should neither bend nor break.
IN VIEW WHEREOF, the Motions for Reconsideration of the public respondents
and of the intervenors as well as the Partial Motion for Reconsideration of
petitioner Enrique Garcia are DENIED for lack of merit.
SO ORDERED.
Regalado, Davide, Jr., Romero, Bellosillo, Vitug, Mendoza and Panganiban, JJ.,
concur.
Martinez, J., took no part.
Narvasa, C.J., is on leave.
Melo and Francisco, JJ., maintain their dissent.

To recapitulate, our Decision declared R.A. No. 8180 unconstitutional for three
reasons: (1) it gave more power to an already powerful oil oligopoly; (2) it
blocked the entry of effective competitors; and (3) it will sire an even more
powerful oligopoly whose unchecked power will prejudice the interest of the
consumers and compromise the general welfare.
A weak and developing country like the Philippines cannot risk a downstream oil
industry controlled by a foreign oligopoly that can run riot. Oil is our most socially
sensitive commodity and for it to be under the control of a foreign oligopoly
without effective competitors is a clear and present danger. A foreign oil oligopoly
can undermine the security of the nation; it can exploit the economy if greed
becomes its creed; it will have the power to drive the Filipino to a prayerful pose.
Under a deregulated regime, the people's only hope to check the overwhelming
power of the foreign oil oligopoly lies on a market where there is fair competition.
With prescience, the Constitution mandates the regulation of monopolies and

Separate Opinions

KAPUNAN, J., concurring and dissenting:


Brought before us are the motion for reconsideration of public
respondents and the partial motions for reconsideration of petitioner

Enrique T. Garcia and the movants-in-intervention. The majority, acting on


the motions, resolves to deny the same for lack of merit. With due respect,
I concur in part and dissent in part.
At the outset let me clarify that, although I concurred with the enlightened
ponencia of Mr. Justice Reynato S. Puno in the decision sought to be
reconsidered, I did not go along with his conclusion declaring the
Downstream Oil Industry Deregulation Act (R.A. No. 8180)
unconstitutional in its entirety. In the dispositive portion of my separate
opinion, I explicitly stated that only the three anti-competition provisions of
the said law should be deemed unconstitutional. The rest of the law, free
from the taint of unconstitutionality, should remain in force and effect in
view of the separability clause contained therein. 1
Let me explain. A separability clause states that if for any reason, any
section or provision of the statute is held to unconstitutional or (invalid),
the other section(s) or provision(s) of the law shall not be affected
thereby. 2 It is a legislative expression of intent that the nullity of one provision shall
not invalidate the other provisions of the act. Such a clause is not, however,
controlling and the court may, in spite of it, invalidate the whole statute where what is
3
left, after the void part, is not complete and workable.

The rules on statutory construction, thus, prescribe that:


The general rule is that where part of a statute is void as repugnant
to the Constitution, while another part is valid, the valid portion, if
separable from the invalid, may stand and be enforced. The
presence of a separability clause in a statute creates the
presumption that the legislature intended separability, rather than
complete nullity, of the statute. To justify this result, the valid
portion must be so far independent of the invalid portion that it is
fair to presume that the legislature would have enacted it by itself if
it had supposed that it could not constitutionally enact the other.
Enough must remain to make a complete, intelligible, and valid
statute, which carriers out the legislative intent. The void provisions

must be eliminated without causing results affecting the main


purpose of the act in a manner contrary to the intention of the
legislature. The language used in the invalid part of the statute can
have no legal effect or efficacy for any purpose whatsoever, and
what remains must express the legislative will independently of the
void part, since the court has no power to legislate.
The exception to the general rule is that when the parts of a statute
are so mutually dependent and connected, as conditions,
considerations, inducements, or compensations for each other, as
to warrant a belief that the legislature intended them as a whole
the nullity of one part will vitiate the rest. In making the parts of the
statute dependent, conditional, or connected with one another, the
legislature intended the statute to be carried out as a whole and
would not have enacted it if one part is void, in which case if some
parts are unconstitutional, all the other provisions thus dependent,
conditional, or connected must fall with them. 4
However, in the instant case, the exception rather than the general rule
was applied. The majority opinion enunciated, thus:
. . .This separability clause not withstanding, we hold that the
offending provisions of R.A. No. 8180 so permeate its essence that
the entire law has to be struck down. The provisions on tariff
differential, inventory and predatory pricing are among the principal
props of R.A. No. 8180. Congress could not have deregulated the
downstream oil industry without these provisions. Unfortunately,
contrary to their intent, these provisions on tariff differential,
inventory and predatory pricing inhibit fair competition, encourage
monopolistic power and interfere with the free interaction of market
forces. . . . 5
I beg to disagree.

The three provisions declared void are severable from the main statute
and their removal therefrom would not affect the validity and enforceability
of the remaining provisions of the said law R.A. No. 8180, sans the
constitutionally infirmed portions, remains "complete in itself, sensible,
capable of being executed and wholly independent of (those) which (are)
rejected. 6 In other words, despite the elimination of some of its parts, the law can
still stand on its own.

The crucial test is to determine if expulsion of the assailed provisions


cripples the whole statute, so much so, that it is no longer expressive of
the legislative will and could no longer carry out the legislative purpose.
The principal intent of R.A. No. 8180 is to open the country's oil market to
fair and free competition and the three provisions are assailed precisely
because they are anti-competition and they obstruct the entry of new
players. Therefore, in order to make the deregulation law work, it is
imperative that the anti-competition provisions found therein be taken out.
In other words, it is only through the "separation" of these provisions that
the deregulation law be able to fully realize its objective.
Take the tariff provision for instance. The repudiation of the tariff
differential will not revive the 10% and 20% tariff rates. What is being
discarded is the differential not the tariff itself, hence, the removal of the
4% differential would result in the imposition of a single uniform tariff rate
on the importation of both crude oil and refined petroleum products at 3%
as distinctly and deliberately set in sec. 5(b) of R.A. No. 8180 itself. The
tariff provision which, admittedly, is among the "principal props" of R.A.
No. 8180 remains intact in substance and the elimination of the tariff
differential would, in effect, transform it into one of the statute's
"vouchsafing provisions," a tool to effectively carry out the legislative
intent of fostering a truly competitive market.
There is no question that the legislature intended a single uniform tariff
rate for imported crude oil and imported petroleum products. This is

obvious from the proviso contained in Sec. 5(b) 7 of R.A. No. 8180 which
specifically states that:

. . . Provided, That beginning on January 1, 2004 the tariff rate on


imported crude oil and refined petroleum products shall be the
same: Provided, further, That this provision may be amended only
by an Act of Congress.
although said proviso equalizing the tariff rate takes effect on January 1,
2004. However, the nullification of the tariff differential renders the
prospective effectivity of the rate equalization irrelevant and superfluous.
Naturally, there would no longer be any basis for postponing the leveling
of the tariff rate to a later date. The provision that the tariff rate shall be
equalized on January 1, 2004 is premised on the validity of the tariff
differential, without which there is nothing to equalize. Stated differently,
the imposition of a single uniform tariff rate on imported crude oil and
imported petroleum products is to take effect immediately. A different way
of interpreting the law would be less than faithful to the legislative intent to
enhance free competition in the oil industry for the purpose of obtaining
fair prices for high-quality petroleum products.
The provision requiring a minimum inventory was similarly found by the
majority to be anti-competition. Its exclusion, therefore, would not have
any deleterious effect on the oil deregulation law. On the contrary, the
essence of R.A. No. 8180, which is free and fair competition, is preserved.
The same rationale applies to the provision concerning predatory pricing
and may be subsumed (at least in the meantime pending the amendment
of the law) under Sec. 9 (a):
Sec. 9. Prohibited Acts. To ensure fair competition and prevent
cartels and monopolies in the downstream oil industry, the
following acts are hereby prohibited:

a) Cartelization which means any agreement,


combination or concerted action by refiners and/or
importers or their representatives to fix prices,
restrict outputs or divide markets, either by products
or by areas, or allocating markets, either by products
or by areas, in restraint of trade or free competition;
and

Copies of applications filed with the EIAB had to be given to


competing oil companies which, under the rules, were allowed to
file their opposition. The EIAB was duty bound to evaluate the
application against the opposition. This rule made it possible for
the big players to block the expansion of competing facilities. 8
These barriers were eradicated by R.A. No. 8180, as expressly mandated
in Sec. 5(a) thereof:

xxx xxx xxx


The answer is not the wholesale rejection of R.A. No. 8180. To strike
down the whole statute would go against the very ideal that our country is
striving for. The goal is to unshackle the oil industry from the restraints of
regulation. To declare R.A. No. 8180 void in its entirety would bring us
back to where we started. Worse, as pointed out by the eminent
constitutionalist, Joaquin G. Bernas, SJ, the hardest hit would be the few
new players who have entered the oil business and have begun investing
in our country under the deregulated regime. He expounds, thus:
. . . Under the regulated regime, importation of oil was controlled by
the Energy Industry Administrative Bureau (EIAB). The procedure
followed was that, whenever there was an application to import oil
products, the EIAB was required to inform the oil companies of the
proposed importation in order to give them the option to match the
desired importation with locally available products. Equivalently,
therefore, the large oil companies could block imports by the
smaller players.
xxx xxx xxx
Another barrier to equalization concerns the expansion of services
of small players. Under the regulated regime, expansion of facilities
was also under the control of the EIAB. Any person wishing to
build and establish or operate, remodel or refurbish any retail outlet
for petroleum products had to obtain approval from the EIAB.

Sec. 5. Liberalization of Downstream Oil Industry and Tariff


Treatment a) Any law to the contrary notwithstanding, any
person or entity may import or purchase any quantity of crude oil
and petroleum products from a foreign or domestic source, lease
or own and operate refineries and other downstream oil facilities
and market such crude oil and petroleum products either in a
generic name or its own trade name, or use the same for his own
requirement: Provided. That any person or entity who shall engage
in any such activity shall give prior notice thereof to the DOE for
monitoring purposes: Provided further, That such notice shall not
exempt such person or entity from securing certificates of quality,
health and safety and environmental clearance from the proper
governmental agencies: Provided, furthermore, That such person
or entity shall, for monitoring purposes, report to the DOE his or its
every importation/exportation; Provided, finally, That all oil
importations shall be in accordance with the Basel Convention.
xxx xxx xxx
The nullification of the whole law would, therefore, considerably
jeopardize the chances of the new entrants to survive and remain
competitive in the market.
As a consequence thereof, Eastern Petroleum Corp., Seaoil Petroleum
Corp., Subic Bay Distribution, Inc., TWA, Inc. and Dubphil Gas, which are
some of the oil industry's new entrants, filed a motion for intervention on

18 November 1997 urging the Court to reconsider its decision declaring


the whole R.A. No. 8180 unconstitutional. The intervenors raise similar
apprehensions concerning the power of the existing oil firms, under the
regulated industry, to block the importation of petroleum products by the
small oil companies and likewise impede their expansion and growth. 9
Even the public respondents in their motion for reconsideration concedes
that if R.A. No. 8180 should be declared unconstitutional, the
unconstitutionality is partial, that is, only the three (3) anti-competition
provisions should be declared void. Public respondents, thus, opine:
Thus, even assuming that the assailed provisions are
constitutionally defective, they cannot be that contagious as to
infect or contaminate the other valid parts of the law which are
complete in themselves, or capable of bringing about the full
deregulation of the oil industry.
To apply the exception to the general rule of separability will
require a clear and overwhelming demonstration which will erase
any and all doubts on the unconstitutionality of R.A. 8180.
Moreover, the separable and independent character of the
assailed provisions may be inferred from the various bills filed by
leading legislators which, as noted by the Honorable Court, seek
"the repeal of this odious and offensive provisions in R.A. No.
8180." In fact, the original as well as the final versions of the House
Bill 5264 and Senate Bill No. 1253, which later became R.A. No.
8180, did not contain any tariff differential.
The foregoing instances clearly demonstrate that the assailed
provisions were indeed separable and independent of the other
provisions of R.A. 8180 and Congress did not consider the same to
be that indispensable, without which Congress would not have
passed R.A. 8180 into law. 10

The public need not fear that prices of petroleum products, particularly
gasoline, will soar if R.A. No. 8180 is declared only partially
unconstitutional. The oil deregulation law itself provides adequate
safeguards that would effectively avert and preclude such a dire scenario.
For instance, Sec. 8 of the said law provides that:
xxx xxx xxx
Any report from any person of an unreasonable rise in the prices of
petroleum products shall be immediately acted upon. For this
purpose, the creation of a Department of Energy (DOE)
Department of Justice (DOJ) Task Force is hereby mandated to
determine the merits of the report and the initiate the necessary
actions warranted under the circumstances to prevent cartelization,
among others.
The law also tasks the Department of Energy (DOE) to "take all measures
to promote fair trade and to prevent cartelization, monopolies and
combinations in restraint of trade and any unfair competition, as defined in
Articles 186, 188 and 189 of the Revised Penal Code, in the downstreams
oil industry. The DOE shall continue to encourage certain practices in the
oil industry which serve the public interest and are intended to achieve
efficiency and cost reduction, ensure continuous supply of petroleum
products, or enhance environmental protection. These practices may
include borrow-and-loan agreements, rationalized deport operations,
hospitality agreements, joint tanker and pipeline utilization, and joint
actions on oil spill control and fire prevention." 11
Likewise, the DOE is endowed with monitoring powers as amended in
Sec. 6 of R.A. No. 8180:
Sec. 8. Monitoring. The DOE shall monitor and publish daily
international oil prices to enable the public to determine whether
current market oil prices are reasonable. It shall likewise monitor
the quality of petroleum products and stop the operation of

businesses involved in the sale of petroleum products which do not


comply with the national standards of quality. The Bureau of
Product Standards (BPS), in coordination with DOE, shall set
national standards of quality that are aligned with the international
standards/protocols of quality.
The DOE shall monitor the refining and manufacturing processes
of local petroleum products to ensure that clean and safe
(environment and worker-benign) technologies are applied. This
shall also apply to the process of marketing local and imported
petroleum products.
The DOE shall maintain in a periodic schedule of present and
future total industry inventory of petroleum products for the
purpose of determining the level of supply. To implement this, the
importers, refiners, and marketers are hereby required to submit
monthly to the DOE their actual and projected importations, local
purchases, sales and/or consumption, and inventory on a per
crude/product basis.
xxx xxx xxx
Reverting to a regulated oil industry, even if only for a short period while
the legislature "fasttracks" the passage of a new oil deregulation law (the
feasibility of which remains a big "if") defeats the whole purpose and only
succeeds in retarding the country's economic growth.
R.A. No. 8180 is a bold and progressive piece of legislation. It must be
given a chance to work and prove its worth. Thus, the better solution is to
retain the foundations of the law and leave it to Congress to pass the
necessary amendments and enact the appropriate supporting legislation
to fortify R.A. No. 8180.
In view of the foregoing, I find myself unable to concur with the majority's
thesis that the three assailed provisions "cannot be struck down alone for

they were the ones intended to carry out the policy of (R.A. No. 8180)"
and that "without these provisions in place. Congress could not have
deregulated the downstream oil industry." As I have previously pointed
out, the aforementioned provisions were declared unconstitutional
precisely because they were found to be anti-competition. How can anticompetition provisions, therefore, have any place in a law whose goal is to
promote and achieve fair and free competition?
The oil deregulation law was not built upon and do not center on the
provisions on tariff differential, minimum inventory requirement and
predatory pricing. These are not the only provisions of R.A. No. 8180
intended to implement the legislative intent as expressed in sec. 2 thereof.
The heart and soul of R.A. No. 8180 is embodied is sec. 5(a) aptly entitled
"Liberalization of Downstream Oil Industry and Tariff Treatment." It is this
provision which does away with the burdensome requirements and
procedures for the importation of petroleum products (the main
impediments to the entry of new players in the oil market). With this
provision the "entry and exit of competitors" is made relatively easy and
from this the competitive market is established.
The other remaining provisions are, likewise, sufficient to serve the
legislative will. There is among others, sec. 7 mandating the promotion of
fair trade practices and sec. 9(a) on the prevention of cartels and
monopolies.
The point is, even without the subject three provisions what remains is a
comprehensible and workable law. The infirmities of some parts of the
statute should not taint the whole when these parts could successfully be
incised.
I also take exception to the majority's observation that ". . . a partial
declaration of unconstitutionality of R.A. No. 8180 will bring about a fully
deregulated downstream oil industry where government will be impotent
to regulate run away prices, where the oil oligopolists can engage in
cartelization without competition, where prospective players cannot come

in, and where new players will close shop. . ." As I have earlier discussed,
R.A. No. 8180 has armed the government with adequate measures to
deal with the above problems, should any of these arise. The
implementation, therefore, of R.A. No. 8180 (sans the void provisions) is
not an absurdity, on the contrary as shown above, it is the sensible thing
to do.
ACCORDINGLY, resolving the pending motion for reconsideration and
partial motions for reconsideration, I CONCUR with the majority insofar as
it maintains the opinion to strike down as unconstitutional the three (3)
anti-competition provisions of R.A. No. 8180, but I register my DISSENT
to its ruling declaring the entire law as unconstitutional.

Separate Opinions
KAPUNAN, J., concurring and dissenting:
Brought before us are the motion for reconsideration of public
respondents and the partial motions for reconsideration of petitioner
Enrique T. Garcia and the movants-in-intervention. The majority, acting on
the motions, resolves to deny the same for lack of merit. With due respect,
I concur in part and dissent in part.
At the outset let me clarify that, although I concurred with the enlightened
ponencia of Mr. Justice Reynato S. Puno in the decision sought to be
reconsidered, I did not go along with his conclusion declaring the
Downstream Oil Industry Deregulation Act (R.A. No. 8180)
unconstitutional in its entirety. In the dispositive portion of my separate
opinion, I explicitly stated that only the three anti-competition provisions of
the said law should be deemed unconstitutional. The rest of the law, free
from the taint of unconstitutionality, should remain in force and effect in
view of the separability clause contained therein. 1

Let me explain. A separability clause states that if for any reason, any
section or provision of the statute is held to unconstitutional or (invalid),
the other section(s) or provision(s) of the law shall not be affected
thereby. 2 It is a legislative expression of intent that the nullity of one provision shall
not invalidate the other provisions of the act. Such a clause is not, however,
controlling and the court may, in spite of it, invalidate the whole statute where what is
3
left, after the void part, is not complete and workable.

The rules on statutory construction, thus, prescribe that:


The general rule is that where part of a statute is void as repugnant
to the Constitution, while another part is valid, the valid portion, if
separable from the invalid, may stand and be enforced. The
presence of a separability clause in a statute creates the
presumption that the legislature intended separability, rather than
complete nullity, of the statute. To justify this result, the valid
portion must be so far independent of the invalid portion that it is
fair to presume that the legislature would have enacted it by itself if
it had supposed that it could not constitutionally enact the other.
Enough must remain to make a complete, intelligible, and valid
statute, which carriers out the legislative intent. The void provisions
must be eliminated without causing results affecting the main
purpose of the act in a manner contrary to the intention of the
legislature. The language used in the invalid part of the statute can
have no legal effect or efficacy for any purpose whatsoever, and
what remains must express the legislative will independently of the
void part, since the court has no power to legislate.
The exception to the general rule is that when the parts of a statute
are so mutually dependent and connected, as conditions,
considerations, inducements, or compensations for each other, as
to warrant a belief that the legislature intended them as a whole
the nullity of one part will vitiate the rest. In making the parts of the
statute dependent, conditional, or connected with one another, the
legislature intended the statute to be carried out as a whole and

would not have enacted it if one part is void, in which case if some
parts are unconstitutional, all the other provisions thus dependent,
conditional, or connected must fall with them. 4
However, in the instant case, the exception rather than the general rule
was applied. The majority opinion enunciated, thus:
. . .This separability clause not withstanding, we hold that the
offending provisions of R.A. No. 8180 so permeate its essence that
the entire law has to be struck down. The provisions on tariff
differential, inventory and predatory pricing are among the principal
props of R.A. No. 8180. Congress could not have deregulated the
downstream oil industry without these provisions. Unfortunately,
contrary to their intent, these provisions on tariff differential,
inventory and predatory pricing inhibit fair competition, encourage
monopolistic power and interfere with the free interaction of market
forces. . . . 5
I beg to disagree.
The three provisions declared void are severable from the main statute
and their removal therefrom would not affect the validity and enforceability
of the remaining provisions of the said law R.A. No. 8180, sans the
constitutionally infirmed portions, remains "complete in itself, sensible,
capable of being executed and wholly independent of (those) which (are)
rejected. 6 In other words, despite the elimination of some of its parts, the law can

players. Therefore, in order to make the deregulation law work, it is


imperative that the anti-competition provisions found therein be taken out.
In other words, it is only through the "separation" of these provisions that
the deregulation law be able to fully realize its objective.
Take the tariff provision for instance. The repudiation of the tariff
differential will not revive the 10% and 20% tariff rates. What is being
discarded is the differential not the tariff itself, hence, the removal of the
4% differential would result in the imposition of a single uniform tariff rate
on the importation of both crude oil and refined petroleum products at 3%
as distinctly and deliberately set in sec. 5(b) of R.A. No. 8180 itself. The
tariff provision which, admittedly, is among the "principal props" of R.A.
No. 8180 remains intact in substance and the elimination of the tariff
differential would, in effect, transform it into one of the statute's
"vouchsafing provisions," a tool to effectively carry out the legislative
intent of fostering a truly competitive market.
There is no question that the legislature intended a single uniform tariff
rate for imported crude oil and imported petroleum products. This is
obvious from the proviso contained in Sec. 5(b) 7 of R.A. No. 8180 which
specifically states that:

. . . Provided, That beginning on January 1, 2004 the tariff rate on


imported crude oil and refined petroleum products shall be the
same: Provided, further, That this provision may be amended only
by an Act of Congress.

still stand on its own.

The crucial test is to determine if expulsion of the assailed provisions


cripples the whole statute, so much so, that it is no longer expressive of
the legislative will and could no longer carry out the legislative purpose.
The principal intent of R.A. No. 8180 is to open the country's oil market to
fair and free competition and the three provisions are assailed precisely
because they are anti-competition and they obstruct the entry of new

although said proviso equalizing the tariff rate takes effect on January 1,
2004. However, the nullification of the tariff differential renders the
prospective effectivity of the rate equalization irrelevant and superfluous.
Naturally, there would no longer be any basis for postponing the leveling
of the tariff rate to a later date. The provision that the tariff rate shall be
equalized on January 1, 2004 is premised on the validity of the tariff
differential, without which there is nothing to equalize. Stated differently,
the imposition of a single uniform tariff rate on imported crude oil and

imported petroleum products is to take effect immediately. A different way


of interpreting the law would be less than faithful to the legislative intent to
enhance free competition in the oil industry for the purpose of obtaining
fair prices for high-quality petroleum products.
The provision requiring a minimum inventory was similarly found by the
majority to be anti-competition. Its exclusion, therefore, would not have
any deleterious effect on the oil deregulation law. On the contrary, the
essence of R.A. No. 8180, which is free and fair competition, is preserved.
The same rationale applies to the provision concerning predatory pricing
and may be subsumed (at least in the meantime pending the amendment
of the law) under Sec. 9 (a):
Sec. 9. Prohibited Acts. To ensure fair competition and prevent
cartels and monopolies in the downstream oil industry, the
following acts are hereby prohibited:
a) Cartelization which means any agreement,
combination or concerted action by refiners and/or
importers or their representatives to fix prices,
restrict outputs or divide markets, either by products
or by areas, or allocating markets, either by products
or by areas, in restraint of trade or free competition;
and
xxx xxx xxx
The answer is not the wholesale rejection of R.A. No. 8180. To strike
down the whole statute would go against the very ideal that our country is
striving for. The goal is to unshackle the oil industry from the restraints of
regulation. To declare R.A. No. 8180 void in its entirety would bring us
back to where we started. Worse, as pointed out by the eminent
constitutionalist, Joaquin G. Bernas, SJ, the hardest hit would be the few

new players who have entered the oil business and have begun investing
in our country under the deregulated regime. He expounds, thus:
. . . Under the regulated regime, importation of oil was controlled by
the Energy Industry Administrative Bureau (EIAB). The procedure
followed was that, whenever there was an application to import oil
products, the EIAB was required to inform the oil companies of the
proposed importation in order to give them the option to match the
desired importation with locally available products. Equivalently,
therefore, the large oil companies could block imports by the
smaller players.
xxx xxx xxx
Another barrier to equalization concerns the expansion of services
of small players. Under the regulated regime, expansion of facilities
was also under the control of the EIAB. Any person wishing to
build and establish or operate, remodel or refurbish any retail outlet
for petroleum products had to obtain approval from the EIAB.
Copies of applications filed with the EIAB had to be given to
competing oil companies which, under the rules, were allowed to
file their opposition. The EIAB was duty bound to evaluate the
application against the opposition. This rule made it possible for
the big players to block the expansion of competing facilities. 8
These barriers were eradicated by R.A. No. 8180, as expressly mandated
in Sec. 5(a) thereof:
Sec. 5. Liberalization of Downstream Oil Industry and Tariff
Treatment a) Any law to the contrary notwithstanding, any
person or entity may import or purchase any quantity of crude oil
and petroleum products from a foreign or domestic source, lease
or own and operate refineries and other downstream oil facilities
and market such crude oil and petroleum products either in a
generic name or its own trade name, or use the same for his own

requirement: Provided. That any person or entity who shall engage


in any such activity shall give prior notice thereof to the DOE for
monitoring purposes: Provided further, That such notice shall not
exempt such person or entity from securing certificates of quality,
health and safety and environmental clearance from the proper
governmental agencies: Provided, furthermore, That such person
or entity shall, for monitoring purposes, report to the DOE his or its
every importation/exportation; Provided, finally, That all oil
importations shall be in accordance with the Basel Convention.
xxx xxx xxx
The nullification of the whole law would, therefore, considerably
jeopardize the chances of the new entrants to survive and remain
competitive in the market.
As a consequence thereof, Eastern Petroleum Corp., Seaoil Petroleum
Corp., Subic Bay Distribution, Inc., TWA, Inc. and Dubphil Gas, which are
some of the oil industry's new entrants, filed a motion for intervention on
18 November 1997 urging the Court to reconsider its decision declaring
the whole R.A. No. 8180 unconstitutional. The intervenors raise similar
apprehensions concerning the power of the existing oil firms, under the
regulated industry, to block the importation of petroleum products by the
small oil companies and likewise impede their expansion and growth. 9

To apply the exception to the general rule of separability will


require a clear and overwhelming demonstration which will erase
any and all doubts on the unconstitutionality of R.A. 8180.
Moreover, the separable and independent character of the
assailed provisions may be inferred from the various bills filed by
leading legislators which, as noted by the Honorable Court, seek
"the repeal of this odious and offensive provisions in R.A. No.
8180." In fact, the original as well as the final versions of the House
Bill 5264 and Senate Bill No. 1253, which later became R.A. No.
8180, did not contain any tariff differential.
The foregoing instances clearly demonstrate that the assailed
provisions were indeed separable and independent of the other
provisions of R.A. 8180 and Congress did not consider the same to
be that indispensable, without which Congress would not have
passed R.A. 8180 into law. 10
The public need not fear that prices of petroleum products, particularly
gasoline, will soar if R.A. No. 8180 is declared only partially
unconstitutional. The oil deregulation law itself provides adequate
safeguards that would effectively avert and preclude such a dire scenario.
For instance, Sec. 8 of the said law provides that:
xxx xxx xxx

Even the public respondents in their motion for reconsideration concedes


that if R.A. No. 8180 should be declared unconstitutional, the
unconstitutionality is partial, that is, only the three (3) anti-competition
provisions should be declared void. Public respondents, thus, opine:
Thus, even assuming that the assailed provisions are
constitutionally defective, they cannot be that contagious as to
infect or contaminate the other valid parts of the law which are
complete in themselves, or capable of bringing about the full
deregulation of the oil industry.

Any report from any person of an unreasonable rise in the prices of


petroleum products shall be immediately acted upon. For this
purpose, the creation of a Department of Energy (DOE)
Department of Justice (DOJ) Task Force is hereby mandated to
determine the merits of the report and the initiate the necessary
actions warranted under the circumstances to prevent cartelization,
among others.

The law also tasks the Department of Energy (DOE) to "take all measures
to promote fair trade and to prevent cartelization, monopolies and
combinations in restraint of trade and any unfair competition, as defined in
Articles 186, 188 and 189 of the Revised Penal Code, in the downstreams
oil industry. The DOE shall continue to encourage certain practices in the
oil industry which serve the public interest and are intended to achieve
efficiency and cost reduction, ensure continuous supply of petroleum
products, or enhance environmental protection. These practices may
include borrow-and-loan agreements, rationalized deport operations,
hospitality agreements, joint tanker and pipeline utilization, and joint
actions on oil spill control and fire prevention." 11
Likewise, the DOE is endowed with monitoring powers as amended in
Sec. 6 of R.A. No. 8180:
Sec. 8. Monitoring. The DOE shall monitor and publish daily
international oil prices to enable the public to determine whether
current market oil prices are reasonable. It shall likewise monitor
the quality of petroleum products and stop the operation of
businesses involved in the sale of petroleum products which do not
comply with the national standards of quality. The Bureau of
Product Standards (BPS), in coordination with DOE, shall set
national standards of quality that are aligned with the international
standards/protocols of quality.
The DOE shall monitor the refining and manufacturing processes
of local petroleum products to ensure that clean and safe
(environment and worker-benign) technologies are applied. This
shall also apply to the process of marketing local and imported
petroleum products.
The DOE shall maintain in a periodic schedule of present and
future total industry inventory of petroleum products for the
purpose of determining the level of supply. To implement this, the
importers, refiners, and marketers are hereby required to submit

monthly to the DOE their actual and projected importations, local


purchases, sales and/or consumption, and inventory on a per
crude/product basis.
xxx xxx xxx
Reverting to a regulated oil industry, even if only for a short period while
the legislature "fasttracks" the passage of a new oil deregulation law (the
feasibility of which remains a big "if") defeats the whole purpose and only
succeeds in retarding the country's economic growth.
R.A. No. 8180 is a bold and progressive piece of legislation. It must be
given a chance to work and prove its worth. Thus, the better solution is to
retain the foundations of the law and leave it to Congress to pass the
necessary amendments and enact the appropriate supporting legislation
to fortify R.A. No. 8180.
In view of the foregoing, I find myself unable to concur with the majority's
thesis that the three assailed provisions "cannot be struck down alone for
they were the ones intended to carry out the policy of (R.A. No. 8180)"
and that "without these provisions in place. Congress could not have
deregulated the downstream oil industry." As I have previously pointed
out, the aforementioned provisions were declared unconstitutional
precisely because they were found to be anti-competition. How can anticompetition provisions, therefore, have any place in a law whose goal is to
promote and achieve fair and free competition?
The oil deregulation law was not built upon and do not center on the
provisions on tariff differential, minimum inventory requirement and
predatory pricing. These are not the only provisions of R.A. No. 8180
intended to implement the legislative intent as expressed in sec. 2 thereof.
The heart and soul of R.A. No. 8180 is embodied is sec. 5(a) aptly entitled
"Liberalization of Downstream Oil Industry and Tariff Treatment." It is this
provision which does away with the burdensome requirements and
procedures for the importation of petroleum products (the main

impediments to the entry of new players in the oil market). With this
provision the "entry and exit of competitors" is made relatively easy and
from this the competitive market is established.
The other remaining provisions are, likewise, sufficient to serve the
legislative will. There is among others, sec. 7 mandating the promotion of
fair trade practices and sec. 9(a) on the prevention of cartels and
monopolies.
The point is, even without the subject three provisions what remains is a
comprehensible and workable law. The infirmities of some parts of the
statute should not taint the whole when these parts could successfully be
incised.
I also take exception to the majority's observation that ". . . a partial
declaration of unconstitutionality of R.A. No. 8180 will bring about a fully
deregulated downstream oil industry where government will be impotent
to regulate run away prices, where the oil oligopolists can engage in
cartelization without competition, where prospective players cannot come
in, and where new players will close shop. . ." As I have earlier discussed,
R.A. No. 8180 has armed the government with adequate measures to
deal with the above problems, should any of these arise. The
implementation, therefore, of R.A. No. 8180 (sans the void provisions) is
not an absurdity, on the contrary as shown above, it is the sensible thing
to do.
ACCORDINGLY, resolving the pending motion for reconsideration and
partial motions for reconsideration, I CONCUR with the majority insofar as
it maintains the opinion to strike down as unconstitutional the three (3)
anti-competition provisions of R.A. No. 8180, but I register my DISSENT
to its ruling declaring the entire law as unconstitutional.