Taada vs.

Tuvera 136 SCRA 27 (April 24, 1985) 146

SCRA 446 (December 29, 1986)
TAADA VS. TUVERA
136 SCRA 27 (April 24, 1985)
FACTS:
Invoking the right of the people to be informed on matters of public concern as well as the principle that
laws to be valid and enforceable must be published in the Official Gazette, petitioners filed for writ of
mandamus to compel respondent public officials to publish and/or cause to publish various presidential
decrees, letters of instructions, general orders, proclamations, executive orders, letters of
implementations and administrative orders.
The Solicitor General, representing the respondents, moved for the dismissal of the case, contending that
petitioners have no legal personality to bring the instant petition.
ISSUE:
Whether or not publication in the Official Gazette is required before any law or statute becomes valid and
enforceable.
HELD:
Art. 2 of the Civil Code does not preclude the requirement of publication in the Official Gazette, even if the
law itself provides for the date of its effectivity. The clear object of this provision is to give the general
public adequate notice of the various laws which are to regulate their actions and conduct as citizens.
Without such notice and publication, there would be no basis for the application of the maxim ignoratia
legis nominem excusat. It would be the height of injustive to punish or otherwise burden a citizen for the
transgression of a law which he had no notice whatsoever, not even a constructive one.
The very first clause of Section 1 of CA 638 reads: there shall be published in the Official Gazette. The
word shall therein imposes upon respondent officials an imperative duty. That duty must be enforced if
the constitutional right of the people to be informed on matter of public concern is to be given substance
and validity.
The publication of presidential issuances of public nature or of general applicability is a requirement of
due process. It is a rule of law that before a person may be bound by law, he must first be officially and
specifically informed of its contents. The Court declared that presidential issuances of general application
which have not been published have no force and effect.

TAADA VS. TUVERA

146 SCRA 446 (December 29, 1986)
FACTS:
This is a motion for reconsideration of the decision promulgated on April 24, 1985. Respondent argued
that while publication was necessary as a rule, it was not so when it was otherwise as when the decrees
themselves declared that they were to become effective immediately upon their approval.

ISSUES:
1. Whether or not a distinction be made between laws of general applicability and laws which are not as
to their publication;
2. Whether or not a publication shall be made in publications of general circulation.
HELD:
The clause unless it is otherwise provided refers to the date of effectivity and not to the requirement of
publication itself, which cannot in any event be omitted. This clause does not mean that the legislature
may make the law effective immediately upon approval, or in any other date, without its previous
publication.
Laws should refer to all laws and not only to those of general application, for strictly speaking, all laws
relate to the people in general albeit there are some that do not apply to them directly. A law without any
bearing on the public would be invalid as an intrusion of privacy or as class legislation or as an ultra vires
act of the legislature. To be valid, the law must invariably affect the public interest eve if it might be directly
applicable only to one individual, or some of the people only, and not to the public as a whole.
All statutes, including those of local application and private laws, shall be published as a condition for their
effectivity, which shall begin 15 days after publication unless a different effectivity date is fixed by the
legislature.
Publication must be in full or it is no publication at all, since its purpose is to inform the public of the
content of the law.
Article 2 of the Civil Code provides that publication of laws must be made in the Official Gazette, and not
elsewhere, as a requirement for their effectivity. The Supreme Court is not called upon to rule upon the
wisdom of a law or to repeal or modify it if it finds it impractical.
The publication must be made forthwith, or at least as soon as possible.
J. Cruz:
Laws must come out in the open in the clear light of the sun instead of skulking in the shadows with their
dark, deep secrets. Mysterious pronouncements and rumored rules cannot be recognized as binding
unless their existence and contents are confirmed by a valid publication intended to make full disclosure
and give proper notice to the people. The furtive law is like a scabbarded saber that cannot faint, parry or
cut unless the naked blade is drawn.

LA BUGAL BLAAN TRIBAL ASSOCIATION INC vs RAMOS Case Digest

LA BUGAL BLAAN TRIBAL ASSOCIATION INC., et. al. v. VICTOR O. RAMOS, Secretary
Department of Environment and Natural Resources; HORACIO RAMOS, Director, Mines and
Geosciences Bureau (MGB-DENR); RUBEN TORRES, Executive Secretary; and WMC
(PHILIPPINES) INC.
G.R. No. 127882, 27 January 2004, En Banc (Carpio-Morales, J.)
The constitutional provision allowing the President to enter into FTAA is a exception to the
rule that participation in the nations natural resources is reserved exclusively to Filipinos.
Provision must be construed strictly against their enjoyment by non-Filipinos.

FACTS: RA 7942 (The Philippine Mining Act) took effect on April 9, 1995. Before the effectivity of RA
7942, or on March 30, 1995, the President signed a Financial and Technical Assistance Agreement
(FTAA) with WMCP, a corporation organized under Philippine laws, covering close to 100,000
hectares of land in South Cotabato, Sultan Kudarat, Davao del Sur and North Cotabato. On August
15, 1995, the Environment Secretary Victor Ramos issued DENR Administrative Order 95-23, which
was later repealed by DENR Administrative Order 96-40, adopted on December 20, 1996.
Petitioners prayed that RA 7942, its implementing rules, and the FTAA between the government and
WMCP be declared unconstitutional on ground that they allow fully foreign owned corporations like
WMCP to exploit, explore and develop Philippine mineral resources in contravention of Article XII
Section 2 paragraphs 2 and 4 of the Charter.
In January 2001, WMC - a publicly listed Australian mining and exploration company - sold its whole
stake in WMCP to Sagittarius Mines, 60% of which is owned by Filipinos while 40% of which is
owned by Indophil Resources, an Australian company. DENR approved the transfer and registration
of the FTAA in Sagittarius name but Lepanto Consolidated assailed the same. The latter case is still
pending before the Court of Appeals.
EO 279, issued by former President Aquino on July 25, 1987, authorizes the DENR to accept,
consider and evaluate proposals from foreign owned corporations or foreign investors for contracts
or agreements involving wither technical or financial assistance for large scale exploration,
development and utilization of minerals which upon appropriate recommendation of the (DENR)
Secretary, the President may execute with the foreign proponent. WMCP likewise contended that the
annulment of the FTAA would violate a treaty between the Philippines and Australia which provides
for the protection of Australian investments.
ISSUES:
1.
Whether or not the Philippine Mining Act is unconstitutional for allowing fully foreign-owned
corporations to exploit the Philippine mineral resources.
2.
Whether or not the FTAA between the government and WMCP is a service contract that
permits fully foreign owned companies to exploit the Philippine mineral resources.
HELD:
First Issue: RA 7942 is Unconstitutional
RA 7942 or the Philippine Mining Act of 1995 is unconstitutional for permitting fully foreign owned
corporations to exploit the Philippine natural resources.
Article XII Section 2 of the 1987 Constitution retained the Regalian Doctrine which states that All
lands of the public domain, waters, minerals, coal, petroleum, and other minerals, coal, petroleum,
and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and
fauna, and other natural resources are owned by the State. The same section also states that,
the exploration and development and utilization of natural resources shall be under the full control
and supervision of the State.
Conspicuously absent in Section 2 is the provision in the 1935 and 1973 Constitution authorizing the
State to grant licenses, concessions, or leases for the exploration, exploitation, development, or
utilization of natural resources. By such omission, the utilization of inalienable lands of the public
domain through license, concession or lease is no longer allowed under the 1987 Constitution.
Under the concession system, the concessionaire makes a direct equity investment for the purpose
of exploiting a particular natural resource within a given area. The concession amounts to complete

control by the concessionaire over the countrys natural resource, for it is given exclusive and
plenary rights to exploit a particular resource at the point of extraction.
The 1987 Constitution, moreover, has deleted the phrase management or other forms of
assistance in the 1973 Charter. The present Constitution now allows only technical and financial
assistance. The management and the operation of the mining activities by foreign contractors, the
primary feature of the service contracts was precisely the evil the drafters of the 1987 Constitution
sought to avoid.
The constitutional provision allowing the President to enter into FTAAs is an exception to the rule
that participation in the nations natural resources is reserved exclusively to Filipinos. Accordingly,
such provision must be construed strictly against their enjoyment by non-Filipinos. Therefore, RA
7942 is invalid insofar as the said act authorizes service contracts. Although the statute employs the
phrase financial and technical agreements in accordance with the 1987 Constitution, its pertinent
provisions actually treat these agreements as service contracts that grant beneficial ownership to
foreign contractors contrary to the fundamental law.
The underlying assumption in the provisions of the law is that the foreign contractor manages the
mineral resources just like the foreign contractor in a service contract. By allowing foreign
contractors to manage or operate all the aspects of the mining operation, RA 7942 has, in effect,
conveyed beneficial ownership over the nations mineral resources to these contractors, leaving the
State with nothing but bare title thereto.
The same provisions, whether by design or inadvertence, permit a circumvention of the
constitutionally ordained 60-40% capitalization requirement for corporations or associations engaged
in the exploitation, development and utilization of Philippine natural resources.
When 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, then if some parts are unconstitutional, all provisions that are thus dependent,
conditional or connected, must fail with them.
Under Article XII Section 2 of the 1987 Charter, foreign owned corporations are limited only to merely
technical or financial assistance to the State for large scale exploration, development and utilization
of minerals, petroleum and other mineral oils.
Second Issue: RP Government-WMCP FTAA is a Service Contract
The FTAA between he WMCP and the Philippine government is likewise unconstitutional since the
agreement itself is a service contract.
Section 1.3 of the FTAA grants WMCP a fully foreign owned corporation, the exclusive right to
explore, exploit, utilize and dispose of all minerals and by-products that may be produced from the
contract area. Section 1.2 of the same agreement provides that EMCP shall provide all financing,
technology, management, and personnel necessary for the Mining Operations.
These contractual stipulations and related provisions in the FTAA taken together, grant WMCP
beneficial ownership over natural resources that properly belong to the State and are intended for
the benefit of its citizens. These stipulations are abhorrent to the 1987 Constitution. They are
precisely the vices that the fundamental law seeks to avoid, the evils that it aims to suppress.
Consequently, the contract from which they spring must be struck down.

Full text

DECISION
CARPIO-MORALES, J.:

The present petition for mandamus and prohibition assails the constitutionality of
Republic Act No. 7942, otherwise known as the PHILIPPINE MINING ACT OF 1995,
along with the Implementing Rules and Regulations issued pursuant thereto,
Department of Environment and Natural Resources (DENR) Administrative Order 96-40,
and of the Financial and Technical Assistance Agreement (FTAA) entered into on March
30, 1995 by the Republic of the Philippines and WMC (Philippines), Inc. (WMCP), a
corporation organized under Philippine laws.
[5]

On July 25, 1987, then President Corazon C. Aquino issued Executive Order (E.O.)
No. 279 authorizing the DENR Secretary to
[6]

accept, consider and evaluate proposals from foreign-owned corporations or foreign

investors for contracts or agreements involving either technical or financial assistance
for large-scale exploration, development, and utilization of minerals, which, upon
appropriate recommendation of the Secretary, the President may execute with the
foreign proponent. In entering into such proposals, the President shall consider the
real contributions to the economic growth and general welfare of the country that will
be realized, as well as the development and use of local scientific and technical
resources that will be promoted by the proposed contract or agreement. Until
Congress shall determine otherwise, large-scale mining, for purpose of this Section,
shall mean those proposals for contracts or agreements for mineral resources
exploration, development, and utilization involving a committed capital investment in
a single mining unit project of at least Fifty Million Dollars in United States Currency
(US $50,000,000.00).
[7]

On March 3, 1995, then President Fidel V. Ramos approved R.A. No. 7942 to
govern the exploration, development, utilization and processing of all mineral resources.
R.A. No. 7942 defines the modes of mineral agreements for mining operations,
outlines the procedure for their filing and approval, assignment/transfer and
withdrawal, and fixes their terms. Similar provisions govern financial or technical
assistance agreements.
[8]
[9]

[10]

[12]

[11]

[13]

[14]

The law prescribes the qualifications of contractors and grants them certain rights,
including timber, water and easement rights, and the right to possess explosives.
Surface owners, occupants, or concessionaires are forbidden from preventing holders
of mining rights from entering private lands and concession areas. A procedure for the
settlement of conflicts is likewise provided for.
[15]

[16]

[17]

[18]

[19]

[20]

[21]

The Act restricts the conditions for exploration, quarry and other permits. It
regulates the transport, sale and processing of minerals, and promotes the
development of mining communities, science and mining technology, and safety and
environmental protection.
[22]

[23]

[24]

[25]

[26]

[27]

The governments share in the agreements is spelled out and allocated, taxes and
fees are imposed, incentives granted. Aside from penalizing certain acts, the law
likewise specifies grounds for the cancellation, revocation and termination of
agreements and permits.
[28]

[29]

[30]

[31]

[32]

On April 9, 1995, 30 days following its publication on March 10, 1995

in Malaya and Manila Times, two newspapers of general circulation, R.A. No. 7942 took
effect.
[33]

Shortly before the effectivity of R.A. No. 7942, however, or on March 30, 1995,
the President entered into an FTAA with WMCP covering 99,387 hectares of land in
South Cotabato, Sultan Kudarat, Davao del Sur and North Cotabato.
[34]

On August 15, 1995, then DENR Secretary Victor O. Ramos issued DENR
Administrative Order (DAO) No. 95-23, s. 1995, otherwise known as the Implementing
Rules and Regulations of R.A. No. 7942. This was later repealed by DAO No. 96-40, s.
1996 which was adopted on December 20, 1996.
On January 10, 1997, counsels for petitioners sent a letter to the DENR Secretary
demanding that the DENR stop the implementation of R.A. No. 7942 and DAO No. 9640, giving the DENR fifteen days from receipt to act thereon. The DENR, however,
has yet to respond or act on petitioners letter.
[35]

[36]

[37]

Petitioners thus filed the present petition for prohibition and mandamus, with a
prayer for a temporary restraining order. They allege that at the time of the filing of the
petition, 100 FTAA applications had already been filed, covering an area of 8.4 million
hectares, 64 of which applications are by fully foreign-owned corporations covering a
total of 5.8 million hectares, and at least one by a fully foreign-owned mining company
over offshore areas.
[38]

[39]

Petitioners claim that the DENR Secretary acted without or in excess of jurisdiction:
I

x x x in signing and promulgating DENR Administrative Order No. 96-40

implementing Republic Act No. 7942, the latter being unconstitutional in that it allows
fully foreign owned corporations to explore, develop, utilize and exploit mineral
resources in a manner contrary to Section 2, paragraph 4, Article XII of the
Constitution;
II

x x x in signing and promulgating DENR Administrative Order No. 96-40

implementing Republic Act No. 7942, the latter being unconstitutional in that it allows

the taking of private property without the determination of public use and for just
compensation;
III

x x x in signing and promulgating DENR Administrative Order No. 96-40

implementing Republic Act No. 7942, the latter being unconstitutional in that it
violates Sec. 1, Art. III of the Constitution;
IV

x x x in signing and promulgating DENR Administrative Order No. 96-40

implementing Republic Act No. 7942, the latter being unconstitutional in that it allows
enjoyment by foreign citizens as well as fully foreign owned corporations of the
nations marine wealth contrary to Section 2, paragraph 2 of Article XII of the
Constitution;
V

x x x in signing and promulgating DENR Administrative Order No. 96-40

implementing Republic Act No. 7942, the latter being unconstitutional in that it allows
priority to foreign and fully foreign owned corporations in the exploration,
development and utilization of mineral resources contrary to Article XII of the
Constitution;
VI

x x x in signing and promulgating DENR Administrative Order No. 96-40

implementing Republic Act No. 7942, the latter being unconstitutional in that it allows
the inequitable sharing of wealth contrary to Sections [sic] 1, paragraph 1, and Section
2, paragraph 4[,] [Article XII] of the Constitution;
VII

x x x in recommending approval of and implementing the Financial and Technical

Assistance Agreement between the President of the Republic of the Philippines and
Western Mining Corporation Philippines Inc. because the same is illegal and
unconstitutional.
[40]

They pray that the Court issue an order:

(a) Permanently enjoining respondents from acting on any application for Financial or
Technical Assistance Agreements;

(b) Declaring the Philippine Mining Act of 1995 or Republic Act No. 7942 as
unconstitutional and null and void;
(c) Declaring the Implementing Rules and Regulations of the Philippine Mining Act
contained in DENR Administrative Order No. 96-40 and all other similar
administrative issuances as unconstitutional and null and void; and
(d) Cancelling the Financial and Technical Assistance Agreement issued to Western
Mining Philippines, Inc. as unconstitutional, illegal and null and void.
[41]

Impleaded as public respondents are Ruben Torres, the then Executive Secretary,
Victor O. Ramos, the then DENR Secretary, and Horacio Ramos, Director of the Mines
and Geosciences Bureau of the DENR. Also impleaded is private respondent WMCP,
which entered into the assailed FTAA with the Philippine Government. WMCP is owned
by WMC Resources International Pty., Ltd. (WMC), a wholly owned subsidiary of
Western Mining Corporation Holdings Limited, a publicly listed major Australian mining
and exploration company. By WMCPs information, it is a 100% owned subsidiary of
WMC LIMITED.
[42]

[43]

Respondents, aside from meeting petitioners contentions, argue that the requisites
for judicial inquiry have not been met and that the petition does not comply with the
criteria for prohibition and mandamus. Additionally, respondent WMCP argues that there
has been a violation of the rule on hierarchy of courts.
After petitioners filed their reply, this Court granted due course to the petition. The
parties have since filed their respective memoranda.
WMCP subsequently filed a Manifestation dated September 25, 2002 alleging that
on January 23, 2001, WMC sold all its shares in WMCP to Sagittarius Mines, Inc.
(Sagittarius), a corporation organized under Philippine laws. WMCP was subsequently
renamed Tampakan Mineral Resources Corporation. WMCP claims that at least 60%
of the equity of Sagittarius is owned by Filipinos and/or Filipino-owned corporations
while about 40% is owned by Indophil Resources NL, an Australian company. It further
claims that by such sale and transfer of shares, WMCP has ceased to be connected in
any way with WMC.
[44]

[45]

[46]

[47]

By virtue of such sale and transfer, the DENR Secretary, by Order of December 18,
2001, approved the transfer and registration of the subject FTAA from WMCP to
Sagittarius. Said Order, however, was appealed by Lepanto Consolidated Mining Co.
(Lepanto) to the Office of the President which upheld it by Decision of July 23, 2002.
Its motion for reconsideration having been denied by the Office of the President by
Resolution of November 12, 2002, Lepanto filed a petition for review before the Court
of Appeals. Incidentally, two other petitions for review related to the approval of the
transfer and registration of the FTAA to Sagittarius were recently resolved by this Court.
[48]

[49]

[50]

[51]

[52]

It bears stressing that this case has not been rendered moot either by the transfer
and registration of the FTAA to a Filipino-owned corporation or by the non-issuance of a

temporary restraining order or a preliminary injunction to stay the above-said July 23,
2002 decision of the Office of the President. The validity of the transfer remains in
dispute and awaits final judicial determination. This assumes, of course, that such
transfer cures the FTAAs alleged unconstitutionality, on which question judgment is
reserved.
[53]

WMCP also points out that the original claimowners of the major mineralized areas
included in the WMCP FTAA, namely, Sagittarius, Tampakan Mining Corporation, and
Southcot Mining Corporation, are all Filipino-owned corporations, each of which was a
holder of an approved Mineral Production Sharing Agreement awarded in 1994, albeit
their respective mineral claims were subsumed in the WMCP FTAA; and that these
three companies are the same companies that consolidated their interests in Sagittarius
to whom WMC sold its 100% equity in WMCP. WMCP concludes that in the event that
the FTAA is invalidated, the MPSAs of the three corporations would be revived and the
mineral claims would revert to their original claimants.
[54]

[55]

[56]

[57]

These circumstances, while informative, are hardly significant in the resolution of

this case, it involving the validity of the FTAA, not the possible consequences of its
invalidation.
Of the above-enumerated seven grounds cited by petitioners, as will be shown later,
only the first and the last need be delved into; in the latter, the discussion shall dwell
only insofar as it questions the effectivity of E. O. No. 279 by virtue of which order the
questioned FTAA was forged.
I

Before going into the substantive issues, the procedural questions posed by
respondents shall first be tackled.
REQUISITES FOR JUDICIAL REVIEW
When an issue of constitutionality is raised, this Court can exercise its power of
judicial review only if the following requisites are present:
(1) The existence of an actual and appropriate case;
(2) A personal and substantial interest of the party raising the constitutional
question;
(3) The exercise of judicial review is pleaded at the earliest opportunity; and
(4) The constitutional question is the lis mota of the case.

[58]

Respondents claim that the first three requisites are not present.
Section 1, Article VIII of the Constitution states that (j)udicial power includes the
duty of the courts of justice to settle actual controversies involving rights which are
legally demandable and enforceable. The power of judicial review, therefore, is limited
to the determination of actual cases and controversies.
[59]

An actual case or controversy means an existing case or controversy that is

appropriate or ripe for determination, not conjectural or anticipatory, lest the decision of
the court would amount to an advisory opinion. The power does not extend to
hypothetical questions since any attempt at abstraction could only lead to dialectics
and barren legal questions and to sterile conclusions unrelated to actualities.
[60]

[61]

[62]

[63]

Legal standing or locus standi has been defined as a personal and substantial
interest in the case such that the party has sustained or will sustain direct injury as a
result of the governmental act that is being challenged, alleging more than a
generalized grievance. The gist of the question of standing is whether a party alleges
such personal stake in the outcome of the controversy as to assure that concrete
adverseness which sharpens the presentation of issues upon which the court depends
for illumination of difficult constitutional questions. Unless a person is injuriously
affected in any of his constitutional rights by the operation of statute or ordinance, he
has no standing.
[64]

[65]

[66]

[67]

Petitioners traverse a wide range of sectors. Among them are La Bugal Blaan Tribal
Association, Inc., a farmers and indigenous peoples cooperative organized under
Philippine laws representing a community actually affected by the mining activities of
WMCP, members of said cooperative, as well as other residents of areas also affected
by the mining activities of WMCP. These petitioners have standing to raise the
constitutionality of the questioned FTAA as they allege a personal and substantial
injury. They claim that they would suffer irremediable displacement as a result of the
implementation of the FTAA allowing WMCP to conduct mining activities in their area of
residence. They thus meet the appropriate case requirement as they assert an interest
adverse to that of respondents who, on the other hand, insist on the FTAAs validity.
[68]

[69]

[70]

In view of the alleged impending injury, petitioners also have standing to assail the
validity of E.O. No. 279, by authority of which the FTAA was executed.
Public respondents maintain that petitioners, being strangers to the FTAA, cannot
sue either or both contracting parties to annul it. In other words, they contend that
petitioners are not real parties in interest in an action for the annulment of contract.
[71]

Public respondents contention fails. The present action is not merely one for
annulment of contract but for prohibition and mandamus. Petitioners allege that public
respondents acted without or in excess of jurisdiction in implementing the FTAA, which
they submit is unconstitutional. As the case involves constitutional questions, this Court
is not concerned with whether petitioners are real parties in interest, but with whether
they have legal standing. As held in Kilosbayan v. Morato:
[72]

x x x. It is important to note . . . that standing because of its constitutional and public

policy underpinnings, is very different from questions relating to whether a particular
plaintiff is the real party in interest or has capacity to sue. Although all three
requirements are directed towards ensuring that only certain parties can maintain an
action, standing restrictions require a partial consideration of the merits, as well as
broader policy concerns relating to the proper role of the judiciary in certain areas.
[] (FRIEDENTHAL, KANE AND MILLER, CIVIL PROCEDURE 328 [1985])

Standing is a special concern in constitutional law because in some cases suits are
brought not by parties who have been personally injured by the operation of a law or
by official action taken, but by concerned citizens, taxpayers or voters who actually
sue in the public interest. Hence, the question in standing is whether such parties have
alleged such a personal stake in the outcome of the controversy as to assure that
concrete adverseness which sharpens the presentation of issues upon which the court
so largely depends for illumination of difficult constitutional questions. (Baker v. Carr,
369 U.S. 186, 7 L.Ed.2d 633 [1962].)
As earlier stated, petitioners meet this requirement.
The challenge against the constitutionality of R.A. No. 7942 and DAO No. 9640 likewise fulfills the requisites of justiciability. Although these laws were not in force
when the subject FTAA was entered into, the question as to their validity is ripe for
adjudication.
The WMCP FTAA provides:

14.3 Future Legislation

Any term and condition more favourable to Financial &Technical
Assistance Agreement contractors resulting from repeal or amendment of
any existing law or regulation or from the enactment of a law, regulation
or administrative order shall be considered a part of this Agreement.
It is undisputed that R.A. No. 7942 and DAO No. 96-40 contain provisions that are more
favorable to WMCP, hence, these laws, to the extent that they are favorable to WMCP,
govern the FTAA.
In addition, R.A. No. 7942 explicitly makes certain provisions apply to pre-existing
agreements.

SEC. 112. Non-impairment of Existing Mining/Quarrying Rights. x x x That the

provisions of Chapter XIV on government share in mineral production-sharing
agreement and of Chapter XVI on incentives of this Act shall immediately govern and
apply to a mining lessee or contractor unless the mining lessee or contractor indicates
his intention to the secretary, in writing, not to avail of said provisions x x
xProvided, finally, That such leases, production-sharing agreements, financial or
technical assistance agreements shall comply with the applicable provisions of this
Act and its implementing rules and regulations.
As there is no suggestion that WMCP has indicated its intention not to avail of the
provisions of Chapter XVI of R.A. No. 7942, it can safely be presumed that they apply to
the WMCP FTAA.

Misconstruing the application of the third requisite for judicial review that the
exercise of the review is pleaded at the earliest opportunity WMCP points out that the
petition was filed only almost two years after the execution of the FTAA, hence, not
raised at the earliest opportunity.
The third requisite should not be taken to mean that the question of constitutionality
must be raised immediately after the execution of the state action complained of. That
the question of constitutionality has not been raised before is not a valid reason for
refusing to allow it to be raised later. A contrary rule would mean that a law, otherwise
unconstitutional, would lapse into constitutionality by the mere failure of the proper party
to promptly file a case to challenge the same.
[73]

PROPRIETY OF PROHIBITION
AND MANDAMUS
Before the effectivity in July 1997 of the Revised Rules of Civil Procedure, Section 2
of Rule 65 read:

SEC. 2. Petition for prohibition. When the proceedings of any tribunal, corporation,
board, or person, whether exercising functions judicial or ministerial, are without or in
excess of its or his jurisdiction, or with grave abuse of discretion, and there is no
appeal or any other plain, speedy, and adequate remedy in the ordinary course of law,
a person aggrieved thereby may file a verified petition in the proper court alleging the
facts with certainty and praying that judgment be rendered commanding the defendant
to desist from further proceeding in the action or matter specified therein.
Prohibition is a preventive remedy. It seeks a judgment ordering the defendant to
desist from continuing with the commission of an act perceived to be illegal.
[74]

[75]

The petition for prohibition at bar is thus an appropriate remedy. While the execution
of the contract itself may be fait accompli, its implementation is not. Public respondents,
in behalf of the Government, have obligations to fulfill under said contract. Petitioners
seek to prevent them from fulfilling such obligations on the theory that the contract is
unconstitutional and, therefore, void.
The propriety of a petition for prohibition being upheld, discussion of the propriety of
the mandamus aspect of the petition is rendered unnecessary.
HIERARCHY OF COURTS
The contention that the filing of this petition violated the rule on hierarchy of courts
does not likewise lie. The rule has been explained thus:

Between two courts of concurrent original jurisdiction, it is the lower court that should
initially pass upon the issues of a case. That way, as a particular case goes through the
hierarchy of courts, it is shorn of all but the important legal issues or those of first
impression, which are the proper subject of attention of the appellate court. This is a
procedural rule borne of experience and adopted to improve the administration of
justice.
This Court has consistently enjoined litigants to respect the hierarchy of
courts. Although this Court has concurrent jurisdiction with the Regional Trial Courts
and the Court of Appeals to issue writs ofcertiorari, prohibition, mandamus, quo
warranto, habeas corpus and injunction, such concurrence does not give a party
unrestricted freedom of choice of court forum. The resort to this Courts primary
jurisdiction to issue said writs shall be allowed only where the redress desired cannot
be obtained in the appropriate courts or where exceptional and compelling
circumstances justify such invocation. We held in People v. Cuaresma that:
A becoming regard for 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 where there are special and important reasons therefor,
clearly and specifically set out in the petition. This is 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 x x x. [Emphasis supplied.]
[76]

The repercussions of the issues in this case on the Philippine mining industry, if not
the national economy, as well as the novelty thereof, constitute exceptional and
compelling circumstances to justify resort to this Court in the first instance.
In all events, this Court has the discretion to take cognizance of a suit which does
not satisfy the requirements of an actual case or legal standing when paramount public
interest is involved. When the issues raised are of paramount importance to the public,
this Court may brush aside technicalities of procedure.
[77]

[78]

II

Petitioners contend that E.O. No. 279 did not take effect because its supposed date
of effectivity came after President Aquino had already lost her legislative powers under
the Provisional Constitution.
And they likewise claim that the WMC FTAA, which was entered into pursuant to
E.O. No. 279, violates Section 2, Article XII of the Constitution because, among other
reasons:

(1) It allows foreign-owned companies to extend more than mere financial or

technical assistance to the State in the exploitation, development, and utilization of
minerals, petroleum, and other mineral oils, and even permits foreign owned companies
to operate and manage mining activities.
(2) It allows foreign-owned companies to extend both technical and financial
assistance, instead of either technical or financial assistance.
To appreciate the import of these issues, a visit to the history of the pertinent
constitutional provision, the concepts contained therein, and the laws enacted pursuant
thereto, is in order.
Section 2, Article XII reads in full:

Sec. 2. All lands of the public domain, waters, minerals, coal, petroleum, and other
mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora
and fauna, and other natural resources are owned by the State. With the exception of
agricultural lands, all other natural resources shall not be alienated. The exploration,
development, and utilization of natural resources shall be under the full control and
supervision of the State. The State may directly undertake such activities or it may
enter into co-production, joint venture, or production-sharing agreements with
Filipino citizens, or corporations or associations at least sixty per centum of whose
capital is owned by such citizens. Such agreements may be for a period not exceeding
twenty-five years, renewable for not more than twenty-five years, and under such
terms and conditions as may be provided by law. In cases of water rights for
irrigation, water supply, fisheries, or industrial uses other than the development of
water power, beneficial use may be the measure and limit of the grant.
The State shall protect the nations marine wealth in its archipelagic waters, territorial
sea, and exclusive economic zone, and reserve its use and enjoyment exclusively to
Filipino citizens.
The Congress may, by law, allow small-scale utilization of natural resources by
Filipino citizens, as well as cooperative fish farming, with priority to subsistence
fishermen and fish-workers in rivers, lakes, bays, and lagoons.
The President may enter into agreements with foreign-owned corporations involving
either technical or financial assistance for large-scale exploration, development, and
utilization of minerals, petroleum, and other mineral oils according to the general
terms and conditions provided by law, based on real contributions to the economic
growth and general welfare of the country. In such agreements, the State shall
promote the development and use of local scientific and technical resources.

The President shall notify the Congress of every contract entered into in accordance
with this provision, within thirty days from its execution.
THE SPANISH REGIME
AND THE REGALIAN DOCTRINE
The first sentence of Section 2 embodies the Regalian doctrine or jura
regalia. Introduced by Spain into these Islands, this feudal concept is based on the
States power of dominium, which is the capacity of the State to own or acquire property.
[79]

In its broad sense, the term jura regalia refers to royal rights, or those rights which the
King has by virtue of his prerogatives. In Spanish law, it refers to a right which the
sovereign has over anything in which a subject has a right of property
or propriedad. These were rights enjoyed during feudal times by the king as the
sovereign.
The theory of the feudal system was that title to all lands was originally held by the
King, and while the use of lands was granted out to others who were permitted to hold
them under certain conditions, the King theoretically retained the title. By fiction of
law, the King was regarded as the original proprietor of all lands, and the true and
only source of title, and from him all lands were held. The theory of jura regalia was
therefore nothing more than a natural fruit of conquest.
[80]

[81]

The Philippines having passed to Spain by virtue of discovery and conquest,

earlier Spanish decrees declared that all lands were held from the Crown.
[82]

The Regalian doctrine extends not only to land but also to all natural wealth that
may be found in the bowels of the earth. Spain, in particular, recognized the unique
value of natural resources, viewing them, especially minerals, as an abundant source of
revenue to finance its wars against other nations. Mining laws during the Spanish
regime reflected this perspective.
[83]

[84]

[85]

THE AMERICAN OCCUPATION AND

THE CONCESSION REGIME
By the Treaty of Paris of December 10, 1898, Spain ceded the archipelago known
as the Philippine Islands to the United States. The Philippines was hence governed by
means of organic acts that were in the nature of charters serving as a Constitution of
the occupied territory from 1900 to 1935. Among the principal organic acts of the
Philippines was the Act of Congress of July 1, 1902, more commonly known as
the Philippine Bill of 1902, through which the United States Congress assumed the
[86]

administration of the Philippine Islands. Section 20 of said Bill reserved the disposition
of mineral lands of the public domain from sale. Section 21 thereof allowed the free and
open exploration, occupation and purchase of mineral deposits not only to citizens of
the Philippine Islands but to those of the United States as well:
[87]

Sec. 21. That all valuable mineral deposits in public lands in the Philippine Islands,
both surveyed and unsurveyed, are hereby declared to be free and open to exploration,
occupation and purchase, and the land in which they are found, to occupation and
purchase, by citizens of the United States or of said Islands: Provided, That when on
any lands in said Islands entered and occupied as agricultural lands under the
provisions of this Act, but not patented, mineral deposits have been found, the
working of such mineral deposits is forbidden until the person, association, or
corporation who or which has entered and is occupying such lands shall have paid to
the Government of said Islands such additional sum or sums as will make the total
amount paid for the mineral claim or claims in which said deposits are located equal
to the amount charged by the Government for the same as mineral claims.
Unlike Spain, the United States considered natural resources as a source of wealth
for its nationals and saw fit to allow both Filipino and American citizens to explore and
exploit minerals in public lands, and to grant patents to private mineral lands. A person
who acquired ownership over a parcel of private mineral land pursuant to the laws then
prevailing could exclude other persons, even the State, from exploiting minerals within
his property. Thus, earlier jurisprudence held that:
[88]

[89]

[90]

A valid and subsisting location of mineral land, made and kept up in accordance with
the provisions of the statutes of the United States, has the effect of a grant by the
United States of the present and exclusive possession of the lands located, and this
exclusive right of possession and enjoyment continues during the entire life of the
location. x x x.
x x x.
The discovery of minerals in the ground by one who has a valid mineral location
perfects his claim and his location not only against third persons, but also against the
Government. x x x. [Italics in the original.]
The Regalian doctrine and the American system, therefore, differ in one essential
respect. Under the Regalian theory, mineral rights are not included in a grant of land by
the state; under the American doctrine, mineral rights are included in a grant of land by
the government.
[91]

Section 21 also made possible the concession (frequently styled permit, license or
lease) system. This was the traditional regime imposed by the colonial administrators
[92]

[93]

for the exploitation of natural resources in the extractive sector (petroleum, hard
minerals, timber, etc.).
[94]

Under the concession system, the concessionaire makes a direct equity investment
for the purpose of exploiting a particular natural resource within a given area. Thus,
the concession amounts to complete control by the concessionaire over the countrys
natural resource, for it is given exclusive and plenary rights to exploit a particular
resource at the point of extraction. In consideration for the right to exploit a natural
resource, the concessionaire either pays rent or royalty, which is a fixed percentage of
the gross proceeds.
[95]

[96]

[97]

Later statutory enactments by the legislative bodies set up in the Philippines

adopted the contractual framework of the concession. For instance, Act No. 2932,
approved on August 31, 1920, which provided for the exploration, location, and lease
of lands containing petroleum and other mineral oils and gas in the Philippines, and Act
No. 2719, approved on May 14, 1917, which provided for the leasing and
development of coal lands in the Philippines, both utilized the concession system.
[98]

[99]

[100]

[101]

THE 1935 CONSTITUTION AND THE

NATIONALIZATION OF NATURAL RESOURCES
By the Act of United States Congress of March 24, 1934, popularly known as
the Tydings-McDuffie Law, the People of the Philippine Islands were authorized to
adopt a constitution. On July 30, 1934, the Constitutional Convention met for the
purpose of drafting a constitution, and the Constitution subsequently drafted was
approved by the Convention on February 8, 1935. The Constitution was submitted to
the President of the United States on March 18, 1935. On March 23, 1935, the
President of the United States certified that the Constitution conformed substantially
with the provisions of the Act of Congress approved on March 24, 1934. On May 14,
1935, the Constitution was ratified by the Filipino people.
[102]

[103]

[104]

[105]

[106]

The 1935 Constitution adopted the Regalian doctrine, declaring all natural
resources of the Philippines, including mineral lands and minerals, to be property
belonging to the State. As adopted in a republican system, the medieval concept
of jura regalia is stripped of royal overtones and ownership of the land is vested in the
State.
[107]

[108]

Section 1, Article XIII, on Conservation and Utilization of Natural Resources, of the

1935 Constitution provided:

SECTION 1. All agricultural, timber, and mineral lands of the public domain, waters,
minerals, coal, petroleum, and other mineral oils, all forces of potential energy, and
other natural resources of the Philippines belong to the State, and their disposition,
exploitation, development, or utilization shall be limited to citizens of the Philippines,
or to corporations or associations at least sixty per centum of the capital of which is
owned by such citizens, subject to any existing right, grant, lease, or concession at the

time of the inauguration of the Government established under this

Constitution. Natural resources, with the exception of public agricultural land, shall
not be alienated, and no license, concession, or lease for the exploitation,
development, or utilization of any of the natural resources shall be granted for a
period exceeding twenty-five years, except as to water rights for irrigation, water
supply, fisheries, or industrial uses other than the development of water power, in
which cases beneficial use may be the measure and the limit of the grant.
The nationalization and conservation of the natural resources of the country was
one of the fixed and dominating objectives of the 1935 Constitutional Convention. One
delegate relates:
[109]

There was an overwhelming sentiment in the Convention in favor of the principle of

state ownership of natural resources and the adoption of the Regalian doctrine. State
ownership of natural resources was seen as a necessary starting point to secure
recognition of the states power to control their disposition, exploitation, development,
or utilization. The delegates of the Constitutional Convention very well knew that the
concept of State ownership of land and natural resources was introduced by the
Spaniards, however, they were not certain whether it was continued and applied by the
Americans. To remove all doubts, the Convention approved the provision in the
Constitution affirming the Regalian doctrine.
The adoption of the principle of state ownership of the natural resources and of the
Regalian doctrine was considered to be a necessary starting point for the plan of
nationalizing and conserving the natural resources of the country. For with the
establishment of the principle of state ownership of the natural resources, it would not
be hard to secure the recognition of the power of the State to control their disposition,
exploitation, development or utilization.
[110]

The nationalization of the natural resources was intended (1) to insure their
conservation for Filipino posterity; (2) to serve as an instrument of national defense,
helping prevent the extension to the country of foreign control through peaceful
economic penetration; and (3) to avoid making the Philippines a source of international
conflicts with the consequent danger to its internal security and independence.
[111]

The same Section 1, Article XIII also adopted the concession system, expressly
permitting the State to grant licenses, concessions, or leases for the exploitation,
development, or utilization of any of the natural resources. Grants, however, were
limited to Filipinos or entities at least 60% of the capital of which is owned by Filipinos.
The swell of nationalism that suffused the 1935 Constitution was radically diluted
when on November 1946, the Parity Amendment, which came in the form of an
Ordinance Appended to the Constitution, was ratified in a plebiscite. The Amendment
extended, from July 4, 1946 to July 3, 1974, the right to utilize and exploit our natural
[112]

resources to citizens of the United States and business enterprises owned or controlled,
directly or indirectly, by citizens of the United States:
[113]

Notwithstanding the provision of section one, Article Thirteen, and section eight,
Article Fourteen, of the foregoing Constitution, during the effectivity of the Executive
Agreement entered into by the President of the Philippines with the President of the
United States on the fourth of July, nineteen hundred and forty-six, pursuant to the
provisions of Commonwealth Act Numbered Seven hundred and thirty-three, but in
no case to extend beyond the third of July, nineteen hundred and seventy-four, the
disposition, exploitation, development, and utilization of all agricultural, timber, and
mineral lands of the public domain, waters, minerals, coals, petroleum, and other
mineral oils, all forces and sources of potential energy, and other natural resources of
the Philippines, and the operation of public utilities, shall, if open to any person, be
open to citizens of the United States and to all forms of business enterprise owned or
controlled, directly or indirectly, by citizens of the United States in the same manner
as to, and under the same conditions imposed upon, citizens of the Philippines or
corporations or associations owned or controlled by citizens of the Philippines.
The Parity Amendment was subsequently modified by the 1954 Revised Trade
Agreement, also known as the Laurel-Langley Agreement, embodied in Republic Act
No. 1355.
[114]

THE PETROLEUM ACT OF 1949

AND THE CONCESSION SYSTEM
In the meantime, Republic Act No. 387,
was approved on June 18, 1949.

[115]

also known as the Petroleum Act of 1949,

The Petroleum Act of 1949 employed the concession system for the exploitation of
the nations petroleum resources. Among the kinds of concessions it sanctioned were
exploration and exploitation concessions, which respectively granted to the
concessionaire the exclusive right to explore for or develop petroleum within
specified areas.
[116]

[117]

Concessions may be granted only to duly qualified persons who have sufficient
finances, organization, resources, technical competence, and skills necessary to
conduct the operations to be undertaken.
[118]

[119]

Nevertheless, the Government reserved the right to undertake such work itself.
This proceeded from the theory that all natural deposits or occurrences of petroleum
or natural gas in public and/or private lands in the Philippines belong to the State.
Exploration and exploitation concessions did not confer upon the concessionaire
ownership over the petroleum lands and petroleum deposits. However, they did grant
[120]

[121]

[122]

concessionaires the right to explore, develop, exploit, and utilize them for the period and
under the conditions determined by the law.
[123]

Concessions were granted at the complete risk of the concessionaire; the

Government did not guarantee the existence of petroleum or undertake, in any case,
title warranty.
[124]

Concessionaires were required to submit information as maybe required by the

Secretary of Agriculture and Natural Resources, including reports of geological and
geophysical examinations, as well as production reports. Exploration and
exploitation concessionaires were also required to submit work programs.
[125]

[126]

[127]

Exploitation concessionaires, in particular, were obliged to pay an annual

exploitation tax, the object of which is to induce the concessionaire to actually produce
petroleum, and not simply to sit on the concession without developing or exploiting it.
These concessionaires were also bound to pay the Government royalty, which was
not less than 12% of the petroleum produced and saved, less that consumed in the
operations of the concessionaire. Under Article 66, R.A. No. 387, the exploitation tax
may be credited against the royalties so that if the concessionaire shall be actually
producing enough oil, it would not actually be paying the exploitation tax.
[128]

[129]

[130]

[131]

Failure to pay the annual exploitation tax for two consecutive years, or the royalty
due to the Government within one year from the date it becomes due, constituted
grounds for the cancellation of the concession. In case of delay in the payment of the
taxes or royalty imposed by the law or by the concession, a surcharge of 1% per month
is exacted until the same are paid.
[132]

[133]

[134]

As a rule, title rights to all equipment and structures that the concessionaire placed
on the land belong to the exploration or exploitation concessionaire. Upon termination
of such concession, the concessionaire had a right to remove the same.
[135]

[136]

The Secretary of Agriculture and Natural Resources was tasked with carrying out
the provisions of the law, through the Director of Mines, who acted under the Secretarys
immediate supervision and control. The Act granted the Secretary the authority to
inspect any operation of the concessionaire and to examine all the books and accounts
pertaining to operations or conditions related to payment of taxes and royalties.
[137]

[138]

The same law authorized the Secretary to create an Administration Unit and a
Technical Board. The Administration Unit was charged, inter alia, with the enforcement
of the provisions of the law. The Technical Board had, among other functions, the duty
to check on the performance of concessionaires and to determine whether the
obligations imposed by the Act and its implementing regulations were being complied
with.
[139]

[140]

[141]

Victorio Mario A. Dimagiba, Chief Legal Officer of the Bureau of Energy

Development, analyzed the benefits and drawbacks of the concession system insofar
as it applied to the petroleum industry:

Advantages of Concession. Whether it emphasizes income tax or royalty, the most

positive aspect of the concession system is that the States financial involvement is

virtually risk free and administration is simple and comparatively low in

cost. Furthermore, if there is a competitive allocation of the resource leading to
substantial bonuses and/or greater royalty coupled with a relatively high level of
taxation, revenue accruing to the State under the concession system may compare
favorably with other financial arrangements.
Disadvantages of Concession. There are, however, major negative aspects to this
system. Because the Governments role in the traditional concession is passive, it is at
a distinct disadvantage in managing and developing policy for the nations petroleum
resource. This is true for several reasons. First, even though most concession
agreements contain covenants requiring diligence in operations and production, this
establishes only an indirect and passive control of the host country in resource
development. Second, and more importantly, the fact that the host country does not
directly participate in resource management decisions inhibits its ability to train and
employ its nationals in petroleum development. This factor could delay or prevent the
country from effectively engaging in the development of its resources. Lastly, a direct
role in management is usually necessary in order to obtain a knowledge of the
international petroleum industry which is important to an appreciation of the host
countrys resources in relation to those of other countries.
[142]

Other liabilities of the system have also been noted:

x x x there are functional implications which give the concessionaire great economic
power arising from its exclusive equity holding. This includes, first, appropriation of
the returns of the undertaking, subject to a modest royalty; second, exclusive
management of the project; third, control of production of the natural resource, such
as volume of production, expansion, research and development; and fourth, exclusive
responsibility for downstream operations, like processing, marketing, and
distribution. In short, even if nominally, the state is the sovereign and owner of the
natural resource being exploited, it has been shorn of all elements of control over such
natural resource because of the exclusive nature of the contractual regime of the
concession. The concession system, investing as it does ownership of natural
resources, constitutes a consistent inconsistency with the principle embodied in our
Constitution that natural resources belong to the state and shall not be alienated, not to
mention the fact that the concession was the bedrock of the colonial system in the
exploitation of natural resources.
[143]

Eventually, the concession system failed for reasons explained by Dimagiba:

Notwithstanding the good intentions of the Petroleum Act of 1949, the concession
system could not have properly spurred sustained oil exploration activities in the
country, since it assumed that such a capital-intensive, high risk venture could be

successfully undertaken by a single individual or a small company. In effect,

concessionaires funds were easily exhausted. Moreover, since the concession system
practically closed its doors to interested foreign investors, local capital was stretched
to the limits. The old system also failed to consider the highly sophisticated
technology and expertise required, which would be available only to multinational
companies.
[144]

A shift to a new regime for the development of natural resources thus seemed
imminent.
PRESIDENTIAL DECREE NO. 87, THE 1973
CONSTITUTION AND THE SERVICE CONTRACT SYSTEM
The promulgation on December 31, 1972 of Presidential Decree No. 87,
otherwise known as THE OIL EXPLORATION AND DEVELOPMENT ACT OF
1972 signaled such a transformation. P.D. No. 87 permitted the government to explore
for and produce indigenous petroleum through service contracts.
[145]

[146]

Service contracts is a term that assumes varying meanings to different people, and
it has carried many names in different countries, like work contracts in Indonesia,
concession agreements in Africa, production-sharing agreements in the Middle East,
and participation agreements in Latin America. A functional definition of service
contracts in the Philippines is provided as follows:
[147]

A service contract is a contractual arrangement for engaging in the exploitation and

development of petroleum, mineral, energy, land and other natural resources by which
a government or its agency, or a private person granted a right or privilege by the
government authorizes the other party (service contractor) to engage or participate in
the exercise of such right or the enjoyment of the privilege, in that the latter provides
financial or technical resources, undertakes the exploitation or production of a given
resource, or directly manages the productive enterprise, operations of the exploration
and exploitation of the resources or the disposition of marketing or resources.
[148]

In a service contract under P.D. No. 87, service and technology are furnished by the
service contractor for which it shall be entitled to the stipulated service fee. The
contractor must be technically competent and financially capable to undertake the
operations required in the contract.
[149]

[150]

Financing is supposed to be provided by the Government to which all petroleum

produced belongs. In case the Government is unable to finance petroleum exploration
operations, the contractor may furnish services, technology and financing, and the
proceeds of sale of the petroleum produced under the contract shall be the source of
funds for payment of the service fee and the operating expenses due the contractor.
The contractor shall undertake, manage and execute petroleum operations, subject
[151]

[152]

to the government overseeing the management of the operations. The contractor

provides all necessary services and technology and the requisite financing, performs
the exploration work obligations, and assumes all exploration risks such that if no
petroleum is produced, it will not be entitled to reimbursement. Once petroleum in
commercial quantity is discovered, the contractor shall operate the field on behalf of the
government.
[153]

[154]

[155]

P.D. No. 87 prescribed minimum terms and conditions for every service contract.
It also granted the contractor certain privileges, including exemption from taxes and
payment of tariff duties, and permitted the repatriation of capital and retention of
profits abroad.
[156]

[157]

[158]

Ostensibly, the service contract system had certain advantages over the concession
regime. It has been opined, though, that, in the Philippines, our concept of a service
contract, at least in the petroleum industry, was basically a concession regime with a
production-sharing element.
[159]

[160]

On January 17, 1973, then President Ferdinand E. Marcos proclaimed the

ratification of a new Constitution. Article XIV on the National Economy and Patrimony
contained provisions similar to the 1935 Constitution with regard to Filipino participation
in the nations natural resources. Section 8, Article XIV thereof provides:
[161]

SEC. 8. All lands of the public domain, waters, minerals, coal, petroleum and other
mineral oils, all forces of potential energy, fisheries, wildlife, and other natural
resources of the Philippines belong to the State. With the exception of agricultural,
industrial or commercial, residential and resettlement lands of the public domain,
natural resources shall not be alienated, and no license, concession, or lease for the
exploration, development, exploitation, or utilization of any of the natural resources
shall be granted for a period exceeding twenty-five years, renewable for not more than
twenty-five years, except as to water rights for irrigation, water supply, fisheries, or
industrial uses other than the development of water power, in which cases beneficial
use may be the measure and the limit of the grant.
While Section 9 of the same Article maintained the Filipino-only policy in the
enjoyment of natural resources, it also allowed Filipinos, upon authority of the Batasang
Pambansa, to enter into service contracts with any person or entity for the exploration or
utilization of natural resources.

SEC. 9. The disposition, exploration, development, exploitation, or utilization of any

of the natural resources of the Philippines shall be limited to citizens, or to
corporations or associations at least sixty per centum of which is owned by such
citizens. The Batasang Pambansa, in the national interest, may allow such
citizens, corporations or associations to enter into service contracts for financial,
technical, management, or other forms of assistance with any person or entity for
the exploration, or utilization of any of the natural resources. Existing valid and

binding service contracts for financial, technical, management, or other forms of

assistance are hereby recognized as such. [Emphasis supplied.]
The concept of service contracts, according to one delegate, was borrowed from the
methods followed by India, Pakistan and especially Indonesia in the exploration of
petroleum and mineral oils. The provision allowing such contracts, according to
another, was intended to enhance the proper development of our natural resources
since Filipino citizens lack the needed capital and technical know-how which are
essential in the proper exploration, development and exploitation of the natural
resources of the country.
[162]

[163]

The original idea was to authorize the government, not private entities, to enter into
service contracts with foreign entities. As finally approved, however, a citizen or
private entity could be allowed by the National Assembly to enter into such service
contract. The prior approval of the National Assembly was deemed sufficient to protect
the national interest. Notably, none of the laws allowing service contracts were passed
by the Batasang Pambansa. Indeed, all of them were enacted by presidential decree.
[164]

[165]

[166]

On March 13, 1973, shortly after the ratification of the new Constitution, the
President promulgated Presidential Decree No. 151. The law allowed Filipino citizens
or entities which have acquired lands of the public domain or which own, hold or control
such lands to enter into service contracts for financial, technical, management or other
forms of assistance with any foreign persons or entity for the exploration, development,
exploitation or utilization of said lands.
[167]

[168]

Presidential Decree No. 463, also known as THE MINERAL RESOURCES

DEVELOPMENT DECREE OF 1974, was enacted on May 17, 1974. Section 44 of the
decree, as amended, provided that a lessee of a mining claim may enter into a service
contract with a qualified domestic or foreign contractor for the exploration, development
and exploitation of his claims and the processing and marketing of the product thereof.
[169]

Presidential Decree No. 704 (THE FISHERIES DECREE OF 1975), approved on

May 16, 1975, allowed Filipinos engaged in commercial fishing to enter into contracts
for financial, technical or other forms of assistance with any foreign person, corporation
or entity for the production, storage, marketing and processing of fish and
fishery/aquatic products.
[170]

[171]

Presidential Decree No. 705 (THE REVISED FORESTRY CODE OF THE

PHILIPPINES), approved on May 19, 1975, allowed forest products licensees, lessees,
or permitees to enter into service contracts for financial, technical, management, or
other forms of assistance . . . with any foreign person or entity for the exploration,
development, exploitation or utilization of the forest resources.
[172]

[173]

Yet another law allowing service contracts, this time for geothermal resources, was
Presidential Decree No. 1442, which was signed into law on June 11, 1978. Section 1
thereof authorized the Government to enter into service contracts for the exploration,
exploitation and development of geothermal resources with a foreign contractor who
must be technically and financially capable of undertaking the operations required in the
service contract.
[174]

Thus, virtually the entire range of the countrys natural resources from petroleum
and minerals to geothermal energy, from public lands and forest resources to fishery
products was well covered by apparent legal authority to engage in the direct
participation or involvement of foreign persons or corporations (otherwise disqualified) in
the exploration and utilization of natural resources through service contracts.
[175]

THE 1987 CONSTITUTION AND TECHNICAL

OR FINANCIAL ASSISTANCE AGREEMENTS
After the February 1986 Edsa Revolution, Corazon C. Aquino took the reins of
power under a revolutionary government. On March 25, 1986, President Aquino issued
Proclamation No. 3, promulgating the Provisional Constitution, more popularly
referred to as the Freedom Constitution. By authority of the same Proclamation, the
President created a Constitutional Commission (CONCOM) to draft a new constitution,
which took effect on the date of its ratification on February 2, 1987.
[176]

[177]

The 1987 Constitution retained the Regalian doctrine. The first sentence of Section
2, Article XII states: All lands of the public domain, waters, minerals, coal, petroleum,
and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife,
flora and fauna, and other natural resources are owned by the State.
Like the 1935 and 1973 Constitutions before it, the 1987 Constitution, in the second
sentence of the same provision, prohibits the alienation of natural resources, except
agricultural lands.
The third sentence of the same paragraph is new: The exploration, development
and utilization of natural resources shall be under the full control and supervision of
the State. The constitutional policy of the States full control and supervision over
natural resources proceeds from the concept of jura regalia, as well as the recognition
of the importance of the countrys natural resources, not only for national economic
development, but also for its security and national defense. Under this provision, the
State assumes a more dynamic role in the exploration, development and utilization of
natural resources.
[178]

[179]

Conspicuously absent in Section 2 is the provision in the 1935 and 1973

Constitutions authorizing the State to grant licenses, concessions, or leases for the
exploration, exploitation, development, or utilization of natural resources. By such
omission, the utilization of inalienable lands of public domain through license,
concession or lease is no longer allowed under the 1987 Constitution.
[180]

Having omitted the provision on the concession system, Section 2 proceeded to

introduce unfamiliar language:
[181]

The State may directly undertake such activities or it may enter into co-production,
joint venture, or production-sharing agreements with Filipino citizens, or corporations
or associations at least sixty per centum of whose capital is owned by such citizens.

Consonant with the States full supervision and control over natural resources,
Section 2 offers the State two options. One, the State may directly undertake these
activities itself; or two, it may enter into co-production, joint venture, or productionsharing agreements with Filipino citizens, or entities at least 60% of whose capital is
owned by such citizens.
[182]

A third option is found in the third paragraph of the same section:

The Congress may, by law, allow small-scale utilization of natural resources by

Filipino citizens, as well as cooperative fish farming, with priority to subsistence
fishermen and fish-workers in rivers, lakes, bays, and lagoons.
While the second and third options are limited only to Filipino citizens or, in the case
of the former, to corporations or associations at least 60% of the capital of which is
owned by Filipinos, a fourth allows the participation of foreign-owned corporations. The
fourth and fifth paragraphs of Section 2 provide:

The President may enter into agreements with foreign-owned corporations involving
either technical or financial assistance for large-scale exploration, development, and
utilization of minerals, petroleum, and other mineral oils according to the general
terms and conditions provided by law, based on real contributions to the economic
growth and general welfare of the country. In such agreements, the State shall
promote the development and use of local scientific and technical resources.
The President shall notify the Congress of every contract entered into in accordance
with this provision, within thirty days from its execution.
Although Section 2 sanctions the participation of foreign-owned corporations in the
exploration, development, and utilization of natural resources, it imposes certain
limitations or conditions to agreements with such corporations.
First, the parties to FTAAs. Only the President, in behalf of the State, may enter
into these agreements, and only with corporations. By contrast, under the 1973
Constitution, a Filipino citizen, corporation or association may enter into a service
contract with a foreign person or entity.
Second, the size of the activities: only large-scale exploration, development, and
utilization is allowed. The term large-scale usually refers to very capital-intensive
activities.
[183]

Third, the natural resources subject of the activities is restricted to minerals,

petroleum and other mineral oils, the intent being to limit service contracts to those
areas where Filipino capital may not be sufficient.
[184]

Fourth, consistency with the provisions of statute. The agreements must be in

accordance with the terms and conditions provided by law.

Fifth, Section 2 prescribes certain standards for entering into such

agreements. The agreements must be based on real contributions to economic growth
and general welfare of the country.
Sixth, the agreements must contain rudimentary stipulations for the promotion of
the development and use of local scientific and technical resources.
Seventh, the notification requirement. The President shall notify Congress of every
financial or technical assistance agreement entered into within thirty days from its
execution.
Finally, the scope of the agreements. While the 1973 Constitution referred to
service contracts for financial, technical, management, or other forms of assistance the
1987 Constitution provides for agreements. . . involving either financial or technical
assistance. It bears noting that the phrases service contracts and management or other
forms of assistance in the earlier constitution have been omitted.
By virtue of her legislative powers under the Provisional Constitution, President
Aquino, on July 10, 1987, signed into law E.O. No. 211 prescribing the interim
procedures in the processing and approval of applications for the exploration,
development and utilization of minerals. The omission in the 1987 Constitution of the
term service contracts notwithstanding, the said E.O. still referred to them in Section 2
thereof:
[185]

SEC. 2. Applications for the exploration, development and utilization of mineral

resources, including renewal applications and applications for approval of operating
agreements and mining service contracts, shall be accepted and processed and may
be approved x x x. [Emphasis supplied.]
The same law provided in its Section 3 that the processing, evaluation and approval
of all mining applications . . . operating agreements and service contracts . . . shall be
governed by Presidential Decree No. 463, as amended, other existing mining laws, and
their implementing rules and regulations. . . .
As earlier stated, on the 25th also of July 1987, the President issued E.O. No. 279
by authority of which the subject WMCP FTAA was executed on March 30, 1995.
On March 3, 1995, President Ramos signed into law R.A. No. 7942. Section 15
thereof declares that the Act shall govern the exploration, development, utilization, and
processing of all mineral resources. Such declaration notwithstanding, R.A. No. 7942
does not actually cover all the modes through which the State may undertake the
exploration, development, and utilization of natural resources.
The State, being the owner of the natural resources, is accorded the primary power
and responsibility in the exploration, development and utilization thereof. As such, it
may undertake these activities through four modes:
The State may directly undertake such activities.

(2) The State may enter into co-production, joint venture or production-sharing
agreements with Filipino citizens or qualified corporations.
(3) Congress may, by law, allow small-scale utilization of natural resources by
Filipino citizens.
(4) For the large-scale exploration, development and utilization of minerals,
petroleum and other mineral oils, the President may enter into agreements with foreignowned corporations involving technical or financial assistance.
[186]

Except to charge the Mines and Geosciences Bureau of the DENR with performing
researches and surveys, and a passing mention of government-owned or controlled
corporations, R.A. No. 7942 does not specify how the State should go about the first
mode. The third mode, on the other hand, is governed by Republic Act No. 7076 (the
Peoples Small-Scale Mining Act of 1991) and other pertinent laws. R.A. No. 7942
primarily concerns itself with the second and fourth modes.
[187]

[188]

[189]

[190]

Mineral production sharing, co-production and joint venture agreements are

collectively classified by R.A. No. 7942 as mineral agreements. The Government
participates the least in a mineral production sharing agreement (MPSA). In an MPSA,
the Government grants the contractor the exclusive right to conduct mining operations
within a contract area and shares in the gross output. The MPSA contractor
provides the financing, technology, management and personnel necessary for the
agreements implementation. The total government share in an MPSA is the excise tax
on mineral products under Republic Act No. 7729, amending Section 151(a) of the
National Internal Revenue Code, as amended.
[191]

[192]

[193]

[194]

[195]

[196]

[197]

In a co-production agreement (CA), the Government provides inputs to the mining

operations other than the mineral resource, while in a joint venture agreement (JVA),
where the Government enjoys the greatest participation, the Government and the JVA
contractor organize a company with both parties having equity shares. Aside from
earnings in equity, the Government in a JVA is also entitled to a share in the gross
output. The Government may enter into a CA or JVA with one or more
contractors. The Governments share in a CA or JVA is set out in Section 81 of the law:
[198]

[199]

[200]

[201]

[202]

[203]

The share of the Government in co-production and joint venture agreements shall be
negotiated by the Government and the contractor taking into consideration the: (a)
capital investment of the project, (b) the risks involved, (c) contribution of the project
to the economy, and (d) other factors that will provide for a fair and equitable sharing
between the Government and the contractor. The Government shall also be entitled to
compensations for its other contributions which shall be agreed upon by the parties,
and shall consist, among other things, the contractors income tax, excise tax, special
allowance, withholding tax due from the contractors foreign stockholders arising from
dividend or interest payments to the said foreign stockholders, in case of a foreign
national and all such other taxes, duties and fees as provided for under existing laws.
All mineral agreements grant the respective contractors the exclusive right to
conduct mining operations and to extract all mineral resources found in the contract

area. A qualified person may enter into any of the mineral agreements with the
Government. A qualified person is
[204]

[205]

any citizen of the Philippines with capacity to contract, or a corporation, partnership,

association, or cooperative organized or authorized for the purpose of engaging in
mining, with technical and financial capability to undertake mineral resources
development and duly registered in accordance with law at least sixty per
centum (60%) of the capital of which is owned by citizens of the Philippines x x x.
[206]

The fourth mode involves financial or technical assistance agreements. An FTAA is

defined as a contract involving financial or technical assistance for large-scale
exploration, development, and utilization of natural resources. Any qualified person
with technical and financial capability to undertake large-scale exploration,
development, and utilization of natural resources in the Philippines may enter into such
agreement directly with the Government through the DENR. For the purpose of
granting an FTAA, a legally organized foreign-owned corporation (any corporation,
partnership, association, or cooperative duly registered in accordance with law in which
less than 50% of the capital is owned by Filipino citizens) is deemed a qualified
person.
[207]

[208]

[209]

[210]

Other than the difference in contractors qualifications, the principal distinction

between mineral agreements and FTAAs is the maximum contract area to which a
qualified person may hold or be granted. Large-scale under R.A. No. 7942 is
determined by the size of the contract area, as opposed to the amount invested (US
$50,000,000.00), which was the standard under E.O. 279.
[211]

Like a CA or a JVA, an FTAA is subject to negotiation. The Governments

contributions, in the form of taxes, in an FTAA is identical to its contributions in the two
mineral agreements, save that in an FTAA:
[212]

The collection of Government share in financial or technical assistance agreement

shall commence after the financial or technical assistance agreement contractor has
fully recovered its pre-operating expenses, exploration, and development
expenditures, inclusive.
[213]

III

Having examined the history of the constitutional provision and statutes enacted
pursuant thereto, a consideration of the substantive issues presented by the petition is
now in order.
THE EFFECTIVITY OF
EXECUTIVE ORDER NO. 279

Petitioners argue that E.O. No. 279, the law in force when the WMC FTAA was
executed, did not come into effect.
E.O. No. 279 was signed into law by then President Aquino on July 25, 1987, two
days before the opening of Congress on July 27, 1987. Section 8 of the E.O. states
that the same shall take effect immediately. This provision, according to petitioners,
runs counter to Section 1 of E.O. No. 200, which provides:
[214]

[215]

SECTION 1. Laws shall take effect after fifteen days following the completion of
their publication either in the Official Gazette or in a newspaper of general
circulation in the Philippines, unless it is otherwise provided. [Emphasis supplied.]
[216]

On that premise, petitioners contend that E.O. No. 279 could have only taken effect
fifteen days after its publication at which time Congress had already convened and the
Presidents power to legislate had ceased.
Respondents, on the other hand, counter that the validity of E.O. No. 279 was
settled in Miners Association of the Philippines v. Factoran, supra. This is of course
incorrect for the issue in Miners Association was not the validity of E.O. No. 279 but that
of DAO Nos. 57 and 82 which were issued pursuant thereto.
Nevertheless, petitioners contentions have no merit.
It bears noting that there is nothing in E.O. No. 200 that prevents a law from taking
effect on a date other than even before the 15-day period after its publication. Where a
law provides for its own date of effectivity, such date prevails over that prescribed by
E.O. No. 200. Indeed, this is the very essence of the phrase unless it is otherwise
provided in Section 1 thereof.Section 1, E.O. No. 200, therefore, applies only when a
statute does not provide for its own date of effectivity.
What is mandatory under E.O. No. 200, and what due process requires, as this
Court held in Taada v. Tuvera, is the publication of the law for
[217]

without such notice and publication, there would be no basis for the application of the
maxim ignorantia legis n[eminem] excusat. It would be the height of injustice to
punish or otherwise burden a citizen for the transgression of a law of which he had no
notice whatsoever, not even a constructive one.
While the effectivity clause of E.O. No. 279 does not require its publication, it is not
a ground for its invalidation since the Constitution, being the fundamental, paramount
and supreme law of the nation, is deemed written in the law. Hence, the due process
clause, which, so Taada held, mandates the publication of statutes, is read into
Section 8 of E.O. No. 279.Additionally, Section 1 of E.O. No. 200 which provides for
publication either in the Official Gazette or in a newspaper of general circulation in the
Philippines, finds suppletory application. It is significant to note that E.O. No. 279 was
actually published in the Official Gazette on August 3, 1987.
[218]

[219]

[220]

From a reading then of Section 8 of E.O. No. 279, Section 1 of E.O. No. 200,
and Taada v. Tuvera, this Court holds that E.O. No. 279 became
effective immediately upon its publication in the Official Gazette on August 3, 1987.
That such effectivity took place after the convening of the first Congress is
irrelevant. At the time President Aquino issued E.O. No. 279 on July 25, 1987, she was
still validly exercising legislative powers under the Provisional Constitution. Article
XVIII (Transitory Provisions) of the 1987 Constitution explicitly states:
[221]

SEC. 6. The incumbent President shall continue to exercise legislative powers until
the first Congress is convened.
The convening of the first Congress merely precluded the exercise of legislative powers
by President Aquino; it did not prevent the effectivity of laws she had previously
enacted.
There can be no question, therefore, that E.O. No. 279 is an effective, and a
validly enacted, statute.
THE CONSTITUTIONALITY
OF THE WMCP FTAA
Petitioners submit that, in accordance with the text of Section 2, Article XII of the
Constitution, FTAAs should be limited to technical or financial assistance only. They
observe, however, that, contrary to the language of the Constitution, the WMCP FTAA
allows WMCP, a fully foreign-owned mining corporation, to extend more than mere
financial or technical assistance to the State, for it permits WMCP to manage and
operate every aspect of the mining activity.
[222]

Petitioners submission is well-taken. It is a cardinal rule in the interpretation of

constitutions that the instrument must be so construed as to give effect to the intention
of the people who adopted it. This intention is to be sought in the constitution itself,
and the apparent meaning of the words is to be taken as expressing it, except in cases
where that assumption would lead to absurdity, ambiguity, or contradiction. What the
Constitution says according to the text of the provision, therefore, compels acceptance
and negates the power of the courts to alter it, based on the postulate that the framers
and the people mean what they say. Accordingly, following the literal text of the
Constitution, assistance accorded by foreign-owned corporations in the large-scale
exploration, development, and utilization of petroleum, minerals and mineral oils should
be limited to technical or financial assistance only.
[223]

[224]

[225]

WMCP nevertheless submits that the word technical in the fourth paragraph of
Section 2 of E.O. No. 279 encompasses a broad number of possible services, perhaps,
scientific and/or technological in basis. It thus posits that it may also well include the
area of management or operations . . . so long as such assistance requires
[226]

specialized knowledge or skills, and are related to the exploration, development and
utilization of mineral resources.
[227]

This Court is not persuaded. As priorly pointed out, the phrase management or
other forms of assistance in the 1973 Constitution was deleted in the 1987 Constitution,
which allows only technical or financial assistance. Casus omisus pro omisso habendus
est. A person, object or thing omitted from an enumeration must be held to have been
omitted intentionally. As will be shown later, the management or operation of mining
activities by foreign contractors, which is the primary feature of service contracts, was
precisely the evil that the drafters of the 1987 Constitution sought to eradicate.
[228]

Respondents insist that agreements involving technical or financial assistance is

just another term for service contracts. They contend that the proceedings of the
CONCOM indicate that although the terminology service contract was avoided [by the
Constitution], the concept it represented was not. They add that [t]he concept is
embodied in the phrase agreements involving financial or technical assistance. And
point out how members of the CONCOM referred to these agreements as service
contracts. For instance:
[229]

SR. TAN. Am I correct in thinking that the only difference between these future
service contracts and the past service contracts under Mr. Marcos is the general
law to be enacted by the legislature and the notification of Congress by the
President? That is the only difference, is it not?
MR. VILLEGAS. That is right.
SR. TAN. So those are the safeguards[?]
MR. VILLEGAS. Yes. There was no law at all governing service contracts before.
SR. TAN. Thank you, Madam President.

[230]

[Emphasis supplied.]

WMCP also cites the following statements of Commissioners Gascon, Garcia,

Nolledo and Tadeo who alluded to service contracts as they explained their respective
votes in the approval of the draft Article:

MR. GASCON. Mr. Presiding Officer, I vote no primarily because of two reasons:
One, the provision on service contracts. I felt that if we would constitutionalize any
provision on service contracts, this should always be with the concurrence of
Congress and not guided only by a general law to be promulgated by Congress. x x x.
[Emphasis supplied.]
[231]

x x x.
MR. GARCIA. Thank you.

I vote no. x x x.
Service contracts are given constitutional legitimization in Section 3, even when
they have been proven to be inimical to the interests of the nation, providing as
they do the legal loophole for the exploitation of our natural resources for the
benefit of foreign interests. They constitute a serious negation of Filipino control on
the use and disposition of the nations natural resources, especially with regard to those
which are nonrenewable. [Emphasis supplied.]
[232]

xxx
MR. NOLLEDO. While there are objectionable provisions in the Article on National
Economy and Patrimony, going over said provisions meticulously, setting aside
prejudice and personalities will reveal that the article contains a balanced set of
provisions. I hope the forthcoming Congress will implement such provisions taking
into account that Filipinos should have real control over our economy and patrimony,
and if foreign equity is permitted, the same must be subordinated to the imperative
demands of the national interest.
x x x.
It is also my understanding that service contracts involving foreign corporations
or entities are resorted to only when no Filipino enterprise or Filipino-controlled
enterprise could possibly undertake the exploration or exploitation of our
natural resources and that compensation under such contracts cannot and should
not equal what should pertain to ownership of capital. In other words, the service
contract should not be an instrument to circumvent the basic provision, that the
exploration and exploitation of natural resources should be truly for the benefit
of Filipinos.
Thank you, and I vote yes.

[233]

[Emphasis supplied.]

x x x.
MR. TADEO. Nais ko lamang ipaliwanag ang aking boto.
Matapos suriin ang kalagayan ng Pilipinas, ang saligang suliranin, pangunahin ang
salitang imperyalismo. Ang ibig sabihin nito ay ang sistema ng lipunang
pinaghaharian ng iilang monopolyong kapitalista at ang salitang imperyalismo ay
buhay na buhay sa National Economy and Patrimony na nating ginawa. Sa
pamamagitan ng salitang based on, naroroon na ang free trade sapagkat tayo ay
mananatiling tagapagluwas ng hilaw na sangkap at tagaangkat ng yaring

produkto. Pangalawa, naroroon pa rin ang parity rights, ang service contract, ang
60-40 equity sa natural resources. Habang naghihirap ang sambayanang Pilipino,
ginagalugad naman ng mga dayuhan ang ating likas na yaman. Kailan man ang
Article on National Economy and Patrimony ay hindi nagpaalis sa pagkaalipin
ng ating ekonomiya sa kamay ng mga dayuhan. Ang solusyon sa suliranin ng
bansa ay dalawa lamang: ang pagpapatupad ng tunay na reporma sa lupa at ang
national industrialization. Ito ang tinatawag naming pagsikat ng araw sa
Silangan. Ngunit ang mga landlords and big businessmen at ang mga komprador ay
nagsasabi na ang free trade na ito, ang kahulugan para sa amin, ay ipinipilit sa ating
sambayanan na ang araw ay sisikat sa Kanluran. Kailan man hindi puwedeng sumikat
ang araw sa Kanluran. I vote no. [Emphasis supplied.]
[234]

This Court is likewise not persuaded.

As earlier noted, the phrase service contracts has been deleted in the 1987
Constitutions Article on National Economy and Patrimony. If the CONCOM intended to
retain the concept of service contracts under the 1973 Constitution, it could have simply
adopted the old terminology (service contracts) instead of employing new and unfamiliar
terms (agreements . . . involving either technical or financial assistance). Such a
difference between the language of a provision in a revised constitution and that of a
similar provision in the preceding constitution is viewed as indicative of a difference in
purpose. If, as respondents suggest, the concept of technical or financial assistance
agreements is identical to that of service contracts, the CONCOM would not have
bothered to fit the same dog with a new collar. To uphold respondents theory would
reduce the first to a mere euphemism for the second and render the change in
phraseology meaningless.
[235]

An examination of the reason behind the change confirms that technical or financial
assistance agreements are not synonymous to service contracts.

[T]he Court in construing a Constitution should bear in mind the object sought to be
accomplished by its adoption, and the evils, if any, sought to be prevented or
remedied. A doubtful provision will be examined in light of the history of the times,
and the condition and circumstances under which the Constitution was framed. The
object is to ascertain the reason which induced the framers of the Constitution to enact
the particular provision and the purpose sought to be accomplished thereby, in order to
construe the whole as to make the words consonant to that reason and calculated to
effect that purpose.
[236]

As the following question of Commissioner Quesada and Commissioner Villegas

answer shows the drafters intended to do away with service contracts which were used
to circumvent the capitalization (60%-40%) requirement:

MS. QUESADA. The 1973 Constitution used the words service contracts. In this
particular Section 3, is there a safeguard against the possible control of foreign
interests if the Filipinos go into coproduction with them?
MR. VILLEGAS. Yes. In fact, the deletion of the phrase service contracts was our
first attempt to avoid some of the abuses in the past regime in the use of service
contracts to go around the 60-40 arrangement. The safeguard that has been
introduced and this, of course can be refined is found in Section 3, lines 25 to 30,
where Congress will have to concur with the President on any agreement entered into
between a foreign-owned corporation and the government involving technical or
financial assistance for large-scale exploration, development and utilization of natural
resources. [Emphasis supplied.]
[237]

In a subsequent discussion, Commissioner Villegas allayed the fears of

Commissioner Quesada regarding the participation of foreign interests in Philippine
natural resources, which was supposed to be restricted to Filipinos.

MS. QUESADA. Another point of clarification is the phrase and utilization of natural
resources shall be under the full control and supervision of the State. In the 1973
Constitution, this was limited to citizens of the Philippines; but it was removed and
substituted by shall be under the full control and supervision of the State. Was the
concept changed so that these particular resources would be limited to citizens of the
Philippines? Or would these resources only be under the full control and supervision
of the State; meaning, noncitizens would have access to these natural resources? Is
that the understanding?
MR. VILLEGAS. No, Mr. Vice-President, if the Commissioner reads the next
sentence, it states:
Such activities may be directly undertaken by the State, or it may enter into coproduction, joint venture, production-sharing agreements with Filipino citizens.
So we are still limiting it only to Filipino citizens.
x x x.
MS. QUESADA. Going back to Section 3, the section suggests that:
The exploration, development, and utilization of natural resources may be directly
undertaken by the State, or it may enter into co-production, joint venture or
production-sharing agreement with . . . corporations or associations at least sixty per
cent of whose voting stock or controlling interest is owned by such citizens.

Lines 25 to 30, on the other hand, suggest that in the large-scale exploration,
development and utilization of natural resources, the President with the concurrence
of Congress may enter into agreements with foreign-owned corporations even for
technical or financial assistance.
I wonder if this part of Section 3 contradicts the second part. I am raising this point for
fear that foreign investors will use their enormous capital resources to facilitate the
actual exploitation or exploration, development and effective disposition of our
natural resources to the detriment of Filipino investors. I am not saying that we should
not consider borrowing money from foreign sources. What I refer to is that foreign
interest should be allowed to participate only to the extent that they lend us money
and give us technical assistance with the appropriate government permit. In this way,
we can insure the enjoyment of our natural resources by our own people.
MR. VILLEGAS. Actually, the second provision about the President does not
permit foreign investors to participate. It is only technical or financial assistance
they do not own anything but on conditions that have to be determined by law
with the concurrence of Congress. So, it is very restrictive.
If the Commissioner will remember, this removes the possibility for service
contracts which we said yesterday were avenues used in the previous regime to
go around the 60-40 requirement. [Emphasis supplied.]
[238]

The present Chief Justice, then a member of the CONCOM, also referred to this
limitation in scope in proposing an amendment to the 60-40 requirement:

MR. DAVIDE. May I be allowed to explain the proposal?

MR. MAAMBONG. Subject to the three-minute rule, Madam President.
MR. DAVIDE. It will not take three minutes.
The Commission had just approved the Preamble. In the Preamble we clearly stated
that the Filipino people are sovereign and that one of the objectives for the
creation or establishment of a government is to conserve and develop the
national patrimony. The implication is that the national patrimony or our
natural resources are exclusively reserved for the Filipino people. No alien must
be allowed to enjoy, exploit and develop our natural resources. As a matter of
fact, that principle proceeds from the fact that our natural resources are gifts
from God to the Filipino people and it would be a breach of that special blessing
from God if we will allow aliens to exploit our natural resources.

I voted in favor of the Jamir proposal because it is not really exploitation that we
granted to the alien corporations but only for them to render financial or
technical assistance. It is not for them to enjoy our natural resources. Madam
President, our natural resources are depleting; our population is increasing by leaps
and bounds. Fifty years from now, if we will allow these aliens to exploit our natural
resources, there will be no more natural resources for the next generations of
Filipinos. It may last long if we will begin now. Since 1935 the aliens have been
allowed to enjoy to a certain extent the exploitation of our natural resources, and we
became victims of foreign dominance and control. The aliens are interested in coming
to the Philippines because they would like to enjoy the bounty of nature exclusively
intended for Filipinos by God.
And so I appeal to all, for the sake of the future generations, that if we have to pray in
the Preamble to preserve and develop the national patrimony for the sovereign
Filipino people and for the generations to come, we must at this time decide once and
for all that our natural resources must be reserved only to Filipino citizens.
Thank you.

[239]

[Emphasis supplied.]

The opinion of another member of the CONCOM is persuasive and leaves no

doubt as to the intention of the framers to eliminate service contracts altogether. He
writes:
[240]

Paragraph 4 of Section 2 specifies large-scale, capital-intensive, highly technological

undertakings for which the President may enter into contracts with foreign-owned
corporations, and enunciates strict conditions that should govern such contracts. x x x.
This provision balances the need for foreign capital and technology with the need to
maintain the national sovereignty. It recognizes the fact that as long as Filipinos can
formulate their own terms in their own territory, there is no danger of relinquishing
sovereignty to foreign interests.
Are service contracts allowed under the new Constitution? No. Under the new
Constitution, foreign investors (fully alien-owned) can NOT participate in
Filipino enterprises except to provide: (1) Technical Assistance for highly
technical enterprises; and (2) Financial Assistance for large-scale enterprises.
The intent of this provision, as well as other provisions on foreign investments, is
to prevent the practice (prevalent in the Marcos government) of skirting the
60/40 equation using the cover of service contracts. [Emphasis supplied.]
[241]

Furthermore, it appears that Proposed Resolution No. 496, which was the draft
Article on National Economy and Patrimony, adopted the concept of agreements . . .
[242]

involving either technical or financial assistance contained in the Draft of the 1986 U.P.
Law Constitution Project (U.P. Law draft) which was taken into consideration during the
deliberation of the CONCOM. The former, as well as Article XII, as adopted, employed
the same terminology, as the comparative table below shows:
[243]

DRAFT OF THE UP LAW

CONSTITUTION
PROJECT
SEC. 1. All lands of the
public domain, waters,
minerals, coal, petroleum
and other mineral oils, all
forces of potential energy,
fisheries, flora and fauna
and other natural resources
of the Philippines are
owned by the State. With
the exception of agricultural
lands, all other natural
resources shall not be
alienated. The exploration,
development and utilization
of natural resources shall be
under the full control and
supervision of the
State. Such activities may
be directly undertaken by
the state, or it may enter
into co-production, joint
venture, production sharing
agreements with Filipino
citizens or corporations or
associations sixty per cent
of whose voting stock or
controlling interest is
owned by such citizens for
a period of not more than
twenty-five years,
renewable for not more than
twenty-five years and under

PROPOSED
RESOLUTION NO. 496
OF THE
CONSTITUTIONAL
COMMISSION

ARTICLE XII OF THE

1987 CONSTITUTION

SEC. 3. All lands of the

public domain, waters,
minerals, coal, petroleum
and other mineral oils, all
forces of potential energy,
fisheries, forests, flora and
fauna, and other natural
resources are owned by the
State. With the exception of
agricultural lands, all other
natural resources shall not
be alienated. The
exploration, development,
and utilization of natural
resources shall be under the
full control and supervision
of the State. Such activities
may be directly undertaken
by the State, or it may enter
into co-production, joint
venture, production-sharing
agreements with Filipino
citizens or corporations or
associations at least sixty
per cent of whose voting
stock or controlling interest
is owned by such
citizens. Such agreements
shall be for a period of
twenty-five years,
renewable for not more than
twenty-five years, and

SEC. 2. All lands of the

public domain, waters,
minerals, coal, petroleum,
and other mineral oils, all
forces of potential energy,
fisheries, forests or timber,
wildlife, flora and fauna,
and other natural resources
are owned by the
State. With the exception of
agricultural lands, all other
natural resources shall not
be alienated. The
exploration, development,
and utilization of natural
resources shall be under the
full control and supervision
of the State. The State may
directly undertake such
activities or it may enter
into co-production, joint
venture, or productionsharing agreements with
Filipino citizens, or
corporations or associations
at least sixty per centum of
whose capital is owned by
such citizens. Such
agreements may be for a
period not exceeding
twenty-five years,
renewable for not more than

such terms and conditions

as may be provided by
law. In case as to water
rights for irrigation, water
supply, fisheries, or
industrial uses other than
the development of water
power, beneficial use may
be the measure and limit of
the grant.

under such term and

conditions as may be
provided by law. In cases of
water rights for irrigation,
water supply, fisheries or
industrial uses other than
the development for water
power, beneficial use may
be the measure and limit of
the grant.

twenty-five years, and

under such terms and
conditions as may be
provided by law. In case of
water rights for irrigation,
water supply, fisheries, or
industrial uses other than
the development of water
power, beneficial use may
be the measure and limit of
the grant.

The State shall protect the

nations marine wealth in its
archipelagic waters,
territorial sea, and exclusive
economic zone, and reserve
its use and enjoyment
exclusively to Filipino
citizens.

The National Assembly

may by law allow small
scale utilization of natural
resources by Filipino
citizens.

The Congress may by law

allow small-scale utilization
of natural resources by
Filipino citizens, as well as
cooperative fish farming in
rivers, lakes, bays, and
lagoons.

The Congress may, by law,

allow small-scale utilization
of natural resources by
Filipino citizens, as well as
cooperative fish farming,
with priority to subsistence
fishermen and fish-workers
in rivers, lakes, bays, and
lagoons.

The National Assembly,

may, by two-thirds vote of
all its members by special
law provide the terms and
conditions under which a

The President with the

concurrence of Congress,
by special law, shall provide
the terms and conditions
under which a foreign-

The President may enter

into agreements with
foreign-owned corporations
involvingeither technical
or financial assistance for

foreign-owned corporation
may enter into agreements
with the government
involving either technical
or financial assistance for
large-scale exploration,
development, or utilization
of natural
resources. [Emphasis
supplied.]

owned corporation may

enter into agreements with
the government
involving either technical
or financial assistance for
large-scale exploration,
development, and
utilization of natural
resources. [Emphasis
supplied.]

large-scale exploration,
development, and
utilization of minerals,
petroleum, and other
mineral oils according to
the general terms and
conditions provided by law,
based on real contributions
to the economic growth and
general welfare of the
country. In such
agreements, the State shall
promote the development
and use of local scientific
and technical resources.
[Emphasis supplied.]
The President shall notify
the Congress of every
contract entered into in
accordance with this
provision, within thirty days
from its execution.

The insights of the proponents of the U.P. Law draft are, therefore, instructive in
interpreting the phrase technical or financial assistance.
In his position paper entitled Service Contracts: Old Wine in New Bottles?,
Professor Pacifico A. Agabin, who was a member of the working group that prepared
the U.P. Law draft, criticized service contracts for they lodge exclusive management and
control of the enterprise to the service contractor, which is reminiscent of the old
concession regime. Thus, notwithstanding the provision of the Constitution that natural
resources belong to the State, and that these shall not be alienated, the service contract
system renders nugatory the constitutional provisions cited. He elaborates:
[244]

Looking at the Philippine model, we can discern the following vestiges of the
concession regime, thus:
1. Bidding of a selected area, or leasing the choice of the area to the interested party
and then negotiating the terms and conditions of the contract; (Sec. 5, P.D. 87)

2. Management of the enterprise vested on the contractor, including operation of

the field if petroleum is discovered; (Sec. 8, P.D. 87)
3. Control of production and other matters such as expansion and development;
(Sec. 8)
4. Responsibility for downstream operations marketing, distribution, and
processing may be with the contractor (Sec. 8);
5. Ownership of equipment, machinery, fixed assets, and other properties remain with
contractor (Sec. 12, P.D. 87);
6. Repatriation of capital and retention of profits abroad guaranteed to the contractor
(Sec. 13, P.D. 87); and
7. While title to the petroleum discovered may nominally be in the name of the
government, the contractor has almost unfettered control over its disposition and
sale, and even the domestic requirements of the country is relegated to a pro rata basis
(Sec. 8).
In short, our version of the service contract is just a rehash of the old concession
regime x x x. Some people have pulled an old rabbit out of a magicians hat, and
foisted it upon us as a new and different animal.
The service contract as we know it here is antithetical to the principle of
sovereignty over our natural resources restated in the same article of the [1973]
Constitution containing the provision for service contracts. If the service
contractor happens to be a foreign corporation, the contract would also run
counter to the constitutional provision on nationalization or Filipinization, of the
exploitation of our natural resources. [Emphasis supplied. Underscoring in the
original.]
[245]

Professor Merlin M. Magallona, also a member of the working group, was harsher in
his reproach of the system:

x x x the nationalistic phraseology of the 1935 [Constitution] was retained by the

[1973] Charter, but the essence of nationalism was reduced to hollow rhetoric. The
1973 Charter still provided that the exploitation or development of the countrys
natural resources be limited to Filipino citizens or corporations owned or controlled
by them. However, the martial-law Constitution allowed them, once these resources
are in their name, to enter into service contracts with foreign investors for financial,
technical, management, or other forms of assistance. Since foreign investors have the

capital resources, the actual exploitation and development, as well as the effective
disposition, of the countrys natural resources, would be under their direction, and
control, relegating the Filipino investors to the role of second-rate partners in joint
ventures.
Through the instrumentality of the service contract, the 1973 Constitution had
legitimized at the highest level of state policy that which was prohibited under
the 1973 Constitution, namely: the exploitation of the countrys natural resources
by foreign nationals. The drastic impact of [this] constitutional change becomes
more pronounced when it is considered that the active party to any service
contract may be a corporation wholly owned by foreign interests. In such a case,
the citizenship requirement is completely set aside, permitting foreign
corporations to obtain actual possession, control, and [enjoyment] of the
countrys natural resources. [Emphasis supplied.]
[246]

Accordingly, Professor Agabin recommends that:

Recognizing the service contract for what it is, we have to expunge it from the
Constitution and reaffirm ownership over our natural resources. That is the only
way we can exercise effective control over our natural resources.
This should not mean complete isolation of the countrys natural resources from
foreign investment. Other contract forms which are less derogatory to our
sovereignty and control over natural resources like technical assistance
agreements, financial assistance [agreements], co-production agreements, joint
ventures, production-sharing could still be utilized and adopted without violating
constitutional provisions. In other words, we can adopt contract forms which
recognize and assert our sovereignty and ownership over natural resources, and
where the foreign entity is just a pure contractor instead of the beneficial owner
of our economic resources. [Emphasis supplied.]
[247]

Still another member of the working group, Professor Eduardo Labitag, proposed
that:

2. Service contracts as practiced under the 1973 Constitution should be

discouraged, instead the government may be allowed, subject to authorization by
special law passed by an extraordinary majority to enter into either technical or
financial assistance. This is justified by the fact that as presently worded in the 1973
Constitution, a service contract gives full control over the contract area to the service
contractor, for him to work, manage and dispose of the proceeds or production. It was
a subterfuge to get around the nationality requirement of the constitution. [Emphasis
supplied.]
[248]

In the annotations on the proposed Article on National Economy and Patrimony, the
U.P. Law draft summarized the rationale therefor, thus:

5. The last paragraph is a modification of the service contract provision found in

Section 9, Article XIV of the 1973 Constitution as amended. This 1973 provision
shattered the framework of nationalism in our fundamental law (see Magallona,
Nationalism and its Subversion in the Constitution). Through the service contract, the
1973 Constitution had legitimized that which was prohibited under the 1935
constitutionthe exploitation of the countrys natural resources by foreign
nationals. Through the service contract, acts prohibited by the Anti-Dummy Law were
recognized as legitimate arrangements. Service contracts lodge exclusive
management and control of the enterprise to the service contractor, not unlike
the old concession regime where the concessionaire had complete control over the
countrys natural resources, having been given exclusive and plenary rights to
exploit a particular resource and, in effect, having been assured of ownership of
that resource at the point of extraction (see Agabin, Service Contracts: Old Wine in
New Bottles). Service contracts, hence, are antithetical to the principle of sovereignty
over our natural resources, as well as the constitutional provision on nationalization or
Filipinization of the exploitation of our natural resources.
Under the proposed provision, only technical assistance or financial assistance
agreements may be entered into, and only for large-scale activities. These are
contract forms which recognize and assert our sovereignty and ownership over
natural resources since the foreign entity is just a pure contractor and not a
beneficial owner of our economic resources. The proposal recognizes the need for
capital and technology to develop our natural resources without sacrificing our
sovereignty and control over such resources by the safeguard of a special law
which requires two-thirds vote of all the members of the Legislature. This will
ensure that such agreements will be debated upon exhaustively and thoroughly in the
National Assembly to avert prejudice to the nation. [Emphasis supplied.]
[249]

The U.P. Law draft proponents viewed service contracts under the 1973
Constitution as grants of beneficial ownership of the countrys natural resources to
foreign owned corporations.While, in theory, the State owns these natural resources
and Filipino citizens, their beneficiaries service contracts actually vested foreigners with
the right to dispose, explore for, develop, exploit, and utilize the same. Foreigners, not
Filipinos, became the beneficiaries of Philippine natural resources. This arrangement is
clearly incompatible with the constitutional ideal of nationalization of natural resources,
with the Regalian doctrine, and on a broader perspective, with Philippine sovereignty.
The proponents nevertheless acknowledged the need for capital and technical
know-how in the large-scale exploitation, development and utilization of natural
resources the second paragraph of the proposed draft itself being an admission of such
scarcity. Hence, they recommended a compromise to reconcile the nationalistic

provisions dating back to the 1935 Constitution, which reserved all natural resources
exclusively to Filipinos, and the more liberal 1973 Constitution, which allowed foreigners
to participate in these resources through service contracts. Such a compromise called
for the adoption of a new system in the exploration, development, and utilization of
natural resources in the form of technical agreements or financial agreements which,
necessarily, are distinct concepts from service contracts.
The replacement of service contracts with agreements involving either technical or
financial assistance, as well as the deletion of the phrase management or other forms of
assistance, assumes greater significance when note is taken that the U.P. Law draft
proposed other equally crucial changes that were obviously heeded by the
CONCOM. These include the abrogation of the concession system and the adoption of
new options for the State in the exploration, development, and utilization of natural
resources. The proponents deemed these changes to be more consistent with the
States ownership of, and its full control and supervision (a phrase also employed by the
framers) over, such resources. The Project explained:

3. In line with the State ownership of natural resources, the State should take a more
active role in the exploration, development, and utilization of natural resources, than
the present practice of granting licenses, concessions, or leases hence the provision
that said activities shall be under the full control and supervision of the State. There
are three major schemes by which the State could undertake these activities: first,
directly by itself; second, by virtue of co-production, joint venture, production sharing
agreements with Filipino citizens or corporations or associations sixty per cent (60%)
of the voting stock or controlling interests of which are owned by such citizens; or
third, with a foreign-owned corporation, in cases of large-scale exploration,
development, or utilization of natural resources through agreements involving either
technical or financial assistance only. x x x.
At present, under the licensing concession or lease schemes, the government benefits
from such benefits only through fees, charges, ad valorem taxes and income taxes of
the exploiters of our natural resources. Such benefits are very minimal compared with
the enormous profits reaped by theses licensees, grantees, concessionaires. Moreover,
some of them disregard the conservation of natural resources and do not protect the
environment from degradation. The proposed role of the State will enable it to a
greater share in the profits it can also actively husband its natural resources and
engage in developmental programs that will be beneficial to them.
4. Aside from the three major schemes for the exploration, development, and
utilization of our natural resources, the State may, by law, allow Filipino citizens to
explore, develop, utilize natural resources in small-scale. This is in recognition of the
plight of marginal fishermen, forest dwellers, gold panners, and others similarly
situated who exploit our natural resources for their daily sustenance and survival.
[250]

Professor Agabin, in particular, after taking pains to illustrate the similarities

between the two systems, concluded that the service contract regime was but a rehash
of the concession system. Old wine in new bottles, as he put it. The rejection of the
service contract regime, therefore, is in consonance with the abolition of the
concession system.
In light of the deliberations of the CONCOM, the text of the Constitution, and the
adoption of other proposed changes, there is no doubt that the framers considered and
shared the intent of the U.P. Law proponents in employing the phrase agreements . . .
involving either technical or financial assistance.
While certain commissioners may have mentioned the term service contracts during
the CONCOM deliberations, they may not have been necessarily referring to the
concept of service contracts under the 1973 Constitution. As noted earlier, service
contracts is a term that assumes different meanings to different people. The
commissioners may have been using the term loosely, and not in its technical and legal
sense, to refer, in general, to agreements concerning natural resources entered into by
the Government with foreign corporations. These loose statements do not necessarily
translate to the adoption of the 1973 Constitution provision allowing service contracts.
[251]

It is true that, as shown in the earlier quoted portions of the proceedings in

CONCOM, in response to Sr. Tans question, Commissioner Villegas commented that,
other than congressional notification, the only difference between future and past
service contracts is the requirement of a general law as there were no laws previously
authorizing the same. However, such remark is far outweighed by his more categorical
statement in his exchange with Commissioner Quesada that the draft article does not
permit foreign investors to participate in the nations natural resources which was exactly
what service contracts did except to provide technical or financial assistance.
[252]

[253]

In the case of the other commissioners, Commissioner Nolledo himself clarified in

his work that the present charter prohibits service contracts. Commissioner Gascon
was not totally averse to foreign participation, but favored stricter restrictions in the form
of majority congressional concurrence. On the other hand, Commissioners Garcia and
Tadeo may have veered to the extreme side of the spectrum and their objections may
be interpreted as votes against any foreign participation in our natural resources
whatsoever.
[254]

[255]

WMCP cites Opinion No. 75, s. 1987, and Opinion No. 175, s. 1990 of the
Secretary of Justice, expressing the view that a financial or technical assistance
agreement is no different in concept from the service contract allowed under the 1973
Constitution. This Court is not, however, bound by this interpretation. When an
administrative or executive agency renders an opinion or issues a statement of policy, it
merely interprets a pre-existing law; and the administrative interpretation of the law is at
best advisory, for it is the courts that finally determine what the law means.
[256]

[257]

[258]

In any case, the constitutional provision allowing the President to enter into FTAAs
with foreign-owned corporations is an exception to the rule that participation in the
nations natural resources is reserved exclusively to Filipinos. Accordingly, such
provision must be construed strictly against their enjoyment by non-Filipinos. As

Commissioner Villegas emphasized, the provision is very restrictive. Commissioner

Nolledo also remarked that entering into service contracts is an exception to the rule on
protection of natural resources for the interest of the nation and, therefore, being an
exception, it should be subject, whenever possible, to stringent rules. Indeed,
exceptions should be strictly but reasonably construed; they extend only so far as their
language fairly warrants and all doubts should be resolved in favor of the general
provision rather than the exception.
[259]

[260]

[261]

With the foregoing discussion in mind, this Court finds that R.A. No. 7942 is invalid
insofar as said Act authorizes service contracts. Although the statute employs the
phrase financial and technical agreements in accordance with the 1987 Constitution, it
actually treats these agreements as service contracts that grant beneficial ownership to
foreign contractors contrary to the fundamental law.

Section 33, which is found under Chapter VI (Financial or Technical Assistance

Agreement) of R.A. No. 7942 states:
SEC. 33. Eligibility.Any qualified person with technical and financial capability to
undertake large-scale exploration, development, and utilization of mineral
resources in the Philippines may enter into a financial or technical assistance
agreement directly with the Government through the Department. [Emphasis
supplied.]
Exploration, as defined by R.A. No. 7942,

means the searching or prospecting for mineral resources by geological, geochemical

or geophysical surveys, remote sensing, test pitting, trending, drilling, shaft sinking,
tunneling or any other means for the purpose of determining the existence, extent,
quantity and quality thereof and the feasibility of mining them for profit.
[262]

A legally organized foreign-owned corporation may be granted an exploration permit,

which vests it with the right to conduct exploration for all minerals in specified areas,
i.e., to enter, occupy and explore the same. Eventually, the foreign-owned
corporation, as such permittee, may apply for a financial and technical assistance
agreement.
[263]
[264]

[265]

[266]

Development is

the work undertaken to explore and prepare an ore body or a mineral deposit for
mining, including the construction of necessary infrastructure and related facilities.

[267]

Utilization means the extraction or disposition of minerals. A stipulation that the

proponent shall dispose of the minerals and byproducts produced at the highest price
and more advantageous terms and conditions as provided for under the implementing
rules and regulations is required to be incorporated in every FTAA.
[268]

[269]

A foreign-owned/-controlled corporation may likewise be granted a mineral

processing permit. Mineral processing is the milling, beneficiation or upgrading of ores
or minerals and rocks or by similar means to convert the same into marketable
products.
[270]

[271]

An FTAA contractor makes a warranty that the mining operations shall be

conducted in accordance with the provisions of R.A. No. 7942 and its implementing
rules and for work programs and minimum expenditures and commitments. And it
obliges itself to furnish the Government records of geologic, accounting, and other
relevant data for its mining operation.
[272]

[273]

[274]

Mining
operation,
as
activities involving exploration,
and processing.

the
law
feasibility,

defines
it,
development,

means mining
utilization,

[275]

The underlying assumption in all these provisions is that the foreign contractor
manages the mineral resources, just like the foreign contractor in a service contract.
Furthermore, Chapter XII of the Act grants foreign contractors in FTAAs the same
auxiliary mining rights that it grants contractors in mineral agreements (MPSA, CA and
JV). Parenthetically, Sections 72 to 75 use the term contractor, without distinguishing
between FTAA and mineral agreement contractors. And so does holders of mining
rights in Section 76. A foreign contractor may even convert its FTAA into a mineral
agreement if the economic viability of the contract area is found to be inadequate to
justify large-scale mining operations, provided that it reduces its equity in the
corporation, partnership, association or cooperative to forty percent (40%).
[276]

[277]

[278]

Finally, under the Act, an FTAA contractor warrants that it has or has access to all
the financing, managerial, and technical expertise. . . . This suggests that an FTAA
contractor is bound to provide some management assistance a form of assistance that
has been eliminated and, therefore, proscribed by the present Charter.
[279]

By allowing foreign contractors to manage or operate all the aspects of the mining
operation, the above-cited provisions of R.A. No. 7942 have in effect conveyed
beneficial ownership over the nations mineral resources to these contractors, leaving
the State with nothing but bare title thereto.
Moreover, the same provisions, whether by design or inadvertence, permit a
circumvention of the constitutionally ordained 60%-40% capitalization requirement for
corporations or associations engaged in the exploitation, development and utilization of
Philippine natural resources.
In sum, the Court finds the following provisions of R.A. No. 7942 to be violative of
Section 2, Article XII of the Constitution:
(1) The proviso in Section 3 (aq), which defines qualified person, to wit:

Provided, That a legally organized foreign-owned corporation shall be deemed a

qualified person for purposes of granting an exploration permit, financial or technical
assistance agreement or mineral processing permit.

(2) Section 23, which specifies the rights and obligations of an exploration
permittee, insofar as said section applies to a financial or technical assistance
agreement,
[280]

(3) Section 33, which prescribes the eligibility of a contractor in a financial or

technical assistance agreement;
(4) Section 35, which enumerates the terms and conditions for every financial or
technical assistance agreement;
[281]

(5) Section 39, which allows the contractor in a financial and technical assistance
agreement to convert the same into a mineral production-sharing agreement;
[282]

(6) Section 56, which authorizes the issuance of a mineral processing permit to a
contractor in a financial and technical assistance agreement;
[283]

The following provisions of the same Act are likewise void as they are dependent on
the foregoing provisions and cannot stand on their own:
(1) Section 3 (g), which defines the term contractor, insofar as it applies to a
financial or technical assistance agreement.
[284]

Section 34, which prescribes the maximum contract area in a financial or

technical assistance agreements;
[285]

Section 36,
agreements;

[286]

which allows negotiations for financial or technical assistance

Section 37, which prescribes the procedure for filing and evaluation of financial or
technical assistance agreement proposals;
[287]

Section 38,

[288]

which limits the term of financial or technical assistance agreements;

Section 40, which allows the assignment or transfer of financial or technical

assistance agreements;
[289]

Section 41,

[290]

which allows the withdrawal of the contractor in an FTAA;

The second and third paragraphs of Section 81, which provide for the
Governments share in a financial and technical assistance agreement; and
[291]

Section 90, which provides for incentives to contractors in FTAAs insofar as it

applies to said contractors;
[292]

When the parts of the 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, and that if all could not be carried
into effect, the legislature would not pass the residue independently, then, if some parts
are unconstitutional, all the provisions which are thus dependent, conditional, or
connected, must fall with them.
[293]

There can be little doubt that the WMCP FTAA itself is a service contract.
Section 1.3 of the WMCP FTAA grants WMCP the exclusive right to explore, exploit,
utilise[,] process and dispose of all Minerals products and by-products thereof that may

be produced from the Contract Area.

rights:

[294]

The FTAA also imbues WMCP with the following

(b) to extract and carry away any Mineral samples from the Contract area for the
purpose of conducting tests and studies in respect thereof;
(c) to determine the mining and treatment processes to be utilised during the
Development/Operating Period and the project facilities to be constructed during the
Development and Construction Period;
(d) have the right of possession of the Contract Area, with full right of ingress and
egress and the right to occupy the same, subject to the provisions of Presidential
Decree No. 512 (if applicable) and not be prevented from entry into private ands by
surface owners and/or occupants thereof when prospecting, exploring and exploiting
for minerals therein;
xxx
(f) to construct roadways, mining, drainage, power generation and transmission
facilities and all other types of works on the Contract Area;
(g) to erect, install or place any type of improvements, supplies, machinery and other
equipment relating to the Mining Operations and to use, sell or otherwise dispose of,
modify, remove or diminish any and all parts thereof;
(h) enjoy, subject to pertinent laws, rules and regulations and the rights of third
Parties, easement rights and the use of timber, sand, clay, stone, water and other
natural resources in the Contract Area without cost for the purposes of the Mining
Operations;
xxx
(l) have the right to mortgage, charge or encumber all or part of its interest and
obligations under this Agreement, the plant, equipment and infrastructure and the
Minerals produced from the Mining Operations;
x x x.

[295]

All materials, equipment, plant and other installations erected or placed on the
Contract Area remain the property of WMCP, which has the right to deal with and
remove such items within twelve months from the termination of the FTAA.
[296]

Pursuant to Section 1.2 of the FTAA, WMCP shall provide [all] financing,
technology, management and personnel necessary for the Mining Operations. The

mining company binds itself to perform all Mining Operations . . . providing all necessary
services, technology and financing in connection therewith, and to furnish all
materials, labour, equipment and other installations that may be required for carrying on
all Mining Operations. WMCP may make expansions, improvements and
replacements of the mining facilities and may add such new facilities as it considers
necessary for the mining operations.
[297]

[298]

[299]

These contractual stipulations, taken together, grant WMCP beneficial ownership

over natural resources that properly belong to the State and are intended for the benefit
of its citizens.These stipulations are abhorrent to the 1987 Constitution. They are
precisely the vices that the fundamental law seeks to avoid, the evils that it aims to
suppress. Consequently, the contract from which they spring must be struck down.
In arguing against the annulment of the FTAA, WMCP invokes the Agreement on
the Promotion and Protection of Investments between the Philippine and Australian
Governments, which was signed in Manila on January 25, 1995 and which entered into
force on December 8, 1995.

x x x. Article 2 (1) of said treaty states that it applies to investments whenever made
and thus the fact that [WMCPs] FTAA was entered into prior to the entry into force of
the treaty does not preclude the Philippine Government from protecting [WMCPs]
investment in [that] FTAA. Likewise, Article 3 (1) of the treaty provides that Each
Party shall encourage and promote investments in its area by investors of the other
Party and shall [admit] such investments in accordance with its Constitution, Laws,
regulations and investment policies and in Article 3 (2), it states that Each Party
shall ensure that investments are accorded fair and equitable treatment. The latter
stipulation indicates that it was intended to impose an obligation upon a Party to
afford fair and equitable treatment to the investments of the other Party and that a
failure to provide such treatment by or under the laws of the Party may constitute a
breach of the treaty. Simply stated, the Philippines could not, under said treaty, rely
upon the inadequacies of its own laws to deprive an Australian investor (like
[WMCP]) of fair and equitable treatment by invalidating [WMCPs] FTAA without
likewise nullifying the service contracts entered into before the enactment of RA 7942
such as those mentioned in PD 87 or EO 279.
This becomes more significant in the light of the fact that [WMCPs] FTAA was
executed not by a mere Filipino citizen, but by the Philippine Government itself,
through its President no less, which, in entering into said treaty is assumed to be
aware of the existing Philippine laws on service contracts over the exploration,
development and utilization of natural resources. The execution of the FTAA by the
Philippine Government assures the Australian Government that the FTAA is in
accordance with existing Philippine laws. [Emphasis and italics by private
respondents.]
[300]

The invalidation of the subject FTAA, it is argued, would constitute a breach of said
treaty which, in turn, would amount to a violation of Section 3, Article II of the
Constitution adopting the generally accepted principles of international law as part of the
law of the land. One of these generally accepted principles is pacta sunt servanda,
which requires the performance in good faith of treaty obligations.
Even assuming arguendo that WMCP is correct in its interpretation of the treaty and
its assertion that the Philippines could not . . . deprive an Australian investor (like
[WMCP]) of fair and equitable treatment by invalidating [WMCPs] FTAA without likewise
nullifying the service contracts entered into before the enactment of RA 7942 . . ., the
annulment of the FTAA would not constitute a breach of the treaty invoked. For this
decision herein invalidating the subject FTAA forms part of the legal system of the
Philippines. The equal protection clause guarantees that such decision shall apply to
all contracts belonging to the same class, hence, upholding rather than violating, the fair
and equitable treatment stipulation in said treaty.
[301]

[302]

One other matter requires clarification. Petitioners contend that, consistent with the
provisions of Section 2, Article XII of the Constitution, the President may enter into
agreements involving either technical or financial assistance only. The agreement in
question, however, is a technical and financial assistance agreement.
Petitioners contention does not lie. To adhere to the literal language of the
Constitution would lead to absurd consequences. As WMCP correctly put it:
[303]

x x x such a theory of petitioners would compel the government (through the

President) to enter into contract with two (2) foreign-owned corporations, one for
financial assistance agreement and with the other, for technical assistance over one
and the same mining area or land; or to execute two (2) contracts with
only one foreign-owned corporation which has the capability to provide both financial
and technical assistance, one for financial assistance and another for technical
assistance, over the same mining area. Such an absurd result is definitely not
sanctioned under the canons of constitutional construction. [Underscoring in the
original.]
[304]

Surely, the framers of the 1987 Charter did not contemplate such an absurd result
from their use of either/or. A constitution is not to be interpreted as demanding the
impossible or the impracticable; and unreasonable or absurd consequences, if possible,
should be avoided. Courts are not to give words a meaning that would lead to absurd
or unreasonable consequences and a literal interpretation is to be rejected if it would be
unjust or lead to absurd results. That is a strong argument against its adoption.
Accordingly, petitioners interpretation must be rejected.
[305]

[306]

[307]

The foregoing discussion has rendered unnecessary the resolution of the other
issues raised by the petition.
WHEREFORE, the
unconstitutional and void:

petition

is GRANTED. The

Court

hereby

declares

(1) The following provisions of Republic Act No. 7942:

(a) The proviso in Section 3 (aq),

(b) Section 23,
(c) Section 33 to 41,
(d) Section 56,
(e) The second and third paragraphs of Section 81, and
(f) Section 90.
(2) All provisions of Department of Environment and Natural Resources
Administrative Order 96-40, s. 1996 which are not in conformity with this Decision, and
(3) The Financial and Technical Assistance Agreement between the Government of
the Republic of the Philippines and WMC Philippines, Inc.
SO ORDERED.
Davide, Jr., C.J., Puno, Quisumbing, Carpio, Corona, Callejo, Sr., and Tinga.
JJ., concur.
Vitug, J., see Separate Opinion.
Panganiban, J., see Separate Opinion.
Ynares-Santiago,
Sandoval-Gutierrez and Austria-Martinez,
JJ., joins
J.
Panganibans separate opinion.
Azcuna, no part, one of the parties was a client.

[1]

Appears as Nequito in the caption of the Petition but Nequinto in the body. (Rollo, p. 12.)

[2]

As appears in the body of the Petition. (Id., at 13.) The caption of the petition does not include Louel A.
Peria as one of the petitioners but the name of his father Elpidio V. Peria appears therein.

[3]

Appears as Kaisahan Tungo sa Kaunlaran ng Kanayunan at Repormang Pansakahan (KAISAHAN) in

the caption of the Petition by Philippine Kaisahan Tungo sa Kaunlaran ng Kanayunan at
Repormang Pansakahan (KAISAHAN) in the body. (Id., at 14.)

[4]

Erroneously designated in the Petition as Western Mining Philippines Corporation. (Id., at 212.)
Subsequently, WMC (Philippines), Inc. was renamed Tampakan Mineral Resources
Corporation. (Id., at 778.)

[5]

An Act Instituting A New System of Mineral Resources Exploration, Development, Utilization and
Conservation.

[6]

Authorizing the Secretary of Environment and Natural Resources to Negotiate and Conclude Joint
Venture, Co-Production, or Production-Sharing Agreements for the Exploration, Development and
Utilization of Mineral Resources, and Prescribing the Guidelines for such Agreements and those

Agreements involving Technical or Financial Assistance by Foreign-Owned Corporations for

Large-Scale Exploration, Development and Utilization of Minerals.
[7]

Exec. Order No. 279 (1987), sec. 4.

[8]

Rep. Act No. 7942 (1995), sec. 15.

[9]

Id., sec. 26 (a)-(c).

[10]

Id., sec. 29.

[11]

Id., sec. 30.

[12]

Id., sec. 31.

[13]

Id., sec. 32.

[14]

Id., ch. VI.

[15]

Id., secs. 27 and 33 in relation to sec. 3 (aq).

[16]

Id., sec. 72.

[17]

Id., sec. 73.

[18]

Id., sec. 75.

[19]

Id., sec. 74.

[20]

Id., sec. 76.

[21]

Id., ch. XIII.

[22]

Id., secs. 20-22.

[23]

Id., secs. 43, 45.

[24]

Id., secs. 46-49, 51-52.

[25]

Id., ch. IX.

[26]

Id., ch. X.

[27]

Id., ch. XI.

[28]

Id., ch. XIV.

[29]

Id., ch. XV.

[30]

Id., ch. XVI.

[31]

Id., ch. XIX.

[32]

Id., ch. XVII.

[33]

Section 116, R.A. No. 7942 provides that the Act shall take effect thirty (30) days following its complete
publication in two (2) newspapers of general circulation in the Philippines.

[34]

WMCP FTAA, sec. 4.1.

[35]

Rollo, p. 22.

[36]

Ibid.

[37]

Ibid.

[38]

Ibid. The number has since risen to 129 applications when the petitioners filed their Reply. (Rollo, p.
363.)

[39]

Id., at 22.

[40]

Id., at 23-24.

[41]

Id., at 52-53. Emphasis and underscoring supplied.

[42]

WMCP FTAA, p. 2.

[43]

Rollo, p. 220.

[44]

Id., at 754.

[45]

Vide Note 4.

[46]

Rollo, p. 754.

[47]

Id., at 755.

[48]

Id., at 761-763.

[49]

Id., at 764-776.

[50]

Id., at 782-786.

[51]

Docketed as C.A.-G. R. No. 74161.

[52]

G.R. No. 153885, entitled Lepanto Consolidated Mining Company v. WMC Resources International Pty.
Ltd., et al., decided September 24, 2003 and G.R. No. 156214, entitled Lepanto Mining
Company v. WMC Resources International Pty. Ltd., WMC (Philippines), Inc., Southcot Mining
Corporation, Tampakan Mining Corporation and Sagittarius Mines, Inc., decided September 23,
2003.

[53]

Section 12, Rule 43 of the Rules of Court, invoked by private respondent, states, The appeal shall not
stay the award, judgment, final order or resolution sought to be reviewed unless the Court of
Appeals shall direct otherwise upon such terms as it may deem just.

[54]

WMCPs Reply (dated May 6, 2003) to Petitioners Comment (to the Manifestation and Supplemental
Manifestation), p. 3.

[55]

Ibid.

[56]

Ibid.

[57]

WMCPs Reply (dated May 6, 2003) to Petitioners Comment (to the Manifestation and Supplemental
Manifestation), p. 4.

[58]

Philippine Constitution Association v. Enriquez, 235 SCRA 506 (1994); National Economic
Protectionism Association v. Ongpin, 171 SCRA 657 (1989); Dumlao v. COMELEC, 95 SCRA 392
(1980).

[59]

Dumlao v. COMELEC, supra.

[60]

Board of Optometry v. Colet, 260 SCRA 88 (1996).

[61]

Dumlao v. COMELEC, supra.

[62]

Subic Bay Metropolitan Authority v. Commission on Elections, 262 SCRA 492 (1996).

[63]

Angara v. Electoral Commission, 63 Phil. 139 (1936).

[64]

Integrated Bar of the Philippines v. Zamora, 338 SCRA 81, 100 (2000); Dumlao v. COMELEC, supra;
People v. Vera, 65 Phil. 56 (1937).

[65]

Dumlao v. COMELEC, supra.

[66]

Integrated Bar of the Philippines v. Zamora, supra.

[67]

Ermita-Malate Hotel and Motel Operators Association, Inc. v. City Mayor of Manila 21 SCRA 449
(1967).

[68]

Petitioners Roberto P. Amloy, Raqim L. Dabie, Simeon H. Dolojo, Imelda Gandon, Leny B. Gusanan,
Marcelo L. Gusanan, Quintol A. Labuayan, Lomingges Laway, and Benita P. Tacuayan.

[69]

Petitioners Flong Agutin M. Dabie, Mario L. Mangcal, Alden S. Tusan, Sr. Susuan O. Bolanio, OND,
Lolita G. Demonteverde, Benjie L. Nequinto, Rose Lilia S. Romano and Amparo S. Yap.

[70]

Rollo, p. 6.

[71]

Id. at 337, citing Malabanan v. Gaw Ching, 181 SCRA 84 (1990).

[72]

246 SCRA 540 (1995).

[73]

People v. Vera, supra.

[74]

Militante v. Court of Appeals, 330 SCRA 318 (2000).

[75]

Ibid.

[76]

Cruz v. Secretary of Environment and Natural Resources, 347 SCRA 128 (2000), Kapunan, J.,
Separate Opinion. [Emphasis supplied.]

[77]

Joya v. Presidential Commission on Good Government, 225 SCRA 568 (1993).

[78]

Integrated Bar of the Philippines v. Zamora, supra.

[79]

J. BERNAS, S.J., THE 1987 CONSTITUTION OF THE PHILIPPINES: A COMMENTARY 1009 (1996).

[80]

Cruz v. Secretary of Environment and Natural Resources, supra, Kapunan, J., Separate Opinion.

[81]

Id., Puno, J., Separate Opinion, and Panganiban, J., Separate Opinion.

[82]

Cario v. Insular Government, 212 US 449, 53 L.Ed. 595 (1909). For instance, Law 14, Title 12, Book 4
of the Recopilacion de Leyes de las Indias proclaimed:

We having acquired full sovereignty over the Indies, and all lands, territories, and possessions not
heretofore ceded away by our royal predecessors, or by us, or in our name, still pertaining to the
royal crown and patrimony, it is our will that all lands which are held without proper and true
deeds of grant be restored to us according as they belong to us, in order that after reserving
before all what to us or to our viceroys, audiencias, and governors may seem necessary for
public squares, ways, pastures, and commons in those places which are peopled, taking into
consideration not only their present condition, but also their future and their probable increase,
and after distributing to the natives what may be necessary for tillage and pasturage, confirming
them in what they now have and giving them more if necessary, all the rest of said lands may
remain free and unencumbered for us to dispose of as we may wish.
[83]

Republic v. Court of Appeals, 160 SCRA 228 (1988). It has been noted, however, that the prohibition in
the [1935] Constitution against alienation by the state of mineral lands and minerals is not
properly a part of the Regalian doctrine but a separate national policy designed to conserve our
mineral resources and prevent the state from being deprived of such minerals as are essential to
national defense. (A. NOBLEJAS, PHILIPPINE LAW ON NATURAL RESOURCES 126-127 [1959
ED.], citing V. FRANCISCO, THE NEW MINING LAW.)

[84]

Cruz v. Secretary of Environment and Natural Resources, supra, Kapunan, J., Separate Opinion,
citing A. NOBLEJAS, PHILIPPINE LAW ON NATURAL RESOURCES 6 (1961). Noblejas
continues:

Thus, they asserted their right of ownership over mines and minerals or precious metals, golds, and silver
as distinct from the right of ownership of the land in which the minerals were found. Thus, when
on a piece of land mining was more valuable than agriculture, the sovereign retained ownership
of mines although the land has been alienated to private ownership. Gradually, the right to the

ownership of minerals was extended to base metals. If the sovereign did not exploit the minerals,
they grant or sell it as a right separate from the land. (Id., at 6.)
[85]

In the unpublished case of Lawrence v. Garduo (L-10942, quoted in V. FRANCISCO, PHILIPPINE LAW
ON NATURAL RESOURCES 14-15 [1956]), this Court observed:

The principle underlying Spanish legislation on mines is that these are subject to the eminent domain of
the state. The Spanish law of July 7, 1867, amended by the law of March 4, 1868, in article 2
says: The ownership of the substances enumerated in the preceding article (among them those
of inflammable nature), belong[s] to the state, and they cannot be disposed of without the
government authority.
The first Spanish mining law promulgated for these Islands (Decree of Superior Civil Government of
January 28, 1864), in its Article I, says: The supreme ownership of mines throughout the kingdom
belong[s] to the crown and to the king. They shall not be exploited except by persons who
obtained special grant from this superior government and by those who may secure it thereafter,
subject to this regulation.
Article 2 of the royal decree on ownership of mines in the Philippine Islands, dated May 14, 1867, which
was the law in force at the time of the cession of these Islands to the Government of the United
States, says: The ownership of the substances enumerated in the preceding article (among them
those of inflammable nature) belongs to the state, and they cannot be disposed of without an
authorization issued by the Superior Civil Governor.
Furthermore, all those laws contained provisions regulating the manner of prospecting, locating and
exploring mines in private property by persons other than the owner of the land as well as the
granting of concessions, which goes to show that private ownership of the land did not include,
without express grant, the mines that might be found therein.
Analogous provisions are found in the Civil Code of Spain determining the ownership of mines. In its
Article 339 (Article 420, New Civil Code) enumerating properties of public ownership, the mines
are included, until specially granted to private individuals. In its article 350 (Art. 437, New Civil
Code) declaring that the proprietor of any parcel of land is the owner of its surface and of
everything under it, an exception is made as far as mining laws are concerned. Then in speaking
of minerals, the Code in its articles 426 and 427 (Art. 519, New Civil Code) provides rules
governing the digging of pits by third persons on private-owned lands for the purpose of
prospecting for minerals.
[86]

Atok Big-Wedge Mining Co. v. Intermediate Appellate Court, 261 SCRA 528 (1996).

[87]

Ibid.

[88]

Cruz v. Secretary of Environment and Natural Resources, supra, Kapunan, J., Separate Opinion.

[89]

Ibid.

[90]

McDaniel v. Apacible and Cuisia, 42 Phil. 749 (1922).

[91]

NOBLEJAS, supra, at 5.

[92]

V. M. A. Dimagiba, Service Contract Concepts in Energy, 57 PHIL. L. J. 307, 313 (1982).

[93]

P. A. Agabin, Service Contracts: Old Wine in New Bottles?, in II DRAFT PROPOSAL OF THE 1986 U.P.
LAW CONSTITUTION PROJECT 3.

[94]

Id., at 2-3.

[95]

Id., at 3.

[96]

Ibid.

[97]

Ibid.

[98]

Ibid.

[99]

An Act to Provide for the Exploration, Location and Lease of Lands Containing Petroleum and other
Mineral Oils and Gas in the Philippine Islands.

[100]

An Act to Provide for the Leasing and Development of Coal Lands in the Philippine Islands.

[101]

Agabin, supra, at 3.

[102]

People v. Linsangan, 62 Phil. 646 (1935).

[103]

Ibid.

[104]

Ibid.

[105]

Ibid.

[106]

Ibid.

[107]

Atok Big-Wedge Mining Co. v. Intermediate Appellate Court, supra.

[108]

BERNAS, S.J., supra, at 1009-1010, citing Lee Hong Hok v. David, 48 SCRA 372 (1972).

[109]

II J. ARUEGO, THE FRAMING OF THE PHILIPPINE CONSTITUTION 592 (1949).

[110]

Id., at 600-601.

[111]

Id., at 604. Delegate Aruego expounds:

At the time of the framing of the Philippine Constitution, Filipino capital had been known to be rather
shy. Filipinos hesitated as a general rule to invest a considerable sum of their capital for the
development, exploitation, and utilization of the natural resources of the country. They had not as
yet been so used to corporate enterprises as the peoples of the West. This general apathy, the
delegates knew, would mean the retardation of the development of the natural resources, unless
foreign capital would be encouraged to come in and help in that development. They knew that the
nationalization of the natural resources would certainly not encourage the investment of foreign
capital into them. But there was a general feeling in the Convention that it was better to have
such development retarded or even postponed altogether until such time when the Filipinos
would be ready and willing to undertake it rather than permit the natural resources to be placed
under the ownership or control of foreigners in order that they might be immediately developed,
with the Filipinos of the future serving not as owners but at most as tenants or workers under
foreign masters. By all means, the delegates believed, the natural resources should be conserved
for Filipino posterity.
The nationalization of natural resources was also intended as an instrument of national defense. The
Convention felt that to permit foreigner to own or control the natural resources would be to
weaken the national defense. It would be making possible the gradual extension of foreign
influence into our politics, thereby increasing the possibility of foreign control. x x x.
Not only these. The nationalization of the natural resources, it was believed, would prevent making the
Philippines a source of international conflicts with the consequent danger to its internal security
and independence. For unless the natural resources were nationalized, with the nationals of
foreign countries having the opportunity to own or control them, conflicts of interest among them
might arise inviting danger to the safety and independence of the nation. (Id., at 605-606.)
[112]

Palting v. San Jose Petroleum Inc., 18 SCRA 924 (1966); Republic v. Quasha, 46 SCRA 160 (1972).

[113]

Atok Big-Wedge Mining Co. v. Intermediate Appellate Court, supra.

[114]

Article VI thereof provided:

1. The disposition, exploitation, development and utilization of all agricultural, timber, and mineral lands of
the public domain, waters, minerals, coal, petroleum and other mineral oils, all forces and sources

of potential energy, and other natural resources of either Party, and the operation of public
utilities, shall, if open to any person, be open to citizens of the other Party and to all forms of
business enterprise owned or controlled directly or indirectly, by citizens of such other Party in the
same manner as to and under the same conditions imposed upon citizens or corporations or
associations owned or controlled by citizens of the Party granting the right.
2. The rights provided for in Paragraph 1 may be exercised x x x in the case of citizens of the United
States, with respect to natural resources in the public domain in the Philippines, only through the
medium of a corporation organized under the laws of the Philippines and at least 60% of the
capital stock of which is owned or controlled by citizens of the United States x x x.
3. The United States of America reserves the rights of the several States of the United States to limit the
extent to which citizens or corporations or associations owned or controlled by citizens of the
Philippines may engage in the activities specified in this Article. The Republic of the Philippines
reserves the power to deny any of the rights specified in this Article to citizens of the United
States who are citizens of States, or to corporations or associations at least 60% of whose capital
stock or capital is owned or controlled by citizens of States, which deny like rights to citizens of
the Philippines, or to corporations or associations which ore owned or controlled by citizens of the
Philippines x x x.
[115]

An Act to Promote the Exploration, Development, Exploitation, and Utilization of the Petroleum
Resources of the Philippines; to Encourage the Conservation of such Petroleum Resources; to
Authorize the Secretary of Agriculture and Natural Resources to Create an Administration Unit
and a Technical Board in the Bureau of Mines; to Appropriate Funds therefor; and for other
purposes.

[116]

Rep. Act No. 387 (1949), as amended, art. 10 (b).

[117]

Id., art. 10 (c).

[118]

Id., art. 5.

[119]

Id., art. 31. The same provision recognized the rights of American citizens under the Parity
Amendment:

During the effectivity and subject to the provisions of the ordinance appended to the Constitution of the
Philippines, citizens of the United States and all forms of business enterprises owned and
controlled, directly or indirectly, by citizens of the United States shall enjoy the same rights and
obligations under the provisions of this Act in the same manner as to, and under the same
conditions imposed upon, citizens of the Philippines or corporations or associations owned or
controlled by citizens of the Philippines.
[120]

Id., art. 10.

[121]

Id., art. 3.

[122]

Id., art. 9.

[123]

Ibid.

[124]

Rep. Act No. 387 (1949), as amended, art. 8.

[125]

Id., art. 25.

[126]

Id., art. 47.

[127]

Id., art. 60.

[128]

Id., art. 64. Article 49, R.A. No. 387 originally imposed an annual exploration tax on exploration
concessionaires but this provision was repealed by Section 1, R.A. No. 4304.

[129]

FRANCISCO, supra, at 103.

[130]

Rep. Act No. 387 (1949), as amended, art. 65.

[131]

FRANCISCO, supra, at 103.

[132]

Rep. Act No. 387 (1949), as amended, art. 90 (b) 3.

[133]

Id., art. 90 (b) 4.

[134]

Id., art. 93-A.

[135]

Id., art. 93.

[136]

Ibid.

[137]

Rep. Act No. 387 (1949), as amended, art. 94.

[138]

Id., art. 106.

[139]

Id., art. 95.

[140]

Ibid.

[141]

Rep. Act No. 387 (1949), as amended, art. 95 (e).

[142]

Dimagiba, supra, at 315, citing Fabrikant, Oil Discovery and Technical Change in Southeast Asia,
Legal Aspects of Production Sharing Contracts in the Indonesian Petroleum Industry, 101-102,
sections 13C.24 and 13C.25 (1972).

[143]

Agabin, supra, at 4.

[144]

Dimagiba, supra, at 318.

[145]

Amending Presidential Decree No. 8 issued on October 2, 1972, and Promulgating an Amended Act to
Promote the Discovery and Production of Indigenous Petroleum and Appropriate Funds Therefor.

[146]

Pres. Decree No. 87 (1972), sec. 4.

[147]

Agabin, supra, at 6.

[148]

M. Magallona, Service Contracts in Philippine Natural Resources, 9 WORLD BULL. 1, 4 (1993).

[149]

Pres. Decree No. 87 (1972), sec. 6.

[150]

Id., sec. 4.

[151]

Id., sec. 6.

[152]

Id., sec. 7.

[153]

Id., sec. 8.

[154]

Ibid.

[155]

Ibid.

[156]

Pres. Decree No. 87 (1972), sec. 9.

[157]

Id., sec. 12.

[158]

Id., sec. 13.

[159]

Dimagiba draws the following comparison between the service contract scheme and the
concession system:

In both the concession system and the service contract scheme, work and financial obligations are
required of the developer. Under Republic Act No. 387 and Presidential Decree No. 87, the
concessionaire and the service contractors are extracted certain taxes in favor of the

government. In both arrangements, the explorationist/developer is given incentives in the form of

tax exemptions in the importation or disposition of machinery, equipment, materials and spare
parts needed in petroleum operations.
The concessionaire and the service contractor are required to keep in their files valuable data and
information and may be required to submit need technological or accounting reports to the
Government. Duly authorized representatives of the Government could, under the law, inspect or
audit the books of accounts of the contract holder.
In both systems, signature, discovery or production bonuses may be given by the developer to the host
Government.
The concession system, however, differs considerably from the service contract system in important
areas of the operations. In the concession system, the Government merely receives fixed royalty
which is a certain percentage of the crude oil produced or other units of measure, regardless of
whether the concession holder makes profits or not. This is not so in the service contract
system. A certain percentage of the gross production is set aside for recoverable expenditures by
the contractor. Of the net proceeds the parties are entitled percentages of share that will accrue
to each of them.
In the royalty system, the concessionaire may be discouraged to produce more for the reason that since
the royalty paid to the host country is closely linked to the volume of production, the greater the
produce, the more amount or royalty would be allocated to the Government. This is not so in the
production sharing system. The share of the Government depends largely on the net proceeds of
production after reimbursing the service contractor of its recoverable expenses.
As a general rule, the Government plays a passive role in the concession system, more particularly,
interested in receiving royalties from the concessionaire. In the production-sharing arrangement,
the Government plays a more active role in the management and monitoring of oil operations and
requires the service contractor entertain obligations designed to bring more economic and
technological benefits to the host country. (Dimagiba, supra, at 330-331.)
[160]

Agabin, supra, at 6.

[161]

The antecedents leading to the Proclamation are narrated in Javellana v. Executive Secretary, 50
SCRA 55 (1973):

On March 16, 1967, Congress of the Philippines passed Resolution No. 2, which was amended by
Resolution No. 4, of said body, adopted on June 17, 1969, calling a convention to propose
amendments to the Constitution of the Philippines. Said Resolution No. 2, as amended, was
implemented by Republic Act No. 6132 approved on August 24, 1970, pursuant to the provisions
of which the election of delegates to said convention was held on November 10, 1970, and the
1971 Convention began to perform its functions on June 1, 1971. While the Convention was in
session on September 21, 1972, the President issued Proclamation No. 1081 placing the entire
Philippines under Martial Law. On November 29, 1972, the President of the Philippines issued
Presidential Decree No. 73, submitting to the Filipino people for ratification or rejection the
Constitution of the Republic of the Philippines proposed by the 1971 Constitutional Convention,
and appropriating funds therefor, as well as setting the plebiscite for such ratification on January
15, 1973.
On January 17, 1973, the President issued Proclamation No. 1102 certifying and proclaiming that the
Constitution proposed by the 1971 Constitutional Convention has been ratified by an
overwhelming majority of all the votes cast by the members of all the Barangays (Citizens
Assemblies) throughout the Philippines, and has thereby come into effect.
[162]

BERNAS, S.J., supra, at 1016, Note 28, citing Session of November 25, 1972.

[163]

Agabin, supra, at 1, quoting Sanvictores, The Economic Provisions in the 1973 Constitution,
in ESPIRITU, 1979 PHILCONSA READER ON CONSTITUTIONAL AND POLICY ISSUES 449.

[164]

BERNAS, S.J., supra, at 1016, Note 28, citing Session of November 25, 1972.

[165]

Ibid.

[166]

Ibid.

[167]

Allowing Citizens of the Philippines or Corporations or Associations at least Sixty Per Centum of the
Capital of which is Owned by such Citizens to Enter into Service Contracts with Foreign Persons,
Corporations for the Exploration, Development, Exploitation or Utilization of Lands of the Public
Domain, Amending for the purpose certain provisions of Commonwealth Act No. 141.

[168]

Pres. Decree No. 151 (1973), sec. 1.

[169]

Providing for A Modernized System of Administration and Disposition of Mineral Lands and to Promote
and Encourage the Development and Exploitation thereof.

[170]

Revising and Consolidating All Laws and Decrees Affecting Fishing and Fisheries.

[171]

Pres. Decree No. 704 (1975), sec. 21.

[172]

Revising Presidential Decree No. 389, otherwise known as The Forestry Reform Code of the
Philippines.

[173]

Pres. Decree No. 705 (1975), sec. 62.

[174]

An Act to Promote the Exploration and Development of Geothermal Resources.

[175]

Magallona, supra, at 6.

[176]

Declaring a National Policy to Implement the Reforms Mandated by the People, Protecting their Basic
Rights, Adopting a Provisional Constitution, and Providing for an Orderly Transition to a
Government under a New Constitution.

[177]

CONST., art. XVIII, sec. 27; De Leon v. Esguerra, 153 SCRA 602 (1987).

[178]

Miners Association of the Philippines, Inc. v. Factoran, Jr., 240 SCRA 100 (1995).

[179]

Ibid.

[180]

Ibid.

[181]

J. BERNAS, S.J., THE INTENT OF THE 1986 CONSTITUTION WRITERS 812 (1995).

[182]

Miners Association of the Philippines, Inc. v. Factoran, Jr., supra.

[183]

III RECORDS OF THE CONSTITUTIONAL COMMISSION 255.

[184]

Id., at 355-356.

[185]

CONST. (1986), art. II, sec. 1.

[186]

Cruz v. Secretary of Environment and Natural Resources, supra, Puno, J., Separate Opinion.

[187]

Rep. Act No. 7942 (1995), sec. 9.

[188]

SEC. 82. Allocation of Government Share.The Government share as referred to in the preceding
sections shall be shared and allocated in accordance with Sections 290 and 292 of Republic Act
No. 7160 otherwise known as the Local Government Code of 1991. In case the development and
utilization of mineral resources is undertaken by a government-owned or -controlled corporation,
the sharing and allocation shall be in accordance with Sections 291 and 292 of the said Code.

[189]

An Act Creating A Peoples Small-Scale Mining Program and for other purposes.

[190]

Rep. Act No. 7942 (1995), sec. 42.

[191]

Id., secs. 3 (ab) and 26.

[192]

Contractor means a qualified person acting alone or in consortium who is a party to a mineral
agreement or to a financial or technical assistance agreement. (Id., sec. 3[g].)

[193]

Contract area means land or body water delineated for purposes of exploration, development, or
utilization of the minerals found therein. (Id., sec. 3[f].)

[194]

Gross output means the actual market value of minerals or mineral products from its mining area as
defined in the National Internal Revenue Code (Id., sec. 3[v]).

[195]

Id., sec. 26 (a).

[196]

An Act Reducing Excise Tax Rates on Metallic and Non-Metallic Minerals and Quarry Resources,
amending for the purpose Section 151 (a) of the National Internal Revenue Code, as amended.

[197]

Rep. Act No. 7942 (1995), sec. (80).

[198]

Id., Sec. 26 (b).

[199]

Mineral resource means any concentration of minerals/rocks with potential economic value. (Id., sec.
3[ad].)

[200]

Id., sec. 26 (c).

[201]

Ibid.

[202]

Id., sec. 3 (h).

[203]

Id., sec. 3 (x).

[204]

Id., sec. 26, last par.

[205]

Id., sec. 27.

[206]

Id., sec. 3 (aq).

[207]

Id., sec. 3 (r).

[208]

Id., sec. 33.

[209]

Id., sec. 3 (t).

[210]

Id., sec. 3 (aq).

[211]

The maximum areas in cases of mineral agreements are prescribed in Section 28 as follows:

SEC. 28. Maximum Areas for Mineral Agreement. The maximum area that a qualified person may hold at
any time under a mineral agreement shall be:
(a) Onshore, in any one province
(1) For individuals, ten (10) blocks; and
(2) For partnerships, cooperatives, associations, or corporations, one hundred (100) blocks.
(b) Onshore, in the entire Philippines
(1) For individuals, twenty (20) blocks; and
(2) For partnerships, cooperatives, associations, or corporations, two hundred (200) blocks.
(c) Offshore, in the entire Philippines
(1) For individuals, fifty (50) blocks;
(2) For partnerships, cooperatives, associations, or corporations, five hundred (500) blocks; and
(3) For the exclusive economic area, a larger area to be determined by the Secretary.

The maximum areas mentioned above that a contractor may hold under a mineral agreement shall not
include mining/quarry areas under operating agreements between the contractor and a
claimowner/lessee/permittee/licensee entered into under Presidential Decree No. 463.
On the other hand, Section 34, which governs the maximum area for FTAAs provides:
SEC. 34. Maximum Contract Area. The maximum contract area that may be granted per qualified person,
subject to relinquishment shall be:
(a) 1,000 meridional blocks onshore;
(b) 4,000 meridional blocks offshore; or
(c) Combinations of (a) and (b) provided that it shall not exceed the maximum limits for onshore and
offshore areas.
[212]

Id., sec. 33.

[213]

Id., sec. 81.

[214]

Kapatiran v. Tan, 163 SCRA 371 (1988).

[215]

Providing for the Publication of Laws either in the Official Gazette or in a Newspaper of General
Circulation in the Philippines as a Requirement for their Effectivity.

[216]

Section 1, E.O. No. 200 was subsequently incorporated in the Administrative Code of 1987 (Executive
Order No. 292 as Section 18, Chapter 5 (Operation and Effect of Laws), Book 1 (Sovereignty and
General Administration).

[217]

136 SCRA 27 (1985).

[218]

Manila Prince Hotel v. Government Service Insurance System, 267 SCRA 408 (1997).

[219]

CONST., art. 3, sec. 1.

[220]

83 O.G. (Suppl.) 3528-115 to 3528-117 (August 1987).

[221]

Miners Association of the Philippines, Inc. v. Factoran, Jr., supra.

[222]

Petitioners note in their Memorandum that the FTAA:

x x x guarantees that wholly foreign owned [WMCP] entered into the FTAA in order to facilitate the large
scale exploration, development and commercial exploitation of mineral deposits that may be
found to exist within the Contract area. [Section 1.1] As a contractor it also has the exclusive right
to explore, exploit, utilize, process and dispose of all mineral products and by-products thereof
that may be derived or produced from the Contract Area. [Section 1.3] Thus, it is divided into an
exploration and feasibility phase [Section 3.2 (a)] and a construction, development and production
phase. [Section 3. 2 (b).]
Thus, it is this wholly foreign owned corporation that, among other things:
(a) operates within a prescribed contract area [Section 4],
(b) opts to apply for a Mining Production Sharing Agreement [Section 4.2],
(c) relinquishes control over portions thereof at their own choice [Section 4.6],
(d) submits work programs, incurs expenditures, and makes reports during the exploration period [Section
5],
(e) submits a Declaration of Mining Feasibility [Sections 5.4 and 5.5],
(f) during the development period, determines the timetable, submits work programs, provides the reports
and determines and executes expansions, modifications, improvements and replacements of new
mining facilities within the area [Section 6],

(g) complies with the conditions for environmental protection and industrial safety, posts the necessary
bonds and makes representations and warranties to the government [Section 10.5].
The contract subsists for an initial term of twenty-five (25) years from the date of its effectivity [Section
3.1] and renewable for a further period of twenty-five years under the same terms and conditions
upon application by private respondent [Section 3.3]. (Rollo, pp. 458-459.)
[223]

H. C. BLACK, HANDBOOK ON THE CONSTRUCTION AND INTERPRETATION OF THE LAWS 8.

[224]

Ibid.

[225]

J. M. Tuason & Co., Inc. v. Land Tenure Association, 31 SCRA 413 (1970).

[226]

Rollo, p. 580.

[227]

Ibid. Emphasis supplied.

[228]

People v. Manantan, 115 Phil. 657 (1962); Commission on Audit of the Province of Cebu v. Province of
Cebu, 371 SCRA 196 (2001).

[229]

Rollo, p. 569.

[230]

III Record of the Constitutional Commission 351-352 .

[231]

V Record of the Constitutional Commission 844.

[232]

Id., at 841.

[233]

Id., at 842.

[234]

Id. at 844.

[235]

Vide Cherey v. Long Beach, 282 NY 382, 26 NE 2d 945, 127 ALR 1210 (1940), cited in 16 Am Jur 2d
Constitutional Law 79.

[236]

Civil Liberties Union v. Executive Secretary, 194 SCRA 317, 325 (1991).

[237]

III Record of the Constitutional Commission 278.

[238]

Id., at 316-317.

[239]

III Record of the Constitutional Commission 358-359 .

[240]

Vera v. Avelino, 77 Phil. 192 (1946).

[241]

J. NOLLEDO, THE NEW CONSTITUTION OF THE PHILIPPINES ANNOTATED 924-926 (1990).

[242]

Resolution to Incorporate in the New Constitution an Article on National Economy and Patrimony.

[243]

The Chair of the Committee on National Economy and Patrimony, alluded to it in the discussion on the
capitalization requirement:

MR. VILLEGAS. We just had a long discussion with the members of the team from the UP Law Center
who provided us a draft. The phrase that is contained here which we adopted from the UP draft is
60 percent of voting stock. (III Record of the Constitutional Commission 255.)
Likewise, in explaining the reasons for the deletion of the term exploitation:
MR. VILLEGAS. Madam President, following the recommendation in the UP draft, we omitted exploitation
first of all because it is believed to be subsumed under development and secondly because it has
a derogatory connotation. (Id., at 358.)
[244]

Id., at 12.

[245]

Id., at 15-16.

[246]

M. Magallona, Nationalism and Its Subversion in the Constitution 5, in II DRAFT PROPOSAL OF THE
1986 U.P. LAW CONSTITUTION PROJECT.

[247]

Agabin, supra, at 16.

[248]

E. Labitag, Philippine Natural Resources: Some Problems and Perspectives 17 in II DRAFT

PROPOSAL OF THE 1986 U.P. LAW CONSTITUTION PROJECT.

[249]

I DRAFT PROPOSAL OF THE 1986 U.P. LAW CONSTITUTION PROJECT 11-13.

[250]

Id., at 9-11. Professor Labitag also suggests that:

x x x. The concession regime of natural resources disposition should be discontinued. Instead the State
shall enter into such arrangements and agreements like co-production, joint ventures, etc. as
shall bring about effective control and a larger share in the proceeds, harvest or
production. (Labitag, supra, at 17.)
[251]

Vide Note 147.

[252]

Vide Note 230. The question was posed before the Jamir amendment and subsequent proposals
introducing other limitations.

Comm. Villegas response that there was no requirement in the 1973 Constitution for a law to govern
service contracts and that, in fact, there were then no such laws is inaccurate. The 1973 Charter
required similar legislative approval, although it did not specify the form it should take: The
Batasang Pambansa, in the national interest, may allow such citizens to enter into service
contracts. As previously noted, however, laws authorizing service contracts were actually enacted
by presidential decree.
[253]

Vide Note 238.

[254]

Vide Note 241.

[255]

Vide Note 231.

[256]

Dated July 28, 1987.

[257]

Dated October 3, 1990.

[258]

Peralta v. Civil Service Commission, 212 SCRA 425 (1992).

[259]

Vide Note 238.

[260]

III RECORD OF THE CONSTITUTIONAL COMMISSION 354.

[261]

Salaysay v. Castro, 98 Phil. 364 (1956).

[262]

Rep. Act No. 7942 (1995), sec. 3 (q).

[263]

Id., sec. 3 (aq).

[264]

Id., sec. 20.

[265]

Id., sec. 23, first par.

[266]

Id., sec. 23, last par.

[267]

Id., sec. 3 (j).

[268]

Id., sec. 3 (az).

[269]

Id., sec. 35 (m).

[270]

Id., secs. 3 (aq) and 56.

[271]

Id., sec. 3 (y).

[272]

Id., sec. 35 (g).

[273]

Id., sec. 35 (h).

[274]

Id., sec. 35 (l).

[275]

Id., sec. 3 (af).

[276]

SEC. 72. Timber Rights.Any provision of the law to the contrary notwithstanding, a contractor may be
granted a right to cut trees or timber within his mining area as may be necessary for his mining
operations subject to forestry laws, rules and regulations: Provided, That if the land covered by
the mining area is already covered by exiting timber concessions, the volume of timber needed
and the manner of cutting and removal thereof shall be determined by the mines regional director,
upon consultation with the contractor, the timber concessionaire/permittee and the Forest
Management Bureau of the Department: Provided, further, That in case of disagreement between
the contractor and the timber concessionaire, the matter shall be submitted to the Secretary
whose decision shall be final. The contractor shall perform reforestation work within his mining
area in accordance with forestry laws, rules and regulations. [Emphasis supplied.]

SEC. 73. Water Rights.A contractor shall have water rights for mining operations upon approval of
application with the appropriate government agency in accordance with existing water laws, rules
and regulations promulgated thereunder: Provided, That water rights already granted or vested
through long use, recognized and acknowledged by local customs, laws and decisions of courts
shall not thereby be impaired: Provided, further, That the Government reserves the right to
regulate water rights and the reasonable and equitable distribution of water supply so as to
prevent the monopoly of the use thereof. [Emphasis supplied.]
SEC. 74. Right to Possess Explosives.A contractor/exploration permittee shall have the right to
possess and use explosives within his contract/permit area as may be necessary for his mining
operations upon approval of an application with the appropriate government agency in
accordance with existing laws, rules and regulations promulgated thereunder: Provided, That the
Government reserves the right to regulate and control the explosive accessories to ensure safe
mining operations. [Emphasis supplied.]
SEC. 75. Easement Rights.When mining areas are so situated that for purposes of more convenient
mining operations it is necessary to build, construct or install on the mining areas or lands owned,
occupied or leased by other persons, such infrastructure as roads, railroads, mills, waste dump
sites, tailings ponds, warehouses, staging or storage areas and port facilities, tramways, runways,
airports, electric transmission, telephone or telegraph lines, dams and their normal flood and
catchment areas, sites for water wells, ditches, canals, new river beds, pipelines, flumes, cuts,
shafts, tunnels, or mills, the contractor, upon payment of just compensation, shall be entitled to
enter and occupy said mining areas or lands. [Emphasis supplied.]
SEC. 76. Entry into Private Lands and Concession Areas.Subject to prior notification, holders of mining
rights shall not be prevented from entry into private lands and concession areas by surface
owners, occupants, or concessionaires when conducting mining operations therein: Provided,
That any damage done to the property of the surface owner, occupant, or concessionaire as a
consequence of such operations shall be properly compensated as may be bee provided for in
the implementing rules and regulations: Provided, further, That to guarantee such compensation,
the person authorized to conduct mining operation shall, prior thereto, post a bond with the
regional director based on the type of properties, the prevailing prices in and around the area
where the mining operations are to be conducted, with surety or sureties satisfactory to the
regional director.[Emphasis supplied.]
[277]

Id., sec. 39, first par.

[278]

Id., sec. 39, second par.

[279]

Id., sec. 35 (e).

[280]

SEC. 23. Rights and Obligations of the Permittee.x x x.

The permittee may apply for a mineral production sharing agreement, joint venture agreement, coproduction agreement or financial or technical assistance agreement over the permit area, which
application shall be granted if the permittee meets the necessary qualifications and the terms and
conditions of any such agreement: Provided, That the exploration period covered by the
exploration period of the mineral agreement or financial or technical assistance agreement.
[281]

SEC. 35. Terms and Conditions. The following terms, conditions, and warranties shall be incorporated
in the financial or technical assistance agreement, to wit:

(a) A firm commitment in the form of a sworn statement, of an amount corresponding to the expenditure
obligation that will be invested in the contract area: Provided, That such amount shall be subject
to changes as may be provided for in the rules and regulations of this Act;
(b) A financial guarantee bond shall be posted in favor of the Government in an amount equivalent to the
expenditure obligation of the applicant for any year;
(c) Submission of proof of technical competence, such as, but not limited to, its track record in mineral
resource exploration, development, and utilization; details of technology to be employed in the
proposed operation; and details of technical personnel to undertake the operation;
(d) Representations and warranties that the applicant has all the qualifications and none of the
disqualifications for entering into the agreement;
(e) Representations and warranties that the contractor has or has access to all the financing, managerial
and technical expertise and, if circumstances demand, the technology required to promptly and
effectively carry out the objectives of the agreement with the understanding to timely deploy these
resources under its supervision pursuant to the periodic work programs and related budgets,
when proper, providing an exploration period up to two (2) years, extendible for another two (2)
years but subject to annual review by the Secretary in accordance with the implementing rules
and regulations of this Act, and further, subject to the relinquishment obligations;
(f) Representations and warranties that, except for paymets for dispositions for its equity, foreign
investments in local enterprises which are qualified for repatriation, and local suppliers credits
and such other generally accepted and permissible financial schemes for raising funds for valid
business purposes, the conractor shall not raise any form of financing from domestic sources of
funds, whether in Philippine or foreign currency, for conducting its mining operations for and in the
contract area;
(g) The mining operations shall be conducted in accordance with the provisions of this Act and its
implementing rules and regulations;
(h) Work programs and minimum expenditures commitments;
(i) Preferential use of local goods and services to the maximum extent practicable;
(j) A stipulation that the contractors are obligated to give preference to Filipinos in all types of mining
employment for which they are qualified and that technology shall be transferred to the same;
(k) Requiring the proponent to effectively use appropriate anti-pollution technology and facilities to protect
the environment and to restore or rehabilitate mined out areas and other areas affected by mine
tailings and other forms of pollution or destruction;
(l) The contractors shall furnish the Government records of geologic, accounting, and other relevant data
for its mining operations, and that book of accounts and records shall be open for inspection by
the government;
(m) Requiring the proponent to dispose of the minerals and byproducts produced under a financial or
technical assistance agreement at the highest price and more advantageous terms and
conditions as provided for under the rules and regulations of this Act;

(n) Provide for consultation and arbitration with respect to the interpretation and implementation of the
terms and conditions of the agreements; and
(o) Such other terms and conditions consistent with the Constitution and with this Act as the Secretary
may deem to be for the best interest of the State and the welfare of the Filipino people.
[282]

SEC. 39. Option to Convert into a Mineral Agreement. The contractor has the option to convert the
financial or technical assistance agreement to a mineral agreement at any time during the term of
the agreement, if the economic viability of the contract area is found to be inadequate to justify
large-scale mining operations, after proper notice to the Secretary as provided for under the
implementing rules and regulations; Provided, That the mineral agreement shall only be for the
remaining period of the original agreement.

In the case of a foreign contractor, it shall reduce its equity to forty percent (40%) in the corporation,
partnership, association, or cooperative. Upon compliance with this requirement by the contractor,
the Secretary shall approve the conversion and execute the mineral production-sharing
agreement.
[283]

SEC. 56. Eligibility of Foreign-owned/-controlled Corporation.A foreign owned/ -controlled corporation

may be granted a mineral processing permit.

[284]

SEC. 3. Definition of Terms. As used in and for purposes of this Act, the following terms, whether in
singular or plural, shall mean:

xxx
(g) Contractor means a qualified person acting alone or in consortium who is a party to a mineral
agreement or to a financial or technical assistance agreement.
[285]

SEC. 34. Maximum Contract Area. The maximum contract area that may be granted per qualified
person, subject to relinquishment shall be:

(a) 1,000 meridional blocks onshore;

(b) 4,000 meridional blocks offshore; or
(c) Combinations of (a) and (b) provided that it shall not exceed the maximum limits for onshore
and offshore areas.
[286]

SEC. 36. Negotiations. A financial or technical assistance agreement shall be negotiated by the
Department and executed and approved by the President. The President shall notify
Congress of all financial or technical assistance agreements within thirty (30) days from
execution and approval thereof.

[287]

SEC. 37. Filing and Evaluation of Financial or Technical Assistance Agreement Proposals. All financial
or technical assistance agreement proposals shall be filed with the Bureau after payment of the
required processing fees.If the proposal is found to be sufficient and meritorious in form and
substance after evaluation, it shall be recorded with the appropriate government agency to give
the proponent the prior right to the area covered by such proposal: Provided, That existing
mineral agreements, financial or technical assistance agreements and other mining rights are not
impaired or prejudiced thereby. The Secretary shall recommend its approval to the President.

[288]

SEC. 38. Term of Financial or Technical Assistance Agreement. A financial or technical assistance
agreement shall have a term not exceeding twenty-five (25) years to start from the execution
thereof, renewable for not more than twenty-five (25) years under such terms and conditions as
may be provided by law.

[289]

SEC. 40. Assignment/Transfer. A financial or technical assistance agreement may be assigned or

transferred, in whole or in part, to a qualified person subject to the prior approval of the
President: Provided, That the President shall notify Congress of every financial or technical

assistance agreement assigned or converted in accordance with this provision within thirty (30)
days from the date of the approval thereof.
[290]

SEC. 41. Withdrawal from Financial or Technical Assistance Agreement. The contractor shall manifest
in writing to the Secretary his intention to withdraw from the agreement, if in his judgment the
mining project is no longer economically feasible, even after he has exerted reasonable diligence
to remedy the cause or the situation. The Secretary may accept the withdrawal: Provided, That
the contractor has complied or satisfied all his financial, fiscal or legal obligations.

[291]

SEC. 81. Government Share in Other Mineral Agreements.x x x.

The Government share in financial or technical assistance agreement shall consist of, among other
things, the contractors corporate income tax, excise tax, special allowance, withholding tax due
from the contractors foreign stockholders arising from dividend or interest payments to the said
foreign stockholder in case of a foreign national and all such other taxes, duties and fees as
provided for under existing laws.
The collection of Government share in financial or technical assistance agreement shall commence after
the financial or technical assistance agreement contractor has fully recovered its pre-operating
expenses, exploration, and development expenditures, inclusive.
[292]

SEC. 90. Incentives.The contractors in mineral agreements, and financial or technical assistance
agreements shall be entitled to the applicable fiscal and non-fiscal incentives as provided for
under Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987:
Provided, That holders of exploration permits may register with the Board of Investments and be
entitled to the fiscal incentives granted under the said Code for the duration of the permits or
extensions thereof: Provided, further, That mining activities shall always be included in the
investment priorities plan.

[293]

Lidasan v. Commission on Elections, 21 SCRA 496 (1967).

[294]

Vide also WMCP FTAA, sec. 10.2 (a).

[295]

WMCP, sec. 10.2.

[296]

Id., sec. 11.

[297]

Id., sec. 10.1(a).

[298]

Id., sec. 10.1(c).

[299]

Id., sec. 6.4.

[300]

Rollo, pp. 563-564.

[301]

CIVIL CODE, art. 8.

[302]

CONST., art III, sec. 1.

[303]

Vide Note 223.

[304]

Rollo, p. 243.

[305]

Civil Liberties Union v. Executive Secretary, supra.

[306]

Automotive Parts & Equipment Company, Inc. v. Lingad, 30 SCRA 248 (1969).

[307]

Ibid.

Felisa De Roy vs Court of

Appeals
157 SCRA 757 Civil Law Preliminary Title Application of Laws Publication of Laws
Publication of Supreme Court Decisions in the Official Gazette
The firewall of a burned out building owned by Felisa De Roy collapsed and destroyed the
tailoring shop occupied by the family of Luis Bernal resulting in injuries and even to the
death of Bernals daughter. De Roy claimed that Bernal had been warned prior hand but
that she was ignored.
In the RTC, De Roy was found guilty of gross negligence. She appealed but the Court of
Appeals affirmed the RTC. On the last day of filing a motion for reconsideration, De Roys
counsel filed a motion for extension. It was denied by the CA. The CA ruled that pursuant to
the case of Habaluyas Enterprises vs Japzon (August 1985), the fifteen-day period for
appealing or for filing a motion for reconsideration cannot be extended.
De Roys counsel however argued that the Habaluyas case should not be applicable
because said ruling was never published in the Official Gazette.
ISSUE: Whether or not Supreme Court decisions must be published in the Official Gazette
before they can be binding.
HELD: No. There is no law requiring the publication of Supreme Court decision in the
Official Gazette before they can be binding and as a condition to their becoming effective. It
is bounden duty of counsel as lawyer in active law practice to keep abreast of decisions of
the Supreme Court particularly where issues have been clarified, consistently reiterated and
published in the advance reports of Supreme Court decisions and in such publications as
the SCRA and law journals.

OFELIA P. TY, petitioner, vs. THE COURT

EDGARDO M. REYES, respondents.

OF

APPEALS,

and

DECISION
QUISUMBING, J.:

This appeal seeks the reversal of the decision dated July 24, 1996, of the Court of
Appeals in C.A. G.R. CV 37897, which affirmed the decision of the Regional Trial Court
of Pasig, Branch 160, declaring the marriage contract between private respondent
Edgardo M. Reyes and petitioner Ofelia P. Ty null and void ab initio. It also ordered
private respondent to pay P15,000.00 as monthly support for their children Faye Eloise
Reyes and Rachel Anne Reyes.
As shown in the records of the case, private respondent married Anna Maria Regina
Villanueva in a civil ceremony on March 29, 1977, in Manila. Then they had a church
wedding on August 27, 1977. However, on August 4, 1980, the Juvenile and Domestic
Relations Court of Quezon City declared their marriage null and void ab initio for lack of
a valid marriage license.The church wedding on August 27, 1977, was also declared
null and void ab initio for lack of consent of the parties.
Even before the decree was issued nullifying his marriage to Anna Maria, private
respondent wed Ofelia P. Ty, herein petitioner, on April 4, 1979, in ceremonies officiated
by the judge of the City Court of Pasay. On April 4, 1982, they also had a church
wedding in Makati, Metro Manila.
On January 3, 1991, private respondent filed a Civil Case 1853-J with the RTC of
Pasig, Branch 160, praying that his marriage to petitioner be declared null and void. He
alleged that they had no marriage license when they got married. He also averred that
at the time he married petitioner, he was still married to Anna Maria. He stated that at
the time he married petitioner the decree of nullity of his marriage to Anna Maria had not
been issued. The decree of nullity of his marriage to Anna Maria was rendered only on
August 4, 1980, while his civil marriage to petitioner took place on April 4, 1979.
Petitioner, in defending her marriage to private respondent, pointed out that his
claim that their marriage was contracted without a valid license is untrue. She submitted
their Marriage License No. 5739990 issued at Rosario, Cavite on April 3, 1979, as Exh.
11, 12 and 12-A. He did not question this document when it was submitted in
evidence. Petitioner also submitted the decision of the Juvenile and Domestic Relations
Court of Quezon City dated August 4, 1980, which declared null and void his civil
marriage to Anna Maria Regina Villanueva celebrated on March 29, 1977, and his
church marriage to said Anna Maria on August 27, 1977. These documents were
submitted as evidence during trial and, according to petitioner, are therefore deemed
sufficient proof of the facts therein. The fact that the civil marriage of private respondent

and petitioner took place on April 4, 1979, before the judgment declaring his prior
marriage as null and void is undisputed. It also appears indisputable that private
respondent and petitioner had a church wedding ceremony on April 4, 1982.
[1]

The Pasig RTC sustained private respondents civil suit and declared his marriage to
herein petitioner null and void ab initio in its decision dated November 4, 1991. Both
parties appealed to respondent Court of Appeals. On July 24, 1996, the appellate court
affirmed the trial courts decision. It ruled that a judicial declaration of nullity of the first
marriage (to Anna Maria) must first be secured before a subsequent marriage could be
validly contracted. Said the appellate court:

We can accept, without difficulty, the doctrine cited by defendants counsel that
no judicial decree is necessary to establish the invalidity of void marriages. It
does not say, however, that a second marriage may proceed even without a
judicial decree. While it is true that if a marriage is null and void, ab initio,
there is in fact no subsisting marriage, we are unwilling to rule that the matter
of whether a marriage is valid or not is for each married spouse to determine
for himself for this would be the consequence of allowing a spouse to proceed
to a second marriage even before a competent court issues a judicial decree
of nullity of his first marriage. The results would be disquieting, to say the
least, and could not have been the intendment of even the now-repealed
provisions of the Civil Code on marriage.
xxx

WHEREFORE, upon the foregoing ratiocination, We modify the appealed

Decision in this wise:
1. The marriage contracted by plaintiff-appellant [herein private respondent] Eduardo
M. Reyes and defendant-appellant [herein petitioner] Ofelia P. Ty is declared null
and void ab initio;
2. Plaintiff-appellant Eduardo M. Reyes is ordered to give monthly support in the
amount of P15,000.00 to his children Faye Eloise Reyes and Rachel Anne Reyes
from November 4, 1991; and
3. Cost against plaintiff-appellant Eduardo M. Reyes.

SO ORDERED.

[2]

Petitioners motion for reconsideration was denied. Hence, this instant petition
asserting that the Court of Appeals erred:
I.

BOTH IN THE DECISION AND THE RESOLUTION, IN REQUIRING FOR

THE VALIDITY OF PETITIONERS MARRIAGE TO RESPONDENT, A
JUDICIAL DECREE NOT REQUIRED BY LAW.
II

IN THE RESOLUTION, IN APPLYING THE RULING IN DOMINGO VS.

COURT OF APPEALS.
III

IN BOTH THE DECISION AND RESOLUTION IN NOT CONSIDERING THE

CIVIL EFFECTS OF THE RELIGIOUS RATIFICATION WHICH USED THE
SAME MARRIAGE LICENSE.
IV

IN THE DECISION NOT GRANTING MORAL AND EXEMPLARY DAMAGES

TO THE DEFENDANT-APPELLANT.
The principal issue in this case is whether the decree of nullity of the first marriage
is required before a subsequent marriage can be entered into validly? To resolve this
question, we shall go over applicable laws and pertinent cases to shed light on the
assigned errors, particularly the first and the second which we shall discuss jointly.
In sustaining the trial court, the Court of Appeals declared the marriage of petitioner
to private respondent null and void for lack of a prior judicial decree of nullity of the
marriage between private respondent and Villanueva. The appellate court rejected
petitioners claim that People v. Mendoza and People v. Aragon are applicable in this
case. For these cases held that where a marriage is void from its performance, no
judicial decree is necessary to establish its invalidity. But the appellate court said these
cases, decided before the enactment of the Family Code (E.O. No. 209 as amended by
E.O No. 227), no longer control. A binding decree is now needed and must be read into
the provisions of law previously obtaining.
[3]

[4]

[5]

In refusing to consider petitioners appeal favorably, the appellate court also said:

Terre v. Attorney Terre, Adm. Case No. 2349, 3 July 1992 is mandatory
precedent for this case. Although decided by the High Court in 1992, the facts
situate it within the regime of the now-repealed provisions of the Civil Code,
as in the instant case.
xxx

For purposes of determining whether a person is legally free to contract a

second marriage, a judicial declaration that the first marriage was null and
void ab initio is essential. . . .
[6]

At the outset, we must note that private respondents first and second marriages
contracted in 1977 and 1979, respectively, are governed by the provisions of the Civil
Code. The present case differs significantly from the recent cases of Bobis v.
Bobis and Mercado v. Tan, both involving a criminal case for bigamy where the bigamous
marriage was contracted during the effectivity of the Family Code, under which a
judicial declaration of nullity of marriage is clearly required.
[7]

[8]

[9]

Pertinent to the present controversy, Article 83 of the Civil Code provides that:

Art. 83. Any marriage subsequently contracted by any person during the
lifetime of the first spouse of such person with any person other than such first
spouse shall be illegal and void from its performance, unless:
(1) The first marriage was annulled or dissolved; or
(2) The first spouse had been absent for seven consecutive years at the time
of the second marriage without the spouse present having news of the
absentee being alive, or if the absentee, though he has been absent for less
than seven years, is generally considered as dead and before any person
believed to be so by the spouse present at the time of contracting such
subsequent marriage, or if the absentee is presumed dead according to
articles 390 and 391. The marriage so contracted shall be valid in any of the
three cases until declared null and void by a competent court.
As to whether a judicial declaration of nullity of a void marriage is necessary, the
Civil Code contains no express provision to that effect. Jurisprudence on the matter,
however, appears to be conflicting.

Originally, in People v. Mendoza, and People v. Aragon, this Court held that no
judicial decree is necessary to establish the nullity of a void marriage. Both cases
involved the same factual milieu. Accused contracted a second marriage during the
subsistence of his first marriage. After the death of his first wife, accused contracted a
third marriage during the subsistence of the second marriage. The second wife initiated
a complaint for bigamy. The Court acquitted accused on the ground that the second
marriage is void, having been contracted during the existence of the first
marriage. There is no need for a judicial declaration that said second marriage is
void. Since the second marriage is void, and the first one terminated by the death of his
wife, there are no two subsisting valid marriages. Hence, there can be no
bigamy. Justice Alex Reyes dissented in both cases, saying that it is not for the spouses
but the court to judge whether a marriage is void or not.
[10]

[11]

In Gomez v. Lipana, and Consuegra v. Consuegra, however, we recognized the

right of the second wife who entered into the marriage in good faith, to share in their
acquired estate and in proceeds of the retirement insurance of the husband. The Court
observed that although the second marriage can be presumed to be void ab initio as it
was celebrated while the first marriage was still subsisting, still there was a need for
judicial declaration of such nullity (of the second marriage). And since the death of the
husband supervened before such declaration, we upheld the right of the second wife to
share in the estate they acquired, on grounds of justice and equity.
[12]

[13]

[14]

But in Odayat v. Amante (1977), the Court adverted to Aragon and Mendoza as
precedents. We exonerated a clerk of court of the charge of immorality on the ground
that his marriage to Filomena Abella in October of 1948 was void, since she was
already previously married to one Eliseo Portales in February of the same year. The
Court held that no judicial decree is necessary to establish the invalidity of void
marriages. This ruling was affirmed in Tolentino v. Paras.
[15]

[16]

Yet again in Wiegel v. Sempio-Diy (1986), the Court held that there is a need for a
judicial declaration of nullity of a void marriage. In Wiegel, Lilia married Maxion in
1972. In 1978, she married another man, Wiegel. Wiegel filed a petition with the
Juvenile Domestic Relations Court to declare his marriage to Lilia as void on the ground
of her previous valid marriage.The Court, expressly relying on Consuegra, concluded
that:
[17]

[18]

There is likewise no need of introducing evidence about the existing prior marriage
of her first husband at the time they married each other, for then such a marriage
though void still needs according to this Court a judicial declaration (citing Consuegra)
of such fact and for all legal intents and purposes she would still be regarded as a
married woman at the time she contracted her marriage with respondent Karl Heinz

Wiegel; accordingly, the marriage of petitioner and respondent would be regarded VOID
under the law. (Emphasis supplied).
In Yap v. Court of Appeals, however, the Court found the second marriage void
without
need
of
judicial
declaration,
thus
reverting
to
the Odayat,
Mendoza and Aragon rulings.
[19]

At any rate, the confusion under the Civil Code was put to rest under the Family
Code. Our rulings in Gomez, Consuegra, and Wiegel were eventually embodied in
Article 40 of the Family Code. Article 40 of said Code expressly required a judicial
declaration of nullity of marriage
[20]

Art. 40. The absolute nullity of a previous marriage may be invoked for
purposes of remarriage on the basis solely of a final judgment declaring such
previous marriage void.
In Terre
v.
Terre (1992) the
Court,
applying Gomez,
Consuegra and Wiegel, categorically stated that a judicial declaration of nullity of a void
marriage is necessary. Thus, we disbarred a lawyer for contracting a bigamous
marriage during the subsistence of his first marriage. He claimed that his first marriage
in 1977 was void since his first wife was already married in 1968. We held that Atty.
Terre should have known that the prevailing case law is that for purposes of determining
whether a person is legally free to contract a second marriage, a judicial declaration that
the first marriage was null and void ab initio is essential.
[21]

The Court applied this ruling in subsequent cases. In Domingo v. Court of

Appeals (1993), the Court held:
[22]

Came the Family Code which settled once and for all the conflicting
jurisprudence on the matter. A declaration of absolute nullity of marriage is
now explicitly required either as a cause of action or a ground for
defense. (Art. 39 of the Family Code). Where the absolute nullity of a previous
marriage is sought to be invoked for purposes of contracting a second
marriage, the sole basis acceptable in law for said projected marriage to be
free from legal infirmity is a final judgment declaring the previous marriage
void. (Family Code, Art. 40; See also arts. 11, 13, 42, 44, 48, 50, 52, 54, 86,
99, 147, 148).
[23]

However, a recent case applied the old rule because of the peculiar circumstances
of the case. In Apiag v. Cantero, (1997) the first wife charged a municipal trial judge of
[24]

immorality for entering into a second marriage. The judge claimed that his first marriage
was void since he was merely forced into marrying his first wife whom he got
pregnant. On
the
issue
of
nullity
of
the
first
marriage,
we
applied Odayat, Mendoza and Aragon. We held that since the second marriage took
place and all the children thereunder were born before the promulgation of Wiegel and
the effectivity of the Family Code, there is no need for a judicial declaration of nullity of
the first marriage pursuant to prevailing jurisprudence at that time.
Similarly, in the present case, the second marriage of private respondent was
entered into in 1979, before Wiegel. At that time, the prevailing rule was found
in Odayat, Mendoza andAragon. The first marriage of private respondent being void for
lack of license and consent, there was no need for judicial declaration of its nullity
before he could contract a second marriage. In this case, therefore, we conclude that
private respondents second marriage to petitioner is valid.
Moreover, we find that the provisions of the Family Code cannot be retroactively
applied to the present case, for to do so would prejudice the vested rights of petitioner
and of her children. As held in Jison v. Court of Appeals, the Family Code has
retroactive effect unless there be impairment of vested rights. In the present case, that
impairment of vested rights of petitioner and the children is patent. Additionally, we are
not quite prepared to give assent to the appellate courts finding that despite private
respondents deceit and perfidy in contracting marriage with petitioner, he could benefit
from her silence on the issue. Thus, coming now to the civil effects of the church
ceremony wherein petitioner married private respondent using the marriage license
used three years earlier in the civil ceremony, we find that petitioner now has raised this
matter properly. Earlier petitioner claimed as untruthful private respondents allegation
that he wed petitioner but they lacked a marriage license. Indeed we find there was a
marriage license, though it was the same license issued on April 3, 1979 and used in
both the civil and the church rites. Obviously, the church ceremony was confirmatory of
their civil marriage. As petitioner contends, the appellate court erred when it refused to
recognize the validity and salutary effects of said canonical marriage on a technicality,
i.e. that petitioner had failed to raise this matter as affirmative defense during trial. She
argues
that
such
failure
does
not
prevent
the
appellate
court
from giving her defense due consideration and weight. She adds that the interest of the
State in protecting the inviolability of marriage, as a legal and social institution,
outweighs such technicality. In our view, petitioner and private respondent had complied
with all the essential and formal requisites for a valid marriage, including the
requirement of a valid license in the first of the two ceremonies. That this license was
used legally in the celebration of the civil ceremony does not detract from the
ceremonial use thereof in the church wedding of the same parties to the marriage, for
we hold that the latter rites served not only to ratify but also to fortify the first. The
[25]

appellate court might have its reasons for brushing aside this possible defense of the
defendant below which undoubtedly could have tendered a valid issue, but which was
not timely interposed by her before the trial court. But we are now persuaded we cannot
play blind to the absurdity, if not inequity, of letting the wrongdoer profit from what the
CA calls his own deceit and perfidy.
On the matter of petitioners counterclaim for damages and attorneys fees. Although
the appellate court admitted that they found private respondent acted duplicitously and
craftily in marrying petitioner, it did not award moral damages because the latter did not
adduce evidence to support her claim.
[26]

Like the lower courts, we are also of the view that no damages should be awarded
in the present case, but for another reason. Petitioner wants her marriage to private
respondent held valid and subsisting. She is suing to maintain her status as legitimate
wife. In the same breath, she asks for damages from her husband for filing a baseless
complaint for annulment of their marriage which caused her mental anguish, anxiety,
besmirched reputation, social humiliation and alienation from her parents. Should we
grant her prayer, we would have a situation where the husband pays the wife damages
from conjugal or common funds. To do so, would make the application of the law
absurd. Logic, if not common sense, militates against such incongruity.Moreover, our
laws do not comprehend an action for damages between husband and wife merely
because of breach of a marital obligation. There are other remedies.
[27]

[28]

WHEREFORE, the petition is GRANTED. The assailed Decision of the Court of

Appeals dated July 24, 1996 and its Resolution dated November 7, 1996, are reversed
partially, so that the marriage of petitioner Ofelia P. Ty and private respondent Edgardo
M. Reyes is hereby DECLARED VALID AND SUBSISTING; and the award of the
amount of P15,000.00 is RATIFIED and MAINTAINED as monthly support to their two
children, Faye Eloise Reyes and Rachel Anne Reyes, for as long as they are of minor
age or otherwise legally entitled thereto. Costs against private respondent.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Buena, and De Leon, Jr., JJ., concur.

G.R. No. L-30642 April 30, 1985

PERFECTO S. FLORESCA, in his own behalf and on behalf of the minors ROMULO and
NESTOR S. FLORESCA; and ERLINDA FLORESCA-GABUYO, PEDRO S. FLORESCA, JR.,
CELSO S. FLORESCA, MELBA S. FLORESCA, JUDITH S. FLORESCA and CARMEN S.
FLORESCA;
LYDIA CARAMAT VDA. DE MARTINEZ in her own behalf and on behalf of her minor children
LINDA, ROMEO, ANTONIO JEAN and ELY, all surnamed Martinez; and DANIEL MARTINEZ and
TOMAS MARTINEZ;
SALUSTIANA ASPIRAS VDA. DE OBRA, in her own behalf and on behalf of her minor children
JOSE, ESTELA, JULITA SALUD and DANILO, all surnamed OBRA;
LYDIA CULBENGAN VDA. DE VILLAR, in her own behalf and on behalf of her minor children
EDNA, GEORGE and LARRY III, all surnamed VILLAR;
DOLORES LOLITA ADER VDA. DE LANUZA, in her own behalf and on behalf of her minor
children EDITHA, ELIZABETH, DIVINA, RAYMUNDO, NESTOR and AURELIO, JR. all surnamed
LANUZA;
EMERENCIANA JOSE VDA. DE ISLA, in her own behalf and on behalf of her minor children
JOSE, LORENZO, JR., MARIA, VENUS and FELIX, all surnamed ISLA, petitioners,
vs.
PHILEX MINING CORPORATION and HON. JESUS P. MORFE, Presiding Judge of Branch XIII,
Court of First Instance of Manila, respondents.
Rodolfo C. Pacampara for petitioners.
Tito M. Villaluna for respondents.

MAKASIAR, J.:

This is a petition to review the order of the former Court of First Instance of Manila, Branch XIII,
dated December 16, 1968 dismissing petitioners' complaint for damages on the ground of lack of
jurisdiction.
Petitioners are the heirs of the deceased employees of Philex Mining Corporation (hereinafter
referred to as Philex), who, while working at its copper mines underground operations at Tuba,
Benguet on June 28, 1967, died as a result of the cave-in that buried them in the tunnels of the
mine. Specifically, the complaint alleges that Philex, in violation of government rules and regulations,
negligently and deliberately failed to take the required precautions for the protection of the lives of its
men working underground. Portion of the complaint reads:
xxx xxx xxx
9. That for sometime prior and up to June 28,1967, the defendant PHILEX, with
gross and reckless negligence and imprudence and deliberate failure to take the
required precautions for the due protection of the lives of its men working
underground at the time, and in utter violation of the laws and the rules and
regulations duly promulgated by the Government pursuant thereto, allowed great
amount of water and mud to accumulate in an open pit area at the mine above Block
43-S-1 which seeped through and saturated the 600 ft. column of broken ore and
rock below it, thereby exerting tremendous pressure on the working spaces at its
4300 level, with the result that, on the said date, at about 4 o'clock in the afternoon,
with the collapse of all underground supports due to such enormous pressure,
approximately 500,000 cubic feet of broken ores rocks, mud and water, accompanied
by surface boulders, blasted through the tunnels and flowed out and filled in, in a
matter of approximately five (5) minutes, the underground workings, ripped timber
supports and carried off materials, machines and equipment which blocked all
avenues of exit, thereby trapping within its tunnels of all its men above referred to,
including those named in the next preceding paragraph, represented by the plaintiffs
herein;
10. That out of the 48 mine workers who were then working at defendant PHILEX's
mine on the said date, five (5) were able to escape from the terrifying holocaust; 22
were rescued within the next 7 days; and the rest, 21 in number, including those
referred to in paragraph 7 hereinabove, were left mercilessly to their fate,
notwithstanding the fact that up to then, a great many of them were still alive,
entombed in the tunnels of the mine, but were not rescued due to defendant
PHILEX's decision to abandon rescue operations, in utter disregard of its bounden
legal and moral duties in the premises;
xxx xxx xxx
13. That defendant PHILEX not only violated the law and the rules and regulations
duly promulgated by the duly constituted authorities as set out by the Special
Committee above referred to, in their Report of investigation, pages 7-13, Annex 'B'
hereof, but also failed completely to provide its men working underground the

necessary security for the protection of their lives notwithstanding the fact that it had
vast financial resources, it having made, during the year 1966 alone, a total operating
income of P 38,220,254.00, or net earnings, after taxes of P19,117,394.00, as per its
llth Annual Report for the year ended December 31, 1966, and with aggregate assets
totalling P 45,794,103.00 as of December 31, 1966;
xxx xxx xxx
(pp. 42-44, rec.)
A motion to dismiss dated May 14, 1968 was filed by Philex alleging that the causes of action of
petitioners based on an industrial accident are covered by the provisions of the Workmen's
Compensation Act (Act 3428, as amended by RA 772) and that the former Court of First Instance
has no jurisdiction over the case. Petitioners filed an opposition dated May 27, 1968 to the said
motion to dismiss claiming that the causes of action are not based on the provisions of the
Workmen's Compensation Act but on the provisions of the Civil Code allowing the award of actual,
moral and exemplary damages, particularly:
Art. 2176. Whoever by act or omission causes damage to another, there being fault
or negligence, is obliged to pay for the damage done. Such fault or negligence, if
there is no pre- existing contractual relation between the parties, is called a quasidelict and is governed by the provisions of this Chapter.
Art. 2178. The provisions of articles 1172 to 1174 are also applicable to a quasidelict.
(b) Art. 1173The fault or negligence of the obligor consists in the omission of that
diligence which is required by the nature of the obligation and corresponds with the
circumstances of the persons, of the time and of the place. When negligence shows
bad faith, the provisions of Articles 1171 and 2201, paragraph 2 shall apply.
Art. 2201. x x x x x x x x x
In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible
for all damages which may be reasonably attributed to the non-performance of the
obligation.
Art. 2231. In quasi-delicts, exemplary damages may be granted if the defendant
acted with gross negligence.
After a reply and a rejoinder thereto were filed, respondent Judge issued an order dated June 27,
1968 dismissing the case on the ground that it falls within the exclusive jurisdiction of the Workmen's
Compensation Commission. On petitioners' motion for reconsideration of the said order, respondent
Judge, on September 23, 1968, reconsidered and set aside his order of June 27, 1968 and allowed
Philex to file an answer to the complaint. Philex moved to reconsider the aforesaid order which was
opposed by petitioners.

On December 16, 1968, respondent Judge dismissed the case for lack of jurisdiction and ruled that
in accordance with the established jurisprudence, the Workmen's Compensation Commission has
exclusive original jurisdiction over damage or compensation claims for work-connected deaths or
injuries of workmen or employees, irrespective of whether or not the employer was negligent, adding
that if the employer's negligence results in work-connected deaths or injuries, the employer shall,
pursuant to Section 4-A of the Workmen's Compensation Act, pay additional compensation equal to
50% of the compensation fixed in the Act.
Petitioners thus filed the present petition.
In their brief, petitioners raised the following assignment of errors:
I
THE LOWER COURT ERRED IN DISMISSING THE PLAINTIFFS- PETITIONERS'
COMPLAINT FOR LACK OF JURISDICTION.
II
THE LOWER COURT ERRED IN FAILING TO CONSIDER THE CLEAR
DISTINCTION BETWEEN CLAIMS FOR DAMAGES UNDER THE CIVIL CODE AND
CLAIMS FOR COMPENSATION UNDER THE WORKMEN'S COMPENSATION ACT.
A
In the first assignment of error, petitioners argue that the lower court has jurisdiction over the cause
of action since the complaint is based on the provisions of the Civil Code on damages, particularly
Articles 2176, 2178, 1173, 2201 and 2231, and not on the provisions of the Workmen's
Compensation Act. They point out that the complaint alleges gross and brazen negligence on the
part of Philex in failing to take the necessary security for the protection of the lives of its employees
working underground. They also assert that since Philex opted to file a motion to dismiss in the
court a quo, the allegations in their complaint including those contained in the annexes are deemed
admitted.
In the second assignment of error, petitioners asseverate that respondent Judge failed to see the
distinction between the claims for compensation under the Workmen's Compensation Act and the
claims for damages based on gross negligence of Philex under the Civil Code. They point out that
workmen's compensation refers to liability for compensation for loss resulting from injury, disability or
death of the working man through industrial accident or disease, without regard to the fault or
negligence of the employer, while the claim for damages under the Civil Code which petitioners
pursued in the regular court, refers to the employer's liability for reckless and wanton negligence
resulting in the death of the employees and for which the regular court has jurisdiction to adjudicate
the same.
On the other hand, Philex asserts that work-connected injuries are compensable exclusively under
the provisions of Sections 5 and 46 of the Workmen's Compensation Act, which read:

SEC. 5. Exclusive right to compensation.The rights and remedies granted by this

Act to an employee by reason of a personal injury entitling him to compensation shall
exclude all other rights and remedies accruing to the employee, his personal
representatives, dependents or nearest of kin against the employer under the Civil
Code and other laws because of said injury ...
SEC. 46. Jurisdiction. The Workmen's Compensation Commissioner shall have
exclusive jurisdiction to hear and decide claims for compensation under the
Workmen's Compensation Act, subject to appeal to the Supreme Court, ...
Philex cites the case of Manalo vs. Foster Wheeler (98 Phil. 855 [1956]) where it was held that "all
claims of workmen against their employer for damages due to accident suffered in the course of
employment shall be investigated and adjudicated by the Workmen's Compensation Commission,"
subject to appeal to the Supreme Court.
Philex maintains that the fact that an employer was negligent, does not remove the case from the
exclusive character of recoveries under the Workmen's Compensation Act; because Section 4-A of
the Act provides an additional compensation in case the employer fails to comply with the
requirements of safety as imposed by law to prevent accidents. In fact, it points out that Philex
voluntarily paid the compensation due the petitioners and all the payments have been accepted in
behalf of the deceased miners, except the heirs of Nazarito Floresca who insisted that they are
entitled to a greater amount of damages under the Civil Code.
In the hearing of this case, then Undersecretary of Labor Israel Bocobo, then Atty. Edgardo Angara,
now President of the University of the Philippines, Justice Manuel Lazaro, as corporate counsel and
Assistant General Manager of the GSIS Legal Affairs Department, and Commissioner on Elections,
formerly UP Law Center Director Froilan Bacungan, appeared as amici curiae and thereafter,
submitted their respective memoranda.
The issue to be resolved as WE stated in the resolution of November 26, 1976, is:
Whether the action of an injured employee or worker or that of his heirs in case of his
death under the Workmen's Compensation Act is exclusive, selective or cumulative,
that is to say, whether his or his heirs' action is exclusively restricted to seeking the
limited compensation provided under the Workmen's Compensation Act or whether
they have a right of selection or choice of action between availing of the worker's
right under the Workmen's Compensation Act and suing in the regular courts under
the Civil Code for higher damages (actual, moral and/or exemplary) from the
employer by virtue of negligence (or fault) of the employer or of his other employees
or whether they may avail cumulatively of both actions, i.e., collect the limited
compensation under the Workmen's Compensation Act and sue in addition for
damages in the regular courts.
There are divergent opinions in this case. Justice Lazaro is of the opinion that an injured employee
or worker, or the heirs in case of his death, may initiate a complaint to recover damages (not
compensation under the Workmen's Compensation Act) with the regular court on the basis of

negligence of an employer pursuant to the Civil Code provisions. Atty. Angara believes otherwise. He
submits that the remedy of an injured employee for work-connected injury or accident is exclusive in
accordance with Section 5 of the Workmen's Compensation Act, while Atty. Bacungan's position is
that the action is selective. He opines that the heirs of the employee in case of his death have a right
of choice to avail themselves of the benefits provided under the Workmen's Compensation Act or to
sue in the regular court under the Civil Code for higher damages from the employer by virtue of
negligence of the latter. Atty. Bocobo's stand is the same as that of Atty. Bacungan and adds that
once the heirs elect the remedy provided for under the Act, they are no longer entitled to avail
themselves of the remedy provided for under the Civil Code by filing an action for higher damages in
the regular court, and vice versa.
On August 3, 1978, petitioners-heirs of deceased employee Nazarito Floresca filed a motion to
dismiss on the ground that they have amicably settled their claim with respondent Philex. In the
resolution of September 7, 1978, WE dismissed the petition only insofar as the aforesaid petitioners
are connected, it appearing that there are other petitioners in this case.
WE hold that the former Court of First Instance has jurisdiction to try the case,
It should be underscored that petitioners' complaint is not for compensation based on the Workmen's
Compensation Act but a complaint for damages (actual, exemplary and moral) in the total amount of
eight hundred twenty-five thousand (P825,000.00) pesos. Petitioners did not invoke the provisions of
the Workmen's Compensation Act to entitle them to compensation thereunder. In fact, no allegation
appeared in the complaint that the employees died from accident arising out of and in the course of
their employments. The complaint instead alleges gross and reckless negligence and deliberate
failure on the part of Philex to protect the lives of its workers as a consequence of which a cave-in
occurred resulting in the death of the employees working underground. Settled is the rule that in
ascertaining whether or not the cause of action is in the nature of workmen's compensation claim or
a claim for damages pursuant to the provisions of the Civil Code, the test is the averments or
allegations in the complaint (Belandres vs. Lopez Sugar Mill, Co., Inc., 97 Phil. 100).
In the present case, there exists between Philex and the deceased employees a contractual
relationship. The alleged gross and reckless negligence and deliberate failure that amount to bad
faith on the part of Philex, constitute a breach of contract for which it may be held liable for damages.
The provisions of the Civil Code on cases of breach of contract when there is fraud or bad faith,
read:
Art. 2232. In contracts and quasi-contracts, the court may award exemplary damages
if the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent
manner.
Art. 2201. In contracts and quasi-contracts, the damages for which the obligor who
acted in good faith is able shall be those that are the natural and probable
consequences of the breach of the obligation, and which the parties have foreseen or
could have reasonably foreseen at the time the obligation was constituted.

In cases of fraud, bad faith, malice or wanton attitude, the obligor shall be
responsible for all damages which may be reasonably attributed to the nonperformance of the obligation.
Furthermore, Articles 2216 et seq., Civil Code, allow the payment of all kinds of damages, as
assessed by the court.
The rationale in awarding compensation under the Workmen's Compensation Act differs from that in
giving damages under the Civil Code. The compensation acts are based on a theory of
compensation distinct from the existing theories of damages, payments under the acts being made
as compensation and not as damages (99 C.J.S. 53). Compensation is given to mitigate the
harshness and insecurity of industrial life for the workman and his family. Hence, an employer is
liable whether negligence exists or not since liability is created by law. Recovery under the Act is not
based on any theory of actionable wrong on the part of the employer (99 C.J.S. 36).
In other words, under the compensation acts, the employer is liable to pay compensation benefits for
loss of income, as long as the death, sickness or injury is work-connected or work-aggravated, even
if the death or injury is not due to the fault of the employer (Murillo vs. Mendoza, 66 Phil. 689). On
the other hand, damages are awarded to one as a vindication of the wrongful invasion of his rights. It
is the indemnity recoverable by a person who has sustained injury either in his person, property or
relative rights, through the act or default of another (25 C.J.S. 452).
The claimant for damages under the Civil Code has the burden of proving the causal relation
between the defendant's negligence and the resulting injury as well as the damages suffered. While
under the Workmen's Compensation Act, there is a presumption in favor of the deceased or injured
employee that the death or injury is work-connected or work-aggravated; and the employer has the
burden to prove otherwise (De los Angeles vs. GSIS, 94 SCRA 308; Carino vs. WCC, 93 SCRA 551;
Maria Cristina Fertilizer Corp. vs. WCC, 60 SCRA 228).
The claim of petitioners that the case is not cognizable by the Workmen's Compensation
Commission then, now Employees Compensation Commission, is strengthened by the fact that
unlike in the Civil Code, the Workmen's Compensation Act did not contain any provision for an award
of actual, moral and exemplary damages. What the Act provided was merely the right of the heirs to
claim limited compensation for the death in the amount of six thousand (P6,000.00) pesos plus burial
expenses of two hundred (P200.00) pesos, and medical expenses when incurred (Sections 8, 12
and 13, Workmen's Compensation Act), and an additional compensation of only 50% if the complaint
alleges failure on the part of the employer to "install and maintain safety appliances or to take other
precautions for the prevention of accident or occupational disease" (Section 4-A, Ibid.). In the case
at bar, the amount sought to be recovered is over and above that which was provided under the
Workmen's Compensation Act and which cannot be granted by the Commission.
Moreover, under the Workmen's Compensation Act, compensation benefits should be paid to an
employee who suffered an accident not due to the facilities or lack of facilities in the industry of his
employer but caused by factors outside the industrial plant of his employer. Under the Civil Code, the
liability of the employer, depends on breach of contract or tort. The Workmen's Compensation Act
was specifically enacted to afford protection to the employees or workmen. It is a social legislation

designed to give relief to the workman who has been the victim of an accident causing his death or
ailment or injury in the pursuit of his employment (Abong vs. WCC, 54 SCRA 379).
WE now come to the query as to whether or not the injured employee or his heirs in case of death
have a right of selection or choice of action between availing themselves of the worker's right under
the Workmen's Compensation Act and suing in the regular courts under the Civil Code for higher
damages (actual, moral and exemplary) from the employers by virtue of that negligence or fault of
the employers or whether they may avail themselves cumulatively of both actions, i.e., collect the
limited compensation under the Workmen's Compensation Act and sue in addition for damages in
the regular courts.
In disposing of a similar issue, this Court in Pacana vs. Cebu Autobus Company, 32 SCRA 442,
ruled that an injured worker has a choice of either to recover from the employer the fixed amounts
set by the Workmen's Compensation Act or to prosecute an ordinary civil action against the
tortfeasor for higher damages but he cannot pursue both courses of action simultaneously.
In Pacaa WE said:
In the analogous case of Esguerra vs. Munoz Palma, involving the application of
Section 6 of the Workmen's Compensation Act on the injured workers' right to sue
third- party tortfeasors in the regular courts, Mr. Justice J.B.L. Reyes, again speaking
for the Court, pointed out that the injured worker has the choice of remedies but
cannot pursue both courses of action simultaneously and thus balanced the relative
advantage of recourse under the Workmen's Compensation Act as against an
ordinary action.
As applied to this case, petitioner Esguerra cannot maintain his action for damages
against the respondents (defendants below), because he has elected to seek
compensation under the Workmen's Compensation Law, and his claim (case No.
44549 of the Compensation Commission) was being processed at the time he filed
this action in the Court of First Instance. It is argued for petitioner that as the
damages recoverable under the Civil Code are much more extensive than the
amounts that may be awarded under the Workmen's Compensation Act, they should
not be deemed incompatible. As already indicated, the injured laborer was initially
free to choose either to recover from the employer the fixed amounts set by the
Compensation Law or else, to prosecute an ordinary civil action against the
tortfeasor for higher damages. While perhaps not as profitable, the smaller indemnity
obtainable by the first course is balanced by the claimant's being relieved of the
burden of proving the causal connection between the defendant's negligence and the
resulting injury, and of having to establish the extent of the damage suffered; issues
that are apt to be troublesome to establish satisfactorily. Having staked his fortunes
on a particular remedy, petitioner is precluded from pursuing the alternate course, at
least until the prior claim is rejected by the Compensation Commission. Anyway,
under the proviso of Section 6 aforequoted, if the employer Franklin Baker Company
recovers, by derivative action against the alleged tortfeasors, a sum greater than the

compensation he may have paid the herein petitioner, the excess accrues to the
latter.
Although the doctrine in the case of Esguerra vs. Munoz Palma (104 Phil. 582), applies to third-party
tortfeasor, said rule should likewise apply to the employer-tortfeasor.
Insofar as the heirs of Nazarito Floresca are concerned, as already stated, the petition has been
dismissed in the resolution of September 7, 1978 in view of the amicable settlement reached by
Philex and the said heirs.
With regard to the other petitioners, it was alleged by Philex in its motion to dismiss dated May 14,
1968 before the court a quo, that the heirs of the deceased employees, namely Emerito Obra, Larry
Villar, Jr., Aurelio Lanuza, Lorenzo Isla and Saturnino Martinez submitted notices and claims for
compensation to the Regional Office No. 1 of the then Department of Labor and all of them have
been paid in full as of August 25, 1967, except Saturnino Martinez whose heirs decided that they be
paid in installments (pp. 106-107, rec.). Such allegation was admitted by herein petitioners in their
opposition to the motion to dismiss dated May 27, 1968 (pp. 121-122, rec.) in the lower court, but
they set up the defense that the claims were filed under the Workmen's Compensation Act before
they learned of the official report of the committee created to investigate the accident which
established the criminal negligence and violation of law by Philex, and which report was forwarded
by the Director of Mines to the then Executive Secretary Rafael Salas in a letter dated October 19,
1967 only (p. 76, rec.).
WE hold that although the other petitioners had received the benefits under the Workmen's
Compensation Act, such may not preclude them from bringing an action before the regular court
because they became cognizant of the fact that Philex has been remiss in its contractual obligations
with the deceased miners only after receiving compensation under the Act. Had petitioners been
aware of said violation of government rules and regulations by Philex, and of its negligence, they
would not have sought redress under the Workmen's Compensation Commission which awarded a
lesser amount for compensation. The choice of the first remedy was based on ignorance or a
mistake of fact, which nullifies the choice as it was not an intelligent choice. The case should
therefore be remanded to the lower court for further proceedings. However, should the petitioners be
successful in their bid before the lower court, the payments made under the Workmen's
Compensation Act should be deducted from the damages that may be decreed in their favor.
B
Contrary to the perception of the dissenting opinion, the Court does not legislate in the instant case.
The Court merely applies and gives effect to the constitutional guarantees of social justice then
secured by Section 5 of Article 11 and Section 6 of Article XIV of the 1935 Constitution, and now by
Sections 6, 7, and 9 of Article 11 of the DECLARATION OF PRINCIPLES AND STATE POLICIES of
the 1973 Constitution, as amended, and as implemented by Articles 2176, 2177, 2178, 1173, 2201,
2216, 2231 and 2232 of the New Civil Code of 1950.
To emphasize, the 1935 Constitution declares that:

Sec. 5. The promotion of social justice to insure the well-being and economic security
of all the people should be the concern of the State (Art. II).
Sec. 6. The State shall afford protection to labor, especially to working women, and
minors, and shall regulate the relations between landowner and tenant, and between
labor and capital in industry and in agriculture. The State may provide for compulsory
arbitration (Art. XIV).
The 1973 Constitution likewise commands the State to "promote social justice to insure the dignity,
welfare, and security of all the people "... regulate the use ... and disposition of private property and
equitably diffuse property ownership and profits "establish, maintain and ensure adequate social
services in, the field of education, health, housing, employment, welfare and social security to
guarantee the enjoyment by the people of a decent standard of living" (Sections 6 and 7, Art. II, 1973
Constitution); "... afford protection to labor, ... and regulate the relations between workers and
employers ..., and assure the rights of workers to ... just and humane conditions of work"(Sec. 9, Art.
II, 1973 Constitution, emphasis supplied).
The foregoing constitutional guarantees in favor of labor institutionalized in Section 9 of Article 11 of
the 1973 Constitution and re-stated as a declaration of basic policy in Article 3 of the New Labor
Code, thus:
Art. 3. Declaration of basic policy.The State shall afford protection to labor,
promote full employment, ensure equal work opportunities regardless of sex, race or
creed, and regulate the relations between workers and employers. The State
shall assure the rights of workers to self-organization, collective bargaining, security
of tenure, and just and humane conditions of work. (emphasis supplied).
The aforestated constitutional principles as implemented by the aforementioned articles of the New
Civil Code cannot be impliedly repealed by the restrictive provisions of Article 173 of the New Labor
Code. Section 5 of the Workmen's Compensation Act (before it was amended by R.A. No. 772 on
June 20, 1952), predecessor of Article 173 of the New Labor Code, has been superseded by the
aforestated provisions of the New Civil Code, a subsequent law, which took effect on August 30,
1950, which obey the constitutional mandates of social justice enhancing as they do the rights of the
workers as against their employers. Article 173 of the New Labor Code seems to diminish the rights
of the workers and therefore collides with the social justice guarantee of the Constitution and the
liberal provisions of the New Civil Code.
The guarantees of social justice embodied in Sections 6, 7 and 9 of Article II of the 1973 Constitution
are statements of legal principles to be applied and enforced by the courts. Mr. Justice Robert
Jackson in the case of West Virginia State Board of Education vs. Barnette, with characteristic
eloquence, enunciated:
The very purpose of a Bill of Rights was to withdraw certain subjects from the
vicissitudes of political controversy, to place them beyond the reach of majorities and
officials and to establish them as legal principles to be applied by the courts. One's
right to life, liberty, and property, to free speech, a free press, freedom of worship and

assembly, and other fundamental rights may not be submitted to vote; they depend
on the outcome of no elections (319 U.S. 625, 638, 87 L.ed. 1638, emphasis
supplied).
In case of any doubt which may be engendered by Article 173 of the New Labor Code, both the New
Labor Code and the Civil Code direct that the doubts should be resolved in favor of the workers and
employees.
Thus, Article 4 of the New Labor Code, otherwise known as Presidential Decree No. 442, as
amended, promulgated on May 1, 1974, but which took effect six months thereafter, provides that
"all doubts in the implementation and interpretation of the provisions of this Code, including its
implementing rules and regulations, shall be resolved in favor of labor" (Art. 2, Labor Code).
Article 10 of the New Civil Code states: "In case of doubt in the interpretation or application of laws, it
is presumed that the law-making body intended right and justice to prevail. "
More specifically, Article 1702 of the New Civil Code likewise directs that. "In case of doubt, all labor
legislation and all labor contracts shall be construed in favor of the safety and decent living of the
laborer."
Before it was amended by Commonwealth Act No. 772 on June 20, 1952, Section 5 of the
Workmen's Compensation Act provided:
Sec. 5. Exclusive right to compensation.- The rights and remedies granted by this Act
to an employee by reason of a personal injury entitling him to compensation shall
exclude all other rights and remedies accruing to the employee, his personal
representatives, dependents or nearest of kin against the employer under the Civil
Code and other laws, because of said injury (emphasis supplied).
Employers contracting laborecsrs in the Philippine Islands for work outside the same
may stipulate with such laborers that the remedies prescribed by this Act shall apply
exclusively to injuries received outside the Islands through accidents happening in
and during the performance of the duties of the employment; and all service
contracts made in the manner prescribed in this section shall be presumed to include
such agreement.
Only the second paragraph of Section 5 of the Workmen's Compensation Act No. 3428, was
amended by Commonwealth Act No. 772 on June 20, 1952, thus:
Sec. 5. Exclusive right to compensation.- The rights and remedies granted by this Act
to an employee by reason of a personal injury entitling him to compensation shall
exclude all other rights and remedies accruing to the employee, his personal
representatives, dependents or nearest of kin against the employer under the Civil
Code and other laws, because of said injury.

Employers contracting laborers in the Philippine Islands for work outside the same
shall stipulate with such laborers that the remedies prescribed by this Act shall apply
to injuries received outside the Island through accidents happening in and during the
performance of the duties of the employment. Such stipulation shall not prejudice the
right of the laborers to the benefits of the Workmen's Compensation Law of the place
where the accident occurs, should such law be more favorable to them (As amended
by section 5 of Republic Act No. 772).
Article 173 of the New Labor Code does not repeal expressly nor impliedly the applicable provisions
of the New Civil Code, because said Article 173 provides:
Art. 173. Exclusiveness of liability.- Unless otherwise provided, the liability of the
State Insurance Fund under this Title shall be exclusive and in place of all other
liabilities of the employer to the employee, his dependents or anyone otherwise
entitled to receive damages on behalf of the employee or his dependents. The
payment of compensation under this Title shall bar the recovery of benefits as
provided for in Section 699 of the Revised Administrative Code, Republic Act
Numbered Eleven hundred sixty-one, as amended, Commonwealth Act Numbered
One hundred eighty- six, as amended, Commonwealth Act Numbered Six hundred
ten, as amended, Republic Act Numbered Forty-eight hundred Sixty-four, as
amended, and other laws whose benefits are administered by the System during the
period of such payment for the same disability or death, and conversely (emphasis
supplied).
As above-quoted, Article 173 of the New Labor Code expressly repealed only Section 699 of the
Revised Administrative Code, R.A. No. 1161, as amended, C.A. No. 186, as amended, R.A. No. 610,
as amended, R.A. No. 4864, as amended, and all other laws whose benefits are administered by the
System (referring to the GSIS or SSS).
Unlike Section 5 of the Workmen's Compensation Act as aforequoted, Article 173 of the New Labor
Code does not even remotely, much less expressly, repeal the New Civil Code provisions heretofore
quoted.
It is patent, therefore, that recovery under the New Civil Code for damages arising from negligence,
is not barred by Article 173 of the New Labor Code. And the damages recoverable under the New
Civil Code are not administered by the System provided for by the New Labor Code, which defines
the "System" as referring to the Government Service Insurance System or the Social Security
System (Art. 167 [c], [d] and [e] of the New Labor Code).
Furthermore, under Article 8 of the New Civil Code, decisions of the Supreme Court form part of the
law of the land.
Article 8 of the New Civil Code provides:
Art. 8. Judicial decisions applying or interpreting the laws or the Constitution shall
form a part of the legal system of the Philippines.

The Court, through the late Chief Justice Fred Ruiz Castro, in People vs. Licera ruled:
Article 8 of the Civil Code of the Philippines decrees that judicial decisions applying
or interpreting the laws or the Constitution form part of this jurisdiction's legal system.
These decisions, although in themselves not laws, constitute evidence of what the
laws mean. The application or interpretation placed by the Court upon a law is part of
the law as of the date of the enactment of the said law since the Court's application
or interpretation merely establishes the contemporaneous legislative intent that the
construed law purports to carry into effect" (65 SCRA 270, 272-273 [1975]).
WE ruled that judicial decisions of the Supreme Court assume the same authority as the statute
itself (Caltex vs. Palomer, 18 SCRA 247; 124 Phil. 763).
The aforequoted provisions of Section 5 of the Workmen's Compensation Act, before and after it was
amended by Commonwealth Act No. 772 on June 20, 1952, limited the right of recovery in favor of
the deceased, ailing or injured employee to the compensation provided for therein. Said Section 5
was not accorded controlling application by the Supreme Court in the 1970 case of Pacana vs. Cebu
Autobus Company (32 SCRA 442) when WE ruled that an injured worker has a choice of either to
recover from the employer the fixed amount set by the Workmen's Compensation Act or to prosecute
an ordinary civil action against the tortfeasor for greater damages; but he cannot pursue both
courses of action simultaneously. Said Pacana case penned by Mr. Justice Teehankee, applied
Article 1711 of the Civil Code as against the Workmen's Compensation Act, reiterating the 1969
ruling in the case of Valencia vs. Manila Yacht Club (28 SCRA 724, June 30,1969) and the 1958
case of Esguerra vs. Munoz Palma (104 Phil. 582), both penned by Justice J.B.L. Reyes. Said
Pacana case was concurred in by Justices J.B.L. Reyes, Dizon, Makalintal, Zaldivar, Castro,
Fernando and Villamor.
Since the first sentence of Article 173 of the New Labor Code is merely a re-statement of the first
paragraph of Section 5 of the Workmen's Compensation Act, as amended, and does not even refer,
neither expressly nor impliedly, to the Civil Code as Section 5 of the Workmen's Compensation Act
did, with greater reason said Article 173 must be subject to the same interpretation adopted in the
cases of Pacana, Valencia and Esguerra aforementioned as the doctrine in the aforesaid three (3)
cases is faithful to and advances the social justice guarantees enshrined in both the 1935 and 1973
Constitutions.
It should be stressed likewise that there is no similar provision on social justice in the American
Federal Constitution, nor in the various state constitutions of the American Union. Consequently, the
restrictive nature of the American decisions on the Workmen's Compensation Act cannot limit the
range and compass of OUR interpretation of our own laws, especially Article 1711 of the New Civil
Code, vis-a-vis Article 173 of the New Labor Code, in relation to Section 5 of Article II and Section 6
of Article XIV of the 1935 Constitution then, and now Sections 6, 7 and 9 of the Declaration of
Principles and State Policies of Article II of the 1973 Constitution.
The dissent seems to subordinate the life of the laborer to the property rights of the employer. The
right to life is guaranteed specifically by the due process clause of the Constitution. To relieve the
employer from liability for the death of his workers arising from his gross or wanton fault or failure to

provide safety devices for the protection of his employees or workers against the dangers which are
inherent in underground mining, is to deprive the deceased worker and his heirs of the right to
recover indemnity for the loss of the life of the worker and the consequent loss to his family without
due process of law. The dissent in effect condones and therefore encourages such gross or wanton
neglect on the part of the employer to comply with his legal obligation to provide safety measures for
the protection of the life, limb and health of his worker. Even from the moral viewpoint alone, such
attitude is un-Christian.
It is therefore patent that giving effect to the social justice guarantees of the Constitution, as
implemented by the provisions of the New Civil Code, is not an exercise of the power of law-making,
but is rendering obedience to the mandates of the fundamental law and the implementing legislation
aforementioned.
The Court, to repeat, is not legislating in the instant case.
It is axiomatic that no ordinary statute can override a constitutional provision.
The words of Section 5 of the Workmen's Compensation Act and of Article 173 of the New Labor
Code subvert the rights of the petitioners as surviving heirs of the deceased mining employees.
Section 5 of the Workmen's Compensation Act and Article 173 of the New Labor Code are
retrogressive; because they are a throwback to the obsolete laissez-faire doctrine of Adam Smith
enunciated in 1776 in his treatise Wealth of Nations (Collier's Encyclopedia, Vol. 21, p. 93, 1964),
which has been discarded soon after the close of the 18th century due to the Industrial Revolution
that generated the machines and other mechanical devices (beginning with Eli Whitney's cotton gin
of 1793 and Robert Fulton's steamboat of 1807) for production and transportation which are
dangerous to life, limb and health. The old socio-political-economic philosophy of live-and-let-live is
now superdesed by the benign Christian shibboleth of live-and-help others to live. Those who
profess to be Christians should not adhere to Cain's selfish affirmation that he is not his brother's
keeper. In this our civilization, each one of us is our brother's keeper. No man is an island. To assert
otherwise is to be as atavistic and ante-deluvian as the 1837 case of Prisley vs. Fowler (3 MN 1,150
reprint 1030) invoked by the dissent, The Prisley case was decided in 1837 during the era of
economic royalists and robber barons of America. Only ruthless, unfeeling capitalistics and egoistic
reactionaries continue to pay obeisance to such un-Christian doctrine. The Prisley rule humiliates
man and debases him; because the decision derisively refers to the lowly worker as "servant" and
utilizes with aristocratic arrogance "master" for "employer." It robs man of his inherent dignity and
dehumanizes him. To stress this affront to human dignity, WE only have to restate the quotation from
Prisley, thus: "The mere relation of the master and the servant never can imply an obligation on the
part of the master to take more care of the servant than he may reasonably be expected to do
himself." This is the very selfish doctrine that provoked the American Civil War which generated so
much hatred and drew so much precious blood on American plains and valleys from 1861 to 1864.
"Idolatrous reverence" for the letter of the law sacrifices the human being. The spirit of the law
insures man's survival and ennobles him. In the words of Shakespeare, "the letter of the law killeth;
its spirit giveth life."
C

It is curious that the dissenting opinion clings to the myth that the courts cannot legislate.
That myth had been exploded by Article 9 of the New Civil Code, which provides that "No judge or
court shall decline to render judgment by reason of the silence, obscurity or insufficiency of the laws.
"
Hence, even the legislator himself, through Article 9 of the New Civil Code, recognizes that in certain
instances, the court, in the language of Justice Holmes, "do and must legislate" to fill in the gaps in
the law; because the mind of the legislator, like all human beings, is finite and therefore cannot
envisage all possible cases to which the law may apply Nor has the human mind the infinite capacity
to anticipate all situations.
But about two centuries before Article 9 of the New Civil Code, the founding fathers of the American
Constitution foresaw and recognized the eventuality that the courts may have to legislate to supply
the omissions or to clarify the ambiguities in the American Constitution and the statutes.
'Thus, Alexander Hamilton pragmatically admits that judicial legislation may be justified but denies
that the power of the Judiciary to nullify statutes may give rise to Judicial tyranny (The Federalist,
Modern Library, pp. 503-511, 1937 ed.). Thomas Jefferson went farther to concede that the court is
even independent of the Nation itself (A.F.L. vs. American Sash Company, 1949 335 US 538).
Many of the great expounders of the American Constitution likewise share the same view. Chief
Justice Marshall pronounced: "It is emphatically the province and duty of the Judicial department to
say what the law is (Marbury vs. Madison I Cranch 127 1803), which was re-stated by Chief Justice
Hughes when he said that "the Constitution is what the judge says it is (Address on May 3, 1907,
quoted by President Franklin Delano Roosevelt on March 9, 1937). This was reiterated by Justice
Cardozo who pronounced that "No doubt the limits for the judge are narrower. He legislates only
between gaps. He fills the open spaces in the law. " (The Nature of the Judicial Process, p. 113). In
the language of Chief Justice Harlan F. Stone, "The only limit to the judicial legislation is the restraint
of the judge" (U.S. vs. Butler 297 U.S. 1 Dissenting Opinion, p. 79), which view is also entertained by
Justice Frankfurter and Justice Robert Jackson. In the rhetoric of Justice Frankfurter, "the courts
breathe life, feeble or strong, into the inert pages of the Constitution and all statute books."
It should be stressed that the liability of the employer under Section 5 of the Workmen's
Compensation Act or Article 173 of the New Labor Code is limited to death, ailment or injury caused
by the nature of the work, without any fault on the part of the employers. It is correctly termed no
fault liability. Section 5 of the Workmen's Compensation Act, as amended, or Article 173 of the New
Labor Code, does not cover the tortious liability of the employer occasioned by his fault or culpable
negligence in failing to provide the safety devices required by the law for the protection of the life,
limb and health of the workers. Under either Section 5 or Article 173, the employer remains liable to
pay compensation benefits to the employee whose death, ailment or injury is work-connected, even
if the employer has faithfully and diligently furnished all the safety measures and contrivances
decreed by the law to protect the employee.
The written word is no longer the "sovereign talisman." In the epigrammatic language of Mr. Justice
Cardozo, "the law has outgrown its primitive stage of formalism when the precise word was the

sovereign talisman, and every slip was fatal" (Wood vs. Duff Gordon 222 NW 88; Cardozo, The
Nature of the Judicial Process 100). Justice Cardozo warned that: "Sometimes the conservatism of
judges has threatened for an interval to rob the legislation of its efficacy. ... Precedents established in
those items exert an unhappy influence even now" (citing Pound, Common Law and Legislation 21
Harvard Law Review 383, 387).
Finally, Justice Holmes delivered the coup de grace when he pragmatically admitted, although with a
cautionary undertone: "that judges do and must legislate, but they can do so only interstitially they
are confined from molar to molecular motions" (Southern Pacific Company vs. Jensen, 244 US 204
1917). And in the subsequent case of Springer vs. Government (277 US 188, 210-212, 72 L.ed. 845,
852- 853), Justice Holmes pronounced:
The great ordinances of the Constitution do not establish and divide fields of black
and white. Even the more specific of them are found to terminate in a penumbra
shading gradually from one extreme to the other. x x x. When we come to the
fundamental distinctions it is still more obvious that they must be received with a
certain latitude or our government could not go on.
To make a rule of conduct applicable to an individual who but for such action would
be free from it is to legislate yet it is what the judges do whenever they determine
which of two competing principles of policy shall prevail.
xxx xxx xxx
It does not seem to need argument to show that however we may disguise it by
veiling words we do not and cannot carry out the distinction between legislative and
executive action with mathematical precision and divide the branches into waterlight
compartments, were it ever so desirable to do so, which I am far from believing that it
is, or that the Constitution requires.
True, there are jurists and legal writers who affirm that judges should not legislate, but grudgingly
concede that in certain cases judges do legislate. They criticize the assumption by the courts of such
law-making power as dangerous for it may degenerate into Judicial tyranny. They include
Blackstone, Jeremy Bentham, Justice Black, Justice Harlan, Justice Roberts, Justice David Brewer,
Ronald Dworkin, Rolf Sartorious, Macklin Fleming and Beryl Harold Levy. But said Justices, jurists or
legal commentators, who either deny the power of the courts to legislate in-between gaps of the law,
or decry the exercise of such power, have not pointed to examples of the exercise by the courts of
such law-making authority in the interpretation and application of the laws in specific cases that gave
rise to judicial tyranny or oppression or that such judicial legislation has not protected public interest
or individual welfare, particularly the lowly workers or the underprivileged.
On the other hand, there are numerous decisions interpreting the Bill of Rights and statutory
enactments expanding the scope of such provisions to protect human rights. Foremost among them
is the doctrine in the cases of Miranda vs. Arizona (384 US 436 1964), Gideon vs. Wainright (372 US
335), Escubedo vs. Illinois (378 US 478), which guaranteed the accused under custodial
investigation his rights to remain silent and to counsel and to be informed of such rights as even as it

protects him against the use of force or intimidation to extort confession from him. These rights are
not found in the American Bill of Rights. These rights are now institutionalized in Section 20, Article
IV of the 1973 Constitution. Only the peace-and-order adherents were critical of the activism of the
American Supreme Court led by Chief Justice Earl Warren.
Even the definition of Identical offenses for purposes of the double jeopardy provision was
developed by American judicial decisions, not by amendment to the Bill of Rights on double jeopardy
(see Justice Laurel in People vs. Tarok, 73 Phil. 260, 261-268). And these judicial decisions have
been re-stated in Section 7 of Rule 117 of the 1985 Rules on Criminal Procedure, as well as in
Section 9 of Rule 117 of the 1964 Revised Rules of Court. In both provisions, the second offense is
the same as the first offense if the second offense is an attempt to commit the first or frustration
thereof or necessarily includes or is necessarily included in the first offense.
The requisites of double jeopardy are not spelled out in the Bill of Rights. They were also developed
by judicial decisions in the United States and in the Philippines even before people vs. Ylagan (58
Phil. 851-853).
Again, the equal protection clause was interpreted in the case of Plessy vs. Ferguson (163 US 537)
as securing to the Negroes equal but separate facilities, which doctrine was revoked in the case of
Brown vs. Maryland Board of Education (349 US 294), holding that the equal protection clause
means that the Negroes are entitled to attend the same schools attended by the whites-equal
facilities in the same school-which was extended to public parks and public buses.
De-segregation, not segregation, is now the governing principle.
Among other examples, the due process clause was interpreted in the case of People vs. Pomar (46
Phil. 440) by a conservative, capitalistic court to invalidate a law granting maternity leave to working
women-according primacy to property rights over human rights. The case of People vs. Pomar is no
longer the rule.
As early as 1904, in the case of Lochner vs. New York (198 US 45, 76, 49 L. ed. 937, 949), Justice
Holmes had been railing against the conservatism of Judges perverting the guarantee of due
process to protect property rights as against human rights or social justice for the working man. The
law fixing maximum hours of labor was invalidated. Justice Holmes was vindicated finally in 1936 in
the case of West Coast Hotel vs. Parish (300 US 377-79; 81 L. ed. 703) where the American
Supreme Court upheld the rights of workers to social justice in the form of guaranteed minimum
wage for women and minors, working hours not exceeding eight (8) daily, and maternity leave for
women employees.
The power of judicial review and the principle of separation of powers as well as the rule on political
questions have been evolved and grafted into the American Constitution by judicial decisions
(Marbury vs. Madison, supra Coleman vs. Miller, 307 US 433, 83 L. ed. 1385; Springer vs.
Government, 277 US 210-212, 72 L. ed. 852, 853).
It is noteworthy that Justice Black, who seems to be against judicial legislation, penned a separate
concurring opinion in the case of Coleman vs. Miller, supra, affirming the doctrine of political question

as beyond the ambit of judicial review. There is nothing in both the American and Philippine
Constitutions expressly providing that the power of the courts is limited by the principle of separation
of powers and the doctrine on political questions. There are numerous cases in Philippine
jurisprudence applying the doctrines of separation of powers and political questions and invoking
American precedents.
Unlike the American Constitution, both the 1935 and 1973 Philippine Constitutions expressly vest in
the Supreme Court the power to review the validity or constitutionality of any legislative enactment or
executive act.
WHEREFORE, THE TRIAL COURT'S ORDER OF DISMISSAL IS HEREBY REVERSED AND SET
ASIDE AND THE CASE IS REMANDED TO IT FOR FURTHER PROCEEDINGS. SHOULD A
GREATER AMOUNT OF DAMAGES BE DECREED IN FAVOR OF HEREIN PETITIONERS, THE
PAYMENTS ALREADY MADE TO THEM PURSUANT TO THE WORKMEN'S COMPENSATION
ACT SHALL BE DEDUCTED. NO COSTS.
SO ORDERED.
Fernando, C.J., Teehankee, Plana, Escolin, De la Fuente, Cuevas and Alampay JJ., concur.
Concepcion, Jr., J., is on leave.
Abad Santos and Relova, JJ., took no part.

Separate Opinions

MELENCIO-HERRERA, J., dissenting:

A
This case involves a complaint for damages for the death of five employees of PHILEX Mining
Corporation under the general provisions of the Civil Code. The Civil Code itself, however, provides
for its non-applicability to the complaint. It is specifically provided in Article 2196 of the Code, found
in Title XVIII-Damages that:
COMPENSATION FOR WORKMEN AND OTHER EMPLOYEES IN CASE OF
DEATH, INJURY OR ILLNESS IS REGULATED BY SPECIAL LAWS.
Compensation and damages are synonymous. In Esguerra vs. Muoz Palma, etc., et al., 104 Phil.
582, 586, Justice J.B.L. Reyes had said:

Petitioner also avers that compensation is not damages. This argument is but a play
on words. The term compensation' is used in the law (Act 3812 and Republic Act
772) in the sense of indemnity for damages suffered, being awarded for a personal
injury caused or aggravated by or in the course of employment. ...
By the very provisions of the Civil Code, it is a "special law", not the Code itself, which has to apply
to the complaint involved in the instant case. That "special law", in reference to the complaint, can be
no other than the Workmen's Compensation
Even assuming, without conceding, that an employee is entitled to an election of remedies, as the
majority rules, both options cannot be exercised simultaneously, and the exercise of one will
preclude the exercise of the other. The petitioners had already exercised their option to come under
the Workmen's Compensation Act, and they have already received compensation payable to them
under that Act. Stated differently, the remedy under the Workmen's Compensation Act had already
become a "finished transaction".
There are two considerations why it is believed petitioners should no longer be allowed to exercise
the option to sue under the Civil Code. In the first place, the proceedings under the Workmen's
Compensation Act have already become the law in regards to" the "election of remedies", because
those proceedings had become a "finished transaction".
In the second place, it should be plainly equitable that, if a person entitled to an "election of
remedies" makes a first election and accepts the benefits thereof, he should no longer be allowed to
avail himself of the second option. At the very least, if he wants to make a second election, in
disregard of the first election he has made, when he makes the second election he should surrender
the benefits he had obtained under the first election, This was not done in the case before the Court.
B.
'There is full concurrence on my part with the dissenting opinion of Mr. Justice Gutierrez upholding
"the exclusory provision of the Workmen's Compensation Act." I may further add:
1. The Workmen's Compensation Act (Act No. 3428) was approved on December 10, 1927 and took
effect on June 10, 1928. It was patterned from Minnesota and Hawaii statutes.
Act No. 3428 was adopted by the Philippine legislature, in Spanish and some
sections of the law were taken from the statutes of Minnesota and Hawaii, (Chapter
209 of the Revised Laws of Hawaii, 1925). [Morabe & Inton, Workmen's
Compensation Act, p. 2]
Under the Workmen's Compensation Act of Hawaii, when the Act is applicable, the remedy under the
Act is exclusive The following is stated in 1 Schneider Workmen's Compensation Text, pp. 266, 267.
Sec. 112. Hawaii

Statutory Synopsis. The act is compulsory as to employees in 'all industrial

employment' and employees of the territory and its political subdivisions. (Sections
7480-7481, S.S., Vol. 1, p. 713.)
Compensation is not payable when injury is due to employee's willful intention to
injure himself or another or to his intoxication. (Sec. 7482, S.S., p. 713.)
When the act is applicable the remedy thereunder is exclusive (Sec. 7483, S.S., p.
714.)
2. In providing for exclusiveness of the remedy under our Workmen's Compensation Act, the
Philippine Legislature worded the first paragraph of Section 5 of the Act as follows:
SEC. 5. Exclusive right to compensation.-The rights and remedies granted by this Act
to an employee
by reason of a personal injury entitling him to compensation
shall exclude all other rights and remedies accruing to the employee, his personal
representatives, dependents or nearest of kin against the employer
under the Civil Code and other laws, because of said injury (Paragraphing and
emphasis supplied)
In regards to the intent of the Legislature under the foregoing provision:
A cardinal rule in the interpretation of statutes is that the meaning and intention of the
law-making body must be sought, first of all in the words of the statute itself, read
and considered in their natural, ordinary, commonly-accepted and most obvious
significations, according to good and approved usage and without resorting to forced
or subtle construction Courts, therefore, as a rule, cannot presume that the lawmaking body does not know the meaning of words and the rules of grammar.
Consequently, the grammatical reading of a statute must be presumed to yield its
correct sense. (Espino vs. Cleofe 52 SCRA 92, 98) [Italics supplied]
3. The original second paragraph of Section 5 provided:
Employers contracting laborers in the Philippine Islands for work outside the same
shall stipulate with such laborers that the remedies prescribed by this Act shall apply
exclusively to injuries received outside the Islands through accidents happening in
and during the performance of the duties of the employment. (Italics supplied)
The use of the word "exclusively is a further confirmation of the exclusory provision of the Act,
subject only to exceptions which may be provided in the Act itself.

4. It might be mentioned that, within the Act itself, provision is made for remedies other than within
the Act itself. Thus, Section 6, in part, provides:
SEC. 6. Liability of third parties.-In case an employee suffers an injury for which
compensation is due under this Act by any other person besides his employer, it shall
be optional with such injured employee either to claim compensation from his
employer, under this Act, or sue such other person for damages, in accordance with
law; ... (Emphasis supplied)
If the legislative intent under the first paragraph of Section 5 were to allow the injured employee to
sue his employer under the Civil Code, the legislator could very easily have formulated the said first
paragraph of Section 5 according to the pattern of Section 6. That that was not done shows the
legislative intent not to allow any option to an employee to sue the employer under the Civil Code for
injuries compensable under the Act.
5. There should be no question but that the original first paragraph of Section 5 of the Workmen's
Compensation Act, formulated in 1927, provided that an injured worker or employee, or his heirs, if
entitled to compensation under the Act, cannot have independent recourse neither to the Civil Code
nor to any other law relative to the liability of the employer. After 1927, there were occasions when
the legislator had the opportunity to amend the first paragraph of Section 5 such that the remedies
under the Act would not be exclusive; yet, the legislator refrained from doing so. That shows the
legislatives continuing intent to maintain the exclusory provision of the first paragraph of Section 5
unless otherwise provided in the Act itself.
(a) The original second paragraph of Section 5 provided:
Employers contracting laborers in the Philippine Islands for work outside the same
shall stipulate with such laborers that the remedies prescribed by this Act shall apply
(exclusively) to injuries received outside the Islands through accidents happening in
and during the performance of the duties of the employment (and all service
contracts made in the manner prescribed in this section be presumed to include such
agreement).
On June 20, 1952, through RA 772, the foregoing second paragraph was amended with the
elimination of the underlined words in parentheses, and the addition of this sentence at the end of
the paragraph:
Such stipulation shall not prejudice the right of the laborers to the benefits of the
Workmen's Compensation Law of the place where the accident occurs, should such
law be more favorable to them. (Emphasis supplied)
It will be seen that, within the Act itself, the exclusory character of the Act was amended. At that time,
if he had so desired, the legislator could have amended the first paragraph of Section 5 so that the
employee would have the option to sue the employer under the Act, or under the Civil Code, should
the latter be more favorable to him.

(b) The Workmen's Compensation Act, which took effect in 1927, grants compensation to an injured
employee without regard to the presence or absence of negligence on the part of the employer. The
compensation is deemed an expense chargeable to the industry (Murillo vs. Mendoza, 66 Phil. 689
[1938]).
In time, it must have been thought that it was inequitable to have the amount of compensation,
caused by negligence on the part of the employer, to be the same amount payable when the
employer was not negligent. Based on that thinking, Section 4-A 1 was included into the Act, on June
20, 1952, through RA 772. Said Section 4-A increased the compensation payable by 50% in case there
was negligence on the part of the employer. That additional section evidenced the intent of the legislator
not to give an option to an employee, injured with negligence on the part of the employer, to sue the latter
under the provisions of the Civil Code.
On June 20, 1964, Section 4-A was amended (insubstantially) by RA 4119. The legislator was again
given the opportunity to provide, but he did not, the option to an employee to sue under the Act or
under the Civil Code.
When a Court gives effect to a statute not in accordance with the intent of the law-maker, the Court
is unjustifiably legislating.
It is in view of the foregoing that I vote for affirmation of the trial Court's dismissal of the Complaint.
GUTIERREZ, JR., J., dissenting:
To grant the petition and allow the victims of industrial accidents to file damages suits based on torts
would be a radical innovation not only contrary to the express provisions of the Workmen's
Compensation Act but a departure from the principles evolved in the long history of workmen's
compensation. At the very least, it should be the legislature and not this Court which should remove
the exclusory provision of the Workmen's Compensation Act, a provision reiterated in the present
Labor Code on employees' compensation.
Workmen's compensation evolved to remedy the evils associated with the situation in the early years
of the industrial revolution when injured workingmen had to rely on damage suits to get recompense.
Before workmen's compensation, an injured worker seeking damages would have to prove in a tort
suit that his employer was either negligent or in bad faith, that his injury was caused by the employer
and not a fellow worker, and that he was not guilty of contributory negligence. The employer could
employ not only his wealth in defeating the claim for damages but a host of common law defenses
available to him as well. The worker was supposed to know what he entered into when he accepted
employment. As stated in the leading case of Priestley u. Fowler (3 M. & W. 1, 150 Reprint 1030)
decided in 1837 "the mere relation of the master and the servant never can imply an obligation on
the part of the master to take more care of the servant than he may reasonably be expected to do of
himself." By entering into a contract of employment, the worker was deemed to accept the risks of
employment that he should discover and guard against himself.

The problems associated with the application of the fellow servant rule, the assumption of risk
doctrine, the principle of contributory negligence, and the many other defenses so easily raised in
protracted damage suits illustrated the need for a system whereby workers had only to prove the fact
of covered employment and the fact of injury arising from employment in order to be compensated.
The need for a compensation scheme where liability is created solely by statute and made
compulsory and where the element of fault-either the fault of the employer or the fault of the
employee-disregarded became obvious. Another objective was to have simplified, expeditious,
inexpensive, and non-litigious procedures so that victims of industrial accidents could more readily, if
not automatically, receive compensation for work-related injuries.
Inspite of common law defenses to defeat a claim being recognized, employers' liability acts were a
major step in the desired direction. However, employers liability legislation proved inadequate.
Legislative reform led to the workmen's compensation.
I cite the above familiar background because workmen's compensation represents a compromise. In
return for the near certainty of receiving a sum of money fixed by law, the injured worker gives up the
right to subject the employer to a tort suit for huge amounts of damages. Thus, liability not only
disregards the element of fault but it is also a pre- determined amount based on the wages of the
injured worker and in certain cases, the actual cost of rehabilitation. The worker does not receive the
total damages for his pain and suffering which he could otherwise claim in a civil suit. The employer
is required to act swiftly on compensation claims. An administrative agency supervises the program.
And because the overwhelming mass of workingmen are benefited by the compensation system,
individual workers who may want to sue for big amounts of damages must yield to the interests of
their entire working class.
The nature of the compensation principle is explained as follows:
An appreciation of the nature of the compensation principle is essential to an
understanding of the acts and the cases interpreting them.
By the turn of the century it was apparent that the toll of industrial accidents of both
the avoidable and unavoidable variety had become enormous, and government was
faced with the problem of who was to pay for the human wreckage wrought by the
dangers of modern industry. If the accident was avoidable and could be attributed to
the carelessness of the employer, existing tort principles offered some measure of
redress. Even here, however, the woeful inadequacy of the fault principle was
manifest. The uncertainty of the outcome of torts litigation in court placed the
employee at a substantial disadvantage. So long as liability depended on fault there
could be no recovery until the finger of blame had been pointed officially at the
employer or his agents. In most cases both the facts and the law were uncertain. The
witnesses, who were usually fellow workers of the victim, were torn between
friendship or loyalty to their class, on the one hand, and fear of reprisal by the
employer, on the other. The expense and delay of litigation often prompted the
injured employee to accept a compromise settlement for a fraction of the full value of
his claim. Even if suit were successfully prosecuted, a large share of the proceeds of

the judgment were exacted as contingent fees by counsel. Thus the employer
against whom judgment was cast often paid a substantial damage bill, while only a
part of this enured to the benefit of the injured employee or his dependents. The
employee's judgment was nearly always too little and too late.
xxx xxx xxx
Workmen's Compensation rests upon the economic principle that those persons who
enjoy the product of a business- whether it be in the form of goods or servicesshould ultimately bear the cost of the injuries or deaths that are incident to the
manufacture, preparation and distribution of the product. ...
xxx xxx xxx
Under this approach the element of personal fault either disappears entirely or is
subordinated to broader economic considerations. The employer absorbs the cost of
accident loss only initially; it is expected that this cost will eventually pass down the
stream of commerce in the form of increase price until it is spread in dilution among
the ultimate consumers. So long as each competing unit in a given industry is
uniformly affected, no producer can gain any substantial competitive advantage or
suffer any appreciable loss by reason of the general adoption of the compensation
principle.
In order that the compensation principle may operate properly and with fairness to all
parties it is essential that the anticipated accident cost be predictable and that it be
fixed at a figure that will not disrupt too violently the traffic in the product of the
industry affected. Thus predictability and moderateness of cost are necessary from
the broad economic viewpoint. ....
Compensation, then, differs from the conventional damage suit in two important
respects: Fault on the part of either employer or employee is eliminated; and
compensation payable according to a definitely limited schedule is substituted for
damages. All compensation acts alike work these two major changes, irrespective of
how they may differ in other particulars.
Compensation, when regarded from the viewpoint of employer and employee
represents a compromise in which each party surrenders certain advantages in order
to gain others which are of more importance both to him and to society. The
employer gives up the immunity he otherwise would enjoy in cases where he is not at
fault, and the employee surrenders his former right to full damages and accepts
instead a more modest claim for bare essentials, represented by compensation.
The importance of the compromise character of compensation cannot be
overemphasized. The statutes vary a great deal with reference to the proper point of
balance. The amount of weekly compensation payments and the length of the period
during which compensation is to be paid are matters concerning which the acts differ

considerably. The interpretation of any compensation statute will be influenced

greatly by the court's reaction to the basic point of compromise established in the
Act. If the court feels that the basic compromise unduly favors the employer, it will be
tempted to restore what it regards as a proper balance by adopting an interpretation
that favors the worker. In this way, a compensation act drawn in a spirit of extreme
conservatism may be transformed by a sympathetic court into a fairly liberal
instrument; and conversely, an act that greatly favors the laborer may be so
interpreted by the courts that employers can have little reason to complain. Much of
the unevenness and apparent conflict in compensation decisions throughout the
various jurisdictions must be attributed to this." (Malone & Plant, Workmen's
Compensation American Casebook Series, pp. 63-65).
The schedule of compensation, the rates of payments, the compensable injuries and diseases, the
premiums paid by employers to the present system, the actuarial stability of the trust fund and many
other interrelated parts have all been carefully studied before the integrated scheme was enacted in
to law. We have a system whose parts must mesh harmonious with one another if it is to succeed.
The basic theory has to be followed.
If this Court disregards this totality of the scheme and in a spirit of generosity recasts some parts of
the system without touching the related others, the entire structure is endangered. For instance, I am
personally against stretching the law and allowing payment of compensation for contingencies never
envisioned to be compensable when the law was formulated. Certainly, only harmful results to the
principle of workmen's compensation can arise if workmen, whom the law allows to receive
employment compensation, can still elect to file damage suits for industrial accidents. It was
precisely for this reason that Section 5 of the Workmen's Compensation Act, which reads:
SEC. 5. Exclusive right to compensation.-The rights and remedies granted by this Act
to an employee by reason of a personal injury entitling him to compensation shall
exclude all other rights and remedies accruing to the employee, his personal
representatives, dependents or nearest of kin against the employer under the Civil
Code and other laws because of said injury. ...
Article 173 of the labor Code also provides:
ART. 173. Exclusivenesss of liability.Unless otherwise provided, the liability of the
State Insurance Fund under this Title shall be exclusive and in place of all other
liabilities of the employer to the employee his dependents or anyone otherwise
entitled to receive damages on behalf of the employee or his dependents.
I am against the Court assuming the role of legislator in a matter calling for actuarial studies and
public hearings. If employers already required to contribute to the State Insurance Fund will still have
to bear the cost of damage suits or get insurance for that purpose, a major study will be necessary.
The issue before us is more far reaching than the interests of the poor victims and their families. All
workers covered by workmen's compensation and all employers who employ covered employees
are affected. Even as I have deepest sympathies for the victims, I regret that I am constrained to
dissent from the majority opinion.

Separate Opinions

MELENCIO-HERRERA, J., dissenting:

A
This case involves a complaint for damages for the death of five employees of PHILEX Mining
Corporation under the general provisions of the Civil Code. The Civil Code itself, however, provides
for its non-applicability to the complaint. It is specifically provided in Article 2196 of the Code, found
in Title XVIII-Damages that:
COMPENSATION FOR WORKMEN AND OTHER EMPLOYEES IN CASE OF
DEATH, INJURY OR ILLNESS IS REGULATED BY SPECIAL LAWS.
Compensation and damages are synonymous. In Esguerra vs. Muoz Palma, etc., et al., 104 Phil.
582, 586, Justice J.B.L. Reyes had said:
Petitioner also avers that compensation is not damages. This argument is but a play
on words. The term compensation' is used in the law (Act 3812 and Republic Act
772) in the sense of indemnity for damages suffered, being awarded for a personal
injury caused or aggravated by or in the course of employment. ...
By the very provisions of the Civil Code, it is a "special law", not the Code itself, which has to apply
to the complaint involved in the instant case. That "special law", in reference to the complaint, can be
no other than the Workmen's Compensation
Even assuming, without conceding, that an employee is entitled to an election of remedies, as the
majority rules, both options cannot be exercised simultaneously, and the exercise of one will
preclude the exercise of the other. The petitioners had already exercised their option to come under
the Workmen's Compensation Act, and they have already received compensation payable to them
under that Act. Stated differently, the remedy under the Workmen's Compensation Act had already
become a "finished transaction".
There are two considerations why it is believed petitioners should no longer be allowed to exercise
the option to sue under the Civil Code. In the first place, the proceedings under the Workmen's
Compensation Act have already become the law in regards to" the "election of remedies", because
those proceedings had become a "finished transaction".
In the second place, it should be plainly equitable that, if a person entitled to an "election of
remedies" makes a first election and accepts the benefits thereof, he should no longer be allowed to

avail himself of the second option. At the very least, if he wants to make a second election, in
disregard of the first election he has made, when he makes the second election he should surrender
the benefits he had obtained under the first election, This was not done in the case before the Court.
B.
'There is full concurrence on my part with the dissenting opinion of Mr. Justice Gutierrez upholding
"the exclusory provision of the Workmen's Compensation Act." I may further add:
1. The Workmen's Compensation Act (Act No. 3428) was approved on December 10, 1927 and took
effect on June 10, 1928. It was patterned from Minnesota and Hawaii statutes.
Act No. 3428 was adopted by the Philippine legislature, in Spanish and some
sections of the law were taken from the statutes of Minnesota and Hawaii, (Chapter
209 of the Revised Laws of Hawaii, 1925). [Morabe & Inton, Workmen's
Compensation Act, p. 2]
Under the Workmen's Compensation Act of Hawaii, when the Act is applicable, the remedy under the
Act is exclusive The following is stated in 1 Schneider Workmen's Compensation Text, pp. 266, 267.
Sec. 112. Hawaii
Statutory Synopsis. The act is compulsory as to employees in 'all industrial
employment' and employees of the territory and its political subdivisions. (Sections
7480-7481, S.S., Vol. 1, p. 713.)
Compensation is not payable when injury is due to employee's willful intention to
injure himself or another or to his intoxication. (Sec. 7482, S.S., p. 713.)
When the act is applicable the remedy thereunder is exclusive (Sec. 7483, S.S., p.
714.)
2. In providing for exclusiveness of the remedy under our Workmen's Compensation Act, the
Philippine Legislature worded the first paragraph of Section 5 of the Act as follows:
SEC. 5. Exclusive right to compensation.-The rights and remedies granted by this Act
to an employee
by reason of a personal injury entitling him to compensation
shall exclude all other rights and remedies accruing to the employee, his personal
representatives, dependents or nearest of kin against the employer
under the Civil Code and other laws, because of said injury (Paragraphing and
emphasis supplied)

In regards to the intent of the Legislature under the foregoing provision:

A cardinal rule in the interpretation of statutes is that the meaning and intention of the
law-making body must be sought, first of all in the words of the statute itself, read
and considered in their natural, ordinary, commonly-accepted and most obvious
significations, according to good and approved usage and without resorting to forced
or subtle construction Courts, therefore, as a rule, cannot presume that the lawmaking body does not know the meaning of words and the rules of grammar.
Consequently, the grammatical reading of a statute must be presumed to yield its
correct sense. (Espino vs. Cleofe 52 SCRA 92, 98) [Italics supplied]
3. The original second paragraph of Section 5 provided:
Employers contracting laborers in the Philippine Islands for work outside the same
shall stipulate with such laborers that the remedies prescribed by this Act shall apply
exclusively to injuries received outside the Islands through accidents happening in
and during the performance of the duties of the employment. (Italics supplied)
The use of the word "exclusively is a further confirmation of the exclusory provision of the Act,
subject only to exceptions which may be provided in the Act itself.
4. It might be mentioned that, within the Act itself, provision is made for remedies other than within
the Act itself. Thus, Section 6, in part, provides:
SEC. 6. Liability of third parties.-In case an employee suffers an injury for which
compensation is due under this Act by any other person besides his employer, it shall
be optional with such injured employee either to claim compensation from his
employer, under this Act, or sue such other person for damages, in accordance with
law; ... (Emphasis supplied)
If the legislative intent under the first paragraph of Section 5 were to allow the injured employee to
sue his employer under the Civil Code, the legislator could very easily have formulated the said first
paragraph of Section 5 according to the pattern of Section 6. That that was not done shows the
legislative intent not to allow any option to an employee to sue the employer under the Civil Code for
injuries compensable under the Act.
5. There should be no question but that the original first paragraph of Section 5 of the Workmen's
Compensation Act, formulated in 1927, provided that an injured worker or employee, or his heirs, if
entitled to compensation under the Act, cannot have independent recourse neither to the Civil Code
nor to any other law relative to the liability of the employer. After 1927, there were occasions when
the legislator had the opportunity to amend the first paragraph of Section 5 such that the remedies
under the Act would not be exclusive; yet, the legislator refrained from doing so. That shows the
legislatives continuing intent to maintain the exclusory provision of the first paragraph of Section 5
unless otherwise provided in the Act itself.
(a) The original second paragraph of Section 5 provided:

Employers contracting laborers in the Philippine Islands for work outside the same
shall stipulate with such laborers that the remedies prescribed by this Act shall apply
(exclusively) to injuries received outside the Islands through accidents happening in
and during the performance of the duties of the employment (and all service
contracts made in the manner prescribed in this section be presumed to include such
agreement).
On June 20, 1952, through RA 772, the foregoing second paragraph was amended with the
elimination of the underlined words in parentheses, and the addition of this sentence at the end of
the paragraph:
Such stipulation shall not prejudice the right of the laborers to the benefits of the
Workmen's Compensation Law of the place where the accident occurs, should such
law be more favorable to them. (Emphasis supplied)
It will be seen that, within the Act itself, the exclusory character of the Act was amended. At that time,
if he had so desired, the legislator could have amended the first paragraph of Section 5 so that the
employee would have the option to sue the employer under the Act, or under the Civil Code, should
the latter be more favorable to him.
(b) The Workmen's Compensation Act, which took effect in 1927, grants compensation to an injured
employee without regard to the presence or absence of negligence on the part of the employer. The
compensation is deemed an expense chargeable to the industry (Murillo vs. Mendoza, 66 Phil. 689
[1938]).
In time, it must have been thought that it was inequitable to have the amount of compensation,
caused by negligence on the part of the employer, to be the same amount payable when the
employer was not negligent. Based on that thinking, Section 4-A 1 was included into the Act, on June
20, 1952, through RA 772. Said Section 4-A increased the compensation payable by 50% in case there
was negligence on the part of the employer. That additional section evidenced the intent of the legislator
not to give an option to an employee, injured with negligence on the part of the employer, to sue the latter
under the provisions of the Civil Code.
On June 20, 1964, Section 4-A was amended (insubstantially) by RA 4119. The legislator was again
given the opportunity to provide, but he did not, the option to an employee to sue under the Act or
under the Civil Code.
When a Court gives effect to a statute not in accordance with the intent of the law-maker, the Court
is unjustifiably legislating.
It is in view of the foregoing that I vote for affirmation of the trial Court's dismissal of the Complaint.
GUTIERREZ, JR., J., dissenting:
To grant the petition and allow the victims of industrial accidents to file damages suits based on torts
would be a radical innovation not only contrary to the express provisions of the Workmen's

Compensation Act but a departure from the principles evolved in the long history of workmen's
compensation. At the very least, it should be the legislature and not this Court which should remove
the exclusory provision of the Workmen's Compensation Act, a provision reiterated in the present
Labor Code on employees' compensation.
Workmen's compensation evolved to remedy the evils associated with the situation in the early years
of the industrial revolution when injured workingmen had to rely on damage suits to get recompense.
Before workmen's compensation, an injured worker seeking damages would have to prove in a tort
suit that his employer was either negligent or in bad faith, that his injury was caused by the employer
and not a fellow worker, and that he was not guilty of contributory negligence. The employer could
employ not only his wealth in defeating the claim for damages but a host of common law defenses
available to him as well. The worker was supposed to know what he entered into when he accepted
employment. As stated in the leading case of Priestley u. Fowler (3 M. & W. 1, 150 Reprint 1030)
decided in 1837 "the mere relation of the master and the servant never can imply an obligation on
the part of the master to take more care of the servant than he may reasonably be expected to do of
himself." By entering into a contract of employment, the worker was deemed to accept the risks of
employment that he should discover and guard against himself.
The problems associated with the application of the fellow servant rule, the assumption of risk
doctrine, the principle of contributory negligence, and the many other defenses so easily raised in
protracted damage suits illustrated the need for a system whereby workers had only to prove the fact
of covered employment and the fact of injury arising from employment in order to be compensated.
The need for a compensation scheme where liability is created solely by statute and made
compulsory and where the element of fault-either the fault of the employer or the fault of the
employee-disregarded became obvious. Another objective was to have simplified, expeditious,
inexpensive, and non-litigious procedures so that victims of industrial accidents could more readily, if
not automatically, receive compensation for work-related injuries.
Inspite of common law defenses to defeat a claim being recognized, employers' liability acts were a
major step in the desired direction. However, employers liability legislation proved inadequate.
Legislative reform led to the workmen's compensation.
I cite the above familiar background because workmen's compensation represents a compromise. In
return for the near certainty of receiving a sum of money fixed by law, the injured worker gives up the
right to subject the employer to a tort suit for huge amounts of damages. Thus, liability not only
disregards the element of fault but it is also a pre- determined amount based on the wages of the
injured worker and in certain cases, the actual cost of rehabilitation. The worker does not receive the
total damages for his pain and suffering which he could otherwise claim in a civil suit. The employer
is required to act swiftly on compensation claims. An administrative agency supervises the program.
And because the overwhelming mass of workingmen are benefited by the compensation system,
individual workers who may want to sue for big amounts of damages must yield to the interests of
their entire working class.
The nature of the compensation principle is explained as follows:

An appreciation of the nature of the compensation principle is essential to an

understanding of the acts and the cases interpreting them.
By the turn of the century it was apparent that the toll of industrial accidents of both
the avoidable and unavoidable variety had become enormous, and government was
faced with the problem of who was to pay for the human wreckage wrought by the
dangers of modern industry. If the accident was avoidable and could be attributed to
the carelessness of the employer, existing tort principles offered some measure of
redress. Even here, however, the woeful inadequacy of the fault principle was
manifest. The uncertainty of the outcome of torts litigation in court placed the
employee at a substantial disadvantage. So long as liability depended on fault there
could be no recovery until the finger of blame had been pointed officially at the
employer or his agents. In most cases both the facts and the law were uncertain. The
witnesses, who were usually fellow workers of the victim, were torn between
friendship or loyalty to their class, on the one hand, and fear of reprisal by the
employer, on the other. The expense and delay of litigation often prompted the
injured employee to accept a compromise settlement for a fraction of the full value of
his claim. Even if suit were successfully prosecuted, a large share of the proceeds of
the judgment were exacted as contingent fees by counsel. Thus the employer
against whom judgment was cast often paid a substantial damage bill, while only a
part of this enured to the benefit of the injured employee or his dependents. The
employee's judgment was nearly always too little and too late.
xxx xxx xxx
Workmen's Compensation rests upon the economic principle that those persons who
enjoy the product of a business- whether it be in the form of goods or servicesshould ultimately bear the cost of the injuries or deaths that are incident to the
manufacture, preparation and distribution of the product. ...
xxx xxx xxx
Under this approach the element of personal fault either disappears entirely or is
subordinated to broader economic considerations. The employer absorbs the cost of
accident loss only initially; it is expected that this cost will eventually pass down the
stream of commerce in the form of increase price until it is spread in dilution among
the ultimate consumers. So long as each competing unit in a given industry is
uniformly affected, no producer can gain any substantial competitive advantage or
suffer any appreciable loss by reason of the general adoption of the compensation
principle.
In order that the compensation principle may operate properly and with fairness to all
parties it is essential that the anticipated accident cost be predictable and that it be
fixed at a figure that will not disrupt too violently the traffic in the product of the
industry affected. Thus predictability and moderateness of cost are necessary from
the broad economic viewpoint. ....

Compensation, then, differs from the conventional damage suit in two important
respects: Fault on the part of either employer or employee is eliminated; and
compensation payable according to a definitely limited schedule is substituted for
damages. All compensation acts alike work these two major changes, irrespective of
how they may differ in other particulars.
Compensation, when regarded from the viewpoint of employer and employee
represents a compromise in which each party surrenders certain advantages in order
to gain others which are of more importance both to him and to society. The
employer gives up the immunity he otherwise would enjoy in cases where he is not at
fault, and the employee surrenders his former right to full damages and accepts
instead a more modest claim for bare essentials, represented by compensation.
The importance of the compromise character of compensation cannot be
overemphasized. The statutes vary a great deal with reference to the proper point of
balance. The amount of weekly compensation payments and the length of the period
during which compensation is to be paid are matters concerning which the acts differ
considerably. The interpretation of any compensation statute will be influenced
greatly by the court's reaction to the basic point of compromise established in the
Act. If the court feels that the basic compromise unduly favors the employer, it will be
tempted to restore what it regards as a proper balance by adopting an interpretation
that favors the worker. In this way, a compensation act drawn in a spirit of extreme
conservatism may be transformed by a sympathetic court into a fairly liberal
instrument; and conversely, an act that greatly favors the laborer may be so
interpreted by the courts that employers can have little reason to complain. Much of
the unevenness and apparent conflict in compensation decisions throughout the
various jurisdictions must be attributed to this." (Malone & Plant, Workmen's
Compensation American Casebook Series, pp. 63-65).
The schedule of compensation, the rates of payments, the compensable injuries and diseases, the
premiums paid by employers to the present system, the actuarial stability of the trust fund and many
other interrelated parts have all been carefully studied before the integrated scheme was enacted in
to law. We have a system whose parts must mesh harmonious with one another if it is to succeed.
The basic theory has to be followed.
If this Court disregards this totality of the scheme and in a spirit of generosity recasts some parts of
the system without touching the related others, the entire structure is endangered. For instance, I am
personally against stretching the law and allowing payment of compensation for contingencies never
envisioned to be compensable when the law was formulated. Certainly, only harmful results to the
principle of workmen's compensation can arise if workmen, whom the law allows to receive
employment compensation, can still elect to file damage suits for industrial accidents. It was
precisely for this reason that Section 5 of the Workmen's Compensation Act, which reads:
SEC. 5. Exclusive right to compensation.-The rights and remedies granted by this Act
to an employee by reason of a personal injury entitling him to compensation shall
exclude all other rights and remedies accruing to the employee, his personal

representatives, dependents or nearest of kin against the employer under the Civil
Code and other laws because of said injury. ...
Article 173 of the labor Code also provides:
ART. 173. Exclusivenesss of liability.Unless otherwise provided, the liability of the
State Insurance Fund under this Title shall be exclusive and in place of all other
liabilities of the employer to the employee his dependents or anyone otherwise
entitled to receive damages on behalf of the employee or his dependents.
I am against the Court assuming the role of legislator in a matter calling for actuarial studies and
public hearings. If employers already required to contribute to the State Insurance Fund will still have
to bear the cost of damage suits or get insurance for that purpose, a major study will be necessary.
The issue before us is more far reaching than the interests of the poor victims and their families. All
workers covered by workmen's compensation and all employers who employ covered employees
are affected. Even as I have deepest sympathies for the victims, I regret that I am constrained to
dissent from the majority opinion.

G.R. No. L-30771 May 28, 1984

LIAM LAW, plaintiff-appellee,
vs.
OLYMPIC SAWMILL CO. and ELINO LEE CHI, defendants-appellants.
Felizardo S.M. de Guzman for plaintiff-appellee.
Mariano M. de Joya for defendants-appellants.

MELENCIO-HERRERA, J.:
This is an appeal by defendants from a Decision rendered by the then Court of First Instance of
Bulacan. The appeal was originally taken to the then Court of Appeals, which endorsed it to this
instance stating that the issue involved was one of law.
It appears that on or about September 7, 1957, plaintiff loaned P10,000.00, without interest, to
defendant partnership and defendant Elino Lee Chi, as the managing partner. The loan became
ultimately due on January 31, 1960, but was not paid on that date, with the debtors asking for an
extension of three months, or up to April 30, 1960.
On March 17, 1960, the parties executed another loan document. Payment of the P10,000.00 was
extended to April 30, 1960, but the obligation was increased by P6,000.00 as follows:

That the sum of SIX THOUSAND PESOS (P6,000.00), Philippine currency shall form
part of the principal obligation to answer for attorney's fees, legal interest, and other
cost incident thereto to be paid unto the creditor and his successors in interest upon
the termination of this agreement.
Defendants again failed to pay their obligation by April 30, 1960 and, on September 23, 1960,
plaintiff instituted this collection case. Defendants admitted the P10,000.00 principal obligation, but
claimed that the additional P6,000.00 constituted usurious interest.
Upon application of plaintiff, the Trial Court issued, on the same date of September 23, 1960, a writ
of Attachment on real and personal properties of defendants located at Karanglan, Nueva Ecija. After
the Writ of Attachment was implemented, proceedings before the Trial Court versed principally in
regards to the attachment.
On January 18, 1961, an Order was issued by the Trial Court stating that "after considering the
manifestation of both counsel in Chambers, the Court hereby allows both parties to simultaneously
submit a Motion for Summary Judgment. 1 The plaintiff filed his Motion for Summary Judgment on January 31, 1961, while
defendants filed theirs on February 2, 196l.

On June 26, 1961, the Trial Court rendered decision ordering defendants to pay plaintiff "the amount
of P10,000.00 plus the further sum of P6,000.00 by way of liquidated damages . . . with legal rate of
interest on both amounts from April 30, 1960." It is from this judgment that defendants have
appealed.
We have decided to affirm.
Under Article 1354 of the Civil Code, in regards to the agreement of the parties relative to the
P6,000.00 obligation, "it is presumed that it exists and is lawful, unless the debtor proves the
contrary". No evidentiary hearing having been held, it has to be concluded that defendants had not
proven that the P6,000.00 obligation was illegal. Confirming the Trial Court's finding, we view the
P6,000.00 obligation as liquidated damages suffered by plaintiff, as of March 17, 1960, representing
loss of interest income, attorney's fees and incidentals.
The main thrust of defendants' appeal is the allegation in their Answer that the P6,000.00 constituted
usurious interest. They insist the claim of usury should have been deemed admitted by plaintiff as it
was "not denied specifically and under oath". 3
Section 9 of the Usury Law (Act 2655) provided:
SEC. 9. The person or corporation sued shall file its answer in writing under oath to
any complaint brought or filed against said person or corporation before a competent
court to recover the money or other personal or real property, seeds or agricultural
products, charged or received in violation of the provisions of this Act. The lack of
taking an oath to an answer to a complaint will mean the admission of the facts
contained in the latter.

The foregoing provision envisages a complaint filed against an entity which has committed usury, for
the recovery of the usurious interest paid. In that case, if the entity sued shall not file its answer
under oath denying the allegation of usury, the defendant shall be deemed to have admitted the
usury. The provision does not apply to a case, as in the present, where it is the defendant, not the
plaintiff, who is alleging usury.
Moreover, for sometime now, usury has been legally non-existent. Interest can now be charged as
lender and borrower may agree upon. 4 The Rules of Court in regards to allegations of usury, procedural
in nature, should be considered repealed with retroactive effect.
Statutes regulating the procedure of the courts will be construed as applicable to
actions pending and undetermined at the time of their passage. Procedural laws are
retrospective in that sense and to that extent. 5
... Section 24(d), Republic Act No. 876, known as the Arbitration Law, which took effect on
19 December 1953, and may be retroactively applied to the case at bar because it is
procedural in nature. ... 6

WHEREFORE, the appealed judgment is hereby affirmed, without pronouncement as to costs.

SO ORDERED.

Case Digest on People vs. Donato

PEOPLE V. DONATO [198 S 130 (1991)] - The doctrine of waiver extends to the rights and privileges of
any character, and since the word "waiver" covers any conceivable right, it is the general rule that a
person may waive any matter which affects his property, and any alienable right or privilege of which he is
the owner or which belongs to him or to which he is legally entitled whether secured by contract,
conferred
with statute, or guaranteed by constitution, provided such rights and privileges do not infringe on the
rights of others, and further provided the waiver of the right or privilege is not forbidden by law, and does
not contravene public policy.
Rights guaranteed to one accused of a crime fall naturally into two classes: (a) Those in which the state,
as well as the accused, is interested, and (b) those which are personal to the accused, which are in the
nature of personal privileges. Those of the first class cannot be waived, those of the second may be.
(Commonwealth v. Petrillo).
This Court has recognized waivers of constitutional rights such as the rights against unreasonable
searches and seizures, the right to counsel and to remain silent, and the right to be heard.
The right to bail is another of the constitutional rights which can be waived. It is a right personal to the
accused and whose waiver would not be contrary to law, public order, morals or good customs, or
prejudicial to a third person with a right recognized by law.

G.R. No. L-51841 June 30, 1987

REMIGIO QUIQUI, EMILIANA Q. ARELLANO, TURCUATA Q. DIPUTADO, APOLONIA Q.
SALCEDOR, LORETO QUIQUI, SUPLICIA Q. CHAN, ELDEGUNDA Q. MONASTERIO, ELSA Q.
ARBON and ANTIPAS Q. YANG, petitioners
vs.
The Honorable Judge ALEJANDRO R. BONCAROS of Branch V, Court of First Instance of
Negros Oriental, ESTEFANIA G. AMOLO, LOPE AMOLO, SOFIA G. ALBON, PASTOR
GADINGAN, ANGEL GADINGAN, ANTERO GADINGAN, TEOFILO GADINGAN and FELICITAS
GADINGAN, respondents.

GANCAYCO, J.:
This is a Petition for certiorari, prohibition and mandamus. It concerns a parcel of agricultural land
situated in Barangay Cabangan, Siaton, Negros Oriental with an area of about 450 square meters.
The said parcel of land is a portion of Lot No. 3217, Pls-659-D covered by Free Patent Title No. FV13703. The improvements on the parcel of land in question include several fruit trees and a modest
residential house.
The record of the case reveals that on May 22, 1973, the herein private respondents Estefania G.
Amolo, Lope Amolo, Sofia G. Albon, Pastor Gadingan, Angel Gadingan, Antero Gadingan, Teofilo
Gadingan and Felicitas Gadingan were able to secure Free Patent Title No. FV-13703 in their
names. The 450-square meter lot in question was included in the survey of the entire parcel of land
covered by the said Title.
On the other hand, it is the position of the herein petitioners Remigio Quiqui, Emiliana Q. Arellano,
Turcuata Q. Diputado, Apolonia Q. Salcedor, Loreto Quiqui, Suplicia Q. Chan, Eldegunda Q.
Monasterio, Elsa Q. Arbon and Antipas Q. Yang that the 450-square meter lot in question belongs to
them and not to the private respondents. They contend that the said lot was purchased by their late
father sometime in 1920 and that ever since then, they have been in actual possession thereof,
peacefully, openly continuously and adversely, for a period of 56 years already. They also contend
that the private respondents succeeded in putting the said property in their name by clandestinely
including the said lot in the survey of the premises undertaken by the Government sometime in the
1970s.
On November 9, 1976, the petitioners, assisted by the Citizens Legal Assistance Office of the then
Ministry of Justice, filed a Complaint in the Court of First Instance of Negros Oriental for
"reconveyance and/or annulment of Title with damages" against the private respondents. 1 The said
Complaint was anchored on the theory that the title to the lot in question obtained by the private respondents in their name was secured
through fraud. The case was docketed as Civil Case No. 6606.

On December 5, 1976, the private respondents filed their Answer to the Complaint, alleging, inter
alia, that the petitioners have no cause of action against them. By way of Counterclaim, the private
respondents sought the payment to them of moral damages and attorney's fees. 2
Thereafter, a pre-trial conference was scheduled by the trial court. Inasmuch as the parties could not
reach an amicable settlement of their case, the pre-trial conference was terminated and the case
was set for trial on the merits. In the course of the proceedings, more particularly on May 10, 1979,
the private respondents filed a Motion to dismiss the case on the ground of lack of jurisdiction on the
part of the trial court. 3
On June 7, 1979, the petitioners submitted their Opposition to the said Motion, stressing that the trial
court has jurisdiction over cases for reconveyance. 4 In its Order dated July 16, 1979, the trial court,
with respondent Judge Alejandro R. Boncaros presiding, dismissed the Complaint for reconveyance on
the ground that it had no jurisdiction over the case. 5 Counsel for the petitioners received a copy of the
said Order on July 17, 1979. 6
On August 17, 1979, the petitioners filed a Motion for the reconsideration of the Order of the trial
court dismissing the Complaint. 7 The said Motion for Reconsideration is dated August 16, 1979.
The private respondents opposed the Motion for Reconsideration, stating that the same had been
filed beyond the 30 day reglementary period under the Rules. The private respondents maintain that
inasmuch as the petitioners received their copy of the Order of dismissal on July 17, 1979, they had
up to August 16, 1979 to file the Motion for reconsideration, computed on the basis of the 30-day
reglementary period. They contend that since the said Motion was filed beyond the 30-day period,
the Order of dismissal has become final and executory and could no longer be the subject of a
Motion for reconsideration. 8 In its Order dated August 21, 1979, the trial court denied the Motion for
Reconsideration on the ground asserted by the private respondents. 9
On August 23, 1979, the petitioners filed a Notice of Appeal, seeking relief from the Court of Appeals.
They sought the Appeal on the ground that the Orders of the trial court dismissing their Complaint
and denying their Motion for Reconsideration are contrary to law and the evidence submitted. 10 On
August 24, 1979, the petitioners filed their Appeal Bond, together with their Motion to approve the same.

In its Order dated August 28, 1979, the trial court denied the Notice of Appeal, including the Motion
to approve the Appeal Bond. The pertinent portion of the said Order are as follows
The order of dismissal of this Court which was dated July 16, 1979 was received by
the plaintiffs (the herein petitioners) on July 17, 1979. Under Section 3, Rule 41 of
the Revised Rules of Court, the period to appeal is thirty (30) days, so with the
motion for a reconsideration so that (sic) under Art. 13 of the Civil Code that in the
computation of the period exclude the first (day), include the last (sic), August 16,
1979 therefore was the last day to file the motion for reconsideration but it was filed
on August 17 or one day late and this motion for reconsideration was denied by this
Court on August 21, 1979 (sic). The reason for the denial was the motion for
reconsideration was filed (sic) beyond the reglementary period, in which case, the
notice of appeal ... (was) likewise filed beyond the reglementary period ....

xxx xxx xxx 11

Finding the action taken by the trial court unsatisfactory, the petitioners brought their case directly to
this Court by way of the instant Petition for certiorari, prohibition and mandamus under Rule 65 of
the Rules of Court. They maintain that the Order of the trial court dated July 16, 1979 is illegal and
void for having been "issued without jurisdiction or in excess of jurisdiction or with grave abuse of
discretion, for the so called "one day late" (ground) upon which it is based does not actually exist.
" 12 They pray, inter alia, that the trial court be ordered to approve their Notice of Appeal.13
Complying with the instructions of this Court, the private respondents submitted their Comment on
the Petition. 14
In the Resolution of this Court dated January 14, 1980, We gave due course to the instant
Petition. 15 The parties submitted their respective Memoranda after which the case was deemed submitted for decision on June 11,
1980.

After a careful examination of the entire record of the case, We find the instant Petition devoid of
merit.
At the time this litigation was instituted in the trial court, Section 3, Rule 41 of the Rules of Court was
the provision governing the period within which an Appeal may be taken to the Court of Appeals, to
wit
SEC. 3. How appeal is taken. Appeal may be taken by serving upon the adverse
party and filing with the trial court within thirty (30) days from notice of order or
judgment, a notice of appeal, an appeal bond, and a record on appeal. The time
during which a motion to set aside the judgment or order or for a new trial has been
pending shall be deducted, unless such motion fails to satisfy the requirements of
Rule 37.
But where such a motion has been filed during office hours of the last day of the
period herein provided, the appeal must be perfected within the day following that in
which the party appealing received notice of the denial of said motion.
Under this cited provision, the Appeal may be taken within 30 days from notice of the judgment or
order of the trial court. 16 In the event that the party aggrieved by the judgment or order of the trial court files a Motion to set aside
the judgment or order, i. e a Motion for Reconsideration, the time during which such Motion is pending resolution shall, as a rule, be
deducted from the 30-day period. 17 In relation thereto, the New Civil Code states that in computing a period, the first day shall be excluded
and the last day included. 18

The petitioners admit that they received their copy of the Order of dismissal of their Complaint on
July 17, 1979. Under Section 3, Rule 41, they had 30 days within which to appeal their case or to file
a Motion for Reconsideration of the judgment or order of the trial court. In computing the 30-day
period, July 17, 1979 (the first day) is excluded, pursuant to Article 13 of the New Civil Code.
Counting 30 days thereafter, beginning on July 18, 1979, the petitioners had up to August 16, 1979
to file their Motion for Reconsideration. Their Motion for Reconsideration, although dated August 16,

1979, was filed with the trial court on August 17, 1979 or one day beyond the 30-day reglementary
period prescribed by Section 3 of Rule 41.
Under these circumstances, the order of the trial court dismissing the Complaint has become final
and executory. As such, it is beyond the reach of a Motion for consideration. 19 The Notice of Appeal,
therefore, was properly denied. Perfection of an appeal in the manner and within the period laid down by law is not only mandatory but also
jurisdictional and failure to perfect an appeal as required by the rules has the effect of rendering the judgment final and executory. A strict
observance of the reglementary period within which to exercise the statutory right of appeal has been considered as absolutely
indispensable to the prevention of needless delays.

20

As a last recourse in support of their case, the petitioners invoke the following observations made by
this Court in De Las Alas v. Court of Appeals, 21 to wit:
Regardless, however, of the above findings and even assuming that respondents'
position were correct, WE find that a one-day delay does not justify the dismissal of
the appeal under the circumstances obtaining in this case. The real purpose behind
the limitation of the period of appeal is to forestall or avoid an unreasonable delay in
the administration of justice and to put an end to controversies ... 22
Unfortunately for the petitioners, the observation made by this Court in De Las Alas does not apply
to their case.
In De Las Alas, the view expressed by this Court to the effect that "a one-day delay does not justify
the dismissal of the appeal" is qualified by the phrase "under the circumstances obtaining in this
case". Unlike the situation faced by the herein petitioners, there is no showing that the petitioners in
the De Las Alas case failed to file their Motion for Reconsideration as well as their Record on Appeal
within the reglementary period. On the contrary, this Court noted therein the lack of delay on the part
of the petitioners in that case, viz
Furthermore, WE note from the records the absence or lack of the element of intent
to delay the administration of justice on the part of petitioners in this case. On the
contrary, petitioners' counsel have demonstrated cautiousness, concern and
punctuality in the prosecution of the appeal. They filed their motion for
reconsideration October 7, 1972, even if the respondent lower court judge had given
them an extension up to October 24, 1972, within which to file the said motion.
Petitioners had up to December 25, 1972, within which to submit their record on
appeal, yet they filed their record on appeal on December 8, 1972, or 17 days before
the deadline. 23
Moreover, a doubtful and controversial question of law confronted the parties in the De Las
Alas case, i.e., the matter of computing the reglementary period for filing an Appeal. The respondent
court found petitioner had only two (2) days left to perfect the appeal after the denial of the motion
for reconsideration while this Court held petitioners had three (3) days left deducting the period
within which the motion for reconsideration has been pending, excluding the first day in the
computation of the period, but since the last day falls on a Sunday the period of appeal is ipso
jure extended to the first working day immediately following. 24 In the case at bar, however, there is no
such doubtful or controversial question of law submitted for Our resolution.

For the petitioners to seek exception for their failure to comply strictly with the requirements for
perfecting their Appeal, strong compelling reasons, like the prevention of a grave miscarriage of
justice, must be shown to exist in order to warrant this Court to suspend the Rules. 25 No such
reasons have been shown to exist in this case. In fact, the petitioners did not even offer any reasonable
explanation for their delay.
On the basis of the foregoing discussion, We find no jurisdictional infirmity, sufficient to call for the
issuance of the corrective writ of certiorari in the action taken by the trial court. As stated earlier, the
instant Petition is devoid of merit.
WHEREFORE, in view of the foregoing, the instant Petition for certiorari prohibition
and mandamus is hereby DISMISSED for lack of merit. We make no pronouncement as to costs.
SO ORDERED.
Yap (Chairman), Narvasa, Melencio-Herrera, Cruz, Feliciano and Sarmiento, JJ., concur.

Case Digest on People vs. Licera

PEOPLE V. LICERA [65 S 270 (1975)] - F: In 1961, accused was granted an appointment as secret agent
of Governor Leviste. In 1965, accused was charged with illegal possession of firearms. The SC held that
where at the time of his appointment, People v. Macarandang (1959) was applicable, which held that
secret agents were exempt from the license requirement, and later People v. Mapa (1967) was decided,
the earlier case should be held applicable.

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HELD: Art. 8 of the Civil Code decrees that judicial decisions applying or interpreting the laws or the
Constitution form part of this jurisdiction's legal system. These decisions, although in themselves not
law, constitute evidence of what the laws mean. The application or interpretation placed by the courts
upon a law is part of the law as of the date of the enactment of the said law since the Court's application
or interpretation merely establishes the contemporaneous legislative intent that the construed law
purports to carry into effect.
A new doctrine abrogating an old rule operates prospectively and should not adversely affect those
favored by the old rule.
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