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G.R. No. L-58184 October 30, 1981 there is an unconstitutional application.

there is an unconstitutional application. There was not even a categorical assertion to that
effect by petitioner's counsel which was indicative of the care in his choice of words. He only
FREE TELEPHONE WORKERS UNION, petitioner, assumed that the conferment of such authority may run counter to the right of the workers to
vs. self-organization and collective bargaining. The petition then cannot prosper.
THE HONORABLE MINISTER OF LABOR AND EMPLOYMENT, THE NATIONAL LABOR
RELATIONS COMMISSION, and THE PHILIPPINE LONG DISTANCE TELEPHONE The facts alleged in the petition relevant for the purpose of determining whether or not there is
COMPANY, respondents. an undue delegation of legislative power do not sustain the claim of petitioner union. On
September 14, 1981, there was a notice of strike with the Ministry of Labor for unfair labor
practices stating the following grounds " 1) Unilateral and arbitrary implementation of a Code
of Conduct, a copy of which is attached, to the detriment of the interest of our members; 2)
FERNANDO, C.J.: Illegal terminations and suspensions of our officers and members as a result of the
implementation of said Code of Conduct; and 3) Unconfirmation (sic) of call sick leaves and its
automatic treatment as Absence Without Official Leave of Absence (AWOL) with
The constitutionality of the amendment to the Article of the Labor Code regarding strikes corresponding suspensions, in violation of our Collective Bargaining Agreement." 7After which
"affecting the national interest" 1 is assailed in this petition which partakes of the nature of a came, on September 15, 1981, the notification to the Ministry that there was compliance with
prohibition proceeding filed by the Free Telephone Workers Union. As amended, the Article the two-thirds strike vote and other formal requirements of the law and Implementing
now reads: "In labor disputes causing or likely to cause strikes or lockouts adversely affecting Rules. 8 Several conciliation meetings called by the Ministry followed, with petitioner
the national interest, such as may occur in but not limited to public utilities, companies engaged manifesting its willingness to have a revised Code of Conduct that would be fair to all concerned
in the generation or distribution of energy, banks, hospitals, and those within export processing but with a plea that in the meanwhile the Code of Conduct being imposed be suspended a
zones, the Minister of Labor and Employment may assume jurisdiction over the dispute and position that failed to meet the approval of private respondent. Subsequently, respondent, 9 on
decide it or certify the same to the Commission for compulsory arbitration. Such assumption or September 25, 1981, certified the labor dispute to the National Labor Relations Commission
certification shall have the effect of automatically enjoining the intended or impending strike or for compulsory arbitration and enjoined any strike at the private respondent's
lockout. If one has already taken place at the time of assumption or certification, all striking or establishment. 10 The labor dispute was set for hearing by respondent National Labor Relations
locked out employees shall immediately return to work and the employers shall immediately Commission on September 28,
resume operations and readmit all workers under the same terms and conditions prevailing 1981. 11 There was in the main an admission of the above relevant facts by public respondents.
before the strike or lockout. The Minister may seek the assistance of law enforcement agencies Private respondent, following the lead of petitioner labor union, explained its side on the
to ensure compliance with this provision as well as with such orders as he may issue to enforce controversy regarding the Code of Conduct, the provisions of which as alleged in the petition
the same." 2 It is the submission of petitioner labor union that "Batas Pambansa Blg. 130 in so were quite harsh, resulting in what it deemed indefinite preventive suspension apparently the
far as it amends article 264 of the Labor Code delegating to the Honorable Minister of Labor principal cause of the labor dispute. At this stage, as mentioned, it would be premature to
and Employment the power and discretion to assume jurisdiction and/or certify strikes for discuss the merits, or lack of it, of such claim, the matter being properly for the Ministry of Labor
compulsory arbitration to the National Labor Relations Commission, and in effect make or to determine.
unmake the law on free collective bargaining, is an undue delegation of legislative
powers. 3 There is likewise the assertion that such conferment of authority "may also ran (sic)
contrary to the assurance of the State to the workers' right to self-organization and collective The very next day after the filing of the petition, to be exact on September 29, 1981, this Court
bargaining. 4 issued the following resolution: "Considering the allegations contained, the issues raised and
the arguments adduced in the petition for certiorari with prayer for a restraining order, the Court
Resolved to (a) require the respondents to file an [answer], not a motion to dismiss, on or before
On the CRUCIAL ISSUE PRESENTED; THE Court holds that petitioner was not able to make Wednesday, October 7, 1981; and (b) [Set] this case for hearing on Thursday, October 8, 1981
out a case of an undue delegation of legislative power. There could be, however, an at 11:00 o'clock in the morning. 12 After the parties were duly heard, Solicitor General Estelito
unconstitutional application. For while the Constitution allows compulsory arbitration, it must P. Mendoza 13 appearing for the public respondents, the case was considered ripe for
be stressed that the exercise of such competence cannot ignore the basic fundamental decision. 14
principle and state policy that the state should afford protection to labor. 5 Whenever, therefore,
it is resorted to in labor disputes causing or likely to cause strikes or lockouts affecting national
To repeat, while the unconstitutionality of the amendatory act has not been demonstrated, there
interest, the State still is required to "assure the rights of workers to self-organization, collective
is no ruling on the question of unconstitutional application, especially so as to any alleged
bargaining, security of tenure, and just and humane conditions of work. 6 At this stage of the
infringement in the exercise of the power of compulsory arbitration of the specific modes
litigation, however, in the absence of factual determination by the Ministry of Labor and the
provided in the Constitution to assure compliance with the constitutional mandate to "afford
National Labor Relations Commission, this Court is not in a position to rule on whether or not
protection to labor" being at this stage premature.
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1. The allegation that there is undue delegation of legislative powers cannot stand the test of the 1935 Constitution remain with him. It cannot be emphasized too strongly that under the
scrutiny. The power which he would deny the Minister of Labor by virtue of such principle is for 1935 Constitution. "The Executive power shall be vested in the President of the Philippines. 26
petitioner labor union within the competence of the President, who in its opinion can best
determine national interests, but only when a strike is in progress. 15 Such admission is 2. A later decision, Villena v. Secretary of Interior 27 greater relevance to this case. The opinion
qualified by the assumption that the President "can make law," " an assertion which need not of Justice Laurel, again the ponente, made clear that under the presidential system, "all
be passed upon in this petition.'What possesses significance for the purpose of this litigation is executive and administrative organizations are adjuncts of the Executive Department, the
that it is the President who "Shall have control of the ministries. 16 It may happen, therefore, heads of the various executive departments are assistants and agents of the Chief Executive,
that a single person may occupy a dual position of Minister and Assemblyman. To the extent, and, except in cases where the Chief Executive is required by the Constitution or the law to act
however, that what is involved is the execution or enforcement of legislation, the Minister is an in person or the exigencies of the situation demand that he act personally, the multifarious
official of the executive branch of the government. The adoption of certain aspects of a executive and administrative functions of the Chief Executive are performed by and through
parliamentary system in the amended Constitution does not alter its essentially presidential the executive departments, and the acts of the secretaries of such departments, performed and
character. Article VII on the presidency starts with this provision: "The President shall be the promulgated in the regular course of business, are, unless disapproved or reprobated by the
head of state and chief executive of the Republic of the Philippines. 17 Its last section is an even Chief Executive, presumptively the acts of the Chief Executive. 28 At the time of the adoption
more emphatic affirmation that it is a presidential system that obtains in our government. Thus: of the present Constitution on January 17, 1973, this Court had cited with approval the above
"All powers vested in the President of the Philippines under the 1935 Constitution and the laws ruling of Villena in twelve cases. 29 It is particularly noteworthy that the first decision
of the land which are not herein provided for or conferred upon any official shall be deemed promulgated under the present Constitution reiterating the above doctrine is
and are hereby vested in the President unless the Batasang Pambansa provides Philippine American Management Co. v. Philippine American Management Employees
otherwise. 18There is a provision, of course, on the Prime Minister, but the Constitution is Association. 30 For the question therein involved, as in this case, is the statutory grant of
explicit that while he shall be the head of the Cabinet, it is the President who nominates him authority to the then Secretary of Labor, now Minister of Labor, by the Minimum Wage Law to
from among the members of the Batasang Pambansa, thereafter being "elected by a majority refer to the then existing Court of Industrial Relations for arbitration the dispute that led to a
of all the members thereof. 19 He is primarily, therefore, a Presidential choice. He need not strike. It is indisputable, according to the opinion, that in the very petition, the Secretary of Labor
even come from its elected members. He is responsible, along with the Cabinet, to the on January 6, 1972, pursuant to the Minimum Wage Law, "endorsed the controversy on the
Batasang Pambansa for the program of government but as "approved by the precise question of whether or not petitioner Philippine American Management Company was
President. 20 His term of office as Prime Minister "shall commence from the date of his election complying with its mandatory terms. What was done by him, as a department head, in the
by the Batasang Pambansa and shall end on the date that the nomination of his successor is regular course of business and conformably to a statutory provision is, according to settled
submitted by the President to the Batasang Pambansa. Any other member of the Cabinet or jurisprudence that dates back to an authoritative pronouncement by Justice Laurel in 1939
the Executive Committee may be removed at the discretion of the President. 21 Even the in Villena v. Secretary of the Interior, presumptively the act of the President, who is the only
duration of his term then depends on the Presidential pleasure, not on legislative approval or dignitary who could, paraphrasing the language of the decision, disapprove or reprobate it.
lack of it. During his incumbency, he exercises supervision over all ministries, 22 a recognition What other response could be legitimately expected from respondent Court then? It could not
of the important role he plays in the implementation of the policy of the government, the just simply fold its hands and refuse to pass on the dispute. 31 The Villena doctrine was stressed
legislation duly enacted in pursuance thereof, and the decrees and orders of the President. To even more in denying a motion for reconsideration by a more extensive citation from the
the Prime Minister can thus be delegated the performance of the administrative functions of ponencia of Justice Laurel: "Without minimizing the importance of the heads of the various
the President, who can then devote more time and energy in the fulfillment of his exacting role departments, their personality is in reality but the projection of that of the President. Stated
as the national leader. 23 As the only one whose constituency is national it is the President who, otherwise, and as forcibly characterized by Chief Justice Taft of the Supreme Court of the
by virtue of his election by the entire electorate, has an indisputable claim to speak for the United States, "each head of a department is, and must be, the President's alter ego in the
country as a whole. Moreover, it is he who is explicitly granted the greater power of control of matters of that department where the President is required by law to exercise authority." ...
such ministries. He continues to be the Executive, the amplitude and scope of the functions Secretaries of departments, of course, exercise certain powers under the law but the law
entrusted to him in the formulation of policy and its execution leading to the apt observation by cannot impair or in any way affect the constitutional power of control and direction of the
Laski that there is not one aspect of which that does not affect the lives of all. The Prime Minister President. As a matter of executive policy, they may be granted departmental autonomy as to
can be of valuable assistance indeed to the President in the discharge of his awesome certain matters but this is by mere concession of the executive, in the absence of valid
responsibility, but it is the latter who is vested with powers, aptly characterized by Justice Laurel legislation in the particular field. If the President, then, is the authority in the Executive
in Planas v. Gil 24 as "broad and extraordinary [being] expected to govern with a firm and steady Department, he assumes the corresponding responsibility. The head of a department is a man
hand without vexation or embarrassing interference and much less dictation from any of his confidence; he control and directs his acts; he appoints him and can remove him at
source. 25 It may be said that Justice Laurel was referring to his powers under the 1935 pleasure; he is the executive, not any of his secretaries. It is therefore logical that he, the
Constitution. It suffices to refer anew to the last section of the article of the present Constitution President, should be answerable for the acts of administration of the entire Executive
on the presidency to the effect that all powers vested in the President of the Philippines under Department before his own conscience no less than before that undefined power of public

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opinion which, in the language of Daniel Webster, is the last repository of popular situations that may be met in carrying the law into effect. All that is required is that the regulation
government. 32 So it should be in this case. should be germane to the objects and purposes of the law; that the regulation be not in
contradiction with it; but conform to the standards that the law prescribes.' 34 Batas Pambansa
3. Even on the assumption, indulged in solely because of the claim earnestly and vigorously Blg. 130 cannot be any clearer, the coverage being limited to "strikes or lockouts adversely
pressed by counsel for petitioner, that the authority conferred to the Minister of Labor partakes affecting the national interest."
of a legislative character, still no case of an unlawful delegation of such power may be
discerned. That is the teaching from Edu v. Ericta 33 Thus: "What cannot be delegated is the 4. The strict rule on non-delegation was enunciated by Justice Laurel in People v.
authority under the Constitution to make laws and to alter and repeal them; the test is the Vera, 35 Which declared unconstitutional the then Probation Act. 36 Such an approach,
completeness of the statute in all its term and provisions when it leaves the hands of the conceded, by some constitutionalists to be both scholarly and erudite nonetheless aroused
legislature, To determine whether or riot there is an undue delegation of legislative power, the apprehension for being too rigid and inflexible. While no doubt appropriate in that particular
inquiry must be directed to the scope and definiteness of the measure enacted. The legislature case, the institution of a new mode of treating offenders, it may pose difficulty for social and
does not abdicate its functions when it describes what job must be done, who is to do it, and economic legislation needed by the times. Even prior to the above-cited Pangasinan
what is the scope of his authority. For a complex economy, that may indeed be the only way in Transportation decision, Justice Laurel himself in an earlier decision, People v. Rosenthal in
which the legislative process can go forward. A distinction has rightfully been made between 1939, promulgated less than two years after Vera, pointed out that such doctrine of non-
delegation of power to make the laws which necessarily involves a discretion as to what it shall delegation "has been made to adopt itself to the complexities of modern governments, giving
be, which constitutionally may not be done, and delegation of authority or discretion as to its rise to the adoption, within certain limits, of the principle of 'subordinate legislation' not only in
execution to be exercised under and in pursuance of the law, to which no valid objection can the United States and England but in practically all modern governments. The difficulty lies in
be made. The Constitution is thus not to be regarded as denying the legislature the necessary the fixing of the limit and extent of the authority. While courts have undertaken to lay down
resources of flexibility and practicability. To avoid the taint of unlawful delegation, there must general principles, the safest is to decide each case according to its peculiar environment,
be a standard, which implies at the very least that the legislature itself determines matters having in mind the wholesome legislative purpose intended to be achieved. 37 After which, in
principle and lays down fundamental policy. Otherwise, the charge of complete abdication may came the even more explicit formulation in Pangasinan Transportation appearing in the quoted
be hard to repel. A standard thus defines legislative policy, marks its limits, maps out its excerpt from Edu v. Ericta. There is no question therefore that there is a marked drift in the
boundaries and specifies the public agency to apply it. It indicates the circumstances under direction of a more liberal approach. It is partly in recognition of the ever increasing needs for
which the legislative command is to be effected. It is the criterion by which legislative purpose the type of legislation allowing rule-making in accordance with standards, explicit or implicit,
may be carried out. Thereafter, the executive or administrative office designated may in discernible from a perusal of the entire enactment that in Agricultural Credit and Cooperative
pursuance of the above guidelines promulgate supplemental rules and regulations. The Financing Administration v. Confederation of Unions in Government Corporations and
standard may be either express or implied. If the former, the non-delegation objection is easily Offices" 38 the then Justice, now the retired Chief Justice and presently Speaker, Makalintal
met. The standard though does not have to be spelled out specifically. It could be implied from had occasion to refer to "the growing complexities of society" as well as "the increasing social
the policy and purpose of the act considered as a whole. ... This is to adhere to the recognition challenges of the times. 39It would be self-defeating in the extreme if the legislation intended to
given expression by Justice Laurel in a decision [Pangasinan Transportation v. Public Service cope with the grave social and economic problems of the present and foreseeable future would
Commission] announced not-too-long after the Constitution came into force and effect that the founder on the rock of an unduly restrictive and decidedly unrealistic meaning to be affixed to
principle of non-delegation 'has been made to adapt itself to the complexities of modem the doctrine of non-delegation. Fortunately with the retention in the amended Constitution of
governments giving rise to the adoption, within certain limits, of the principle of "subordinate some features of the 1973 Constitution as originally adopted leading to an appreciable measure
legislation" not only in the United States and England but in practically all modern governments of concord and harmony between the policy-making branches of the government, executive
He continued: 'Accordingly, with the growing complexity of modern life, the multiplication of the and legislative, the objection on the grounds of non- delegation would be even less persuasive.
subjects of governmental regulation, and the increased difficulty of administering the laws, It is worth repeating that the Prime Minister, while the choice of the President, must have the
there is a constantly growing tendency toward the delegation of greater powers by the approval of all members of the Batasang Pambansa. 40 At least the majority of the cabinet
legislature and toward the approval of the practice by the courts.' Consistency with the members, the Ministers being appointed by the President, if heads of ministries, shall come
conceptual approach requires the reminder that what is delegated is authority non-legislative from its regional representatives. 41 So, also, while the Prime Minister and the Cabinet are
in character, the completeness of the statute when it leaves the hands of Congress being responsible to the Batasang Pambansa for the program of government, it must be one
assumed. Our later decisions speak to the same effect. Thus from Justice J.B.L. Reyes "approved by the President. 42 While conceptually, there still exists a distinction between the
in People v. Exconde; 'It is well established in this jurisdiction that, while the making of laws is enactment of legislation and its execution, between formulation and implementation, the
a non-delegable activity that corresponds exclusively to Congress, nevertheless the latter may fundamental principle of separation of powers of which non-delegation is a logical corollary
constitutionally delegate authority to promulgate rules and regulations to implement a given becomes even more flexible and malleable. Even in the case of the United States, with its
legislation and effectuate its policies, for the reason that the legislature often finds it adherence to the Madisonian concept of separation of powers, President Kennedy could state
impracticable (if not impossible) to anticipate and provide for the multifarious and complex that its Constitution did not make "the Presidency and Congress rivals for power but partners

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for progress [with the two branches] being trustees for the people, custodians of their WHEREFORE, the petition is dismissed for lack of merit. During the pendency of the
heritage. 43 With the closer relationship provided for by the amended Constitution in our case, compulsory arbitration proceedings, both petitioner labor union and private respondent are
there is likely to be even more promptitude and dispatch in framing the policies and thereafter enjoined to good faith compliance with the provisions of Batas Pambansa Blg. 130. No costs.
unity and vigor in their execution. A rigid application of the non-delegation doctrine, therefore,
would be an obstacle to national efforts at development and progress. There is accordingly
more receptivity to laws leaving to administrative and executive agencies the adoption of such
means as may be necessary to effectuate a valid legislative purpose. It is worth noting that a
highly-respected legal scholar, Professor Jaffe as early as 1947, could speak of delegation as
the "dynamo of modern government. 44 He then went on to state that "the occasions for
delegating power to administrative offices [could be] compassed by a single
generalization. 45 Thus: "Power should be delegated where there is agreement that a task must
be performed and it cannot be effectively performed by the legislature without the assistance
of a delegate or without an expenditure of time so great as to lead to the neglect of equally
important business. Delegation is most commonly indicated where the relations to be regulated
are highly technical or where their regulation requires a course of continuous decision. 46 His
perceptive study could rightfully conclude that even in a strictly presidential system like that of
the United States, the doctrine of non-delegation reflects the American "political philosophy
that insofar as possible issues be settled [by legislative bodies], an essentially restrictive
approach" may ignore "deep currents of social force. 47 In plainer terms, and as applied to the
Philippines under the amended Constitution with the close ties that bind the executive and
legislative departments, certain features of parliamentarism having been retained, it may be a
deterrent factor to much needed legislation. The spectre of the non-delegation concept need
not haunt, therefore, party caucuses, cabinet sessions or legislative chambers.

5. By way of summary, this Court holds that Batas Pambansa Blg. 130 insofar as it empowers
the Minister of Labor to assume jurisdiction over labor disputes causing or likely to cause strikes
or lockouts adversely affecting the national interest and thereafter decide it or certify the same
the National Labor Relations Commission is not on its face unconstitutional for being violative
of the doctrine of non-delegation of legislative power. To repeat, there is no ruling on the
question of whether or not it has been unconstitutionally applied in this case, for being
repugnant to the regime of self-organization and free collective bargaining, as on the facts
alleged, disputed by private respondent, the matter is not ripe for judicial determination. It must
be stressed anew, however, that the power of compulsory arbitration, while allowable under
the Constitution and quite understandable in labor disputes affected with a national interest, to
be free from the taint of unconstitutionality, must be exercised in accordance with the
constitutional mandate of protection to labor. The arbiter then is called upon to take due care
that in the decision to be reached, there is no violation of "the rights of workers to self-
organization, collective bargaining, security of tenure, and just and humane conditions of
work. 48 It is of course manifest that there is such unconstitutional application if a law "fair on
its face and impartial in appearance (is) applied and administered by public authority with an
evil eye and an unequal hand. 49 It does not even have to go that far. An instance of
unconstitutional application would be discernible if what is ordained by the fundamental law,
the protection of labor, is ignored or disregarded.

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EN BANC cannot abdicate that obligation mandated by the 1987 Constitution, although said provision by
no means does away with the applicability of the principle in appropriate cases.
[ GR No. 94571, Apr 22, 1991 ]
'SECTION 1. The judicial power shall be vested in one Supreme Court and in such lower courts
TEOFISTO T. GUINGONA v. GUILLERMO CARAGUE + as may be established by law.
DECISION 'Judicial power includes the duty of the courts of justice to settle actual controversies involving
273 Phil. 443 rights which are legally demandable and enforceable, and to determine whether or not there
has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of
any branch or instrumentality of the Government.'

GANCAYCO, J.: "With the Senate maintaining that the President's veto is unconstitutional, and that charge
being controverted, there is an actual case or justiciable controversy between the Upper House
This is a case of first impression whereby petitioners question the constitutionality of the of Congress and the executive department that may be taken cognizance of by this Court."
automatic appropriation for debt service in the 1990 budget.
The questions raised in the instant petition are
As alleged in the petition, the facts are as follows:
"I. IS THE APPROPRIATION OF P86 BILLION IN THE P233 BILLION 1990 BUDGET
The 1990 budget consists of P98.4 Billion in automatic appropriation (with P86.8 Billion for debt VIOLATIVE OF SECTION 5, ARTICLE XIV OF THE CONSTITUTION?
service) and P155.3 Billion appropriated under Republic Act No. 6831, otherwise known as the
General Appropriations Act, or a total of P233.5 Billion,[1] while the appropriations for the II. ARE PD No. 81, PD No. 1177 AND PD No. 1967 STILL OPERATIVE UNDER THE
Department of Education, Culture and Sports amount to P27,017,813,000.00. [2] CONSTITUTION?

The said automatic appropriation for debt service is authorized by P.D. No. 81, entitled III. ARE THEY VIOLATIVE OF SECTION 29(1), ARTICLE VI OF THE CONSTITUTION?" [6]
"Amending Certain Provisions of Republic Act Numbered Four Thousand Eight Hundred Sixty,
as Amended (Re: Foreign Borrowing Act)," by P.D. No. 1177, entitled "Revising the Budget There is thus a justiciable controversy raised in the petition which this Court may properly take
Process in Order to Institutionalize the Budgetary Innovations of the New Society," and by P.D. cognizance of.
No. 1967, entitled "An Act Strengthening the Guarantee and Payment Positions of the Republic
of the Philippines on Its Contingent Liabilities Arising out of Relent and Guaranteed Loans by On the first issue, the petitioners aver
Appropriating Funds For The Purpose." "According to Sec. 5, Art. XIV of the Constitution:
There can be no question that petitioners as Senators of the Republic of the Philippines may '(5) The State shall assign the highest budgetary priority to education and ensure that teaching
bring this suit where a constitutional issue is raised. [3] Indeed, even a taxpayer has personality will attract and retain its rightful share of the best available talents through adequate
to restrain unlawful expenditure of public funds. [4] remuneration and other means of job satisfaction and fulfillment.'
The petition seeks the declaration of the unconstitutionality of P.D. No. 81, Section 31 of P.D. "The reason behind the said provision is stated, thus:
No. 1177, and P.D. No. 1967. The petition also seeks to restrain the disbursement for debt
service under the 1990 budget pursuant to said decrees. 'In explaining his proposed amendment, Mr. Ople stated that all the great and sincere piety
professed by every President and every Congress of the Philippines since the end of World
Respondents contend that the petition involves a pure political question which is the repeal or War II for the economic welfare of the public schoolteachers always ended up in failure and
amendment of said laws addressed to the judgment, wisdom and patriotism of the legislative this failure, he stated, had caused mass defection of the best and brightest teachers to other
body and not this Court. careers, including menial jobs in overseas employment and concerted actions by them to
In Gonzales,[5] the main issue was the unconstitutionality of the presidential veto of certain project their grievances, mainly over low pay and abject working conditions.
provisions, particularly Section 16 of the General Appropriations Act of 1990, R.A. No. 'He pointed to the high expectations generated by the February Revolution, especially keen
6831. This Court, in disposing of the issue, stated among public schoolteachers, which at present exacerbate these long frustrated hopes.
"The political question doctrine neither interposes an obstacle to judicial determination of the 'Mr. Ople stated that despite the sincerity of all administrations that tried vainly to respond to
rival claims. The jurisdiction to delimit constitutional boundaries has been given to this Court. It the needs of the teachers, the central problem that always defeated their pious intentions was

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really the one budgetary priority in the sense that any proposed increase for public for debt service bigger than the share allocated to education, the Court finds and so holds that
schoolteachers had to be multiplied many times by the number of government employees in said appropriation cannot be thereby assailed as unconstitutional.
general and their equitable claims to any pay standardization such that the pay rate of teachers
is hopelessly pegged to the rate of government workers in general. This, he stated, Now to the second issue. The petitioners made the following observations:
foredoomed the prospect of a significant pay increase for teachers. "To begin with, Rep. Act 4860 entitled 'AN ACT AUTHORIZING THE PRESIDENT OF THE
'Mr. Ople pointed out that the recognition by the Constitution of the highest priority for public PHILIPPINES TO OBTAIN SUCH FOREIGN LOANS AND CREDITS, OR TO INCUR SUCH
schoolteachers, and by implication, for all teachers, would ensure that the President and FOREIGN INDEBTEDNESS, AS MAY BE NECESSARY TO FINANCE APPROVED
Congress would be strongly urged by a constitutional mandate to grant to them such a level of ECONOMIC DEVELOPMENT PURPOSES OR PROJECTS, AND TO GUARANTEE, IN
remuneration and other incentives that would make teaching competitive again and attractive BEHALF OF THE REPUBLIC OF THE PHILIPPINES, FOREIGN LOANS OBTAINED OR
to the best available talents in the nation. BONDS ISSUED BY CORPORATIONS OWNED OR CONTROLLED BY THE GOVERNMENT
OF THE PHILIPPINES FOR ECONOMIC DEVELOPMENT PURPOSES INCLUDING THOSE
'Finally, Mr. Ople recalled that before World War II, teaching competed most successfully INCURRED FOR PURPOSES OF RE-LENDING TO THE PRIVATE
against all other career choices for the best and the brightest of the younger generation. It is SECTOR, APPROPRIATING THE NECESSARY FUNDS THEREFOR, AND FOR OTHER
for this reason, he stated, that his proposed amendment if approved, would ensure that PURPOSES,' provides:
teaching would be restored to its lost glory as the career of choice for the most talented and
most public-spirited of the younger generation in the sense that it would become the 'SEC. 2. The total amount of loans, credits and indebtedness, excluding interests, which the
countervailing measure against the continued decline of teaching and the wholesale desertion President of the Philippines is authorized to incur under this Act shall not exceed one billion
of this noble profession presently taking place. He further stated that this would ensure that United States dollars or its equivalent in other foreign currencies at the exchange rate prevailing
the future and the quality of the population would be asserted as a top priority against many at the time the loans, credits and indebtedness are incurred: Provided, however, That the total
clamorous and importunate but less important claims of the present.' (Journal of the loans, credits and indebtedness incurred under this Act shall not exceed two hundred fifty
Constitutional Commission, Vol. II, p. 1172) million in the fiscal year of the approval of this Act, and two hundred fifty million every fiscal
year thereafter, all in United States dollars or its equivalent in other currencies.
"However, as against this constitutional intention, P86 Billion is appropriated for debt service
while only P27 Billion is appropriated for the Department of Education in the 1990 budget. It is 'SEC. 5. It shall be the duty of the President, within thirty days after the opening of every regular
plain, therefore, that the said appropriation for debt service is inconsistent with the Constitution, session, to report to the Congress the amount of loans, credits and indebtedness contracted,
hence, void (Art. 7, New Civil Code)."[7] as well as the guarantees extended, and the purposes and projects for which the loans, credits
and indebtedness were incurred, and the guarantees extended, as well as such loans which
While it is true that under Section 5(5), Article XIV of the Constitution Congress is mandated to may be reloaned to Filipino-owned or controlled corporations and similar purposes.
"assign the highest budgetary priority to education" in order to "insure that teaching will attract
and retain its rightful share of the best available talents through adequate remuneration and 'SEC. 6. The Congress shall appropriate the necessary amount out of any funds in the National
other means of job satisfaction and fulfillment," it does not thereby follow that the hands of Treasury not otherwise appropriated, to cover the payment of the principal and interest on such
Congress are so hamstrung as to deprive it the power to respond to the imperatives of the loans, credits or indebtedness as and when they shall become due.'
national interest and for the attainment of other state policies or objectives. "However, after the declaration of martial law, President Marcos issued PD 81 amending
As aptly observed by respondents, since 1985, the budget for education has tripled to upgrade Section 6, thus:
and improve the facility of the public school system. The compensation of teachers has been SEC. 7. Section six of the same Act is hereby further amended to read as follows:
doubled. The amount of P29,740,611,000.00[8] set aside for the Department of Education,
Culture and Sports under the General Appropriations Act (R.A. No. 6831), is the highest 'SEC. 6. Any provision of law to the contrary notwithstanding, and in order to enable the
budgetary allocation among all department budgets. This is a clear compliance with the Republic of the Philippines to pay the principal, interest, taxes and other normal banking
aforesaid constitutional mandate according highest priority to education. charges on the loans, credits or indebtedness, or on the bonds, debentures, securities or other
evidences of indebtedness sold in international markets incurred under the authority of this Act,
Having faithfully complied therewith, Congress is certainly not without any power, guided only the proceeds of which are deemed appropriated for the projects, all the revenue realized from
by its good judgment, to provide an appropriation, that can reasonably service our enormous the projects financed by such loans, credits or indebtedness, or on the bonds, debentures,
debt, the greater portion of which was inherited from the previous administration. It is not only securities or other evidences of indebtedness, shall be turned over in full, after deducting actual
a matter of honor and to protect the credit standing of the country. More especially, the very and necessary expenses for the operation and maintenance of said projects, to the National
survival of our economy is at stake. Thus, if in the process Congress appropriated an amount Treasury by the government office, agency or instrumentality, or government-owned or
controlled corporation concerned, which is hereby appropriated for the purpose as and when
6|C ONSTI 1
they shall become due. In case the revenue realized is insufficient to cover the principal, 'Sources Appropriation
interest and other charges, such portion of the budgetary savings as may be necessary to
cover the balance or deficiency shall be set aside exclusively for the purpose by the 'The P233.5 billion budget proposed for fiscal year 1990 will require P132.1 billion of new
government office, agency or instrumentality, or government-owned or controlled corporation programmed appropriations out of a total P155.3 billion in new legislative authorization from
concerned: Provided, That, if there still remains a deficiency, such amount necessary to cover Congress. The rest of the budget, totalling P101.4 billion, will be sourced from existing
the payment of the principal and interest on such loans, credit or indebtedness as and when appropriations: P98.4 billion from Automatic Appropriations and P3.0 billion from Continuing
they shall become due is hereby appropriated out of any funds in the national treasury not Appropriations (Fig. 4).
otherwise appropriated: x x x "And according to Figure 4, xxx, P86.8 billion out of the P98.4 Billion are programmed for debt
"President Marcos also issued PD 1177, which provides: service. In other words, the President had, on her own, determined and set aside the said
amount of P98.4 Billion with the rest of the appropriations of P155.3 Billion to be determined
'SEC. 31. Automatic appropriations. All expenditures for (a) personnel retirement premiums, and fixed by Congress, which is now Rep. Act 6831." [9]
government service insurance, and other similar fixed expenditures, (b) principal and interest
on public debt, (c) national government guarantees of obligations which are drawn upon, Petitioners argue that the said automatic appropriations under the aforesaid decrees of then
are automatically appropriated: Provided, that no obligations shall be incurred or payments President Marcos became functus oficio when he was ousted in February, 1986; that upon the
made from funds thus automatically appropriated except as issued in the form of regular expiration of the one-man legislature in the person of President Marcos, the legislative power
budgetary allotments.' was restored to Congress on February 2, 1987 when the Constitution was ratified by the
people; that there is a need for a new legislation by Congress providing for automatic
and PD 1967, which provides: appropriation, but Congress, up to the present, has not approved any such law; and thus the
said P86.8 Billion automatic appropriation in the 1990 budget is an administrative act that rests
'Section 1. There is hereby appropriated, out of any funds in the National Treasury not on no law, and thus, it cannot be enforced.
otherwise appropriated, such amounts as may be necessary to effect payments on foreign or
domestic loans, or foreign or domestic loans whereon creditors make a call on the direct and Moreover, petitioners contend that assuming arguendo that P.D. No. 81, P.D. No. 1177 and
indirect guarantee of the Republic of the Philippines, obtained by: P.D. No. 1967 did not expire with the ouster of President Marcos, after the adoption of the 1987
Constitution, the said decrees are inoperative under Section 3, Article XVIII which provides
'a. The Republic of the Philippines the proceeds of which were relent to government-owned or
controlled corporations and/or government financial institutions; "Sec. 3. All existing laws, decrees, executive orders, proclamations, letters of instructions, and
other executive issuances not inconsistent with this Constitution shall remain operative until
'b. government-owned or controlled corporations and/or government financial institutions the amended, repealed, or revoked." (Emphasis supplied.)
proceeds of which were relent to public or private institutions;
They then point out that since the said decrees are inconsistent with Section 24, Article VI of
'c. government-owned or controlled corporations and/or financial institutions and guaranteed the Constitution, i.e.,
by the Republic of the Philippines;
"Sec. 24. All appropriation, revenue or tariff bills, bills authorizing increase of the public debt,
'd. other public or private institutions and guaranteed by government-owned or controlled bills of local application, and private bills shall originate exclusively in the House of
corporations and/or government financial institutions. Representatives, but the Senate may propose or concur with amendments." (Emphasis
'Section 2. All repayments made by borrower institutions on the loans for whose account supplied.
advances were made by the National Treasury will revert to the General Fund. whereby bills have to be approved by the President, [10] then a law must be passed by Congress
'Section 3. In the event that any borrower institution is unable to settle the advances made out to authorize said automatic appropriation. Further, petitioners state said decrees violate
of the appropriation provided therein, the Treasurer of the Philippines shall make the proper Section 29(1) of Article VI of the Constitution which provides as follows –
recommendation to the Minister of Finance on whether such advances shall be treated as "Sec. 29(1). No money shall be paid out of the Treasury except in pursuance of
equity or subsidy of the National Government to the institution concerned, which shall be an appropriation made by law.
considered in the budgetary program of the Government.
They assert that there must be definiteness, certainty and exactness in an
"In the 'Budget of Expenditures and Sources of Financing Fiscal Year 1990,' which appropriation,[11] otherwise it is an undue delegation of legislative power to the President who
accompanied her budget message to Congress, the President of the Philippines, Corazon C. determines in advance the amount appropriated for the debt service.[12]
Aquino, stated:
The Court is not persuaded.
7|C ONSTI 1
Section 3, Article XVIII of the Constitution recognizes that "All existing laws, decrees, executive the Constitution which refer to "bills" is that they mean appropriation measures still to be passed
orders, proclamations, letters of instructions and other executive issuances not inconsistent by Congress. If the intention of the framers thereof were otherwise they should have expressed
with the Constitution shall remain operative until amended, repealed or revoked." their decision in a more direct or express manner.
This transitory provision of the Constitution has precisely been adopted by its framers to Well-known is the rule that repeal or amendment by implication is frowned upon. Equally
preserve the social order so that legislation by the then President Marcos may be fundamental is the principle that construction of the Constitution and law is generally applied
recognized. Such laws are to remain in force and effect unless they are inconsistent with the prospectively and not retrospectively unless it is so clearly stated.
Constitution or are otherwise amended, repealed or revoked.
On the third issue that there is undue delegation of legislative power, in Edu vs. Ericta,[14] this
An examination of the aforecited presidential decrees show the clear intent that the amounts Court had this to say
needed to cover the payment of the principal and interest on all foreign loans, including those
guaranteed by the national government, should be made available when they shall become "What cannot be delegated is the authority under the Constitution to make laws and to alter
due precisely without the necessity of periodic enactments of separate laws appropriating funds and repeal them; the test is the completeness of the statute in all its terms and provisions when
therefore, since both the periods and necessities are incapable of determination in advance. it leaves the hands of the legislature. To determine whether or not there is an undue delegation
of legislative power, the inequity must be directed to the scope and definiteness of the measure
The automatic appropriation provides the flexibility for the effective execution of debt enacted. The legislature does not abdicate its function when it describes what job must be
management policies. Its political wisdom has been convincingly discussed by the Solicitor done, who is to do it, and what is the scope of his authority. For a complex economy, that may
General as he argues indeed be the only way in which legislative process can go forward...
'To avoid the taint of unlawful delegation there must be a standard, which implies at the very
"x x x First, for example, it enables the Government to take advantage of a favorable turn of least that the legislature itself determines matters of principle and lays down fundamental
market conditions by redeeming high-interest securities and borrowing at lower rates, or to shift policy...
from short-term to long-term instruments, or to enter into arrangements that could lighten our 'The standard may be either express or implied … from the policy and purpose of the act
outstanding debt burden debt-to-equity, debt-to-asset, debt-to-debt or other such considered as whole…
schemes. Second, the automatic appropriation obviates the serious difficulties in debt
servicing arising from any deviation from what has been previously programmed. The annual In People vs. Vera,[15] this Court said "the true distinction is between the delegation of power
debt service estimates, which are usually made one year in advance, are based on a to make the law, which necessarily involves discretion as to what the law shall be, and
mathematical set or matrix or, in layman's parlance, 'basket' of foreign exchange and interest conferring authority or discretion as to its execution, to be exercised under and in pursuance
rate assumptions which may significantly differ from actual rates not even in proportion to of the law. The first cannot be done; to the latter no valid objection can be made."
changes on the basis of the assumptions. Absent an automatic appropriation clause, the
Philippine Government has to await and depend upon Congressional action, which by the time Ideally, the law must be complete in all its essential terms and conditions when it leaves the
this comes, may no longer be responsive to the intended conditions which in the meantime legislature so that there will be nothing left for the delegate to do when it reaches him except
may have already drastically changed. In the meantime, also, delayed payments and enforce it. If there are gaps in the law that will prevent its enforcement unless they are first
arrearages may have supervened, only to worsen our debt service-to-total expenditure ratio in filled, the delegate will then have been given the opportunity to step in the shoes of the
the budget due to penalties and/or demand for immediate-payment even before due dates. legislature and exercise a discretion essentially legislative in order to repair the omissions. This
is invalid delegation.[16]
Clearly, the claim that payment of the loans and indebtedness is conditioned upon the
continuance of the person of President Marcos and his legislative power goes against the intent The Court finds that in this case the questioned laws are complete in all their essential terms
and purpose of the law. The purpose is foreseen to subsist with or without the person of and conditions and sufficient standards are indicated therein.
Marcos."[13]
The legislative intention in R.A. No. 4860, as amended, Section 31 of P.D. No. 1177 and P.D.
The argument of petitioners that the said presidential decrees did not meet the requirement No. 1967 is that the amount needed should be automatically set aside in order to enable the
and are therefore inconsistent with Sections 24 and 27 of Article VI of the Constitution which Republic of the Philippines to pay the principal, interest, taxes and other normal banking
requires, among others, that "all appropriations, x x x bills authorizing increase of public debt" charges on the loans, credits or indebtedness incurred as guaranteed by it when they shall
must be passed by Congress and approved by the President is untenable. Certainly, the become due without the need to enact a separate law appropriating funds therefor as the need
framers of the Constitution did not contemplate that existing laws in the statute books including arises. The purpose of these laws is to enable the government to make prompt payment and/or
existing presidential decrees appropriating public money are reduced to mere "bills" that must advances for all loans to protect and maintain the credit standing of the country.
again go through the legislative mill. The only reasonable interpretation of said provisions of

8|C ONSTI 1
Although the subject presidential decrees do not state specific amounts to be paid, of government fiscal position, the regulation of fund releases, the implementation of cash
necessitated by the very nature of the problem being addressed, the amounts nevertheless are payment schedules, and other related activities comprise this phase of the budget cycle.
made certain by the legislative parameters provided in the decrees. The Executive is not of
unlimited discretion as to the amounts to be disbursed for debt servicing. The mandate is to Release from the debt service fund is triggered by a request of the Bureau of the Treasury for
pay only the principal, interest, taxes and other normal banking charges on the loans, credits allotments from the Department of Budget and Management, one quarter in advance of
or indebtedness, or on the bonds, debentures or security or other evidences of indebtedness payment schedule, to ensure prompt payments. The Bureau of Treasury, upon receiving
sold in international markets incurred by virtue of the law, as and when they shall become official billings from the creditors, remits payments to creditors through the Central Bank or to
due. No uncertainty arises in executive implementation as the limit will be the exact amounts the Sinking Fund established for government security issues (Annex F).
as shown by the books of the Treasury. 4. Budget accountability. The fourth phase refers to the evaluation of actual performance and
The Government budgetary process has been graphically described to consist of four major initially approved work targets, obligations incurred, personnel hired and work accomplished
phases as aptly discussed by the Solicitor General: are compared with the targets set at the time the agency budgets were approved.

"The Government budgeting process consists of four major phases: There being no undue delegation of legislative power as clearly above shown, petitioners insist
nevertheless that subject presidential decrees constitute undue delegation of legislative power
1. Budget preparation. The first step is essentially tasked upon the Executive Branch and to the executive on the alleged ground that the appropriations therein are notexact,
covers the estimation of government revenues, the determination of budgetary priorities and certain or definite, invoking in support therefor the Constitution of Nebraska, the constitution
activities within the constraints imposed by available revenues and byborrowing limits, and the under which the case of State v. Moore, 69 NW 974, cited by petitioners, was decided. Unlike
translation of desired priorities and activities into expenditure levels. the Constitution of Nebraska, however, our Constitution does not require a definite, certain,
exact or 'specific appropriation made by law.' Section 29, Article VI of our 1987 Constitution
Budget preparation starts with the budget call issued by the Department of Budget and omits any of these words and simply states:
Management. Each agency is required to submit agency budget estimates in line with the
requirements consistent with the general ceilings set by the Development Budget Coordinating 'Section 29(1). No money shall be paid out of the treasury except in pursuance of an appro-
Council (DBCC). priation made by law.
With regard to debt servicing, the DBCC staff, based on the macroeconomic projections of More significantly, there is no provision in our Constitution that provides or prescribes any
interest rates (e.g. LIBOR rate) and estimated sources of domestic and foreign financing, particular form of words or religious recitals in which an authorization or appropriation by
estimates debt service levels. Upon issuance of budget call, the Bureau of Treasury computes Congress shall be made, except that it be 'made by law,' such as precisely the authorization or
for the interest and principal payments for the year for all direct national government borrowings appropriation under the questioned presidential decrees. In other words, in terms of time
and other liabilities assumed by the same. horizons, an appropriation may be made impliedly (as by past but subsisting legislations) as
well as expressly for the current fiscal year (as by enactment of laws by the present Congress),
2. Legislative authorization. At this stage, Congress enters the picture and deliberates or acts just as said appropriation may be made in general as well as in specific terms. The
on the budget proposals of the President, and Congress in the exercise of its own judgment Congressional authorization may be embodied in annual laws, such as a general appro-
and wisdom formulates an appropriation act precisely following the process established by the priations act or in special provisions of laws of general or special application which appropriate
Constitution, which specifies that no money may be paid from the Treasury except in public funds for specific public purposes, such as the questioned decrees. An appropriation
accordance with an appropriation made by law. measure is sufficient if the legislative intention clearly and certainly appears from the language
Debt service is not included in the General Appropriations Act, since authorization therefor employed (In re Continuing Appropriations, 32 P. 272), whether in the past or in the present." [17
already exists under RA No. 4860 and 245, as amended and PD 1967. Precisely in the light Thus, in accordance with Section 22, Article VII of the 1987 Constitution, President Corazon
of this subsisting authorization as embodied in said Republic Acts and PD for debt service, C. Aquino submitted to Congress the Budget of Expenditures and Sources of Financing for the
Congress does not concern itself with details for implementation by the Executive, but largely Fiscal Year 1990. The proposed 1990 expenditure program covering the estimated obligation
with annual levels and approval thereof upon due deliberations as part of the whole obligation that will be incurred by the national government during the fiscal year amounts to P233.5
program for the year. Upon such approval, Congress has spoken and cannot be said to have Billion. Of the proposed budget, P86.8 is set aside for debt servicing as follows:
delegated its wisdom to the Executive, on whose part lies the implementation or execution of
the legislative wisdom. "National Government Debt Service Expenditures, 1990 (in million pesos)

3. Budget Execution. Tasked on the Executive, the third phase of the budget process covers
the various operational aspects of budgeting. The establishment of obligation authority
ceilings, the evaluation of work and financial plans for individual activities, the continuing review
9|C ONSTI 1
Foreign
Domestic
RA 4860,
RA 245, as Total
as amended,
amended
PD 1967

Interest
P36,861 P18,570 P55,431
Payments
Principal
16,310 15,077 31,387
Amortization
__________ __________ __________
Total P53,171 P33, 647 P86,818"[18]
__________ __________ __________

as authorized under P.D. 1967 and R.A. 4860 and 245, as amended.
The Court, therefor, finds that R.A. No. 4860, as amended by P.D. No. 81, Section 31 of P.D.
1177 and P.D. No. 1967 constitute lawful authorizations or appropriations, unless they are
repealed or otherwise amended by Congress. The Executive was thus merely complying with
the duty to implement the same.
There can be no question as to the patriotism and good motive of petitioners in filing this
petition. Unfortunately, the petition must fail on the constitutional and legal issues raised. As
to whether or not the country should honor its international debt, more especially the enormous
amount that had been incurred by the past administration, which appears to be the ultimate
objective of the petition, is not an issue that is presented or proposed to be addressed by the
Court. Indeed, it is more of a political decision for Congress and the Executive to determine in
the exercise of their wisdom and sound discretion.
WHEREFORE, the petition is DISMISSED, without pronouncement as to costs.

SO ORDERED.

10 | C O N S T I 1
G.R. No. 182249 March 5, 2013 Section 7. The Board of Directors shall provide for an organizational structure and staffing
pattern for officers and employees of the Trade and Investment Development Corporation of
TRADE AND INVESTMENT DEVELOPMENT CORPORATION OF THE the Philippines (TIDCORP) and upon recommendation of its President, appoint and fix their
PHILIPPINES, Petitioner, remuneration, emoluments and fringe benefits: Provided, That the Board shall have exclusive
vs. and final authority to appoint, promote, transfer, assign and re-assign personnel of the
CIVIL SERVICE COMMISSION, Respondent. TIDCORP, any provision of existing law to the contrary notwithstanding.

DECISION All positions in TIDCORP shall be governed by a compensation and position classification
system and qualification standards approved by TIDCORP's Board of Directors based on a
BRION, J.: comprehensive job analysis and audit of actual duties and responsibilities. The compensation
plan shall be comparable with the prevailing compensation plans in the private sector and shall
be subject to periodic review by the Board no more than once every four (4) years without
We resolve the petition for review on certiorari 1 of Trade and Investment Development prejudice to yearly merit reviews or increases based on productivity and profitability. TIDCORP
Corporation of the Philippines (TJDCORP) seeking the reversal of the decision 2 dated shall be exempt from existing laws, rules and regulations on compensation, position
September 28, 2007 and the resolution 3 dated March 17, 2008 of the Court of Appeals (CA) in classification and qualification standards. It shall, however, endeavor to make the system to
CA-G.R. SP. No. 81058. The assailed CA rulings affirmed the resolutions,4 dated January 31, conform as closely as possible to the principles and modes provided in Republic Act No. 6758.
2003 and October 7, 2003, of the Civil Service Commission (CSC), invalidating Arsenio de
Guzman’s appointment as Financial Management Specialist IV in TIDCORP. The CA
On the basis of Section 7 of RA 8494, Tambanillo argued that TIDCORP is authorized to adopt
subsequently denied the motion for reconsideration that followed.
an organizational structure different from that set and prescribed by the CSC. Section 7
exempts TIDCORP from existing laws on compensation, position classification and
Factual Antecedents qualification standards, and is thus not bound by the DBM’s Index of Occupational Service.
Pursuant to this authority, TIDCORP’s Board of Directors issued Resolution No. 1185, s. 1998
On August 30, 2001, De Guzman was appointed on a permanent approving the corporation’s re-organizational plan, under which De Guzman was appointed
Financial Management Specialist IV. De Guzman’s appointment was valid because the plan
status as Financial Management Specialist IV of TIDCORP, a government-owned and providing for his position followed the letter of the law.
controlled corporation (GOCC) created pursuant to Presidential
Tambanillo also noted that prior to De Guzman’s appointment as Financial Management
Decree No. 1080. His appointment was included in TIDCORP’s Report on Specialist IV, the position had earlier been occupied by Ma. Loreto H. Mayor whose
appointment was duly approved by Director Bugtong. Thus, Director Bugtong’s invalidation of
Personnel Actions (ROPA) for August 2001, which was submitted to the De Guzman’s appointment is inconsistent with her earlier approval of Mayor’s appointment to
the same position.
CSC – Department of Budget and Management (DBM) Field Office. 5
The CSC-NCR’s Ruling
In a letter6 dated September 28, 2001, Director Leticia M. Bugtong disallowed De Guzman’s
appointment because the position of Financial Management Specialist IV was not included in Director Padilla denied Tambanillo’s appeal because De Guzman’s appointment failed to
the DBM’s Index of Occupational Service. comply with Section 1, Rule III of CSC Memorandum Circular No. 40, s. 1998, which requires
that the position title of an appointment submitted to the CSC must conform with the approved
Position Allocation List and must be found in the Index of Occupational Service. Since the
TIDCORP’s Executive Vice President Jane U. Tambanillo appealed7 the invalidation of De
position of Financial Management Specialist IV is not included in the Index of Occupational
Guzman’s appointment to Director IV Agnes Padilla of the CSC-National Capital Region (NCR).
Service, then De Guzman’s appointment to this position must be invalid. 8 Director Padilla
According to Tambanillo, Republic Act No. (RA) 8494, which amended TIDCORP’s charter,
pointed out that the CSC had already decided upon an issue similar to De Guzman’s case in
empowers its Board of Directors to create its own organizational structure and staffing pattern,
CSC Resolution No. 011495 (Geronimo, Rolando S.C., Macapagal, Vivencio M. Tumangan,
and to approve its own compensation and position classification system and qualification
Panser E., Villar, Victor G., Ong, Elizabeth P., Re: Invalidated Appointments; Appeal) where it
standards. Specifically, Section 7 of RA 8494 provides:
invalidated the appointments of several Development Bank of the Philippines (DBP) employees
because their position titles did not conform with the Position Allocation List and with the Index

11 | C O N S T I 1
of Occupational Service. Like TIDCORP, the DBP’s charter exempts the DBP from existing RA 8494 gave TIDCORP staffing prerogatives, it would still have to comply with civil service
laws, rules, and regulations on compensation, position classification and qualification rules because Section 7 did not expressly exempt TIDCORP from civil service laws.
standards. It also has a similar duty to "endeavor to make its system conform as closely as
possible to the principles under the Compensation and Position Classification Act of 1989 The CSC-CO also supported the CSC-NCR’s invocation of CSC Resolution No. 011495. Both
(Republic Act No. 6758, as amended)."9 the charters of the DBP and TIDCORP have similar provisions in the recruitment and
administration of their human resources. Thus, the ruling in CSC Resolution No. 011495 has
Lastly, Padilla stressed that the 1987 Administrative Code empowers10 the CSC to formulate been correctly applied in TIDCORP’s appeal.
policies and regulations for the administration, maintenance and implementation of position,
classification and compensation. Lastly, the CSC-CO noted that the government is not bound by its public officers’ erroneous
application and enforcement of the law. Granting that the CSC-NCR had erroneously approved
TIDCORP’s appeal to the CSC-CO an appointment to the same position as De Guzman’s appointment, the CSC is not estopped
from correcting its officers’ past mistakes.
In response to the CSC-NCR’s ruling, TIDCORP’s President and CEO Joel C. Valdes sent
CSC Chairperson Karina Constantino-David a Letter11 appealing Director Padilla’s decision to TIDCORP moved to reconsider15 the CSC-CO’s decision, but this motion was
the CSC-Central Office (CO). Valdes reiterated TIDCORP’s argument that RA 8494 authorized denied,16 prompting TIDCORP to file a Rule 65 petition for certiorari 17 with the CA. The petition
its Board of Directors to determine its own organizational structure and staffing pattern, and asserted that the CSC-CO committed grave abuse of discretion in issuing Resolution No.
exempted TIDCORP from all existing laws on compensation, position classification and 030144 and Resolution No. 031037.
qualification standards. Citing Javellana v. The Executive Secretary, et al., 12 Valdes asserted
that the wisdom of Congress in granting TIDCORP this authority and exemption is a political The Appellate Court’s Ruling
question that cannot be the subject of judicial review. Given TIDCORP’s functions as the
government’s export credit agency, its Board of Directors has been provided flexibility in The CA denied18 TIDCORP’s petition and upheld the ruling of the CSC-CO in Resolution No.
administering its personnel so that it can hire qualified employees from the private sector, such 030144 and Resolution No. 031037. The CA noted that filing a petition for certiorari was an
as banks and other financial institutions. improper recourse; TIDCORP should have instead filed a petition for review under Section 1,
Rule 43 of the Rules of Court. The CA, however, brushed aside the procedural defect, ruling
In addition, prior actions of the CSC show that it recognized TIDCORP’s exemption from all that the assailed resolutions should still stand as they are consistent with law and
laws regarding compensation, position classification and qualification standards of its jurisprudence.
employees. The CSC has approved prior appointments of TIDCORP’s officers under its July
1, 1998 re-organization plan. It also approved Mayor’s previous appointment as Financial Citing Central Bank of the Philippines v. Civil Service Commission, 19 the CA stood by the CSC-
Management Specialist IV. Further, a memorandum dated October 29, 1998 issued by the
CO’s ruling that it has authority to approve and review De Guzman’s appointment. The CSC
CSC-NCR noted that "pursuant to Sec. 7 of RA 8494, TIDCORP is exempt from existing laws,
has the power to ascertain whether the appointing authority complied with the requirements of
rules and regulations on compensation, position classification and qualification standards."13 the law; otherwise, it may revoke the appointment. As TIDCORP is a government-owned
corporation, it is covered by civil service laws and is therefore bound by the CSC’s jurisdiction
The CSC-CO’s ruling over all matters pertaining to personnel, including appointments.

In its Resolution No. 030144,14 the CSC-CO affirmed the CSC-NCR’s decision that De Further, the CA cited the CSC’s mandate under the 1987 Constitution to approve or disapprove
Guzman’s appointment should have complied with CSC Memorandum Circular No. 40, s. 1998, appointments and to determine whether an appointee possesses civil service eligibility. As
as amended by CSC Memorandum Circular No. 15, s. 1999. Rule III, Section 1(c) is explicit in TIDCORP’s charter does not expressly or impliedly divest the CSC of administrative authority
requiring that the position title indicated in the appointment should conform with the Position over personnel concerns at TIDCORP, the latter is still covered by the existing civil service laws
Allocation List and found in the Index of Occupational Service. Otherwise, the appointment on compensation, position classification and qualification standards. Its appointment of De
shall be disapproved. In disallowing De Guzman’s appointment, the CSC-CO held that Director Guzman as Financial Management Specialist IV should have complied with these rules.
Bugtong was simply following the letter of the law.
The CA thus concluded that the CSC was well-within its authority when it invalidated De
According to the CSC-CO, TIDCORP misconstrued the provisions of Section 7 of RA 8494 in Guzman’s appointment. It held that an appointee’s title to the office does not permanently vest
its attempt to bypass the requirements of CSC Memorandum Circular No. 40, s. 1998. While until the appointee complies with the legal requirements of his appointment. The requirements
include the submission of the appointment to the CSC for the determination of whether the
12 | C O N S T I 1
appointee qualifies to the position and whether the procedure for appointment has been covered by the civil service rules and by the CSC. It should submit its Position Allocation List
properly followed. Until these requirements are complied with, his appointment may still be to the DBM, regardless of its exemption under RA 6758.
recalled or withdrawn by the appointing authority. 20
Lastly, the CSC argued that RA 8494 should not prevail over RA 6758 because the latter also
TIDCORP moved for reconsideration21 but the CA denied the motion in a resolution 22 dated applies to GOCCs like TIDCORP; RA 8494 even makes a reference to RA 6758.
March 17, 2008.
Issues
The Present Petition
The parties’ arguments, properly joined, present to us the following issues:
In its present petition for review on certiorari, 23 TIDCORP argued that the CSC’s interpretation
of the last sentence of Section 7 of RA 8494 (which mandates it to endeavor to make the 1) Whether the Constitution empowers the CSC to prescribe and enforce civil service
system conform as closely as possible with the principles provided in RA 6758) is misplaced. rules and regulations contrary to laws passed by Congress;
This provision does not bar TIDCORP from adopting a position classification system and
qualification standards different from those prescribed by the CSC. TIDCORP asserts that it is 2) Whether the requirement in Section 1(c), Rule III of CSC Memorandum Circular No.
not also duty bound to comply with civil service rules on compensation and position 40, s. 1998, as amended by CSC Memorandum Circular No. 15, s. 1999, applies to
classification, as it is exempt from all these rules. Instead, TIDCORP is only required to furnish appointments in TIDCORP; and
the CSC with its compensation and position classification system and qualification standards
so that the CSC can be properly guided in processing TIDCORP’s appointments, promotion
and personnel action. 3) Whether De Guzman’s appointment as Financial Management Specialist IV in
TIDCORP is valid.
Insisting on its exemption from RA 6758 and CSC Memorandum Circular No. 40, s. 1998,
TIDCORP emphasizes that the provisions of RA 6758, which the CSC applied to TIDCORP, is The Court’s Ruling
a general law, while TIDCORP’s charter, RA 8494, is a special law. In interpreting conflicting
provisions of a general law and a special law, the provisions of the two laws should be We find the petition meritorious.
harmonized to give effect to both. But if these provisions cannot be reconciled, then the special
law should prevail because it is a qualification to the general rule. Directly at issue is the application of Section 1(c), Rule III of CSC Memorandum Circular No.
40, s. 1998, to appointments in TIDCORP. TIDCORP claims that its exemption, embodied in
Further, RA 8494 is a later expression of Congress’ intent as it was enacted nine years after Section 7 of its charter, precludes the application of this requirement. The CSC, on the other
RA 6758 was approved, and should therefore be construed in this light in its relation with the hand, maintains its stance that appointments in a GOCC should follow the civil service laws on
latter. A new statute should be interpreted in connection with those already existing in relation appointments, regardless of its exemption from the civil service rules on compensation, position
to the same subject matter and all should be made to harmonize and stand together – classification and qualification standards.
interpretare et concordare legibus est optimus interpretandi.
While the CSC has authority over personnel actions in GOCCs, the rules it formulates pursuant
Under these principles, TIDCORP argued that Section 7 of RA 8494, the provision of a special to this mandate should not contradict or amend the civil service laws it implements.
law, should be interpreted as an exemption to RA 6758. Thus, CSC Memorandum Circular No.
40, s. 1998, which was issued pursuant to RA 6758, should not have been applied to limit At the outset, we clarify that the CSC’s authority over personnel actions in TIDCORP is
TIDCORP’s staffing prerogatives. uncontested. Both parties acknowledge this relationship in the pleadings they filed before the
Supreme Court.25 But while TIDCORP asserts that its charter exempts it from rules on
In its comment,24 the CSC noted that CSC Memorandum Circular No. 40, series of 1998, as compensation, position classification and qualification standards, the CSC argues that this
amended by CSC Memorandum Circular No. 15, s. 1999, was issued in accordance with its exemption is irrelevant to the denial of De Guzman’s appointment because the CSC’s authority
authority to prescribe rules and regulations to carry out the provisions of civil service laws and over TIDCORP’s personnel actions requires it to comply with the CSC’s rules on appointments.
other pertinent laws (Administrative Code), and not pursuant to RA 6758.
The parties’ arguments reveal an apparent clash between TIDCORP’s charter, enacted by
The CSC maintained that Section 2(1), Article IX-B of the Constitution includes government Congress, and the CSC rules, issued pursuant to the CSC’s rule-making power. Does the
and controlled corporations as part of the civil service. TIDCORP, a GOCC, is therefore
13 | C O N S T I 1
CSC’s constitutional authority over the civil service divest the Legislature of the power to enact The 1987 Administrative Code then spelled out the CSC’s rule-making power in concrete terms
laws providing exemptions to civil service rules? in Section 12, Book V, Title I-A, which empowered the CSC to implement the civil service law
and other pertinent laws, and to promulgate policies, standards and guidelines for the civil
We answer in the negative. The CSC’s rule-making power, albeit constitutionally granted, is service.29
still limited to the implementation and interpretation of the laws it is tasked to enforce.
The CSC’s rule-making power as a constitutional grant is an aspect of its independence as a
The 1987 Constitution created the CSC as the central personnel agency of the government constitutional commission. It places the grant of this power outside the reach of Congress,
mandated to establish a career service and promote morale, efficiency, integrity, which cannot withdraw the power at any time. As we said in Gallardo v. Tabamo, Jr., 30 a case
responsiveness, progressiveness, and courtesy in the civil service. 26 It is a constitutionally which upheld the validity of a resolution issued by the Commission on Elections (COMELEC),
created administrative agency that possesses executive, quasi-judicial and quasi-legislative or another constitutional commission:
rule-making powers.
Hence, the present Constitution upgraded to a constitutional status the aforesaid statutory
While not explicitly stated, the CSC’s rule-making power is subsumed under its designation as authority to grant the Commission broader and more flexible powers to effectively perform its
the government’s "central personnel agency" in Section 3, Article IX-B of the 1987 Constitution. duties and to insulate it further from legislative intrusions. Doubtless, if its rule-making power is
The original draft of Section 3 empowered the CSC to "promulgate and enforce policies on made to depend on statutes, Congress may withdraw the same at any time. Indeed, the present
personnel actions, classify positions, prescribe conditions of employment except as to Constitution envisions a truly independent Commission on Elections committed to ensure free,
compensation and other monetary benefits which shall be provided by law." This, however, orderly, honest, peaceful and credible elections, and to serve as the guardian of the people's
was deleted during the constitutional commission’s deliberations because it was redundant to sacred right of suffrage — the citizenry's vital weapon in effecting a peaceful change of
the CSC’s nature as an administrative agency:27 government and in achieving and promoting political stability. [citation omitted]

MR. REGALADO. This is more for clarification. The original Section 3 states, among others, But while the grant of the CSC’s rule-making power is untouchable by Congress, the laws that
the functions of the Civil Service Commission — to promulgate and enforce policies on the CSC interprets and enforces fall within the prerogative of Congress. As an administrative
personnel actions. Will Commissioner Aquino kindly indicate to us the corresponding provisions agency, the CSC’s quasi-legislative power is subject to the same limitations applicable to other
and her proposed amendment which would encompass the powers to promulgate and enforce administrative bodies. The rules that the CSC formulates must not override, but must be in
policies on personnel actions? harmony with, the law it seeks to apply and implement. 31

MS. AQUINO. It is my submission that the same functions are already subsumed under the For example, in Grego v. Commission on Elections, 32 we held that it was improper for the
concept of a central personnel agency. COMELEC, a constitutional body bestowed with rule-making power by the Constitution, to use
the word "shall" in the rules it formulated, when the law it sought to implement uses the word
"may." While rules issued by administrative bodies are entitled to great respect, "the conclusive
MR. REGALADO. In other words, all those functions enumerated from line 35 on page 2 to line
1 of page 3, inclusive, are understood to be encompassed in the phrase "central personnel effect of administrative construction is not absolute. The function of promulgating rules and
agency of the government." regulations may be legitimately exercised only for the purpose of carrying the provisions of the
law into effect. x x x Administrative regulations cannot extend the law nor amend a legislative
enactment; x x x administrative regulations must be in harmony with the provisions of the law,"
MS. AQUINO. Yes, Mr. Presiding Officer, except that on line 40 of page 2 and line 1 of the and in a conflict between the basic law and an implementing rule or regulation, the former must
subsequent page, it was only subjected to a little modification. prevail.33

MR. REGALADO. May we, therefore, make it of record that the phrase ". . . promulgate and CSC Memorandum Circular No. 40, s. 1998, and CSC Resolution No. 15, s. 1999, which were
enforce policies on personnel actions, classify positions, prescribe conditions of employment issued pursuant to the CSC’s rule-making power, involve rules on position classification
except as to compensation and other monetary benefits which shall be provided by law" is
understood to be subsumed under and included in the concept of a central personnel agency.
Two questions logically follow our conclusion on the extent of the CSC’s rule-making power.
28
The first is whether Section 1(c), Rule III of CSC Memorandum Circular No. 40, s. 1998, was
MS. AQUINO. I would have no objection to that. issued pursuant to the CSC’s rule-making power; the second is whether this provision involves
compensation, position classification and/or qualification standards that TIDCORP claims to be
exempt from. We answer both questions in the affirmative.

14 | C O N S T I 1
We agree with the CSC’s position that CSC Memorandum Circular No. 40, s. 1998, and CSC RA 8494, the provision TIDCORP invokes as the source of its exemption, also directs its Board
Resolution No. 15, s. 1999, were all issued pursuant to its rule-making power. No less than the of Directors to "endeavor to make its system conform as closely as possible with the principles
introductory clause of CSC Memorandum Circular No. 40, s. 1998, confirms this: [and modes provided in] Republic Act No. 6758." 39 This reference of RA 6758 in Section 7
means that TIDCORP cannot simply disregard RA 6758 but must take its principles into
Pursuant to Paragraphs 2 and 3, Section 12, Book V of Administrative Code of 1987 otherwise account in providing for its own position classifications. This requirement, to be sure, does not
known as Executive Order No. 292, the Civil Service Commission hereby prescribes the run counter to Section 2(1), Article IX-B of the Constitution which provides that "the civil service
following rules to govern the preparation, submission of, and actions to be taken on embraces all branches, subdivisions, instrumentalities, and agencies of the Government,
appointments and other personnel actions. 34 including government-owned or controlled corporations with original charters." The CSC shall
still enforce position classifications at TIDCORP, but must do this under the terms that
TIDCORP has itself established, based on the principles of RA 6758.
Both these memoranda govern appointments and personnel actions in the civil service. CSC
Memorandum Circular No. 40, s. 1998, or the "Revised Omnibus Rules on Appointments and
Other Personnel Actions," updated and consolidated the various issuances on appointments To further expound on these points, the CSC’s authority over TIDCORP is
and other personnel actions and simplified their processing. This was subsequently amended undisputed.1âwphi1 The rules that the CSC formulates should implement and be in harmony
by CSC Memorandum Circular No. 15, s. 1999. with the law it seeks to enforce. In TIDCORP’s case, the CSC should also consider TIDCORP’s
charter in addition to other civil service laws. Having said this, there remains the issue of how
The assailed provisions in those memorandum circulars, however, involve position the CSC should apply the civil service law to TIDCORP, given the exemptions provided in the
latter’s charter. Does the wording of Section 7 of RA 8494 command TIDCORP to follow issued
classification. Section 1(c), Rule III of CSC Memorandum Circular No. 40, 35 s. 1998, requires,
requirements pursuant to RA 6758 despite its exemption from laws involving position
as a condition sine qua non for the approval of an appointment, that the position title indicated
classification?
therein conform with the approved Position Allocation List. The position title should also be
found in the Index of Occupational Service. According to National Compensation Circular No.
58, the Position Allocation List is a list prepared by the DBM which reflects the allocation of We answer in the negative. "Under the principles of statutory construction, if a statute is clear,
existing positions to the new position titles in accordance with the Index of Occupational plain and free from ambiguity, it must be given its literal meaning and applied without attempted
Service, Position Titles and Salary Grades issued under National Compensation Circular No. interpretation. This plain-meaning rule or verba legis is derived from the maxim index animi
57.36 Both circulars were published by the DBM pursuant to its mandate from RA 6758 to sermo est (speech is the index of intention) and rests on the valid presumption that the words
establish a position classification system in the government.37 employed by the legislature in a statute correctly express its intent and preclude the court from
construing it differently. The legislature is presumed to know the meaning of the words, to have
used words advisedly, and to have expressed its intent by the use of such words as are found
Further, the CSC admitted in its comment that RA 6758 was the basis for the issuance of CSC
in the statute. Verba legis non est recedendum, or from the words of a statute there should be
Memorandum Circular No. 40, s. 1998, as amended by CSC Memorandum Circular No. 15, s.
1999. The CSC said: no departure."40

The phrase "to endeavor" means to "to devote serious and sustained effort" and "to make an
The abovecited Sections 4 and 6 of R.A. No. 6758 are the bases for respondent’s issuance of
CSC Memorandum Circular No. 40, series of 1998, as amended by CSC Memorandum Circular effort to do." It is synonymous with the words to strive, to struggle and to seek. 41 The use of "to
No. 15, series of 1999. To reiterate, the Circulars mandate that appointments should conform endeavor" in the context of Section 7 of RA 8494 means that despite TIDCORP’s exemption
from laws involving compensation, position classification and qualification standards, it should
to the approved Position Allocation List (PAL) and at the same time be listed in the Index of
still strive to conform as closely as possible with the principles and modes provided in RA 6758.
Occupational Service (IOS).38
The phrase "as closely as possible," which qualifies TIDCORP’s duty "to endeavor to conform,"
recognizes that the law allows TIDCORP to deviate from RA 6758, but it should still try to hew
Section 7 of TIDCORP’s charter exempts it from rules involving position classification closely with its principles and modes. Had the intent of Congress been to require TIDCORP to
fully, exactly and strictly comply with RA 6758, it would have so stated in unequivocal terms.
To comply with Section 1(c), Rule III of CSC Memorandum Circular No. 40, s. 1998, TIDCORP Instead, the mandate it gave TIDCORP was to endeavor to conform to the principles and
must conform with the circulars on position classification issued by the DBM. Section 7 of its modes of RA 6758, and not to the entirety of this law.
charter, however, expressly exempts TIDCORP from existing laws on position classification,
among others. These inter-relationships render it clear, as a plain reading of Section 7 of RA 8494 itself would
confirm, that TIDCORP is exempt from existing laws on compensation, position classification
In its comment, the CSC would want us to disregard TIDCORP’s exemption from laws involving and qualification standards, including compliance with Section 1(c), Rule III of CSC
position classification because RA 6758 applies to all GOCCs. It also noted that Section 7 of Memorandum Circular No. 40, s. 1998.
15 | C O N S T I 1
De Guzman’s appointment as Financial Management Specialist IV is valid

With TIDCORP exempt from Section 1(c), Rule III of CSC Memorandum Circular No. 40, s.
1998, there remains the issue of whether De Guzman’s appointment as Financial Management
Specialist IV is valid. Since Section 1(c), Rule III of CSC Memorandum Circular No. 40, s.
1998,is the only requirement that De Guzman failed to follow, his appointment actually
complied with all the requisites for a valid appointment. The CSC, therefore, should have given
due course to De Guzman's appointment.

WHEREFORE, all premises considered, we hereby GRANT the petition, and REVERSE and
SET ASIDE the decision dated September 28, 2007 and the resolution dated March 17, 2008
of the Court of Appeals in CA-G.R. SP. No. 81058, as well 'as Resolution No. 030144 and
Resolution No. 031037 of the Civil Service Commission that the Court of Appeals rulings
affirmed. No costs.

16 | C O N S T I 1
G.R. Nos. L-8895 and L-9191 April 30, 1957 Executive Order No. 80 (50 Off. Gaz., 5198) was issued reviving Executive Order No. 22, to
take effect after December 31, 1954.
SALVADOR A. ARANETA, ETC., ET AL., petitioners,
vs. A group of Otter trawl operators took the matter to the court by filing a complaint for injunction
THE HON. MAGNO S. GATMAITAN, ETC., ET AL., respondents. and/or declaratory relief with preliminary injunction with the Court of First Instance of Manila,
docketed as Civil Case No. 24867, praying that a writ of preliminary injunction be issued to
EXEQUIEL SORIANO, ET AL., petitioners-appellees, restrain the Secretary of Agriculture and Natural Resources and the Director of Fisheries from
vs. enforcing said executive order; to declare the same null and void, and for such other relief as
SALVADOR ARANETA, ETC., ET AL., respondents-appellants. may be just and equitable in the premises.

Office of the Solicitor General Ambrosio Padilla, Assistant Solicitor General Jose G. Bautista The Secretary of Agriculture and Natural Resources and the Director of Fisheries, represented
and Solicitor Troadio T. Quiazon for petitioners. by the Legal Adviser of said Department and a Special Attorney of the Office of the Solicitor
San Juan, Africa and Benedicto for respondents. General, answered the complaint alleging, among other things, that of the 18 plaintiff (Exequiel
Soriano, Teodora Donato, Felipe Concepcion, Venancio Correa, Santo Gaviana, Alfredo
FELIX, J.: General, Constancio Gutierrez, Arsenio de Guzman, Pedro Lazaro, Porfirio Lazaro, Deljie de
Leon, Jose Nepomuceno, Bayani Pingol, Claudio Salgado, Porfirio, San Juan, Luis Sioco,
Casimiro Villar and Enrique Voluntad), only 11 were issued license to operate fishing boats for
San Miguel Bay, located between the provinces of Camarines Norte and Camarines Sur, a part the year 1954 (Annex B, petition — L-8895); that the executive orders in question were issued
of the National waters of the Philippines with an extension of about 250 square miles and an accordance with law; that the encouragement by the Bureau of Fisheries of the use of Otter
average depth of approximately 6 fathoms (Otter trawl explorations in Philippine waters p. 21, trawls should not be construed to mean that the general welfare of the public could be
Exh. B), is considered as the most important fishing area in the Pacific side of the Bicol region. disregarded, and set up the defenses that since plaintiffs question the validity of the executive
Sometime in 1950, trawl 1 operators from Malabon, Navotas and other places migrated to this orders issued by the President, then the Secretary of Agriculture and Natural Resources and
region most of them settling at Sabang, Calabanga, Camarines Sur, for the purpose of using the Director of Fisheries were not the real parties in interest; that said executive orders do not
this particular method of fishing in said bay. On account of the belief of sustenance fishermen constitute a deprivation of property without due process of law, and therefore prayed that the
that the operation of this kind of gear caused the depletion of the marine resources of that area, complaint be dismissed (Exh. B, petition, L-8895).
there arose a general clamor among the majority of the inhabitants of coastal towns to prohibit
the operation of trawls in San Miguel Bay. This move was manifested in the resolution of
During the trial of the case, the Governor of Camarines Sur appearing for the municipalities of
December 18, 1953 (Exh. F), passed by the Municipal Mayors' League condemning the
operation of trawls as the cause of the wanton destruction of the shrimp specie and resolving Siruma, Tinambac, Calabanga, Cabusao and Sipocot, in said province, called the attention of
to petition the President of the Philippines to regulate fishing in San Miguel Bay by declaring it the Court that the Solicitor General had not been notified of the proceeding. To this
manifestation, the Court ruled that in view of the circumstances of the case, and as the Solicitor
closed for trawl fishing at a certain period of the year. In another resolution dated March 27,
General would only be interested in maintaining the legality of the executive orders sought to
1954, the same League of Municipal Mayor, prayed the President to protect them and the fish
resources of San Miguel Bay by banning the operation of trawls therein (Exh. 4). The Provincial be impugned, section 4 of Rule 66 could be interpreted to mean that the trial could go on and
Governor also made proper presentations to this effect and petitions in behalf of the non-trawl the Solicitor General could be notified before judgement is entered.
fishermen were likewise presented to the President by social and civic organizations as the
NAMFREL (National Movement for Free Elections) and the COMPADRE (Committee for After the evidence for both parties was submitted and the Solicitor General was allowed to file
Philippine Action in Development, Reconstruction and Education), recommending the his memorandum, the Court rendered decision on February 2, 1955, the last part of which
cancellation of the licenses of trawl operators after investigation, if such inquiry would reads as follows:
substantiate the charges that the operation of said fishing method was detrimental to the
welfare of the majority of the inhabitants (Exh. 2). The power to close any definite area of the Philippine waters, from the fact that
Congress has seen fit to define under what conditions it may be done by the enactment
In response to these pleas, the President issued on April 5, 1954, Executive Order No. 22 (50 of the sections cited, in the mind of Congress must be of transcendental significance.
Off. Gaz., 1421) prohibiting the use of trawls in San Miguel Bay, but said executive order was It is primarily within the fields of legislation not of execution: for it goes far and says
amended by Executive Order No. 66, issued on September 23, 1954 (50 Off. Gaz., 4037), who can and who can not fish in definite territorial waters. The court can not accept
apparently in answer to a resolution of the Provincial Board of Camarines Sur recommending that Congress had intended to abdicate its inherent right to legislate on this matter of
the allowance of trawl fishing during the typhoon season only. On November 2, 1954, however, national importance. To accept respondents' view would be to sanction the exercise of

17 | C O N S T I 1
legislative power by executive decrees. If it is San Miguel Bay now, it may be Davao Meanwhile, the appeal (G.R. No. L-9191) was heard on October 3, 1956, wherein respondents-
Gulf tomorrow, and so on. That may be done only by Congress. This being the appellants ascribed to the lower court the commission of the following errors:
conclusion, there is hardly need to go any further. Until the trawler is outlawed by
legislative enactment, it cannot be banned from San Miguel Bay by executive 1. In ruling that the President has no authority to issue Executive Orders Nos. 22, 66
proclamation. The remedy for respondents and population of the coastal towns of and 80 banning the operation of trawls in San Miguel Bay;
Camarines Sur is to go to the Legislature. The result will be to issue the writ prayed
for, even though this be to strike at public clamor and to annul the orders of the
2. In holding that the power to declare a closed area for fishing purposes has not been
President issued in response therefor. This is a task unwelcome and unpleasant; delegated to the President of the Philippines under the Fisheries Act;
unfortunately, courts of justice use only one measure for both the rich and poor, and
are not bound by the more popular cause when they give judgments.
3. In not considering Executive Orders Nos. 22, 66 and 80 as declaring a closed
season pursuant to Section 7, Act 4003, as amended, otherwise known as the
IN VIEW WHEREOF, granted; Executive Order Nos. 22, 66 and 80 are declared Fisheries Act;
invalid; the injunction prayed for is ordered to issue; no pronouncement as to costs.
4. In holding that to uphold the validity of Executive Orders Nos. 22 and 80 would be
Petitioners immediately filed an ex-parte motion for the issuance of a writ of injunction which to sanction the exercise of legislative power by executive decrees;
was opposed by the Solicitor General and after the parties had filed their respective
memoranda, the Court issued an order dated February 19, 1955, denying respondents' motion
to set aside judgement and ordering them to file a bond in the sum of P30,000 on or before 5. In its suggestion that the only remedy for respondents and the people of the coastal
March 1, 1955, as a condition for the non-issuance of the injunction prayed for by petitioners towns of Camarines Sur and Camarines Norte is to go to the Legislature; and
pending appeal. The Solicitor General filed a motion for reconsideration which was denied for
lack of merit, and the Court, acting upon the motion for new trial filed by respondents, issued 6. In declaring Executive Orders Nos. 22, 66 and 80 invalid and in ordering the
another order on March 3, 1965, denying said motion and granting the injunction prayed for by injunction prayed for to issue.
petitioners upon the latter's filing a bond for P30,000 unless respondents could secure a writ of
preliminary injunction from the Supreme Court on or before March 15, 1955. Respondents, As Our decision in the prohibition and certiorari case (G.R. No. L-8895) would depend, in the
therefore, brought the matter to this Court in a petition for prohibition and certiorariwith last analysis, on Our ruling in the appeal of the respondents in case G.R. No. L-9191, We shall
preliminary injunction, docketed as G.R. No. L-8895, and on the same day filed a notice to first proceed to dispose of the latter case.
appeal from the order of the lower court dated February 2, 1955, which appeal was docketed
in this Court as G.R. No. L-9191. It is indisputable that the President issued Executive Orders Nos. 22, 66 and 80 in response to
the clamor of the inhabitants of the municipalities along the coastline of San Miguel Bay. They
In the petition for prohibition and certiorari, petitioners (respondents therein) contended among read as follows:
other things, that the order of, the respondent Judge requiring petitioners Secretary of
Agriculture and Natural Resources and the Director of Fisheries to post a bond in the sum of EXECUTIVE ORDER No. 22
P30,000 on or before March 1, 1955, had been issued without jurisdiction or in excess thereof,
or at the very least with grave abuse of discretion, because by requiring the bond, the Republic
PROHIBITING THE USE OF TRAWLS IN SAN MIGUEL BAY
of the Philippines was in effect made a party defendant and therefore transformed the suit into
one against the Government which is beyond the jurisdiction of the respondent Judge to
entertain; that the failure to give the Solicitor General the opportunity to defend the validity of In order to effectively protect the municipal fisheries of San Miguel Bay, Camarines
the challenged executive orders resulted in the receipt of objectionable matters at the hearing; Norte and Camarines Sur, and to conserve fish and other aquatic resources of the
that Rule 66 of the Rules of Court does not empower a court of law to pass upon the validity of area, I, RAMON MAGSAYSAY, President of the Philippines, by virtue of the powers
an executive order in a declaratory relief proceeding; that the respondent Judge did not have vested in me by law, do hereby order that:
the power to grant the injunction as Section 4 of Rule 39 does not apply to declaratory relief
proceedings but only to injunction, receivership and patent accounting proceedings; and 1. Fishing by means of trawls (utase, otter and/or perenzella) of any kind, in the waters
prayed that a writ of preliminary injunction be issued to enjoin the respondent Judge from comprised within San Miguel Bay, is hereby prohibited.
enforcing its order of March 3, 1955, and for such other relief as may be deem just and equitable
in the premises. This petition was given due course and the hearing on the merits was set by 2. Trawl shall mean, for the purpose of this Order, a fishing net made in the form of a
this Court for April 12, 1955, but no writ of preliminary injunction was issued. bag with the mouth kept open by a device, the whole affair being towed, dragged,
18 | C O N S T I 1
trailed or trawled on the bottom of the sea to capture demersal, ground or bottom Done in the City of Manila, this 2nd day of November, in the year of Our Lord, nineteen
species. hundred and fifty-four and of the Independence of the Philippines, the ninth. (50 Off.
Gaz. 5198)
3. Violation of the provisions of this Order shall subject the offender to the penalty
provided under Section 83 of Act 4993, or more than six months, or both, in the It is likewise admitted that petitioners assailed the validity of said executive orders in their
discretion of the Court. petition for a writ of injunction and/or declaratory relief filed with the Court of First Instance of
Manila, and that the lower court, upon declaring Executive Orders Nos. 22, 66 and 80 invalid,
Done in the City of Manila, this 5th day of April, nineteen hundred and fifty-four and of issued an order requiring the Secretary of Agriculture and Natural Resources and the Director
the Independence of the Philippines, the eighth. (50 Off. Gaz. 1421) of Fisheries to post a bond for P30,000 if the writ of injunction restraining them from enforcing
the executive orders in question must be stayed.
EXECUTIVE ORDER No. 66
The Solicitor General avers that the constitutionality of an executive order cannot be ventilated
in a declaratory relief proceeding. We find this untenable, for this Court taking cognizance of
AMENDING EXECUTIVE ORDER No. 22, DATED APRIL 5, 1954, ENTITLED
an appeal from the decision of the lower court in the case of Hilado vs. De la Costa, et al., 83
"PROHIBITING THE USE OF TRAWLS IN SAN MIGUEL BAY"
Phil., 471, which involves the constitutionality of another executive order presented in an action
for declaratory relief, in effect accepted the propriety of such action.
By virtue of the powers voted in me by law, I, RAMON MAGSAYSAY, President of the
Philippines, do hereby amend Executive Order No. 22, dated April 5, 1954, so as to
This question being eliminated, the main issues left for Our determination with respect to
allow fishing by means of trawls, as defined in said Executive Order, within that portion
defendants' appeal (G.R. No. L-9191), are:
of San Miguel Bay north of a straight line drawn from Tacubtacuban Hill in the
Municipality of Tinambac, Province of Camarines Sur. Fishing by means of trawls south
of said line shall still be absolutely prohibited. (1) Whether the Secretary of an Executive Department and the Director of a Bureau, acting in
their capacities as such Government officials, could lawfully be required to post a bond in an
action against them;
Done in the City of Manila, this 23rd day of September, in the year of our Lord, nineteen
hundred and fifty-four, and of the Independence of the Philippines, the ninth." (50 Off.
Gaz. 4037). (2) Whether the President of the Philippines has authority to issue Executive Orders Nos. 22,
66 and 80, banning the operation of trawls in San Miguel Bay, or, said in other words, whether
said Executive Orders Nos. 22, 66 and 80 were issued in accordance with law; and.
EXECUTIVE ORDER No. 80.

FURTHER AMENDING EXECUTIVE ORDER No. 22, DATED APRIL 5, 1954, AS (3) Whether Executive Orders Nos. 22, 66 and 80 were valid, for the issuance thereof was not
AMENDED BY EXECUTIVE ORDER No. 66, DATED SEPTEMBER 23, 1954. in the exercise of legislative powers unduly delegated to the President.

By virtue of the powers vested in me by law, I, RAMON MAGSAYSAY, President of Counsel for both parties presented commendable exhaustive defenses in support of their
the Philippines, do hereby amend Executive Order No. 66 dated September 23, 1954, respective stands. Certainly, these cases deserve such efforts, not only because the
constitutionality of an act of a coordinate branch in our tripartite system of Government is in
so as to allow fishing by means of trawls, as defined in Executive Order No. 22, dated
issue, but also because of the number of inhabitants, admittedly classified as "subsistence
April 5, 1954, within the portion of San Miguel Bay North of a straight line drawn from
fishermen", that may be affected by any ruling that We may promulgate herein.
Tacubtacuban Hill in the Municipality of Mercedes, Province of Camarines Norte to
Balocbaloc Point in the Municipality of Tinambac, Province of Camarines Sur, until
December 31, 1954, only. I. As to the first proposition, it is an elementary rule of procedure that an appeal stays the
execution of a judgment. An exception is offered by section 4 of Rule 39 of the Rules of Court
which provides that:
Thereafter, the provisions of said Executive Order No. 22 absolutely prohibiting fishing
by means of trawls in all the waters comprised within the San Miguel Bay shall be
revived and given full force and effect as originally provided therein. SEC. 4. INJUNCTION, RECEIVERSHIP AND PATENT ACCOUNTING, NOT
STAYED. — Unless otherwise ordered by the court, a judgment in an action for
injunction or in a receivership action, or a judgment or order directing an accounting in
an action for infringement of letter patent, shall not be stayed after its rendition and
19 | C O N S T I 1
before an appeal is taken or during the pendency of an appeal. The trial court, however, Instance of Iloilo, 34 Phil., 167, cited in Joaquin Gutierrez et al. vs. Camus et al. * G.R. No. L-
in its discretion, when an appeal is taken from a judgement granting, dissolving or 6725, promulgated October 30, 1954). However, as the records show that herein petitioners
denying an injunction, may make an order suspending, modifying, restoring, or failed to put up the bond required by the lower court, allegedly due to difficulties encountered
granting such injunction during the pendency of an appeal, upon such terms as to bond with the Auditor General's Office (giving the impression that they were willing to put up said
or otherwise as it may consider proper for the security of the rights of the adverse party. bond but failed to do so for reasons beyond their control), and that the orders subjects of the
prohibition and certiorari proceedings in G.R. No. L-8895, were enforced, if at all,2 in
This provision was the basis of the order of the lower court dated February 19, 1955, requiring accordance with section 4 of Rule 39, which We hold to be applicable to the case at bar, the
the filing by the respondents of a bond for P30,000 as a condition for the non-issuance of the issue as to the regularity or adequacy of requiring herein petitioners to post a bond, becomes
injunction prayed for by plaintiffs therein, and which the Solicitor General charged to have been moot and academic.
issued in excess of jurisdiction. The State's counsel, however, alleges that while judgment
could be stayed in injunction, receivership and patent accounting cases and although the II. Passing upon the question involved in the second proposition, the trial judge extending the
complaint was styled "Injunction, and/or Declaratory Relief with Preliminary Injunction", the controversy to the determination of which between the Legislative, and Executive Departments
case is necessarily one for declaratory relief, there being no allegation sufficient to convince of the Government had "the power to close any definite area of the Philippine waters" instead
the Court that the plaintiffs intended it to be one for injunction. But aside from the title of the of limiting the same to the real issue raised by the enactment of Executive Orders No. 22, 26
complaint, We find that plaintiffs pray for the declaration of the nullity of Executive Order Nos. and 80, especially the first and the last "absolutely prohibiting fishing by means trawls in all the
22, 66 and 80; the issuance of a writ of preliminary injunction, and for such other relief as may waters comprised within the San Miguel Bay", ruled in favor of Congress had not intended to
be deemed just and equitable. This Court has already held that there are only two requisites to abdicate its power to legislate on the matter, he maintained as stated before, that "until the
be satisfied if an injunction is to issue, namely, the existence of the right sought to be protected, trawler is outlawed by legislative enactment, it cannot be banned from San Miguel Bay by
and that the acts against which the injunction is to be directed are violative of said right (North executive proclamation", and that "the remedy for respondents and population of the coastal
Negros Sugar Co., Inc. vs.Serafin Hidalgo, 63 Phil., 664). There is no question that at least 11 towns of Camarines Sur is to go to Legislature," and thus declared said Executive Orders Nos.
of the complaining trawl operators were duly licensed to operate in any of the national waters 22, 66 and 80 invalid".
of the Philippines, and it is undeniable that the executive enactment's sought to be annulled
are detrimental to their interests. And considering further that the granting or refusal of an The Solicitor General, on the contrary, asserts that the President is empowered by law to issue
injunction, whether temporary or permanent, rests in the sound discretion of the Court, taking the executive enactment's in question.
into account the circumstances and the facts of the particular case (Rodulfa vs. Alfonso, 76
Phil,, 225, 42 Off. Gaz., 2439), We find no abuse of discretion when the trial Court treated the Sections 6, 13 and 75 of Act No. 4003, known as the Fisheries Law, the latter two sections as
complaint as one for injunction and declaratory relief and executed the judgment pursuant to amended by section 1 of Commonwealth Act No. 471, read as follows:
the provisions of section 4 of Rule 39 of the Rules of Court.
SEC. 6. WORDS AND PHRASES DEFINED. —Words and terms used in this Act shall
On the other hand, it shall be remembered that the party defendants in Civil Case No. 24867 be construed as follows:
of the Court of First Instance of Manila are Salvador Araneta, as Secretary of Agriculture and
Natural Resources, and, Deogracias Villadolid, as Director of Fisheries, and were sued in such
capacities because they were the officers charged with duty of carrying out the statutes, orders xxx xxx xxx
and regulations on fishing and fisheries. In its order of February 19, 1955, the trial court denied
defendants' motion to set aside judgment and they were required to file a bond for P30,000 to TAKE or TAKING includes pursuing, shooting, killing, capturing, trapping, snaring, and
answer for damages that plaintiffs were allegedly suffering at that time, as otherwise the netting fish and other aquatic animals, and all lesser acts, such as disturbing,
injunction prayed for by the latter would be issued. wounding, stupefying; or placing, setting, drawing, or using any net or other device
commonly used to take or collect fish and other aquatic animals, whether they result
Because of these facts, We agree with the Solicitor General when he says that the action, in taking or not, and includes every attempt to take and every act of assistance to every
being one against herein petitioners as such Government officials, is essentially one against other person in taking or attempting to take or collect fish and other aquatic animals:
the Government, and to require these officials to file a bond would be indirectly a requirement PROVIDED, That whenever taking is allowed by law, reference is had to taking by
against the Government for as regards bonds or damages that may be proved, if any, the real lawful means and in lawful manner.
party in interest would be the Republic of the Philippines (L. S. Moon and Co. vs. Harrison, 43
Phi., 39; Salgado vs. Ramos, 64 Phil., 724-727, and others). The reason for this xxx xxx xxx
pronouncement is understandable; the State undoubtedly is always solvent
(Tolentino vs. Carlos 66 Phil., 140; Government of the P. I. vs. Judge of the Court of First
20 | C O N S T I 1
SEC. 13. PROTECTION OF FRY OR FISH EGGS. — Except for scientific or From the resolution passed at the Conference of Municipal Mayors held at Tinambac,
educational purpose or for propagation, it shall be unlawful to take or catch fry or fish Camarines Sur, on December 18, 1953 (Exh. F), the following manifestation is made:
eggs and the small fish, not more than three (3) centimeters long, known as siliniasi,
in the territorial waters of the Philippines. Towards this end, the Secretary of Agriculture WHEREAS, the continuous operation of said trawls even during the close season as
and Commerce shall be authorized to provide by regulations such restrictions as may specified in said Executive Order No. 20 caused the wanton destruction of the mother
be deemed necessary to be imposed on THE USE OF ANY FISHING NET OR shrimps laying their eggs and the millions of eggs laid and the inevitable extermination
FISHING DEVICE FOR THE PROTECTION OF FRY OR FISH EGGS; Provided, of the shrimps specie; in order to save the shrimps specie from eventual extermination
however, That the Secretary of Agriculture and Commerce shall permit the taking of and in order to conserve the shrimps specie for posterity;
young of certain species of fish known as hipon under such restrictions as may be
deemed necessary. In the brief submitted by the NAMFREL and addressed to the President of the Philippines (Exh.
2), in support of the petition of San Miguel Bay fishermen (allegedly 6, 175 in number), praying
SEC. 75. FISH REFUGEES AND SANCTUARIES. — Upon the recommendation of that trawlers be banned from operating in San Miguel Bay, it is stated that:
the officer or chief of the bureau, office or service concerned, the Secretary of
Agriculture and Commerce may set aside and establish fishery reservation or fish
The trawls ram and destroy the fish corrals. The heavy trawl nets dig deep into the
refuges and sanctuaries to be administered in the manner to be prescribed by him. All ocean bed. They destroy the fish foods which lies below the ocean floor. Their daytime
streams, ponds and waters within the game refuge, birds, sanctuaries, national parks, catches net millions of shrimps scooped up from the mud. In their nets they bring up
botanical gardens, communal forest and communal pastures are hereby declared the life of the sea: algea, shell fish and star fish . . .
fishing refuges and sanctuaries. It shall be unlawful for any person, to take, destroy or
kill in any of the places aforementioned, or in any manner disturb or drive away or take
therefrom, any fish fry or fish eggs. The absence of some species or the apparent decline in the catch of some fishermen
operating in the bay may be due to several factors, namely: the indiscriminate catching
of fry and immature sizes of fishes, the wide-spread use of explosives inside as well
Act No. 4003 further provides as follows: as at the mouth and approaches of the bay, and the extensive operation of the trawls.
(p.9, Report of Santos B. Rasalan, Exh. A)
SEC. 83. OTHER VIOLATIONS. — Any other violation of the provisions of this Act or
any rules and regulations promulgated thereunder shall subject the offender to a fine Extensive Operation of Trawls: — The strenuous effect of the operations of the
of not more than two hundred pesos, or imprisonment for not more than six months, or 17 TRAWLS of the demersal fisheries of San Miguel Bay is better appreciated when
both, in the discretion of the Court. we consider the fact that out of its about 850 square kilometers area, only about 350
square kilometers of 5 fathoms up could be trawled. With their continuous operation,
As may be seen from the just quoted provisions, the law declares unlawful and fixes the penalty is greatly strained. This is shown by the fact that in view of the non-observance of the
for the taking (except for scientific or educational purposes or for propagation), destroying or close season from May to October, each year, majority of their catch are immature. If
killing of any fish fry or fish eggs, and the Secretary of Agriculture and Commerce (now the their operation would continue unrestricted, the supply would be greatly depleted. (p.
Secretary of Agriculture and Natural Resources) is authorized to promulgate regulations 11), Report of Santos B. Rasalan, Exh. A)
restricting the use of any fish net or fishing device (which includes the net used by trawl
fishermen) for the protection of fry or fish eggs, as well as to set aside and establish fishery
San Miguel Bay — can sustain 3 to 4 small trawlers (Otter Trawl Explorations in
reservations or fish refuges and sanctuaries to be administered in the manner prescribed by Philippine Waters, Research Report 25 of the Fish and Wildlife Service, United States
him, from which no person could lawfully take, destroy or kill in any of the places Department of the Interior, p. 9 Exhibit B).
aforementioned, or in any manner disturb or drive away or take therefrom any small or
immature fish, fry or fish eggs. It is true that said section 75 mentions certain streams, ponds
and waters within the game refuges, . . . communal forest, etc., which the law itself declares According to Annex A of the complaint filed in the lower court in Civil Case No. 24867 — G.R.
fish refuges and sanctuaries, but this enumeration of places does not curtail the general and No. L-9191 (Exh. D, p. 53 of the folder of Exhibits), the 18 plaintiffs-appellees operate 29
unlimited power of the Secretary of Agriculture and Natural Resources in the first part of section trawling boats, and their operation must be in a big scale considering the investments plaintiffs
75, to set aside and establish fishery reservations or fish refuges and sanctuaries, which have made therefore, amounting to P387,000 (Record on Appeal, p. 16-17).
naturally include seas or bays, like the San Miguel Bay in Camarines.
In virtue of the aforementioned provisions of law and the manifestation just copied, We are of
the opinion that with or without said Executive Orders, the restriction and banning of trawl
fishing from all Philippine waters come, under the law, within the powers of the Secretary of
21 | C O N S T I 1
Agriculture and Natural Resources, who in compliance with his duties may even cause the and recommendation of the respective Department" (Sec. 79-A, R.A.C.), and there can be no
criminal prosecution of those who in violation of his instructions, regulations or orders are doubt that the promulgation of the questioned Executive Orders was upon the proposition and
caught fishing with trawls in the Philippine waters. recommendation of the Secretary of Agriculture and Natural Resources and that is why said
Secretary, who was and is called upon to enforce said executive Orders, was made a party
Now, if under the law the Secretary of Agriculture and Natural Resources has authority to defendant in one of the cases at bar (G.R. No. L-9191).
regulate or ban the fishing by trawl which, it is claimed, obnoxious for it carries away fish eggs
and fry's which should be preserved, can the President of the Philippines exercise that same For the foregoing reasons We do hesitate to declare that Executive Orders Nos. 22, 66 and 80,
power and authority? Section 10(1), Article VII of the Constitution of the Philippines prescribes: series of 1954, of the President, are valid and issued by authority of law.

SEC. 10 (1). The President shall have control of all the executive departments, III. But does the exercise of such authority by the President constitute and undue delegation of
bureaus or offices, exercises general supervision over all local governments as may the powers of Congress?
be provided by law, and take care that the laws be faithfully executed.
As already held by this Court, the true distinction between delegation of the power to legislate
Section 63 of the Revised Administrative Code reads as follows: and the conferring of authority or discretion as to the execution of law consists in that the former
necessary involves a discretion as to what the law shall be, wile in the latter the authority or
SEC. 63. EXECUTIVE ORDERS AND EXECUTIVE PROCLAMATION. — discretion as to its execution has to be exercised under and in pursuance of the law. The first
Administrative acts and commands of the President of the Philippines touching the cannot be done; to the latter no valid objection can be made (Cruz vs. Youngberg, 56 Phil.,
organization or mode of operation of the Government or rearranging or readjusting any 234, 239. See also Rubi, et al. vs. The Provincial Board of Mindoro, 39 Phil., 660).
of the district, divisions, parts or ports of the Philippines, and all acts and
commands governing the general performance of duties by public employees or In the case of U. S. vs. Ang Tang Ho, 43 Phil. 1, We also held:
disposing of issues of general concern shall be made in executive orders.
THE POWER TO DELEGATE. — The Legislature cannot delegate legislative power
xxx xxx xxx to enact any law. If Act No. 2868 is a law unto itself, and it does nothing more than to
authorize the Governor-General to make rules and regulations to carry it into effect,
Regarding department organization Section 74 of the Revised Administrative Code also then the Legislature created the law. There is no delegation of power and it is valid. On
provides that: the other hand, if the act within itself does not define a crime and is not complete, and
some legislative act remains to be done to make it a law or a crime, the doing of which
is vested in the Governor-General, the act is delegation of legislative power, is
All executive functions of the government of the Republic of the Philippines shall be
unconstitutional and void.
directly under the Executive Departments subject to the supervision and control of the
President of the Philippines in matters of general policy. The Departments are
established for the proper distribution of the work of the Executive, for the performance From the provisions of Act No. 4003 of the Legislature, as amended by Commonwealth Act
of the functions expressly assigned to them by law, and in order that each branch of No. 471, which have been aforequoted, We find that Congress (a) declared it unlawful "to take
the administration may have a chief responsible for its direction and policy. Each or catch fry or fish eggs in the territorial waters of the Philippines; (b) towards this end, it
Department Secretary shall assume the burden of, and responsibility for, all activities authorized the Secretary of Agriculture and Natural Resources to provide by the regulations
of the Government under his control and supervision. such restrictions as may be deemed necessary to be imposed on the use of any fishing net or
fishing device for the protection of fish fry or fish eggs (Sec. 13); (c) it authorized the Secretary
of Agriculture and Natural Resources to set aside and establish fishery reservations or fish
For administrative purposes the President of the Philippines shall be considered the
refuges and sanctuaries to be administered in the manner to be prescribed by him and declared
Department Head of the Executive Office.
it unlawful for any person to take, destroy or kill in any of said places, or, in any manner disturb
or drive away or take therefrom, any fish fry or fish eggs (See. 75); and (d) it penalizes the
One of the executive departments is that of Agriculture and Natural Resources which by law is execution of such acts declared unlawful and in violation of this Act (No. 4003) or of any rules
placed under the direction and control of the Secretary, who exercises its functions subject to and regulations promulgated thereunder, making the offender subject to a fine of not more than
the general supervision and control of the President of the Philippines (Sec. 75, R. A. C.). P200, or imprisonment for not more than 6 months, or both, in the discretion of the court (Sec.
Moreover, "executive orders, regulations, decrees and proclamations relative to matters under 83).
the supervision or jurisdiction of a Department, the promulgation whereof is expressly assigned
by law to the President of the Philippines, shall as a general rule, be issued upon proposition
22 | C O N S T I 1
From the foregoing it may be seen that in so far as the protection of fish fry or fish egg is
concerned, the Fisheries Act is complete in itself, leaving to the Secretary of Agriculture and
Natural Resources the promulgation of rules and regulations to carry into effect the legislative
intent. It also appears from the exhibits on record in these cases that fishing with trawls causes
"a wanton destruction of the mother shrimps laying their eggs and the millions of eggs laid and
the inevitable extermination of the shrimps specie" (Exh. F), and that, "the trawls ram and
destroy the fish corrals. The heavy trawl nets dig deep into the ocean bed. They destroy the
fish food which lies below the ocean floor. Their daytime catches net millions of shrimps
scooped up from the mud. In their nets they bring up the life of the sea" (Exh- 2).

In the light of these facts it is clear to Our mind that for the protection of fry or fish eggs and
small and immature fishes, Congress intended with the promulgation of Act No. 4003, to
prohibit the use of any fish net or fishing device like trawl nets that could endanger and deplete
our supply of sea food, and to that end authorized the Secretary of Agriculture and Natural
Resources to provide by regulations such restrictions as he deemed necessary in order to
preserve the aquatic resources of the land. Consequently, when the President, in response to
the clamor of the people and authorities of Camarines Sur issued Executive Order No. 80
absolutely prohibiting fishing by means of trawls in all waters comprised within the San Miguel
Bay, he did nothing but show an anxious regard for the welfare of the inhabitants of said coastal
province and dispose of issues of general concern (Sec. 63, R.A.C.) which were in consonance
and strict conformity with the law.

Wherefore, and on the strength of the foregoing considerations We render judgement, as


follows:

(a) Declaring that the issues involved in case G.R. No. L-8895 have become moot, as no writ
of preliminary injunction has been issued by this Court the respondent Judge of the Court of
First Instance of Manila Branch XIV, from enforcing his order of March 3, 1955; and

(b) Reversing the decision appealed from in case G. R. No. L-9191; dissolving the writ of
injunction prayed for in the lower court by plaintiffs, if any has been actually issued by the
court a quo; and declaring Executive Orders Nos. 22, 66 and 80, series of 1954, valid for having
been issued by authority of the Constitution, the Revised Administrative Code and the Fisheries
Act.

Without pronouncement as to costs. It is so ordered.

23 | C O N S T I 1
G.R. No. 159796 July 17, 2007 The universal charge shall be a non-bypassable charge which shall be passed on and collected
from all end-users on a monthly basis by the distribution utilities. Collections by the distribution
ROMEO P. GEROCHI, KATULONG NG BAYAN (KB) and ENVIRONMENTALIST utilities and the TRANSCO in any given month shall be remitted to the PSALM Corp. on or
CONSUMERS NETWORK, INC. (ECN), Petitioners, before the fifteenth (15th) of the succeeding month, net of any amount due to the distribution
vs. utility. Any end-user or self-generating entity not connected to a distribution utility shall remit its
DEPARTMENT OF ENERGY (DOE), ENERGY REGULATORY COMMISSION (ERC), corresponding universal charge directly to the TRANSCO. The PSALM Corp., as administrator
NATIONAL POWER CORPORATION (NPC), POWER SECTOR ASSETS AND of the fund, shall create a Special Trust Fund which shall be disbursed only for the purposes
LIABILITIES MANAGEMENT GROUP (PSALM Corp.), STRATEGIC POWER UTILITIES specified herein in an open and transparent manner. All amount collected for the universal
GROUP (SPUG), and PANAY ELECTRIC COMPANY INC. (PECO),Respondents. charge shall be distributed to the respective beneficiaries within a reasonable period to be
provided by the ERC.
DECISION
The Facts
NACHURA, J.:
Congress enacted the EPIRA on June 8, 2001; on June 26, 2001, it took effect. 7
Petitioners Romeo P. Gerochi, Katulong Ng Bayan (KB), and Environmentalist Consumers
Network, Inc. (ECN) (petitioners), come before this Court in this original action praying that On April 5, 2002, respondent National Power Corporation-Strategic Power Utilities
Section 34 of Republic Act (RA) 9136, otherwise known as the "Electric Power Industry Reform Group8 (NPC-SPUG) filed with respondent Energy Regulatory Commission (ERC) a petition
Act of 2001" (EPIRA), imposing the Universal Charge, 1and Rule 18 of the Rules and for the availment from the Universal Charge of its share for Missionary Electrification, docketed
Regulations (IRR)2 which seeks to implement the said imposition, be declared unconstitutional. as ERC Case No. 2002-165.9
Petitioners also pray that the Universal Charge imposed upon the consumers be refunded and
that a preliminary injunction and/or temporary restraining order (TRO) be issued directing the On May 7, 2002, NPC filed another petition with ERC, docketed as ERC Case No. 2002-194,
respondents to refrain from implementing, charging, and collecting the said charge. 3 The praying that the proposed share from the Universal Charge for the Environmental charge of
assailed provision of law reads: ₱0.0025 per kilowatt-hour (/kWh), or a total of ₱119,488,847.59, be approved for withdrawal
from the Special Trust Fund (STF) managed by respondent Power Sector Assets and
SECTION 34. Universal Charge. — Within one (1) year from the effectivity of this Act, a
universal charge to be determined, fixed and approved by the ERC, shall be imposed on all Liabilities Management Group (PSALM)10 for the rehabilitation and management of watershed
electricity end-users for the following purposes: areas.11

(a) Payment for the stranded debts4 in excess of the amount assumed by the National On December 20, 2002, the ERC issued an Order 12 in ERC Case No. 2002-165 provisionally
Government and stranded contract costs of NPC5 and as well as qualified stranded approving the computed amount of ₱0.0168/kWh as the share of the NPC-SPUG from the
contract costs of distribution utilities resulting from the restructuring of the industry; Universal Charge for Missionary Electrification and authorizing the National Transmission
Corporation (TRANSCO) and Distribution Utilities to collect the same from its end-users on a
(b) Missionary electrification;6 monthly basis.

(c) The equalization of the taxes and royalties applied to indigenous or renewable On June 26, 2003, the ERC rendered its Decision 13 (for ERC Case No. 2002-165) modifying
sources of energy vis-à-vis imported energy fuels; its Order of December 20, 2002, thus:

(d) An environmental charge equivalent to one-fourth of one centavo per kilowatt-hour WHEREFORE, the foregoing premises considered, the provisional authority granted to
(₱0.0025/kWh), which shall accrue to an environmental fund to be used solely for petitioner National Power Corporation-Strategic Power Utilities Group (NPC-SPUG) in the
watershed rehabilitation and management. Said fund shall be managed by NPC under Order dated December 20, 2002 is hereby modified to the effect that an additional amount of
existing arrangements; and ₱0.0205 per kilowatt-hour should be added to the ₱0.0168 per kilowatt-hour provisionally
authorized by the Commission in the said Order. Accordingly, a total amount of ₱0.0373 per
kilowatt-hour is hereby APPROVED for withdrawal from the Special Trust Fund managed by
(e) A charge to account for all forms of cross-subsidies for a period not exceeding three
PSALM as its share from the Universal Charge for Missionary Electrification (UC-ME) effective
(3) years.
on the following billing cycles:
24 | C O N S T I 1
(a) June 26-July 25, 2003 for National Transmission Corporation (TRANSCO); and On the basis of the said ERC decisions, respondent Panay Electric Company, Inc. (PECO)
charged petitioner Romeo P. Gerochi and all other end-users with the Universal Charge as
(b) July 2003 for Distribution Utilities (Dus). reflected in their respective electric bills starting from the month of July 2003. 17

Relative thereto, TRANSCO and Dus are directed to collect the UC-ME in the amount of Hence, this original action.
₱0.0373 per kilowatt-hour and remit the same to PSALM on or before the 15th day of the
succeeding month. Petitioners submit that the assailed provision of law and its IRR which sought to implement the
same are unconstitutional on the following grounds:
In the meantime, NPC-SPUG is directed to submit, not later than April 30, 2004, a detailed
report to include Audited Financial Statements and physical status (percentage of completion) 1) The universal charge provided for under Sec. 34 of the EPIRA and sought to be
of the projects using the prescribed format.1avvphi1 implemented under Sec. 2, Rule 18 of the IRR of the said law is a tax which is to be
collected from all electric end-users and self-generating entities. The power to tax is
Let copies of this Order be furnished petitioner NPC-SPUG and all distribution utilities (Dus). strictly a legislative function and as such, the delegation of said power to any executive
or administrative agency like the ERC is unconstitutional, giving the same unlimited
authority. The assailed provision clearly provides that the Universal Charge is to be
SO ORDERED.
determined, fixed and approved by the ERC, hence leaving to the latter complete
discretionary legislative authority.
On August 13, 2003, NPC-SPUG filed a Motion for Reconsideration asking the ERC, among
others,14 to set aside the above-mentioned Decision, which the ERC granted in its Order dated
2) The ERC is also empowered to approve and determine where the funds collected
October 7, 2003, disposing:
should be used.
WHEREFORE, the foregoing premises considered, the "Motion for Reconsideration" filed by
3) The imposition of the Universal Charge on all end-users is oppressive and
petitioner National Power Corporation-Small Power Utilities Group (NPC-SPUG) is hereby
confiscatory and amounts to taxation without representation as the consumers were
GRANTED. Accordingly, the Decision dated June 26, 2003 is hereby modified accordingly.
not given a chance to be heard and represented.18
Relative thereto, NPC-SPUG is directed to submit a quarterly report on the following:
Petitioners contend that the Universal Charge has the characteristics of a tax and is collected
to fund the operations of the NPC. They argue that the cases19 invoked by the respondents
1. Projects for CY 2002 undertaken; clearly show the regulatory purpose of the charges imposed therein, which is not so in the case
at bench. In said cases, the respective funds20 were created in order to balance and stabilize
2. Location the prices of oil and sugar, and to act as buffer to counteract the changes and adjustments in
prices, peso devaluation, and other variables which cannot be adequately and timely monitored
3. Actual amount utilized to complete the project; by the legislature. Thus, there was a need to delegate powers to administrative
bodies.21 Petitioners posit that the Universal Charge is imposed not for a similar purpose.
4. Period of completion;
On the other hand, respondent PSALM through the Office of the Government Corporate
5. Start of Operation; and Counsel (OGCC) contends that unlike a tax which is imposed to provide income for public
purposes, such as support of the government, administration of the law, or payment of public
expenses, the assailed Universal Charge is levied for a specific regulatory purpose, which is
6. Explanation of the reallocation of UC-ME funds, if any.
to ensure the viability of the country's electric power industry. Thus, it is exacted by the State
in the exercise of its inherent police power. On this premise, PSALM submits that there is no
SO ORDERED.15 undue delegation of legislative power to the ERC since the latter merely exercises a limited
authority or discretion as to the execution and implementation of the provisions of the EPIRA. 22
Meanwhile, on April 2, 2003, ERC decided ERC Case No. 2002-194, authorizing the NPC to
draw up to ₱70,000,000.00 from PSALM for its 2003 Watershed Rehabilitation Budget subject Respondents Department of Energy (DOE), ERC, and NPC, through the Office of the Solicitor
to the availability of funds for the Environmental Fund component of the Universal Charge. 16 General (OSG), share the same view that the Universal Charge is not a tax because it is levied
25 | C O N S T I 1
for a specific regulatory purpose, which is to ensure the viability of the country's electric power 1. Exercise original jurisdiction over cases affecting ambassadors, other public
industry, and is, therefore, an exaction in the exercise of the State's police power. Respondents ministers and consuls, and over petitions for certiorari, prohibition, mandamus, quo
further contend that said Universal Charge does not possess the essential characteristics of a warranto, and habeas corpus.
tax, that its imposition would redound to the benefit of the electric power industry and not to the
public, and that its rate is uniformly levied on electricity end-users, unlike a tax which is imposed 2. Review, revise, reverse, modify, or affirm on appeal or certiorari, as the law or the
based on the individual taxpayer's ability to pay. Moreover, respondents deny that there is rules of court may provide, final judgments and orders of lower courts in:
undue delegation of legislative power to the ERC since the EPIRA sets forth sufficient
determinable standards which would guide the ERC in the exercise of the powers granted to (a) All cases in which the constitutionality or validity of any treaty, international or executive
it. Lastly, respondents argue that the imposition of the Universal Charge is not oppressive and agreement, law, presidential decree, proclamation, order, instruction, ordinance, or regulation
confiscatory since it is an exercise of the police power of the State and it complies with the is in question.
requirements of due process.23
But this Court's jurisdiction to issue writs of certiorari, prohibition, mandamus, quo warranto,
On its part, respondent PECO argues that it is duty-bound to collect and remit the amount and habeas corpus, while concurrent with that of the regional trial courts and the Court of
pertaining to the Missionary Electrification and Environmental Fund components of the
Appeals, does not give litigants unrestrained freedom of choice of forum from which to seek
Universal Charge, pursuant to Sec. 34 of the EPIRA and the Decisions in ERC Case Nos. such relief.28 It has long been established that this Court will not entertain direct resort to it
2002-194 and 2002-165. Otherwise, PECO could be held liable under Sec. 46 24 of the EPIRA, unless the redress desired cannot be obtained in the appropriate courts, or where exceptional
which imposes fines and penalties for any violation of its provisions or its IRR. 25 and compelling circumstances justify availment of a remedy within and call for the exercise of
our primary jurisdiction.29 This circumstance alone warrants the outright dismissal of the
The Issues present action.

The ultimate issues in the case at bar are: This procedural infirmity notwithstanding, we opt to resolve the constitutional issue raised
herein. We are aware that if the constitutionality of Sec. 34 of the EPIRA is not resolved now,
1) Whether or not, the Universal Charge imposed under Sec. 34 of the EPIRA is a tax; the issue will certainly resurface in the near future, resulting in a repeat of this litigation, and
and probably involving the same parties. In the public interest and to avoid unnecessary delay, this
Court renders its ruling now.
2) Whether or not there is undue delegation of legislative power to tax on the part of
the ERC.26 The instant complaint is bereft of merit.

Before we discuss the issues, the Court shall first deal with an obvious procedural lapse. The First Issue

Petitioners filed before us an original action particularly denominated as a Complaint assailing To resolve the first issue, it is necessary to distinguish the State’s power of taxation from the
the constitutionality of Sec. 34 of the EPIRA imposing the Universal Charge and Rule 18 of the police power.
EPIRA's IRR. No doubt, petitioners havelocus standi. They impugn the constitutionality of Sec.
34 of the EPIRA because they sustained a direct injury as a result of the imposition of the The power to tax is an incident of sovereignty and is unlimited in its range, acknowledging in
Universal Charge as reflected in their electric bills. its very nature no limits, so that security against its abuse is to be found only in the responsibility
of the legislature which imposes the tax on the constituency that is to pay it. 30 It is based on the
However, petitioners violated the doctrine of hierarchy of courts when they filed this "Complaint" principle that taxes are the lifeblood of the government, and their prompt and certain availability
directly with us. Furthermore, the Complaint is bereft of any allegation of grave abuse of is an imperious need.31 Thus, the theory behind the exercise of the power to tax emanates from
discretion on the part of the ERC or any of the public respondents, in order for the Court to necessity; without taxes, government cannot fulfill its mandate of promoting the general welfare
consider it as a petition for certiorari or prohibition. and well-being of the people.32

Article VIII, Section 5(1) and (2) of the 1987 Constitution27 categorically provides that: On the other hand, police power is the power of the state to promote public welfare by
restraining and regulating the use of liberty and property. 33 It is the most pervasive, the least
SECTION 5. The Supreme Court shall have the following powers: limitable, and the most demanding of the three fundamental powers of the State. The
justification is found in the Latin maxims salus populi est suprema lex (the welfare of the people
26 | C O N S T I 1
is the supreme law) and sic utere tuo ut alienum non laedas (so use your property as not to (i) To provide for an orderly and transparent privatization of the assets and liabilities of
injure the property of others). As an inherent attribute of sovereignty which virtually extends to the National Power Corporation (NPC);
all public needs, police power grants a wide panoply of instruments through which the State,
as parens patriae, gives effect to a host of its regulatory powers.34 We have held that the power (j) To establish a strong and purely independent regulatory body and system to ensure
to "regulate" means the power to protect, foster, promote, preserve, and control, with due consumer protection and enhance the competitive operation of the electricity market;
regard for the interests, first and foremost, of the public, then of the utility and of its patrons. 35 and

The conservative and pivotal distinction between these two powers rests in the purpose for (k) To encourage the efficient use of energy and other modalities of demand side
which the charge is made. If generation of revenue is the primary purpose and regulation is management.
merely incidental, the imposition is a tax; but if regulation is the primary purpose, the fact that
revenue is incidentally raised does not make the imposition a tax. 36 From the aforementioned purposes, it can be gleaned that the assailed Universal Charge is
not a tax, but an exaction in the exercise of the State's police power. Public welfare is surely
In exacting the assailed Universal Charge through Sec. 34 of the EPIRA, the State's police promoted.
power, particularly its regulatory dimension, is invoked. Such can be deduced from Sec. 34
which enumerates the purposes for which the Universal Charge is imposed 37 and which can Moreover, it is a well-established doctrine that the taxing power may be used as an implement
be amply discerned as regulatory in character. The EPIRA resonates such regulatory of police power.38 In Valmonte v. Energy Regulatory Board, et al.39 and in Gaston v. Republic
purposes, thus: Planters Bank,40 this Court held that the Oil Price Stabilization Fund (OPSF) and the Sugar
Stabilization Fund (SSF) were exactions made in the exercise of the police power. The doctrine
SECTION 2. Declaration of Policy. — It is hereby declared the policy of the State: was reiterated in Osmeña v. Orbos41 with respect to the OPSF. Thus, we disagree with
petitioners that the instant case is different from the aforementioned cases. With the Universal
(a) To ensure and accelerate the total electrification of the country; Charge, a Special Trust Fund (STF) is also created under the administration of PSALM. 42 The
STF has some notable characteristics similar to the OPSF and the SSF, viz.:
(b) To ensure the quality, reliability, security and affordability of the supply of electric
power; 1) In the implementation of stranded cost recovery, the ERC shall conduct a review to
determine whether there is under-recovery or over recovery and adjust (true-up) the
(c) To ensure transparent and reasonable prices of electricity in a regime of free and level of the stranded cost recovery charge. In case of an over-recovery, the ERC shall
fair competition and full public accountability to achieve greater operational and ensure that any excess amount shall be remitted to the STF. A separate account shall
economic efficiency and enhance the competitiveness of Philippine products in the be created for these amounts which shall be held in trust for any future claims of
global market; distribution utilities for stranded cost recovery. At the end of the stranded cost recovery
period, any remaining amount in this account shall be used to reduce the electricity
(d) To enhance the inflow of private capital and broaden the ownership base of the rates to the end-users.43
power generation, transmission and distribution sectors;
2) With respect to the assailed Universal Charge, if the total amount collected for the
same is greater than the actual availments against it, the PSALM shall retain the
(e) To ensure fair and non-discriminatory treatment of public and private sector entities
balance within the STF to pay for periods where a shortfall occurs.44
in the process of restructuring the electric power industry;

3) Upon expiration of the term of PSALM, the administration of the STF shall be
(f) To protect the public interest as it is affected by the rates and services of electric
transferred to the DOF or any of the DOF attached agencies as designated by the DOF
utilities and other providers of electric power;
Secretary.45
(g) To assure socially and environmentally compatible energy sources and
The OSG is in point when it asseverates:
infrastructure;

Evidently, the establishment and maintenance of the Special Trust Fund, under the last
(h) To promote the utilization of indigenous and new and renewable energy resources
paragraph of Section 34, R.A. No. 9136, is well within the pervasive and non-waivable power
in power generation in order to reduce dependence on imported energy;
and responsibility of the government to secure the physical and economic survival and well-
27 | C O N S T I 1
being of the community, that comprehensive sovereign authority we designate as the police SECTION 43. Functions of the ERC. — The ERC shall promote competition, encourage market
power of the State.46 development, ensure customer choice and penalize abuse of market power in the restructured
electricity industry. In appropriate cases, the ERC is authorized to issue cease and desist order
This feature of the Universal Charge further boosts the position that the same is an exaction after due notice and hearing. Towards this end, it shall be responsible for the following key
imposed primarily in pursuit of the State's police objectives. The STF reasonably serves and functions in the restructured industry:
assures the attainment and perpetuity of the purposes for which the Universal Charge is
imposed, i.e., to ensure the viability of the country's electric power industry. xxxx

The Second Issue (b) Within six (6) months from the effectivity of this Act, promulgate and enforce, in accordance
with law, a National Grid Code and a Distribution Code which shall include, but not limited to
The principle of separation of powers ordains that each of the three branches of government the following:
has exclusive cognizance of and is supreme in matters falling within its own constitutionally
allocated sphere. A logical corollary to the doctrine of separation of powers is the principle of xxxx
non-delegation of powers, as expressed in the Latin maxim potestas delegata non delegari
potest (what has been delegated cannot be delegated). This is based on the ethical principle (ii) Financial capability standards for the generating companies, the TRANSCO, distribution
that such delegated power constitutes not only a right but a duty to be performed by the utilities and suppliers: Provided, That in the formulation of the financial capability standards,
delegate through the instrumentality of his own judgment and not through the intervening mind the nature and function of the entity shall be considered: Provided, further, That such standards
of another. 47 are set to ensure that the electric power industry participants meet the minimum financial
standards to protect the public interest. Determine, fix, and approve, after due notice and public
In the face of the increasing complexity of modern life, delegation of legislative power to various hearings the universal charge, to be imposed on all electricity end-users pursuant to Section
specialized administrative agencies is allowed as an exception to this principle. 48 Given the 34 hereof;
volume and variety of interactions in today's society, it is doubtful if the legislature can
promulgate laws that will deal adequately with and respond promptly to the minutiae of Moreover, contrary to the petitioners’ contention, the ERC does not enjoy a wide latitude of
everyday life. Hence, the need to delegate to administrative bodies - the principal agencies discretion in the determination of the Universal Charge. Sec. 51(d) and (e) of the
tasked to execute laws in their specialized fields - the authority to promulgate rules and EPIRA50 clearly provides:
regulations to implement a given statute and effectuate its policies. All that is required for the
valid exercise of this power of subordinate legislation is that the regulation be germane to the
SECTION 51. Powers. — The PSALM Corp. shall, in the performance of its functions and for
objects and purposes of the law and that the regulation be not in contradiction to, but in the attainment of its objective, have the following powers:
conformity with, the standards prescribed by the law. These requirements are denominated as
the completeness test and the sufficient standard test.
xxxx
Under the first test, the law must be complete in all its terms and conditions when it leaves the
legislature such that when it reaches the delegate, the only thing he will have to do is to enforce (d) To calculate the amount of the stranded debts and stranded contract costs of NPC
it. The second test mandates adequate guidelines or limitations in the law to determine the which shall form the basis for ERC in the determination of the universal charge;
boundaries of the delegate's authority and prevent the delegation from running riot. 49
(e) To liquidate the NPC stranded contract costs, utilizing the proceeds from sales and
The Court finds that the EPIRA, read and appreciated in its entirety, in relation to Sec. 34 other property contributed to it, including the proceeds from the universal charge.
thereof, is complete in all its essential terms and conditions, and that it contains sufficient
standards. Thus, the law is complete and passes the first test for valid delegation of legislative power.

Although Sec. 34 of the EPIRA merely provides that "within one (1) year from the effectivity As to the second test, this Court had, in the past, accepted as sufficient standards the following:
thereof, a Universal Charge to be determined, fixed and approved by the ERC, shall be "interest of law and order;"51 "adequate and efficient instruction;" 52 "public interest;"53 "justice
imposed on all electricity end-users," and therefore, does not state the specific amount to be and equity;"54 "public convenience and welfare;"55 "simplicity, economy and
paid as Universal Charge, the amount nevertheless is made certain by the legislative efficiency;"56 "standardization and regulation of medical education;" 57 and "fair and equitable
parameters provided in the law itself. For one, Sec. 43(b)(ii) of the EPIRA provides: employment practices."58 Provisions of the EPIRA such as, among others, "to ensure the total

28 | C O N S T I 1
electrification of the country and the quality, reliability, security and affordability of the supply This was reiterated in National Association of Electricity Consumers for Reforms v. Energy
of electric power"59 and "watershed rehabilitation and management" 60 meet the requirements Regulatory Commission63 where the Court held that the ERC, as regulator, should have
for valid delegation, as they provide the limitations on the ERC’s power to formulate the IRR. sufficient power to respond in real time to changes wrought by multifarious factors affecting
These are sufficient standards. public utilities.

It may be noted that this is not the first time that the ERC's conferred powers were challenged. From the foregoing disquisitions, we therefore hold that there is no undue delegation of
In Freedom from Debt Coalition v. Energy Regulatory Commission,61 the Court had occasion legislative power to the ERC.
to say:
Petitioners failed to pursue in their Memorandum the contention in the Complaint that the
In determining the extent of powers possessed by the ERC, the provisions of the EPIRA must imposition of the Universal Charge on all end-users is oppressive and confiscatory, and
not be read in separate parts. Rather, the law must be read in its entirety, because a statute is amounts to taxation without representation. Hence, such contention is deemed waived or
passed as a whole, and is animated by one general purpose and intent. Its meaning cannot to abandoned per Resolution64 of August 3, 2004.65 Moreover, the determination of whether or
be extracted from any single part thereof but from a general consideration of the statute as a not a tax is excessive, oppressive or confiscatory is an issue which essentially involves
whole. Considering the intent of Congress in enacting the EPIRA and reading the statute in its questions of fact, and thus, this Court is precluded from reviewing the same. 66
entirety, it is plain to see that the law has expanded the jurisdiction of the regulatory body, the
ERC in this case, to enable the latter to implement the reforms sought to be accomplished by As a penultimate statement, it may be well to recall what this Court said of EPIRA:
the EPIRA. When the legislators decided to broaden the jurisdiction of the ERC, they did not
intend to abolish or reduce the powers already conferred upon ERC's predecessors. To sustain One of the landmark pieces of legislation enacted by Congress in recent years is the EPIRA. It
the view that the ERC possesses only the powers and functions listed under Section 43 of the established a new policy, legal structure and regulatory framework for the electric power
EPIRA is to frustrate the objectives of the law. industry. The new thrust is to tap private capital for the expansion and improvement of the
industry as the large government debt and the highly capital-intensive character of the industry
In his Concurring and Dissenting Opinion62 in the same case, then Associate Justice, now Chief itself have long been acknowledged as the critical constraints to the program. To attract private
Justice, Reynato S. Puno described the immensity of police power in relation to the delegation investment, largely foreign, the jaded structure of the industry had to be addressed. While the
of powers to the ERC and its regulatory functions over electric power as a vital public utility, to generation and transmission sectors were centralized and monopolistic, the distribution side
wit: was fragmented with over 130 utilities, mostly small and uneconomic. The pervasive flaws have
caused a low utilization of existing generation capacity; extremely high and uncompetitive
Over the years, however, the range of police power was no longer limited to the preservation power rates; poor quality of service to consumers; dismal to forgettable performance of the
of public health, safety and morals, which used to be the primary social interests in earlier government power sector; high system losses; and an inability to develop a clear strategy for
times. Police power now requires the State to "assume an affirmative duty to eliminate the overcoming these shortcomings.
excesses and injustices that are the concomitants of an unrestrained industrial economy."
Police power is now exerted "to further the public welfare — a concept as vast as the good of Thus, the EPIRA provides a framework for the restructuring of the industry, including the
society itself." Hence, "police power is but another name for the governmental authority to privatization of the assets of the National Power Corporation (NPC), the transition to a
further the welfare of society that is the basic end of all government." When police power is competitive structure, and the delineation of the roles of various government agencies and the
delegated to administrative bodies with regulatory functions, its exercise should be given a private entities. The law ordains the division of the industry into four (4) distinct sectors, namely:
wide latitude. Police power takes on an even broader dimension in developing countries such generation, transmission, distribution and supply.
as ours, where the State must take a more active role in balancing the many conflicting interests
in society. The Questioned Order was issued by the ERC, acting as an agent of the State in Corollarily, the NPC generating plants have to privatized and its transmission business spun
the exercise of police power. We should have exceptionally good grounds to curtail its exercise. off and privatized thereafter.67inally, every law has in its favor the presumption of
This approach is more compelling in the field of rate-regulation of electric power rates. Electric constitutionality, and to justify its nullification, there must be a clear and unequivocal breach of
power generation and distribution is a traditional instrument of economic growth that affects not the Constitution and not one that is doubtful, speculative, or argumentative.68Indubitably,
only a few but the entire nation. It is an important factor in encouraging investment and
petitioners failed to overcome this presumption in favor of the EPIRA. We find no clear violation
promoting business. The engines of progress may come to a screeching halt if the delivery of of the Constitution which would warrant a pronouncement that Sec. 34 of the EPIRA and Rule
electric power is impaired. Billions of pesos would be lost as a result of power outages or 18 of its IRR are unconstitutional and void.
unreliable electric power services. The State thru the ERC should be able to exercise its police
power with great flexibility, when the need arises.
WHEREFORE, the instant case is hereby DISMISSED for lack of merit.
29 | C O N S T I 1
G.R. Nos. L-46076 and L-46077 June 12, 1939 been subscribed by the accused Jacob Rosenthal and paid by both at the price of only
P5 per share, according to the said agreement, which shares were speculative
THE PEOPLE OF THE PHILIPPINES, plaintifff-appellee, securities, because the value thereof materially depended upon proposed promise of
vs. future promotion and development of the oil business above mentioned rather than on
JACOB ROSENTHAL and NICASIO OSMEÑA, defendants-appellants. actual tangible assets and conditions thereof, did then and there, with deliberate intent
of evading the provisions of sections 2 and 5 of Act No. 2581, and conspiring and
confederating together and helping one another, willfully, unlawfully and feloniously
Claro M. Recto and Hilado, Lorenzo and Hilado for appellant Rosenthal.
trade in, negotiate and speculate with, their shares aforesaid, by making personally or
Jose M. Casal for appellant Osmeña.
through brokers or agents repeated and successive sales of the said shares at a price
Office of the Solicitor-General Tuason for appellee.
ranging from P100 to P300 per share, as follows:
LAUREL, J.:
The accused Nicasio Osmeña sold 185 shares to nine different parties, and the
accused Jacob Rosenthal sold 12 shares to seven others, without first obtaining the
Appellants, Jacob Rosenthal and Nicasio Osmeña, were charged in the Court of First Instance corresponding written permit or license form the Insular Treasurer of the
of Manila with having violated Act No. 2581, commonly known as the Blue Sky Law, under the Commonwealth of the Philippines, as by law provided.
following informations:
Upon motion of Jacob Rosenthal, the Court of First Instance of Manila granted him separate
CASE NO. 52365 trial although, when the cases were called for hearing, the court acceded to the motion of the
prosecution that the two cases be tried jointly inasmuch as the evidence to be adduced by the
That in or about and during the period comprised between October 1, 1935 and government therein was the same, without prejudice to allowing the defendants to present their
January 22, 1936, both dates inclusive, in the City of Manila, Philihelping each other, proof separately. After trial, the lower court, on March 22, 1937, in separate decisions, found
willfully, unlawfully and feloniously trade in, negotiate and speculate with, their shares the defendants guilty as charged in the informations. In case No. 52365 Jacob Rosenthal was
aforesaid, by making personally or through brokers or agents repeated and successive sentenced to pay a fine of P500, with subsidiary imprisonment in case of insolvency, and to
sales of the said shares at a price ranging from P100 to P300 per share, as follows: pay one-half of the costs; Nicasio Osmeña was sentenced to pay a fine of P1,000, with
subsidiary imprisonment in case of insolvency, and to pay one-half of the costs. In case No.
The accused Nicasio Osmeña sold 163 shares to nine different parties, and the 52366 Jacob Rosenthal was sentenced to pay a fine of P500, with subsidiary imprisonment in
accused Jacob Rosenthal sold 21 shares to seven others, without first obtaining the case of insolvency, and to pay one-half of the costs; Nicasio Osmeña was sentenced to pay a
corresponding written permit or license from the Insular Treasurer of the fine of P2,000, with subsidiary imprisonment in case of insolvency, and to pay one-half of the
Commonwealth of the Philippines, as by law required. costs. The defendants duly perfected their appeal from these judgments and the cases were
originally elevated to the Court of Appeals but, upon motion of the Solicitor-General, the same
CASE NO. 52366 were forwarded to this court in view of the fact that the constitutionality of Act No. 2581 has
been put in issue by appellants. Two separate briefs have been filed by Rosenthal and
Osmeña. In the brief for appellant Rosenthal the following "joint assignment of errors" is made:
That in or about and during the period comprised between October 1, 1935, and
January 22, 1936, both dates inclusive, in the City of Manila, Philippine Islands, and
within the jurisdiction of this court, the said Nicasio Osmeña and Jacob Rosenthal, two 1. In declaring that according to the report of the geologist contracted by the O.R. Oil
of the ten promoters, organizers, founders and incorporators of, the former being, in Co. and the South Cebu Oil Co. to explore the properties leased to said companies,
addition, one of the members of the board of directors of, the South Cebu Oil Co., Inc., "no habia ninguna indicacion de que hubiese petroleo en aquellos terrenos", when in
a domestic corporation organized under the laws of the Philippines and registered in truth what the report stated was that in so far as the O.R.O. Oil Co. land was concerned,
the mercantile registry of the Bureau of Commerce, with central office in the said city, the territory covered by the lease if full of possibilities; and with respect to the South
the main objects and purposes of which were "to mine, dig for, or otherwise obtain from Cebu Oil Co. lease, that no further investigations and expenses be made "unless
earth, petroleum, rock or carbon oils, natural gas, other volatile mineral substances favorable test results are obtained on the northern lease."
and salt, and to manufacture, refine, prepare for market, buy, sell and transport the
same in crude and refined condition", and the capital stock of which, as per agreement 2. In declaring that the exploration leases were, subsequent to the findings of the
of all the incorporators thereof in their articles of incorporation, the accused herein geologist, cancelled by the government, implying thereby that as no oil was found in
included, consisting of 2,800 shares without par value, 200 shares of which having said lands, the leases were cancelled; when in truth the cancellation was based on
been subscribed by the accused Nicasio Osmeña, and 100 shares of which having
30 | C O N S T I 1
supposed violation of those provisions of the corporation law prohibiting the setting up 8. In holding as proven that the possession of the defendant of his own stock, which
of interlocking directorates. he paid for in full, was not a possession in good faith, because he, as an incorporator
(fundador), should have known that no permit in writing had been issued the
3. In declaring that the defendant, of his 200 shares of stock in the O.R.O. Oil Co., sold corporations by the Insular Treasurer for the sale of said stock.
twenty-one shares to different persons and on different dates, one share having been
sold directly to one E.F. Pimley; five, thru a firm of brokers known as Mackay & 9. In overruling the objection to the admission of Exhibit 1-b, and in holding that a permit
McCormick, to Arthur Hoyer, Wm. Scheunig, and Modesto Bautista, in the proportion had not been issued by the Insular Treasurer for the sale of the stocks of the
of two, two and one, respectively; and fifteen shares directly to Henry J. Belden, R.T. corporations.
Fitzimmons and D.P. O'Brien, in the proportion of five shares to each of them — when
in truth only that to E.F. Pimley was sold to the latter by the defendant, while those 10. In holding that there were repeated and successive sales made by the defendant
eventually transferred to Hoyer, Scheunig and Bautista were sold directly to the said Rosenthal of his own shares of stock.
firm Mackay & McCormick, which bought them on its own risk and account, and the
remaining fifteen transferred to Belden, O'Brien, and Fitzimmons were loaned by 11. In holding that although the defendant was the absolute owner of the stock he sold,
Rosenthal to Nicasio Osmeña, who was not until now either returned those shares or
his repeated and successive sales of such stock prove that this claim of ownership
paid their value. (esta pretension de propriedad) was but a means employed by him to sell said stock
at prices very much higher than those he paid for them.
4. In also declaring that of his 100 shares of stock in the South Cebu Oil Co., the
defendant sold twelve to various persons and on different dates, when in truth only one 12. In holding that said stock was sold by the defendant without the required permit
of these shares was sold by the defendant to E.F. Pimley, and the remaining eleven, having been first issued by the Insular Treasurer, and that the sale was effected as if
two of which were transferred to Arthur Hoyer, two to William Scheunig, one to Jose such permit had been actually issued (como si en realidad pudieran venderse por
de la Fuente, one to Crispin Llamado, one to A.M. Opisso, and four to Ines Galano, haberse expedido tal permiso).
were sold and transferred, in one single transaction, to the said firm of brokers directly,
which firm bought said shares on its own risk and account.
13. In holding that as a result of an investigation conducted by the City Fiscal, the
defendant refunded to Belden, O'Brien and Fitzimmons and others the amount they
5. In declaring that the shares sold to Mackay & McCormick were brought by the latter paid for the stock they purchased.
on credit at P250 each, to be resold by it at P300 each, and that out of the proceeds
of the sale of these shares the defendant received the price agreed upon between him
and the said brokerage firm, or P250 per share, when in truth and in fact there was no 14. In holding that the opinion given by the Chief of the Insurance Division of the Office
agreement between the parties as to whether the said firm was to sell said shares to of the Insular Treasurer to the effect that the defendant could sell the said stock without
others or whether those shares were to be kept and retained by it on its own risk and a permit as long as no false representations were made by the said defendant, can not
account. and does not exempt the latter from criminal responsibility even though no false
representations whatsoever were made by the aforesaid defendant.
6. In declaring that the corporations had not begun exploration work on the territory
covered by their leases, and that they had no tangible properties. 15. In holding that the prima facie presumption in section 8 of the law to the effect that
the claim of ownership is not bona fide when repeated and successive sales of such
stock are effected, has been totally destroyed by the fact that said stock absolutely
7. In declaring that while the defendant needed no permit to sell his own stock, the belongs to the defendant, and in not further holding that because of such absolute
corporations as issuer being the ones bound to obtain the permit required by the Blue ownership the defendant could have legally disposed of such stock in as many sales
Sky Law, nevertheless he (the defendant) was guilty of a violation of said law because as he saw fit without any permit from the Insular Treasurer.
the possession of the shares held and sold by him was not in good faith, in that his
acquisition thereof was not made in the ordinary and normal course of the business of
the corporations, but that said shares were purchased to indirectly promote the 16. In not holding that the Blue Sky Law contravenes the constitutional provisions of
enterprise for which the corporations were formed; the said defendant having paid in the Jones Act in so far as such law constitutes an undue delegation of legislative
full to the corporations the value of said shares of stock. powers to the Insular Treasurer, and in so far as it does not afford equal protection
before the law.

17. In not absolving the defendant.


31 | C O N S T I 1
In the brief for appellant Osmeña the following "relacion conjunta de errores" is in turn (d) That the appellants sold their shares in said corporations without permit or knowing
submitted: that the latter did not have the permit required by law.

1. Al no sobreseer esta causa despues de promulgada la Ley No. 83 del (e) That the appellants are not entitled to the exemption provided in section 8 of the
Commonwealth, no obstante haberse llamado su atencion al hecho de que esta Ley Blue Sky Law (Act No. 2581).
derogaba la Ley No. 2581 de la Legislatura Filipina, bajo cuyas disposiciones ha sido
procesado el acusado. (f) That the Blue Sky Law is valid and constitutional.

2. Al condenar al acusado por infraccion de la "Blue Sky Law", no obstante Most of the errors assigned by the appellants deal with questions of fact. This is particularly
reconocerse en la decision que consta en las pruebas que el acusado Osmeña no ha true with reference to errors one, two, three, four, five, six, seven, eight, nine, ten, eleven,
of recido en venta ninguna de aquellas acciones, ni ha hecho manifestaciones falsas twelve and thirteen of appellant Jacob Rosenthal, and error four of appellant Nicasio Osmeña.
a nadie para poder venderlas, y que la mayor parte, si no todos los que las compraron, There is no material discrepancy regarding the facts, and we shall proceed to consider the
estaban satisfechos de la inversion de su dinero en la adquisicion de tales acciones. legal questions propounded, which are in the main set forth by the Solicitor-General in his brief.

3. Al condenar al acusado por haber vendido acciones especulativas sin licencia, It is contended by the appellants that Act No. 2581 is unconstitutional on three grounds. (1)
cuando no se probo: (a) que las acciones de la O.R.O. Oil Co., Inc., y de la South That it constitutes an undue delegation of legislative authority to the Insular Treasurer: (2) that
Cebu Oil Co., Inc., eran especulativas por su naturaleza, y (b) que el acusado Osmeña it does not afford equal protection before the law; and (3) that it is vague and ambiguous.
carecia de licencia para venderlas.
Under section 2 of Act No. 2581, every person, partnership, association, or corporation
4. Al declarar que la posesion por el acusado Osmeña de sus acciones de la O.R.O. attempting to offer to sell in the Philippines speculative securities of any kind or character
Oil Co., Inc., y de la South Cebu Oil Co., Inc., no era de buena fe y que no las habia whatsoever, is under obligation to file previously with the Insular Treasurer the various
adquirido por su propia cuenta sino para la promocion indirecta de un provecto de documents and papers enumerated therein and to pay the required tax of twenty pesos. Certain
negocio o empresa especulativa. securities listed in section 3 are exempted from the operation of the Act. Section 5 imposes
upon the Insular Treasurer the mandatory duty to examine the statements and documents thus
5. Al no declarar que la "Blue Sky Law" es contraria a las normas constitucionales que filed and the additional duty to make or cause to be made, if deemed advisable by him, a
gozaba al tiempo de su promulgacion : (1) porque contiene en sus disposiciones una detailed examination of the affairs of the applicant. Section 5 also provides that "whatever the
delegacion indebida de facultades legislativas; (2) porque es vaga e incierte en sus said Treasurer of the Philippine Islands is satisfied, either with or without the examination herein
disposiciones y, por tanto, nula; y (3) porque infringe el derecho de igual proteccion provided, that any person, partnership, association or corporation is entitled to the right to offer
ante la ley, viola la libertad de contratacion y contraviene el derecho de adquirir, gozar its securities as above defined and provided for sale in the Philippine Islands, he shall issue to
y disponer libremente de la propriedad privada, siendo su promulgacion, por tanto, un such person, partnership, association or corporation a certificate or permit reciting that such
acto de opresion y de verdadera tirania. person, partnership, association or corporation has complied with the provisions of this Act,
and that such person, partnership, association or corporation, its brokers or agents are entitled
6. Al no absolveral acusado Nicasio Osmeña.. to offer the securities named in said certificate or permit for sale"; that "said Treasurer shall
furthermore have authority, whenever in his judgment it is in the public interest, to cancel said
certificate or permit", and that "an appeal from the decision of the Insular Treasurer may be
To meet the foregoing errors assigned by the appellants, plaintiff-appellee contends:
had within the period of thirty days to the Secretary of Finance."
(a) That the enactment of Commonwealth Act No. 83 did not have the effect of relieving
Appellants argue that, while Act No. 2581 empowers the Insular Treasurer to issue and cancel
appellants from criminal liability.
certificates or permits for the sale of speculative securities, no standard or rule is fixed in the
Act which can guide said official in determining the cases in which a certificate or permit ought
(b) That the appellants acted as promoters of the O.R.O. Oil Co. and the South Cebu to be issued, thereby making his opinion the sole criterion in the matter of its issuance, with the
Oil Co. result that, legislative powers being unduly delegated to the Insular Treasurer, Act No. 2581 is
unconstitutional. We are of the opinion that the Act furnishes a sufficient standard for the Insular
(c) That the shares of the two corporations are speculative in nature. Treasurer to follow in reaching a decision regarding the issuance or cancellation of a certificate
or permit. The certificate or permit to be issued under the Act must recite that the person,

32 | C O N S T I 1
partnership, association or corporation applying therefor "has complied with the provisions of its peculiar environment, having in mind the wholesome legislative purpose intended to be
this Act", and this requirement, construed in relation to the other provisions of the law, means achieved.
that a certificate or permit shall be issued by the Insular Treasurer when the provisions of Act
No. 2581 have been complied with. Upon the other hand, the authority of the Insular Treasurer Counsel for appellant Jacob Rosenthal also argues that the Insular Treasurer possesses "the
to cancel a certificate or permit is expressly conditioned upon a finding that such cancellation discretionary power to determine when a security is a speculative security and when it is not"
"is in the public interest." In view of the intention and purpose of Act No. 2581 — to protect the because "he is given the power to compel any corporation, association or partnership already
public against "speculative schemes which have no more basis than so many feet of blue sky" functioning, to surrender to him for examination its books and accounts enumerated in section
and against the "sale of stock in fly-by-night concerns, visionary oil wells, distant gold mines, 2, 'whenever he has reasonable ground to believe that the securities being sold or offered for
and other like fraudulent exploitations", — we incline to hold that "public interest" in this case sale are of a speculative character.'" It should be observed, however, that section 1 of Act No.
is a sufficient standard to guide the Insular Treasurer in reaching a decision on a matter 2581 defines and enumerates what are "speculative securities" and all the other provisions of
pertaining to the issuance or cancellation of certificates or permits. As we observed in the case the Act must be read and construed in conjunction and harmony with said section.
of People vs. Fernandez and Trinidad (G.R. No. 45655, June 15, 1938), "siendo el objecto de
la ley el evitar especulaciones ruinosas, es claro que el interes publico, es, y debe ser la razon Laws of the different states of the American Union similar in nature to Act No. 2581 were
en que el Tesorero Insular deba basar sus resoluciones." And the term "public interest" is not
assailed on constitutional grounds somewhat analogous to those involved in the case at bar,
without a settled meaning. but the decisions of both the state courts and the Supreme Court of the United States have
upheld their constitutionality. In the case of Hall vs. Geiger-Jones Co. (242 U.S., 539), the
Appellant insists that the delegation of authority to the Commission is invalid because contention was made that the Blue Sky Law of Ohio, which requires the commissioner before
the stated criterion is uncertain. That criterion is the public interest. It is a mistaken granting a license to "be satisfied of the good repute in business of such applicant and named
assumption that this is a mere general reference to public welfare without any standard agents", and which empowers said commissioner to revoke the license or refuse to renew it
to guide determinations. The purpose of the Act, the requirement it imposes, and the upon ascertaining that the licensee "is of bad business repute; has violated any provisions of
context of the provision in question show the contrary. . . . (New York Central Securities this act or has engaged, or is about to engage, under favor of such license, in illegitimate
Corporation vs. U.S.A., 287 U.S., 12, 24, 25; 77 Law. ed., 138, 145, 146.) (See business or in fraudulent transactions", is unconstitutional because the law has failed to give a
also Schenchter Poultry Corporation vs. U.S., 295 U.S., 495; 540; 79 Law. ed., 1570, standard to guide or determine the decision of the commissioner leaves "room for the play and
1585; Ferrazzini vs. Gsell, 34 Phil., 697, 711, 712.) action of purely personal and arbitrary power", but the Supreme Court of the United States
overruled the contention and held:
In this connection, we cannot overlook the fact that the Act No. 2581 allows an appeal from the
decision of the Insular Treasurer to the Secretary of Finance. Hence, it cannot be contended Besides it is certainly apparent that if the conditions are within the power of the State
that the Insular Treasurer can act and decide without any restraining influence. to impose, they can only be ascertained by an executive officer. Reputation and
character are quite tangible attributes, but there can be no legislative definition of them
The theory of the separation of powers is designed by its originators to secure action and at that can automatically attach to or identify individuals possessing them, and
the same time to forestall over action which necessarily results from undue concentration of necessarily the aid of some executive agency must be invoked. The contention of
powers, and thereby obtain efficiency and prevent despotism. Thereby, the "rule of law" was appellees would take from government one of its most essential instrumentalities, of
established which narrows the range of governmental action and makes it subject to control by which the various national and state commissions are instances. But the contention
certain legal devices. As a corollary, we find the rule prohibiting delegation of legislative may be answered by authority. In Gundling vs. Chicago (177 U.S., 183), an ordinance
authority, and from the earliest time American legal authorities have proceeded on the theory of the City of Chicago was passed on which required a license of dealers in cigarettes
that legislative power must be exercised by the legislative alone. It is frankness, however, to and as a condition of the license that the applicant, if a single individual, all of the
confess that as one delves into the mass of judicial pronouncements, he finds a great deal of members of the firm, if a co-partnership, and any person or persons in charge of the
confusion. One thing, however, is apparent in the development of the principle of separation of business, if a corporation, should be of good character and reputation, and the duty
powers and that is that the maximum of delegatus non potest delegare or delegata potestas was delegated to the mayor of the city to determine the existence of the conditions.
non potest delegare, attributed to Bracton (De Legibus et Consuetudinious Angliae, edited by The ordinance was sustained. To this case may be added Red "C" Oil Manufacturing
G.E. Woodbine, Yale University Press [1922], vol. 2, p.167) but which is also recognized in Co. vs. North Carolina (222 U.S., 380, 394, and cases cited); Mutual Film
principle in the Roman Law (D.17.18.3), has been made to adapt itself to the complexities of Corporation vs. Industrial Commission of Ohio (236 U.S., 230); Brazee vs. Michigan
modern governments, giving rise to the adoption, within certain limits, of the principle of (241 U.S., 340, 341). See also Reetz vs. Michigan, (188 U.S., 505);
"subordinate legislation", not only in the United States and England but in practically all modern Lieberman vs. Van de Carr (199 U. S., 552). (Pp. 553, 554.)
governments. The difficulty lies in the fixing of the limit and extent of the authority. While courts
have undertaken to lay down general principles, the safest is to decide each case according to
33 | C O N S T I 1
In the case of Leach vs. Daugherty (238 P., 160), where the contention was advanced that This is but a usual provision found in the many so-called Blue Sy Laws, the
section 6 of the Corporate Securities Act of California which authorized the corporation constitutionality of which has been upheld by the courts generally. The constitutionality
commissioner to refuse to grant a broker's certificate, if he is not satisfied of the "good business of similar provisions has been so thoroughly considered by this court that further
reputation of the applicant", is unconstitutional because "no rules, regulations, or specifications discussion thereof is unnecessary. The following cases abundantly establish the
are set forth in the said Corporate Securities Act defining what shall constitute 'good business constitutionality of this provision. (State ex rel. Minneapolis, St. Paul & Sault Ste. Marie
reputation,'" it was ruled that "Considering such objection, it would appear that the leading case Railway Company vs. Railroad Commission of Wisconsin, 137 Wis., 80; 117 N.W.,
of Hall vs. Geiger-Jones Co. (242 U.S., 539; 37 Sup. Ct., 217; 61 Law. ed., 480; L.R.A., 1917F, 846; Appleton Water Works Co. vs.Railroad Commission of Wisconsin, 154 Wis., 121;
514; Ann. Cas. 1917C, 643), is so conclusively against the petitioner's contention that little 142 N.E., 476; 47 L.R.A. [N.S.], 770; Ann. Cas. 1915B, 1160; State ex rel. City of
room is left for argument", and that "it is well-settled principle of law in this state that by Milwaukee vs. Milwaukee Electric Railway & Light Co., 169 Wis., 183; 172 N.W., 230;
legislative act a commission or board may be empowered to ascertain the existence of facts, City of Milwaukee vs. Railroad Commission of Wisconsin, 183 Wis., 498; 196 N.W.,
upon the finding of which may depend the right to continue in the practice of a profession or a 853; Wisconsin Southern Ry. Co. vs. Railroad Commission of Wisconsin, 185 Wis.,
regulated business." 313; 201 N.W., 244; Kretuzer vs.Westfahl, 187 Wis., 463; 204 N.W., 595.)

In the case of G.F. Redmond & Co. vs. Michigan Securities Commission (222 Mich., 1; 192 Another ground relied upon by appellants in contending that Act No. 2581 is unconstitutional is
N.W., 688), in which it was argued that the provision in section 11955 of the Compiled Laws of that it denies equal protection of the laws because the law discriminates between an owner
1915 (Michigan Blue Sky Law), authorizing the commission to revoke a license for "good who sells his securities in a single transaction and one who disposes of them in repeated and
cause" upon notice to the dealer and a hearing duly had, is unconstitutional because the term successive transactions. In disposing of this contention we need only refer to the case of
"good cause" is so vague and indefinite that the law practically vested upon the commission Hall vs. Geiger-Jones Co., supra, wherein the Supreme Court of the United States held:
arbitrary powers, the court said:
"Discriminations are asserted against the statute which extend, it is contended, to
The term "good cause" for revocation, as employed in the statute, relates so clearly to denying appellees the equal protection of the laws. Counsel enumerates them as
the conduct of the licensed business, within the limits fixed by law, as to negative any follows:
arbitrary official action, and is so comprehensive of unlawful, irregular, fraudulent,
unauthorized, and forbidden business management and transactions conducted as to "Prominent among such discriminations are . . . between an owner who sells his
demand no more particular specification of its meaning and its application. securities in a single transaction and one who disposes of them in successive
transactions; . . . "
Must the law map out , for the guidance of the licensee, a code of ethics and post
danger signals against inhibited and dishonest practices? The defendant had no right We cannot give separate attention to the asserted discriminations. It is enough to say
to have the conduct of its business charted by specifications of forbidden practices that they are within the power of classification which a state has. A state "ay direct its
involving revocation of the license. The general scope and expressed purpose of the law against what it deems the evil as it actually exists without covering the whole field
law, together with open and fair dealing, entered the license, and transgression thereof of possible abuses, and it may do so none the less that the forbidden act does not
constituted good cause for revocation thereof. (P. 689.) differ in kind from those that are allowed . . .. If a class is deemed to present a
conspicuous example of what the legislature seeks to prevent, the 14th Amendment
In the case of State ex rel. Central Steam Heat & Power Co. vs. Gettle (Wis. [1928], 220 N.W., allows it to be dealt with although otherwise and merely logically not distinguishable
201), where it was argued that the requirement of the Wisconsin Blue Sky Law (St. 1925, sec. from others not embraced in the law.
184.09 [3]; Law 1927, c. 444) that the Railroad Commission shall find that the "financial
condition, plan of operation, and the proposed undertakings of the corporation are such as to Counsel for appellant Nicasio Osmeña further alleges that Act No. 2581 is unconstitutional on
afford reasonable protection to the purchasers of the securities to be issued", is unconstitutional the ground that it is vague and uncertain. A similar contention has already been overruled by
for the reason that (1) the Legislature has no power to regulate the issuance of securities in this court in the case of People vs. Fernandez and Trinidad, supra. An Act will be declared void
order to protect the investing public; (2) the Legislature does not provide a standard to control and inoperative on the ground of vagueness and uncertainty only upon a showing that the
the commission; (3) the statute is so indefinite and uncertain in its meaning as to be incapable defect is such that the courts are unable to determine, with any reasonable degree of certainty,
of administration; and (4) the statute delegates to the railroad commission legislative power, what the legislature intended. The circumstance that this court has no more than one occasion
the court said: given effect and application to Act. No. 2581 (Valhalla Hotel Construction Co. vs. Carmona, 44
Phil., 233; People vs.Nimrod McKinney, 47 Phil., 792; People vs. Fernandez and
Trinidad, supra) decisively argues against the position taken by appellant Osmeña. In this

34 | C O N S T I 1
connection we cannot pretermit reference to the rule that "legislation should not be held invalid and ordinary course of business and not for the direct or indirect promotion of any
on the ground of uncertainty if susceptible of any reasonable construction that will support and enterprise or scheme within the purview of this Act, unless such possession is in good
give it effect. An Act will not be declared inoperative and ineffectual on the ground that it faith. Repeated and successive sales of any speculative securities shall be prima
furnishes no adequate means to secure the purpose for which it is passed, if men of common facieevidence that the claim of ownership is not bona fide, but is a mere shift, device
sense and reason can devise and provide the means, and all the instrumentalities necessary or plot to evade the provisions of this Act. Such speculators shall incur the penalty
for its execution are within the reach of those intrusted therewith." (25 R.C.L., pp. 810, 811.) provided for in section seven of this Act.

Reaffirming our view in People vs. Fernandez and Trinidad, supra, we hold that Act No. 2581 Under this section, there are clearly two classes of persons to whom the law is not applicable:
is valid and constitutional. (1) Persons who hold speculative securities but who are not the issuers thereof; and (2)
persons who have acquired the same for their own account in the usual and ordinary course
Taking up now the question raised with reference to the speculative nature of the shares of the of business and not for the direct or indirect promotion of any enterprise or scheme within the
). O.R.O. Oil Co. and the South Cebu Oil Co., we find that section 1, paragraph (b) of Act No. purview of this Act, provided (the law uses the term "unless") such possession is in good faith.
2581, in defining speculative securities, provides:
Passing upon the questions of fact necessarily involved in the application of section 8 of Act
. . . The term "speculative securities" as used in this Act shall be deemed to mean and No. 2581, the trial court in case No. 52365 makes the following findings with reference to
include: Nicasio Osmeña:

xxx xxx xxx . . . El acusado Osmeña no ha adquirido por su propia cuenta en el curso ordinario y
corriente de los negocios en la O.R.O. Oil Co. Las acciones por el vendidas, pues las
adquirio mediante suscripcion como uno de los fundadores de dicha corporacion, pero
(b) All securities the value of which materially depend upon proposed or promised
si para la promocion indirecta de un proyecto de negocio o empresa para el cual se
future promotion or development rather than on present tangible assets and conditions.
habia organizado le corporacion, habiendo pagado totalmente el importe de dichas
acciones a la misma corporacion; ni tampoco las poseia de buena fe, puesto que como
At the beginning, and at the time of the issuance of the shares of the O.R.O. Oil Co. and the fundador y miembro de la junta directiva de dicha corporacion debia saber que no se
South Cebu Oil Co., all that these companies had were their exploration leases. Beyond this, habia expedido por el Tesorero Insular ningun permiso por escrito a al corporacion
there was nothing tangible. The value of those shares depended upon future development and para la venta de dichas acciones. Y las ventas sucesivas y repetidas de esas acciones
the uncertainty of "striking" oil. The shares issued under these circumstances are clearly que tenia en la misma corporacion, aunque tales acciones eran suyas por haberlas el
speculative because they depended upon proposed or promised future promotion or obtenido de la corporacion mediante suscripcion y pago del importe correspondiente
development rather than on present tangible assets and conditions. prueban que esta pretension de propiedad ha sido solamente un medio de que se ha
valido para vender tales acciones a precios mucho mayores que el importe por por
Appellants next contend that in view of the repeal of Act No. 2581 by Commonwealth Act. No. haberse expedido tal permiso.
83, they have been relieved of criminal responsibility. Assuming that the former Act has been
entirely and completely abrogated by the latter Act — a point we do not have to decide — this The same findings, mutatis mutandis, are made in case No. 52366 against the same appellant,
fact does not relieve appellants from criminal responsibility. "It has been the holding, and it and against Jacob Rosenthal in the two cases. Even if we could, we do not feel justified in
must again be the holding, that where an Act of the Legislature which penalizes an offense disturbing the findings of the trial court. The good faith set up by appellant Rosenthal for having
repeals a former Act which penalized the same offense, such repeal does not have the effect acted on the advice of one Garcia, an officer in the Insular Treasury, and the subsequent
of thereafter depriving the courts of jurisdiction to try, convict and sentence offenders charged devolution by him of amounts collected from some of the purchasers of the shares may be
with violations of the old law." (People vs. Concepcion, 44 Phil., 126, 132; Ong Chang Wing considered as a circumstance in his favor in the imposition of the penalty prescribed by law but
and Kwong Fok vs. U.S., 218 U.S., 272; 40 Phil., 1046; U.S. vs. Cuna, 12 Phil., 241; does not exempt him from criminal responsibility. (People vs. McCalla, 63 Cal. App., 783; 220
U.S. vs. Aron, 12 Phil., 778; U.S. vs. Tonga, 15 Phil., 43; U.S. vs. Molina, 17 Phil., 582.) Pac., 436; 367 U.S., 585; 69 Law. ed., 799; 45 Sup. Ct., 461; People vs. Fernandez and
Trinidad, supra.)The judgments of the lower court are affirmed, with the modification that the
Appellants further contend that they come under the exception provided in section 8 of Act No. fines are reduced as to accused Jacob Rosenthal from P500 to P200 in each case, and as to
2581. This section provides: accused Nicasio Osmeña, from P1,000 to P500 in case No. 52365 and from P2,000 to P1,000
in case No. 52366, with subsidiary imprisonment for both in case of insolvency, and costs. So
This Act shall not apply to the holder of any speculative security who is not the issuer ordered.
thereof, nor to the person who has acquired the same for his own account in the usual
35 | C O N S T I 1
G.R. No. 76633 October 18, 1988 Filipinos and to protect their rights. It replaced the National Seamen Board created earlier under
Article 20 of the Labor Code in 1974. Under Section 4(a) of the said executive order, the POEA
EASTERN SHIPPING LINES, INC., petitioner, is vested with "original and exclusive jurisdiction over all cases, including money claims,
vs. involving employee-employer relations arising out of or by virtue of any law or contract involving
PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION (POEA), MINISTER OF Filipino contract workers, including seamen." These cases, according to the 1985 Rules and
LABOR AND EMPLOYMENT, HEARING OFFICER ABDUL BASAR and KATHLEEN D. Regulations on Overseas Employment issued by the POEA, include "claims for death, disability
SACO, respondents. and other benefits" arising out of such employment. 2

Jimenea, Dala & Zaragoza Law Office for petitioner. The petitioner does not contend that Saco was not its employee or that the claim of his widow
is not compensable. What it does urge is that he was not an overseas worker but a 'domestic
employee and consequently his widow's claim should have been filed with Social Security
The Solicitor General for public respondent.
System, subject to appeal to the Employees Compensation Commission.
Dizon Law Office for respondent Kathleen D. Saco.
We see no reason to disturb the factual finding of the POEA that Vitaliano Saco was an
overseas employee of the petitioner at the time he met with the fatal accident in Japan in 1985.

Under the 1985 Rules and Regulations on Overseas Employment, overseas employment is
CRUZ, J.: defined as "employment of a worker outside the Philippines, including employment on board
vessels plying international waters, covered by a valid contract. 3 A contract worker is described
The private respondent in this case was awarded the sum of P192,000.00 by the Philippine as "any person working or who has worked overseas under a valid employment contract and
Overseas Employment Administration (POEA) for the death of her husband. The decision is shall include seamen" 4 or "any person working overseas or who has been employed by
challenged by the petitioner on the principal ground that the POEA had no jurisdiction over the another which may be a local employer, foreign employer, principal or partner under a valid
case as the husband was not an overseas worker. employment contract and shall include seamen." 5 These definitions clearly apply to Vitaliano
Saco for it is not disputed that he died while under a contract of employment with the petitioner
Vitaliano Saco was Chief Officer of the M/V Eastern Polaris when he was killed in an accident and alongside the petitioner's vessel, the M/V Eastern Polaris, while berthed in a foreign
in Tokyo, Japan, March 15, 1985. His widow sued for damages under Executive Order No. 797 country. 6
and Memorandum Circular No. 2 of the POEA. The petitioner, as owner of the vessel, argued
that the complaint was cognizable not by the POEA but by the Social Security System and It is worth observing that the petitioner performed at least two acts which constitute implied or
should have been filed against the State Insurance Fund. The POEA nevertheless assumed tacit recognition of the nature of Saco's employment at the time of his death in 1985. The first
jurisdiction and after considering the position papers of the parties ruled in favor of the is its submission of its shipping articles to the POEA for processing, formalization and approval
complainant. The award consisted of P180,000.00 as death benefits and P12,000.00 for burial in the exercise of its regulatory power over overseas employment under Executive Order NO.
expenses. 797. 7 The second is its payment 8 of the contributions mandated by law and regulations to the
Welfare Fund for Overseas Workers, which was created by P.D. No. 1694 "for the purpose of
The petitioner immediately came to this Court, prompting the Solicitor General to move for providing social and welfare services to Filipino overseas workers."
dismissal on the ground of non-exhaustion of administrative remedies.
Significantly, the office administering this fund, in the receipt it prepared for the private
Ordinarily, the decisions of the POEA should first be appealed to the National Labor Relations respondent's signature, described the subject of the burial benefits as "overseas contract
Commission, on the theory inter alia that the agency should be given an opportunity to correct worker Vitaliano Saco." 9 While this receipt is certainly not controlling, it does indicate, in the
the errors, if any, of its subordinates. This case comes under one of the exceptions, however, light of the petitioner's own previous acts, that the petitioner and the Fund to which it had made
as the questions the petitioner is raising are essentially questions of law. 1 Moreover, the contributions considered Saco to be an overseas employee.
private respondent himself has not objected to the petitioner's direct resort to this Court,
observing that the usual procedure would delay the disposition of the case to her prejudice. The petitioner argues that the deceased employee should be likened to the employees of the
Philippine Air Lines who, although working abroad in its international flights, are not considered
The Philippine Overseas Employment Administration was created under Executive Order No. overseas workers. If this be so, the petitioner should not have found it necessary to submit its
797, promulgated on May 1, 1982, to promote and monitor the overseas employment of shipping articles to the POEA for processing, formalization and approval or to contribute to the

36 | C O N S T I 1
Welfare Fund which is available only to overseas workers. Moreover, the analogy is hardly institutions and other similar institutions as the Chairman of the National Meat
appropriate as the employees of the PAL cannot under the definitions given be considered Inspection Commission may see fit, in the case of carabaos.' (Italics supplied.)
seamen nor are their appointments coursed through the POEA. The phrase "may see fit" is an extremely generous and dangerous condition,
if condition it is. It is laden with perilous opportunities for partiality and abuse,
The award of P180,000.00 for death benefits and P12,000.00 for burial expenses was made and even corruption. One searches in vain for the usual standard and the
by the POEA pursuant to its Memorandum Circular No. 2, which became effective on February reasonable guidelines, or better still, the limitations that the officers must
1, 1984. This circular prescribed a standard contract to be adopted by both foreign and observe when they make their distribution. There is none. Their options are
domestic shipping companies in the hiring of Filipino seamen for overseas employment. A apparently boundless. Who shall be the fortunate beneficiaries of their
similar contract had earlier been required by the National Seamen Board and had been generosity and by what criteria shall they be chosen? Only the officers named
sustained in a number of cases by this Court. 10 The petitioner claims that it had never entered can supply the answer, they and they alone may choose the grantee as they
into such a contract with the deceased Saco, but that is hardly a serious argument. In the first see fit, and in their own exclusive discretion. Definitely, there is here a 'roving
place, it should have done so as required by the circular, which specifically declared that "all commission a wide and sweeping authority that is not canalized within banks
parties to the employment of any Filipino seamen on board any ocean-going vessel are advised that keep it from overflowing,' in short a clearly profligate and therefore invalid
to adopt and use this employment contract effective 01 February 1984 and to desist from using delegation of legislative powers.
any other format of employment contract effective that date." In the second place, even if it had
not done so, the provisions of the said circular are nevertheless deemed written into the There are two accepted tests to determine whether or not there is a valid delegation of
contract with Saco as a postulate of the police power of the State. 11 legislative power, viz, the completeness test and the sufficient standard test. Under the first
test, the law must be complete in all its terms and conditions when it leaves the legislature such
But the petitioner questions the validity of Memorandum Circular No. 2 itself as violative of the that when it reaches the delegate the only thing he will have to do is enforce it. 13 Under the
principle of non-delegation of legislative power. It contends that no authority had been given sufficient standard test, there must be adequate guidelines or stations in the law to map out the
the POEA to promulgate the said regulation; and even with such authorization, the regulation boundaries of the delegate's authority and prevent the delegation from running riot. 14
represents an exercise of legislative discretion which, under the principle, is not subject to
delegation. Both tests are intended to prevent a total transference of legislative authority to the delegate,
who is not allowed to step into the shoes of the legislature and exercise a power essentially
The authority to issue the said regulation is clearly provided in Section 4(a) of Executive Order legislative.
No. 797, reading as follows:
The principle of non-delegation of powers is applicable to all the three major powers of the
... The governing Board of the Administration (POEA), as hereunder provided Government but is especially important in the case of the legislative power because of the
shall promulgate the necessary rules and regulations to govern the exercise many instances when its delegation is permitted. The occasions are rare when executive or
of the adjudicatory functions of the Administration (POEA). judicial powers have to be delegated by the authorities to which they legally certain. In the case
of the legislative power, however, such occasions have become more and more frequent, if not
Similar authorization had been granted the National Seamen Board, which, as earlier observed, necessary. This had led to the observation that the delegation of legislative power has become
had itself prescribed a standard shipping contract substantially the same as the format adopted the rule and its non-delegation the exception.
by the POEA.
The reason is the increasing complexity of the task of government and the growing inability of
the legislature to cope directly with the myriad problems demanding its attention. The growth
The second challenge is more serious as it is true that legislative discretion as to the
of society has ramified its activities and created peculiar and sophisticated problems that the
substantive contents of the law cannot be delegated. What can be delegated is the discretion
legislature cannot be expected reasonably to comprehend. Specialization even in legislation
to determine how the law may be enforced, not whatthe law shall be. The ascertainment of the
has become necessary. To many of the problems attendant upon present-day undertakings,
latter subject is a prerogative of the legislature. This prerogative cannot be abdicated or
the legislature may not have the competence to provide the required direct and efficacious, not
surrendered by the legislature to the delegate. Thus, in Ynot v. Intermediate Apellate
to say, specific solutions. These solutions may, however, be expected from its delegates, who
Court 12 which annulled Executive Order No. 626, this Court held:
are supposed to be experts in the particular fields assigned to them.
We also mark, on top of all this, the questionable manner of the disposition of
The reasons given above for the delegation of legislative powers in general are particularly
the confiscated property as prescribed in the questioned executive order. It is
applicable to administrative bodies. With the proliferation of specialized activities and their
there authorized that the seized property shall be distributed to charitable
37 | C O N S T I 1
attendant peculiar problems, the national legislature has found it more and more necessary to 2. It is understood and agreed that the benefits mentioned above shall be
entrust to administrative agencies the authority to issue rules to carry out the general provisions separate and distinct from, and will be in addition to whatever benefits which
of the statute. This is called the "power of subordinate legislation." the seaman is entitled to under Philippine laws. ...

With this power, administrative bodies may implement the broad policies laid down in a statute 3. ...
by "filling in' the details which the Congress may not have the opportunity or competence to
provide. This is effected by their promulgation of what are known as supplementary regulations, c. If the remains of the seaman is buried in the Philippines, the
such as the implementing rules issued by the Department of Labor on the new Labor Code. owners shall pay the beneficiaries of the seaman an amount
These regulations have the force and effect of law. not exceeding P18,000.00 for burial expenses.

Memorandum Circular No. 2 is one such administrative regulation. The model contract The underscored portion is merely a reiteration of Memorandum Circular No. 22, issued by the
prescribed thereby has been applied in a significant number of the cases without challenge by National Seamen Board on July 12,1976, providing an follows:
the employer. The power of the POEA (and before it the National Seamen Board) in requiring
the model contract is not unlimited as there is a sufficient standard guiding the delegate in the Income Benefits under this Rule Shall be Considered Additional Benefits.—
exercise of the said authority. That standard is discoverable in the executive order itself which,
in creating the Philippine Overseas Employment Administration, mandated it to protect the
rights of overseas Filipino workers to "fair and equitable employment practices." All compensation benefits under Title II, Book Four of the Labor Code of the
Philippines (Employees Compensation and State Insurance Fund) shall be
granted, in addition to whatever benefits, gratuities or allowances that the
Parenthetically, it is recalled that this Court has accepted as sufficient standards "Public seaman or his beneficiaries may be entitled to under the employment contract
interest" in People v. Rosenthal 15 "justice and equity" in Antamok Gold Fields v. CIR 16 "public approved by the NSB. If applicable, all benefits under the Social Security Law
convenience and welfare" in Calalang v. Williams 17 and "simplicity, economy and efficiency" and the Philippine Medicare Law shall be enjoyed by the seaman or his
in Cervantes v. Auditor General, 18 to mention only a few cases. In the United States, the beneficiaries in accordance with such laws.
"sense and experience of men" was accepted in Mutual Film Corp. v. Industrial
Commission, 19 and "national security" in Hirabayashi v. United States. 20
The above provisions are manifestations of the concern of the State for the working class,
consistently with the social justice policy and the specific provisions in the Constitution for the
It is not denied that the private respondent has been receiving a monthly death benefit pension protection of the working class and the promotion of its interest.
of P514.42 since March 1985 and that she was also paid a P1,000.00 funeral benefit by the
Social Security System. In addition, as already observed, she also received a P5,000.00 burial
gratuity from the Welfare Fund for Overseas Workers. These payments will not preclude One last challenge of the petitioner must be dealt with to close t case. Its argument that it has
allowance of the private respondent's claim against the petitioner because it is specifically been denied due process because the same POEA that issued Memorandum Circular No. 2
reserved in the standard contract of employment for Filipino seamen under Memorandum has also sustained and applied it is an uninformed criticism of administrative law itself.
Circular No. 2, Series of 1984, that— Administrative agencies are vested with two basic powers, the quasi-legislative and the quasi-
judicial. The first enables them to promulgate implementing rules and regulations, and the
second enables them to interpret and apply such regulations. Examples abound: the Bureau
Section C. Compensation and Benefits.—
of Internal Revenue adjudicates on its own revenue regulations, the Central Bank on its own
circulars, the Securities and Exchange Commission on its own rules, as so too do the Philippine
1. In case of death of the seamen during the term of his Contract, the employer Patent Office and the Videogram Regulatory Board and the Civil Aeronautics Administration
shall pay his beneficiaries the amount of: and the Department of Natural Resources and so on ad infinitum on their respective
administrative regulations. Such an arrangement has been accepted as a fact of life of modern
a. P220,000.00 for master and chief engineers governments and cannot be considered violative of due process as long as the cardinal rights
laid down by Justice Laurel in the landmark case of Ang Tibay v. Court of Industrial
b. P180,000.00 for other officers, including radio operators Relations 21 are observed.
and master electrician
Whatever doubts may still remain regarding the rights of the parties in this case are resolved
c. P 130,000.00 for ratings. in favor of the private respondent, in line with the express mandate of the Labor Code and the
principle that those with less in life should have more in law.
38 | C O N S T I 1
When the conflicting interests of labor and capital are weighed on the scales of social justice,
the heavier influence of the latter must be counter-balanced by the sympathy and compassion
the law must accord the underprivileged worker. This is only fair if he is to be given the
opportunity and the right to assert and defend his cause not as a subordinate but as a peer of
management, with which he can negotiate on even plane. Labor is not a mere employee of
capital but its active and equal partner.

WHEREFORE, the petition is DISMISSED, with costs against the petitioner. The temporary
restraining order dated December 10, 1986 is hereby LIFTED. It is so ordered.

39 | C O N S T I 1
G.R. No. 78164 July 31, 1987 The statute, among other things, created a Board of Medical Education which is composed of
(a) the Secretary of Education, Culture and Sports or his duly authorized representative, as
TERESITA TABLARIN, MA, LUZ CIRIACO, MA NIMFA B. ROVIRA, EVANGELINA S. Chairman; (b) the Secretary of Health or his duly authorized representative; (c) the Director of
LABAO, in their behalf and in behalf of applicants for admission into the Medical Higher Education or his duly authorized representative; (d) the Chairman of the Medical Board
Colleges during the school year 1987-88 and future years who have not taken or or his duly authorized representative; (e) a representative of the Philippine Medical Association;
successfully hurdled tile National Medical Admission Test (NMAT).petitioners, (f) the Dean of the College of Medicine, University of the Philippines; (g) a representative of the
vs. Council of Deans of Philippine Medical Schools; and (h) a representative of the Association of
THE HONORABLE JUDGE ANGELINA S. GUTIERREZ, Presiding Judge of Branch Philippine Medical Colleges, as members. The functions of the Board of Medical Education
XXXVII of the Regional Trial Court of the National Capital Judicial Region with seat at specified in Section 5 of the statute include the following:
Manila, THE HONORABLE SECRETARY LOURDES QUISUMBING, in her capacity as
Chairman of the BOARD OF MEDICAL EDUCATION, and THE CENTER FOR (a) To determine and prescribe equirements for admission into a recognized college of
EDUCATIONAL MEASUREMENT (CEM), respondents. medicine;

FELICIANO, J.: (b) To determine and prescribe requirements for minimum physical facilities of colleges
of medicine, to wit: buildings, including hospitals, equipment and supplies, apparatus,
The petitioners sought admission into colleges or schools of medicine for the school year 1987- instruments, appliances, laboratories, bed capacity for instruction purposes, operating
1988. However, the petitioners either did not take or did not successfully take the National and delivery rooms, facilities for outpatient services, and others, used for didactic and
Medical Admission Test (NMAT) required by the Board of Medical Education, one of the public practical instruction in accordance with modern trends;
respondents, and administered by the private respondent, the Center for Educational
Measurement (CEM). (c) To determine and prescribe the minimum number and minimum qualifications of
teaching personnel, including student-teachers ratio;
On 5 March 1987, the petitioners filed with the Regional Trial Court, National Capital Judicial
Region, a Petition for Declaratory Judgment and Prohibition with a prayer for Temporary (d) To determine and prescribe the minimum required curriculum leading to the degree
Restraining Order and Preliminary Injunction. The petitioners sought to enjoin the Secretary of of Doctor of Medicine;
Education, Culture and Sports, the Board of Medical Education and the Center for Educational
Measurement from enforcing Section 5 (a) and (f) of Republic Act No. 2382, as amended, and (e) To authorize the implementation of experimental medical curriculum in a medical
MECS Order No. 52, series of 1985, dated 23 August 1985 and from requiring the taking and school that has exceptional faculty and instrumental facilities. Such an experimental
passing of the NMAT as a condition for securing certificates of eligibility for admission, from curriculum may prescribe admission and graduation requirements other than those
proceeding with accepting applications for taking the NMAT and from administering the NMAT prescribed in this Act; Provided, That only exceptional students shall be enrolled in the
as scheduled on 26 April 1987 and in the future. After hearing on the petition for issuance of experimental curriculum;
preliminary injunction, the trial court denied said petition on 20 April 1987. The NMAT was
conducted and administered as previously scheduled. (f) To accept applications for certification for admission to a medical school and keep
a register of those issued said certificate; and to collect from said applicants the amount
Petitioners accordingly filed this Special Civil Action for certiorari with this Court to set aside of twenty-five pesos each which shall accrue to the operating fund of the Board of
the Order of the respondent judge denying the petition for issuance of a writ of preliminary Medical Education;
injunction.
(g) To select, determine and approve hospitals or some departments of the hospitals
Republic Act 2382, as amended by Republic Acts Nos. 4224 and 5946, known as the "Medical for training which comply with the minimum specific physical facilities as provided in
Act of 1959" defines its basic objectives in the following manner: subparagraph (b) hereof; and

Section 1. Objectives. — This Act provides for and shall govern (a) the standardization (h) To promulgate and prescribe and enforce the necessary rules and regulations for
and regulation of medical education (b) the examination for registration of physicians; the proper implementation of the foregoing functions. (Emphasis supplied)
and (c) the supervision, control and regulation of the practice of medicine in the
Philippines. (Underscoring supplied) Section 7 prescribes certain minimum requirements for applicants to medical schools:

40 | C O N S T I 1
Admission requirements. — The medical college may admit any student who has not Petitioners raise the question of whether or not a writ of preliminary injunction may be issued
been convicted by any court of competent jurisdiction of any offense involving moral to enjoin the enforcement of Section 5 (a) and (f) of Republic Act No. 2382, as amended, and
turpitude and who presents (a) a record of completion of a bachelor's degree in science MECS Order No. 52, s. 1985, pending resolution of the issue of constitutionality of the assailed
or arts; (b) a certificate of eligibility for entrance to a medical school from the Board of statute and administrative order. We regard this issue as entirely peripheral in nature. It
Medical Education; (c) a certificate of good moral character issued by two former scarcely needs documentation that a court would issue a writ of preliminary injunction only
professors in the college of liberal arts; and (d) birth certificate. Nothing in this act shall when the petitioner assailing a statute or administrative order has made out a case of
be construed to inhibit any college of medicine from establishing, in addition to the unconstitutionality strong enough to overcome, in the mind of the judge, the presumption of
preceding, other entrance requirements that may be deemed admissible. constitutionality, aside from showing a clear legal right to the remedy sought. The fundamental
issue is of course the constitutionality of the statute or order assailed.
xxx xxx x x x (Emphasis supplied)
1. The petitioners invoke a number of provisions of the 1987 Constitution which are, in their
MECS Order No. 52, s. 1985, issued by the then Minister of Education, Culture and Sports and assertion, violated by the continued implementation of Section 5 (a) and (f) of Republic Act
dated 23 August 1985, established a uniform admission test called the National Medical 2381, as amended, and MECS Order No. 52, s. 1985. The provisions invoked read as follows:
Admission Test (NMAT) as an additional requirement for issuance of a certificate of eligibility
for admission into medical schools of the Philippines, beginning with the school year 1986- (a) Article 11, Section 11: "The state values the dignity of every human person and
1987. This Order goes on to state that: guarantees full respect of human rights. "

2. The NMAT, an aptitude test, is considered as an instrument toward upgrading the (b) ArticleII, Section l3: "The State recognizes the vital role of the youth in nation
selection of applicants for admission into the medical schools and its calculated to building and shall promote and protect their physical, moral, spiritual, intellectual and
improve the quality of medical education in the country. The cutoff score for the social well being. It shall inculcate in the youth patriotism and nationalism, and
successful applicants, based on the scores on the NMAT, shall be determined every encourage their involvement in public and civic affairs."
year by the Board of Medical Education after consultation with the Association of
Philippine Medical Colleges. The NMAT rating of each applicant, together with the (c) Article II, Section 17: "The State shall give priority to education, science and
other admission requirements as presently called for under existing rules, shall serve technology, arts, culture and sports to foster patriotism and nationalism, accelerate
as a basis for the issuance of the prescribed certificate of elegibility for admission into social progress and to promote total human liberation and development. "
the medical colleges.
(d) Article XIV, Section l: "The State shall protect and promote the right of all citizens
3. Subject to the prior approval of the Board of Medical Education, each medical to quality education at all levels and take appropriate steps to make such education
college may give other tests for applicants who have been issued a corresponding accessible to all. "
certificate of eligibility for admission that will yield information on other aspects of the
applicant's personality to complement the information derived from the NMAT. (e) Article XIV, Section 5 (3): "Every citizen has a right to select a profession or course
of study, subject to fair, reasonable and equitable admission and academic
xxx xxx xxx requirements."

8. No applicant shall be issued the requisite Certificate of Eligibility for Admission Article II of the 1987 Constitution sets forth in its second half certain "State policies" which the
(CEA), or admitted for enrollment as first year student in any medical college, beginning government is enjoined to pursue and promote. The petitioners here have not seriously
the school year, 1986-87, without the required NMAT qualification as called for under undertaken to demonstrate to what extent or in what manner the statute and the administrative
this Order. (Underscoring supplied) order they assail collide with the State policies embodied in Sections 11, 13 and 17. They have
not, in other words, discharged the burden of proof which lies upon them. This burden is heavy
Pursuant to MECS Order No. 52, s. 1985, the private respondent Center conducted NMATs enough where the constitutional provision invoked is relatively specific, rather than abstract, in
for entrance to medical colleges during the school year 1986-1987. In December 1986 and in character and cast in behavioral or operational terms. That burden of proof becomes of
April 1987, respondent Center conducted the NMATs for admission to medical colleges during necessity heavier where the constitutional provision invoked is cast, as the second portion of
the school year 1987.1988.1avvphi1 Article II is cast, in language descriptive of basic policies, or more precisely, of basic objectives
of State policy and therefore highly generalized in tenor. The petitioners have not made their
case, even a prima facie case, and we are not compelled to speculate and to imagine how the
41 | C O N S T I 1
legislation and regulation impugned as unconstitutional could possibly offend the constitutional specifically. It could be implied from the policy and purpose of the act considered as a
provisions pointed to by the petitioners. whole. In the Reflector Law, clearly the legislative objective is public safety. What is
sought to be attained as in Calalang v. Williams is "safe transit upon the roads. 5
Turning to Article XIV, Section 1, of the 1987 Constitution, we note that once more petitioners
have failed to demonstrate that the statute and regulation they assail in fact clash with that We believe and so hold that the necessary standards are set forth in Section 1 of the 1959
provision. On the contrary we may note-in anticipation of discussion infra — that the statute Medical Act: "the standardization and regulation of medical education" and in Section 5 (a) and
and the regulation which petitioners attack are in fact designed to promote "quality education" 7 of the same Act, the body of the statute itself, and that these considered together are sufficient
at the level of professional schools. When one reads Section 1 in relation to Section 5 (3) of compliance with the requirements of the non-delegation principle.
Article XIV as one must one cannot but note that the latter phrase of Section 1 is not to be read
with absolute literalness. The State is not really enjoined to take appropriate steps to make 3. The petitioners also urge that the NMAT prescribed in MECS Order No. 52, s. 1985, is an
quality education " accessible to all who might for any number of reasons wish to enroll in a "unfair, unreasonable and inequitable requirement," which results in a denial of due process.
professional school but rather merely to make such education accessible to all who qualify Again, petitioners have failed to specify just what factors or features of the NMAT render it
under "fair, reasonable and equitable admission and academic requirements. " "unfair" and "unreasonable" or "inequitable." They appear to suggest that passing the NMAT is
an unnecessary requirement when added on top of the admission requirements set out in
2. In the trial court, petitioners had made the argument that Section 5 (a) and (f) of Republic Section 7 of the Medical Act of 1959, and other admission requirements established by internal
Act No. 2382, as amended, offend against the constitutional principle which forbids the undue regulations of the various medical schools, public or private. Petitioners arguments thus appear
delegation of legislative power, by failing to establish the necessary standard to be followed by to relate to utility and wisdom or desirability of the NMAT requirement. But constitutionality is
the delegate, the Board of Medical Education. The general principle of non-delegation of essentially a question of power or authority: this Court has neither commission or competence
legislative power, which both flows from the reinforces the more fundamental rule of the to pass upon questions of the desirability or wisdom or utility of legislation or administrative
separation and allocation of powers among the three great departments of government, 1 must regulation. Those questions must be address to the political departments of the government
be applied with circumspection in respect of statutes which like the Medical Act of 1959, deal not to the courts.
with subjects as obviously complex and technical as medical education and the practice of
medicine in our present day world. Mr. Justice Laurel stressed this point 47 years ago There is another reason why the petitioners' arguments must fail: the legislative and
in Pangasinan Transportation Co., Inc. vs. The Public Service Commission:2 administrative provisions impugned by them constitute, to the mind of the Court, a valid
exercise of the police power of the state. The police power, it is commonplace learning, is the
One thing, however, is apparent in the development of the principle of separation of pervasive and non-waivable power and authority of the sovereign to secure and promote an
powers and that is that the maxim of delegatus non potest delegare or delegate the important interests and needs — in a word, the public order — of the general
potestas non potest delegare, adopted this practice (Delegibus et Consuetudiniis community.6 An important component of that public order is the health and physical safety and
Anglia edited by G.E. Woodbine, Yale University Press, 1922, Vol. 2, p. 167) but which well being of the population, the securing of which no one can deny is a legitimate objective of
is also recognized in principle in the Roman Law (d. 17.18.3) has been made to adapt governmental effort and regulation.7
itself to the complexities of modern government, giving rise to the adoption, within
certain limits of the principle of "subordinate legislation," not only in the United States Perhaps the only issue that needs some consideration is whether there is some reasonable
and England but in practically all modern governments. (People vs. Rosenthal and relation between the prescribing of passing the NMAT as a condition for admission to medical
Osmena [68 Phil. 318, 1939]. Accordingly, with the growing complexity of modern life, school on the one hand, and the securing of the health and safety of the general community,
the multiplication of the subjects of governmental regulation and the increased difficulty on the other hand. This question is perhaps most usefully approached by recalling that
of administering the laws, there is a constantly growing tendency toward the delegation the regulation of the practice of medicine in all its branches has long been recognized as a
of greater power by the legislature, and toward the approval of the practice by the reasonable method of protecting the health and safety of the public. 8 That the power to regulate
courts." 3 and control the practice of medicine includes the power to regulate admission to the ranks of
those authorized to practice medicine, is also well recognized. thus, legislation and
The standards set for subordinate legislation in the exercise of rule making authority by an administrative regulations requiring those who wish to practice medicine first to take and pass
administrative agency like the Board of Medical Education are necessarily broad and highly medical board examinations have long ago been recognized as valid exercises of
abstract. As explained by then Mr. Justice Fernando in Edu v. Ericta4 — governmental power.9 Similarly, the establishment of minimum medical educational
requirements — i.e., the completion of prescribed courses in a recognized medical school
The standard may be either expressed or implied. If the former, the non-delegation — for admission to the medical profession, has also been sustained as a legitimate exercise
objection is easily met. The standard though does not have to be spelled out of the regulatory authority of the state.10 What we have before us in the instant case is closely
related: the regulation of access to medical schools. MECS Order No. 52, s. 1985, as noted
42 | C O N S T I 1
earlier, articulates the rationale of regulation of this type: the improvement of the professional We conclude that prescribing the NMAT and requiring certain minimum scores therein as a
and technical quality of the graduates of medical schools, by upgrading the quality of those condition for admission to medical schools in the Philippines, do not constitute an
admitted to the student body of the medical schools. That upgrading is sought by selectivity in unconstitutional imposition.
the process of admission, selectivity consisting, among other things, of limiting admission to
those who exhibit in the required degree the aptitude for medical studies and eventually for WHEREFORE, the Petition for certiorari is DISMISSED and the Order of the respondent trial
medical practice. The need to maintain, and the difficulties of maintaining, high standards in court denying the petition for a writ of preliminary injunction is AFFIRMED. Costs against
our professional schools in general, and medical schools in particular, in the current stage of petitioners.
our social and economic development, are widely known.
SO ORDERED.
We believe that the government is entitled to prescribe an admission test like the NMAT as a
means for achieving its stated objective of "upgrading the selection of applicants into [our]
medical schools" and of "improv[ing] the quality of medical education in the country." Given the
widespread use today of such admission tests in, for instance, medical schools in the United
States of America (the Medical College Admission Test [MCAT] 11 and quite probably in other
countries with far more developed educational resources than our own, and taking into account
the failure or inability of the petitioners to even attempt to prove otherwise, we are entitled to
hold that the NMAT is reasonably related to the securing of the ultimate end of legislation and
regulation in this area. That end, it is useful to recall, is the protection of the public from the
potentially deadly effects of incompetence and ignorance in those who would undertake to treat
our bodies and minds for disease or trauma.

4. Petitioners have contended, finally, that MECS Order No. 52, s. 1985, is in conflict with the
equal protection clause of the Constitution. More specifically, petitioners assert that that portion
of the MECS Order which provides that

the cutoff score for the successful applicants, based on the scores on the NMAT, shall
be determined every-year by the Board of Medical 11 Education after consultation with
the Association of Philippine Medical Colleges. (Emphasis supplied)

infringes the requirements of equal protection. They assert, in other words, that students
seeking admission during a given school year, e.g., 1987-1988, when subjected to a different
cutoff score than that established for an, e.g., earlier school year, are discriminated against and
that this renders the MECS Order "arbitrary and capricious." The force of this argument is more
apparent than real. Different cutoff scores for different school years may be dictated by differing
conditions obtaining during those years. Thus, the appropriate cutoff score for a given year
may be a function of such factors as the number of students who have reached the cutoff score
established the preceding year; the number of places available in medical schools during the
current year; the average score attained during the current year; the level of difficulty of the test
given during the current year, and so forth. To establish a permanent and immutable cutoff
score regardless of changes in circumstances from year to year, may wen result in an
unreasonable rigidity. The above language in MECS Order No. 52, far from being arbitrary or
capricious, leaves the Board of Medical Education with the measure of flexibility needed to
meet circumstances as they change.

43 | C O N S T I 1
G.R. No. 116418 March 7, 1995 1. The OCSS [Office of Career Systems and Standards], OPIA [Office of
Personnel Inspection and Audit] and OPR [Office of Personnel Relations] are
SALVADOR C. FERNANDEZ and ANICIA M. DE LIMA, petitioners, merged to form the Research and Development Office (RDO).
vs.
HON. PATRICIA A. STO. TOMAS, Chairman, and HON. RAMON B. ERENETA, 2. The Office for Human Resource Development (OHRD) is renamed Human
Commissioner, Civil Service Commission, respondents. Resource Development Office (HRDO).

3. The following functions and the personnel assigned to the unit performing
said functions are hereby transferred to HRDO:
FELICIANO, J.:
a. Administration of the Honor and Awards program under
In this Petition for Certiorari, Prohibition and Mandamus with Prayer for a Temporary OCSS;
Restraining Order, petitioners Salvador C. Fernandez and Anicia M. de Lima assail the validity
of Resolution No. 94-3710 of the Civil Service Commission ("Commission") and the authority b. Registration and Accreditation of Unions under OPR; and
of the Commission to issue the same.
c. Accreditation of Agencies to take final action on
Petitioner Fernandez was serving as Director of the Office of Personnel Inspection and Audit appointments under OPIA.
("OPIA") while petitioner de Lima was serving as Director of the Office of the Personnel
Relations ("OPR"), both at the Central Office of the Civil Service Commission in Quezon City, 4. The Office for Central Personnel Records (OCPR) is renamed Management
Metropolitan Manila. While petitioners were so serving, Resolution No. 94-3710 signed by Information Office (MIO).
public respondents Patricia A.. Sto. Tomas and Ramon Ereneta, Jr., Chairman and
Commissioner, respectively, of the Commission, was issued on 7 June 1994. 1 Resolution No. 5. The Information technology functions of OPM and the personnel assigned
94-3710 needs to be quoted in full: to the unit are transferred to MIO.

RESOLUTION NO. 94-3710 6. The following functions of OPM and the personnel assigned to the unit
performing said functions are hereby transferred to the Office of the Executive
WHEREAS, Section 17 of Book V of Executive Order 292 provides that ". . . Director:
as an independent constitutional body, the Commission may effect changes in
the organization as the need arises;" a. Financial Audit and Evaluation;

WHEREAS, the Commission finds it imperative to effect changes in the b. Internal Management and Improvement;
organization to streamline its operations and improve delivery of public
service;
c. Research and Statistics; and
WHEREAS, the Commission finds it necessary to immediately effect changes
in the organization of the Central Offices in view of the need to implement new d. Planning and Programming.
programs in lieu of those functions which were transferred to the Regional
Offices; 7. The library service and its personnel under OCPR are transferred to the
Central Administrative Office.
WHEREFORE, foregoing premises considered, the Commission hereby
RESOLVES to effect the following changes in its organization, specifically in 8. The budget allocated for the various functions shall be transferred to the
the Central Offices: Offices where the functions are transferred. Records, fixtures and equipment
that go with the functions shall be moved to where the functions are
transferred.

44 | C O N S T I 1
Annex A contains the manning list for all the offices, except the OCES. Systems and Standards], the OPIA [Office of Personnel Inspection and Audit]
and the OPR [Office of Personnel Relations], to form the RDO [Research and
The changes in the organization and in operations shall take place before end Development Office]; and
of July 1994.
(2) Whether or not Resolution No. 94-3710 violated petitioners' constitutional
Done in Quezon City, July 07, 1994. right to security of tenure.

(Signed) I.
Patricia A. Sto. Tomas
Chairman The Revised Administrative Code of 1987 (Executive Order No. 292 dated 25 July 1987) sets
out, in Book V, Title I, Subtitle A, Chapter 3, the internal structure and organization of the
(Signed) Did not participate Commission in the following terms:
Ramon P. Ereneta, Jr., Thelma P. Gaminde
Commissioner Commissioner Sec. 16. Offices in the Commission — The Commission shall have the
following offices:
Attested by:
(Signed) (1) The Office of the Executive Director — . . .
Carmencita Giselle B. Dayson
Board Secretary V 2 (2) The Merit System Protection Board — . . .

During the general assembly of officers and employees of the Commission held in the morning (3) The Office of Legal Affairs — . . .
of 28 July 1994, Chairman Sto. Tomas, when apprised of objections of petitioners, expressed
the determination of the Commission to implement Resolution No. 94-3710 unless restrained (4) The Office of Planning and Management — . . .
by higher authority.
(5) The Central Administrative Office — . . .
Petitioners then instituted this Petition. In a Resolution dated 23 August 1994, the Court
required public respondents to file a Comment on the Petition. On 21 September 1994,
petitioners filed an Urgent Motion for Issuance of a Temporary Restraining Order, alleging that (6) The Office of Central Personnel Records — . . .
petitioners had received Office Orders from the Commission assigning petitioner Fernandez to
Region V at Legaspi City and petitioner de Lima to Region III in San Fernando, Pampanga and (7) The Office of Position Classification and
praying that public respondents be restrained from enforcing these Office Orders. The Court, Compensation — . . .
in a Resolution dated 27 September 1994, granted this Motion and issued the Temporary
Restraining Order prayed for by petitioners. (8) The Office of Recruitment, Examination and
Placement — . . .
The Commission filed its own Comment, dated 12 September 1994, on the Petition and then
moved to lift the Temporary Restraining Order. The Office of the Solicitor General filed a (9) The Office of Career Systems and Standards shall provide leadership and
separate Comment dated 28 November 1994, defending the validity of Resolution No. 94-3710 assistance in the formulation and evaluation of personnel systems and
and urging dismissal of the Petition. Petitioners filed separate Replies to these Comments. The standards relative to performance appraisal, merit promotion and employee
Commission in turn filed a Rejoinder (denominated "Comment [on] the Reply"). incentive benefits and awards.

The principal issues raised in this Petition are the following: (10) The Office of Human Resource Development — . . .

(1) Whether or not the Civil Service Commission had legal authority to issue (11) The Office of Personnel Inspection and Audit shall develop policies,
Resolution No. 94-3710 to the extent it merged the OCSS [Office of Career standards, rules and regulations for the effective conduct of inspection and

45 | C O N S T I 1
audit of personnel and personnel management programs and the exercise of What did Resolution No. 94-3710 of the Commission do? Examination of Resolution No. 94-
delegated authority; provide technical and advisory services to Civil Service 3710 shows that thereby the Commission re-arranged some of the administrative units (i.e.,
Regional Offices and government agencies in the implementation of their Offices) within the Commission and, among other things, merged three (3) of them (OCSS,
personnel programs and evaluation systems. OPIA and OPR) to form a new grouping called the "Research and Development Office (RDO)."
The same Resolution renamed some of the Offices of the Commission, e.g., the Office for
(12) The Office of Personnel Relations shall provide leadership and assistance Human Resource Development (OHRD) was renamed Human Resource Development Office
in the development and implementation of policies, standards, rules and (HRDO); the Office for Central Personnel Records (OCPR) was renamed Management
regulations governing corporate officials and employees in the areas of Information Office (MIO). The Commission also re-allocated certain functions moving some
recruitment, examination, placement, career development, merit and awards functions from one Office to another; e.g., the information technology function of OPM (Office
systems, position classification and compensation, performance appraisal, of Planning and Management) was transferred to the newly named Management Information
employee welfare and benefits, discipline and other aspects of personnel Office (MIO). This re-allocation or re-assignment of some functions carried with it the transfer
management on the basis of comparable industry practices. of the budget earmarked for such function to the Office where the function was transferred.
Moreover, the personnel, records, fixtures and equipment that were devoted to the carrying out
of such functions were moved to the Offices to where the functions were transferred.
(13) The Office of the Corporate Affairs — . . .

(14) The Office of Retirement Administration — . . . The objectives sought by the Commission in enacting Resolution No. 94-3710 were described
in that Resolution in broad terms as "effect[ing] changes in the organization to streamline [the
Commission's] operations and improve delivery of service." These changes in internal
(15) The Regional and Field Offices. — . . . (Emphases in the original) organization were rendered necessary by, on the one hand, the decentralization and devolution
of the Commission's functions effected by the creation of fourteen (14) Regional Offices and
Immediately after the foregoing listing of offices of the Commission and their respective ninety-five (95) Field Offices of the Commission throughout the country, to the end that the
functions, the 1987 Revised Administrative Code goes on to provide as follows: Commission and its staff may be brought closer physically to the government employees that
they are mandated to serve. In the past, its functions had been centralized in the Head Office
Sec. 17. Organizational Structure. — Each office of the Commission shall be of the Commission in Metropolitan Manila and Civil Service employees all over the country
headed by a Director with at least one (1) Assistant Director, and may have were compelled to come to Manila for the carrying out of personnel transactions. Upon the
such divisions as are necessary to carry out their respective functions. As an other hand, the dispersal of the functions of the Commission to the Regional Offices and the
independent constitutional body, the Commission may effect chances in the Field Offices attached to various governmental agencies throughout the country makes
organization as the need arises. possible the implementation of new programs of the Commission at its Central Office in
Metropolitan Manila.
xxx xxx xxx 3
The Commission's Office Order assigning petitioner de Lima to the CSC Regional Office No. 3
(Emphasis supplied) was precipitated by the incumbent Regional Director filing an application for retirement, thus
generating a need to find a replacement for him. Petitioner de Lima was being assigned to that
Regional Office while the incumbent Regional Director was still there to facilitate her take over
Examination of the foregoing statutory provisions reveals that the OCSS, OPIA and OPR, and
of the duties and functions of the incumbent Director. Petitioner de Lima's prior experience as
as well each of the other Offices listed in Section 16 above, consist of aggregations of Divisions,
a labor lawyer was also a factor in her assignment to Regional Office No. 3 where public sector
each of which Divisions is in turn a grouping of Sections. Each Section, Division and Office
unions have been very active. Petitioner Fernandez's assignment to the CSC Regional Office
comprises a group of positions within the agency called the Civil Service Commission, each
No. 5 had, upon the other hand, been necessitated by the fact that the then incumbent Director
group being entrusted with a more or less definable function or functions. These functions are
in Region V was under investigation and needed to be transferred immediately to the Central
related to one another, each of them being embraced by a common or general subject matter.
Office. Petitioner Fernandez was deemed the most likely designee for Director of Regional
Clearly, each Office is an internal department or organizational unit within the Commission and
Office No. 5 considering that the functions previously assigned to him had been substantially
that accordingly, the OCSS, OPIA and OPR, as well as all the other Offices within the
devolved to the Regional Offices such that his reassignment to a Regional Office would result
Commission constitute administrative subdivisions of the CSC. Put a little differently, these
in the least disruption of the operations of the Central Office. 4
offices relate to the internal structure of the Commission.
It thus appears to the Court that the Commission was moved by quite legitimate considerations
of administrative efficiency and convenience in promulgating and implementing its Resolution
46 | C O N S T I 1
No. 94-3710 and in assigning petitioner Salvador C. Fernandez to the Regional Office of the We turn to the second claim of petitioners that their right to security of tenure was breached by
Commission in Region V in Legaspi City and petitioner Anicia M. de Lima to the Commission's the respondents in promulgating Resolution No. 94-3710 and ordering petitioners' assignment
Regional Office in Region III in San Fernando, Pampanga. It is also clear to to the Commission's Regional Offices in Regions III and V. Section 2(3) of Article IX(B) of the
the Court that the changes introduced and formalized through Resolution No. 94-3710 — re- 1987 Constitution declared that "no officer or employee of the Civil Service shall be removed
naming of existing Offices; re-arrangement of the groupings of Divisions and Sections or suspended except for cause provided by law." Petitioners in effect contend that they were
composing particular Offices; re-allocation of existing functions (and related personnel; budget, unlawfully removed from their positions in the OPIA and OPR by the implementation of
etc.) among the re-arranged Offices — are precisely the kind of internal changes which are Resolution No. 94-3710 and that they cannot, without their consent, be moved out to the
referred to in Section 17 (Book V, Title I, Subtitle A, Chapter 3) of the 1987 Revised Regional Offices of the Commission.
Administrative Code), quoted above, as "chances in the organization" of the Commission.
We note, firstly, that appointments to the staff of the Commission are not appointments to a
Petitioners argue that Resolution No. 94-3710 effected the "abolition" of public offices, specified public office but rather appointments to particular positions or ranks. Thus, a person
something which may be done only by the same legislative authority which had created those may be appointed to the position of Director III or Director IV; or to the position of Attorney IV
public offices in the first place. or Attorney V; or to the position of Records Officer I or Records Officer II; and so forth. In the
instant case, petitioners were each appointed to the position of Director IV, without specification
The Court is unable, in the circumstances of this case, to accept this argument. The term "public of any particular office or station. The same is true with respect to the other persons holding
office" is frequently used to refer to the right, authority and duty, created and conferred by law, the same position or rank of Director IV of the Commission.
by which, for a given period either fixed by law or enduring at the pleasure of the creating
power, an individual is invested with some portion of the sovereign functions of government, to Section 26(7), Book V, Title I, Subtitle A of the 1987 Revised Administrative Code recognizes
be exercised by that individual for the benefit of the public. 5 We consider that Resolution No. reassignment as a management prerogative vested in the Commission and, for that matter, in
94-3710 has not abolished any public office as that term is used in the law of public officers. 6 It any department or agency of government embraced in the civil service:
is essential to note that none of the "changes in organization" introduced by Resolution No. 94-
3710 carried with it or necessarily involved the termination of the relationship of public Sec. 26. Personnel Actions. — . . .
employment between the Commission and any of its officers and employees. We find it very
difficult to suppose that the 1987 Revised Administrative Code having mentioned fourteen (14) xxx xxx xxx
different "Offices" of the Civil Service Commission, meant to freeze those Offices and to cast
in concrete, as it were, the internal organization of the commission until it might please
Congress to change such internal organization regardless of the ever changing needs of the As used in this Title, any action denoting the movement or progress of
Civil Service as a whole. To the contrary, the legislative authority had expressly authorized the personnel in the civil service shall be known as personnel action. Such action
Commission to carry out "changes in the organization," as the need [for such changes] shall include appointment through certification, promotion, transfer, re-
arises." 7 Assuming, for purposes of argument merely, that legislative authority was necessary instatement, re-employment, detail, reassignment, demotion, and
to carry out the kinds off changes contemplated in Resolution No. 94-3710 (and the Court separation. All personnel actions shall be in accordance with such rules,
is not saying that such authority is necessary), such legislative authority was validly delegated standards, and regulations as may be promulgated by the Commission.
to the Commission by Section 17 earlier quoted. The legislative standards to be observed and
respected in the exercise of such delegated authority are set out not only in Section 17 itself xxx xxx xxx
(i.e., "as the need arises"), but also in the Declaration of Policies found in Book V, Title I, Subtitle
A, Section 1 of the 1987 Revised Administrative Code which required the Civil Service (7) Reassignment. An employee may be re-assigned from one organizational
Commission unit to another in the same agency, Provided, That such re-assignment
shall not involve a reduction in rank status and salary. (Emphasis supplied)
as the central personnel agency of the Government [to] establish a
career service, adopt measures to promote — efficiency — It follows that the reassignment of petitioners Fernandez and de Lima from their previous
[and] responsiveness . . . in the civil service . . . and that personnel functions positions in OPIA and OPR, respectively, to the Research and Development Office (RDO) in
shall be decentralized, delegating the corresponding authority to the Central Office of the Commission in Metropolitan Manila and their subsequent assignment
the departments, offices and agencies where such functions can be effectively from the RDO to the Commission's Regional Offices in Regions V and III had been effected
performed. (Emphasis supplied) with express statutory authority and did not constitute removals without lawful cause. It also
follows that such re-assignment did not involve any violation of the constitutional right of
II. petitioners to security of tenure considering that they retained their positions of Director IV and
47 | C O N S T I 1
would continue to enjoy the same rank, status and salary at their new assigned stations which upon the nature of the appointment (Hojilla
they had enjoyed at the Head Office of the Commission in Metropolitan Manila. Petitioners had vs. Marino, 121 Phil. 280 [1965].) Such
not, in other words, acquired a vested right to serve at the Commission's Head Office. that the rule which proscribes transfers
without consent as anathema to the security
Secondly, the above conclusion is compelled not only by the statutory provisions relevant in of tenure is predicated upon the theory that
the instant case, but also by a long line of cases decided by this Court in respect of different the officer involved is appointed — not
agencies or offices of government. merely assigned — to a particular
station(Miclat v. Ganaden, et al., 108 Phil.
439 [1960]; Jaro v. Hon. Valencia, et al., 118
In one of the more recent of these cases, Department of Education Culture and Sports, etc., et
Phil. 728 [1963]). [Brillantes v. Guevarra, 27
al. v. Court of Appeals, et al.,8 this Court held that a person who had been appointed as
SCRA 138 (1969)]
"Secondary School Principal II" in the Division of City Schools, District II, Quezon City, National
Capital Region, and who had been stationed as High School Principal in the Carlos Albert High
School in Quezon for a number of years, could lawfully be reassigned or transferred to the The appointment of Navarro as principal does not refer to any particular station
Manuel Roxas High School, also in Quezon City, without demotion in rank or diminution of or school. As such, she could be assigned to any station and she is not entitled
salry. This Court held: to stay permanently at any specific school. (Bongbong v. Parado, 57 SCRA
623) When she was assigned to the Carlos Albert High School, it could not
have been with the intention to let her stay in said school permanently.
The aforequoted provision of Republic Act No. 4670 particularly Section 6
Otherwise, her appointment would have so stated. Consequently, she may be
thereof which provides that except for cause and in the exigencies of the
assigned to any station or school in Quezon City as the exigencies of public
service no teacher shall be transferred without his consent from one station to
service require even without consent. As this Court ruled in Brillantes
another, finds no application in the case at bar as this is predicated upon the
v. Guevarra, 27 SCRA 138,
theory that the teacher concerned is appointed — not merely assigned — to a
143 —
particular station. Thus:

Plaintiff's confident stride falters. She took too loose a view of


The rule pursued by plaintiff only goes so far as
the applicable jurisprudence. Her refuge behind the mantle of
the appointed indicates a specification. Otherwise, the
security of tenure guaranteed by the Constitution is not
constitutionally ordained security of tenure cannot shield her.
impenetrable. She proceeds upon the assumption that she
In appointments of this nature, this Court has consistently
occupies her station in Sinalang Elementary School by
rejected the officer's demand to remain — even as public
service dictates that a transfer be made — in a particular appointment. But her first appointment as Principal merely
station. Judicial attitude toward transfers of this nature is reads thus: "You are hereby appointed a Principal
(Elementary School) in the Bureau of Public Schools,
expressed in the following statement in Ibañez, et
Department of Education", without mentioning her station.
al. vs. Commission on Elections, et al. (G.R. No.
L-26558, April 27, 1967; 19 SCRA 1002 [1967]); She cannot therefore claim security of tenure as Principal of
Sinalang Elementary School or any particular station. She
may be assigned to any station as exigency of public service
That security of tenure is an essential and requires, even without her consent. She thus has no right of
constitutionally guaranteed feature of our choice.9 (Emphasis supplied; citation omitted)
Civil Service System, is not open to debate.
The mantle of its protection extends not only
In the very recent case of Fernando, et al. v. Hon. Sto. Tomas, etc., et
against removals without cause but also
a1., 10 the Court addressed appointments of petitioners as "Mediators-Arbiters in the National
against unconsented transfer which, as
Capital Region" in dismissing a challenge on certiorari to resolutions of the CSC and orders of
repeatedly enunciatEd, are tantamount to
the Secretary of Labor. The Court said:
removals which are within the ambit of the
fundamental guarantee. However, the
availability of that security of tenure Petitioners were appointed as Mediator Arbiters in the National Capital
necessarily depends, in the first instance, Region. They were not, however, appointed to a specific station or particular
unit of the Department of Labor in the National Capital Region (DOLE-NCR).
48 | C O N S T I 1
Consequently, they can always be reassigned from one organizational unit to stated in their respective appointments, no security of tenure can be asserted
another of the same agency where, in the opinion of respondent Secretary, by the petitioners on the basis of the mere assignments which were given to
their services may be used more effectively. As such they can neither claim a them. A contrary rule will erase altogether the demarcation line we have
vested right to the station to which they were assigned nor to security of tenure repeatedly drawn between appointment and assignment as two distinct
thereat. As correctly observed by the Solicitor General, petitioners' concepts in the law of public officers. 16 (Emphases supplied)
reassignment is not a transfer for they were not removed from their position as
med-arbiters. They were not given new appointments to new positions. It The petitioner, in Miclat v. Ganaden, 17 had been appointed as a "Welfare Office Incharge,
indubitably follows, therefore, that Memorandum Order No. 4 ordering their Division of Urban, Rural and Community Administration, Social Welfare Administration." She
reassignment in the interest of the service is legally in order. 11 (Emphases was assigned as Social Welfare Incharge of the Mountain Province, by an office order of the
supplied) Administrator, Social Welfare Administration. After a little more than a year; petitioner was
assigned elsewhere and respondent Ganaden transferred to petitioner's first station in Baguio
In Quisumbing v. Gumban, 12 the Court, dealing with an appointment in the Bureau of City. The Court ruled that petitioner was not entitled to remain in her first station, In Jaro
Public Schools of the Department of Education, Culture and Sports, ruled as follows: v. Hon. Valencia, et al., 18petitioner Dr. Jaro had been appointed "Physician in the Municipal
Maternity and Charity Clinics, Bureau of Hospitals." He was first assigned to the Municipal
After a careful scrutiny of the records, it is to be underscored that the Maternity and Charity Clinics in Batulati, Davao, and later to the corresponding clinic in Saug,
appointment of private respondent Yap is simply that of a District Supervisor Davao and then to Catil, Davao. He was later assigned to the Municipality of Padada, also of
of the Bureau of Public Schools which does not indicate a specific Davao Province. He resisted his last assignment and brought mandamus against the Secretary
station (Rollo, p. 13). A such, she could be assigned to any station and she is of Health to compel the latter to return him to his station in Catil, Davao as Municipal Health
no entitled to stay permanently at any specific station (Bongbong v. Parado, Officer thereof. The Court, applying Miclat v. Ganaden dismissed this Petition holding that his
57 SCRA 623 [1974]; Department of Education, Culture and Sports v. Court of appointment not being to any specific station but as a physician in the Municipal Maternity and
Appeals [G.R. 81032, March 22, 1990] citing Brillantes v. Guevarra [27 SCRA Charity Clinics, Bureau of Hospitals, he could be transferred or assigned to any station where,
138 [1969]). 13 in the opinion of the Secretary of Health, his services may be utilized more effectively. 19

Again, in Ibañez v. Commission on Elections, 14 the Court had before it petitioners' Also noteworthy is Sta. Maria v. Lopez 20 which involved the appointment of petitioner Sta.
appointments as "Election Registrars in the Commission of Elections," without any intimation Maria as "Dean, College of Education, University of the Philippines." Dean Sta. Maria was
to what city, municipality or municipal district they had been appointed as such. 15 The Court transferred by the President of the University of the Philippines to the Office of the President,
held that since petitioners "were not appointed to, and consequently not entitled to any security U.P., without demotion in rank or salary, thereby acceding to the demands of student activists
of tenure or permanence in, any specific station," "on general principles, they [could] be who were boycotting their classes in the U.P. College of Education. Dean Sta. Maria assailed
transferred as the exigencies of the service required," and that they had no right to complain his transfer as an illegal and unconstitutional removal from office. In upholding Dean Sta.
against any change in assignment. The Court further held that assignment to a particular station Maria's claim, the Court, speaking through Mr. Justice Sanchez, laid down the applicable
after issuance of the appointment was not necessary to complete such appointment: doctrine in the following terms:

. . . . We cannot subscribe to the theory that an assignment to a particular 4. Concededly, transfers there are which do not amount to removal. Some
station, in the light of the terms of the appointments in question, was necessary such transfer can be effected without the need for charges being preferred,
to complete the said appointments. The approval thereof by the Commissioner without trial or hering, and even without the consent of the employee.
of Civil Service gave those appointments the stamp of finality.With the view
that the respondent Commission then took of its power in the premises and The clue to such transfers may be found in the "nature of the
the demand of the mission it set out to accomplish with the appointments it appointment." Where the appointment does not indicate a specific station, an
extended, said appointments were definitely meant to be complete as then employee may be transferred or reassigned provided the transfer affects no
issued. The subsequent assignment of the appointees thereunder that the substantial change in title, rank and salary. Thus one who is appointed
said respondent Commission held in reserve to be exercised as the needs of "principal in the Bureau of Public Schools" and is designated to head a pilot
each locality justified did not in any way detract from the perfection attained by school may be transferred to the post of principal of another school.
the appointments beforehand. And the respective appointees were entitled
only to such security of tenure as the appointment papers concerned actually And the rule that outlaws unconsented transfers as anathema to security of
conferred — not in that of any place to which they may have been tenure applies only to an officer who is appointed — not merely assigned — to
subsequently assigned. . . . As things stand, in default of any particular station
49 | C O N S T I 1
a particular station. Such a rule does not prescribe a transfer carried out under
a specific statute that empowers the head of an agency to periodically reassign
the employees and officers in order to improve the service of the agency. The
use of approved techniques or methods in personnel management to harness
the abilities of employees to promote optimum public service cannot-be
objected to. . . .

5. The next point of inquiry is whether or not Administrative Order 77 would


stand the test of validity vis-a-vis the principles just enunciated.

xxx xxx xxx

To be stressed at this point, however, is that the appointment of Sta. Maria is


that of "Dean, College of Education, University of the Philippines." He is not
merely a dean "in the university." His appointment is to a specific position; and,
more importantly, to a specific station. 21 (Citations omitted; emphases
supplied)

For all the foregoing we conclude that the reassignment of petitioners Fernandez and de Lima
from their stations in the OPIA and OPR, respectively, to the Research Development Office
(RDO) and from the RDO to the Commissions Regional Offices in Regions V and III,
respectively, without their consent, did not constitute a violation of their constitutional right to
security of tenure.

WHEREFORE, the Petition for Certiorari, Prohibition and Mandamus with Prayer for Writ of
Preliminary Injunction or Temporary Restraining Order is hereby DISMISSED. The Temporary
Restraining Order issued by this Court on 27 September 1994 is hereby LIFTED. Costs against
petitioners.

SO ORDERED.

50 | C O N S T I 1
G.R. No. 96754 June 22, 1995 Zamboanga del Sur, and the cities of Cotabato, Dapitan, Dipolog, General Santos, Iligan,
Marawi, Pagadian, Puerto Princesa and Zamboanga. In the ensuing plebiscite held on
CONGRESSMAN JAMES L. CHIONGBIAN (Third District, South Cotobato) ADELBERT November 16, 1989, four provinces voted in favor of creating an autonomous region. These
W. ANTONINO (First District, South Cotobato), WILFREDO G. CAINGLET (Third are the provinces of Lanao del Sur, Maguindanao, Sulu and Tawi-Tawi. In accordance with the
District, Zamboanga del Norte), HILARION RAMIRO, JR. (Second Division, Misamis constitutional provision, these provinces became the Autonomous Region in Muslim Mindanao.
Occidental), ERNESTO S. AMATONG (Second District, Zamboanga del Norte), ALVIN
G. DANS (Lone District, Basilan), ABDULLAH M. DIMAPORO (Second District, Lanao On the other hand, with respect to provinces and cities not voting in favor of the Autonomous
del Norte), and CONGRESSWOMAN MARIA CLARA A. LOBREGAT (Lone District, Region, Art. XIX, § 13 of R.A. No. 6734 provides,
Zamboanga City) petitioners,
vs. That only the provinces and cities voting favorably in such plebiscites shall be
HON. OSCAR M. ORBOS, Executive Secretary; COMMITTEE CHAIRMAN SEC. FIDEL V. included in the Autonomous Region in Muslim Mindanao. The provinces and
RAMOS, CABINET OFFICERS FOR REGIONAL DEVELOPMENT FOR REGIONS X AND cities which in the plebiscite do not vote for inclusion in the Autonomous
XII, CHAIRMAN OF THE REGIONAL DEVELOPMENT COUNCIL FOR REGION X, Region shall remain in the existing administrative regions. Provided, however,
CHAIRMAN JESUS V. AYALA, CABINET OFFICERS FOR REGIONAL DEVELOPMENT that the President may, by administrative determination, merge the existing
FOR REGIONS XI and XII, DEPARTMENT OF LOCAL GOVERNMENT, NATIONAL regions.
ECONOMIC AND DEVELOPMENT AUTHORITY SECRETARIAT, PRESIDENTIAL
MANAGEMENT STAFF, HON. GUILLERMO CARAGUE, Secretary of the DEPARTMENT
Pursuant to the authority granted by this provision, then President Corazon C. Aquino issued
OF BUDGET and MANAGEMENT; and HON. ROSALINA S. CAJUCUM, OIC National
on October 12, 1990 Executive Order No. 429, "providing for the Reorganization of the
Treasurer, respondents.
Administrative Regions in Mindanao." Under this Order, as amended by E.O. No. 439 —

IMMANUEL JALDON, petitioner,


(1) Misamis Occidental, at present part of Region X, will become part of Region
vs. IX.
HON. EXECUTIVE SECRETARY OSCAR M. ORBOS, HON. FIDEL RAMOS, HON.
SECRETARY LUIS SANTOS, AND HON. NATIONAL TREASURER ROSALINA
CAJUCOM, respondents. (2) Oroquieta City, Tangub City and Ozamiz City, at present parts of Region X
will become parts of Region IX.

(3) South Cotobato, at present a part of Region XI, will become part of Region
XII.
MENDOZA, J.:
(4) General Santos City, at present part of Region XI, will become part of
These suits challenge the validity of a provision of the Organic Act for the Autonomous Region Region XII.
in Muslim Mindanao (R.A. No. 6734), authorizing the President of the Philippines to "merge"
by administrative determination the regions remaining after the establishment of the
Autonomous Region, and the Executive Order issued by the President pursuant to such (5) Lanao del Norte, at present part of Region XII, will become part of Region
authority, "Providing for the Reorganization of Administrative Regions in Mindanao." A IX.
temporary restraining order prayed for by the petitioners was issued by this Court on January
29, 1991, enjoining the respondents from enforcing the Executive Order and statute in (6) Iligan City and Marawi City, at present part of Region XII, will become part
question. of Region IX.

The facts are as follows: Petitioners in G.R. No. 96754 are, or at least at the time of the filing of their petition, members
of Congress representing various legislative districts in South Cotobato, Zamboanga del Norte,
Pursuant to Art. X, §18 of the 1987 Constitution, Congress passed R.A. No. 6734, the Organic Basilan, Lanao del Norte and Zamboanga City. On November 12, 1990, they wrote then
Act for the Autonomous Region in Muslim Mindanao, calling for a plebiscite to be held in the President Aquino protesting E.O. No. 429. They contended that
provinces of Basilan, Cotobato, Davao del Sur, Lanao del Norte, Lanao del Sur, Maguindanao,
Palawan, South Cotabato, Sultan Kudarat, Sulu, Tawi-Tawi, Zamboanga del Norte, and
51 | C O N S T I 1
There is no law which authorizes the President to pick certain provinces and Petitioners in both cases contend that Art. XIX, §13 of R.A. No. 6734 is unconstitutional
cities within the existing regions — some of which did not even take part in the because (1) it unduly delegates legislative power to the President by authorizing him to "merge
plebiscite as in the case of the province of Misamis Occidental and the cities [by administrative determination] the existing regions" or at any rate provides no standard for
of Oroquieta, Tangub and Ozamiz — and restructure them to new the exercise of the power delegated and (2) the power granted is not expressed in the title of
administrative regions. On the other hand, the law (Sec. 13, Art. XIX, R.A. the law.
6734) is specific to the point, that is, that "the provinces and cities which in the
plebiscite do not vote for inclusion in the Autonomous Region shall remain in In addition, petitioner in G.R. No. 96673 challenges the validity of E.O. No. 429 on the ground
the existing administrative regions." that the power granted by Art. XIX, §13 to the President is only to "merge regions IX and XII"
but not to reorganize the entire administrative regions in Mindanao and certainly not to transfer
The transfer of the provinces of Misamis Occidental from Region X to Region the regional center of Region IX from Zamboanga City to Pagadian City.
IX; Lanao del Norte from Region XII to Region IX, and South Cotobato from
Region XI to Region XII are alterations of the existing structures of The Solicitor General defends the reorganization of regions in Mindanao by E.O. No. 429 as
governmental units, in other words, reorganization. This can be gleaned from merely the exercise of a power "traditionally lodged in the President," as held in Abbas
Executive Order No. 429, thus v. Comelec,2 and as a mere incident of his power of general supervision over local
governments and control of executive departments, bureaus and offices under Art. X, §16 and
Whereas, there is an urgent need to reorganize the Art. VII, §17, respectively, of the Constitution.
administrative regions in Mindanao to guarantee the effective
delivery of field services of government agencies taking into He contends that there is no undue delegation of legislative power but only a grant of the power
consideration the formation of the Autonomous Region in to "fill up" or provide the details of legislation because Congress did not have the facility to
Muslim Mindanao. provide for them. He cites by analogy the case of Municipality of Cardona v. Municipality of
Binangonan,3 in which the power of the Governor-General to fix municipal boundaries was
With due respect to Her Excellency, we submit that while the authority sustained on the ground that —
necessarily includes the authority to merge, the authority to merge does not
include the authority to reorganize. Therefore, the President's authority under [such power] is simply a transference of certain details with respect to
RA 6734 to "merge existing regions" cannot be construed to include the provinces, municipalities, and townships, many of them newly created, and all
authority to reorganize them. To do so will violate the rules of statutory of them subject to a more or less rapid change both in development and
construction. centers of population, the proper regulation of which might require not only
prompt action but action of such a detailed character as not to permit the
The transfer of regional centers under Executive Order 429 is actually a legislative body, as such, to take it efficiently.
restructuring (reorganization) of administrative regions. While this
reorganization, as in Executive Order 429, does not affect the apportionment The Solicitor General justifies the grant to the President of the power "to merge the existing
of congressional representatives, the same is not valid under the penultimate regions" as something fairly embraced in the title of R.A. No. 6734, to wit, "An Act Providing for
paragraph of Sec. 13, Art. XIX of R.A. 6734 and Ordinance appended to the an Organic Act for the Autonomous Region in Muslim Mindanao," because it is germane to it.
1986 Constitution apportioning the seats of the House of Representatives of
Congress of the Philippines to the different legislative districts in provinces and He argues that the power is not limited to the merger of those regions in which the provinces
cities.1 and cities which took part in the plebiscite are located but that it extends to all regions in
Mindanao as necessitated by the establishment of the autonomous region.
As their protest went unheeded, while Inauguration Ceremonies of the New Administrative
Region IX were scheduled on January 26, 1991, petitioners brought this suit for certiorari and Finally, he invokes P.D. No. 1416, as amended by P.D. No. 1772 which provides:
prohibition.
1. The President of the Philippines shall have the continuing authority to
On the other hand, the petitioner in G.R. No. 96673, Immanuel Jaldon, is a resident of reorganize the National Government. In exercising this authority, the President
Zamboanga City, who is suing in the capacity of taxpayer and citizen of the Republic of the shall be guided by generally acceptable principles of good government and
Philippines. responsive national government, including but not limited to the following

52 | C O N S T I 1
guidelines for a more efficient, effective, economical and development- Considering the arguments of the parties, the issues are:
oriented governmental framework:
(1) whether the power to "merge" administrative regions is legislative in character, as
(a) More effective planning implementation, and review petitioners contend, or whether it is executive in character, as respondents claim it is, and, in
functions; any event, whether Art. XIX, §13 is invalid because it contains no standard to guide the
President's discretion;
(b) Greater decentralization and responsiveness in decision-
making process; (2) whether the power given is fairly expressed in the title of the statute; and

(c) Further minimization, if not, elimination, of duplication or (3) whether the power granted authorizes the reorganization even of regions the provinces and
overlapping of purposes, functions, activities, and programs; cities in which either did not take part in the plebiscite on the creation of the Autonomous
Region or did not vote in favor of it; and
(d) Further development of as standardized as possible
ministerial, sub-ministerial and corporate organizational (4) whether the power granted to the President includes the power to transfer the regional
structures; center of Region IX from Zamboanga City to Pagadian City.

(e) Further development of the regionalization process; and It will be useful to recall first the nature of administrative regions and the basis and purpose for
their creation. On September 9, 1968, R.A. No. 5435 was passed "authorizing the President of
(f) Further rationalization of the functions of and administrative the Philippines, with the help of a Commission on Reorganization, to reorganize the different
relationships among government entities. executive departments, bureaus, offices, agencies and instrumentalities of the government,
including banking or financial institutions and corporations owned or controlled by it." The
purpose was to promote "simplicity, economy and efficiency in the government."4 The
For purposes of this Decree, the coverage of the continuing
Commission on Reorganization created under the law was required to submit an integrated
authority of the President to reorganize shall be interpreted to
reorganization plan not later than December 31, 1969 to the President who was in turn required
encompass all agencies, entities, instrumentalities, and units
to submit the plan to Congress within forty days after the opening of its next regular session.
of the National Government, including all government owned
The law provided that any reorganization plan submitted would become effective only upon the
or controlled corporations as well as the entire range of the
approval of Congress.5
powers, functions, authorities, administrative relationships,
acid related aspects pertaining to these agencies, entities,
instrumentalities, and units. Accordingly, the Reorganization Commission prepared an Integrated Reorganization Plan
which divided the country into eleven administrative regions. 6 By P.D. No. 1, the Plan was
approved and made part of the law of the land on September 24, 1972. P.D. No. 1 was twice
2. [T]he President may, at his discretion, take the following actions:
amended in 1975, first by P.D. No. 742 which "restructur[ed] the regional organization of
Mindanao, Basilan, Sulu and Tawi-Tawi" and later by P.D. No. 773 which further "restructur[ed]
xxx xxx xxx the regional organization of Mindanao and divid[ed] Region IX into two sub-regions." In 1978,
P.D. No. 1555 transferred the regional center of Region IX from Jolo to Zamboanga City.
f. Create, abolish, group, consolidate, merge, or integrate
entities, agencies, instrumentalities, and units of the National Thus the creation and subsequent reorganization of administrative regions have been by the
Government, as well as expand, amend, change, or otherwise President pursuant to authority granted to him by law. In conferring on the President the power
modify their powers, functions and authorities, including, with "to merge [by administrative determination] the existing regions" following the establishment of
respect to government-owned or controlled corporations, their the Autonomous Region in Muslim Mindanao, Congress merely followed the pattern set in
corporate life, capitalization, and other relevant aspects of previous legislation dating back to the initial organization of administrative regions in 1972. The
their charters. choice of the President as delegate is logical because the division of the country into regions
is intended to facilitate not only the administration of local governments but also the direction
g. Take such other related actions as may be necessary to of executive departments which the law requires should have regional offices. As this Court
carry out the purposes and objectives of this Decree. observed in Abbas, "while the power to merge administrative regions is not expressly provided
53 | C O N S T I 1
for in the Constitution, it is a power which has traditionally been lodged with the President to The questioned Executive Order No. 429 distorted and, in fact, contravened
facilitate the exercise of the power of general supervision over local governments [seeArt. X, the clear intent of this provision by moving out or transferring certain political
§4 of the Constitution]." The regions themselves are not territorial and political divisions like subdivisions (provinces/cities) out of their legally designated regions.
provinces, cities, municipalities and barangays but are "mere groupings of contiguous Aggravating this unacceptable or untenable situation is EO No. 429's effecting
provinces for administrative purposes."7 The power conferred on the President is similar to the certain movements on areas which did not even participate in the November
power to adjust municipal boundaries8 which has been described in Pelaez v. Auditor 19, 1989 plebiscite. The unauthorized action of the President, as effected by
General9 or as "administrative in nature." and under the questioned EO No. 429, is shown by the following dispositions:
(1) Misamis Occidental, formerly of Region X and which did not even
There is, therefore, no abdication by Congress of its legislative power in conferring on the participate in the plebiscite, was moved from said Region X to Region IX; (2)
President the power to merge administrative regions. The question is whether Congress has the cities of Ozamis, Oroquieta, and Tangub, all formerly belonging to Region
provided a sufficient standard by which the President is to be guided in the exercise of the X, which likewise did not participate in the said plebiscite, were transferred to
power granted and whether in any event the grant of power to him is included in the subject Region IX; (3) South Cotobato, from Region XI to Region XII; (4) General
expressed in the title of the law. Santos City: from Region XI to Region XII; (5) Lanao del Norte, from Region
XII to Region IX; and (6) the cities of Marawi and Iligan from Region XII to
Region IX. All of the said provinces and cities voted "NO", and thereby rejected
First, the question of standard. A legislative standard need not be expressed. It may simply be
their entry into the Autonomous Region in Muslim Mindanao, as provided
gathered or implied. 10 Nor need it be found in the law challenged because it may be embodied
in other statutes on the same subject as that of the challenged legislation. 11 under RA No. 6734. 15

The contention has no merit. While Art. XIX, §13 provides that "The provinces and cities which
With respect to the power to merge existing administrative regions, the standard is to be found
do not vote for inclusion in the Autonomous Region shall remain in the existing administrative
in the same policy underlying the grant to the President in R.A. No. 5435 of the power to
regions," this provision is subject to the qualification that "the President may by administrative
reorganize the Executive Department, to wit: "to promote simplicity, economy and efficiency in
determination merge the existing regions." This means that while non-assenting provinces and
the government to enable it to pursue programs consistent with national goals for accelerated
cities are to remain in the regions as designated upon the creation of the Autonomous Region,
social and economic development and to improve the service in the transaction of the public
they may nevertheless be regrouped with contiguous provinces forming other regions as the
business."12 Indeed, as the original eleven administrative regions were established in
exigency of administration may require.
accordance with this policy, it is logical to suppose that in authorizing the President to "merge
[by administrative determination] the existing regions" in view of the withdrawal from some of
those regions of the provinces now constituting the Autonomous Region, the purpose of The regrouping is done only on paper. It involves no more than are definition or redrawing of
Congress was to reconstitute the original basis for the organization of administrative regions. the lines separating administrative regions for the purpose of facilitating the administrative
supervision of local government units by the President and insuring the efficient delivery of
Nor is Art. XIX, §13 susceptible to charge that its subject is not embraced in the title of R.A. essential services. There will be no "transfer" of local governments from one region to another
except as they may thus be regrouped so that a province like Lanao del Norte, which is at
No. 6734. The constitutional requirement that "every bill passed by the Congress shall embrace
present part of Region XII, will become part of Region IX.
only one subject which shall be expressed in the title thereof" 13 has always been given a
practical rather than a technical construction. The title is not required to be an index of the
content of the bill. It is a sufficient compliance with the constitutional requirement if the title The regrouping of contiguous provinces is not even analogous to a redistricting or to the
expresses the general subject and all provisions of the statute are germane to that division or merger of local governments, which all have political consequences on the right of
subject. 14 Certainly the reorganization of the remaining administrative regions is germane to people residing in those political units to vote and to be voted for. It cannot be overemphasized
the general subject of R.A. No. 6734, which is the establishment of the Autonomous Region in that administrative regions are mere groupings of contiguous provinces for administrative
Muslim Mindanao. purposes, not for political representation.

Finally, it is contended that the power granted to the President is limited to the reorganization Petitioners nonetheless insist that only those regions, in which the provinces and cities which
of administrative regions in which some of the provinces and cities which voted in favor of voted for inclusion in the Autonomous Region are located, can be "merged" by the President.
regional autonomy are found, because Art. XIX, §13 provides that those which did not vote for
autonomy "shall remain in the existing administrative regions." More specifically, petitioner in To be fundamental reason Art. XIX, §13 is not so limited. But the more fundamental reason is
G.R. No. 96673 claims: that the President's power cannot be so limited without neglecting the necessities of
administration. It is noteworthy that the petitioners do not claim that the reorganization of the

54 | C O N S T I 1
regions in E.O. No. 429 is irrational. The fact is that, as they themselves admit, the
reorganization of administrative regions in E.O. No. 429 is based on relevant criteria, to wit: (1)
contiguity and geographical features; (2) transportation and communication facilities; (3)
cultural and language groupings; (4) land area and population; (5) existing regional centers
adopted by several agencies; (6) socio-economic development programs in the regions and
(7) number of provinces and cities.

What has been said above applies to the change of the regional center from Zamboanga City
to Pagadian City. Petitioners contend that the determination of provincial capitals has always
been by act of Congress. But as, this Court said in Abbas, 16 administrative regions are mere
"groupings of contiguous provinces for administrative purposes, . . . [They] are not territorial
and political subdivisions like provinces, cities, municipalities and barangays." There is,
therefore, no basis for contending that only Congress can change or determine regional
centers. To the contrary, the examples of P.D. Nos. 1, 742, 773 and 1555 suggest that the
power to reorganize administrative regions carries with it the power to determine the regional
center.

It may be that the transfer of the regional center in Region IX from Zamboanga City to Pagadian
City may entail the expenditure of large sums of money for the construction of buildings and
other infrastructure to house regional offices. That contention is addressed to the wisdom of
the transfer rather than to its legality and it is settled that courts are not the arbiters of the
wisdom or expediency of legislation. In any event this is a question that we will consider only if
fully briefed and upon a more adequate record than that presented by petitioners.

WHEREFORE, the petitions for certiorari and prohibition are DISMISSED for lack of merit.

SO ORDERED.

55 | C O N S T I 1
G.R. No. L-32166 October 18, 1977 As legal background, it should be stated that section 11 of the Fisheries Law prohibits "the use
of any obnoxious or poisonous substance" in fishing.
THE PEOPLE OF THE PHILIPPINES, plaintiff-appellant,
vs. Section 76 of the same law punishes any person who uses an obnoxious or poisonous
HON. MAXIMO A. MACEREN CFI, Sta. Cruz, Laguna, JOSE BUENAVENTURA, substance in fishing with a fine of not more than five hundred pesos nor more than five
GODOFREDO REYES, BENJAMIN REYES, NAZARIO AQUINO and CARLO DEL thousand, and by imprisonment for not less than six months nor more than five years.
ROSARIO, accused-appellees.
It is noteworthy that the Fisheries Law does not expressly punish .electro fishing."
Office of the Solicitor General for appellant. Notwithstanding the silence of the law, the Secretary of Agriculture and Natural Resources,
upon the recommendation of the Commissioner of Fisheries, promulgated Fisheries
Rustics F. de los Reyes, Jr. for appellees. Administrative Order No. 84 (62 O.G. 1224), prohibiting electro fishing in all Philippine waters.
The order is quoted below: ñé+.£ªwph!1

SUBJECT: PROHIBITING ELECTRO FISHING IN ALL


AQUINO, J.:têñ.£îhqw⣠WATERS ñé+.£ªwph!1

OF THE PHILIPPINES.
This is a case involving the validity of a 1967 regulation, penalizing electro fishing in fresh water
fisheries, promulgated by the Secretary of Agriculture and Natural Resources and the
Commissioner of Fisheries under the old Fisheries Law and the law creating the Fisheries Pursuant to Section 4 of Act No. 4003, as amended, and Section 4 of R.A. No. 3512, the
Commission. following rules and regulations regarding the prohibition of electro fishing in all waters of the
Philippines are promulgated for the information and guidance of all concerned.ñé+.£ªwph!1
On March 7, 1969 Jose Buenaventura, Godofredo Reyes, Benjamin Reyes, Nazario Aquino
and Carlito del Rosario were charged by a Constabulary investigator in the municipal court of SECTION 1. — Definition. — Words and terms used in this Order 11 construed
Sta. Cruz, Laguna with having violated Fisheries Administrative Order No. 84-1. as follows:

It was alleged in the complaint that the five accused in the morning of March 1, 1969 resorted (a) Philippine waters or territorial waters of the Philippines' includes all waters
to electro fishing in the waters of Barrio San Pablo Norte, Sta. Cruz by "using their own motor of the Philippine Archipelago, as defined in the t between the United States
banca, equipped with motor; with a generator colored green with attached dynamo colored and Spain, dated respectively the tenth of December, eighteen hundred ninety
gray or somewhat white; and electrocuting device locally known as sensored with a somewhat eight and the seventh of November, nineteen hundred. For the purpose of this
webbed copper wire on the tip or other end of a bamboo pole with electric wire attachment order, rivers, lakes and other bodies of fresh waters are included.
which was attached to the dynamo direct and with the use of these devices or equipments
catches fish thru electric current, which destroy any aquatic animals within its cuffed reach, to (b) Electro Fishing. — Electro fishing is the catching of fish with the use of
the detriment and prejudice of the populace" (Criminal Case No. 5429). electric current. The equipment used are of many electrical devices which may
be battery or generator-operated and from and available source of electric
Upon motion of the accused, the municipal court quashed the complaint. The prosecution current.
appealed. The Court of First Instance of Laguna affirmed the order of dismissal (Civil Case No.
SC-36). The case is now before this Court on appeal by the prosecution under Republic Act (c) 'Persons' includes firm, corporation, association, agent or employee.
No. 5440.
(d) 'Fish' includes other aquatic products.
The lower court held that electro fishing cannot be penalize because electric current is not an
obnoxious or poisonous substance as contemplated in section I I of the Fisheries Law and that SEC. 2. — Prohibition. — It shall be unlawful for any person to engage in
it is not a substance at all but a form of energy conducted or transmitted by substances. The electro fishing or to catch fish by the use of electric current in any portion of
lower court further held that, since the law does not clearly prohibit electro fishing, the executive the Philippine waters except for research, educational and scientific purposes
and judicial departments cannot consider it unlawful.

56 | C O N S T I 1
which must be covered by a permit issued by the Secretary of Agriculture and And since the instant case was filed in the municipal court of Sta. Cruz, Laguna, a provincial
Natural Resources which shall be carried at all times. capital, the order of d rendered by that municipal court was directly appealable to the Court,
not to the Court of First Instance of Laguna (Sec. 45 and last par. of section 87 of the Judiciary
SEC. 3. — Penalty. — Any violation of the provisions of this Administrative Law; Esperat vs. Avila, L-25992, June 30, 1967, 20 SCRA 596).
Order shall subject the offender to a fine of not exceeding five hundred pesos
(P500.00) or imprisonment of not extending six (6) months or both at the It results that the Court of First Instance of Laguna had no appellate jurisdiction over the case.
discretion of the Court. Its order affirming the municipal court's order of dismissal is void for lack of motion. This appeal
shall be treated as a direct appeal from the municipal court to this Court. (See People vs. Del
SEC. 4. — Repealing Provisions. — All administrative orders or parts thereof Rosario, 97 Phil. 67).
inconsistent with the provisions of this Administrative Order are hereby
revoked. In this appeal, the prosecution argues that Administrative Orders Nos. 84 and 84-1 were not
issued under section 11 of the Fisheries Law which, as indicated above, punishes fishing by
SEC. 5. — Effectivity. — This Administrative Order shall take effect six (60) means of an obnoxious or poisonous substance. This contention is not well-taken because, as
days after its publication in the Office Gazette. already stated, the Penal provision of Administrative Order No. 84 implies that electro fishing
is penalized as a form of fishing by means of an obnoxious or poisonous substance under
section 11.
On June 28, 1967 the Secretary of Agriculture and Natural Resources, upon the
recommendation of the Fisheries Commission, issued Fisheries Administrative Order No. 84-
1, amending section 2 of Administrative Order No. 84, by restricting the ban against electro The prosecution cites as the legal sanctions for the prohibition against electro fishing in fresh
fishing to fresh water fisheries (63 O.G. 9963). water fisheries (1) the rule-making power of the Department Secretary under section 4 of the
Fisheries Law; (2) the function of the Commissioner of Fisheries to enforce the provisions of
the Fisheries Law and the regulations Promulgated thereunder and to execute the rules and
Thus, the phrase "in any portion of the Philippine waters" found in section 2, was changed by
regulations consistent with the purpose for the creation of the Fisheries Commission and for
the amendatory order to read as follows: "in fresh water fisheries in the Philippines, such as
the development of fisheries (Sec. 4[c] and [h] Republic Act No. 3512; (3) the declared national
rivers, lakes, swamps, dams, irrigation canals and other bodies of fresh water."
policy to encourage, Promote and conserve our fishing resources (Sec. 1, Republic Act No.
3512), and (4) section 83 of the Fisheries Law which provides that "any other violation of" the
The Court of First Instance and the prosecution (p. 11 of brief) assumed that electro fishing is Fisheries Law or of any rules and regulations promulgated thereunder "shall subject the
punishable under section 83 of the Fisheries Law (not under section 76 thereof), which provides offender to a fine of not more than two hundred pesos, or imprisonment for not more than six
that any other violation of that law "or of any rules and regulations promulgated thereunder months, or both, in the discretion of the court."
shall subject the offender to a fine of not more than two hundred pesos (P200), or in t for not
more than six months, or both, in the discretion of the court."
As already pointed out above, the prosecution's reference to section 83 is out of place because
the penalty for electro fishing under Administrative order No. 84 is not the same as the penalty
That assumption is incorrect because 3 of the aforequoted Administrative Order No. 84 fixed in section 83.
imposes a fm of not exceeding P500 on a person engaged in electro fishing, which amount the
83. It seems that the Department of Fisheries prescribed their own penalty for swift fishing
We are of the opinion that the Secretary of Agriculture and Natural Resources and the
which penalty is less than the severe penalty imposed in section 76 and which is not Identified
Commissioner of Fisheries exceeded their authority in issuing Fisheries Administrative Orders
to the at penalty imposed in section 83.
Nos. 84 and 84-1 and that those orders are not warranted under the Fisheries Commission,
Republic Act No. 3512.
Had Administrative Order No. 84 adopted the fighter penalty prescribed in on 83, then the crime
of electro fishing would be within the exclusive original jurisdiction of the inferior court (Sec. 44
The reason is that the Fisheries Law does not expressly prohibit electro fishing. As electro
[f], Judiciary Law; People vs. Ragasi, L-28663, September 22,
fishing is not banned under that law, the Secretary of Agriculture and Natural Resources and
the Commissioner of Fisheries are powerless to penalize it. In other words, Administrative
We have discussed this pre point, not raised in the briefs, because it is obvious that the crime Orders Nos. 84 and 84-1, in penalizing electro fishing, are devoid of any legal basis.
of electro fishing which is punishable with a sum up to P500, falls within the concurrent original
jurisdiction of the inferior courts and the Court of First instance (People vs. Nazareno, L-40037,
Had the lawmaking body intended to punish electro fishing, a penal provision to that effect
April 30, 1976, 70 SCRA 531 and the cases cited therein).
could have been easily embodied in the old Fisheries Law.
57 | C O N S T I 1
That law punishes (1) the use of obnoxious or poisonous substance, or explosive in fishing; (2) Note that the definition of electro fishing, which is found in section 1 (c) of Fisheries
unlawful fishing in deepsea fisheries; (3) unlawful taking of marine molusca, (4) illegal taking Administrative Order No. 84 and which is not provided for the old Fisheries Law, is now found
of sponges; (5) failure of licensed fishermen to report the kind and quantity of fish caught, and in section 3(d) of the decree. Note further that the decree penalty electro fishing by
(6) other violations. "imprisonment from two (2) to four (4) years", a punishment which is more severe than the
penalty of a time of not excluding P500 or imprisonment of not more than six months or both
Nowhere in that law is electro fishing specifically punished. Administrative Order No. 84, in fixed in section 3 of Fisheries Administrative Order No. 84.
punishing electro fishing, does not contemplate that such an offense fails within the category
of "other violations" because, as already shown, the penalty for electro fishing is the penalty An examination of the rule-making power of executive officials and administrative agencies
next lower to the penalty for fishing with the use of obnoxious or poisonous substances, fixed and, in particular, of the Secretary of Agriculture and Natural Resources (now Secretary of
in section 76, and is not the same as the penalty for "other violations" of the law and regulations Natural Resources) under the Fisheries Law sustains the view that he ex his authority in
fixed in section 83 of the Fisheries Law. penalizing electro fishing by means of an administrative order.

The lawmaking body cannot delegate to an executive official the power to declare what acts Administrative agent are clothed with rule-making powers because the lawmaking body finds
should constitute an offense. It can authorize the issuance of regulations and the imposition of it impracticable, if not impossible, to anticipate and provide for the multifarious and complex
the penalty provided for in the law itself. (People vs. Exconde 101 Phil. 11 25, citing 11 Am. situations that may be encountered in enforcing the law. All that is required is that the regulation
Jur. 965 on p. 11 32). should be germane to the defects and purposes of the law and that it should conform to the
standards that the law prescribes (People vs. Exconde 101 Phil. 1125; Director of Forestry vs.
Originally, Administrative Order No. 84 punished electro fishing in all waters. Later, the ban Muñ;oz, L-24796, June 28, 1968, 23 SCRA 1183, 1198; Geukeko vs. Araneta, 102 Phil. 706,
against electro fishing was confined to fresh water fisheries. The amendment created the 712).
impression that electro fishing is not condemnable per se. It could be tolerated in marine
waters. That circumstances strengthens the view that the old law does not eschew all forms of The lawmaking body cannot possibly provide for all the details in the enforcement of a particular
electro fishing. statute (U.S. vs. Tupasi Molina, 29 Phil. 119, 125, citing U.S. vs. Grimaud 220 U.S. 506;
Interprovincial Autobus Co., Inc. vs. Coll. of Internal Revenue, 98 Phil. 290, 295-6).
However, at present, there is no more doubt that electro fishing is punishable under the
Fisheries Law and that it cannot be penalized merely by executive revolution because The grant of the rule-making power to administrative agencies is a relaxation of the principle of
Presidential Decree No. 704, which is a revision and consolidation of all laws and decrees separation of powers and is an exception to the nondeleption of legislative, powers.
affecting fishing and fisheries and which was promulgated on May 16, 1975 (71 O.G. 4269), Administrative regulations or "subordinate legislation calculated to promote the public interest
expressly punishes electro fishing in fresh water and salt water areas. are necessary because of "the growing complexity of modem life, the multiplication of the
subjects of governmental regulations, and the increased difficulty of administering the law"
That decree provides: ñé+.£ªwph!1 Calalang vs. Williams, 70 Phil. 726; People vs. Rosenthal and Osmeñ;a, 68 Phil. 328).

SEC. 33. — Illegal fishing, dealing in illegally caught fish or fishery/aquatic Administrative regulations adopted under legislative authority by a particular department must
products. — It shall he unlawful for any person to catch, take or gather or cause be in harmony with the provisions of the law, and should be for the sole purpose of carrying
to be caught, taken or gathered fish or fishery/aquatic products in Philippine into effect its general provisions. By such regulations, of course, the law itself cannot be
waters with the use of explosives, obnoxious or poisonous substance, or by extended. (U.S. vs. Tupasi Molina, supra). An administrative agency cannot amend an act of
the use of electricity as defined in paragraphs (1), (m) and (d), respectively, of Congress (Santos vs. Estenzo, 109 Phil. 419, 422; Teoxon vs. Members of the d of
Section 3 hereof: ... Administrators, L-25619, June 30, 1970, 33 SCRA 585; Manuel vs. General Auditing Office, L-
28952, December 29, 1971, 42 SCRA 660; Deluao vs. Casteel, L-21906, August 29, 1969, 29
SCRA 350).
The decree Act No. 4003, as amended, Republic Acts Nos. 428, 3048, 3512 and 3586,
Presidential Decrees Nos. 43, 534 and 553, and all , Acts, Executive Orders, rules and
regulations or parts thereof inconsistent with it (Sec. 49, P. D. No. 704). The rule-making power must be confined to details for regulating the mode or proceeding to
carry into effect the law as it his been enacted. The power cannot be extended to amending or
expanding the statutory requirements or to embrace matters not covered by the statute. Rules
The inclusion in that decree of provisions defining and penalizing electro fishing is a clear
that subvert the statute cannot be sanctioned. (University of Santo Tomas vs. Board of Tax A
recognition of the deficiency or silence on that point of the old Fisheries Law. It is an admission
93 Phil. 376, 382, citing 12 C.J. 845-46. As to invalid regulations, see of Internal Revenue vs.
that a mere executive regulation is not legally adequate to penalize electro fishing.
58 | C O N S T I 1
Villaflor 69 Phil. 319, Wise & Co. vs. Meer, 78 Phil. 655, 676; Del March vs. Phil. Veterans the law are oftentimes left to the administrative agency entrusted with its enforcement. In this
Administrative, L-27299, June 27, 1973, 51 SCRA 340, 349). sense, it has been said that rules and regulations are the product of a delegated power to
create new or additional legal provisions that have the effect of law." The rule or regulation
There is no question that the Secretary of Agriculture and Natural Resources has rule-making should be within the scope of the statutory authority granted by the legislature to the
powers. Section 4 of the Fisheries law provides that the Secretary "shall from time to time issue administrative agency. (Davis, Administrative Law, p. 194, 197, cited in Victories Milling Co.,
instructions, orders, and regulations consistent" with that law, "as may be and proper to carry Inc. vs. Social Security Commission, 114 Phil. 555, 558).
into effect the provisions thereof." That power is now vested in the Secretary of Natural
Resources by on 7 of the Revised Fisheries law, Presidential December No. 704. In case of discrepancy between the basic law and a rule or regulation issued to implement said
law, the basic law prevails because said rule or regulation cannot go beyond the terms and
Section 4(h) of Republic Act No. 3512 empower the Co of Fisheries "to prepare and execute provisions of the basic law (People vs. Lim, 108 Phil. 1091).
upon the approval of the Secretary of Agriculture and Natural Resources, forms instructions,
rules and regulations consistent with the purpose" of that enactment "and for the development This Court in its decision in the Lim case, supra, promulgated on July 26, 1960, called the
of fisheries." attention of technical men in the executive departments, who draft rules and regulations, to the
importance and necessity of closely following the legal provisions which they intend to
Section 79(B) of the Revised Administrative Code provides that "the Department Head shall implement so as to avoid any possible misunderstanding or confusion.
have the power to promulgate, whenever he may see fit do so, all rules, regulates, orders,
memorandums, and other instructions, not contrary to law, to regulate the proper working and The rule is that the violation of a regulation prescribed by an executive officer of the government
harmonious and efficient administration of each and all of the offices and dependencies of his in conformity with and based upon a statute authorizing such regulation constitutes an offense
Department, and for the strict enforcement and proper execution of the laws relative to matters and renders the offender liable to punishment in accordance with the provisions of the law (U.S.
under the jurisdiction of said Department; but none of said rules or orders shall prescribe vs. Tupasi Molina, 29 Phil. 119, 124).
penalties for the violation thereof, except as expressly authorized by law."
In other words, a violation or infringement of a rule or regulation validly issued can constitute a
Administrative regulations issued by a Department Head in conformity with law have the force crime punishable as provided in the authorizing statute and by virtue of the latter (People vs.
of law (Valerie vs. Secretary of culture and Natural Resources, 117 Phil. 729, 733; Antique Exconde 101 Phil. 1125, 1132).
Sawmills, Inc. vs. Zayco, L- 20051, May 30, 1966, 17 SCRA 316). As he exercises the rule-
making power by delegation of the lawmaking body, it is a requisite that he should not It has been held that "to declare what shall constitute a crime and how it shall be punished is a
transcend the bound demarcated by the statute for the exercise of that power; otherwise, he power vested exclusively in the legislature, and it may not be delegated to any other body or
would be improperly exercising legislative power in his own right and not as a surrogate of the agency" (1 Am. Jur. 2nd, sec. 127, p. 938; Texas Co. vs. Montgomery, 73 F. Supp. 527).
lawmaking body.
In the instant case the regulation penalizing electro fishing is not strictly in accordance with the
Article 7 of the Civil Code embodies the basic principle that administrative or executive acts, Fisheries Law, under which the regulation was issued, because the law itself does not
orders and regulations shall be valid only when they are not contrary to the laws or the expressly punish electro fishing.
Constitution."
The instant case is similar to People vs. Santos, 63 Phil. 300. The Santos case involves section
As noted by Justice Fernando, "except for constitutional officials who can trace their 28 of Fish and Game Administrative Order No. 2 issued by the Secretary of Agriculture and
competence to act to the fundamental law itself, a public office must be in the statute relied Natural Resources pursuant to the aforementioned section 4 of the Fisheries Law.
upon a grant of power before he can exercise it." "department zeal may not be permitted to
outrun the authority conferred by statute." (Radio Communications of the Philippines, Inc. vs. Section 28 contains the proviso that a fishing boat not licensed under the Fisheries Law and
Santiago, L-29236, August 21, 1974, 58 SCRA 493, 496-8). under the said administrative order may fish within three kilometers of the shoreline of islands
and reservations over which jurisdiction is exercised by naval and military reservations
"Rules and regulations when promulgated in pursuance of the procedure or authority conferred authorities of the United States only upon receiving written permission therefor, which
upon the administrative agency by law, partake of the nature of a statute, and compliance permission may be granted by the Secretary upon recommendation of the military or naval
therewith may be enforced by a penal sanction provided in the law. This is so because statutes authorities concerned. A violation of the proviso may be proceeded against under section 45
are usually couched in general terms, after expressing the policy, purposes, objectives, of the Federal Penal Code.
remedies and sanctions intended by the legislature. The details and the manner of carrying out
59 | C O N S T I 1
Augusto A. Santos was prosecuted under that provision in the Court of First Instance of Cavite animals. For that act, he was charged with a violation of the rule Promulgated by the State
for having caused his two fishing boats to fish, loiter and anchor without permission from the Game Commission.
Secretary within three kilometers from the shoreline of Corrigidor Island.
It was held that there was no statute penalizing the display of game. What the statute penalized
This Court held that the Fisheries Law does not prohibit boats not subject to license from fishing was the taking of game. If the lawmaking body desired to prohibit the display of game, it could
within three kilometers of the shoreline of islands and reservations over which jurisdiction is have readily said so. It was not lawful for the administrative board to extend or modify the
exercised by naval and military authorities of the United States, without permission from the statute. Hence, the indictment against Miles was quashed. The Miles case is similar to this
Secretary of Agriculture and Natural Resources upon recommendation of the military and naval case.
authorities concerned.
WHEREFORE, the lower court's decision of June 9, 1970 is set aside for lack of appellate
As the said law does not penalize the act mentioned in section 28 of the administrative order, jurisdiction and the order of dismissal rendered by the municipal court of Sta. Cruz, Laguna in
the promulgation of that provision by the Secretary "is equivalent to legislating on the matter, a Criminal Case No. 5429 is affirmed. Costs de oficio.
power which has not been and cannot be delegated to him, it being expressly reserved" to the
lawmaking body. "Such an act constitutes not only an excess of the regulatory power conferred SO ORDERED.
upon the Secretary but also an exercise of a legislative power which he does not have, and
therefore" the said provision "is null and void and without effect". Hence, the charge against
Santos was dismiss.

A penal statute is strictly construed. While an administrative agency has the right to make ranks
and regulations to carry into effect a law already enacted, that power should not be confused
with the power to enact a criminal statute. An administrative agency can have only the
administrative or policing powers expressly or by necessary implication conferred upon it.
(Glustrom vs. State, 206 Ga. 734, 58 Second 2d 534; See 2 Am. Jr. 2nd 129-130).

Where the legislature has delegated to executive or administrative officers and boards authority
to promulgate rules to carry out an express legislative purpose, the rules of administrative
officers and boards, which have the effect of extending, or which conflict with the authority
granting statute, do not represent a valid precise of the rule-making power but constitute an
attempt by an administrative body to legislate (State vs. Miles, Wash. 2nd 322, 105 Pac. 2nd
51).

In a prosecution for a violation of an administrative order, it must clearly appear that the order
is one which falls within the scope of the authority conferred upon the administrative body, and
the order will be scrutinized with special care. (State vs. Miles supra).

The Miles case involved a statute which authorized the State Game Commission "to adopt,
promulgate, amend and/or repeal, and enforce reasonable rules and regulations governing
and/or prohibiting the taking of the various classes of game.

Under that statute, the Game Commission promulgated a rule that "it shall be unlawful to offer,
pay or receive any reward, prize or compensation for the hunting, pursuing, taking, killing
or displaying of any game animal, game bird or game fish or any part thereof."

Beryl S. Miles, the owner of a sporting goods store, regularly offered a ten-down cash prize to
the person displaying the largest deer in his store during the open for hunting such game
60 | C O N S T I 1
G.R. No. 82849 August 2, 1989 WHICH MAY BE ISSUED BY WAY OF LEGISLATION, DECREE OR
PRESIDENT
CEBU OXYGEN & ACETYLENE CO., INC. (COACO) petitioner,
vs. 2) For the second year which will be paid on January 16, 1987-P 200 to each
SECRETARY FRANKLIN M. DRILON OF THE DEPARTMENT OF LABOR AND covered employee.
EMPLOYMENT, ASSISTANT REGIONAL DIRECTOR CANDIDO CUMBA OF THE
DEPARTMENT OF LABOR AND EMPLOYMENT, REGIONAL OFFICE NO. 7 AND CEBU IT IS HEREBY EXPRESSLY AGREED AND UNDERSTOOD THAT THIS PAY
OXYGEN-ACETYLENE & CENTRAL VISAYAS EMPLOYEES ASSOCIATION INCREASE SHALL BE CREDITED AS PAYMENT TO ANY DATED
(COACVEA) respondents. GOVERNMENT WAGE ADJUSTMENT OR ALLOWANCE INCREASES
WHICH MAY BE ISSUED BY WAY OF LEGISLATION, DECREE OR
Michael L. Rama for petitioner. PRESIDENTIAL EDICT COUNTED FROM THE ABOVE DATE TO THE NEXT
INCREASE.
Armando M. Alforque for private respondent.
3) For the third year which will be paid on January 16, 1988 — P300 to each
covered employee.

GANCAYCO, J.; IT IS HEREBY EXPRESSLY AGREED AND UNDERSTOOD THAT THIS PAY
INCREASE SHALL BE CREDITED AS PAYMENT TO ANY MANDATED
GOVERNMENT WAGE ADJUSTMENT OR ALLOWANCE INCREASES
The principal issue raised in this petition is whether or not an Implementing Order of the
WHICH MAY BE ISSUED BY WAY OF LEGISLATION, DECREE OR
Secretary of Labor and Employment (DOLE) can provide for a prohibition not contemplated by
PRESIDENTIAL EDICT COUNTED FROM THE ABOVE DATE TO THE NEXT
the law it seeks to implement.
INCREASE.
The undisputed facts are as follows:
IF THE WAGE ADJUSTMENT OF ALLOWANCE INCREASES DECREED BY
LAW, LEGISLATION OR PRESIDENTIAL qqqEDICT IN ANY PARTICULAR
Petitioner and the union of its rank and file employees, Cebu Oxygen, Acetylene and Central YEAR SHALL BE HIGHER THAN THE FOREGOING INCREASES IN THAT
Visayas Employees Association (COAVEA) entered into a collective bargaining agreement PARTICULAR YEAR, THEN THE COMPANY SHALL PAY THE
(CBA) covering the years 1986 to 1988. Pursuant thereto, the management gave salary DIFFERENCE.
increases as follows:
On December 14, 1987, Republic Act No. 6640 was passed increasing the minimum wage, as
ARTICLE IV — SALARIES/RICE RATION follows:

Section 1. The COMPANY agrees that for and during the three (3) year Sec. 2. The statutory minimum wage rates of workers and employees in the
effectivity of this AGREEMENT, it will grant to all regular covered employees private sector, whether agricultural or non-agricultural, shall be increased by
the following salary increases: ten pesos (P10.00) per day, except non-agricultural workers and employees
outside Metro Manila who shall receive an increase of eleven pesos (P11.00)
Salaries: per day: Provided, that those already receiving above the minimum wage up
to one hundred pesos (Pl 00.00 shall receive an increase of ten pesos (Pl 0.00)
1) For the first year which will be paid on January 14, 1986 — P200 to each per day. Excepted from the provisions of this Act are domestic helpers and
covered employee. persons employed in the personal service of another.

IT IS HEREBY EXPRESSLY AGREED AND UNDERSTOOD THAT THIS PAY The Secretary of Labor issued the pertinent rules implementing the provisions of Republic Act
INCREASE SHALL BE CREDITED AS PAYMENT TO ANY MANDATED No. 6640. Section 8 thereof provides:
GOVERNMENT WAGE ADJUSTMENT OR ALLOWANCE INCREASES

61 | C O N S T I 1
Section 8. Wage Increase Under Individual/Collective Agreements. — No = P400 x 208 employees (who are not receiving above P100/day as wages
wage increase shall be credited as compliance with the increase prescribed before the effectivity of R.A. No. 6640)
herein unless expressly provided under valid individual written/collective
agreements; and, provided further, that such wage increase was granted in =P 83,200.00
anticipation of the legislated wage increase under the act. Such increases shall
not include anniversary wage increases provided on collective agreements. b) 13th month pay differentials of the year 1987:

In sum, Section 8 of the implementing rules prohibits the employer from crediting anniversary = P231.00 x 208 employees (who are not receiving above P100/day as wages
wage increases negotiated under a collective bargaining agreement against such wage before the effectivity of RA. No. 6640)
increases mandated by Republic Act No. 6640.
=P48,048.00
Accordingly, petitioner credited the first year increase of P200.00 under the CBA and added
the difference of P61.66 (rounded to P62.00) and P31.00 to the monthly salary and the 13th
month pay, respectively, of its employees from the effectivity of Republic Act No. 6640 on Total = P131,248.00
December 14,1987 to February 15, 1988.
In sum, the Assistant Regional Director ordered petitioner to pay the deficiency of P200.00 in
On February 22, 1988, a Labor and Employment Development Officer, pursuant to Inspection the monthly salary and P 231.00 in the 13th month pay of its employees for the period stated.
Authority No. 058-88, commenced a routine inspection of petitioner's establishment. Upon Petitioner protested the Order of the Regional Director on the ground that the anniversary wage
completion of the inspection on March 10, 1988, and based on payrolls and other records, he increases under the CBA can be credited against the wage increase mandated by Republic
found that petitioner committed violations of the law as follows: Act No. 6640. Hence, petitioner contended that inasmuch as it had credited the first year
increase negotiated under the CBA, it was liable only for a salary differential of P 62.00 and a
13th month pay differential of P31.00. Petitioner argued that the payment of the differentials
1. Under payment of Basic Wage per R.A. No. 6640 covering the period of two constitutes full compliance with Republic Act No. 6640. Apparently, the protest was not
(2) months representing 208 employees who are not receiving wages above entertained. Petitioner brought the case immediately to this Court without appealing the matter
P100/day prior to the effectivity of R.A. No. 6640 in the aggregate amount of to the Secretary of Labor and Employment. On May 9,1988, this Court issued a temporary
EIGHTY THREE THOUSAND AND TWO HUNDRED PESOS (P83,200.00); restraining order enjoining the Assistant Regional Director from enforcing his Order dated April
and 7, 1988.1The thrust of the argument of petitioner is that Section 8 of the rules implementing the
provisions of Republic Act No. 6640 particularly the provision excluding anniversary wage
2. Under payment of 13th month pay for the year 1987, representing 208 increases from being credited to the wage increase provided by said law is null and void on the
employees who are not receiving wages above P 100/day prior to the ground that the same unduly expands the provisions of the said law.
effectivity of R.A. No. 6640 in the aggregate amount of FORTY EIGHT
THOUSAND AND FORTY EIGHT PESOS (P48,048.00). This petition is impressed with merit.

On April 7, 1988, respondent Assistant Regional Director, issued an Order instructing petitioner Public respondents aver that petitioner should have first appealed to the Secretary of Labor
to pay its 208 employees the aggregate amount of P 131,248.00, computed as follows: before going to court. It is fundamental that in a case where only pure questions of law are
raised, the doctrine of exhaustion of administrative remedies cannot apply because issues of
Computation sheet of differentials due to COACO-Cebu Workers. law cannot be resolved with finality by the administrative officer. Appeal to the administrative
officer of orders involving questions of law would be an exercise in futility since administrative
Salary Differentials: officers cannot decide such issues with finality. 2 The questions raised in this petition are
questions of law. Hence, the failure to exhaust administrative remedies cannot be considered
a) From December 14/87 to February 15/88 fatal to this petition.

= P200.00/mo x 2 months As to the issue of the validity of Section 8 of the rules implementing Republic Act No. 6640,
which prohibits the employer from crediting the anniversary wage increases provided in
collective bargaining agreements, it is a fundamental rule that implementing rules cannot add
= P400.00
or detract from the provisions of law it is designed to implement. The provisions of Republic
62 | C O N S T I 1
Act No. 6640, do not prohibit the crediting of CBA anniversary wage increases for purposes of
compliance with Republic Act No. 6640. The implementing rules cannot provide for such a
prohibition not contemplated by the law. Administrative regulations adopted under legislative
authority by a particular department must be in harmony with the provisions of the law, and
should be for the sole purpose of carrying into effect its general provisions. The law itself cannot
be expanded by such regulations. An administrative agency cannot amend an act of
Congress. 3 Thus petitioner's contention that the salary increases granted by it pursuant to the
existing CBA including anniversary wage increases should be considered in determining
compliance with the wage increase mandated by Republic Act No. 6640, is correct. However,
the amount that should only be credited to petitioner is the wage increase for 1987 under the
CBA when the law took effect. The wage increase for 1986 had already accrued in favor of the
employees even before the said law was enacted.

Petitioner therefor correctly credited its employees P62.00 for the differential of two (2) months
increase and P31.00 each for the differential in 13th month pay, after deducting the P200.00
anniversary wage increase for 1987 under the CBA. Indeed, it is stipulated in the CBA that in
case any wage adjustment or allowance increase decreed by law, legislation or presidential
edict in any particular year shall be higher than the foregoing increase in that particular year,
then the company (petitioner) shall pay the difference.

WHEREFORE, the petition is hereby GRANTED. The Order of the respondent Assistant
Regional Director dated April 7, 1988 is modified in that petitioner is directed to pay its 208
employees so entitled the amount of P62.00 each as salary differential for two (2) months and
P31.00 as 13th month pay differential in full compliance with the provisions of Republic Act No.
6640. Section 8 of the rules implementing Republic 6640, is hereby declared null and void in
so far as it excludes the anniversary wage increases negotiated under collective bargaining
agreements from being credited to the wage increase provided for under Republic Act No.
6440. This decision is immediately executory.

SO ORDERED.

63 | C O N S T I 1
G.R. Nos. 177857-58 January 24, 2012 The original complaint, CC No. 0033, as later amended to make the allegations more specific,
is described in Republic v. Sandiganbayan2 (one of several ill-gotten suits of the same title
PHILIPPINE COCONUT, PRODUCERS FEDERATION, INC. (COCOFED), MANUEL V. DEL disposed of by the Court) as revolving around the provisional take over by the PCGG of
ROSARIO, DOMINGO P. ESPINA, SALVADOR P. BALLARES, JOSELITO A. MORALEDA, COCOFED, Cocomark, and Coconut Investment Company and their assets and the
PAZ M. YASON, VICENTE A. CADIZ, CESARIA DE LUNA TITULAR, and RAYMUNDO C. sequestration of shares of stock in United Coconut Planters Bank (UCPB) allegedly owned by,
DE VILLA, Petitioners, among others, over a million coconut farmers, and the six (6) Coconut Industry Investment
vs. Fund (CIIF) corporations,3 referred to in some pleadings as CIIF oil mills and the fourteen (14)
REPUBLIC OF THE PHILIPPINES, Respondent, CIIF holding companies4(hereafter collectively called "CIIF companies"), so-called for having
WIGBERTO E. TAÑADA, OSCAR F. SANTOS, SURIGAO DEL SUR FEDERATION OF been either organized, acquired and/or funded as UCPB subsidiaries with the use of the CIIF
AGRICULTURAL COOPERATIVES (SUFAC) and MORO FARMERS ASSOCIATION OF levy. The basic complaint also contained allegations about the alleged misuse of the coconut
ZAMBOANGA DEL SUR (MOFAZS), represented by ROMEO C. levy funds to buy out the majority of the outstanding shares of stock of San Miguel Corporation
ROYANDOYAN, Intervenors. (SMC).

x - - - - - - - - - - - - - - - - - - - - - - -x More particularly, in G.R. Nos. 177857-58, class action petitioners COCOFED and a group of
purported coconut farmers and COCOFED members (hereinafter "COCOFED et al."
G.R. No. 178193 collectively)5 seek the reversal of the following judgments and resolutions of the anti-graft court
insofar as these issuances are adverse to their interests:
DANILO S. URSUA, Petitioner,
1) Partial Summary Judgment6 dated July 11, 2003, as reiterated in a resolution 7 of
vs.
December 28, 2004, denying COCOFED’s motion for reconsideration, and the May
REPUBLIC OF THE PHILIPPINES, Respondent,
11, 2007 resolution denying COCOFED’s motion to set case for trial and declaring the
partial summary judgment final and appealable, 8 all issued in Civil Case No. 0033-A;
DECISION and

VELASCO, JR., J.: 2) Partial Summary Judgment9 dated May 7, 2004, as also reiterated in a resolution 10 of
December 28, 2004, and the May 11, 2007 resolution11 issued in Civil Case No. 0033-
The Case F. The December 28, 2004 resolution denied COCOFED’s Class Action Omnibus
Motion therein praying to dismiss CC Case No. 0033-F on jurisdictional ground and
Cast against a similar backdrop, these consolidated petitions for review under Rule 45 of the alternatively, reconsideration and to set case for trial. The May 11, 2007 resolution
Rules of Court assail and seek to annul certain issuances of the Sandiganbayan in its Civil declared the judgment final and appealable.
Case No. 0033-A entitled, "Republic of the Philippines, Plaintiff, v. Eduardo M. Cojuangco, Jr.,
et al., Defendants, COCOFED, et al., BALLARES, et al., Class Action Movants," and Civil Case For convenience, the partial summary judgment (PSJ) rendered on July 11, 2003 in CC No.
No. 0033-F entitled, "Republic of the Philippines, Plaintiff, v. Eduardo M. Cojuangco, Jr., et al., 0033-A shall hereinafter be referred to as PSJ-A, and that issued on May 7, 2004 in CC 0033-
Defendants." Civil Case (CC) Nos. 0033-A and 0033-F are the results of the splitting into eight F, as PSJ-F. PSJ-A and PSJ-F basically granted the Republic’s separate motions for summary
(8) amended complaints of CC No. 0033 entitled, "Republic of the Philippines v. Eduardo judgment.
Cojuangco, Jr., et al.," a suit for recovery of ill-gotten wealth commenced by the Presidential
Commission on Good Government (PCGG), for the Republic of the Philippines (Republic), On June 5, 2007, the court a quo issued a Resolution in CC No. 0033-A, which modified PSJ-
against Ferdinand E. Marcos and several individuals, among them, Ma. Clara Lobregat A by ruling that no further trial is needed on the issue of ownership of the subject properties.
(Lobregat) and petitioner Danilo S. Ursua (Ursua). Lobregat and Ursua occupied, at one time Likewise, on May 11, 2007, the said court issued a Resolution in CC No. 0033-F amending
or another, directorial or top management positions in either the Philippine Coconut Producers PSJ-F in like manner.
Federation, Inc. (COCOFED) or the Philippine Coconut Authority (PCA), or both. 1 Each of the
eight (8) subdivided complaints correspondingly impleaded as defendants only the alleged
On the other hand, petitioner Ursua, in G.R. No. 178193, limits his petition for review on PSJ-
participants in the transaction/s subject of the suit, or who are averred as owner/s of the assets
A to the extent that it negates his claims over shares of stock in UCPB.
involved.

Tañada, et al. have intervened12 in G.R. Nos. 177857-58 in support of the government’s case.
64 | C O N S T I 1
Another petition was filed and docketed as G.R. No. 180705. It involves questions relating to It is hereby declared that the policy of the State is to provide readily available
Eduardo M. Cojuangco, Jr.’s (Cojuangco, Jr.’s) ownership of the UCPB shares, which he credit facilities to the coconut farmers at a preferential rates; that this policy
allegedly received as option shares, and which is one of the issues raised in PSJ-A.13 G.R. No. can be expeditiously and efficiently realized by the implementation of the
180705 was consolidated with G.R. Nos. 177857-58 and 178193. On September 28, 2011, "Agreement for the Acquisition of a Commercial Bank for the benefit of
respondent Republic filed a Motion to Resolve G.R. Nos. 177857-58 and 178193.14 On January Coconut Farmers" executed by the [PCA]…; and that the [PCA] is hereby
17, 2012, the Court issued a Resolution deconsolidating G.R. Nos. 177857-58 and 178193 authorized to distribute, for free, the shares of stock of the bank it acquired to
from G.R. No. 180705. This Decision is therefore separate and distinct from the decision to be the coconut farmers….
rendered in G.R. No. 180705.
Towards achieving the policy thus declared, P.D. No. 755, under its Section 2,
The Facts authorized PCA to utilize the CCSF and the CIDF collections to acquire a
commercial bank and deposit the CCSF levy collections in said bank,
The relevant facts, as culled from the records and as gathered from Decisions of the Court in interest free, the deposit withdrawable only when the bank has attained a
a batch of coco levy and illegal wealth cases, are: certain level of sufficiency in its equity capital. The same section also decreed
that all levies PCA is authorized to collect shall not be considered as special
and/or fiduciary funds or form part of the general funds of the government
In 1971, Republic Act No. (R.A.) 6260 was enacted creating the Coconut Investment Company
(CIC) to administer the Coconut Investment Fund (CIF), which, under Section 8 15 thereof, was within the contemplation of P.D. No. 711.23
to be sourced from a PhP 0.55 levy on the sale of every 100 kg. of copra. Of the PhP 0.55 levy
of which the copra seller was, or ought to be, issued COCOFUND receipts, PhP 0.02 was 4. P.D. No. 961 codified the various laws relating to the development of coconut/palm
placed at the disposition of COCOFED, the national association of coconut producers declared oil industries.
by the Philippine Coconut Administration (PHILCOA, now PCA16 ) as having the largest
membership.17 5. The relevant provisions of P.D. No. 961, as later amended by P.D. No. 1468
(Revised Coconut Industry Code), read:
The declaration of martial law in September 1972 saw the issuance of several presidential
decrees ("P.Ds.") purportedly designed to improve the coconut industry through the collection ARTICLE III
and use of the coconut levy fund. While coming generally from impositions on the first sale of Levies
copra, the coconut levy fund came under various names, the different establishing laws and
the stated ostensible purpose for the exaction explaining the differing denominations. Charged Section 1. Coconut Consumers Stabilization Fund Levy. — The [PCA] is hereby empowered
with the duty of collecting and administering the Fund was PCA. 18 Like COCOFED with which to impose and collect … the Coconut Consumers Stabilization Fund Levy ….
it had a legal linkage,19 the PCA, by statutory provisions scattered in different coco levy
decrees, had its share of the coco levy.20
….

The following were some of the issuances on the coco levy, its collection and utilization, how Section 5. Exemption. — The [CCSF] and the [CIDF] as well as all disbursements as herein
the proceeds of the levy will be managed and by whom, and the purpose it was supposed to authorized, shall not be construed … as special and/or fiduciary funds, or as part of the
serve: general funds of the national government within the contemplation of PD 711; … the
intention being that said Fund and the disbursements thereof as herein authorized for
1. P.D. No. 276 established the Coconut Consumers Stabilization Fund (CCSF) and the benefit of the coconut farmers shall be owned by them in their private capacities: ….
declared the proceeds of the CCSF levy as trust fund, 21 to be utilized to subsidize the (Emphasis supplied.)
sale of coconut-based products, thus stabilizing the price of edible oil. 22
6. Letter of Instructions No. (LOI) 926, Series of 1979, made reference to the creation, out of
2. P.D. No. 582 created the Coconut Industry Development Fund (CIDF) to finance the other coco levy funds, of the Coconut Industry Investment Fund (CIIF) in P.D. No. 1468 and
operation of a hybrid coconut seed farm. entrusted a portion of the CIIF levy to UCPB for investment, on behalf of coconut farmers, in
oil mills and other private corporations, with the following equity ownership structure: 24
3. Then came P.D. No. 755 providing under its Section 1 the following:
Section 2. Organization of the Cooperative Endeavor. – The [UCPB], in its capacity as the
investment arm of the coconut farmers thru the [CIIF] … is hereby directed to invest, on behalf
65 | C O N S T I 1
of the coconut farmers, such portion of the CIIF … in private corporations … under the following As found by the Sandiganbayan, the PCA appropriated, out of its own fund, an amount for the
guidelines: purchase of the said 72.2% equity, albeit it would later reimburse itself from the coconut levy
fund.34
a) The coconut farmers shall own or control at least … (50%) of the outstanding voting capital
stock of the private corporation [acquired] thru the CIIF and/or corporation owned or controlled As of June 30, 1975, the list of FUB stockholders shows PCA with 129,955 shares. 35
by the farmers thru the CIIF …. (Words in bracket added.)
Shortly after the execution of the PCA – Cojuangco, Jr. Agreement, President Marcos issued,
Through the years, a part of the coconut levy funds went directly or indirectly to various projects on July 29, 1975, P.D. No. 755 directing, as earlier narrated, PCA to use the CCSF and CIDF
and/or was converted into different assets or investments.25 Of particular relevance to this case to acquire a commercial bank to provide coco farmers with "readily available credit facilities at
was their use to acquire the First United Bank (FUB), later renamed UCPB, and the preferential rate," and PCA "to distribute, for free," the bank shares to coconut farmers.
acquisition by UCPB, through the CIIF companies, of a large block of SMC shares. 26
Then came the 1986 EDSA event. One of the priorities of then President Corazon C. Aquino’s
Apropos the intended acquisition of a commercial bank for the purpose stated earlier, it would revolutionary government was the recovery of ill-gotten wealth reportedly amassed by the
appear that FUB was the bank of choice which the Pedro Cojuangco group (collectively, "Pedro Marcos family and close relatives, their nominees and associates. Apropos thereto, she issued
Cojuangco") had control of. The plan, then, was for PCA to buy all of Pedro Cojuangco’s shares Executive Order Nos. (E.Os.) 1, 2 and 14, as amended by E.O. 14-A, all Series of 1986. E.O.
in FUB. However, as later events unfolded, a simple direct sale from the seller (Pedro) to PCA 1 created the PCGG and provided it with the tools and processes it may avail of in the recovery
did not ensue as it was made to appear that Cojuangco, Jr. had the exclusive option to acquire efforts;36 E.O. No. 2 asserted that the ill-gotten assets and properties come in the form of shares
the former’s FUB controlling interests. Emerging from this elaborate, circuitous arrangement of stocks, etc.; while E.O. No. 14 conferred on the Sandiganbayan exclusive and original
were two deeds; the first, simply denominated as Agreement,27 dated May 1975,28 entered into jurisdiction over ill-gotten wealth cases, with the proviso that "technical rules of procedure and
by and between Cojuangco, Jr., for and in his behalf and in behalf of "certain other buyers," evidence shall not be applied strictly" to the civil cases filed under the E.O. Pursuant to these
and Pedro Cojuangco, purportedly accorded Cojuangco, Jr. the option to buy 72.2% of FUB’s issuances, the PCGG issued numerous orders of sequestration, among which were those
outstanding capital stock, or 137,866 shares (the "option shares," for brevity), at PhP 200 per handed out, as earlier mentioned, against shares of stock in UCPB purportedly owned by or
share. registered in the names of (a) more than a million coconut farmers and (b) the CIIF companies,
including the SMC shares held by the CIIF companies. On July 31, 1987, the PCGG instituted
The second but related contract, dated May 25, 1975, was denominated as Agreement for the before the Sandiganbayan a recovery suit docketed thereat as CC No. 0033.
Acquisition of a Commercial Bank for the Benefit of the Coconut Farmers of the Philippines. 29 It
had PCA,30 for itself and for the benefit of the coconut farmers, purchase from Cojuangco, Jr. After the filing and subsequent amendments of the complaint in CC 0033, Lobregat, COCOFED
the shares of stock subject of the First Agreement for PhP 200 per share. As additional et al., and Ballares et al., purportedly representing over a million coconut farmers, sought and
consideration for PCA’s buy-out of what Cojuangco, Jr. would later claim to be his exclusive were allowed to intervene.37 Meanwhile, the following incidents/events transpired:
and personal option,31 it was stipulated that, from PCA, Cojuangco, Jr. shall receive equity in
FUB amounting to 10%, or 7.22%, of the 72.2%, or fully paid shares. 1. On the postulate, inter alia, that its coco-farmer members own at least 51% of the
outstanding capital stock of UCPB, the CIIF companies, etc., COCOFED et al., on
Apart from the aforementioned 72.2%, PCA purchased from other FUB shareholders 6,534 November 29, 1989, filed Class Action Omnibus Motion praying for the lifting of the
shares. orders of sequestration referred to above and for a chance to present evidence to prove
the coconut farmers’ ownership of the UCPB and CIIF shares. The plea to present
While the 64.98% portion of the option shares (72.2% – 7.22% = 64.98%) ostensibly pertained evidence was denied;
to the farmers, the corresponding stock certificates supposedly representing the farmers’ equity
were in the name of and delivered to PCA.32 There were, however, shares forming part of the 2. Later, the Republic moved for and secured approval of a motion for separate trial
aforesaid 64.98% portion, which ended up in the hands of non-farmers.33 The remaining 27.8% which paved the way for the subdivision of the causes of action in CC 0033, each
of the FUB capital stock were not covered by any of the agreements. detailing how the assets subject thereof were acquired and the key roles the principal
played;
Under paragraph 8 of the second agreement, PCA agreed to expeditiously distribute the FUB
shares purchased to such "coconut farmers holding registered COCOFUND receipts" on 3. Civil Case 0033, pursuant to an order of the Sandiganbayan would be subdivided
equitable basis. into eight complaints, docketed as CC 0033-A to CC 0033-H.38

66 | C O N S T I 1
Lobregat, Ballares et al., COCOFED, et al., on the strength of their authority completion of the national census, to all those determined by the PCA to
to intervene in CC 0033, continued to participate in CC 0033-A where one of be bonafide coconut farmers, but who have not received the bank shares; 45 and
the issues raised was the misuse of the names/identities of the over a million
coconut farmers;39 5) Prior to June 1986, a large number of coconut farmers opted to sell all/part of their
UCPB shares below their par value. This prompted the UCPB Board to authorize the
4. On February 23, 2001, Lobregat, COCOFED, Ballares et al., filed a Class Action CIIF companies to buy these shares. Some 40.34 million common voting shares of
Omnibus Motion to enjoin the PCGG from voting the sequestered UCPB shares and UCPB ended up with these CIIF companies albeit initially registered in the name of
the SMC shares registered in the names of the CIIF companies. The Sandiganbayan, UCPB.
by Order of February 28, 2001, granted the motion, sending the Republic to come to
this Court on certiorari, docketed as G.R. Nos. 147062-64, to annul said order; and On the other hand, the subject of CC 0033-F are two (2) blocks of SMC shares of stock, the
first referring to shares purchased through and registered in the name of the CIIF holding
5. By Decision of December 14, 2001, in G.R. Nos. 147062-64 (Republic v. companies. The purported ownership of the second block of SMC shares is for the nonce
COCOFED), 40 the Court declared the coco levy funds as prima facie public funds. And irrelevant to the disposition of this case. During the time material, the CIIF block of SMC shares
purchased as the sequestered UCPB shares were by such funds, beneficial ownership represented 27% of the outstanding capital stock of SMC.
thereon and the corollary voting rights prima facie pertain, according to the Court, to
the government. Civil Case No. 0033-A

The instant proceedings revolve around CC 0033-A (Re: Anomalous Purchase and Use of After the pre-trial, but before the Republic, as plaintiff a quo, could present, as it committed to,
[FUB] now [UCPB])41 and CC 0033-F (Re: Acquisition of San Miguel Corporation Shares of a list of UCPB stockholders as of February 25, 1986, 46 among other evidence, COCOFED, et
Stock), the first case pivoting mainly on the series of transactions culminating in the alleged al., on the premise that the sequestered farmers’ UCPB shares are not unlawfully acquired
anomalous purchase of 72.2% of FUB’s outstanding capital stock and the transfer by PCA of assets, filed in April 2001 their Class Action Motion for a Separate Summary Judgment. In it,
a portion thereof to private individuals. COCOFED, et al. and Ballares, et al. participated in CC they prayed for a judgment dismissing the complaint in CC 0033-A, for the reason that the over
No. 0033-A as class action movants. than a million unimpleaded coconut farmers own the UCPB shares. In March 2002, they
filed Class Action Motion for Partial Separate Trial on the issue of whether said UCPB shares
Petitioners COCOFED et al.42 and Ursua43 narrate in their petitions how the farmers’ UCPB have legitimately become the private property of the million coconut farmers.
shares in question ended up in the possession of those as hereunder indicated:
Correlatively, the Republic, on the strength of the December 14, 2001 ruling in Republic v.
1) The farmers’ UCPB shares were originally registered in the name of PCA for the COCOFED47 and on the argument, among others, that the claim of COCOFED and Ballares et
eventual free distribution thereof to and registration in the individual names of the al. over the subject UCPB shares is based solely on the supposed COCOFUND receipts issued
coconut farmers in accordance with PD 755 and the IRR that PCA shall issue; for payment of the R.A. 6260 CIF levy, filed a Motion for Partial Summary Judgment [RE:
COCOFED, et al. and Ballares, et al.] dated April 22, 2002, praying that a summary judgment
2) Pursuant to the stock distribution procedures set out in PCA Administrative Order be rendered declaring:
No. 1, s. of 1975, (PCA AO 1),44 farmers who had paid to the CIF under RA 6260 and
registered their COCOFUND (CIF) receipts with PCA were given their corresponding a. That Section 2 of [PD] 755, Section 5, Article III of P.D. 961 and Section 5, Article III
UCPB stock certificates. As of June 1976, the cut-off date for the extended registration, of P.D. No. 1468 are unconstitutional;
only 16 million worth of COCOFUND receipts were registered, leaving over 50 million
shares undistributed; b. That … (CIF) payments under … (R.A.) No. 6260 are not valid and legal bases for
ownership claims over UCPB shares; and
3) PCA would later pass Res. 074-78, s. of 1978, to allocate the 50 million undistributed
shares to (a) farmers who were already recipients thereof and (b) qualified farmers to c. That COCOFED, et al., and Ballares, et al. have not legally and validly obtained title
be identified by COCOFED after a national census. over the subject UCPB shares.

4) As of May 1981, some 15.6 million shares were still held by and registered in the After an exchange of pleadings, the Republic filed its sur-rejoinder praying that it be
name of COCOFED "in behalf of coconut farmers" for distribution immediately after the conclusively held to be the true and absolute owner of the coconut levy funds and the UCPB
shares acquired therefrom.48
67 | C O N S T I 1
A joint hearing on the separate motions for summary judgment to determine what material facts – and –
exist with or without controversy followed.49 By Order50 of March 11, 2003, the Sandiganbayan
detailed, based on this Court’s ruling in related cases, the parties’ manifestations made in open EDUARDO COJUANGCO, JR., Filipino, x x x, represented in this act by his
court and the pleadings and evidence on record, the facts it found to be without substantial duly authorized attorney-in-fact, EDGARDO J. ANGARA, for and in his own
controversy, together with the admissions and/or extent of the admission made by the parties behalf and in behalf of certain other buyers, (hereinafter collectively called the
respecting relevant facts, as follows: BUYERS)";

As culled from the exhaustive discussions and manifestations of the parties in open court of WITNESSETH: That
their respective pleadings and evidence on record, the facts which exist without any substantial
controversy are set forth hereunder, together with the admissions and/or the extent or scope WHEREAS, the SELLERS own of record and beneficially a total of 137,866
of the admissions made by the parties relating to the relevant facts: shares of stock, with a par value of P100.00 each, of the common stock of the
First United Bank (the "Bank"), a commercial banking corporation existing
1. The late President Ferdinand E. Marcos was President … for two terms . . . and, under the laws of the Philippines;
during the second term, … declared Martial Law through Proclamation No. 1081 dated
September 21, 1972. WHEREAS, the BUYERS desire to purchase, and the SELLERS are willing to
sell, the aforementioned shares of stock totaling 137,866 shares (hereinafter
2. On January 17, 1973, [he] issued Proclamation No. 1102 announcing the ratification called the "Contract Shares") owned by the SELLERS due to their special
of the 1973 Constitution. relationship to EDUARDO COJUANGCO, JR.;

3. From January 17, 1973 to April 7, 1981, [he] . . .exercised the powers and NOW, THEREFORE, for and in consideration of the premises and the mutual
prerogative of President under the 1935 Constitution and the powers and prerogative covenants herein contained, the parties agree as follows:
of President . . . the 1973 Constitution.
1. Sale and Purchase of Contract Shares
[He] …promulgated various [P.D.s], among which were P.D. No. 232, P.D. No.
276, P.D. No. 414, P.D. No. 755, P.D. No. 961 and P.D. No. 1468. Subject to the terms and conditions of this Agreement, the SELLERS
hereby sell, assign, transfer and convey unto the BUYERS, and the
4. On April 17, 1981, amendments to the 1973 Constitution were effected and, on June BUYERS hereby purchase and acquire, the Contract Shares free and
30, 1981, [he], after being elected President, "reassumed the title and exercised the clear of all liens and encumbrances thereon.
powers of the President until 25 February 1986."
2. Contract Price
5. Defendants Maria Clara Lobregat and Jose R. Eleazar, Jr. were [PCA] Directors …
during the period 1970 to 1986…. The purchase price per share of the Contract Shares payable by the
BUYERS is P200.00 or an aggregate price of P27,573,200.00 (the
6. Plaintiff admits the existence of the following agreements which are attached as "Contract Price").
Annexes "A" and "B" to the Opposition dated October 10, 2002 of defendant Eduardo
M. Cojuangco, Jr. to the above-cited Motion for Partial Summary Judgment: 3. Delivery of, and payment for, stock certificates

a) "Agreement made and entered into this ______ day of May, 1975 at Makati, Upon the execution of this Agreement, (i) the SELLERS shall deliver
Rizal, Philippines, by and between: to the BUYERS the stock certificates representing the Contract
Shares, free and clear of all liens, encumbrances, obligations,
PEDRO COJUANGCO, Filipino, x x x, for and in his own behalf and in behalf liabilities and other burdens in favor of the Bank or third parties, duly
of certain other stockholders of First United Bank listed in Annex "A" attached endorsed in blank or with stock powers sufficient to transfer the shares
hereto (hereinafter collectively called the SELLERS); to bearer; and (ii) BUYERS shall deliver to the SELLERS
P27,511,295.50 representing the Contract Price less the amount of

68 | C O N S T I 1
stock transfer taxes payable by the SELLERS, which the BUYERS behalf of the other Sellers of the other Buyers)
undertake to remit to the appropriate authorities. (Emphasis added.) listed in Annex "A" hereof) (BUYERS)
(SELLERS)
4. Representation and Warranties of Sellers
By:
The SELLERS respectively and independently of each other represent
and warrant that: EDGARDO J. ANGARA
Attorney-in-Fact
(a) The SELLERS are the lawful owners of, with good
marketable title to, the Contract Shares and that (i) the xxx xxx xxx
certificates to be delivered pursuant thereto have been validly
issued and are fully paid and no-assessable; (ii) the Contract
Shares are free and clear of all liens, encumbrances, b) "Agreement for the Acquisition of a Commercial Bank for the Benefit of the Coconut Farmers
obligations, liabilities and other burdens in favor of the Bank of the Philippines, made and entered into this 25th day of May 1975 at Makati, Rizal,
or third parties… Philippines, by and between:

This representation shall survive the execution and delivery of EDUARDO M. COJUANGCO, JR., x x x, hereinafter referred to as the SELLER;
this Agreement and the consummation or transfer hereby
contemplated. – and –

(b) The execution, delivery and performance of this PHILIPPINE COCONUT AUTHORITY, a public corporation created by Presidential Decree No.
Agreement by the SELLERS does not conflict with or 232, as amended, for itself and for the benefit of the coconut farmers of the Philippines,
constitute any breach of any provision in any agreement to (hereinafter called the BUYER)"
which they are a party or by which they may be bound.
WITNESSETH: That
(c) They have complied with the condition set forth in Article
X of the Amended Articles of Incorporation of the Bank. WHEREAS, on May 17, 1975, the Philippine Coconut Producers Federation ("PCPF"), through
its Board of Directors, expressed the desire of the coconut farmers to own a commercial bank
5. Representation of BUYERS …. which will be an effective instrument to solve the perennial credit problems and, for that
purpose, passed a resolution requesting the PCA to negotiate with the SELLER for the transfer
6. Implementation to the coconut farmers of the SELLER’s option to buy the First United Bank (the "Bank") under
such terms and conditions as BUYER may deem to be in the best interest of the coconut
farmers and instructed Mrs. Maria Clara Lobregat to convey such request to the BUYER;
The parties hereto hereby agree to execute or cause to be executed
such documents and instruments as may be required in order to carry
out the intent and purpose of this Agreement. WHEREAS, the PCPF further instructed Mrs. Maria Clara Lobregat to make representations
with the BUYER to utilize its funds to finance the purchase of the Bank;
7. Notices ….
WHEREAS, the SELLER has the exclusive and personal option to buy 144,400 shares (the
"Option Shares") of the Bank, constituting 72.2% of the present outstanding shares of stock of
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands at the Bank, at the price of P200.00 per share, which option only the SELLER can validly exercise;
the place and on the date first above written.
WHEREAS, in response to the representations made by the coconut farmers, the BUYER has
PEDRO COJUANGCO EDUARDO COJUANGCO, JR. requested the SELLER to exercise his personal option for the benefit of the coconut farmers;
(on his own behalf and in (on his own behalf and in behalf

69 | C O N S T I 1
WHEREAS, the SELLER is willing to transfer the Option Shares to the BUYER at a price equal authorize and approve a management contract between the Bank and the
to his option price of P200 per share; SELLER under the following terms:

WHEREAS, recognizing that ownership by the coconut farmers of a commercial bank is a (a) The management contract shall be for a period of five (5) years,
permanent solution to their perennial credit problems, that it will accelerate the growth and renewable for another five (5) years by mutual agreement of the
development of the coconut industry and that the policy of the state which the BUYER is SELLER and the Bank;
required to implement is to achieve vertical integration thereof so that coconut farmers will
become participants in, and beneficiaries of, the request of PCPF that it acquire a commercial (b) The SELLER shall be elected President and shall hold office at the
bank to be owned by the coconut farmers and, appropriated, for that purpose, the sum of P150 pleasure of the Board of Directors. While serving in such capacity, he
Million to enable the farmers to buy the Bank and capitalize the Bank to such an extension as shall be entitled to such salaries and emoluments as the Board of
to be in a position to adopt a credit policy for the coconut farmers at preferential rates; Directors may determine;

WHEREAS, x x x the BUYER is willing to subscribe to additional shares ("Subscribed Shares") (c) The SELLER shall recruit and develop a professional management
and place the Bank in a more favorable financial position to extend loans and credit facilities to team to manage and operate the Bank under the control and
coconut farmers at preferential rates; supervision of the Board of Directors of the Bank;

NOW, THEREFORE, for and in consideration of the foregoing premises and the other terms (d) The BUYER undertakes to cause three (3) persons designated by
and conditions hereinafter contained, the parties hereby declare and affirm that their principal the SELLER to be elected to the Board of Directors of the Bank;
contractual intent is (1) to ensure that the coconut farmers own at least 60% of the outstanding
capital stock of the Bank; and (2) that the SELLER shall receive compensation for exercising (e) The SELLER shall receive no compensation for managing the
his personal and exclusive option to acquire the Option Shares, for transferring such shares to Bank, other than such salaries or emoluments to which he may be
the coconut farmers at the option price of P200 per share, and for performing the management entitled by virtue of the discharge of his function and duties as
services required of him hereunder. President, provided … and

1. To ensure that the transfer to the coconut farmers of the Option Shares is (f) The management contract may be assigned to a management
effected with the least possible delay and to provide for the faithful company owned and controlled by the SELLER.
performance of the obligations of the parties hereunder, the parties hereby
appoint the Philippine National Bank as their escrow agent (the "Escrow
Agent"). 4. As compensation for exercising his personal and exclusive option to acquire
the Option Shares and for transferring such shares to the coconut farmers, as
well as for performing the management services required of him, SELLER shall
Upon execution of this Agreement, the BUYER shall deposit with the Escrow receive equity in the Bank amounting, in the aggregate, to 95,304 fully paid
Agent such amount as may be necessary to implement the terms of this
shares in accordance with the procedure set forth in paragraph 6 below;
Agreement….
5. In order to comply with the Central Bank program for increased capitalization
2. As promptly as practicable after execution of this Agreement, the SELLER of banks and to ensure that the Bank will be in a more favorable financial
shall exercise his option to acquire the Option Share and SELLER shall position to attain its objective to extend to the coconut farmers loans and credit
immediately thereafter deliver and turn over to the Escrow Agent such stock facilities, the BUYER undertakes to subscribe to shares with an aggregate par
certificates as are herein provided to be received from the existing value of P80,864,000 (the "Subscribed Shares"). The obligation of the BUYER
stockholders of the Bank by virtue of the exercise on the aforementioned with respect to the Subscribed Shares shall be as follows:
option….
(a) The BUYER undertakes to subscribe, for the benefit of the coconut
3. To ensure the stability of the Bank and continuity of management and credit farmers, to shares with an aggregate par value of P15,884,000 from
policies to be adopted for the benefit of the coconut farmers, the parties the present authorized but unissued shares of the Bank; and
undertake to cause the stockholders and the Board of Directors of the Bank to

70 | C O N S T I 1
(b) The BUYER undertakes to subscribe, for the benefit of the coconut (a) To classify the present authorized capital stock of P50,000,000
farmers, to shares with an aggregate par value of P64,980,000 from divided into 500,000 shares, with a par value of P100.00 per share
the increased capital stock of the Bank, which subscriptions shall be into: 361,000 Class A shares, with an aggregate par value of
deemed made upon the approval by the stockholders of the increase P36,100,000 and 139,000 Class B shares, with an aggregate par
of the authorized capital stock of the Bank from P50 Million to P140 value of P13,900,000. All of the Option Shares constituting 72.2% of
Million. the outstanding shares, shall be classified as Class A shares and the
balance of the outstanding shares, constituting 27.8% of the
The parties undertake to declare stock dividends of P8 Million out of outstanding shares, as Class B shares;
the present authorized but unissued capital stock of P30 Million.
(b) To amend the articles of incorporation of the Bank to effect the
6. To carry into effect the agreement of the parties that the SELLER shall following changes:
receive as his compensation 95,304 shares:
(i) change of corporate name to First United Coconut Bank;
(a) ….
(ii) replace the present provision restricting the transferability
(b) With respect to the Subscribed Shares, the BUYER undertakes, in of the shares with a limitation on ownership by any individual
order to prevent the dilution of SELLER’s equity position, that it shall or entity to not more than 10% of the outstanding shares of
cede over to the SELLER 64,980 fully-paid shares out of the the Bank;
Subscribed Shares. Such undertaking shall be complied with in the
following manner: …. (iii) provide that the holders of Class A shares shall not be
entitled to pre-emptive rights with respect to the unissued
7. The parties further undertake that the Board of Directors and management portion of the authorized capital stock or any increase thereof;
of the Bank shall establish and implement a loan policy for the Bank of making and
available for loans at preferential rates of interest to the coconut farmers ….
(iv) provide that the holders of Class B shares shall be
8. The BUYER shall expeditiously distribute from time to time the shares of the absolutely entitled to pre-emptive rights, with respect to the
Bank, that shall be held by it for the benefit of the coconut farmers of the unissued portion of Class B shares comprising part of the
Philippines under the provisions of this Agreement, to such, coconut farmers authorized capital stock or any increase thereof, to subscribe
holding registered COCOFUND receipts on such equitable basis as may be to Class B shares in proportion t the subscriptions of Class A
determine by the BUYER in its sound discretion. shares, and to pay for their subscriptions to Class B shares
within a period of five (5) years from the call of the Board of
Directors.
9. ….

(c) To increase the authorized capital stock of the Bank from P50
10. To ensure that not only existing but future coconut farmers shall be
Million to P140 Million….;
participants in and beneficiaries of the credit policies, and shall be entitled to
the benefit of loans and credit facilities to be extended by the Bank to coconut
farmers at preferential rates, the shares held by the coconut farmers shall not (d) To declare a stock dividend of P8 Million payable to the SELLER,
be entitled to pre-emptive rights with respect to the unissued portion of the the BUYER and other stockholders of the Bank out of the present
authorized capital stock or any increase thereof. authorized but unissued capital stock of P30 Million;

11. After the parties shall have acquired two-thirds (2/3) of the outstanding (e) To amend the by-laws of the Bank accordingly; and
shares of the Bank, the parties shall call a special stockholders’ meeting of the
Bank: (f) To authorize and approve the management contract provided in
paragraph 2 above.

71 | C O N S T I 1
The parties agree that they shall vote their shares and take all the 10. Defendants Lobregat, et al. and COCOFED, et al. and Ballares, et al. admit that the
necessary corporate action in order to carry into effect the foregoing Agreement, described in Section 1 of Presidential Decree (P.D.) No. 755 dated July 29, 1975
provisions of this paragraph 11 …. as the "Agreement for the Acquisition of a Commercial Bank for the Benefit of Coconut
Farmers" executed by the Philippine Coconut Authority" and incorporated in Section 1 of P.D.
12. It is the contemplation of the parties that the Bank shall achieve a financial No. 755 by reference, refers to the "AGREEMENT FOR THE ACQUISITION OF A
and equity position to be able to lend to the coconut farmers at preferential COMMERCIAL BANK FOR THE BENEFIT OF THE COCONUT FARMERS OF THE
rates. PHILIPPINES" dated May 25, 1975 between defendant Eduardo M. Cojuangco, Jr. and the
[PCA] (Annex "B" for defendant Cojuangco’s OPPOSITION TO PLAINTIFF’S MOTION FOR
PARTIAL SUMMARY JUDGMENT [RE: EDUARDO M. COJUANGCO, JR.] dated September
In order to achieve such objective, the parties shall cause the Bank to adopt a
18, 2002).
policy of reinvestment, by way of stock dividends, of such percentage of the
profits of the Bank as may be necessary.
Plaintiff refused to make the same admission.
13. The parties agree to execute or cause to be executed such documents and
instruments as may be required in order to carry out the intent and purpose of 11. … the Court takes judicial notice that P.D. No. 755 was published [in] … volume 71 of the
this Agreement. Official Gazette but the text of the agreement … was not so published with P.D. No. 755.

IN WITNESS WHEREOF, … 12. Defendants Lobregat, et al. and COCOFED, et al. and Ballares, et al. admit that the PCA
used public funds, … in the total amount of P150 million, to purchase the FUB shares
amounting to 72.2% of the authorized capital stock of the FUB, although the PCA was later
PHILIPPINE COCONUT AUTHORITY
reimbursed from the coconut levy funds and that the PCA subscription in the increased
(BUYER)
capitalization of the FUB, which was later renamed the … (UCPB), came from the said coconut
levy funds….
By:
13. Pursuant to the May 25, 1975 Agreement, out of the 72.2% shares of the authorized and
EDUARDO COJUANGCO, JR. MARIA CLARA L. LOBREGAT the increased capital stock of the FUB (later UCPB), entirely paid for by PCA, 64.98% of the
(SELLER) shares were placed in the name of the "PCA for the benefit of the coconut farmers" and 7,22%
were given to defendant Cojuangco. The remaining 27.8% shares of stock in the FUB which
xxx xxx xxx later became the UCPB were not covered by the two (2) agreements referred to in item no. 6,
par. (a) and (b) above.
7. Defendants Lobregat, et al. and COCOFED, et al. and Ballares, et al. admit that the … (PCA)
was the "other buyers" represented by …. Cojuangco, Jr. in the May 1975 Agreement entered "There were shares forming part of the aforementioned 64.98% which were later sold or
into between Pedro Cojuangco (on his own behalf and in behalf of other sellers listed in Annex transferred to non-coconut farmers.
"A" of the agreement) and … Cojuangco, Jr. (on his own behalf and in behalf of the other
buyers). Defendant Cojuangco insists he was the "only buyer" under the aforesaid Agreement. 14. Under the May 27, 1975 Agreement, defendant Cojuangco’s equity in the FUB (now UCPB)
was ten percent (10%) of the shares of stock acquired by the PCA for the benefit of the coconut
8. ….. farmers.

9. Defendants Lobregat, et al., and COCOFED, et al., and Ballares, et al. admit that in addition 15. That the fully paid 95.304 shares of the FUB, later the UCPB, acquired by defendant …
to the 137,866 FUB shares of Pedro Cojuangco, et al. covered by the Agreement, other FUB Cojuangco, Jr. pursuant to the May 25, 1975 Agreement were paid for by the PCA in
stockholders sold their shares to PCA such that the total number of FUB shares purchased by accordance with the terms and conditions provided in the said Agreement.
PCA … increased from 137,866 shares to 144,400 shares, the OPTION SHARES referred to
in the Agreement of May 25, 1975. Defendant Cojuangco did not make said admission as to 16. Defendants Lobregat, et al. and COCOFED, et al. and Ballares, et al. admit that the
the said 6,534 shares in excess of the 137,866 shares covered by the Agreement with Pedro affidavits of the coconut farmers (specifically, Exhibit "1-Farmer" to "70-Farmer") uniformly state
Cojuangco. that:

72 | C O N S T I 1
a. they are coconut farmers who sold coconut products; "conclusively" owned by the Republic. In its pertinent parts, PSJ-A, resolving the separate
motions for summary judgment in seriatim with separate dispositive portions for each, reads:
b. in the sale thereof, they received COCOFUND receipts pursuant to R.A. No.
6260; WHEREFORE, in view of the foregoing, we rule as follows:

c. they registered the said COCOFUND receipts; and xxx xxx xxx

d. by virtue thereof, and under R.A. No. 6260, P.D. Nos. 755, 961 and 1468, A. Re: CLASS ACTION MOTION FOR A SEPARATE SUMMARY JUDGMENT dated
they are allegedly entitled to the subject UCPB shares. April 11, 2001 filed by Defendant Maria Clara L. Lobregat, COCOFED, et al., and
Ballares, et al.
but subject to the following qualifications:
The Class Action Motion for Separate Summary Judgment dated April 11, 2001 filed
a. there were other coconut farmers who received UCPB shares although they by defendant Maria Clara L. Lobregat, COCOFED, et al. and Ballares, et al., is hereby
did not present said COCOFUND receipt because the PCA distributed the DENIED for lack of merit.
unclaimed UCPB shares not only to those who already received their UCPB
shares in exchange for their COCOFUND receipts but also to the coconut B. Re: MOTION FOR PARTIAL SUMMARY JUDGMENT (RE: COCOFED, ET AL.
farmers determined by a national census conducted pursuant to PCA AND BALLARES, ET AL.) dated April 22, 2002 filed by Plaintiff.
administrative issuances;
1. a. Section 1 of P.D. No. 755, taken in relation to Section 2 of the same P.D.,
b. [t]here were other affidavits executed by Lobregat, Eleazar, Ballares and is unconstitutional: (i) for having allowed the use of the CCSF to benefit directly
Aldeguer relative to the said distribution of the unclaimed UCPB shares; and private interest by the outright and unconditional grant of absolute ownership
of the FUB/UCPB shares paid for by PCA entirely with the CCSF to the
c. the coconut farmers claim the UCPB shares by virtue of their compliance undefined "coconut farmers", which negated or circumvented the national
not only with the laws mentioned in item (d) above but also with the relevant policy or public purpose declared by P.D. No. 755 to accelerate the growth and
issuances of the PCA such as, PCA Administrative Order No. 1, dated August development of the coconut industry and achieve its vertical integration; and
20, 1975 (Exh. "298-Farmer"); PCA Resolution No. 033-78 dated February 16, (ii) for having unduly delegated legislative power to the PCA.
1978….
b. The implementing regulations issued by PCA, namely,
The plaintiff did not make any admission as to the foregoing qualifications. Administrative Order No. 1, Series of 1975 and Resolution No. 074-78
are likewise invalid for their failure to see to it that the distribution of
shares serve exclusively or at least primarily or directly the
17. Defendants Lobregat, et al. and COCOFED, et al. and Ballares, et al. claim that the UCPB
shares in question have legitimately become the private properties of the 1,405,366 coconut aforementioned public purpose or national policy declared by P.D. No.
farmers solely on the basis of their having acquired said shares in compliance with R.A. No. 755.
6260, P.D. Nos. 755, 961 and 1468 and the administrative issuances of the PCA cited above.
2. Section 2 of P.D. No. 755 which mandated that the coconut levy funds shall
not be considered special and/or fiduciary funds nor part of the general funds
18. …..
of the national government and similar provisions of Sec. 5, Art. III, P.D. No.
961 and Sec. 5, Art. III, P.D. No. 1468 contravene the provisions of the
On July 11, 2003, the Sandiganbayan issued the assailed PSJ-A finding for the Republic, the Constitution, particularly, Art. IX (D), Sec. 2; and Article VI, Sec. 29 (3).
judgment accentuated by (a) the observation that COCOFED has all along manifested as
representing over a million coconut farmers and (b) a declaration on the issue of ownership of
3. Lobregat, COCOFED, et al. and Ballares, et al. have not legally and validly
UCPB shares and the unconstitutionality of certain provisions of P.D. No. 755 and its
obtained title of ownership over the subject UCPB shares by virtue of P.D. No.
implementing regulations. On the matter of ownership in particular, the anti-graft court declared
755, the Agreement dated May 25, 1975 between the PCA and defendant
that the 64.98% sequestered "Farmers’ UCPB shares," plus other shares paid by PCA are
Cojuangco, and PCA implementing rules, namely, Adm. Order No. 1, s. 1975
and Resolution No. 074-78.
73 | C O N S T I 1
4. The so-called "Farmers’ UCPB shares" covered by 64.98% of the UCPB coconut levy funds, particularly the CCSF, belong to the plaintiff Republic of
shares of stock, which formed part of the 72.2% of the shares of stock of the the Philippines as their true and beneficial owner.
former FUB and now of the UCPB, the entire consideration of which was
charged by PCA to the CCSF, are hereby declared conclusively owned by, the Let trial of this Civil Case proceed with respect to the issues which have not been
Plaintiff Republic of the Philippines. disposed of in this Partial Summary Judgment. For this purpose, the plaintiff’s Motion
Ad Cautelam to Present Additional Evidence dated March 28, 2001 is hereby
C. Re: MOTION FOR PARTIAL SUMMARY JUDGMENT (RE: EDUARDO M. GRANTED.
COJUANGCO, JR.) dated September 18, 2002 filed by Plaintiff.
From PSJ-A, Lobregat moved for reconsideration which COCOFED, et al. and
1. Sec. 1 of P.D. No. 755 did not validate the Agreement between PCA and Ballares, et al. adopted. All these motions were denied in the extended assailed
defendant Eduardo M. Cojuangco, Jr. dated May 25, 1975 nor did it give the Resolution51 of December 28, 2004.
Agreement the binding force of a law because of the non-publication of the
said Agreement. Civil Case No. 0033-F

2. Regarding the questioned transfer of the shares of stock of FUB (later Here, the Republic, after filing its pre-trial brief, interposed a Motion for Judgment on the
UCPB) by PCA to defendant Cojuangco or the so-called "Cojuangco UCPB Pleadings and/or for [PSJ] (Re: Defendants CIIF Companies, 14 Holding Companies and
shares" which cost the PCA more than Ten Million Pesos in CCSF in 1975, we COCOFED, et al.) praying that, in light of the parties’ submissions and the supervening ruling
declare, that the transfer of the following FUB/UCPB shares to defendant in Republic v. COCOFED52 which left certain facts beyond question, a judgment issue:
Eduardo M. Cojuangco, Jr. was not supported by valuable consideration, and
therefore null and void: 1) Declaring Section 5 of Article III of P.D. No. 961 (Coconut Industry Code) and
Section 5 of Article III of P.D. No. 1468 (Revised Coconut Industry Code) to be
a. The 14,400 shares from the "Option Shares"; unconstitutional;

b. Additional Bank Shares Subscribed and Paid by PCA, consisting of: 2) Declaring that CIF payments under RA No. 6260 are not valid and legal bases for
ownership claims over the CIIF companies and, ultimately, the CIIF block of SMC
1. Fifteen Thousand Eight Hundred Eighty-Four (15,884) shares; and
shares out of the authorized but unissued shares of the bank,
subscribed and paid by PCA; 3) Ordering the reconveyance of the CIIF companies, the 14 holding companies, and
the 27% CIIF block of San Miguel Corporation shares of stocks in favor of the
2. Sixty Four Thousand Nine Hundred Eighty (64,980) shares government and declaring the ownership thereof to belong to the government in trust
of the increased capital stock subscribed and paid by PCA; for all the coconut farmers.
and
At this juncture, it may be stated that, vis-à-vis CC 0033-F, Gabay Foundation, Inc. sought but
3. Stock dividends declared pursuant to paragraph 5 and was denied leave to intervene. But petitioners COCOFED, et al. moved and were allowed to
paragraph 11 (iv) (d) of the Agreement. intervene53 on the basis of their claim that COCOFED members beneficially own the block of
SMC shares held by the CIIF companies, at least 51% of whose capitol stock such members
3. The above-mentioned shares of stock of the FUB/UCPB transferred to own. The claim, as the OSG explained, arose from the interplay of the following: (a) COCOFED
defendant Cojuangco are hereby declared conclusively owned by the Republic et al.’s alleged majority ownership of the CIIF companies under Sections 9 54 and 1055 of P.D.
of the Philippines. No. 1468, and (b) their alleged entitlement to shares in the CIIF companies by virtue of their
supposed registration of COCOFUND receipts allegedly issued to COCOFED members upon
payment of the R.A. 6260 CIF levy.56
4. The UCPB shares of stock of the alleged fronts, nominees and dummies of
defendant Eduardo M. Cojuangco, Jr. which form part of the 72.2% shares of
the FUB/UCPB paid for by the PCA with public funds later charged to the Just as in CC No. 0033-A, the Sandiganbayan also conducted a hearing in CC No. 0033-F to
determine facts that appeared without substantial controversy as culled from the records and,
by Order57 of February 23, 2004, outlined those facts.
74 | C O N S T I 1
On May 7, 2004, the Sandiganbayan, in light of its ruling in CC No. 0033-A and disposing of 10. Anglo Ventures, Inc.;
the issue on ownership of the CIIF oil and holding companies and their entire block of subject
SMC shares, issued the assailed PSJ-F also finding for the Republic, the fallo of which 11. Randy Allied Ventures, Inc.;
pertinently reading:
12. Rock Steel Resources, Inc.;
WHEREFORE, in view of the foregoing, we hold that:
13. Valhalla Properties Ltd., Inc.; and
The Motion for Partial Summary Judgment (Re: Defendants CIIF Companies, 14 Holding
Companies and Cocofed et al.) filed by Plaintiff is hereby GRANTED. ACCORDINGLY, THE 14. First Meridian Development, Inc.
CIIF COMPANIES, namely:
AND THE CIIF BLOCK OF SAN MIGUEL CORPORATION (SMC) SHARES OF STOCK
1. Southern Luzon Coconut Oil Mills (SOLCOM); TOTALLING 33,133,266 SHARES AS OF 1983 … ARE DECLARED OWNED BY THE
GOVERNMENT IN TRUST FOR ALL THE COCONUT FARMERS GOVERNMENT AND
2. Cagayan de Oro Oil Co., Inc. (CAGOIL); ORDERDED RECONVEYED TO THE GOVERNMENT.58 (Emphasis and capitalization in the
original; underscoring added.)
3. Iligan Coconut Industries, Inc. (ILICOCO);
Let the trial of this Civil Case proceed with respect to the issues which have not been disposed
4. San Pablo Manufacturing Corp. (SPMC); of in this Partial Summary Judgment, including the determination of whether the CIIF Block of
SMC Shares adjudged to be owned by the Government represents 27% of the issued and
5. Granexport Manufacturing Corp. (GRANEX); and outstanding capital stock of SMC according to plaintiff or to 31.3% of said capital stock
according to COCOFED, et al and Ballares, et al.
6. Legaspi Oil Co., Inc. (LEGOIL),
SO ORDERED.
AS WELL AS THE 14 HOLDING COMPANIES, NAMELY:
Expressly covered by the declaration and the reconveyance directive are "all dividends
declared, paid and issued thereon as well as any increments thereto arising from, but not
1. Soriano Shares, Inc.;
limited to, exercise of pre-emptive rights."
2. ACS Investors, Inc.;
On May 26, 2004, COCOFED et al., filed an omnibus motion (to dismiss for lack of subject
matter jurisdiction or alternatively for reconsideration and to set case for trial), but this motion
3. Roxas Shares, Inc.; was denied per the Sandiganbayan’s Resolution 59 of December 28, 2004.

4. Arc Investors, Inc.; On May 11, 2007, in CC 0033-A, the Sandiganbayan issued a Resolution60 denying Lobregat’s
and COCOFED’s separate motions to set the case for trial/hearing, noting that there is no
5. Toda Holdings, Inc.; longer any point in proceeding to trial when the issue of their claim of ownership of the
sequestered UCPB shares and related sub-issues have already been resolved in PSJ-A.
6. AP Holdings, Inc.;
For ease of reference, PSJ-A and PSJ-F each originally decreed trial or further hearing on
7. Fernandez Holdings, Inc.; issues yet to be disposed of. However, the Resolution 61 issued on June 5, 2007 in CC 0033-A
and the Resolution62 of May 11, 2007 rendered in CC 0033-F effectively modified the underlying
8. SMC Officers Corps, Inc.; partial summary judgments by deleting that portions on the necessity of further trial on the issue
of ownership of (1) the sequestered UCPB shares, (2) the CIIF block of SMC shares and (3)
the CIIF companies. As the anti-graft court stressed in both resolutions, the said issue of
9. Te Deum Resources, Inc.;
ownership has been finally resolved in the corresponding PSJs. 63

75 | C O N S T I 1
Hence, the instant petitions. II. Through the assailed PSJs and the assailed Resolutions, the Sandiganbayan declared
certain provisions of the coconut levy laws as well as certain administrative issuances of the
The Issues PCA as unconstitutional. In doing so, the Sandiganbayan erroneously employed, if not grossly
abused, its power of judicial review….
COCOFED et al., in G.R. Nos. 177857-58, impute reversible error on the Sandiganbayan for
(a) assuming jurisdiction over CC Nos. 0033-A and 0033-F despite the Republic’s failure to A. … the Sandiganbayan gravely erred, if not brazenly exceeded its statutory
establish below the jurisdictional facts, i.e., that the sequestered assets sought to be recovered jurisdiction and abused the judicial powers, when it concluded that the public
are ill-gotten in the context of E.O. Nos. 1, 2, 14 and 14-A; (b) declaring certain provisions of purpose of certain coconut levy laws was not evident, when it thereupon
coco levy issuances unconstitutional; and (c) denying the petitioners’ plea to prove that the formulated its own public policies and purposes for the coconut levy laws and
sequestered assets belong to coconut farmers. Specifically, petitioners aver: at the same time disregarded the national policies specifically prescribed
therein.
I. The Sandiganbayan gravely erred … when it refused to acknowledge that it did not have
subject matter jurisdiction over the ill-gotten wealth cases because the respondent Republic B. In ruling that "it is not clear or evident how the means employed by the
failed to prove, and did not even attempt to prove, the jurisdictional fact that the sequestered [coconut levy] laws" would "serve the avowed purpose of the law" or "can serve
assets constitute ill-gotten wealth of former President Marcos and Cojuangco. Being without a public purpose", the Sandiganbayan erroneously examined, determined and
subject matter jurisdiction over the ill-gotten wealth cases, a defect previously pointed out and evaluated the wisdom of such laws, a constitutional power within the exclusive
repeatedly assailed by COCOFED, et al., the assailed PSJs and the assailed Resolutions are province of the legislative department.
all null and void.
C. The Sandiganbayan gravely erred in declaring Section 1 of PD 755, PCA
A. Insofar as the ill-gotten wealth cases are concerned, the Sandiganbayan’s [AO] 1 and PCA Resolution No. 074-78 constitutionally infirm by reason of
subject matter jurisdiction is limited to the recovery of "ill-gotten wealth" as alleged but unproven and unsubstantiated flaws in their implementation.
defined in Eos 1, 2, 14 and 14-A. Consistent with that jurisdiction, the
subdivided complaints in the ill-gotten wealth cases expressly alleged that the D. The Sandiganbayan gravely erred in concluding that Section 1 of PD 755
sequestered assets constitutes "ill-gotten wealth" of former President Marcos constitutes an undue delegation of legislative power insofar as it authorizes
and Cojuangco, having been filed pursuant to, and in connection with, Eos 1, the PCA to promulgate rules and regulations governing the distribution of the
2, 14 and 14-A, the Sandiganbayan gravely erred, if not exceeded its UCPB shares to the coconut farmers. Rather, taken in their proper context,
jurisdiction, when it refused to require the respondent Republic to prove the Section 1 of PD 755 was complete in itself, [and] prescribed sufficient
aforesaid jurisdictional fact. standards that circumscribed the discretion of the PCA….

B. …. Having no evidence on record to prove the said jurisdictional fact, the More importantly, this Honorable Court has, on three (3) separate occasions, rejected
Sandiganbayan gravely erred, if not grossly exceeded its statutory jurisdiction, respondent Republic’s motion to declare the coconut levy laws unconstitutional. The
when it rendered the assailed PSJs instead of dismissing the ill-gotten wealth Sandiganbayan gravely erred, if not acted in excess of its jurisdiction, when it ignored the
cases…. settled doctrines of law of the case and/or stare decisis and granted respondent Republic’s
fourth attempt to declare the coconut levy laws unconstitutional, despite fact that such
C. Under Section 1 of Rule 9 of the Rules of Court, lack of jurisdiction over the declaration of unconstitutionality was not necessary to resolve the ultimate issue of ownership
subject matter may be raised at any stage of the proceedings…. In any event, involved in the ill-gotten wealth cases.
in pursuing its intervention in the ill-gotten wealth cases, COCOFED, et al
precisely questioned the Sandiganbayan’s subject matter jurisdiction, III. In rendering the assailed PSJs and thereafter refusing to proceed to trial on the merits, on
asserted that the jurisdictional fact does not exist, moved to dismiss the ill- the mere say-so of the respondent Republic, the Sandiganbayan committed gross and
gotten wealth cases and even prayed that the writs of sequestration over the irreversible error, gravely abused its judicial discretion and flagrantly exceeded its jurisdiction
sequestered assets be lifted. In concluding that those actions constitute an as it effectively sanctioned the taking of COCOFED, et al.’s property by the respondent
"invocation" of its jurisdiction, the Sandiganbayan clearly acted whimsically, Republic without due process of law and through retroactive application of the declaration of
capriciously and in grave abuse of its discretion. unconstitutionality of the coconut levy laws, an act that is not only illegal and violative of the
settled Operative Fact Doctrine but, more importantly, inequitable to the coconut farmers
whose only possible mistake, offense or misfortune was to follow the law.

76 | C O N S T I 1
A. …. years of litigation, the respondent Republic has not been required to, and has not even
attempted to prove, the bases of its perjurious claim that the sequestered assets constitute ill-
1. In the course of the almost twenty (20) years that the ill-gotten gotten wealth of former President Marcos and his crony, Cojuangco. In tolerating respondent
wealth cases were pending, COCOFED, et al. repeatedly asked to be Republic’s antics for almost twenty (20) years…, the Sandiganbayan so glaringly departed from
allowed to present evidence to prove that the true, actual and procedure and thereby flagrantly violated COCOFED, et al.’s right to speedy trial.
beneficial owners of the sequestered assets are the coconut farmers
and not Cojuangco, an alleged "crony" of former President Marcos. In G.R. No. 178193, petitioner Ursua virtually imputes to the Sandiganbayan the same errors
The Sandiganbayan grievously erred and clearly abused its judicial attributed to it by petitioners in G.R. Nos. 177857-58.65 He replicates as follows:
discretion when it repeatedly and continuously denied COCOFED, et
al. the opportunity to present their evidence to disprove the baseless I
allegations of the Ill-Gotten Wealth Cases that the sequestered assets
constitute ill-gotten wealth of Cojuangco and of former President The Sandiganbayan decided in a manner not in accord with the Rules of Court and settled
Marcos, an error that undeniably and illegally deprived COCOFED, et jurisprudence in rendering the questioned PSJ as final and appealable thereafter taking the
al of their constitutional right to be heard.
sequestered assets from their owners or record without presentation of any evidence, thus, the
questioned PSJ and the questioned Resolutions are all null and void.
2. The Sandiganbayan erroneously concluded that the Assailed PSJs
and Assailed Resolutions settled the ultimate issue of ownership of A. The Sandiganbayan’s jurisdiction insofar as the ill-gotten wealth cases are
the Sequestered Assets and, more importantly, resolved all factual concerned, is limited to the recovery of "ill-gotten wealth" as defined in Executive
and legal issues involved in the ill-gotten wealth cases. Rather, as Orders No. 1, 2, 14 and 14-A.
there are triable issues still to be resolved, it was incumbent upon the
Sandiganbayan to receive evidence thereon and conduct trial on the
merits. B. The Sandiganbayan should have decided to dismiss the case or continue to receive
evidence instead of ruling against the constitutionality of some coconut levy laws and
PCA issuances because it could decide on other grounds available to it.
3. Having expressly ordered the parties to proceed to trial and
thereafter decreeing that trial is unnecessary as the Assailed PSJs
were "final" and "appealable" judgments, the Sandiganbayan acted II
whimsically, capriciously and contrary to the Rules of Court, treated
the parties in the ill-gotten wealth cases unfairly, disobeyed the dictate The Sandiganbayan gravely erred when it declared PD. 755, Section 1 and 2, Section 5, Article
of this Honorable Court and, worse, violated COCOFED, et al’s right 1 of PD 961, and Section 5 of Art. III of PD 1468 as well as administrative issuances of the
to due process and equal protection of the laws. PCA as unconstitutional in effect, it abused it power of judicial review….

B. The Sandiganbayan gravely erred if not grossly abused its discretion when A. The Sandiganbayan gravely erred in concluding that the purpose of PD 755 Section
it repeatedly disregarded, and outrightly refused to recognize, the operative 1 and 2, Section 5, Article 1 of PD 961, and Section 5 of Art. III of PD 1468 is not
facts that existed as well as the rights that vested from the time the coconut evident. It then proceeded to formulated its own purpose thereby intruding into the
levy laws were enacted until their declaration of unconstitutionality in the wisdom of the legislature in enacting [t]he law.
assailed PSJs. As a result, the assailed PSJs constitute a proscribed
retroactive application of the declaration of unconstitutionality, a taking of B. The Sandiganbayan gravely erred in declaring Section 1 of PD 755, PCA [AO] No.
private property, and an impairment of vested rights of ownership, all without 1 and PCA Resolution No. 074-78 unconstitutional due to alleged flaws in their
due process of law.64 Otherwise stated, the assailed PSJs and the assailed implementation.
Resolutions effectively penalized the coconut farmers whose only possible
mistake, offense or misfortune was to follow the laws that were then legal, valid C. The Sandiganbayan gravely erred in concluding that Section 1 of PD No. 755
and constitutional. constitutes an undue delegation of legislative power insofar as it authorizes the PCA
to promulgate rules and regulations governing the distribution of the UCPB shares to
IV. The voluminous records of these ill-gotten wealth cases readily reveal the various dilatory the coconut farmers. Section 1 of PD 755 was complete in itself, prescribed sufficient
tactics respondent Republic resorted to…. As a result, despite the lapse of almost twenty (20)

77 | C O N S T I 1
standards that circumscribed the discretion of the PCA and merely authorized the PCA The determinations made by the PCGG at the time of issuing sequestration … orders cannot
to fill matters of detail an execution through promulgated rules and regulations. be considered as final determinations; that the properties or entities sequestered or taken-over
in fact constitute "ill-gotten wealth" according to [E.O.] No. 1 is a question which can be finally
III determined only by a court – the Sandiganbayan. The PCGG has the burden of proving before
the Sandiganbayan that the assets it has sequestered or business entity it has provisionally
taken-over constitutes "ill-gotten wealth" within the meaning of [E.O.] No. 1 and Article No. XVIII
The coconut levy laws, insofar as they allowed the PCA to promulgate rules and regulations
(26) of the 1987 Constitution.
governing the distribution of the UCPB to the coconut farmers, do not constitute an undue
delegation of legislative power as they were complete in themselves and prescribed sufficient
standards that circumscribed the discretion of the PCA. Petitioners’ above posture is without merit.

IV Justice Florenz D. Regalado explicates subject matter jurisdiction:

Assuming ex-gratia argumenti that the coconut levy laws are unconstitutional, still, the owners 16. Basic … is the doctrine that the jurisdiction of a court over the subject-matter of an action
thereof cannot be deprived of their property without due process of law considering that they is conferred only by the Constitution or the law and that the Rules of Court yield to substantive
have in good faith acquired vested rights over the sequestered assets. law, in this case, the Judiciary Act and B.P. Blg. 129, both as amended, and of which jurisdiction
is only a part. Jurisdiction … cannot be acquired through, or waived, enlarged or diminished
by, any act or omission of the parties; neither can it be conferred by the acquiescence of the
In sum, the instant petitions seek to question the decisions of the Sandiganbayan in both CC
court…. Jurisdiction must exist as a matter of law…. Consequently, questions of jurisdiction
Nos. 0033-A and 0033-F, along with the preliminary issues of objection. We shall address at
may be raised for the first time on appeal even if such issue was not raised in the lower court….
the outset, (1) the common preliminary questions, including jurisdictional issue, followed by (2)
the common primary contentious issues (i.e. constitutional questions), and (3) the issues
particular to each case. 17. Nevertheless, in some case, the principle of estoppel by laches has been availed … to bar
attacks on jurisdiction….69
The Court’s Ruling
It is, therefore, clear that jurisdiction over the subject matter is conferred by law. In turn, the
question on whether a given suit comes within the pale of a statutory conferment is determined
I
by the allegations in the complaint, regardless of whether or not the plaintiff will be entitled at
The Sandiganbayan has jurisdiction over the subject
the end to recover upon all or some of the claims asserted therein. 70 We said as much in Magay
matter ofthe subdivided amended complaints.
v. Estiandan:71
The primary issue, as petitioners COCOFED, et al. and Ursua put forward, boils down to the
Sandiganbayan’s alleged lack of jurisdiction over the subject matter of the amended [J]urisdiction over the subject matter is determined by the allegations of the complaint,
irrespective of whether or not the plaintiff is entitled to recover upon all or some of the claims
complaints. Petitioners maintain that the jurisdictional facts necessary to acquire jurisdiction
asserted therein-a matter that can be resolved only after and as a result of the trial. Nor may
over the subject matter in CC No. 0033-A have yet to be established. In fine, the Republic, so
petitioners claim, has failed to prove the ill-gotten nature of the sequestered coconut farmers’ the jurisdiction of the court be made to depend upon the defenses set up in the answer or upon
the motion to dismiss, for, were we to be governed by such rule, the question of jurisdiction
UCPB shares. Accordingly, the controversy is removed from the subject matter jurisdiction of
could depend almost entirely upon the defendant.
the Sandiganbayan and necessarily any decision rendered on the merits, such as PSJ-A and
PSJ-F, is void.
Of the same tenor was what the Court wrote in Allied Domecq Philippines, Inc. v. Villon: 72
To petitioners, it behooves the Republic to prove the jurisdictional facts warranting the
Sandiganbayan’s continued exercise of jurisdiction over ill-gotten wealth cases. Citing Manila Jurisdiction over the subject matter is the power to hear and determine the general class to
Electric Company [Meralco] v. Ortañez,66petitioners argue that the jurisdiction of an which the proceedings in question belong. Jurisdiction over the subject matter is conferred by
adjudicatory tribunal exercising limited jurisdiction, like the Sandiganbayan, "depends upon the law and not by the consent or acquiescence of any or all of the parties or by erroneous belief
facts of the case as proved at the trial and not merely upon the allegation in the of the court that it exists. Basic is the rule that jurisdiction over the subject matter is determined
complaint."67 Cited too is PCGG v. Nepumuceno,68 where the Court held: by the cause or causes of action as alleged in the complaint.

78 | C O N S T I 1
The material averments in subdivided CC No. 0033-A and CC No. 0033-F included the (vi) In gross violation of their fiduciary positions and in contravention of the
following: goal to create a bank for coconut farmers of the country, the capital stock of
UCPB as of February 25, 1986 was actually held by the defendants, their
12. Defendant Eduardo Cojuangco, Jr served as a public officer during the Marcos lawyers, factotum and business associates, thereby finally gaining control of
administration…. the UCPB by misusing the names and identities of the so-called "more than
one million coconut farmers."
13. Defendant Eduardo Cojuangco, Jr., taking advantage of his association, influence and
connection, acting in unlawful concert with the [Marcoses] and the individual defendants, (b) created and/or funded with the use of coconut levy funds various corporations, such
embarked upon devices, schemes and stratagems, including the use of defendant corporations as … (COCOFED) … with the active collaboration and participation of Defendants
as fronts, to unjustly enrich themselves as the expense of the Plaintiff and the Filipino people, Juan Ponce Enrile, Maria Clara Lobregat … most of whom comprised the interlocking
such as when he – officers and directors of said companies; dissipated, misused and/or misappropriated
a substantial part of said coco levy funds … FINALLY GAIN OWNERSHIP AND
CONTROL OF THE UNITED COCONUT PLANTERS BANK BY MISUSING THE
a) manipulated, beginning the year 1975 with the active collaboration of Defendants
NAMES AND/OR IDENTIFIES OF THE SO-CALLLED "MORE THAN ONE MILLION
…, Marai Clara Lobregat, Danilo Ursua [etc.], the purchase by the … (PCA) of 72.2%
COCONUT FARNMERS;
of the outstanding capital stock of the … (FUB) which was subsequently converted into
a universal bank named … (UCPB) through the use of … (CCSF) … in a manner
contrary to law and to the specific purposes for which said coconut levy funds were (c) misappropriated, misused and dissipated P840 million of the … (CIDF) levy funds
imposed and collected under P.D. 276 and under anomalous and sinister designs and deposited with the National Development Corporation (NIDC) as administrator –trustee
circumstances, to wit: of said funds and later with UCPB, of which Defendant Eduardo Cojuangco, Jr. was
the Chief Executive Officer….
(i) Defendant Eduardo Cojuangco, Jr. coveted the coconut levy funds as a
cheap, lucrative and risk-free source of funds with which to exercise his private (d) established and caused to be funded with coconut levy fundfs, with the active
option to buy the controlling interest in FUB…. collaboration of Defendants Ferdinand E. Marcos through the issuance of LOI 926 and
of [other] defendants … the United Coconut Oil Mills, Inc., a corporation controlled by
Defendant Eduardo Cojuangco, Jr. and bought sixteen (16) certain competing oil mills
(ii) to legitimize a posteriori his highly anomalous and irregular use and
at exorbitant prices … then mothballed them….
diversion of government funds to advance his own private and commercial
interests … Defendant Eduardo Cojuangco, Jr. caused the issuance … of PD
755 (a) declaring that the coconut levy funds shall not be considered special xxx xxx xxx
and fiduciary and trust funds … conveniently repealing for that purpose a
series of previous decrees … establishing the character of the coconut levy (i) misused coconut levy funds to buy majority of the outstanding shares of stock of
funds as special, fiduciary, trust and governments; (b) confirming the San Miguel Corporation….
agreement between …Cojuangco and PCA on the purchase of FUB by
incorporating by reference said private commercial agreement in PD 755; xxx xxx xxx

(iii) …. 14. Defendants Eduardo Cojuangco, Jr. … of the Angara Concepcion Cruz Regala and Abello
law offices (ACCRA) plotted, devised, schemed, conspired and confederated with each other
(iv) To perpetuate his opportunity … to build his economic empire, … in setting up, through the use of the coconut levy funds the financial and corporate structures
Cojuangco caused the issuance of an unconstitutional decree (PD 1468) that led to the establishment of UCPB UNICOM [etc.] and more than twenty other coconut levy
requiring the deposit of all coconut levy funds with UCPB interest free to the funded corporations including the acquisition of [SMC] shares and its institutionalization
prejudice of the government and finally through presidential directives of the coconut monopoly….

(v) Having fully established himself as the undisputed "coconut king" with xxx xxx xxx
unlimited powers to deal with the coconut levy funds, the stage was now set
for Defendant Eduardo Cojuangco, Jr. to launch his predatory forays into 16. The acts of Defendants, singly or collectively, and /or in unlawful concert with one another,
almost all aspects of Philippine activity namely …. oil mills. constitute gross abuse of official position and authority, flagrant breach of public trust and
79 | C O N S T I 1
fiduciary obligations, brazen abuse of right and power, unjust enrichment, violation of the counsel who incorporated said corporations, prove that they were merely nominee
Constitution and laws … to the grave and irreparable damage of the Plaintiff and the Filipino stockholders thereof.
people.
(l) These companies, which ACCRA Law Offices organized for Defendant Cojuangco
CC No. 0033-F to be able to control more than 60% of SMC shares, were funded by institutions which
depended upon the coconut levy such as the UCPB, UNICOM, … (COCOLIFE),
12. Defendant Eduardo Cojuangco, Jr., served as a public officer during the Marcos among others. Cojuangco and his ACCRA lawyers used the funds from 6 large coconut
administration…. oil mills and 10 copra trading companies to borrow money from the UCPB and
purchase these holding companies and the SMC stocks. Cojuangco used $ 150 million
from the coconut levy, broken down as follows:
13. Having fully established himself as the undisputed "coconut king" with unlimited powers to
deal with the coconut levy funds, the stage was now set for … Cojuangco, Jr. to launch his
predatory forays into almost all aspects of Philippine economic activity namely … oil mills …. Amount Source Purpose

14. Defendant Eduardo Cojuangco, Jr., taking undue advantage of his association, influence, (in million)
and connection, acting in unlawful concert with Defendants Ferdinand E. Marcos and Imelda
R. Marcos, and the individual defendants, embarked upon devices, schemes and stratagems, $ 22.26 Oil Mills equity in holding
including the use of defendant corporations as fronts, to unjustly enrich themselves at the
expense of Plaintiff and the Filipino people…. Companies

(a) Having control over the coconut levy, Defendant Eduardo M. Cojuangco invested $ 65.6 Oil Mills loan to holding
the funds in diverse activities, such as the various businesses SMC was engaged in….;
Companies
xxx xxx xxx
$ 61.2 UCPB loan to holding
(c) Later that year [1983], Cojuangco also acquired the Soriano stocks through a series
of complicated and secret agreements, a key feature of which was a "voting trust Companies [164]
agreement" that stipulated that Andres, Jr. or his heir would proxy over the vote of the
shares owned by Soriano and Cojuangco….
The entire amount, therefore, came from the coconut levy, some passing through the
Unicom Oil mills, others directly from the UCPB.
xxx xxx xxx
(m) With his entry into the said Company, it began to get favors from the Marcos
(g) All together, Cojuangco purchased 33 million shares of the SMC through the … 14
government, significantly the lowering of the excise taxes … on beer, one of the main
holding companies
products of SMC.

xxx xxx xxx 15. Defendants … plotted, devised, schemed, conspired and confederated with each other in
setting up, through the use of coconut levy funds, the financial and corporate framework and
3.1. The same fourteen companies were in turn owned by the … six (6) so-called CIIF structures that led to the establishment of UCPB, [etc.], and more than twenty other coconut
Companies…. levy-funded corporations, including the acquisition of [SMC] shares and its institutionalization
through presidential directives of the coconut monopoly….
(h) Defendant Corporations are but "shell" corporations owned by interlocking
shareholders who have previously admitted that they are just "nominee stockholders" 16. The acts of Defendants, singly or collectively, and/or in unlawful concert with one another,
who do not have any proprietary interest over the shares in their names…. [L]awyers constitute gross abuse of official position and authority, flagrant breach of public trust and
of the Angara Abello Concepcion Regala & Cruz (ACCRA) Law offices, the previous fiduciary obligations, brazen abuse of right and power, unjust enrichment, violation of the

80 | C O N S T I 1
constitution and laws of the Republic of the Philippines, to the grave and irreparable damage their powers, authority, influence, connections or relationship." Complementing the aforesaid
of Plaintiff and the Filipino people.73 Section 2(a) is Section 1 of E.O. No. 2 decreeing the freezing of all assets "in which the
[Marcoses] their close relatives, subordinates, business associates, dummies, agents or
Judging from the allegations of the defendants’ illegal acts thereat made, it is fairly obvious that nominees have any interest or participation."
both CC Nos. 0033-A and CC 0033-F partake, in the context of EO Nos. 1, 2 and 14, series of
1986, the nature of ill-gotten wealth suits. Both deal with the recovery of sequestered shares, The Republic’s averments in the amended complaints, particularly those detailing the alleged
property or business enterprises claimed, as alleged in the corresponding basic complaints, to wrongful acts of the defendants, sufficiently reveal that the subject matter thereof comprises
be ill-gotten assets of President Marcos, his cronies and nominees and acquired by taking the recovery by the Government of ill-gotten wealth acquired by then President Marcos, his
undue advantage of relationships or influence and/or through or as a result of improper use, cronies or their associates and dummies through the unlawful, improper utilization or diversion
conversion or diversion of government funds or property. Recovery of these assets–– of coconut levy funds aided by P.D. No. 755 and other sister decrees. President Marcos himself
determined as shall hereinafter be discussed as prima facie ill-gotten––falls within the issued these decrees in a brazen bid to legalize what amounts to private taking of the said
unquestionable jurisdiction of the Sandiganbayan. 74 public funds.

P.D. No. 1606, as amended by R.A. 7975 and E.O. No. 14, Series of 1986, vests the Petitioners COCOFED et al. and Ursua, however, would insist that the Republic has failed to
Sandiganbayan with, among others, original jurisdiction over civil and criminal cases instituted prove the jurisdiction facts: that the sequestered assets indeed constitute ill-gotten wealth as
pursuant to and in connection with E.O. Nos. 1, 2, 14 and 14-A. Correlatively, the PCGG Rules averred in the amended subdivided complaints.
and Regulations defines the term "Ill-Gotten Wealth" as "any asset, property, business
enterprise or material possession of persons within the purview of [E.O.] Nos. 1 and 2, acquired This contention is incorrect.
by them directly, or indirectly thru dummies, nominees, agents, subordinates and/or business
associates by any of the following means or similar schemes": There was no actual need for Republic, as plaintiff a quo, to adduce evidence to show that the
Sandiganbayan has jurisdiction over the subject matter of the complaints as it leaned on the
(1) Through misappropriation, conversion, misuse or malversation of public funds or averments in the initiatory pleadings to make visible the jurisdiction of the Sandiganbayan over
raids on the public treasury; the ill-gotten wealth complaints. As previously discussed, a perusal of the allegations easily
reveals the sufficiency of the statement of matters disclosing the claim of the government
(2) ….; against the coco levy funds and the assets acquired directly or indirectly through said funds as
ill-gotten wealth. Moreover, the Court finds no rule that directs the plaintiff to first prove the
(3) By the illegal or fraudulent conveyance or disposition of assets belonging to the subject matter jurisdiction of the court before which the complaint is filed. Rather, such burden
government or any of its subdivisions, agencies or instrumentalities or government- falls on the shoulders of defendant in the hearing of a motion to dismiss anchored on said
owned or controlled corporations; ground or a preliminary hearing thereon when such ground is alleged in the answer.

(4) By obtaining, receiving or accepting directly or indirectly any shares of stock, equity COCOFED et al. and Ursua’s reliance on Manila Electric Company [Meralco] v. Ortanez 76 is
or any other form of interest or participation in any business enterprise or undertaking; misplaced, there being a total factual dissimilarity between that and the case at bar. Meralco
involved a labor dispute before the Court of Industrial Relations (CIR) requiring the
interpretation of a collective bargaining agreement to determine which between a regular court
(5) Through the establishment of agricultural, industrial or commercial monopolies or
and CIR has jurisdiction. There, it was held that in case of doubt, the case may not be dismissed
other combination and/or by the issuance, promulgation and/or implementation of
for failure to state a cause of action as jurisdiction of CIR is not merely based on the allegations
decrees and orders intended to benefit particular persons or special interests; and
of the complaint but must be proved during the trial of the case. The factual milieu of Meralco
shows that the said procedural holding is peculiar to the CIR. Thus, it is not and could not be a
(6) By taking undue advantage of official position, authority, relationship or influence precedent to the cases at bar.
for personal gain or benefit.75 (Emphasis supplied)
Even PCGG v. Nepomuceno77 is not on all fours with the cases at bench, the issue therein
Section 2(a) of E.O. No. 1 charged the PCGG with the task of assisting the President in "[T]he being whether the regional trial court has jurisdiction over the PCGG and sequestered
recovery of all ill-gotten wealth accumulated by former … [President] Marcos, his immediate properties, vis-à-vis the present cases, which involve an issue concerning the Sandiganbayan’s
family, relatives, subordinates and close associates … including the takeover or sequestration jurisdiction. Like in Meralco, the holding in Nepomuceno is not determinative of the outcome of
of all business enterprises and entities owned or controlled by them, during his administration, the cases at bar.
directly or through nominees, by taking undue advantage of their public office and/or using
81 | C O N S T I 1
While the 1964 Meralco and the Nepomuceno cases are inapplicable, the Court’s ruling in It is of course not for this Court to pass upon the factual issues thus raised. That function
Tijam v. Sibonhonoy78 is the leading case on estoppel relating to jurisdiction. In Tijam, the Court pertains to the Sandiganbayan in the first instance. For purposes of this proceeding, all that the
expressed displeasure on "the undesirable practice of a party submitting his case for decision Court needs to determine is whether or not there is prima facie justification for the sequestration
and then accepting judgment, only if favorable, and then attacking it for lack of jurisdiction, ordered by the PCGG. The Court is satisfied that there is. The cited incidents, given the public
when adverse." character of the coconut levy funds, place petitioners COCOFED and its leaders and officials,
at least prima facie, squarely within the purview of Executive Orders Nos. 1, 2 and 14, as
Considering the antecedents of CC Nos. 0033-A and 0033-F, COCOFED, Lobregat, Ballares, construed and applied in BASECO, to wit:
et al. and Ursua are already precluded from assailing the jurisdiction of the Sandiganbayan.
Remember that the COCOFED and the Lobregat group were not originally impleaded as "1. that ill-gotten properties (were) amassed by the leaders and supporters of the previous
defendants in CC No. 0033. They later asked and were allowed by the Sandiganbayan to regime;
intervene. If they really believe then that the Sandiganbayan is without jurisdiction over the
subject matter of the complaint in question, then why intervene in the first place? They could "a. more particularly, that ‘(i)ll-gotten wealth was accumulated by … Marcos, his immediate
have sat idly by and let the proceedings continue and would not have been affected by the family, relatives, subordinates and close associates, …. (and) business enterprises and entities
outcome of the case as they can challenge the jurisdiction of the Sandiganbayan when the time (came to be) owned or controlled by them, during … (the Marcos) administration, directly or
for implementation of the flawed decision comes. More importantly, the decision in the case through nominees, by taking undue advantage of their public office and using their powers,
will have no effect on them since they were not impleaded as indispensable parties. After all, authority, influence, connections or relationships’;
the joinder of all indispensable parties to a suit is not only mandatory, but jurisdictional as
well.79 By their intervention, which the Sandiganbayan allowed per its resolution dated "b. otherwise stated, that ‘there are assets and properties purportedly pertaining to [the
September 30, 1991, COCOFED and Ursua have clearly manifested their desire to submit to Marcoses], their close relatives, subordinates, business associates, dummies, agents or
the jurisdiction of the Sandiganbayan and seek relief from said court. Thereafter, they filed nominees which had been or were acquired by them directly or indirectly, through or as a result
numerous pleadings in the subdivided complaints seeking relief and actively participated in
of the improper or illegal use of funds or properties owned by the Government …or any of its
numerous proceedings. Among the pleadings thus filed are the Oppositions to the Motion for branches, instrumentalities, enterprises, banks or financial institutions, or by taking undue
Intervention interposed by the Pambansang Koalisyon ng mga Samahang Magsasaka at advantage of their office, authority, influence, connections or relationship, resulting in their
Manggagawa sa Niyogan and Gabay ng Mundo sa Kaunlaran Foundation, Inc., a Class Action unjust enrichment ….;
Omnibus Motion to enjoin the PCGG from voting the SMC shares dated February 23, 2001
(granted by Sandiganbayan) and the Class Action Motion for a Separate Summary Judgment
dated April 11, 2001. By these acts, COCOFED et al. are now legally estopped from asserting xxx xxx xxx
the Sandiganbayn’s want of jurisdiction, if that be the case, over the subject matter of the
complaint as they have voluntarily yielded to the jurisdiction of the Sandiganbayan. Estoppel 2. The petitioners’ claim that the assets acquired with the coconut levy funds are privately
has now barred the challenge on Sandiganbayan’s jurisdiction. owned by the coconut farmers is founded on certain provisions of law, to wit [Sec. 7, RA 6260
and Sec. 5, Art. III, PD 1468]… (Words in bracket added; italics in the original).
The ensuing excerpts from Macahilig v. Heirs of Magalit 80 are instructive:
In their attempt to dismiss the amended complaints in question, petitioners asseverate that (1)
We cannot allow her to attack its jurisdiction simply because it rendered a Decision prejudicial the coconut farmers cannot be considered as "subordinates, close and/or business associates,
to her position. Participation in all stages of a case before a trial court effectively estops a party dummies, agents and nominees" of Cojuangco, Jr. or the Marcoses, and (2) the sequestered
from challenging its jurisdiction. One cannot belatedly reject or repudiate its decision after shares were not illegally acquired nor acquired "through or as result of improper or illegal use
voluntarily submitting to its jurisdiction, just to secure affirmative relief against one’s opponent or conversion of funds belonging to the Government." While not saying so explicitly, petitioners
or after failing to obtain such relief. If, by deed or conduct, a party has induced another to act are doubtless conveying the idea that wealth, however acquired, would not be considered "ill-
in a particular manner, estoppel effectively bars the former from adopting an inconsistent gotten" in the context of EO 1, 2 and 14, s. of 1986, absent proof that the recipient or end
position, attitude or course of conduct that thereby causes loss or injury to the latter. possessor thereof is outside the Marcos’ circle of friends, associates, cronies or nominees.

Lest it be overlooked, this Court has already decided that the sequestered shares are prima We are not convinced.
facie ill-gotten wealth rendering the issue of the validity of their sequestration and of the
jurisdiction of the Sandiganbayan over the case beyond doubt. In the case of COCOFED v. As may be noted, E.O. 1 and 2 advert to President Marcos, or his associates’ nominees. In its
PCGG,81 We stated that: most common signification, the term "nominee" refers to one who is designated to act for
another usually in a limited way; 82 a person in whose name a stock or bond certificate is
82 | C O N S T I 1
registered but who is not the actual owner thereof is considered a nominee." 83 Corpus Juris juridical, in whose name government funds or assets were transferred to by Pres. Marcos, his
Secundum describes a nominee as one: cronies or his associates. To this characterization must include what the Sandiganbayan
considered the "unidentified" coconut farmers, more than a million of faceless and nameless
… designated to act for another as his representative in a rather limited sense. It has no coconut farmers, the alleged beneficiaries of the distributed UCPB shares, who, under the
connotation, however, other than that of acting for another, in representation of another or as terms of Sec. 10 of PCA A.O. No. 1, s. of 1975, were required, upon the delivery of their
the grantee of another. In its commonly accepted meaning the term connoted the delegation respective stock certificates, to execute an irrevocable proxy in favor of the Bank’s manager.
of authority to the nominee in a representative or nominal capacity only, and does not connote There is thus ample truth to the observations - "[That] the PCA provided this condition only
the transfer or assignment to the nominee of any property in, or ownership of, the rights of the indicates that the PCA had no intention to constitute the coconut farmer UCPB stockholder as
person nominating him.84 a bona fide stockholder;" that the 1.5 million registered farmer-stockholders were "mere
nominal stockholders."89
So, the next question that comes to the fore is: would the term "nominee" include the more
than one million coconut farmers alleged to be the recipients of the UCPB shares? From the foregoing, the challenge on the Sandiganbayan’s subject matter jurisdiction at bar
must fail.
Guided by the foregoing definitions, the query must be answered in the affirmative if only to
give life to those executive issuances aimed at ensuring the recovery of ill-gotten wealth. It is II
basic, almost elementary, that: Petitioners COCOFED et al. were not
deprived of their right to be heard.
Laws must receive a sensible interpretation to promote the ends for which they are enacted.
They should be so given reasonable and practical construction as will give life to them, if it can As a procedural issue, COCOFED, et al. and Ursua next contend that in the course of almost
be done without doing violence to reason. Conversely, a law should not be so construed as to 20 years that the cases have been with the anti-graft court, they have repeatedly sought leave
allow the doing of an act which is prohibited by law, not so interpreted as to afford an opportunity to adduce evidence (prior to respondent’s complete presentation of evidence) to prove the coco
to defeat compliance with its terms, create an inconsistency, or contravene the plain words of farmers’ actual and beneficial ownership of the sequestered shares. The Sandiganbayan,
the law. Interpretatio fienda est ut res magis valeat quam pereat or that interpretation as will however, had repeatedly and continuously disallowed such requests, thus depriving them of
give the thing efficacy is to be adopted.85 their constitutional right to be heard.

E.O. 1, 2, 14 and 14-A, it bears to stress, were issued precisely to effect the recovery of ill- This contention is untenable, their demand to adduce evidence being disallowable on the
gotten assets amassed by the Marcoses, their associates, subordinates and cronies, or ground of prematurity.
through their nominees. Be that as it may, it stands to reason that persons listed as associated
with the Marcoses86 refer to those in possession of such ill-gotten wealth but holding the same The records reveal that the Republic, after adducing its evidence in CC No. 0033-A,
in behalf of the actual, albeit undisclosed owner, to prevent discovery and consequently subsequently filed a Motion Ad Cautelam for Leave to Present Additional Evidence dated
recovery. Certainly, it is well-nigh inconceivable that ill-gotten assets would be distributed to March 28, 2001. This motion remained unresolved at the time the Republic interposed its
and left in the hands of individuals or entities with obvious traceable connections to Mr. Marcos Motion for Partial Summary Judgment. The Sandiganbayan granted the later motion and
and his cronies. The Court can take, as it has in fact taken, judicial notice of schemes and accordingly rendered the Partial Summary Judgment, effectively preempting the presentation
machinations that have been put in place to keep ill-gotten assets under wraps. These would of evidence by the defendants in said case (herein petitioners COCOFED and Ursua).
include the setting up of layers after layers of shell or dummy, but controlled, corporations 87 or
manipulated instruments calculated to confuse if not altogether mislead would-be investigators Section 5, Rule 30 the Rules of Court clearly sets out the order of presenting evidence:
from recovering wealth deceitfully amassed at the expense of the people or simply the fruits
thereof. Transferring the illegal assets to third parties not readily perceived as Marcos cronies SEC. 5. Order of trial.—Subject to the provisions of section 2 of Rule 31, and unless the court
would be another. So it was that in PCGG v. Pena, the Court, describing the rule of Marcos as for special reasons otherwise directs, the trial shall be limited to the issues stated in the pre-
a "well entrenched plundering regime of twenty years," noted the magnitude of the past trial order and shall proceed as follows:
regime’s organized pillage and the ingenuity of the plunderers and pillagers with the assistance
of experts and the best legal minds in the market. 88
(a) The plaintiff shall adduce evidence in support of his complaint;
Hence, to give full effect to E.O. 1, 2 and 14, s. of 1986, the term "nominee," as used in the
above issuances, must be taken to mean to include any person or group of persons, natural or (b) The defendant shall then adduce evidence in support of his defense, counterclaim,
cross-claim and third-party complaint;
83 | C O N S T I 1
xxx xxx xxx specifying the facts that appear without substantial controversy, including the extent to which
the amount of damages or other relief is not in controversy, and directing such further
(g) Upon admission of the evidence, the case shall be deemed submitted for decision, proceedings in the action as are just. The facts so specified shall be deemed established, and
unless the court directs the parties to argue or to submit their respective memoranda the trial shall be conducted on the controverted facts accordingly.
or any further pleadings.
Clearly, petitioner COCOFED’s right to be heard had not been violated by the mere issuance
If several defendants or third-party defendants, and so forth. having separate defenses appear of PSJ-A and PSJ-F before they can adduce their evidence.
by different counsel, the court shall determine the relative order of presentation of their
evidence. (Emphasis supplied.) As it were, petitioners COCOFED et al. were able to present documentary evidence in
conjunction with its "Class Action Omnibus Motion" dated February 23, 2001 where they
Evidently, for the orderly administration of justice, the plaintiff shall first adduce evidence in appended around four hundred (400) documents including affidavits of alleged farmers. These
support of his complaint and after the formal offer of evidence and the ruling thereon, then petitioners manifested that said documents comprise their evidence to prove the farmers’
comes the turn of defendant under Section 3 (b) to adduce evidence in support of his defense, ownership of the UCPB shares, which were distributed in accordance with valid and existing
counterclaim, cross-claim and third party complaint, if any. Deviation from such order of trial is laws.92
purely discretionary upon the trial court, in this case, the Sandiganbayan, which cannot be
questioned by the parties unless the vitiating element of grave abuse of discretion supervenes. Lastly, COCOFED et al. even filed their own Motion for Separate Summary Judgment, an event
Thus, the right of COCOFED to present evidence on the main case had not yet ripened. And reflective of their admission that there are no more factual issues left to be determined at the
the rendition of the partial summary judgments overtook their right to present evidence on their level of the Sandiganbayan. This act of filing a motion for summary judgment is a judicial
defenses. admission against COCOFED under Section 26, Rule 130 which declares that the "act,
declaration or omission of a party as to a relevant fact may be given in evidence against him."
It cannot be stressed enough that the Republic as well as herein petitioners were well within
their rights to move, as they in fact separately did, for a partial summary judgment. Summary Viewed in this light, the Court has to reject petitioners’ self-serving allegations about being
judgment may be allowed where, save for the amount of damages, there is, as shown by deprived the right to adduce evidence.
affidavits and like evidentiary documents, no genuine issue as to any material fact and the
moving party is entitled to a judgment as a matter of law. A "genuine issue", as distinguished III
from one that is fictitious, contrived and set up in bad faith, means an issue of fact that calls for The right to speedy trial was not violated.
the presentation of evidence.90 Summary or accelerated judgment, therefore, is a procedural
technique aimed at weeding out sham claims or defenses at an early stage of the This brings to the fore the alleged violation of petitioners’ right to a speedy trial and speedy
litigation.91 Sections 1, 2 and 4 of Rule 35 of the Rules of Court on Summary Judgment,
disposition of the case. In support of their contention, petitioners cite Licaros v.
respectively provide:
Sandiganbayan,93 where the Court dismissed the case pending before the Sandiganbayan for
violation of the accused’s right to a speedy trial.
SECTION 1. Summary judgment for claimant.—A party seeking to recover upon a claim,
counterclaim, or cross-claim … may, at any time after the pleading in answer thereto has been
It must be clarified right off that the right to a speedy disposition of case and the accused’s right
served, move with supporting affidavits, depositions or admissions for a summary judgment in
to a speedy trial are distinct, albeit kindred, guarantees, the most obvious difference being that
his favor upon all or any part thereof. a speedy disposition of cases, as provided in Article III, Section 16 of the Constitution, obtains
regardless of the nature of the case:
SEC. 2. Summary judgment for defending party.—A party against whom a claim, counterclaim
or cross-claim is asserted … is sought may, at any time, move with supporting affidavits, Section 16. All persons shall have the right to a speedy disposition of their cases before all
depositions or admissions for a summary judgment in his favor as to all or any part thereof. judicial, quasi-judicial, or administrative bodies.

SEC. 4. Case not fully adjudicated on motion.—If on motion under this Rule, judgment is not In fine, the right to a speedy trial is available only to an accused and is a peculiarly criminal law
rendered upon the whole case or for all the reliefs sought and a trial is necessary, the court at concept, while the broader right to a speedy disposition of cases may be tapped in any
the hearing of the motion, by examining the pleadings and the evidence before it and by proceedings conducted by state agencies. Thus, in Licaros the Court dismissed the criminal
interrogating counsel shall ascertain what material facts exist without substantial controversy case against the accused due to the palpable transgression of his right to a speedy trial.
and what are actually and in good faith controverted. It shall thereupon make an order
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In the instant case, the appropriate right involved is the right to a speedy disposition of cases, proceedings. Following Tello, petitioners are deemed to have waived their right to a speedy
the recovery of ill-gotten wealth being a civil suit. disposition of the case. Moreover, delays, if any, prejudiced the Republic as well. What is more,
the alleged breach of the right in question was not raised below. As a matter of settled
Nonetheless, the Court has had the occasion to dismiss several cases owing to the jurisprudence, but subject to equally settled exception, an issue not raised before the trial court
infringement of a party’s right to a speedy disposition of cases. 94 Dismissal of the case for cannot be raised for the first time on appeal.97 The sporting idea forbidding one from pulling
violation of this right is the general rule. Bernat v. The Honorable Sandiganbayan (5th surprises underpins this rule. For these reasons, the instant case cannot be dismissed for the
Division)95 expounds on the extent of the right to a speedy disposition of cases as follows: alleged violation of petitioners’ right to a speedy disposition of the case.

Section 16 of Article III of the Constitution guarantees the right of all persons to a "speedy IV
disposition of their cases." Nevertheless, this right is deemed violated only when the
proceedings are attended by vexatious, capricious and oppressive delays. Moreover, the Sections 1 and 2 of P.D. No. 755, Article III, Section 5 of P.D. No. 961 and Article III, Section
determination of whether the delays are of said nature is relative and cannot be based on a 5 of P.D. No. 1468, are unconstitutional.
mere mathematical reckoning of time. Particular regard must be taken of the facts and
circumstances peculiar to each case. As a guideline, the Court in Dela Peña v. Sandiganbayan The Court may pass upon the constitutionality of P.D. Nos. 755, 961 and 1468.
mentioned certain factors that should be considered and balanced, namely: 1) length of delay;
2) reasons for the delay; 3) assertion or failure to assert such right by the accused; and 4) Petitioners COCOFED et al. and Ursua uniformly scored the Sandiganbayan for abusing its
prejudice caused by the delay. power of judicial review and wrongly encroaching into the exclusive domain of Congress when
it declared certain provisions of the coconut levy laws and PCA administrative issuances as
xxx xxx xxx unconstitutional.

While this Court recognizes the right to speedy disposition quite distinctly from the right to a We are not persuaded.
speedy trial, and although this Court has always zealously espoused protection from
oppressive and vexatious delays not attributable to the party involved, at the same time, we It is basic that courts will not delve into matters of constitutionality unless unavoidable, when
hold that a party’s individual rights should not work against and preclude the people’s equally the question of constitutionality is the very lis mota of the case, meaning, that the case cannot
important right to public justice. In the instant case, three people died as a result of the crash be legally resolved unless the constitutional issue raised is determined. This rule finds
of the airplane that the accused was flying. It appears to us that the delay in the disposition of anchorage on the presumptive constitutionality of every enactment. Withal, to justify the
the case prejudiced not just the accused but the people as well. Since the accused has
nullification of a statute, there must be a clear and unequivocal breach of the Constitution. A
completely failed to assert his right seasonably and inasmuch as the respondent judge was not doubtful or speculative infringement would simply not suffice.98
in a position to dispose of the case on the merits… we hold it proper and equitable to give the
parties fair opportunity to obtain … substantial justice in the premises.
Just as basic is the precept that lower courts are not precluded from resolving, whenever
96 warranted, constitutional questions, subject only to review by this Court.
The more recent case of Tello v. People laid stress to the restrictive dimension to the right to
speedy disposition of cases, i.e., it is lost unless seasonably invoked:
To Us, the present controversy cannot be peremptorily resolved without going into the
constitutionality of P.D. Nos. 755, 961 and 1468 in particular. For petitioners COCOFED et al.
In Bernat …, the Court denied petitioner’s claim of denial of his right to a speedy disposition of and Ballares et al. predicate their claim over the sequestered shares and necessarily their
cases considering that [he] … chose to remain silent for eight years before complaining of the cause on laws and martial law issuances assailed by the Republic on constitutional grounds.
delay in the disposition of his case. The Court ruled that petitioner failed to seasonably assert Indeed, as aptly observed by the Solicitor General, this case is for the recovery of shares
his right and he merely sat and waited from the time his case was submitted for resolution. In grounded on the invalidity of certain enactments, which in turn is rooted in the shares being
this case, petitioner similarly failed to assert his right to a speedy disposition of his case…. He public in character, purchased as they were by funds raised by the taxing and/or a mix of taxing
only invoked his right to a speedy disposition of cases after [his conviction]…. Petitioner’s and police powers of the state.99 As may be recalled, P.D. No. 755, under the policy-declaring
silence may be considered as a waiver of his right. provision, authorized the distribution of UCPB shares of stock free to coconut farmers. On the
other hand, Section 2 of P.D. No. 755, hereunder quoted below, effectively authorized the PCA
An examination of the petitioners’ arguments and the cited indicia of delay would reveal the to utilize portions of the CCSF to pay the financial commitment of the farmers to acquire UCPB
absence of any allegation that petitioners moved before the Sandiganbayan for the dismissal and to deposit portions of the CCSF levies with UCPB interest free. And as there also provided,
of the case on account of vexatious, capricious and oppressive delays that attended the the CCSF, CIDF and like levies that PCA is authorized to collect shall be considered as non-
85 | C O N S T I 1
special or fiduciary funds to be transferred to the general fund of the Government, meaning half coconut farmers could have acquired the said shares of stock. It has, therefore, become
they shall be deemed private funds. necessary to determine the validity of the authorizing law, which made the stock transfer and
acquisitions possible.
Section 2 of P.D. No. 755 reads:
To reiterate, it is of crucial importance to determine the validity of P.D. Nos. 755, 961 and 1468
Section 2. Financial Assistance. — To enable the coconut farmers to comply with their in light of the constitutional proscription against the use of special funds save for the purpose
contractual obligations under the aforesaid Agreement, the [PCA] is hereby directed to draw it was established. Otherwise, petitioners’ claim of legitimate private ownership over UCPB
and utilize the collections under the [CCSF] authorized to be levied by [PD] No. 232, as shares and indirectly over SMC shares held by UCPB’s subsidiaries will have no leg to stand
amended, to pay for the financial commitments of the coconut farmers under the said on, P.D. No. 755 being the only law authorizing the distribution of the SMC and UCPB shares
agreement and, except for [PCA’s] budgetary requirements …, all collections under the [CCSF] of stock to coconut farmers, and with the aforementioned provisions actually stating and holding
Levy and (50%) of the collections under the [CIDF] shall be deposited, interest free, with the that the coco levy fund shall not be considered as a special – not even general – fund, but shall
said bank of the coconut farmers and such deposits shall not be withdrawn until the … the bank be owned by the farmers in their private capacities. 102
has sufficient equity capital …; and since the operations, and activities of the [PCA] are all in
accord with the present social economic plans and programs of the Government, all collections The Sandiganbayan’s ensuing ratiocination on the need to pass upon constitutional issues the
and levies which the [PCA] is authorized to levy and collect such as but not limited to the [CCS Republic raised below commends itself for concurrence:
Levy] and the [CIDF] … shall not be considered or construed, under any law or regulation,
special and/or fiduciary funds and do not form part of the general funds of the national This Court is convinced of the imperative need to pass upon the issues of constitutionality
government within the contemplation of [P.D.] No. 711. (Emphasis supplied) raised by Plaintiff. The issue of constitutionality of the provisions of P.D. No. 755 and the laws
related thereto goes to the very core of Plaintiff’s causes of action and defenses thereto. It will
A similar provision can also be found in Article III, Section 5 of P.D. No. 961 and Article III, serve the best interest of justice to define this early the legal framework within which this case
Section 5 of P.D. No. 1468, which We shall later discuss in turn: shall be heard and tried, taking into account the admission of the parties and the established
facts, particularly those relating to the main substance of the defense of Lobregat, COCOFED,
P.D. No. 961 et al. and Ballares, et al., which is anchored on the laws being assailed by Plaintiff on
constitutional grounds.
Section 5. Exemptions. The Coconut Consumers Stabilization Fund and the Coconut Industry
Development Fund as well as all disbursements of said funds for the benefit of the coconut xxx xxx xxx
farmers as herein authorized shall not be construed or interpreted, under any law or regulation,
as special and/or fiduciary funds, or as part of the general funds of the national government The Court is also mindful that lower courts are admonished to observe a becoming modesty in
within the contemplation of P.D. No. 711; nor as a subsidy, donation, levy, government funded examining constitutional questions, but that they are nonetheless not prevented from resolving
investment, or government share within the contemplation of P.D. 898, the intention being that the same whenever warranted, subject only to review by the highest tribunal (Ynot v.
said Fund and the disbursements thereof as herein authorized for the benefit of the coconut Intermediate Appellate Court).
farmers shall be owned by them in their own private capacities.100 (Emphasis Ours)
xxx xxx xxx
P.D. No. 1468
It is true that, as a general rule, the question of constitutionality must be raised at the earliest
Section 5. Exemptions. The [CCSF] and the [CIDF] as well as all disbursement as herein opportunity. The Honorable Supreme Court … has clearly stated that the general rule admits
authorized, shall not be construed or interpreted, under nay law or regulation, as special and/or of exceptions, thus:
fiduciary funds, or as part of the general funds of the national government within the
contemplation of PD 711; nor as subsidy, donation, levy government funded investment, or xxx xxx xxx
government share within the contemplation of PD 898, the intention being that said Fund and
the disbursements thereof as herein authorized for the benefit of the coconut farmers shall be ‘For courts will pass upon a constitutional question only when presented before it in bona fide
owned by them in their private capacities….101 (Emphasis Ours.) cases for determination, and the fact that the question has not been raised before is not a valid
reason for refusing to allow it to be raised later…. It has been held that the determination of a
In other words, the relevant provisions of P.D. Nos. 755, as well as those of P.D. Nos. 961 and constitutional question is necessary whenever it is essential to the decision of the case … as
1468, could have been the only plausible means by which close to a purported million and a where the right of a party is founded solely on a statute, the validity of which is attacked.’
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In the case now before us, the allegations of the Subdivided Complaint are consistent with constitutional question at this stage of the proceedings, where the defense is grounded solely
those in the subject Motion, and they sufficiently raise the issue of constitutionality of the on the very laws the constitutionality of which are being questioned and where the evidence of
provisions of laws in question. The Third Amended Complaint (Subdivided) states: the defendants would seek mainly to prove their faithful and good faith compliance with the
said laws and their implementing rules and regulations.103 (Emphasis added.)
‘(ii) to legitimize a posteriori his highly anomalous and irregular use and diversion of
government funds to advance his own private and commercial interests, … Cojuangco, Jr. The Court’s rulings in COCOFED v. PCGG and Republic v. Sandiganbayan, as law of the
caused the issuance … of PD 755 (a) declaring that the coconut levy funds shall not be case, are speciously invoked.
considered special and fiduciary and trusts funds and do not form part of the general funds of
the National Government, conveniently repealing for that purpose a series of coconut levy To thwart the ruling on the constitutionality of P.D. Nos. 755, 961 and 1468, petitioners would
funds as special, fiduciary, trust and government funds…. sneak in the argument that the Court has, in three separate instances, upheld the validity, and
thumbed down the Republic’s challenge to the constitutionality, of said laws imposing the
xxx xxx xxx different coconut levies and prescribing the uses of the fund collected. The separate actions of
the Court, petitioners add, would conclude the Sandiganbayan on the issue of constitutionality
‘(iv) To perpetuate his opportunity to deal with and make use the coconut levy funds to build of said issuances, following the law-of-the-case principle. Petitioners allege:
his economic empire, Cojuangco, Jr. caused the issuance by Defendant Ferdinand E. Marcos
of an unconstitutional decree (PD 1468) requiring the deposit of all coconut levy funds with Otherwise stated, the decision of this Honorable Court in the COCOFED Case overruling the
UCPB, interest free, to the prejudice of the government.’ strict public fund theory espoused by the Respondent Republic, upholding the propriety of the
laws imposing the collections of the different Coconut Levies and expressly allowing
The above-quoted allegations in the Third Amended Complaint (Subdivided) already question COCOFED, et al., to prove that the Sequestered Assets have legitimately become their private
the "legitimacy" of the exercise by former President Marcos of his legislative authority when he properties had become final and immutable. 104
issued P.D. Nos. 755 and 1468. The provision of Sec. 5, Art. III of P.D. 961 is substantially
similar to the provisions of the aforesaid two [PDs]. P.D. No. 755 allegedly legitimized the Petitioners are mistaken.
"highly anomalous and irregular use and diversion of government funds to advance his
[defendant Cojuangco’s] own private and commercial interest." The issuance of the said [PD] Yu v. Yu,105 as effectively reiterated in Vios v. Pantangco, 106 defines and explains the
which has the force and effect of a law can only be assailed on constitutional grounds. The ramifications of the law of the case principle as follows:
merits of the grounds adverted to in the allegations of the Third Amended Complaint
(Subdivided) can only be resolved by this Court by testing the questioned [PDs], which are
Law of the case has been defined as the opinion delivered on a former appeal. It is a term
considered part of the laws of the land…. applied to an established rule that when an appellate court passes on a question and remands
the case to the lower court for further proceedings, the question there settled becomes the law
As early as June 20, 1989, this Court in its Resolution expressed this Court’s understanding of of the case upon subsequent appeal. It means that whatever is once irrevocably established
the import of the allegations of the complaint, as follows: as the controlling legal rule or decision between the same parties in the same case continues
to be the law of the case, … so long as the facts on which such decision was predicated
"It is likewise alleged in the Complaint that in order to legitimize the diversion of funds, continue to be the facts of the case before the court.
defendant Ferdinand E. Marcos issued the Presidential Decrees referred to by the movants.
This is then the core of Plaintiff’s complaint: that, insofar as the coconut levy is concerned, Otherwise put, the principle means that questions of law that have been previously raised and
these decrees had been enacted as tools for the acquisition of ill-gotten wealth for specific disposed of in the proceedings shall be controlling in succeeding instances where the same
favored individuals. legal question is raised, provided that the facts on which the legal issue was predicated
continue to be the facts of the case before the court. Guided by this definition, the law of the
"Even if Plaintiff may not have said so effectively, the complaint in fact disputes the legitimacy, case principle cannot provide petitioners any comfort. We shall explain why.
and, if one pleases, the constitutionality of such enactments….
In the first instance, petitioners cite COCOFED v. PCGG. 107 There, respondent PCGG
"The issue is validly raised on the face of the complaint and defendants must respond to it." questioned the validity of the coconut levy laws based on the limits of the state’s taxing and
police power, as may be deduced from the ensuing observations of the Court:
Since … the question of constitutionality … may be raised even on appeal if the determination
of such a question is essential to the decision of the case, we find more reason to resolve this
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…. Indeed, the Solicitor General suggests quite strongly that the laws operating or purporting Indeed, coconut levy funds partake of the nature of taxes, which, in general, are enforced
to convert the coconut levy funds into private funds, are a transgression of the basic limitations proportional contributions from persons and properties, exacted by the State by virtue of its
for the licit exercise of the state's taxing and police powers, and that certain provisions of said sovereignty for the support of government and for all public needs.
laws are merely clever stratagems to keep away government audit in order to facilitate
misappropriation of the funds in question. Based on its definition, a tax has three elements, namely: a) it is an enforced proportional
contribution from persons and properties; b) it is imposed by the State by virtue of its
The utilization and proper management of the coconut levy funds, [to acquire shares of stocks sovereignty; and c) it is levied for the support of the government. The coconut levy funds fall
for coconut farmers and workers] raised as they were by the State’s police and taxing power squarely into these elements for the following reasons:
are certainly the concern of the Government…. The coconut levy funds are clearly affected
with public interest. Until it is demonstrated satisfactorily that they have legitimately become (a) They were generated by virtue of statutory enactments imposed on the coconut farmers
private funds, they must prima facie be accounted subject to measures prescribed in EO Nos. requiring the payment of prescribed amounts. Thus, PD No. 276, which created the Coconut
1, 2, and 14 to prevent their concealment, dissipation, etc…. 108 [Words in bracket added.] Consumer[s] Stabilization Fund (CCSF), mandated the following:

The issue, therefore, in COCOFED v. PCGG turns on the legality of the transfer of the shares "a. A levy, initially, of P15.00 per 100 kilograms of copra resecada or its equivalent in other
of stock bought with the coconut levy funds to coconut farmers. This must be distinguished with coconut products, shall be imposed on every first sale, in accordance with the mechanics
the issues in the instant case of whether P.D. No. 755 violated Section 29, paragraph 3 of established under RA 6260, effective at the start of business hours on August 10, 1973.
Article VI of the 1987 Constitution as well as to whether P.D. No. 755 constitutes undue
delegation of legislative power. Clearly, the issues in both sets of cases are so different as to "The proceeds from the levy shall be deposited with the Philippine National Bank or any other
preclude the application of the law of the case rule. government bank to the account of the Coconut Consumers Stabilization Fund, as a separate
trust fund which shall not form part of the general fund of the government."
The second and third instances that petitioners draw attention to refer to the rulings in Republic
v. Sandiganbayan, where the Court by Resolution of December 13, 1994, as reiterated in The coco levies were further clarified in amendatory laws, specifically PD No. 961 and PD No.
another resolution dated March 26, 1996, resolved to deny the separate motions of the 1468 – in this wise:
Republic to resolve legal questions on the character of the coconut levy funds, more particularly
to declare as unconstitutional (a) coconut levies collected pursuant to various issuances as
public funds and (b) Article III, Section 5 of P.D. No. 1468. "The Authority (PCA) is hereby empowered to impose and collect a levy, to be known as the
Coconut Consumers Stabilization Fund Levy, on every one hundred kilos of copra resecada,
or its equivalent … delivered to, and/or purchased by, copra exporters, oil millers, desiccators
Prescinding from the foregoing considerations, petitioners would state: "Having filed at least and other end-users of copra or its equivalent in other coconut products. The levy shall be paid
three (3) motions … seeking, among others, to declare certain provisions of the Coconut Levy
by such copra exporters, oil millers, desiccators and other end-users of copra or its equivalent
Laws unconstitutional and having been rebuffed all three times by this Court," the Republic -
in other coconut products under such rules and regulations as the Authority may prescribe.
and necessarily Sandiganbayan – "should have followed as [they were] legally bound by this Until otherwise prescribed by the Authority, the current levy being collected shall be continued."
… Court’s prior determination" on that above issue of constitutionality under the doctrine of
Law of the Case.
Like other tax measures, they were not voluntary payments or donations by the people. They
were enforced contributions exacted on pain of penal sanctions, as provided under PD No.
Petitioners are wrong. The Court merely declined to pass upon the constitutionality of the 276:
coconut levy laws or some of their provisions. It did not declare that the UCPB shares acquired
with the use of coconut levy funds have legitimately become private.
"3. Any person or firm who violates any provision of this Decree or the rules and regulations
promulgated thereunder, shall, in addition to penalties already prescribed under existing
The coconut levy funds are in the nature of taxes and can only be used for public purpose. administrative and special law, pay a fine of not less than P2,500 or more than P10,000, or
Consequently, they cannot be used to purchase shares of stocks to be given for free to private suffer cancellation of licenses to operate, or both, at the discretion of the Court."
individuals.
Such penalties were later amended thus: ….
Indeed, We have hitherto discussed, the coconut levy was imposed in the exercise of the
State’s inherent power of taxation. As We wrote in Republic v. COCOFED: 109

88 | C O N S T I 1
(b) The coconut levies were imposed pursuant to the laws enacted by the proper legislative individuals in their private capacity and for their benefit, would contravene the rationale behind
authorities of the State. Indeed, the CCSF was collected under PD No. 276…." the imposition of taxes or levies.

(c) They were clearly imposed for a public purpose. There is absolutely no question that they Needless to stress, courts do not, as they cannot, allow by judicial fiat the conversion of special
were collected to advance the government’s avowed policy of protecting the coconut industry. funds into a private fund for the benefit of private individuals. In the same vein, We cannot
This Court takes judicial notice of the fact that the coconut industry is one of the great economic subscribe to the idea of what appears to be an indirect – if not exactly direct – conversion of
pillars of our nation, and coconuts and their byproducts occupy a leading position among the special funds into private funds, i.e., by using special funds to purchase shares of stocks, which
country’s export products…. in turn would be distributed for free to private individuals. Even if these private individuals
belong to, or are a part of the coconut industry, the free distribution of shares of stocks
Taxation is done not merely to raise revenues to support the government, but also to provide purchased with special public funds to them, nevertheless cannot be justified. The ratio in
means for the rehabilitation and the stabilization of a threatened industry, which is so affected Gaston,120 as expressed below, applies mutatis mutandis to this case:
with public interest as to be within the police power of the State….
The stabilization fees in question are levied by the State … for a special purpose – that of
Even if the money is allocated for a special purpose and raised by special means, it is still "financing the growth and development of the sugar industry and all its components,
public in character…. In Cocofed v. PCGG, the Court observed that certain agencies or stabilization of the domestic market including the foreign market." The fact that the State has
enterprises "were organized and financed with revenues derived from coconut levies imposed taken possession of moneys pursuant to law is sufficient to constitute them as state funds even
under a succession of law of the late dictatorship … with deposed Ferdinand Marcos and his though they are held for a special purpose….
cronies as the suspected authors and chief beneficiaries of the resulting coconut industry
monopoly." The Court continued: "…. It cannot be denied that the coconut industry is one of That the fees were collected from sugar producers,[etc.], and that the funds were channeled to
the major industries supporting the national economy. It is, therefore, the State’s concern to the purchase of shares of stock in respondent Bank do not convert the funds into a trust fund
make it a strong and secure source not only of the livelihood of a significant segment of the for their benefit nor make them the beneficial owners of the shares so purchased. It is but
population, but also of export earnings the sustained growth of which is one of the imperatives rational that the fees be collected from them since it is also they who are benefited from the
of economic stability.110 (Emphasis Ours) expenditure of the funds derived from it. ….121 (Emphasis Ours.)

We have ruled time and again that taxes are imposed only for a public purpose.111 "They cannot In this case, the coconut levy funds were being exacted from copra exporters, oil millers,
be used for purely private purposes or for the exclusive benefit of private persons." 112 When a desiccators and other end-users of copra or its equivalent in other coconut
law imposes taxes or levies from the public, with the intent to give undue benefit or advantage products.122 Likewise so, the funds here were channeled to the purchase of the shares of stock
to private persons, or the promotion of private enterprises, that law cannot be said to satisfy in UCPB. Drawing a clear parallelism between Gaston and this case, the fact that the coconut
the requirement of public purpose.113 In Gaston v. Republic Planters Bank, the petitioning sugar levy funds were collected from the persons or entities in the coconut industry, among others,
producers, sugarcane planters and millers sought the distribution of the shares of stock of the does not and cannot entitle them to be beneficial owners of the subject funds – or more bluntly,
Republic Planters Bank, alleging that they are the true beneficial owners thereof. 114 In that case, owners thereof in their private capacity. Parenthetically, the said private individuals cannot own
the investment, i.e., the purchase of the said bank, was funded by the deduction of PhP 1.00 the UCPB shares of stocks so purchased using the said special funds of the government. 123
per picul from the sugar proceeds of the sugar producers pursuant to P.D. No. 388. 115 In ruling
against the petitioners, the Court held that to rule in their favor would contravene the general Coconut levy funds are special public funds of the government.
principle that revenues received from the imposition of taxes or levies "cannot be used for
purely private purposes or for the exclusive benefit of private persons."116 The Court amply Plainly enough, the coconut levy funds are public funds. We have ruled in Republic v.
reasoned that the Stabilization Fund must "be utilized for the benefit of the entire sugar industry, COCOFED that the coconut levy funds are not only affected with public interest; they are prima
and all its components, stabilization of the domestic market including foreign market, the facie public funds.124 In fact, this pronouncement that the levies are government funds was
industry being of vital importance to the country’s economy and to national interest." 117 admitted and recognized by respondents, COCOFED, et al., in G.R. No. 147062-64.125 And
more importantly, in the same decision, We clearly explained exactly what kind of government
Similarly in this case, the coconut levy funds were sourced from forced exactions decreed fund the coconut levies are. We were categorical in saying that coconut levies are treated as
under P.D. Nos. 232, 276 and 582, among others, 118 with the end-goal of developing the entire special funds by the very laws which created them:
coconut industry.119 Clearly, to hold therefore, even by law, that the revenues received from the
imposition of the coconut levies be used purely for private purposes to be owned by private Finally and tellingly, the very laws governing the coconut levies recognize their public character.
Thus, the third Whereas clause of PD No. 276 treats them as special funds for a specific public
89 | C O N S T I 1
purpose. Furthermore, PD No. 711 transferred to the general funds of the State all existing has been fulfilled or abandoned, the balance, if any, shall be transferred to the general funds
special and fiduciary funds including the CCSF. On the other hand, PD No. 1234 specifically of the Government. (Emphasis Ours)
declared the CCSF as a special fund for a special purpose, which should be treated as
a special account in the National Treasury.126 (Emphasis Ours.) Correlatively, Section 2 of P.D. No. 755 clearly states that:

If only to stress the point, P.D. No. 1234 expressly stated that coconut levies are special funds Section 2. Financial Assistance. To enable the coconut farmers to comply with their contractual
to be remitted to the Treasury in the General Fund of the State, but treated as Special Accounts: obligations under the aforesaid Agreement, the [PCA] is hereby directed to draw and utilize the
collections under the Coconut Consumers Stabilization Fund [CCSF] authorized to be levied
Section 1. All income and collections for Special or Fiduciary Funds authorized by law shall be by [P.D.] 232, as amended, to pay for the financial commitments of the coconut farmers under
remitted to the Treasury and treated as Special Accounts in the General Fund, including the the said agreement…. and the Coconut Industry Development Fund as prescribed by
following: Presidential Decree No. 582 shall not be considered or construed, under any law or regulation,
special and/or fiduciary funds and do not form part of the general funds of the national
(a) [PCA] Development Fund, including all income derived therefrom under Sections 13 and government within the contemplation of Presidential Decree No. 711. (Emphasis Ours)
14 of [RA] No. 1145; Coconut Investments Fund under Section 8 of [RA] No. 6260, including
earnings, profits, proceeds and interests derived therefrom; Coconut Consumers Stabilization Likewise, as discussed supra, Article III, Section 5 of both P.D. Nos. 961 and 1468 provides
Funds under Section 3-A of PD No. 232, as inserted by Section 3 of P.D. No. 232, as inserted that the CCSF shall not be construed by any law as a special and/or trust fund, the stated
by Section 2 of P.D. No. 583; and all other fees accruing to the [PCA] under the provisions of intention being that actual ownership of the said fund shall pertain to coconut farmers in their
Section 19 of [RA] No. 1365, in accordance with Section 2 of P.D. No. 755 and all other income private capacities.131 Thus, in order to determine whether the relevant provisions of P.D. Nos.
accruing to the [PCA] under existing laws.127 (Emphasis Ours) 755, 961 and 1468 complied with Article VI, Section 29 (3) of the 1987 Constitution, a look at
the public policy or the purpose for which the CCSF levy was imposed is necessary.
Moreover, the Court, in Gaston, stated the observation that the character of a stabilization fund
as a special fund "is emphasized by the fact that the funds are deposited in the Philippine The CCSF was established by virtue of P.D. No. 276 wherein it is stated that:
National Bank [PNB] and not in the Philippine Treasury, moneys from which may be paid out
only in pursuance of an appropriation made by law." 128 Similarly in this case, Sec.1 (a) of P.D. WHEREAS, an escalating crisis brought about by an abnormal situation in the world market for
No. 276 states that the proceeds from the coconut levy shall be deposited with the PNB, then fats and oils has resulted in supply and price dislocations in the domestic market for coconut-
a government bank, or any other government bank under the account of the CCSF, as a based goods, and has created hardships for consumers thereof;
separate trust fund, which shall not form part of the government’s general fund. 129 And even
assuming arguendo that the coconut levy funds were transferred to the general fund pursuant WHEREAS, the representatives of the coconut industry … have proposed the implementation
to P.D. No. 1234, it was with the specific directive that the same be treated as special accounts
of an industry-financed stabilization scheme which will permit socialized pricing of coconut-
in the general fund.130
based commodities;

The coconut levy funds can only be used for the special purpose and the balance thereof
WHEREAS, it is the policy of the State to promote the welfare and economic well-being of the
should revert back to the general fund. Consequently, their subsequent reclassification as a
consuming public;
private fund to be owned by private individuals in their private capacities under P.D. Nos. 755,
961 and 1468 are unconstitutional.
….
To recapitulate, Article VI, Section 29 (3) of the 1987 Constitution, restating a general principle
on taxation, enjoins the disbursement of a special fund in accordance with the special purpose 1. In addition to its powers granted under [P.D.] No. 232, the [PCA] is hereby authorized to
for which it was collected, the balance, if there be any, after the purpose has been fulfilled or is formulate and immediately implement a stabilization scheme for coconut-based consumer
no longer forthcoming, to be transferred to the general funds of the government, thus: goods, along the following general guidelines:

Section 29(3)…. (a) ….The proceeds of the levy shall be deposited with the Philippine National Bank or any
other government bank to the account of the CCSF as a separate trust fund….
(3) All money collected on any tax levied for a special purpose shall be treated as a special
fund and paid out for such purpose only. If the purpose for which a special fund was created
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(b) The Fund shall be utilized to subsidize the sale of coconut-based products at prices set by …. c) They were clearly imposed for a public purpose. There is absolutely no question that they
the Price Control Council….: were colleted to advance the government’s avowed policy of protecting the coconut industry….

…. "Taxation is done not merely to raise revenues to support the government, but also to provide
means for the rehabilitation and the stabilization of a threatened industry, which is so affected
As couched, P.D. No. 276 created and exacted the CCSF "to advance the government’s with public interest as to be within the police power of the State, as held in Caltex Philippines
avowed policy of protecting the coconut industry." 132 Evidently, the CCSF was originally set up v. COA and Osmeña v. Orbos.
as a special fund to support consumer purchases of coconut products. To put it a bit differently,
the protection of the entire coconut industry, and even more importantly, for the consuming xxx xxx xxx
public provides the rationale for the creation of the coconut levy fund. There can be no quibbling
then that the foregoing provisions of P.D. No. 276 intended the fund created and set up therein The avowed public purpose for the disbursement of the CCSF is contained in the
not especially for the coconut farmers but for the entire coconut industry, albeit the perambulatory clauses and Section 1 of P.D. No. 755. The imperativeness of enunciating the
improvement of the industry would doubtless redound to the benefit of the farmers. Upon the public purpose of the expenditure of funds raised through taxation is underscored in the case
foregoing perspective, the following provisions of P.D. Nos. 755, 961 and 1468 insofar as they of Pascual v. The Secretary of Public Works and Communications, et al, supra, which held:
declared, as the case may be, that: "[the coconut levy] fund and the disbursements thereof
[shall be] authorized for the benefit of the coconut farmers and shall be owned by them in their "As regards the legal feasibility of appropriating public funds for a private purpose the principle
private capacities;"133 or the coconut levy fund shall not be construed by any law to be a special according to Ruling Case Law, is this:
and/or fiduciary fund, and do not therefore form part of the general fund of the national
government later on;134 or the UCPB shares acquired using the coconut levy fund shall be
distributed to the coconut farmers for free, 135 violated the special public purpose for which the ‘It is a general rule that the legislature is without power to appropriate public revenue for
CCSF was established. anything but a public purpose … it is the essential character of the direct object of the
expenditure which must determine its validity as justifying a tax, and not the magnitude of the
interests to be affected nor the degree to which the general advantage of the community, and
In sum, not only were the challenged presidential issuances unconstitutional for decreeing the thus the public welfare may be ultimately benefited by their promotion. Incidental advantage to
distribution of the shares of stock for free to the coconut farmers and, therefore, negating the the public or to the state, which results from the promotion of private interests and the prosperity
public purpose declared by P.D. No. 276, i.e., to stabilize the price of edible oil 136 and to protect of private enterprises or business, does not justify their aid by the use of public money.’ 25
the coconut industry.137 They likewise reclassified, nay treated, the coconut levy fund as private R.L.C. pp. 398-400)
fund to be disbursed and/or invested for the benefit of private individuals in their private
capacities, contrary to the original purpose for which the fund was created. To compound the
situation, the offending provisions effectively removed the coconut levy fund away from the "The rule is set forth in Corpus Juris Secundum in the following language:
cavil of public funds which normally can be paid out only pursuant to an appropriation made by
law.138 The conversion of public funds into private assets was illegally allowed, in fact xxx xxx xxx
mandated, by these provisions. Clearly therefore, the pertinent provisions of P.D. Nos. 755,
961 and 1468 are unconstitutional for violating Article VI, Section 29 (3) of the Constitution. In ‘The test of the constitutionality of a statute requiring the use of public funds is whether the
this context, the distribution by PCA of the UCPB shares purchased by means of the coconut statute is designed to promote the public interests, as opposed to the furtherance of the
levy fund – a special fund of the government – to the coconut farmers, is therefore void. advantage of individuals, although each advantage to individuals might incidentally serve the
public….’ (81 C.J.S. p. 1147)
We quote with approval the Sandiganbayan’s reasons for declaring the provisions of P.D. Nos.
755, 961 and 1468 as unconstitutional: "Needless to say, this Court is fully in accord with the foregoing views…. Besides, reflecting as
they do, the established jurisprudence in the United States, after whose constitutional system
It is now settled, in view of the ruling in Republic v. COCOFED, et al., supra, that "Coconut levy ours has been patterned, said views and jurisprudence are, likewise, part and parcel of our
funds are raised with the use of the police and taxing powers of the State;" that "they are levies own constitutional law."
imposed by the State for the benefit of the coconut industry and its farmers" and that "they were
clearly imposed for a public purpose." This public purpose is explained in the said case, as The gift of funds raised by the exercise of the taxing powers of the State which were converted
follows: into shares of stock in a private corporation, slated for free distribution to the coconut farmers,

91 | C O N S T I 1
can only be accorded constitutional sanction if it will directly serve the public purpose declared The PCA thus assumed, due to lack of adequate guidelines set by P.D. No. 755, that it had
by law….139 complete authority to define who are the coconut farmers and to decide as to who among the
coconut farmers shall be given the gift of bank shares; how many shares shall be given to them,
Section 1 of P.D. No. 755, as well as PCA Administrative Order No. 1, Series of 1975 (PCA and what basis it shall use to determine the amount of shares to be distributed for free to the
AO 1), and Resolution No. 074-75, are invalid delegations of legislative power. coconut farmers. In other words, P.D. No. 755 fails the completeness test which renders it
constitutionally infirm.
Petitioners argue that the anti-graft court erred in declaring Section 1 of PD 755, PCA
Administrative Order No. 1 and PCA Resolution No. 074-78 constitutionally infirm by reason of Regarding the second requisite of standard, it is settled that legislative standard need not be
alleged but unproven and unsubstantiated flaws in their implementation. Additionally, they expressed….
explain that said court erred in concluding that Section 1 of PD No. 755 constitutes an undue
delegation of legislative power insofar as it authorizes the PCA to promulgate rules and We observed, however, that the PCA [AO] No. 1, Series of 1975 and PCA Rules and
regulations governing the distribution of the UCPB shares to the farmers. Regulations 074-78, did not take into consideration the accomplishment of the public purpose
or the national standard/policy of P.D. No. 755 which is directly to accelerate the development
These propositions are meritless. and growth of the coconut industry and as a consequence thereof, to make the coconut farmers
"participants in and beneficiaries" of such growth and development. The said PCA issuances
did nothing more than provide guidelines as to whom the UCPB shares were to be distributed
The assailed PSJ-A noted the operational distribution nightmare faced by PCA and the mode
and how many bank shares shall be allotted to the beneficiaries. There was no mention of how
of distribution of UCPB shares set in motion by that agency left much room for diversion. Wrote
the distributed shares shall be used to achieve exclusively or at least directly or primarily the
the Sandiganbayan:
aim or public purpose enunciated by P.D. No. 755. The numerical or quantitative distribution of
shares contemplated by the PCA regulations which is a condition for the validly of said
The actual distribution of the bank shares was admittedly an enormous operational problem administrative issuances. There was a reversal of priorities. The narrow private interests
which resulted in the failure of the intended beneficiaries to receive their shares of stocks in the prevailed over the laudable objectives of the law…. However, under the May 25, 1975
bank, as shown by the rules and regulations, issued by the PCA, without adequate guidelines agreement implemented by the PCA issuances, the PCA acquired only 64.98% of the shares
being provided to it by P.D. No. 755. PCA Administrative Order No. 1, Series of 1975 (August of the bank and even the shares covering the said 64.98% were later on transferred to non-
20, 1975), "Rules and Regulations Governing the Distribution of Shares of Stock of the Bank coconut farmers."
Authorized to be Acquired Pursuant to PCA Board Resolution No. 246-75", quoted hereunder
discloses how the undistributed shares of stocks due to anonymous coconut farmers or payors
The distribution for free of the shares of stock of the CIIF Companies is tainted with the above-
of the coconut levy fees were authorized to be distributed to existing shareholders of the Bank:
mentioned constitutional infirmities of the PCA administrative issuances. In view of the
foregoing, we cannot consider the provision of P.D. No. 961 and P.D. No. 1468 and the
"Section 9. Fractional and Undistributed Shares – Fractional shares and shares which remain implementing regulations issued by the PCA as valid legal basis to hold that assets acquired
undistributed … shall be distributed to all the coconut farmers who have qualified and received with public funds have legitimately become private properties." 140 (Emphasis added.)
equity in the Bank and shall be apportioned among them, as far as practicable, in proportion to
their equity in relation to the number of undistributed equity and such further rules and
P.D. No. 755 involves an invalid delegation of legislative power, a concept discussed in Soriano
regulations as may hereafter be promulgated.’
v. Laguardia,141citing the following excerpts from Edu v. Ericta:
The foregoing PCA issuance was further amended by Resolution No. 074-78, still citing the
It is a fundamental … that Congress may not delegate its legislative power…. What cannot be
same problem of distribution of the bank shares….:
delegated is the authority … to make laws and to alter and repeal them; the test is the
completeness of the statute in all its term and provisions when it leaves the hands of the
xxx xxx xxx legislature. To determine whether or not there is an undue delegation of legislative power, the
inquiry must be directed to the scope and definiteness of the measure enacted. The legislature
Thus, when 51,200,806 shares in the bank remained undistributed, the PCA deemed it proper does not abdicate its functions when it describes what job must be done, who is to do it, and
to give a "bonanza" to coconut farmers who already got their bank shares, by giving them an what is the scope of his authority….
additional share for each share owned by them and by converting their fractional shares into
full shares. The rest of the shares were then transferred to a private organization, the To avoid the taint of unlawful delegation, there must be a standard, which implies at the very
COCOFED, for distribution to those determined to be "bona fide coconut farmers" who had "not least that the legislature itself determines matters of principle and lays down fundamental
received shares of stock of the Bank." ….
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policy. Otherwise, the charge of complete abdication may be hard to repel. A standard thus al. and Ballares, et al., reveals that indeed, P.D. No. 755 did not provide for any guideline,
defines legislative policy, marks its limits, maps out its boundaries and specifies the public standard, condition or restriction by which the said shares shall be distributed to the coconut
agency to apply it. It indicates the circumstances under which the legislative command is to be farmers that would ensure that the same will be undertaken to accelerate the growth and
effected. It is the criterion by which legislative purpose may be carried out. Thereafter, the development of the coconut industry pursuant to its national policy. The proposed rewording of
executive or administrative office designated may in pursuance of the above guidelines admissions reads:
promulgate supplemental rules and regulations.142 (Emphasis supplied)
There were shares forming part of the aforementioned 64.98% which were, after their
Jurisprudence is consistent as regards the two tests, which must be complied with to determine distribution, for free, to the coconut farmers as required by P.D. No. 755, sold or
the existence of a valid delegation of legislative power. In Abakada Guro Party List, et al. v. transferred respectively by individual coconut farmers who were then the registered
Purisima,143 We reiterated the discussion, to wit: stockholders of those UCPB shares to non-coconut farmers.148

Two tests determine the validity of delegation of legislative power: (1) the completeness test Clearly, P.D. No. 755, insofar as it grants PCA a veritable carte blanche to distribute to coconut
and (2) the sufficient standard test. A law is complete when it sets forth therein the policy to be farmers UCPB shares at the level it may determine, as well as the full disposition of such shares
executed, carried out or implemented by the delegate. It lays down a sufficient standard when to private individuals in their private capacity without any conditions or restrictions that would
it provides adequate guidelines or limitations in the law to map out the boundaries of the advance the law’s national policy or public purpose, present a case of undue delegation of
delegate’s authority and prevent the delegation from running riot. To be sufficient, the standard legislative power. As such, there is even no need to discuss the validity of the administrative
must specify the limits of the delegate’s authority, announce the legislative policy and identify orders and resolutions of PCA implementing P.D. No. 755. Water cannot rise higher than its
the conditions under which it is to be implemented. source.

In the instant case, the requisite standards or criteria are absent in P.D. No. 755. As may be Even so, PCA AO 1 and PCA Resolution No. 078-74, are in themselves, infirm under the undue
noted, the decree authorizes the PCA to distribute to coconut farmers, for free, the shares of delegation of legislative powers. Particularly, Section 9 of PCA AO I provides:
stocks of UCPB and to pay from the CCSF levy the financial commitments of the coconut
farmers under the Agreement for the acquisition of such bank. Yet, the decree does not even SECTION 9. Fractional and Undistributed Shares – Fractional shares and shares which remain
state who are to be considered as coconut farmers. Would, say, one who plants a single undistributed as a consequence of the failure of the coconut farmers to register their
coconut tree be already considered a coconut farmer and, therefore, entitled to own UCPB COCOFUND receipts or the destruction of the COCOFUND receipts or the registration of
shares? If so, how many shares shall be given to him? The definition of a coconut farmer and COCOFUND receipts in the name of an unqualified individual, after the final distribution is made
the basis as to the number of shares a farmer is entitled to receive for free are important on the basis of the consolidated IBM registration Report as of March 31, 1976 shall be
variables to be determined by law and cannot be left to the discretion of the implementing distributed to all the coconut farmers who have qualified and received equity in the Bank and
agency. shall be appointed among them, as far as practicable, in proportion to their equity in relation to
the number of undistributed equity and such further rules and regulations as may hereafter be
Moreover, P.D. No. 755 did not identify or delineate any clear condition as to how the promulgated.
disposition of the UCPB shares or their conversion into private ownership will redound to the
advancement of the national policy declared under it. To recall, P.D. No. 755 seeks to The foregoing provision directs and authorizes the distribution of fractional and undistributed
"accelerate the growth and development of the coconut industry and achieve a vertical shares as a consequence of the failure of the coconut farmers with Coco Fund receipts to
integration thereof so that coconut farmers will become participants in, and beneficiaries of, register them, even without a clear mandate or instruction on the same in any pertinent existing
such growth and development."144 The Sandiganbayan is correct in its observation and ruling law. PCA Resolution No. 078-74 had a similar provision, albeit providing more detailed
that the said law gratuitously gave away public funds to private individuals, and converted them information. The said Resolution identified 51,200,806 shares of the bank that remained
exclusively into private property without any restriction as to its use that would reflect the undistributed and PCA devised its own rules as to how these undistributed and fractional
avowed national policy or public purpose. Conversely, the private individuals to whom the shares shall be disposed of, notwithstanding the dearth as to the standards or parameters in
UCPB shares were transferred are free to dispose of them by sale or any other mode from the the laws which it sought to implement.
moment of their acquisition. In fact and true enough, the Sandiganbayan categorically stated
in its Order dated March 11, 2003,145 that out of the 72.2% shares and increased capital stock Eventually, what happened was that, as correctly pointed out by the Sandiganbayan, the PCA
of the FUB (later UCPB) allegedly covered by the May 25, 1975 Agreement, 146 entirely paid for gave a "bonanza" to supposed coconut farmers who already got their bank shares, by giving
by PCA, 7.22% were given to Cojuangco and the remaining 64.98%, which were originally held them extra shares according to the rules established – on its own – by the PCA under PCA AO
by PCA for the benefit of the coconut farmers, were later sold or transferred to non-coconut 1 and Resolution No. 078-74. Because of the lack of adequate guidelines under P.D. No. 755
farmers.147 Even the proposed rewording of the factual allegations of Lobregat, COCOFED, et
93 | C O N S T I 1
as to how the shares were supposed to be distributed to the coconut farmers, the PCA thus These identical provisions of P.D. Nos. 961 and 1468 likewise violate Article IX (D), Section
assumed that it could decide for itself how these shares will be distributed. This obviously paved 2(1) of the Constitution, defining the powers and functions of the Commission on Audit ("COA")
the way to playing favorites, if not allowing outright shenanigans. In this regard, this poser as a constitutional commission:
raised in the Court’s February 16, 1993 Resolution in G.R. No. 96073 is as relevant then as it
is now: "How is it that shares of stocks in such entities which was organized and financed by Sec. 2. (1) The Commission on Audit shall have the power, authority, and duty to examine,
revenues derived from coconut levy funds which were imbued with public interest ended up in audit, and settle all accounts pertaining to the revenue and receipts of, and expenditures or
private hands who are not farmers or beneficiaries; and whether or not the holders of said uses of funds and property, owned or held in trust by, or pertaining to, the Government, or any
stock, who in one way or another had had some part in the collection, administration, of its subdivisions, agencies, or instrumentalities, including government-owned and controlled
disbursement or other disposition of the coconut levy funds were qualified to acquire stock in corporations with original charters, and on a post-audit basis: (a) constitutional bodies,
the corporations formed and operated from these funds." 149 commissions and offices that have been granted fiscal autonomy under this Constitution; (b)
autonomous state colleges and universities; (c) other government-owned or controlled
Likewise, the said PCA issuances did not take note of the national policy or public purpose for corporations and their subsidiaries;.152(Emphasis Ours)
which the coconut levy funds were imposed under P.D. No. 755, i.e. the acceleration of the
growth and development of the entire coconut industry, and the achievement of a vertical A similar provision was likewise previously found in Article XII (D), Section 2 (1) of the 1973
integration thereof that could make the coconut farmers participants in, and beneficiaries of, Constitution, thus:
such growth and development.150 Instead, the PCA prioritized the coconut farmers themselves
by fully disposing of the bank shares, totally disregarding the national policy for which the funds Section 2. The Commission on Audit shall have the following powers and functions:
were created. This is clearly an undue delegation of legislative powers.
(1) Examine, audit, and settle, in accordance with law and regulations, all accounts pertaining
With this pronouncement, there is hardly any need to establish that the sequestered assets are to the revenues and receipts of, and expenditures or uses of funds and property, owned or held
ill-gotten wealth. The documentary evidence, the P.D.s and Agreements, prove that the transfer in trust by, or pertaining to, the Government, or any of its subdivisions, agencies, or
of the shares to the more than one million of supposed coconut farmers was tainted with instrumentalities, including government-owned and controlled corporations; keep the general
illegality. accounts of the government and, for such period as may be provided by law, preserve the
vouchers pertaining thereto; and promulgate accounting and auditing rules and regulations
Article III, Section 5 of P.D. No. 961 and Article III, Section 5 of P.D. No. 1468 violate Article IX including those for the prevention of irregular, unnecessary, excessive, or extravagant
(D) (2) of the 1987 Constitution. expenditures or use of funds and property. 153 (Emphasis Ours)

Article III, Section 5 of P.D. No. 961 explicitly takes away the coconut levy funds from the coffer The Constitution, by express provision, vests the COA with the responsibility for State
of the public funds, or, to be precise, privatized revenues derived from the coco levy. audit.154 As an independent supreme State auditor, its audit jurisdiction cannot be undermined
Particularly, the aforesaid Section 5 provides: by any law. Indeed, under Article IX (D), Section 3 of the 1987 Constitution, "[n]o law shall be
passed exempting any entity of the Government or its subsidiary in any guise whatever, or any
Section 5. Exemptions. The Coconut Consumers Stabilization Fund and the Coconut Industry investment of public funds, from the jurisdiction of the Commission on Audit."155 Following the
Development fund as well as all disbursements of said funds for the benefit of the coconut mandate of the COA and the parameters set forth by the foregoing provisions, it is clear that it
farmers as herein authorized shall not be construed or interpreted, under any law or regulation, has jurisdiction over the coconut levy funds, being special public funds. Conversely, the COA
as special and/or fiduciary funds, or as part of the general funds of the national government has the power, authority and duty to examine, audit and settle all accounts pertaining to the
within the contemplation of P.D. No. 711; nor as a subsidy, donation, levy, government funded coconut levy funds and, consequently, to the UCPB shares purchased using the said funds.
investment, or government share within the contemplation of P.D. 898 the intention being that However, declaring the said funds as partaking the nature of private funds, ergo subject to
said Fund and the disbursements thereof as herein authorized for the benefit of the coconut private appropriation, removes them from the coffer of the public funds of the government, and
farmers shall be owned in their own private capacity. 151 (Emphasis Ours) consequently renders them impervious to the COA audit jurisdiction. Clearly, the pertinent
provisions of P.D. Nos. 961 and 1468 divest the COA of its constitutionally-mandated function
The same provision is carried over in Article III, Section 5 of P.D. No. 1468, the Revised and undermine its constitutional independence.
Coconut Industry Code:
The assailed purchase of UCPB shares of stocks using the coconut levy funds presents a
classic example of an investment of public funds. The conversion of these special public funds
into private funds by allowing private individuals to own them in their private capacities is

94 | C O N S T I 1
something else. It effectively deprives the COA of its constitutionally-invested power to audit procedure outlined in PCA Resolution No. 033-78.160 And as the administrator of the CIIF
and settle such accounts. The conversion of the said shares purchased using special public holding companies, the UCPB authorized the acquisition of the SMC shares. 161 In fact, these
funds into pure and exclusive private ownership has taken, or will completely take away the companies were formed or organized solely for the purpose of holding the SMC shares. 162 As
said funds from the boundaries with which the COA has jurisdiction. Obviously, the COA is found by the Sandiganbayan, the 14 CIIF holding companies used borrowed funds from the
without audit jurisdiction over the receipt or disbursement of private property. Accordingly, UCPB to acquire the SMC shares in the aggregate amount of P1.656 Billion. 163
Article III, Section 5 of both P.D. Nos. 961 and 1468 must be struck down for being
unconstitutional, be they assayed against Section 2(1), Article XII (D) of the 1973 Constitution Since the CIIF companies and the CIIF block of SMC shares were acquired using coconut levy
or its counterpart provision in the 1987 Constitution. funds – funds, which have been established to be public in character – it goes without saying
that these acquired corporations and assets ought to be regarded and treated as government
The Court, however, takes note of the dispositive portion of PSJ-A, which states that:156 assets. Being government properties, they are accordingly owned by the Government, for the
coconut industry pursuant to currently existing laws. 164
xxx xxx xxx
It may be conceded hypothetically, as COCOFED et al. urge, that the 14 CIIF holding
2. Section 2 of P.D. No. 755 which mandated that the coconut levy funds shall not be companies acquired the SMC shares in question using advances from the CIIF companies and
considered special and/or fiduciary funds nor part of the general funds of the national from UCPB loans. But there can be no gainsaying that the same advances and UCPB loans
government and similar provisions of Sec. 3, Art. III, P.D. 961 and Sec. 5, Art. III, P.D. 1468 are public in character, constituting as they do assets of the 14 holding companies, which in
contravene the provisions of the Constitution, particularly, Art. IX (D), Sec. 2; and Article VI, turn are wholly-owned subsidiaries of the 6 CIIF Oil Mills. And these oil mills were organized,
Sec. 29 (3). (Emphasis Ours) capitalized and/or financed using coconut levy funds. In net effect, the CIIF block of SMC
shares are simply the fruits of the coconut levy funds acquired at the expense of the coconut
industry. In Republic v. COCOFED,165 the en banc Court, speaking through Justice (later Chief
xxx xxx xxx
Justice) Artemio Panganiban, stated: "Because the subject UCPB shares were acquired with
government funds, the government becomes their prima facie beneficial and true owner." By
However, a careful reading of the discussion in PSJ-A reveals that it is Section 5 of Article III parity of reasoning, the adverted block of SMC shares, acquired as they were with government
of P.D. No. 961 and not Section 3 of said decree, which is at issue, and which was therefore funds, belong to the government as, at the very least, their beneficial and true owner.
held to be contrary to the Constitution. The dispositive portion of the said PSJ should therefore
be corrected to reflect the proper provision that was declared as unconstitutional, which is
We thus affirm the decision of the Sandiganbayan on this point. But as We have earlier
Section 5 of Article III of P.D. No. 961 and not Section 3 thereof.
discussed, reiterating our holding in Republic v. COCOFED, the State’s avowed policy or
purpose in creating the coconut levy fund is for the development of the entire coconut industry,
V which is one of the major industries that promotes sustained economic stability, and not merely
the livelihood of a significant segment of the population. 166 Accordingly, We sustain the ruling
The CIIF Companies and the CIIF Block of the Sandiganbayan in CC No. 0033-F that the CIIF companies and the CIIF block of SMC
shares are public funds necessary owned by the Government. We, however, modify the same
of SMC shares are public funds/assets in the following wise: These shares shall belong to the Government, which shall be used only
for the benefit of the coconut farmers and for the development of the coconut industry.
From the foregoing discussions, it is fairly established that the coconut levy funds are special
public funds. Consequently, any property purchased by means of the coconut levy funds should Sandiganbayan did not err in ruling that
likewise be treated as public funds or public property, subject to burdens and restrictions
attached by law to such property. PCA (AO) No. 1, Series of 1975 and

In this case, the 6 CIIF Oil Mills were acquired by the UCPB using coconut levy funds. 157 On PCA rules and regulations 074-78 did
the other hand, the 14 CIIF holding companies are wholly owned subsidiaries of the CIIF Oil
Mills.158 Conversely, these companies were acquired using or whose capitalization comes from not comply with the national standard
the coconut levy funds. However, as in the case of UCPB, UCPB itself distributed a part of its
investments in the CIIF oil mills to coconut farmers, and retained a part thereof as
or policy of P.D. No. 755.
administrator.159 The portion distributed to the supposed coconut farmers followed the

95 | C O N S T I 1
According to the petitioners, the Sandiganbayan has identified the national policy sought to be in mind the (a) dictum that the power to tax should only be exercised for a public purpose and
enhanced by and expressed under Section 1 in relation to Section 2 of P.D. No. 755. Yet, so (b) command of Section 29, paragraph 3 of Article VI of the 1987 Constitution that:
petitioners argue, that court, with grave abuse of discretion, disregarded such policy and
thereafter, ruled that Section 1 in relation to Section 2 of P.D. No. 755 is unconstitutional as the (3) All money collected on any tax levied for a special purpose shall be treated as a special
decree failed to promote the purpose for which it was enacted in the first place. fund and paid out for such purpose only. If the purpose for which a special fund was created
has been fulfilled or abandoned, the balance, if any, shall be transferred to the general funds
We are not persuaded. The relevant assailed portion of PSJ-A states: of the Government. (Emphasis supplied)

We observe, however, that the PCA [AO] No. 1, Series of 1975 and PCA Rules and Regulations For the above reason, the above-assailed action of the Sandiganbayan was well within the
074-78, did not take into consideration the accomplishment of the public purpose or the national scope of its sound discretion and mandate.
standard/policy of P.D. No. 755 which is directly to accelerate the development and growth of
the coconut industry and as a consequence thereof, to make the coconut farmers "participants Moreover, petitioners impute on the anti-graft court the commission of grave abuse of discretion
in and beneficiaries" of such growth and development.… for going into the validity of and in declaring the coco levy laws as unconstitutional, when there
were still factual issues to be resolved in a full blown trial as directed by this Court. 168
It is a basic legal precept that courts do not look into the wisdom of the laws passed. The
principle of separation of powers demands this hands-off attitude from the judiciary. Saguiguit Petitioners COCOFED and the farmer representatives miss the point. They acknowledged that
v. People167 teaches why: their alleged ownership of the sequestered shares in UCPB and SMC is predicated on the coco
levy decrees. Thus, the legality and propriety of their ownership of these valuable assets are
… [W]hat the petitioner asks is for the Court to delve into the policy behind or wisdom of a directly related to and must be assayed against the constitutionality of those presidential
statute, … which, under the doctrine of separation of powers, it cannot do,…. Even with the decrees. This is a primordial issue, which must be determined to address the validity of the rest
best of motives, the Court can only interpret and apply the law and cannot, despite doubts of petitioners’ claims of ownership. Verily, the Sandiganbayan did not commit grave abuse of
about its wisdom, amend or repeal it. Courts of justice have no right to encroach on the discretion, a phrase which, in the abstract, denotes the idea of capricious or whimsical exercise
prerogatives of lawmakers, as long as it has not been shown that they have acted with grave of judgment or the exercise of power in an arbitrary or despotic manner by reason of passion
abuse of discretion. And while the judiciary may interpret laws and evaluate them for or personal hostility as to be equivalent to having acted without jurisdiction.169
constitutional soundness and to strike them down if they are proven to be infirm, this solemn
power and duty do not include the discretion to correct by reading into the law what is not The Operative Fact Doctrine does not apply
written therein.
Petitioners assert that the Sandiganbayan’s refusal to recognize the vested rights purportedly
We reproduce the policy-declaring provision of P.D. No. 755, thus: created under the coconut levy laws constitutes taking of private property without due process
of law. They reason out that to accord retroactive application to a declaration of
Section 1. Declaration of National Policy. — It is hereby declared that the policy of the State is unconstitutionality would be unfair inasmuch as such approach would penalize the farmers who
to provide readily available credit facilities to the coconut farmers at preferential rates; that this merely obeyed then valid laws.
policy can be … efficiently realized by the implementation of the "Agreement for the Acquisition
of a Commercial Bank for the benefit of the Coconut Farmers" executed by the [PCA], the terms This contention is specious.
of which "Agreement" are hereby incorporated by reference; and that the [PCA] is hereby
authorized to distribute, for free, the shares of stock of the bank it acquired to the coconut In Yap v. Thenamaris Ship’s Management, 170 the Operative Fact Doctrine was discussed in
farmers under such rules and regulations it may promulgate. that:

P.D. No. 755 having stated in no uncertain terms that the national policy of providing cheap As a general rule, an unconstitutional act is not a law; it confers no rights; it imposes no duties;
credit facilities to coconut farmers shall be achieved with the acquisition of a commercial bank, it affords no protection; it creates no office; it is inoperative as if it has not been passed at all.
the Court is without discretion to rule on the wisdom of such an undertaking. It is abundantly The general rule is supported by Article 7 of the Civil Code, which provides:
clear, however, that the Sandiganbayan did not look into the policy behind, or the wisdom of,
P.D. No. 755. In context, it did no more than to inquire whether the purpose defined in P.D. No.
755 and for which the coco levy fund was established would be carried out, obviously having Art. 7. Laws are repealed only by subsequent ones, and their violation or non-observance shall
not be excused by disuse or custom or practice to the contrary.

96 | C O N S T I 1
The doctrine of operative fact serves as an exception to the aforementioned general rule. In In the language of an American Supreme Court decision: "The actual existence of a statute,
Planters Products, Inc. v. Fertiphil Corporation, we held: prior to such a determination [of unconstitutionality], is an operative fact and may have
consequences which cannot justly be ignored. The past cannot always be erased by a new
The doctrine of operative fact, as an exception to the general rule, only applies as a matter of judicial declaration. The effect of the subsequent ruling as to invalidity may have to be
equity and fair play. It nullifies the effects of an unconstitutional law by recognizing that the considered in various aspects, with respect to particular relations, individual and corporate, and
existence of a statute prior to a determination of unconstitutionality is an operative fact and may particular conduct, private and official." This language has been quoted with approval in a
have consequences which cannot always be ignored. The past cannot always be erased by a resolution in Araneta v. Hill and the decision in Manila Motor Co., Inc. v. Flores. An even more
new judicial declaration. recent instance is the opinion of Justice Zaldivar speaking for the Court in Fernandez v. Cuerva
and Co. (Emphasis supplied.)
The doctrine is applicable when a declaration of unconstitutionality will impose an undue
burden on those who have relied on the invalid law. Thus, it was applied to a criminal case The principle was further explicated in the case of Rieta v. People of the Philippines, thus:
when a declaration of unconstitutionality would put the accused in double jeopardy or would
put in limbo the acts done by a municipality in reliance upon a law creating it. 171 In similar situations in the past this Court had taken the pragmatic and realistic course set forth
in Chicot County Drainage District vs. Baxter Bank to wit:
In that case, this Court further held that the Operative Fact Doctrine will not be applied as an
exception when to rule otherwise would be iniquitous and would send a wrong signal that an The courts below have proceeded on the theory that the Act of Congress, having been found
act may be justified when based on an unconstitutional provision of law. 172 to be unconstitutional, was not a law; that it was inoperative, conferring no rights and imposing
no duties, and hence affording no basis for the challenged decree…. It is quite clear, however,
The Court had the following disquisition on the concept of the Operative Fact Doctrine in the that such broad statements as to the effect of a determination of unconstitutionality must be
case of Chavez v. National Housing Authority:173 taken with qualifications. The actual existence of a statute, prior to [the determination of its
invalidity], is an operative fact and may have consequences which cannot justly be ignored.
The past cannot always be erased by a new judicial declaration. The effect of the subsequent
The "operative fact" doctrine is embodied in De Agbayani v. Court of Appeals, wherein it is
ruling as to invalidity may have to be considered in various aspects –with respect to particular
stated that a legislative or executive act, prior to its being declared as unconstitutional by the
conduct, private and official. Questions of rights claimed to have become vested, of status, of
courts, is valid and must be complied with, thus:
prior determinations deemed to have finality and acted upon accordingly, of public policy in the
light of the nature both of the statute and of its previous application, demand examination.
As the new Civil Code puts it: "When the courts declare a law to be inconsistent with the These questions are among the most difficult of those which have engaged the attention of
Constitution, the former shall be void and the latter shall govern. Administrative or executive courts, state and federal, and it is manifest from numerous decisions that an all-inclusive
acts, orders and regulations shall be valid only when they are not contrary to the laws of the statement of a principle of absolute retroactive invalidity cannot be justified.
Constitution." It is understandable why it should be so, the Constitution being supreme and
paramount. Any legislative or executive act contrary to its terms cannot survive.
Moreover, the Court ruled in Chavez that:
Such a view has support in logic and possesses the merit of simplicity. It may not however be
Furthermore, when petitioner filed the instant case against respondents on August 5, 2004, the
sufficiently realistic. It does not admit of doubt that prior to the declaration of nullity such
JVAs were already terminated by virtue of the MOA between the NHA and RBI. The
challenged legislative or executive act must have been in force and had to be complied with.
respondents had no reason to think that their agreements were unconstitutional or even
This is so as until after the judiciary, in an appropriate case, declares its invalidity, it is entitled
questionable, as in fact, the concurrent acts of the executive department lent validity to the
to obedience and respect. Parties may have acted under it and may have changed their
implementation of the Project. The SMDRP agreements have produced vested rights in favor
positions. What could be more fitting than that in a subsequent litigation regard be had to what
of the slum dwellers, the buyers of reclaimed land who were issued titles over said land, and
has been done while such legislative or executive act was in operation and presumed to be
the agencies and investors who made investments in the project or who bought SMPPCs.
valid in all respects. It is now accepted as a doctrine that prior to its being nullified, its existence
These properties and rights cannot be disturbed or questioned after the passage of around ten
as a fact must be reckoned with. This is merely to reflect awareness that precisely because the
(10) years from the start of the SMDRP implementation. Evidently, the "operative fact" principle
judiciary is the governmental organ which has the final say on whether or not a legislative or
has set in. The titles to the lands in the hands of the buyers can no longer be invalidated. 174
executive measure is valid, a period of time may have elapsed before it can exercise the power
of judicial review that may lead to a declaration of nullity. It would be to deprive the law of its
quality of fairness and justice then, if there be no recognition of what had transpired prior to
such adjudication.
97 | C O N S T I 1
In the case at bar, the Court rules that the dictates of justice, fairness and equity do not support different corporate entity from UCPB. This fact was admitted by petitioners during the April 17,
the claim of the alleged farmer-owners that their ownership of the UCPB shares should be 2001 oral arguments in G.R. Nos. 147062-64.
respected. Our reasons:
In fact, while the CIF levy payments claimed to have been paid by petitioners were meant for
1. Said farmers or alleged claimants do not have any legal right to own the UCPB shares the CIC, the distribution of UCPB stock certificates to the coconut farmers, if at all, were meant
distributed to them. It was not successfully refuted that said claimants were issued receipts for the payors of the CCSF in proportion to the coconut farmer’s CCSF contributions pursuant
under R.A. 6260 for the payment of the levy that went into the Coconut Investment Fund (CIF) to PCA Resolution No. 045-75 dated May 21, 1975:
upon which shares in the "Coconut Investment Company" will be issued. The Court upholds
the finding of the Sandiganbayan that said investment company is a different corporate entity RESOLVED, FURTHER, That the amount of ONE HUNDRED FIFTY MILLION
from the United Coconut Planters Bank. This was in fact admitted by petitioners during the April (P150,000,000.00) PESOS be appropriated and set aside from available funds of the PCA to
17, 2001 oral arguments in G.R. Nos. 147062-64.175 be utilized in payment for the shares of stock of such existing commercial bank and that the
Treasurer be instructed to disburse the said amount accordingly.
The payments under R.A. 6260 cannot be equated with the payments under P.D. No. 276, the
first having been made as contributions to the Coconut Investment Fund while the payments xxx xxx xxx
under P.D. No. 276 constituted the Coconut Consumers Stabilization Fund ("CCSF"). R.A.
6260 reads: RESOLVED, FINALLY, That … be directed to organize a team which shall prepare a list of
coconut farmers who have paid the levy and contributed to the [CCSF] and to prepare a stock
Section 2. Declaration of Policy. It is hereby declared to be the national policy to accelerate the distribution plan to the end that the aforesaid coconut farmers shall receive certificates of stock
development of the coconut industry through the provision of adequate medium and long-term of such commercial bank in proportion to their contributions to the Fund.
financing for capital investment in the industry, by instituting a Coconut Investment fund
capitalized and administered by coconut farmers through a Coconut Investment Company.176 Unfortunately, the said resolution was never complied with in the distribution of the so-called
"farmers" UCPB shares.
P.D. No. 276 provides:
The payments therefore under R.A. 6260 are not the same as those under P.D. No. 276. The
1. In addition to its powers granted under Presidential Decree No. 232, the Philippine Coconut amounts of CIF contributions under R.A. 6260 which were collected starting 1971 are
Authority is hereby authorized to formulate and immediately implement a stabilization scheme undeniably different from the CCSF levy under P.D. No. 276, which were collected starting
for coconut-based consumer goods, along the following general guidelines: 1973. The two (2) groups of claimants differ not only in identity but also in the levy paid, the
amount of produce and the time the government started the collection.
(a) ….
Thus, petitioners and the alleged farmers claiming them pursuant to R.A. 6260 do not have any
The proceeds from the levy shall be deposited with the Philippine National Bank or any other legal basis to own the UCPB shares distributed to them, assuming for a moment the legal
government bank to the account of the Coconut Consumers Stabilization Fund, as a separate feasibility of transferring these shares paid from the R.A. 6260 levy to private individuals.
trust fund which shall not form part of the general fund of the government.
2. To grant all the UCPB shares to petitioners and its alleged members would be iniquitous and
(b) The Fund shall be utilized to subsidize the sale of coconut-based products at prices set by prejudicial to the remaining 4.6 million farmers who have not received any UCPB shares when
the Price Control Council, under rules and regulations to be promulgated by the Philippine in fact they also made payments to either the CIF or the CCSF but did not receive any receipt
Consumers Stabilization Committee….177 or who was not able to register their receipts or misplaced them.

The PCA, via Resolution No. 045-75 dated May 21, 1975, clarified the distinction between the Section 1 of P.D. No. 755 which was declared unconstitutional cannot be considered to be the
CIF levy payments under R.A. 6260 and the CCSF levy paid pursuant to P.D. 276, thusly: legal basis for the transfer of the supposed private ownership of the UCPB shares to petitioners
who allegedly paid the same under R.A. 6260. The Solicitor General is correct in concluding
It must be remembered that the receipts issued under R.A. No. 6260 were to be registered in that such unauthorized grant to petitioners constitutes illegal deprivation of property without
exchange for shares of stock in the Coconut Investment Company (CIC), which obviously is a due process of law. Due process of law would mean that the distribution of the UCPB shares
should be made only to farmers who have paid the contribution to the CCSF pursuant to P.D.
No. 276, and not to those who paid pursuant to R.A. 6260. What would have been the
98 | C O N S T I 1
appropriate distribution scheme was violated by Section 1 of P.D. No. 755 when it required that WHEREAS, pursuant to PCA Board Resolution No. 246-75, the total par value of the shares
the UCPB shares should be distributed to coconut farmers without distinction – in fact, giving of stock of the Bank purchased by the PCA for the benefit of the coconut farmers is
the PCA limitless power and free hand, to determine who these farmers are, or would be. P85,773,600.00 with a par value of P1.00 per share or equivalent to 85,773.600 shares;

We cannot sanction the award of the UCPB shares to petitioners who appear to represent only WHEREAS, out of the 85,773,600 shares, a total of 34,572,794 shares have already been
1.4 million members without any legal basis to the extreme prejudice of the other 4.6 million distributed in accordance with Administrative Order No. 1, Series of 1975, to wit:
coconut farmers (Executive Order No. 747 fixed the number of coconut farmers at 6 million in
1981). Indeed, petitioners constitute only a small percentage of the coconut farmers in the First Distribution - 12,573,059
Philippines. Thus, the Sandiganbayan correctly declared that the UCPB shares are
government assets in trust for the coconut farmers, which would be more beneficial to all the Second Distribution - 10,841,409
coconut farmers instead of a very few dubious claimants;
Third Distribution - 11,158,326
3. The Sandiganbayan made the finding that due to enormous operational problems and
administrative complications, the intended beneficiaries of the UCPB shares were not able to
receive the shares due to them. To reiterate what the anti-graft court said: 34,572,794

The actual distribution of the bank shares was admittedly an enormous operational problem "WHEREAS, there is, therefore, a total of 51,200,806 shares still available for distribution
which resulted in the failure of the intended beneficiaries to receive their shares of stocks in the among the coconut farmers;
bank, as shown by the rules and regulations, issued by the PCA, without adequate guidelines
being provided to it by P.D. No. 755. PCA Administrative Order No. 1, Series of 1975 (August WHEREAS, it was determined by the PCA Board, in consonance with the policy of the state
20, 1975), "Rules and Regulations Governing the Distribution of Shares of Stock of the Bank on the integration of the coconut industry, that the Bank shares must be widely distributed as
Authorized to be Acquired Pursuant to PCA Board Resolution No. 246-75", quoted hereunder possible among the coconut farmers, for which purpose a national census of coconut farmers
discloses how the undistributed shares of stocks due to anonymous coconut farmers or payors was made through the Philippine Coconut Producers Federation (COCOFED);
of the coconut levy fees were authorized to be distributed to existing shareholders of the Bank:
WHEREAS, to implement such determination of the PCA Board, there is a need to accordingly
"Section 9. Fractional and Undistributed Shares – Fractional shares and shares which remain amend Administrative Order No. 1, Series of 1975;
undistributed as a consequence of the failure of the coconut farmers to register their
COCOFUND receipts or the destruction of the COCOFUND receipts or the registration of the NOW, THEREFORE, BE IT RESOLVED, AS IT IS HEREBY RESOLVED, that the remaining
COCOFUND receipts in the name of an unqualified individual, after the final distribution is made 51,200,806 shares of stock of the Bank authorized to be acquired pursuant to the PCA Board
on the basis of the consolidated IBM registration Report as of March 31, 1976 shall be Resolution No. 246-75 dated July 25, 1975 be distributed as follows:
distributed to all the coconut farmers who have qualified and received equity in the Bank and
shall be apportioned among them, as far as practicable, in proportion to their equity in relation (1) All the coconut farmers who have received their shares in the equity of the Bank on the
to the number of undistributed equity and such further rules and regulations as may hereafter basis of Section 8 of Administrative Order No. 1, Series of 1975, shall receive additional share
be promulgated.’ for each share presently owned by them;

The foregoing PCA issuance was further amended by Resolution No. 074-78, still citing the (2) Fractional shares shall be completed into full shares, and such full shares shall be
same problem of distribution of the bank shares. This latter Resolution is quoted as follows: distributed among the coconut farmers who qualified for the corresponding fractional shares;

RESOLUTION NO. 074-78 (3) The balance of the shares, after deducting those to be distributed in accordance with (1)
and (2) above, shall be transferred to COCOFED for distribution, immediately after completion
AMENDMENT OF ADMINISTRATIVE ORDER of the national census of coconut farmers prescribed under Resolution No. 033-78 of the PCA
Board, to all those who are determined by the PCA Board to be bona fide coconut farmers and
NO. 1, SERIES OF 1975, GOVERNING THE have not received shares of stock of the Bank. The shares shall be equally determined among
them on the basis of per capita.
DISTRIBUTION OF SHARES
99 | C O N S T I 1
RESOLVED, FURTHER, That the rules and regulations under Administrative Order No. 1, the UCPB shares may not actually be the intended beneficiaries of said benefit. Clearly,
Series of 1975, which are inconsistent with this Administrative Order be, as they are hereby, applying the Operative Fact Doctrine would not only be iniquitous but would also serve injustice
repealed and/or amended accordingly." to the Government, to the coconut industry, and to the people, who, whether willingly or
unwillingly, contributed to the public funds, and therefore expect that their Government would
Thus, when 51,200,806 shares in the bank remained undistributed, the PCA deemed it proper take utmost care of them and that they would be used no less, than for public purpose.
to give a "bonanza" to coconut farmers who already got their bank shares, by giving them an
additional share for each share owned by them and by converting their fractional shares into We clarify that PSJ-A is subject of another petition for review interposed by Eduardo
full shares. The rest of the shares were then transferred to a private organization, the Cojuangco, Jr., in G.R. No. 180705 entitled, Eduardo M. Cojuangco, Jr. v. Republic of the
COCOFED, for distribution to those determined to be "bona fide coconut farmers" who had "not Philippines, which shall be decided separately by this Court. Said petition should accordingly
received shares of stock of the Bank." The distribution to the latter was made on the basis of not be affected by this Decision save for determinatively legal issues directly addressed herein.
"per capita", meaning without regard to the COCOFUND receipts. The PCA considered itself
free to disregard the said receipts in the distribution of the shares although they were WHEREFORE, the petitions in G.R. Nos. 177857-58 and 178793 are hereby DENIED. The
considered by the May 25, 1975 Agreement between the PCA and defendant Cojuangco (par. Partial Summary Judgment dated July 11, 2003 in Civil Case No. 0033-A as reiterated with
[8] of said Agreement) and by Sections 1, 3, 4, 6 and 9, PCA Administrative Order No. 1, Series modification in Resolution dated June 5, 2007, as well as the Partial Summary Judgment dated
of 1975 as the basis for the distribution of shares. May 7, 2004 in Civil Case No. 0033-F, which was effectively amended in Resolution dated May
11, 2007, are AFFIRMED with modification, only with respect to those issues subject of the
The PCA thus assumed, due to lack of adequate guidelines set by P.D. No. 755, that it had petitions in G.R. Nos. 177857-58 and 178193. However, the issues raised in G.R. No. 180705
complete authority to define who are the coconut farmers and to decide as to who among the in relation to Partial Summary Judgment dated July 11, 2003 and Resolution dated June 5,
coconut farmers shall be given the gift of bank shares; how many shares shall be given to them, 2007 in Civil Case No. 0033-A, shall be decided by this Court in a separate decision.
and what basis it shall use to determine the amount of shares to be distributed for free to the
coconut farmers. In other words, P.D. No. 755 fails the completeness test which renders it The Partial Summary Judgment in Civil Case No. 0033-A dated July 11, 2003, is hereby
constitutionally infirm. MODIFIED, and shall read as follows:

Due to numerous flaws in the distribution of the UCPB shares by PCA, it would be best for the WHEREFORE, in view of the foregoing, We rule as follows:
interest of all coconut farmers to revert the ownership of the UCBP shares to the government
for the entire coconut industry, which includes the farmers; SUMMARY OF THE COURT’S RULING.

4. The Court also takes judicial cognizance of the fact that a number, if not all, of the coconut A. Re: CLASS ACTION MOTION FOR A SEPARATE SUMMARY JUDGMENT dated April 11,
farmers who sold copra did not get the receipts for the payment of the coconut levy for the
2001 filed by Defendant Maria Clara L. Lobregat, COCOFED, et al., and Ballares, et al.
reason that the copra they produced were bought by traders or middlemen who in turn sold the
same to the coconut mills. The reality on the ground is that it was these traders who got the
receipts and the corresponding UCPB shares. In addition, some uninformed coconut farmers The Class Action Motion for Separate Summary Judgment dated April 11, 2001 filed by
who actually got the COCOFUND receipts, not appreciating the importance and value of said defendant Maria Clara L. Lobregat, COCOFED, et al. and Ballares, et al., is hereby DENIED
receipts, have already sold said receipts to non-coconut farmers, thereby depriving them of the for lack of merit.
benefits under the coconut levy laws. Ergo, the coconut farmers are the ones who will not be
benefited by the distribution of the UCPB shares contrary to the policy behind the coconut levy B. Re: MOTION FOR PARTIAL SUMMARY JUDGMENT (RE: COCOFED, ET AL. AND
laws. The nullification of the distribution of the UCPB shares and their transfer to the BALLARES, ET AL.) dated April 22, 2002 filed by Plaintiff.
government for the coconut industry will, therefore, ensure that the benefits to be deprived from
the UCPB shares will actually accrue to the intended beneficiaries – the genuine coconut 1. a. The portion of Section 1 of P.D. No. 755, which reads:
farmers.
…and that the Philippine Coconut Authority is hereby authorized to distribute, for free, the
From the foregoing, it is highly inappropriate to apply the operative fact doctrine to the UCPB shares of stock of the bank it acquired to the coconut farmers under such rules and regulations
shares. Public funds, which were supposedly given utmost safeguard, were haphazardly it may promulgate.
distributed to private individuals based on statutory provisions that are found to be
constitutionally infirm on not only one but on a variety of grounds. Worse still, the recipients of

100 | C O N S T I 1
taken in relation to Section 2 of the same P.D., is unconstitutional: (i) for having allowed the Wherefore, in view of the foregoing, we hold that:
use of the CCSF to benefit directly private interest by the outright and unconditional grant of
absolute ownership of the FUB/UCPB shares paid for by PCA entirely with the CCSF to the The Motion for Partial Summary Judgment (Re: Defendants CIIF Companies, 14 Holding
undefined "coconut farmers", which negated or circumvented the national policy or public Companies and Cocofed, et al) filed by Plaintiff is hereby GRANTED. Accordingly, the CIIF
purpose declared by P.D. No. 755 to accelerate the growth and development of the coconut Companies, namely:
industry and achieve its vertical integration; and (ii) for having unduly delegated legislative
power to the PCA.
1. Southern Luzon Coconut Oil Mills (SOLCOM);

b. The implementing regulations issued by PCA, namely, Administrative Order No. 1, Series of 2. Cagayan de Oro Oil Co., Inc. (CAGOIL);
1975 and Resolution No. 074-78 are likewise invalid for their failure to see to it that the
distribution of shares serve exclusively or at least primarily or directly the aforementioned public
purpose or national policy declared by P.D. No. 755. 3. Iligan Coconut Industries, Inc. (ILICOCO);

2. Section 2 of P.D. No. 755 which mandated that the coconut levy funds shall not be 4. San Pablo Manufacturing Corp. (SPMC);
considered special and/or fiduciary funds nor part of the general funds of the national
government and similar provisions of Sec. 5, Art. III, P.D. No. 961 and Sec. 5, Art. III, P.D. No. 5. Granexport Manufacturing Corp. (GRANEX); and
1468 contravene the provisions of the Constitution, particularly, Art. IX (D), Sec. 2; and Article
VI, Sec. 29 (3). 6. Legaspi Oil Co., Inc. (LEGOIL),

3. Lobregat, COCOFED, et al. and Ballares, et al. have not legally and validly obtained title of As well as the 14 Holding Companies, namely:
ownership over the subject UCPB shares by virtue of P.D. No. 755, the Agreement dated May
25, 1975 between the PCA and defendant Cojuangco, and PCA implementing rules, namely, 1. Soriano Shares, Inc.;
Adm. Order No. 1, s. 1975 and Resolution No. 074-78.
2. ACS Investors, Inc.;
4. The so-called "Farmers’ UCPB shares" covered by 64.98% of the UCPB shares of stock,
which formed part of the 72.2% of the shares of stock of the former FUB and now of the UCPB,
3. Roxas Shares, Inc.;
the entire consideration of which was charged by PCA to the CCSF, are hereby declared
conclusively owned by, the Plaintiff Republic of the Philippines.
4. Arc Investors; Inc.;
xxx xxx xxx
5. Toda Holdings, Inc.;
So ordered.
6. AP Holdings, Inc.;
The Partial Summary Judgment in Civil Case No. 0033-F dated May 7, 2004, is hereby
MODIFIED, and shall read as follows: 7. Fernandez Holdings, Inc.;

WHEREFORE, the Motion for Execution of Partial summary judgment (re: CIIF Block of Smc 8. SMC Officers Corps, Inc.;
Shares of Stock) dated August 8, 2005 of the plaintiff is hereby denied for lack of merit.
However, this Court orders the severance of this particular claim of Plaintiff. The Partial 9. Te Deum Resources, Inc.;
Summary Judgment dated May 7, 2004 is now considered a separate final and appealable
judgment with respect to the said CIIF Block of SMC shares of stock.1avvphi1 10. Anglo Ventures, Inc.;

The Partial Summary Judgment rendered on May 7, 2004 is modified by deleting the last 11. Randy Allied Ventures, Inc.;
paragraph of the dispositive portion, which will now read, as follows:

101 | C O N S T I 1
12. Rock Steel Resources, Inc.;

13. Valhalla Properties Ltd., Inc.; and

14. First Meridian Development, Inc.

AND THE CIIF BLOCK OF SAN MIGUEL CORPORATION (SMC) SHARES OF STOCK
TOTALING 33,133,266 SHARES AS OF 1983 TOGETHER WITH ALL DIVIDENDS
DECLARED, PAID AND ISSUED THEREON AS WELL AS ANY INCREMENTS THERETO
ARISING FROM, BUT NOT LIMITED TO, EXERCISE OF PRE-EMPTIVE RIGHTS ARE
DECLARED OWNED BY THE GOVERNMENT TO BE USED ONLY FOR THE BENEFIT OF
ALL COCONUT FARMERS AND FOR THE DEVELOPMENT OF THE COCONUT
INDUSTRY, AND ORDERED RECONVEYED TO THE GOVERNMENT.

The Court affirms the Resolutions issued by the Sandiganbayan on June 5, 2007 in civil case
no. 0033-A and ON May 11, 2007 in civil case No. 0033-F, that there is no more necessity of
further trial with respect to the issue of ownership of (1) the sequestered UCPB shares, (2) the
CIIF block of SMC shares, and (3) the CIIF companies. as they have finally been
ADJUDICATED in the AFOREMENTIONED PARTIAL SUMMARY JUDGMENTS DATED jULY
11, 2003 AND mAY 7, 2004.

SO ORDERED.

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

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such violation, negligence, abuse, malfeasance, misfeasance or failure to exercise The equal protection clause recognizes a valid classification, that is, a classification that has a
extraordinary diligence. reasonable foundation or rational basis and not arbitrary. 22 With respect to RA 9335, its
expressed public policy is the optimization of the revenue-generation capability and collection
Equal Protection of the BIR and the BOC.23 Since the subject of the law is the revenue- generation capability
and collection of the BIR and the BOC, the incentives and/or sanctions provided in the law
should logically pertain to the said agencies. Moreover, the law concerns only the BIR and the
Equality guaranteed under the equal protection clause is equality under the same conditions
BOC because they have the common distinct primary function of generating revenues for the
and among persons similarly situated; it is equality among equals, not similarity of treatment of
national government through the collection of taxes, customs duties, fees and charges.
persons who are classified based on substantial differences in relation to the object to be
accomplished.19When things or persons are different in fact or circumstance, they may be
treated in law differently. In Victoriano v. Elizalde Rope Workers’ Union,20 this Court declared: The BIR performs the following functions:

The guaranty of equal protection of the laws is not a guaranty of equality in the Sec. 18. The Bureau of Internal Revenue. – The Bureau of Internal Revenue, which
application of the laws upon all citizens of the [S]tate. It is not, therefore, a requirement, shall be headed by and subject to the supervision and control of the Commissioner of
in order to avoid the constitutional prohibition against inequality, that every man, Internal Revenue, who shall be appointed by the President upon the recommendation
woman and child should be affected alike by a statute. Equality of operation of statutes of the Secretary [of the DOF], shall have the following functions:
does not mean indiscriminate operation on persons merely as such, but on persons
according to the circumstances surrounding them. It guarantees equality, not identity (1) Assess and collect all taxes, fees and charges and account for all revenues
of rights. The Constitution does not require that things which are different in fact collected;
be treated in law as though they were the same. The equal protection clause
does not forbid discrimination as to things that are different. It does not prohibit (2) Exercise duly delegated police powers for the proper performance of its functions
legislation which is limited either in the object to which it is directed or by the and duties;
territory within which it is to operate.
(3) Prevent and prosecute tax evasions and all other illegal economic activities;
The equal protection of the laws clause of the Constitution allows classification.
Classification in law, as in the other departments of knowledge or practice, is the (4) Exercise supervision and control over its constituent and subordinate units; and
grouping of things in speculation or practice because they agree with one another in
certain particulars. A law is not invalid because of simple inequality. The very idea of
classification is that of inequality, so that it goes without saying that the mere fact of (5) Perform such other functions as may be provided by law. 24
inequality in no manner determines the matter of constitutionality. All that is required
of a valid classification is that it be reasonable, which means that the xxx xxx xxx (emphasis supplied)
classification should be based on substantial distinctions which make for real
differences, that it must be germane to the purpose of the law; that it must not On the other hand, the BOC has the following functions:
be limited to existing conditions only; and that it must apply equally to each
member of the class. This Court has held that the standard is satisfied if the Sec. 23. The Bureau of Customs. – The Bureau of Customs which shall be headed
classification or distinction is based on a reasonable foundation or rational basis and subject to the management and control of the Commissioner of Customs, who
and is not palpably arbitrary. shall be appointed by the President upon the recommendation of the Secretary[of the
DOF] and hereinafter referred to as Commissioner, shall have the following functions:
In the exercise of its power to make classifications for the purpose of enacting laws
over matters within its jurisdiction, the state is recognized as enjoying a wide range of (1) Collect custom duties, taxes and the corresponding fees, charges and
discretion. It is not necessary that the classification be based on scientific or marked penalties;
differences of things or in their relation. Neither is it necessary that the classification
be made with mathematical nicety. Hence, legislative classification may in many cases
(2) Account for all customs revenues collected;
properly rest on narrow distinctions, for the equal protection guaranty does not
preclude the legislature from recognizing degrees of evil or harm, and legislation is
addressed to evils as they may appear.21 (emphasis supplied) (3) Exercise police authority for the enforcement of tariff and customs laws;

105 | C O N S T I 1
(4) Prevent and suppress smuggling, pilferage and all other economic frauds within all Section 4 "canalized within banks that keep it from overflowing" 29 the delegated power to the
ports of entry; President to fix revenue targets:

(5) Supervise and control exports, imports, foreign mails and the clearance of vessels SEC. 4. Rewards and Incentives Fund. – A Rewards and Incentives Fund, hereinafter
and aircrafts in all ports of entry; referred to as the Fund, is hereby created, to be sourced from the collection of the BIR
and the BOC in excess of their respective revenue targets of the year, as
(6) Administer all legal requirements that are appropriate; determined by the Development Budget and Coordinating Committee (DBCC), in
the following percentages:
(7) Prevent and prosecute smuggling and other illegal activities in all ports under its
jurisdiction; Excess of Collection of the Excess the Percent (%) of the Excess Collection to Accrue to
Revenue Targets the Fund
(8) Exercise supervision and control over its constituent units; 30% or below – 15%
More than 30% – 15% of the first 30% plus 20% of the remaining
(9) Perform such other functions as may be provided by law. 25 excess

xxx xxx xxx (emphasis supplied) The Fund shall be deemed automatically appropriated the year immediately following
the year when the revenue collection target was exceeded and shall be released on
the same fiscal year.
Both the BIR and the BOC are bureaus under the DOF. They principally perform the special
function of being the instrumentalities through which the State exercises one of its great
inherent functions – taxation. Indubitably, such substantial distinction is germane and intimately Revenue targets shall refer to the original estimated revenue collection expected
related to the purpose of the law. Hence, the classification and treatment accorded to the BIR of the BIR and the BOC for a given fiscal year as stated in the Budget of
and the BOC under RA 9335 fully satisfy the demands of equal protection. Expenditures and Sources of Financing (BESF) submitted by the President to
Congress. The BIR and the BOC shall submit to the DBCC the distribution of the
agencies’ revenue targets as allocated among its revenue districts in the case of the
Undue Delegation
BIR, and the collection districts in the case of the BOC.
Two tests determine the validity of delegation of legislative power: (1) the completeness test
xxx xxx xxx (emphasis supplied)
and (2) the sufficient standard test. A law is complete when it sets forth therein the policy to be
executed, carried out or implemented by the delegate. 26 It lays down a sufficient standard when
it provides adequate guidelines or limitations in the law to map out the boundaries of the Revenue targets are based on the original estimated revenue collection expected respectively
delegate’s authority and prevent the delegation from running riot. 27 To be sufficient, the of the BIR and the BOC for a given fiscal year as approved by the DBCC and stated in the
standard must specify the limits of the delegate’s authority, announce the legislative policy and BESF submitted by the President to Congress. 30 Thus, the determination of revenue targets
identify the conditions under which it is to be implemented. 28 does not rest solely on the President as it also undergoes the scrutiny of the DBCC.

RA 9335 adequately states the policy and standards to guide the President in fixing revenue On the other hand, Section 7 specifies the limits of the Board’s authority and identifies the
targets and the implementing agencies in carrying out the provisions of the law. Section 2 spells conditions under which officials and employees whose revenue collection falls short of the
out the policy of the law: target by at least 7.5% may be removed from the service:

SEC. 2. Declaration of Policy. – It is the policy of the State to optimize the revenue- SEC. 7. Powers and Functions of the Board. – The Board in the agency shall have the
generation capability and collection of the Bureau of Internal Revenue (BIR) and the following powers and functions:
Bureau of Customs (BOC) by providing for a system of rewards and sanctions through
the creation of a Rewards and Incentives Fund and a Revenue Performance xxx xxx xxx
Evaluation Board in the above agencies for the purpose of encouraging their officials
and employees to exceed their revenue targets. (b) To set the criteria and procedures for removing from service officials and
employees whose revenue collection falls short of the target by at least seven
106 | C O N S T I 1
and a half percent (7.5%), with due consideration of all relevant factors affecting Separation Of Powers
the level of collection as provided in the rules and regulations promulgated under this
Act, subject to civil service laws, rules and regulations and compliance with Section 12 of RA 9335 provides:
substantive and procedural due process: Provided, That the following exemptions
shall apply: SEC. 12. Joint Congressional Oversight Committee. – There is hereby created a Joint
Congressional Oversight Committee composed of seven Members from the Senate
1. Where the district or area of responsibility is newly-created, not exceeding and seven Members from the House of Representatives. The Members from the
two years in operation, as has no historical record of collection performance Senate shall be appointed by the Senate President, with at least two senators
that can be used as basis for evaluation; and representing the minority. The Members from the House of Representatives shall be
appointed by the Speaker with at least two members representing the minority. After
2. Where the revenue or customs official or employee is a recent transferee in the Oversight Committee will have approved the implementing rules and regulations
the middle of the period under consideration unless the transfer was due to (IRR) it shall thereafter become functus officio and therefore cease to exist.
nonperformance of revenue targets or potential nonperformance of revenue
targets: Provided, however, That when the district or area of responsibility The Joint Congressional Oversight Committee in RA 9335 was created for the purpose of
covered by revenue or customs officials or employees has suffered from approving the implementing rules and regulations (IRR) formulated by the DOF, DBM, NEDA,
economic difficulties brought about by natural calamities or force majeure or BIR, BOC and CSC. On May 22, 2006, it approved the said IRR. From then on, it
economic causes as may be determined by the Board, termination shall be became functus officio and ceased to exist. Hence, the issue of its alleged encroachment on
considered only after careful and proper review by the Board. the executive function of implementing and enforcing the law may be considered moot and
academic.
(c) To terminate personnel in accordance with the criteria adopted in the preceding
paragraph: Provided, That such decision shall be immediately executory: Provided, This notwithstanding, this might be as good a time as any for the Court to confront the issue of
further, That the application of the criteria for the separation of an official or the constitutionality of the Joint Congressional Oversight Committee created under RA 9335
employee from service under this Act shall be without prejudice to the (or other similar laws for that matter).
application of other relevant laws on accountability of public officers and
employees, such as the Code of Conduct and Ethical Standards of Public
The scholarly discourse of Mr. Justice (now Chief Justice) Puno on the concept of
Officers and Employees and the Anti-Graft and Corrupt Practices Act;
congressional oversight in Macalintal v. Commission on Elections34 is illuminating:

xxx xxx xxx (emphasis supplied) Concept and bases of congressional oversight

Clearly, RA 9335 in no way violates the security of tenure of officials and employees of the BIR Broadly defined, the power of oversight embraces all activities undertaken by
and the BOC. The guarantee of security of tenure only means that an employee cannot be Congress to enhance its understanding of and influence over
dismissed from the service for causes other than those provided by law and only after due the implementation of legislation it has enacted. Clearly, oversight
process is accorded the employee.31 In the case of RA 9335, it lays down a reasonable concerns post-enactment measures undertaken by Congress: (a) to monitor
yardstick for removal (when the revenue collection falls short of the target by at least 7.5%) bureaucratic compliance with program objectives, (b) to determine whether
with due consideration of all relevant factors affecting the level of collection. This standard is agencies are properly administered, (c) to eliminate executive waste and
analogous to inefficiency and incompetence in the performance of official duties, a ground for dishonesty, (d) to prevent executive usurpation of legislative authority, and (d)
disciplinary action under civil service laws. 32 The action for removal is also subject to civil to assess executive conformity with the congressional perception of public
service laws, rules and regulations and compliance with substantive and procedural due interest.
process.
The power of oversight has been held to be intrinsic in the grant of legislative power
At any rate, this Court has recognized the following as sufficient standards: "public interest," itself and integral to the checks and balances inherent in a democratic system of
"justice and equity," "public convenience and welfare" and "simplicity, economy and government. x x x x x x x x x
welfare."33 In this case, the declared policy of optimization of the revenue-generation capability
and collection of the BIR and the BOC is infused with public interest.
Over the years, Congress has invoked its oversight power with increased frequency to
check the perceived "exponential accumulation of power" by the executive branch. By
107 | C O N S T I 1
the beginning of the 20th century, Congress has delegated an enormous amount of a "right" to approve or disapprove any regulation before it takes effect. Such legislative
legislative authority to the executive branch and the administrative agencies. veto provisions usually provide that a proposed regulation will become a law after the
Congress, thus, uses its oversight power to make sure that the administrative agencies expiration of a certain period of time, only if Congress does not affirmatively disapprove
perform their functions within the authority delegated to them. x x x x x x x x x of the regulation in the meantime. Less frequently, the statute provides that a proposed
regulation will become law if Congress affirmatively approves it.
Categories of congressional oversight functions
Supporters of legislative veto stress that it is necessary to maintain the balance of
The acts done by Congress purportedly in the exercise of its oversight powers may be power between the legislative and the executive branches of government as it offers
divided into three categories, namely: scrutiny, investigation and supervision. lawmakers a way to delegate vast power to the executive branch or to independent
agencies while retaining the option to cancel particular exercise of such power without
having to pass new legislation or to repeal existing law. They contend that this
a. Scrutiny
arrangement promotes democratic accountability as it provides legislative check on
the activities of unelected administrative agencies. One proponent thus explains:
Congressional scrutiny implies a lesser intensity and continuity of attention to
administrative operations. Its primary purpose is to determine economy and
efficiency of the operation of government activities. In the exercise of It is too late to debate the merits of this delegation policy: the policy is too
deeply embedded in our law and practice. It suffices to say that the
legislative scrutiny, Congress may request information and report from the
complexities of modern government have often led Congress-whether by
other branches of government. It can give recommendations or pass
actual or perceived necessity- to legislate by declaring broad policy goals and
resolutions for consideration of the agency involved.
general statutory standards, leaving the choice of policy options to the
discretion of an executive officer. Congress articulates legislative aims, but
xxx xxx xxx leaves their implementation to the judgment of parties who may or may not
have participated in or agreed with the development of those aims.
b. Congressional investigation Consequently, absent safeguards, in many instances the reverse of our
constitutional scheme could be effected: Congress proposes, the Executive
While congressional scrutiny is regarded as a passive process of looking at disposes. One safeguard, of course, is the legislative power to enact new
the facts that are readily available, congressional investigation involves a more legislation or to change existing law. But without some means of overseeing
intense digging of facts. The power of Congress to conduct investigation is post enactment activities of the executive branch, Congress would be unable
recognized by the 1987 Constitution under section 21, Article VI, to determine whether its policies have been implemented in accordance with
xxx xxx xxx legislative intent and thus whether legislative intervention is appropriate.

c. Legislative supervision Its opponents, however, criticize the legislative veto as undue encroachment upon
the executive prerogatives. They urge that any post-enactment measures
The third and most encompassing form by which Congress exercises its oversight undertaken by the legislative branch should be limited to scrutiny and
power is thru legislative supervision. "Supervision" connotes a continuing and informed investigation; any measure beyond that would undermine the separation of
awareness on the part of a congressional committee regarding executive operations in powers guaranteed by the Constitution. They contend that legislative veto
a given administrative area. While both congressional scrutiny and investigation constitutes an impermissible evasion of the President’s veto authority and intrusion into
involve inquiry into past executive branch actions in order to influence future executive the powers vested in the executive or judicial branches of government. Proponents
branch performance, congressional supervision allows Congress to scrutinize the counter that legislative veto enhances separation of powers as it prevents the
exercise of delegated law-making authority, and permits Congress to retain part of that executive branch and independent agencies from accumulating too much power. They
delegated authority. submit that reporting requirements and congressional committee investigations allow
Congress to scrutinize only the exercise of delegated law-making authority. They do
not allow Congress to review executive proposals before they take effect and they do
Congress exercises supervision over the executive agencies through its veto power. It
not afford the opportunity for ongoing and binding expressions of congressional intent.
typically utilizes veto provisions when granting the President or an executive agency
In contrast, legislative veto permits Congress to participate prospectively in the
the power to promulgate regulations with the force of law. These provisions require the
approval or disapproval of "subordinate law" or those enacted by the executive branch
President or an agency to present the proposed regulations to Congress, which retains
pursuant to a delegation of authority by Congress. They further argue that legislative
108 | C O N S T I 1
veto "is a necessary response by Congress to the accretion of policy control by forces the checks and balances inherent in a democratic system of government. It may in fact even
outside its chambers." In an era of delegated authority, they point out that legislative enhance the separation of powers as it prevents the over-accumulation of power in the
veto "is the most efficient means Congress has yet devised to retain control over the executive branch.
evolution and implementation of its policy as declared by statute."
However, to forestall the danger of congressional encroachment "beyond the legislative
In Immigration and Naturalization Service v. Chadha, the U.S. Supreme Court sphere," the Constitution imposes two basic and related constraints on Congress. 37 It may not
resolved the validity of legislative veto provisions. The case arose from the order vest itself, any of its committees or its members with either executive or judicial power.38 And,
of the immigration judge suspending the deportation of Chadha pursuant to § 244(c)(1) when it exercises its legislative power, it must follow the "single, finely wrought and exhaustively
of the Immigration and Nationality Act. The United States House of Representatives considered, procedures" specified under the Constitution,39 including the procedure for
passed a resolution vetoing the suspension pursuant to § 244(c)(2) authorizing either enactment of laws and presentment.
House of Congress, by resolution, to invalidate the decision of the executive branch to
allow a particular deportable alien to remain in the United States. The immigration Thus, any post-enactment congressional measure such as this should be limited to scrutiny
judge reopened the deportation proceedings to implement the House order and the and investigation. In particular, congressional oversight must be confined to the following:
alien was ordered deported. The Board of Immigration Appeals dismissed the alien’s
appeal, holding that it had no power to declare unconstitutional an act of Congress. (1) scrutiny based primarily on Congress’ power of appropriation and the budget
The United States Court of Appeals for Ninth Circuit held that the House was without hearings conducted in connection with it, its power to ask heads of departments to
constitutional authority to order the alien’s deportation and that § 244(c)(2) violated the appear before and be heard by either of its Houses on any matter pertaining to their
constitutional doctrine on separation of powers. departments and its power of confirmation 40 and

On appeal, the U.S. Supreme Court declared § 244(c)(2) unconstitutional. But the
(2) investigation and monitoring41 of the implementation of laws pursuant to the power
Court shied away from the issue of separation of powers and instead held that the
of Congress to conduct inquiries in aid of legislation. 42
provision violates the presentment clause and bicameralism. It held that the one-house
veto was essentially legislative in purpose and effect. As such, it is subject to the
procedures set out in Article I of the Constitution requiring the passage by a majority Any action or step beyond that will undermine the separation of powers guaranteed by the
of both Houses and presentment to the President. x x x x x x x x x Constitution. Legislative vetoes fall in this class.

Two weeks after the Chadha decision, the Court upheld, in memorandum decision, Legislative veto is a statutory provision requiring the President or an administrative agency to
two lower court decisions invalidating the legislative veto provisions in the Natural Gas present the proposed implementing rules and regulations of a law to Congress which, by itself
Policy Act of 1978 and the Federal Trade Commission Improvement Act of 1980. or through a committee formed by it, retains a "right" or "power" to approve or disapprove such
Following this precedence, lower courts invalidated statutes containing legislative veto regulations before they take effect. As such, a legislative veto in the form of a congressional
provisions although some of these provisions required the approval of both Houses of oversight committee is in the form of an inward-turning delegation designed to attach a
Congress and thus met the bicameralism requirement of Article I. Indeed, some of congressional leash (other than through scrutiny and investigation) to an agency to which
these veto provisions were not even exercised.35(emphasis supplied) Congress has by law initially delegated broad powers. 43 It radically changes the design or
structure of the Constitution’s diagram of power as it entrusts to Congress a direct role in
enforcing, applying or implementing its own laws. 44
In Macalintal, given the concept and configuration of the power of congressional oversight and
considering the nature and powers of a constitutional body like the Commission on Elections,
the Court struck down the provision in RA 9189 (The Overseas Absentee Voting Act of 2003) Congress has two options when enacting legislation to define national policy within the broad
creating a Joint Congressional Committee. The committee was tasked not only to monitor and horizons of its legislative competence.45 It can itself formulate the details or it can assign to the
evaluate the implementation of the said law but also to review, revise, amend and approve the executive branch the responsibility for making necessary managerial decisions in conformity
IRR promulgated by the Commission on Elections. The Court held that these functions infringed with those standards.46 In the latter case, the law must be complete in all its essential terms
on the constitutional independence of the Commission on Elections. 36 and conditions when it leaves the hands of the legislature.47 Thus, what is left for the executive
branch or the concerned administrative agency when it formulates rules and regulations
implementing the law is to fill up details (supplementary rule-making) or ascertain facts
With this backdrop, it is clear that congressional oversight is not unconstitutional per se, necessary to bring the law into actual operation (contingent rule-making).48
meaning, it neither necessarily constitutes an encroachment on the executive power to
implement laws nor undermines the constitutional separation of powers. Rather, it is integral to

109 | C O N S T I 1
Administrative regulations enacted by administrative agencies to implement and interpret the House where it originated within thirty days after the date of receipt thereof; otherwise,
law which they are entrusted to enforce have the force of law and are entitled to respect. 49 Such it shall become a law as if he had signed it. (emphasis supplied)
rules and regulations partake of the nature of a statute 50 and are just as binding as if they have
been written in the statute itself. As such, they have the force and effect of law and enjoy the Every bill passed by Congress must be presented to the President for approval or veto. In the
presumption of constitutionality and legality until they are set aside with finality in an appropriate absence of presentment to the President, no bill passed by Congress can become a law. In
case by a competent court.51 Congress, in the guise of assuming the role of an overseer, may this sense, law-making under the Constitution is a joint act of the Legislature and of the
not pass upon their legality by subjecting them to its stamp of approval without disturbing the Executive. Assuming that legislative veto is a valid legislative act with the force of law, it cannot
calculated balance of powers established by the Constitution. In exercising discretion to take effect without such presentment even if approved by both chambers of Congress.
approve or disapprove the IRR based on a determination of whether or not they conformed
with the provisions of RA 9335, Congress arrogated judicial power unto itself, a power In sum, two steps are required before a bill becomes a law. First, it must be approved by both
exclusively vested in this Court by the Constitution. Houses of Congress.54 Second, it must be presented to and approved by the President. 55 As
summarized by Justice Isagani Cruz56 and Fr. Joaquin G. Bernas, S.J.57, the following is the
Considered Opinion of procedure for the approval of bills:
Mr. Justice Dante O. Tinga
A bill is introduced by any member of the House of Representatives or the Senate
Moreover, the requirement that the implementing rules of a law be subjected to approval by except for some measures that must originate only in the former chamber.
Congress as a condition for their effectivity violates the cardinal constitutional principles of
bicameralism and the rule on presentment. 52 The first reading involves only a reading of the number and title of the measure and its
referral by the Senate President or the Speaker to the proper committee for study.
Section 1, Article VI of the Constitution states:
The bill may be "killed" in the committee or it may be recommended for approval, with
Section 1. The legislative power shall be vested in the Congress of the or without amendments, sometimes after public hearings are first held thereon. If there
Philippines which shall consist of a Senate and a House of Representatives, are other bills of the same nature or purpose, they may all be consolidated into one bill
except to the extent reserved to the people by the provision on initiative and under common authorship or as a committee bill.
referendum. (emphasis supplied)
Once reported out, the bill shall be calendared for second reading. It is at this stage
Legislative power (or the power to propose, enact, amend and repeal laws) 53 is vested in that the bill is read in its entirety, scrutinized, debated upon and amended when
Congress which consists of two chambers, the Senate and the House of Representatives. A desired. The second reading is the most important stage in the passage of a bill.
valid exercise of legislative power requires the act of both chambers. Corrollarily, it can be
exercised neither solely by one of the two chambers nor by a committee of either or both The bill as approved on second reading is printed in its final form and copies thereof
chambers. Thus, assuming the validity of a legislative veto, both a single-chamber legislative are distributed at least three days before the third reading. On the third reading, the
veto and a congressional committee legislative veto are invalid.
members merely register their votes and explain them if they are allowed by the rules.
No further debate is allowed.
Additionally, Section 27(1), Article VI of the Constitution provides:
Once the bill passes third reading, it is sent to the other chamber, where it will also
Section 27. (1) Every bill passed by the Congress shall, before it becomes a law, undergo the three readings. If there are differences between the versions approved by
be presented to the President. If he approves the same, he shall sign it, otherwise, the two chambers, a conference committee 58 representing both Houses will draft a
he shall veto it and return the same with his objections to the House where it originated, compromise measure that if ratified by the Senate and the House of Representatives
which shall enter the objections at large in its Journal and proceed to reconsider it. If, will then be submitted to the President for his consideration.
after such reconsideration, two-thirds of all the Members of such House shall agree to
pass the bill, it shall be sent, together with the objections, to the other House by which The bill is enrolled when printed as finally approved by the Congress, thereafter
it shall likewise be reconsidered, and if approved by two-thirds of all the Members of authenticated with the signatures of the Senate President, the Speaker, and the
that House, it shall become a law. In all such cases, the votes of each House shall be Secretaries of their respective chambers…59
determined by yeas or nays, and the names of the members voting for or against shall
be entered in its Journal. The President shall communicate his veto of any bill to the
110 | C O N S T I 1
The President’s role in law-making. presumption that the legislature intended separability, rather than complete nullity of
the statute. To justify this result, the valid portion must be so far independent of the
The final step is submission to the President for approval. Once approved, it takes invalid portion that it is fair to presume that the legislature would have enacted it by
effect as law after the required publication.60 itself if it had supposed that it could not constitutionally enact the other. Enough must
remain to make a complete, intelligible and valid statute, which carries out the
legislative intent. x x x
Where Congress delegates the formulation of rules to implement the law it has enacted
pursuant to sufficient standards established in the said law, the law must be complete in all its
essential terms and conditions when it leaves the hands of the legislature. And it may be The exception to the general rule is that when the parts of a statute are so mutually
deemed to have left the hands of the legislature when it becomes effective because it is only dependent and connected, as conditions, considerations, inducements, or
upon effectivity of the statute that legal rights and obligations become available to those entitled compensations for each other, as to warrant a belief that the legislature intended them
by the language of the statute. Subject to the indispensable requisite of publication under the as a whole, the nullity of one part will vitiate the rest. In making the parts of the statute
due process clause,61 the determination as to when a law takes effect is wholly the prerogative dependent, conditional, or connected with one another, the legislature intended the
of Congress.62 As such, it is only upon its effectivity that a law may be executed and the statute to be carried out as a whole and would not have enacted it if one part is void,
executive branch acquires the duties and powers to execute the said law. Before that point, the in which case if some parts are unconstitutional, all the other provisions thus
role of the executive branch, particularly of the President, is limited to approving or vetoing the dependent, conditional, or connected must fall with them.
law.63
The separability clause of RA 9335 reveals the intention of the legislature to isolate and detach
From the moment the law becomes effective, any provision of law that empowers Congress or any invalid provision from the other provisions so that the latter may continue in force and
any of its members to play any role in the implementation or enforcement of the law violates effect. The valid portions can stand independently of the invalid section. Without Section 12,
the principle of separation of powers and is thus unconstitutional. Under this principle, a the remaining provisions still constitute a complete, intelligible and valid law which carries out
provision that requires Congress or its members to approve the implementing rules of a law the legislative intent to optimize the revenue-generation capability and collection of the BIR and
after it has already taken effect shall be unconstitutional, as is a provision that allows Congress the BOC by providing for a system of rewards and sanctions through the Rewards and
or its members to overturn any directive or ruling made by the members of the executive branch Incentives Fund and a Revenue Performance Evaluation Board.
charged with the implementation of the law.
To be effective, administrative rules and regulations must be published in full if their purpose is
Following this rationale, Section 12 of RA 9335 should be struck down as unconstitutional. to enforce or implement existing law pursuant to a valid delegation. The IRR of RA 9335 were
While there may be similar provisions of other laws that may be invalidated for failure to pass published on May 30, 2006 in two newspapers of general circulation66 and became effective
this standard, the Court refrains from invalidating them wholesale but will do so at the proper 15 days thereafter.67 Until and unless the contrary is shown, the IRR are presumed valid and
time when an appropriate case assailing those provisions is brought before us. 64 effective even without the approval of the Joint Congressional Oversight Committee.

The next question to be resolved is: what is the effect of the unconstitutionality of Section 12 WHEREFORE, the petition is hereby PARTIALLY GRANTED. Section 12 of RA 9335 creating
of RA 9335 on the other provisions of the law? Will it render the entire law unconstitutional? a Joint Congressional Oversight Committee to approve the implementing rules and regulations
No. of the law is declared UNCONSTITUTIONAL and therefore NULL and VOID. The
constitutionality of the remaining provisions of RA 9335 is UPHELD. Pursuant to Section 13 of
RA 9335, the rest of the provisions remain in force and effect.
Section 13 of RA 9335 provides:

SO ORDERED.
SEC. 13. Separability Clause. – If any provision of this Act is declared invalid by a
competent court, the remainder of this Act or any provision not affected by such
declaration of invalidity shall remain in force and effect.

In Tatad v. Secretary of the Department of Energy,65 the Court laid down the following rules:

The general rule is that where part of a statute is void as repugnant to the Constitution,
while another part is valid, the valid portion, if separable from the invalid, may stand
and be enforced. The presence of a separability clause in a statute creates the
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G.R. No. 148334 January 21, 2004 On 20 June 2001, petitioners Arturo Tolentino and Arturo Mojica ("petitioners"), as voters and
taxpayers, filed the instant petition for prohibition, impleading only COMELEC as respondent.
ARTURO M. TOLENTINO and ARTURO C. MOJICA, Petitioners, Petitioners sought to enjoin COMELEC from proclaiming with finality the candidate for Senator
vs. receiving the 13th highest number of votes as the winner in the special election for a single
COMMISSION ON ELECTIONS, SENATOR RALPH G. RECTO and SENATOR three-year term seat. Accordingly, petitioners prayed for the nullification of Resolution No. 01-
GREGORIO B. HONASAN,Respondents. 005 in so far as it makes a proclamation to such effect.

DECISION Petitioners contend that COMELEC issued Resolution No. 01-005 without jurisdiction because:
(1) it failed to notify the electorate of the position to be filled in the special election as required
CARPIO, J.: under Section 2 of Republic Act No. 6645 ("R.A. No. 6645"); 4 (2) it failed to require senatorial
candidates to indicate in their certificates of candidacy whether they seek election under the
special or regular elections as allegedly required under Section 73 of Batas Pambansa Blg.
The Case 881;5 and, consequently, (3) it failed to specify in the Voters Information Sheet the candidates
seeking election under the special or regular senatorial elections as purportedly required under
This is a petition for prohibition to set aside Resolution No. NBC 01-005 dated 5 June 2001 Section 4, paragraph 4 of Republic Act No. 6646 ("R.A. No. 6646"). 6 Petitioners add that
("Resolution No. 01-005") and Resolution No. NBC 01-006 dated 20 July 2001 ("Resolution because of these omissions, COMELEC canvassed all the votes cast for the senatorial
No. 01-006") of respondent Commission on Elections ("COMELEC"). Resolution No. 01-005 candidates in the 14 May 2001 elections without distinction such that "there were no two
proclaimed the 13 candidates elected as Senators in the 14 May 2001 elections while separate Senate elections held simultaneously but just a single election for thirteen seats,
Resolution No. 01-006 declared "official and final" the ranking of the 13 Senators proclaimed irrespective of term."7
in Resolution No. 01-005.
Stated otherwise, petitioners claim that if held simultaneously, a special and a regular election
The Facts must be distinguished in the documentation as well as in the canvassing of their results. To
support their claim, petitioners cite the special elections simultaneously held with the regular
Shortly after her succession to the Presidency in January 2001, President Gloria Macapagal- elections of 13 November 1951 and 8 November 1955 to fill the seats vacated by Senators
Arroyo nominated then Senator Teofisto T. Guingona, Jr. ("Senator Guingona") as Vice- Fernando Lopez and Carlos P. Garcia, respectively, who became Vice-Presidents during their
President. Congress confirmed the nomination of Senator Guingona who took his oath as Vice- tenures in the Senate.8 Petitioners point out that in those elections, COMELEC separately
President on 9 February 2001. canvassed the votes cast for the senatorial candidates running under the regular elections from
the votes cast for the candidates running under the special elections. COMELEC also
Following Senator Guingona’s confirmation, the Senate on 8 February 2001 passed Resolution separately proclaimed the winners in each of those elections. 9
No. 84 ("Resolution No. 84") certifying to the existence of a vacancy in the Senate. Resolution
No. 84 called on COMELEC to fill the vacancy through a special election to be held Petitioners sought the issuance of a temporary restraining order during the pendency of their
simultaneously with the regular elections on 14 May 2001. Twelve Senators, with a 6-year term petition.
each, were due to be elected in that election. 1 Resolution No. 84 further provided that the
"Senatorial candidate garnering the 13th highest number of votes shall serve only for the Without issuing any restraining order, we required COMELEC to Comment on the petition.
unexpired term of former Senator Teofisto T. Guingona, Jr.," which ends on 30 June 2004.2
On 20 July 2001, after COMELEC had canvassed the results from all the provinces, it issued
On 5 June 2001, after COMELEC had canvassed the election results from all the provinces but Resolution No. 01-006 declaring "official and final" the ranking of the 13 Senators proclaimed
one (Lanao del Norte), COMELEC issued Resolution No. 01-005 provisionally proclaiming 13 in Resolution No. 01-005. The 13 Senators took their oaths of office on 23 July 2001.
candidates as the elected Senators. Resolution No. 01-005 also provided that "the first twelve
(12) Senators shall serve for a term of six (6) years and the thirteenth (13th) Senator shall serve In view of the issuance of Resolution No. 01-006, the Court required petitioners to file an
the unexpired term of three (3) years of Senator Teofisto T. Guingona, Jr. who was appointed amended petition impleading Recto and Honasan as additional respondents. Petitioners
Vice-President."3 Respondents Ralph Recto ("Recto") and Gregorio Honasan ("Honasan") accordingly filed an amended petition in which they reiterated the contentions raised in their
ranked 12th and 13th, respectively, in Resolution No. 01-005. original petition and, in addition, sought the nullification of Resolution No. 01-006.

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In their Comments, COMELEC, Honasan, and Recto all claim that a special election to fill the winner in the special election. Petitioners anchor their prayers on COMELEC’s alleged failure
seat vacated by Senator Guingona was validly held on 14 May 2001. COMELEC and Honasan to comply with certain requirements pertaining to the conduct of that special election. Clearly
further raise preliminary issues on the mootness of the petition and on petitioners’ standing to then, the petition does not seek to determine Honasan’s right in the exercise of his office as
litigate. Honasan also claims that the petition, which seeks the nullity of his proclamation as Senator. Petitioners’ prayer for the annulment of Honasan’s proclamation and, ultimately,
Senator, is actually a quo warranto petition and the Court should dismiss the same for lack of election is merely incidental to petitioners’ cause of action. Consequently, the Court can
jurisdiction. For his part, Recto, as the 12th ranking Senator, contends he is not a proper party properly exercise jurisdiction over the instant petition.
to this case because the petition only involves the validity of the proclamation of the 13th placer
in the 14 May 2001 senatorial elections. On the Mootness of the Petition

The Issues COMELEC contends that its proclamation on 5 June 2001 of the 13 Senators and its
subsequent confirmation on 20 July 2001 of the ranking of the 13 Senators render the instant
The following are the issues presented for resolution: petition to set aside Resolutions Nos. 01-005 and 01-006 moot and academic.

(1) Procedurally – Admittedly, the office of the writ of prohibition is to command a tribunal or board to desist from
committing an act threatened to be done without jurisdiction or with grave abuse of discretion
(a) whether the petition is in fact a petition for quo warranto over which the amounting to lack or excess of jurisdiction. 11 Consequently, the writ will not lie to enjoin acts
Senate Electoral Tribunal is the sole judge; already done.12 However, as an exception to the rule on mootness, courts will decide a question
otherwise moot if it is capable of repetition yet evading review. 13 Thus, in Alunan III v.
Mirasol,14 we took cognizance of a petition to set aside an order canceling the general elections
(b) whether the petition is moot; and
for the Sangguniang Kabataan ("SK") on 4 December 1992 despite that at the time the petition
was filed, the SK election had already taken place. We noted in Alunan that since the question
(c) whether petitioners have standing to litigate. of the validity of the order sought to be annulled "is likely to arise in every SK elections and yet
the question may not be decided before the date of such elections," the mootness of the petition
(2) On the merits, whether a special election to fill a vacant three-year term Senate is no bar to its resolution. This observation squarely applies to the instant case. The question
seat was validly held on 14 May 2001. of the validity of a special election to fill a vacancy in the Senate in relation to COMELEC’s
failure to comply with requirements on the conduct of such special election is likely to arise in
The Ruling of the Court every such election. Such question, however, may not be decided before the date of the
election.
The petition has no merit.
On Petitioners’ Standing
On the Preliminary Matters
Honasan questions petitioners’ standing to bring the instant petition as taxpayers and voters
The Nature of the Petition and the Court’s Jurisdiction because petitioners do not claim that COMELEC illegally disbursed public funds. Neither do
petitioners claim that they sustained personal injury because of the issuance of Resolution Nos.
01-005 and 01-006.
A quo warranto proceeding is, among others, one to determine the right of a public officer in
the exercise of his office and to oust him from its enjoyment if his claim is not well-
founded.10 Under Section 17, Article VI of the Constitution, the Senate Electoral Tribunal is the "Legal standing" or locus standi refers to a personal and substantial interest in a case such that
sole judge of all contests relating to the qualifications of the members of the Senate. the party has sustained or will sustain direct injury because of the challenged governmental
act.15 The requirement of standing, which necessarily "sharpens the presentation of
issues,"16 relates to the constitutional mandate that this Court settle only actual cases or
A perusal of the allegations contained in the instant petition shows, however, that what
controversies.17 Thus, generally, a party will be allowed to litigate only when (1) he can show
petitioners are questioning is the validity of the special election on 14 May 2001 in which
that he has personally suffered some actual or threatened injury because of the allegedly illegal
Honasan was elected. Petitioners’ various prayers are, namely: (1) a "declaration" that no
conduct of the government; (2) the injury is fairly traceable to the challenged action; and (3) the
special election was held simultaneously with the general elections on 14 May 2001; (2) to
injury is likely to be redressed by a favorable action. 18
enjoin COMELEC from declaring anyone as having won in the special election; and (3) to annul
Resolution Nos. 01-005 and 01-006 in so far as these Resolutions proclaim Honasan as the
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Applied strictly, the doctrine of standing to litigate will indeed bar the instant petition. In Under Section 9, Article VI of the Constitution, a special election may be called to fill any
questioning, in their capacity as voters, the validity of the special election on 14 May 2001, vacancy in the Senate and the House of Representatives "in the manner prescribed by law,"
petitioners assert a harm classified as a "generalized grievance." This generalized grievance thus:
is shared in substantially equal measure by a large class of voters, if not all the voters, who
voted in that election.19 Neither have petitioners alleged, in their capacity as taxpayers, that the In case of vacancy in the Senate or in the House of Representatives, a special election may
Court should give due course to the petition because in the special election held on 14 May be called to fill such vacancy in the manner prescribed by law, but the Senator or Member of
2001 "tax money [was] ‘x x x extracted and spent in violation of specific constitutional the House of Representatives thus elected shall serve only for the unexpired term. (Emphasis
protections against abuses of legislative power’ or that there [was] misapplication of such funds supplied)
by COMELEC or that public money [was] deflected to any improper purpose." 20
To implement this provision of the Constitution, Congress passed R.A. No. 6645, which
On the other hand, we have relaxed the requirement on standing and exercised our discretion provides in pertinent parts:
to give due course to voters’ suits involving the right of suffrage. 21 Also, in the recent case
of Integrated Bar of the Philippines v. Zamora,22 we gave the same liberal treatment to a
SECTION 1. In case a vacancy arises in the Senate at least eighteen (18) months or in the
petition filed by the Integrated Bar of the Philippines ("IBP"). The IBP questioned the validity of
House of Representatives at least one (1) year before the next regular election for Members of
a Presidential directive deploying elements of the Philippine National Police and the Philippine Congress, the Commission on Elections, upon receipt of a resolution of the Senate or the
Marines in Metro Manila to conduct patrols even though the IBP presented "too general an House of Representatives, as the case may be, certifying to the existence of such vacancy and
interest." We held: calling for a special election, shall hold a special election to fill such vacancy. If Congress is in
recess, an official communication on the existence of the vacancy and call for a special election
[T]he IBP primarily anchors its standing on its alleged responsibility to uphold the rule of law by the President of the Senate or by the Speaker of the House of Representatives, as the case
and the Constitution. Apart from this declaration, however, the IBP asserts no other basis in may be, shall be sufficient for such purpose. The Senator or Member of the House of
support of its locus standi. The mere invocation by the IBP of its duty to preserve the rule of Representatives thus elected shall serve only for the unexpired term.
law and nothing more, while undoubtedly true, is not sufficient to clothe it with standing in this
case. This is too general an interest which is shared by other groups and the whole citizenry x SECTION 2. The Commission on Elections shall fix the date of the special election, which shall
x x. not be earlier than forty-five (45) days nor later than ninety (90) days from the date of such
resolution or communication, stating among other things the office or offices to be voted for:
Having stated the foregoing, this Court has the discretion to take cognizance of a suit which Provided, however, That if within the said period a general election is scheduled to be held, the
does not satisfy the requirement of legal standing when paramount interest is involved. In not special election shall be held simultaneously with such general election. (Emphasis supplied)
a few cases, the court has adopted a liberal attitude on the locus standi of a petitioner where
the petitioner is able to craft an issue of transcendental significance to the people. Thus, when Section 4 of Republic Act No. 7166 subsequently amended Sectio