G.R. No.

166471 March 22, 2011

TAWANG MULTI-PURPOSE COOPERATIVE Petitioner,

vs.
LA TRINIDAD WATER DISTRICT, Respondent.

DECISION

CARPIO, J.:

The Case

This is a petition for review on certiorari under Rule 45 of the Rules of Court. The
petition1 challenges the 1 October 2004 Judgment2 and 6 November 2004 Order3 of the
Regional Trial Court (RTC), Judicial Region 1, Branch 62, La Trinidad, Benguet, in Civil
Case No. 03-CV-1878.

The Facts

Tawang Multi-Purpose Cooperative (TMPC) is a cooperative, registered with the

Cooperative Development Authority, and organized to provide domestic water services in
Barangay Tawang, La Trinidad, Benguet.

La Trinidad Water District (LTWD) is a local water utility created under Presidential
Decree (PD) No. 198, as amended. It is authorized to supply water for domestic, industrial
and commercial purposes within the municipality of La Trinidad, Benguet.

On 9 October 2000, TMPC filed with the National Water Resources Board (NWRB) an
application for a certificate of public convenience (CPC) to operate and maintain a
waterworks system in Barangay Tawang. LTWD opposed TMPC’s application. LTWD
claimed that, under Section 47 of PD No. 198, as amended, its franchise is exclusive.
Section 47 states that:

Sec. 47. Exclusive Franchise. No franchise shall be granted to any other person or
agency for domestic, industrial or commercial water service within the district or any
portion thereof unless and except to the extent that the board of directors of said district
consents thereto by resolution duly adopted, such resolution, however, shall be subject
to review by the Administration.

In its Resolution No. 04-0702 dated 23 July 2002, the NWRB approved TMPC’s
application for a CPC. In its 15 August 2002 Decision,4 the NWRB held that LTWD’s
franchise cannot be exclusive since exclusive franchises are unconstitutional and found
that TMPC is legally and financially qualified to operate and maintain a waterworks
system. NWRB stated that:

With respect to LTWD’s opposition, this Board observes that:

1. It is a substantial reproduction of its opposition to the application for water permits
previously filed by this same CPC applicant, under WUC No. 98-17 and 98-62 which was
decided upon by this Board on April 27, 2000. The issues being raised by Oppositor had
been already resolved when this Board said in pertinent portions of its decision:

"The authority granted to LTWD by virtue of P.D. 198 is not Exclusive. While Barangay
Tawang is within their territorial jurisdiction, this does not mean that all others are
excluded in engaging in such service, especially, if the district is not capable of supplying
water within the area. This Board has time and again ruled that the "Exclusive Franchise"
provision under P.D. 198 has misled most water districts to believe that it likewise extends
to be [sic] the waters within their territorial boundaries. Such ideological adherence
collides head on with the constitutional provision that "ALL WATERS AND NATURAL
RESOURCES BELONG TO THE STATE". (Sec. 2, Art. XII) and that "No franchise,
certificate or authorization for the operation of public [sic] shall be exclusive in character".

xxxx

All the foregoing premises all considered, and finding that Applicant is legally and
financially qualified to operate and maintain a waterworks system; that the said operation
shall redound to the benefit of the homeowners/residents of the subdivision, thereby,
promoting public service in a proper and suitable manner, the instant application for a
Certificate of Public Convenience is, hereby, GRANTED.5

LTWD filed a motion for reconsideration. In its 18 November 2002 Resolution,6 the NWRB
denied the motion.

LTWD appealed to the RTC.

The RTC’s Ruling

In its 1 October 2004 Judgment, the RTC set aside the NWRB’s 23 July 2002 Resolution
and 15 August 2002 Decision and cancelled TMPC’s CPC. The RTC held that Section 47
is valid. The RTC stated that:

The Constitution uses the term "exclusive in character". To give effect to this provision, a
reasonable, practical and logical interpretation should be adopted without disregard to the
ultimate purpose of the Constitution. What is this ultimate purpose? It is for the state,
through its authorized agencies or instrumentalities, to be able to keep and maintain
ultimate control and supervision over the operation of public utilities. Essential part of this
control and supervision is the authority to grant a franchise for the operation of a public
utility to any person or entity, and to amend or repeal an existing franchise to serve the
requirements of public interest. Thus, what is repugnant to the Constitution is a grant of
franchise "exclusive in character" so as to preclude the State itself from granting a
franchise to any other person or entity than the present grantee when public interest so
requires. In other words, no franchise of whatever nature can preclude the State, through
its duly authorized agencies or instrumentalities, from granting franchise to any person or
entity, or to repeal or amend a franchise already granted. Consequently, the Constitution
does not necessarily prohibit a franchise that is exclusive on its face, meaning, that the
grantee shall be allowed to exercise this present right or privilege to the exclusion of all
others. Nonetheless, the grantee cannot set up its exclusive franchise against the ultimate
authority of the State.7

TMPC filed a motion for reconsideration. In its 6 November 2004 Order, the RTC denied
the motion. Hence, the present petition.

Issue

TMPC raises as issue that the RTC erred in holding that Section 47 of PD No. 198, as
amended, is valid.

The Court’s Ruling

The petition is meritorious.

What cannot be legally done directly cannot be done indirectly. This rule is basic and, to
a reasonable mind, does not need explanation. Indeed, if acts that cannot be legally done
directly can be done indirectly, then all laws would be illusory.

In Alvarez v. PICOP Resources, Inc.,8 the Court held that, "What one cannot do directly,
he cannot do indirectly."9 In Akbayan Citizens Action Party v. Aquino,10 quoting Agan, Jr.
v. Philippine International Air Terminals Co., Inc.,11 the Court held that, "This Court has
long and consistently adhered to the legal maxim that those that cannot be done directly
cannot be done indirectly."12 In Central Bank Employees Association, Inc. v. Bangko
Sentral ng Pilipinas,13the Court held that, "No one is allowed to do indirectly what he is
prohibited to do directly."14

The President, Congress and the Court cannot create directly franchises for the operation
of a public utility that are exclusive in character. The 1935, 1973 and 1987 Constitutions
expressly and clearly prohibit the creation of franchises that are exclusive in character.
Section 8, Article XIII of the 1935 Constitution states that:

No franchise, certificate, or any other form of authorization for the operation of a public
utility shall be granted except to citizens of the Philippines or to corporations or other
entities organized under the laws of the Philippines, sixty per centum of the capital of
which is owned by citizens of the Philippines, nor shall such franchise, certificate or
authorization be exclusive in character or for a longer period than fifty years. (Empahsis
supplied)

Section 5, Article XIV of the 1973 Constitution states that:

No franchise, certificate, or any other form of authorization for the operation of a public
utility shall be granted except to citizens of the Philippines or to corporations or
associations organized under the laws of the Philippines at least sixty per centum of the
capital of which is owned by such citizens, nor shall such franchise, certificate or
authorization be exclusive in character or for a longer period than fifty years. (Emphasis
supplied)

Section 11, Article XII of the 1987 Constitution states that:

No franchise, certificate, or any other form of authorization for the operation of a public
utility shall be granted except to citizens of the Philippines or to corporations or
associations organized under the laws of the Philippines, at least sixty per centum of
whose capital is owned by such citizens, nor shall such franchise, certificate or
authorization be exclusive in character or for a longer period than fifty years. (Emphasis
supplied)

Plain words do not require explanation. The 1935, 1973 and 1987 Constitutions are clear
— franchises for the operation of a public utility cannot be exclusive in character. The
1935, 1973 and 1987 Constitutions expressly and clearly state that, "nor shall such
franchise x x x be exclusive in character." There is no exception.

When the law is clear, there is nothing for the courts to do but to apply it. The duty of the
Court is to apply the law the way it is worded. In Security Bank and Trust Company v.
Regional Trial Court of Makati, Branch 61,15 the Court held that:

Basic is the rule of statutory construction that when the law is clear and unambiguous,
the court is left with no alternative but to apply the same according to its clear
language. As we have held in the case of Quijano v. Development Bank of the
Philippines:

"x x x We cannot see any room for interpretation or construction in the clear and
unambiguous language of the above-quoted provision of law. This Court had
steadfastly adhered to the doctrine that its first and fundamental duty is the
application of the law according to its express terms, interpretation being called for
only when such literal application is impossible. No process of interpretation or
construction need be resorted to where a provision of law peremptorily calls for
application. Where a requirement or condition is made in explicit and unambiguous
terms, no discretion is left to the judiciary. It must see to it that its mandate is
obeyed."16(Emphasis supplied)

In Republic of the Philippines v. Express Telecommunications Co., Inc.,17 the Court held
that, "The Constitution is quite emphatic that the operation of a public utility shall not be
exclusive."18 In Pilipino Telephone Corporation v. National Telecommunications
Commission,19 the Court held that, "Neither Congress nor the NTC can grant an exclusive
‘franchise, certificate, or any other form of authorization’ to operate a public
utility."20 In National Power Corp. v. Court of Appeals,21 the Court held that, "Exclusivity
of any public franchise has not been favored by this Court such that in most, if not all,
grants by the government to private corporations, the interpretation of rights, privileges or
franchises is taken against the grantee."22 In Radio Communications of the Philippines,
Inc. v. National Telecommunications Commission,23 the Court held that, "The Constitution
mandates that a franchise cannot be exclusive in nature." 24

Indeed, the President, Congress and the Court cannot create directly franchises that are
exclusive in character. What the President, Congress and the Court cannot legally do
directly they cannot do indirectly. Thus, the President, Congress and the Court cannot
create indirectly franchises that are exclusive in character by allowing the Board of
Directors (BOD) of a water district and the Local Water Utilities Administration (LWUA) to
create franchises that are exclusive in character.

In PD No. 198, as amended, former President Ferdinand E. Marcos (President Marcos)

created indirectly franchises that are exclusive in character by allowing the BOD of LTWD
and the LWUA to create directly franchises that are exclusive in character. Section 47 of
PD No. 198, as amended, allows the BOD and the LWUA to create directly franchises
that are exclusive in character. Section 47 states:

Sec. 47. Exclusive Franchise. No franchise shall be granted to any other person or
agency for domestic, industrial or commercial water service within the district or any
portion thereof unless and except to the extent that the board of directors of said
district consents thereto by resolution duly adopted, such resolution, however,
shall be subject to review by the Administration. (Emphasis supplied)

In case of conflict between the Constitution and a statute, the Constitution always prevails
because the Constitution is the basic law to which all other laws must conform to. The
duty of the Court is to uphold the Constitution and to declare void all laws that do not
conform to it.

In Social Justice Society v. Dangerous Drugs Board,25 the Court held that, "It is basic that
if a law or an administrative rule violates any norm of the Constitution, that issuance is
null and void and has no effect. The Constitution is the basic law to which all laws must
conform; no act shall be valid if it conflicts with the Constitution." 26 In Sabio v.
Gordon,27 the Court held that, "the Constitution is the highest law of the land. It is the
‘basic and paramount law to which all other laws must conform.’" 28 In Atty. Macalintal v.
Commission on Elections,29the Court held that, "The Constitution is the fundamental and
paramount law of the nation to which all other laws must conform and in accordance with
which all private rights must be determined and all public authority administered. Laws
that do not conform to the Constitution shall be stricken down for being
unconstitutional."30 In Manila Prince Hotel v. Government Service Insurance
System,31 the Court held that:

Under the doctrine of constitutional supremacy, if a law or contract violates any norm
of the constitution that law or contract whether promulgated by the legislative or by
the executive branch or entered into by private persons for private purposes is null and
void and without any force and effect. Thus, since the Constitution is the
fundamental, paramount and supreme law of the nation, it is deemed written in
every statute and contract."32 (Emphasis supplied)

To reiterate, the 1935, 1973 and 1987 Constitutions expressly prohibit the creation of
franchises that are exclusive in character. They uniformly command that "nor shall such
franchise x x x be exclusive in character." This constitutional prohibition is absolute
and accepts no exception. On the other hand, PD No. 198, as amended, allows the BOD
of LTWD and LWUA to create franchises that are exclusive in character. Section 47 states
that, "No franchise shall be granted to any other person or agency x x x unless and
except to the extent that the board of directors consents thereto x x x subject to
review by the Administration." Section 47 creates a glaring exception to the absolute
prohibition in the Constitution. Clearly, it is patently unconstitutional.

Section 47 gives the BOD and the LWUA the authority to make an exception to the
absolute prohibition in the Constitution. In short, the BOD and the LWUA are given the
discretion to create franchises that are exclusive in character. The BOD and the LWUA
are not even legislative bodies. The BOD is not a regulatory body but simply a
management board of a water district. Indeed, neither the BOD nor the LWUA can be
granted the power to create any exception to the absolute prohibition in the Constitution,
a power that Congress itself cannot exercise.

In Metropolitan Cebu Water District v. Adala,33 the Court categorically declared Section
47 void. The Court held that:

Nonetheless, while the prohibition in Section 47 of P.D. 198 applies to the issuance of
CPCs for the reasons discussed above, the same provision must be deemed void ab
initio for being irreconcilable with Article XIV, Section 5 of the 1973
Constitution which was ratified on January 17, 1973 — the constitution in force when
P.D. 198 was issued on May 25, 1973. Thus, Section 5 of Art. XIV of the 1973
Constitution reads:

"SECTION 5. No franchise, certificate, or any other form of authorization for the operation
of a public utility shall be granted except to citizens of the Philippines or to corporations
or associations organized under the laws of the Philippines at least sixty per centum of
the capital of which is owned by such citizens, nor shall such franchise, certificate, or
authorization be exclusive in character or for a longer period than fifty years. Neither
shall any such franchise or right be granted except under the condition that it shall be
subject to amendment, alteration, or repeal by the Batasang Pambansa when the public
interest so requires. The State shall encourage equity participation in public utiltities by
the general public. The participation of foreign investors in the governing body of any
public utility enterprise shall be limited to their proportionate share in the capital thereof."

This provision has been substantially reproduced in Article XII Section 11 of the 1987
Constitution, including the prohibition against exclusive franchises.

xxxx
Since Section 47 of P.D. 198, which vests an "exclusive franchise" upon public
utilities, is clearly repugnant to Article XIV, Section 5 of the 1973 Constitution, it is
unconstitutional and may not, therefore, be relied upon by petitioner in support of its
opposition against respondent’s application for CPC and the subsequent grant thereof by
the NWRB.

WHEREFORE, Section 47 of P.D. 198 is unconstitutional.34 (Emphasis supplied)

The dissenting opinion declares Section 47 valid and constitutional. In effect, the
dissenting opinion holds that (1) President Marcos can create indirectly franchises that
are exclusive in character; (2) the BOD can create directly franchises that are exclusive
in character; (3) the LWUA can create directly franchises that are exclusive in character;
and (4) the Court should allow the creation of franchises that are exclusive in character.

Stated differently, the dissenting opinion holds that (1) President Marcos can violate
indirectly the Constitution; (2) the BOD can violate directly the Constitution; (3) the LWUA
can violate directly the Constitution; and (4) the Court should allow the violation of the
Constitution.

The dissenting opinion states that the BOD and the LWUA can create franchises that are
exclusive in character "based on reasonable and legitimate grounds," and such creation
"should not be construed as a violation of the constitutional mandate on the non-
exclusivity of a franchise" because it "merely refers to regulation" which is part of "the
government’s inherent right to exercise police power in regulating public utilities" and that
their violation of the Constitution "would carry with it the legal presumption that public
officers regularly perform their official functions." The dissenting opinion states that:

To begin with, a government agency’s refusal to grant a franchise to another entity, based
on reasonable and legitimate grounds, should not be construed as a violation of the
constitutional mandate on the non-exclusivity of a franchise; this merely refers to
regulation, which the Constitution does not prohibit. To say that a legal provision is
unconstitutional simply because it enables a government instrumentality to determine the
propriety of granting a franchise is contrary to the government’s inherent right to exercise
police power in regulating public utilities for the protection of the public and the utilities
themselves. The refusal of the local water district or the LWUA to consent to the grant of
other franchises would carry with it the legal presumption that public officers regularly
perform their official functions.

The dissenting opinion states two "reasonable and legitimate grounds" for the creation of
exclusive franchise: (1) protection of "the government’s investment,"35 and (2) avoidance
of "a situation where ruinous competition could compromise the supply of public utilities
in poor and remote areas."36

There is no "reasonable and legitimate" ground to violate the Constitution. The

Constitution should never be violated by anyone. Right or wrong, the President,
Congress, the Court, the BOD and the LWUA have no choice but to follow the
Constitution. Any act, however noble its intentions, is void if it violates the Constitution.
This rule is basic.

In Social Justice Society,37 the Court held that, "In the discharge of their defined
functions, the three departments of government have no choice but to yield
obedience to the commands of the Constitution. Whatever limits it imposes must
be observed."38 In Sabio,39 the Court held that, "the Constitution is the highest law of the
land. It is ‘the basic and paramount law to which x x x all persons, including the
highest officials of the land, must defer. No act shall be valid, however noble its
intentions, if it conflicts with the Constitution.’"40 In Bengzon v. Drilon,41 the Court
held that, "the three branches of government must discharge their respective functions
within the limits of authority conferred by the Constitution." 42 In Mutuc v. Commission on
Elections,43 the Court held that, "The three departments of government in the
discharge of the functions with which it is [sic] entrusted have no choice but to yield
obedience to [the Constitution’s] commands. Whatever limits it imposes must be
observed."44

Police power does not include the power to violate the Constitution. Police power is the
plenary power vested in Congress to make laws not repugnant to the Constitution. This
rule is basic.

In Metropolitan Manila Development Authority v. Viron Transportation Co., Inc.,45 the

Court held that, "Police power is the plenary power vested in the legislature to make,
ordain, and establish wholesome and reasonable laws, statutes and ordinances, not
repugnant to the Constitution."46 In Carlos Superdrug Corp. v. Department of Social
Welfare and Development,47 the Court held that, police power "is ‘the power vested in the
legislature by the constitution to make, ordain, and establish all manner of wholesome
and reasonable laws, statutes, and ordinances x x x not repugnant to the
constitution.’"48 In Metropolitan Manila Development Authority v. Garin,49 the Court held
that, "police power, as an inherent attribute of sovereignty, is the power vested by the
Constitution in the legislature to make, ordain, and establish all manner of wholesome
and reasonable laws, statutes and ordinances x x x not repugnant to the
Constitution."50

There is no question that the effect of Section 47 is the creation of franchises that are
exclusive in character. Section 47 expressly allows the BOD and the LWUA to create
franchises that are exclusive in character.

The dissenting opinion explains why the BOD and the LWUA should be allowed to create
franchises that are exclusive in character — to protect "the government’s investment" and
to avoid "a situation where ruinous competition could compromise the supply of public
utilities in poor and remote areas." The dissenting opinion declares that these are
"reasonable and legitimate grounds." The dissenting opinion also states that, "The refusal
of the local water district or the LWUA to consent to the grant of other franchises would
carry with it the legal presumption that public officers regularly perform their official
functions."
When the effect of a law is unconstitutional, it is void. In Sabio,51 the Court held that, "A
statute may be declared unconstitutional because it is not within the legislative power
to enact; or it creates or establishes methods or forms that infringe constitutional
principles; or its purpose or effect violates the Constitution or its basic
principles."52 The effect of Section 47 violates the Constitution, thus, it is void.

In Strategic Alliance Development Corporation v. Radstock Securities Limited,53 the

Court held that, "This Court must perform its duty to defend and uphold the
Constitution."54 In Bengzon,55 the Court held that, "The Constitution expressly confers on
the judiciary the power to maintain inviolate what it decrees."56 In Mutuc,57 the Court held
that:

The concept of the Constitution as the fundamental law, setting forth the criterion for the
validity of any public act whether proceeding from the highest official or the lowest
functionary, is a postulate of our system of government. That is to manifest fealty to the
rule of law, with priority accorded to that which occupies the topmost rung in the legal
hierarchy. The three departments of government in the discharge of the functions with
which it is [sic] entrusted have no choice but to yield obedience to its commands.
Whatever limits it imposes must be observed. Congress in the enactment of statutes must
ever be on guard lest the restrictions on its authority, whether substantive or formal, be
transcended. The Presidency in the execution of the laws cannot ignore or disregard what
it ordains. In its task of applying the law to the facts as found in deciding cases, the
judiciary is called upon to maintain inviolate what is decreed by the fundamental law. Even
its power of judicial review to pass upon the validity of the acts of the coordinate branches
in the course of adjudication is a logical corollary of this basic principle that the
Constitution is paramount. It overrides any governmental measure that fails to live up to
its mandates. Thereby there is a recognition of its being the supreme law. 58

Sustaining the RTC’s ruling would make a dangerous precedent. It will allow Congress to
do indirectly what it cannot do directly. In order to circumvent the constitutional prohibition
on franchises that are exclusive in character, all Congress has to do is to create a law
allowing the BOD and the LWUA to create franchises that are exclusive in character, as
in the present case.

WHEREFORE, we GRANT the petition. We DECLARE Section 47 of Presidential

Decree No. 198 UNCONSTITUTIONAL. We SET ASIDE the 1 October 2004 Judgment
and 6 November 2004 Order of the Regional Trial Court, Judicial Region 1, Branch 62,
La Trinidad, Benguet, in Civil Case No. 03-CV-1878 and REINSTATE the 23 July 2002
Resolution and 15 August 2002 Decision of the National Water Resources Board.

SO ORDERED.

G.R. No. 157584 April 2, 2009

CONGRESSMAN ENRIQUE T. GARCIA of the 2nd District of Bataan, Petitioner,

vs.
THE EXECUTIVE SECRETARY, THE SECRETARY OF THE DEPARTMENT OF
ENERGY, CALTEX PHILIPPINES, INC., PETRON CORPORATION, and PILIPINAS
SHELL CORPORATION Respondents.

DECISION

BRION, J.:

For the second time, petitioner Enrique T. Garcia, Jr. (petitioner Garcia) asks this Court
to examine the constitutionality of Section 19 of Republic Act No. 8479 (R.A. No. 8479),
otherwise known as the Oil Deregulation Law of 1998) through this petition for
certiorari.1 He raises once again before us the propriety of implementing full deregulation
by removing the system of price controls in the local downstream oil industry – a matter
that we have ruled upon in the past.

THE FACTS

After years of imposing significant controls over the downstream oil industry in the
Philippines, the government decided in March 1996 to pursue a policy of deregulation by
enacting Republic Act No. 8180 (R.A. No. 8180) or the "Downstream Oil Industry
Deregulation Act of 1996."

R.A. No. 8180, however, met strong opposition, and rightly so, as this Court concluded in
its November 5, 1997 decision in Tatad v. Secretary of Department of Energy. 2 We struck
down the law as invalid because the three key provisions intended to promote free
competition were shown to achieve the opposite result; contrary to its intent, R.A. No.
8180’s provisions on tariff differential, inventory requirements, and predatory pricing
inhibited fair competition, encouraged monopolistic power, and interfered with the free
interaction of market forces. We declared:

R.A. No. 8180 needs provisions to vouchsafe free and fair competition. The need for
these vouchsafing provisions cannot be overstated. Before deregulation, PETRON,
SHELL and CALTEX had no real competitors but did not have a free run of the market
because government controls both the pricing and non-pricing aspects of the oil
industry. After deregulation, PETRON, SHELL and CALTEX remain unthreatened by
real competition yet are no longer subject to control by government with respect to their
pricing and non-pricing decisions. The aftermath of R.A. No. 8180 is a deregulated market
where competition can be corrupted and where market forces can be manipulated by
oligopolies.3

Notwithstanding the existence of a separability clause among its provisions, we struck

down R.A. No. 8180 in its entirety because its offensive provisions permeated the whole
law and were the principal tools to carry deregulation into effect.

Congress responded to our Decision in Tatad by enacting on February 10, 1998 a new
oil deregulation law, R.A. No. 8479. This time, Congress excluded the offensive
provisions found in the invalidated law. Nonetheless, petitioner Garcia again sought to
declare the new oil deregulation law unconstitutional on the ground that it violated Article
XII, Section 19 of the Constitution.4 He specifically objected to Section 19 of R.A. No.
8479 which, in essence, prescribed the period for removal of price control on gasoline
and other finished petroleum products and set the time for the full deregulation of the local
downstream oil industry. The assailed provision reads:

SEC. 19. Start of Full Deregulation. – Full deregulation of the Industry shall start five (5)
months following the effectivity of this Act: Provided, however, That when the public
interest so requires, the President may accelerate the start of full deregulation upon the
recommendation of the DOE and the Department of Finance (DOF) when the prices of
crude oil and petroleum products in the world market are declining and the value of the
peso in relation to the US dollar is stable, taking into account relevant trends and
prospects; Provided, further, That the foregoing provision notwithstanding, the five (5)-
month Transition Phase shall continue to apply to LPG, regular gasoline and kerosene as
socially-sensitive petroleum products and said petroleum products shall be covered by
the automatic pricing mechanism during the said period.

Upon the implementation of full deregulation as provided herein, the Transition Phase is
deemed terminated and the following laws are repealed:

a) Republic Act No. 6173, as amended;

b) Section 5 of Executive Order No. 172, as amended;

c) Letter of Instruction No. 1431, dated October 15, 1984;

d) Letter of Instruction No. 1441, dated November 20, 1984, as amended;

e) Letter of Instruction No. 1460, dated May 9, 1985;

f) Presidential Decree No. 1889; and

g) Presidential Decree No. 1956, as amended by Executive Order No. 137:

Provided, however, That in case full deregulation is started by the President in the
exercise of the authority provided in this Section, the foregoing laws shall continue to be
in force and effect with respect to LPG, regular gasoline and kerosene for the rest of the
five (5)-month period.

Petitioner Garcia contended that implementing full deregulation and removing price
control at a time when the market is still dominated and controlled by an oligopoly5 would
be contrary to public interest, as it would only provide an opportunity for the Big 3 to
engage in price-fixing and overpricing. He averred that Section 19 of R.A. No. 8479 is
"glaringly pro-oligopoly, anti-competition, and anti-people," and thus asked the Court to
declare the provision unconstitutional.
On December 17, 1999, in Garcia v. Corona (1999 Garcia case), 6 we denied petitioner
Garcia’s plea for nullity. We declined to rule on the constitutionality of Section 19 of R.A.
No. 8479 as we found the question replete with policy considerations; in the words of
Justice Ynares-Santiago, the ponente of the 1999 Garcia case:

It bears reiterating at the outset that the deregulation of the oil industry is a policy
determination of the highest order. It is unquestionably a priority program of Government.
The Department of Energy Act of 1992 expressly mandates that the development and
updating of the existing Philippine energy program "shall include a policy direction
towards deregulation of the power and energy industry."

Be that as it may, we are not concerned with whether or not there should be deregulation.
This is outside our jurisdiction. The judgment on the issue is a settled matter and only
Congress can reverse it.

xxx xxx xxx

Reduced to its basic arguments, it can be seen that the challenge in this petition is not
against the legality of deregulation. Petitioner does not expressly challenge deregulation.
The issue, quite simply, is the timeliness or the wisdom of the date when full deregulation
should be effective.

In this regard, what constitutes reasonable time is not for judicial determination.
Reasonable time involves the appraisal of a great variety of relevant conditions, political,
social and economic. They are not within the appropriate range of evidence in a court of
justice. It would be an extravagant extension of judicial authority to assert judicial notice
as the basis for the determination. [Emphasis supplied.]

Undaunted, petitioner Garcia is again before us in the present petition for certiorari
seeking a categorical declaration from this Court of the unconstitutionality of Section 19
of R.A. No. 8479.

THE PETITION

Petitioner Garcia does not deny that the present petition for certiorari raises the same
issue of the constitutionality of Section 19 of R.A. No. 8479, which was already the subject
of the 1999 Garcia case. He disagrees, however, with the allegation that the prior rulings
of the Court in the two oil deregulation cases7 amount to res judicata that would effectively
bar the resolution of the present petition. He reasons that res judicata will not apply, as
the earlier cases did not completely resolve the controversy and were not decided on the
merits. Moreover, he maintains that the present case involves a matter of overarching
and overriding importance to the national economy and to the public and cannot be
sacrificed for technicalities like res judicata.8

To further support the present petition, petitioner Garcia invokes the following additional
grounds to nullify Section 19 of R.A. No. 8479:
1. Subsequent events after the lifting of price control in 1997 have confirmed the
continued existence of the Big 3 oligopoly and its overpricing of finished petroleum
products;

2. The unabated overpricing of finished petroleum products by the Big 3 oligopoly is

gravely and undeniably detrimental to the public interest;

3. No longer may the bare and blatant constitutionality of the lifting of price control be
glossed over through the expediency of legislative wisdom or judgment call in the face of
the Big 3 oligopoly’s characteristic, definitive, and continued overpricing;

4. To avoid declaring the lifting of price control on finished petroleum products as

unconstitutional is to consign to the dead letter dustbin the solemn and explicit
constitutional command for the regulation of monopolies/oligopolies. 9

THE COURT’S RULING

We resolve to dismiss the petition.

In asking the Court to declare Section 19 of R.A. No. 8479 as unconstitutional for
contravening Section 19, Article XII of the Constitution, petitioner Garcia invokes the
exercise by this Court of its power of judicial review, which power is expressly recognized
under Section 4(2), Article VIII of the Constitution.10 The power of judicial review is the
power of the courts to test the validity of executive and legislative acts for their conformity
with the Constitution.11 Through such power, the judiciary enforces and upholds the
supremacy of the Constitution.12 For a court to exercise this power, certain requirements
must first be met, namely:

(1) an actual case or controversy calling for the exercise of judicial power;

(2) the person challenging the act must have "standing" to challenge; he must have a
personal and substantial interest in the case such that he has sustained, or will sustain,
direct injury as a result of its enforcement;

(3) the question of constitutionality must be raised at the earliest possible opportunity;
and

(4) the issue of constitutionality must be the very lis mota of the case.13

Actual Case Controversy

Susceptible of Judicial Determination

The petition fails to satisfy the very first of these requirements – the existence of an actual
case or controversy calling for the exercise of judicial power. An actual case or
controversy is one that involves a conflict of legal rights, an assertion of opposite legal
claims susceptible of judicial resolution; the case must not be moot or academic or based
on extra-legal or other similar considerations not cognizable by a court of justice. Stated
otherwise, it is not the mere existence of a conflict or controversy that will authorize the
exercise by the courts of its power of review; more importantly, the issue involved must
be susceptible of judicial determination. Excluded from these are questions of policy or
wisdom, otherwise referred to as political questions:

As Tañada v. Cuenco puts it, political questions refer "to those questions which, under
the Constitution, are to be decided by the people in their sovereign capacity, or in regard
to which full discretionary authority has been delegated to the legislative or executive
branch of government." Thus, if an issue is clearly identified by the text of the Constitution
as matters for discretionary action by a particular branch of government or to the people
themselves then it is held to be a political question. In the classic formulation of Justice
Brennan in Baker v. Carr, "[p]rominent on the surface of any case held to involve a
political question is found a textually demonstrable constitutional commitment of the issue
to a coordinate political department; or a lack of judicially discoverable and manageable
standards for resolving it; or the impossibility of deciding without an initial policy
determination of a kind clearly for non-judicial discretion; or the impossibility of a court’s
undertaking independent resolution without expressing lack of the respect due coordinate
branches of government; or an unusual need for unquestioning adherence to a political
decision already made; or the potentiality of embarrassment from multifarious
pronouncements by various departments on the one question." 14 [Emphasis supplied.]

Petitioner Garcia’s issues fit snugly into the political question mold, as he insists that by
adopting a policy of full deregulation through the removal of price controls at a time when
an oligopoly still exists, Section 19 of R.A. No. 8479 contravenes the Constitutional
directive to regulate or prohibit monopolies15 under Article XII, Section 19 of the
Constitution. This Section states:

The State shall regulate or prohibit monopolies when the public interest so requires. No
combinations in restraint of trade or unfair competition shall be allowed.

Read correctly, this constitutional provision does not declare an outright prohibition of
monopolies. It simply allows the State to act "when public interest so requires"; even then,
no outright prohibition is mandated, as the State may choose to regulate rather than to
prohibit. Two elements must concur before a monopoly may be regulated or prohibited:

1. There in fact exists a monopoly or an oligopoly, and

2. Public interest requires its regulation or prohibition.

Whether a monopoly exists is a question of fact. On the other hand, the questions of (1)
what public interest requires and (2) what the State reaction shall be essentially require
the exercise of discretion on the part of the State.
Stripped to its core, what petitioner Garcia raises as an issue is the propriety of
immediately and fully deregulating the oil industry. Such determination essentially dwells
on the soundness or wisdom of the timing and manner of the deregulation Congress
wants to implement through R.A. No. 8497. Quite clearly, the issue is not for us to resolve;
we cannot rule on when and to what extent deregulation should take place without
passing upon the wisdom of the policy of deregulation that Congress has decided upon.
To use the words of Baker v. Carr,16 the ruling that petitioner Garcia asks requires "an
initial policy determination of a kind clearly for non-judicial discretion"; the branch of
government that was given by the people the full discretionary authority to formulate the
policy is the legislative department.

Directly supporting our conclusion that Garcia raises a political question is his proposal
to adopt instead a system of partial deregulation – a system he presents as more
consistent with the Constitutional "dictate." He avers that free market forces (in a fully
deregulated environment) cannot prevail for as long as the market itself is dominated by
an entrenched oligopoly. In such situation, he claims that prices are not determined by
the free play of supply and demand, but instead by the entrenched and dominant oligopoly
where overpricing and price-fixing are possible.17Thus, before full deregulation can be
implemented, he calls for an indefinite period of partial deregulation through imposition of
price controls.18

Petitioner Garcia’s thesis readily reveals the political,19 hence, non-justiciable, nature of
his petition; the choice of undertaking full or partial deregulation is not for this Court to
make. By enacting the assailed provision – Section 19 – of R.A. No. 8479, Congress
already determined that the problems confronting the local downstream oil industry are
better addressed by removing all forms of prior controls and adopting a deregulated
system.1awphi1.net This intent is expressed in Section 2 of the law:

Section 2. Declaration of Policy. – It shall be the policy of the State to liberalize and
deregulate the downstream oil industry in order to ensure a truly competitive market under
a regime of fair prices, adequate and continuous supply of environmentally-clean and
high-quality petroleum products. To this end, the State shall promote and encourage the
entry of new participants in the downstream oil industry, and introduce adequate
measures to ensure the attainment of these goals.

In Tatad, we declared that the fundamental principle espoused by Section 19, Article XII
of the Constitution is competition.20 Congress, by enacting R.A. No. 8479, determined
that this objective is better realized by liberalizing the oil market, instead of continuing
with a highly regulated system enforced by means of restrictive prior controls. This
legislative determination was a lawful exercise of Congress’ prerogative and one that this
Court must respect and uphold. Regardless of the individual opinions of the Members of
this Court, we cannot, acting as a body, question the wisdom of a co-equal department’s
acts. The courts do not involve themselves with or delve into the policy or wisdom of a
statute;21 it sits, not to review or revise legislative action, but to enforce the legislative
will.22For the Court to resolve a clearly non-justiciable matter would be to debase the
principle of separation of powers that has been tightly woven by the Constitution into our
republican system of government.

This same line of reasoning was what we used when we dismissed the first Garcia case.
The petitioner correctly noted that this is not a matter of res judicata (as the respondents
invoked), as the application of the principle of res judicata presupposes that there is a
final judgment or decree on the merits rendered by a court of competent jurisdiction. To
be exact, we are simply declaring that then, as now, and for the same reasons, we find
that there is no justiciable controversy that would justify the grant of the petition.

Grave Abuse of Discretion

Recourse to the political question doctrine necessarily raises the underlying doctrine of
separation of powers among the three great branches of government that our Constitution
has entrenched. But at the same time that the Constitution mandates this Court to respect
acts performed by co-equal departments done within their sphere of competence and
authority, it has also allowed us to cross the line of separation on a very limited and
specific point – to determine whether the acts of the executive and the legislative
departments are null because they were undertaken with grave abuse of discretion. IBP
v. Zamora teaches us that -

When political questions are involved, the Constitution limits the determination as to
whether there has been grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of the official whose action is being questioned.

xxx xxx xxx

[W]hile this Court has no power to substitute its judgment for that of Congress or of the
President, it may look into the question of whether such exercise has been made in grave
abuse of discretion. A showing that plenary power is granted either department of
government, may not be an obstacle to judicial inquiry, for the improvident exercise or
abuse thereof may give rise to justiciable controversy. 23 [Emphasis supplied.]

Jurisprudence has defined grave abuse of discretion to mean the capricious or whimsical
exercise of judgment that is so patent and gross as to amount to an evasion of positive
duty or a virtual refusal to perform a duty enjoined by law, or to act at all in contemplation
of law, as where the power is exercised in an arbitrary and despotic manner by reason of
passion or hostility.24

Significantly, the pleadings before us fail to disclose any act of the legislature that may be
characterized as patently capricious or whimsical. A reading of the congressional
deliberations made on R.A. No. 8479 indicates that the measure was thoroughly and
carefully considered. Indeed, petitioner Garcia was among the many who interpellated
the law’s principal author, then Congressman Dante O. Tinga, now a Member of this
Court.
We note, too, that petitioner Garcia has not adequately proven at this point that an
oligopoly does in fact exist in the form of the Big 3, and that the Big 3 have actually
engaged in oligopolistic practices. He merely cites (in his argument against the
applicability of res judicata) and relies on the facts and findings stated in the two prior
cases on oil deregulation. This calls to mind what former Chief Justice Panganiban said
in his Separate Opinion in the 1999 Garcia case:

Petitioner merely resurrects and relies heavily on the arguments, the statistics and the
proofs he submitted twoyears ago in the first oil deregulation case, Tatad v. Secretary of
the Department of Energy. Needless to state, those reasons were taken into
consideration in said case, and they indeed helped show the unconstitutionality of RA
8180. But exactly the same old grounds cannot continue to support petitioner’s present
allegation that the major oil companies -- Petron, Shell and Caltex -- persist to this date in
their oligopolistic practices, as a consequence of the current Oil Deregulation Law and in
violation of the Constitution. In brief, the legal cause and effect relationship has not been
amply shown. [Emphasis supplied.]

This observation is true in the present case as it was true in the 1999 Garcia case; the
petitioner has simply omitted the citation of facts, figures and statistics specifically
supporting his petition. To prove charges of continued overpricing or price-fixing, he refers
to data showing price adjustments of petroleum products for the period covering February
8, 1997 to August 1, 1997. Insofar as R.A. No. 8479 is concerned, however, these data
are irrelevant, as they cover a period way before R.A. No. 8479 was enacted. 251avvphi1

Petitioner Garcia contends that the identity in the pricing patterns of the Big 3 confirms
the existence of an oligopoly and shows that they have colluded to engage in unlawful
cartel-like behaviour. His reasoning fails to persuade us. That the oil firms have the same
prices and change them at the same rate at the same time are not sufficient evidence to
conclude that collusion exists. An independent study on local oil prices explains:

[W]hen products are highly substitutable with each other (or what economists call
"homogeneous products"), then firms will tend to set similar prices, especially when there
are many competing sellers. Otherwise, if one firm tried to set a price significantly higher
than the others, it would find itself losing customers to the others.26

Even assuming that the Big 3 have indeed colluded in fixing oil prices, this development
will not necessarily justify a declaration against the validity and constitutionality of Section
19 of R.A. No. 8479. The remedy against the perceived failure of the Oil Deregulation
Law to combat cartelization is not to declare it invalid, but to set in motion its anti-trust
safeguards under Sections 11,27 12,28 and 13.29

Lis Mota

Lis Mota – the fourth requirement to satisfy before this Court will undertake judicial review
– means that the Court will not pass upon a question of unconstitutionality, although
properly presented, if the case can be disposed of on some other ground, such as the
application of the statute or the general law. The petitioner must be able to show that the
case cannot be legally resolved unless the constitutional question raised is
determined.30 This requirement is based on the rule that every law has in its favor the
presumption of constitutionality; 31 to justify its nullification, there must be a clear and
unequivocal breach of the Constitution, and not one that is doubtful, speculative, or
argumentative.

Petitioner Garcia argues against full deregulation implemented through the lifting of price
control, as it allows oligopoly, overpricing and price-fixing. R.A. No. 8479, however, does
not condone these acts; indeed, Section 11 (a) of the law expressly prohibits and
punishes cartelization, which is defined in the same section as "any agreement,
combination or concerted action by refiners, importers and/or dealers, or their
representatives, to fix prices, restrict outputs or divide markets, either by products or by
areas, or allocate markets, either by products or by areas, in restraint of trade or free
competition, including any contractual stipulation which prescribes pricing levels and profit
margins." This definition is broad enough to include the alleged acts of overpricing or
price-fixing by the Big 3. R.A. No. 8479 has provided, aside from prosecution for
cartelization, several other anti-trust mechanisms, including the enlarged scope of the
Department of Energy’s monitoring power and the creation of a Joint Task Force to
immediately act on complaints against unreasonable rise in the price of petroleum
products.32 Petitioner Garcia’s failure is that he failed to show that he resorted to these
measures before filing the instant petition. His belief that these oversight mechanisms are
unrealistic and insufficient does not permit disregard of these remedies. 33

CONCLUSION

To summarize, we declare that the issues petitioner Garcia presented to this Court are
non-justiciable matters that preclude the Court from exercising its power of judicial review.
The immediate implementation of full deregulation of the local downstream oil industry is
a policy determination by Congress which this Court cannot overturn without offending
the Constitution and the principle of separation of powers. That the law failed in its
objectives because its adoption spawned the evils petitioner Garcia alludes to does not
warrant its nullification. In the words of Mr. Justice Leonardo A. Quisumbing in the 1999
Garcia case, "[a] calculus of fear and pessimism xxx does not justify the remedy petitioner
seeks: that we overturn a law enacted by Congress and approved by the Chief
Executive."34

WHEREFORE, we hereby DISMISS the petition. No pronouncements as to costs.

SO ORDERED.

G.R. No. L-54958 September 2, 1983

ANGLO-FIL TRADING CORPORATION, ADUANA STEVEDORING CORPORATION,

ANDA STEVEDORING CORPORATION, BEN PAZ PORT SERVICE, INC., MANILA
STEVEDORING CORPORATION, WATERFRONT STEVEDORING AND ARRASTRE
SERVICES, INC., VANGUARD STEVEDORING AND ARRASTRE SERVICES, INC.,
and LUVIMIN STEVEDORING/ARRASTRE & DEVELOPMENT
CORPORATION, petitioners,
vs.
HON. ALFREDO LAZARO, in his capacity as Presiding Judge of Branch XXV, of the
Court of First Instance of Manila, PHILIPPINE PORTS AUTHORITY, COL.
EUSTAQUIO S. BACLIG, JR., CDR. PRIMITIVO SOLIS, JR., and OCEAN TERMINAL
SERVICES, INC., respondents.

x-----------------------x

G.R. No. L-54966

PHILIPPINE INTEGRATED PORT SERVICES, INC., petitioner,

vs.
THE HONORABLE ALFREDO M. LAZARO, Judge of the Court of First Instance of
Manila, Branch XXV, PHILIPPINE PORTS AUTHORITY, COL. EUSTAQUIO S.
BACLIG, JR., CDR. PRIMITIVO S. SOLIS, JR., and OCEAN TERMINAL SERVICES,
INC., respondents.

GUTIERREZ, JR., J.:

These two petitioners foe certiorari seek to annul the order of the Court of First Instance
of Manila issued ex-parte, lifting the restraining orders it had previously issued. The
setting aside of the restraining orders enabled the implementation of the Management
Contract executed by and between respondents, providing for respondent Ocean
Terminal Services, Inc. as the exclusive stevedoring contractor at the South Harbor, Port
of Manila.

Involved in these two petitions is the operation of stevedoring work in the South Harbor
of the Port of Manila. Stevedoring, as the term is understood in the port business, consists
of the handling of cargo from the hold of the ship to the dock, in case of pier-side
unloading, or to a barge, in case of unloading at sea. The loading on the ship of outgoing
cargo is also part of stevedoring work. Stevedoring charges at rates approved by the
Government are assessed and collected for the services.

The Philippines Ports Authority (PPA), the government agency charged with the
management and control of all ports, was created by Presidential Decree No. 505,
promulgated on July 11, 1974, later superseded by Presidential Decree No. 857 dated
December 23, 1975. The PPA’s function is to carry out an integrated program for the
planning, development, financing, and operation of ports and port districts throughout the
country. Among other things, the powers, duties, and jurisdiction of the Bureau of
Customs concerning arrastre operations were transferred to and vested in the PPA.

The Philippine Integrated Port Services, Inc., (PIPSI), petitioner in G.R. No. 54966, is a
stevedoring operator at the Manila South Harbor. Anglo-Fil Trading Corporation, Aduana
Stevedoring Corporation, Anda Stevedoring Corporation, Ben Paz Port Service, Inc.,
Manila Stevedoring and Arrastre Services, Inc., (Anglo-Fil, et al.,) petitioners in G.R. No.
54958, are stevedoring and arrastre operators and contractors, likewise at Manila South
Harbor, Port of Manila. Anglo-Fil, et al., are members of the Philippine Association of
Stevedoring Operators and Contractors, Inc. (PASOC).

Prior to the present controversy which arose as a result of the actions of the PPA, twenty-
three (23) contractors competed at the South Harbor for the performance of stevedoring
work. The licenses of these contractors had long expired when the PPA took over the
control and management of ports but they continued to operate afterwards on the strength
of temporary permits and hold-over authorities issued by PPA.

On May 4, 1976, the Board of Directors of PPA passed Resolution No. 10, approving and
adopting and adopting a set of policies on Port Administration, Management and
Operation. The PPA adopted as its own the own the Bureau of Customs’ policy of placing
on only one organization the responsibility for the operation of arrastre and stevedoring
services in one port.

On April 11, 1980, Presidential Ferdinand E. Marcos issued Letter of Instruction No. 1005-
A which among other things, directed PPA;

To expeditiously evaluate all recognized cargo-handling contractors and port-related

service operators doing business in all Port Districts in the country under such criteria as
PPA may set and to determine the qualified contractor or operator under said criteria in
order to ensure effective utilization of port facilities, prevent pilferage and/or pinpoint
responsibility for its and provide optimum services to major ports vital to the country’s
trade and economy.

This was followed by the President’s memorandum to respondent Bacling dated April 18,
1980, directing submission of a report on the integrated of the stevedoring operations in
Manila South Harbor and emphasizing the need for such integration as well as the
strengthening of the PPA in order to remedy the problems therein. In compliance
therewith, PPA made a study evaluation of the arrastre and stevedoring industry in the
ports where integration had not yet been achieved. A special committee was created on
April 25, 1980 to make a final evaluation of existing operators in the South Harbor and to
select the most qualified among them.

On April 28, 1980, the committee submitted its report recommending the award of an
exclusive contract for stevedoring services in the South Harbor to respondent Ocean
Terminal Services, Inc. (OTSI) after finding it the best qualified among the existing
contractors. The committee report and recommendation were indorsed by respondent
Primitivo Solis, Jr., Port Manager of Manila, to respondent Baclig on April 30, 1980. On
May 14, 1980, the latter approved the recommendation.
In accordance with the President’s memorandum dated April 18, 1980, PPA submitted
the committee report to him. On May 24, 1980, the President approved the
recommendation to award an exclusive management contract to OTSI.

On June 27, 1980, PPA and OTSI entered into a management contract which provided,
among others, for a five-year exclusive operation by OTSI of stevedoring services in the
South Harbor, renewable for another five (5) years. The contract set the commencement
of the exclusive operation by OTSI upon proper determination by PPA which shall not be
earlier that two (2) months from the approval of the contract by the Board of Directors of
the PPA. The latter gave its approval on June 27, 1980.

On July 23, 1980, petitioner PIPSI instituted an action against PPA and OTSI for the
nullification of the contract between the two, the annulment of the 10% of gross
stevedoring revenue being collected by PPA, and injunction with preliminary injunction.
The case was docketed as Civil Case No. 133477 in the Court of First Instance of Manila,
provided over by respondent Judge Alfredo Lazaro. On July 29, 1980, the respondent
court issued a restraining order ex-parte, enjoining respondents PPA and OTSI from
implementing the exclusive contract of stevedoring between them.

On August 21, 1980, with leave of court, petitioners, Anglo-Fil, et al., filed their complaint
in intervention. The motion was granted and on August 22, 1980, respondent court issued
another ex-parte restraining order in the case to include the petitioners Anglo-Fil et al.,
under the benefits of such order.

On August 30, 1980, PPA filed an urgent motion to lift the restraining orders "in view of
their long delay in the resolution of the injunction incident and the countervailing public
interest involved." On September 1, 1980, respondent Judge issued an order, which
reads:

"AS PRAYED FOR, the restraining orders issued by the this Court on July 29, 1980 and
August 20, 1980, are hereby dissolved, lifted, and set aside without prejudice to the
Court’s resolution on the propriety of issuing the writ of preliminary injunction prayed for
by the petitioners."

On September 5, 1980, PPA sent a letter to the General Manager of PIPSI informing him
that due to the lifting of the temporary restraining order, it was withdrawing PIPSI’s hold-
over authority to operate or provide stevedoring services at South Harbor effective
September 7, 1980.

Petitioners Anglo-Fil, et al., and PIPSI, therefore, filed the present petitions for certiorari
with preliminary injunction alleging that the lifting of the retraining orders ex-parte by
respondent Judge was clearly affected with grave abuse of discretion amounting to lack
of jurisdiction. They also applied for the issuance in the meantime of a restraining order.

On September 9, 1980, we ordered the consolidation of the two cases and on August 12,
1980, heard the petitioners’ motions for a restraining order.
On September 15, 1980, the respondent court issued an order in Civil Case No. 133477
denying the application of petitioners for a writ of preliminary injunction and affirming its
order of September 1, 1980 lifting the temporary restraining orders issued in the case.

On the same day, the Katipunan ng mga Manggagawa sa Daungan (KAMADA), a labor
federation and its thirteen (13) member labor organizations filed a petition to intervene in
the consolidated cases. According to KAMADA, its members would lose their jobs if the
contract was implemented. It also alleged that the collective bargaining contract between
OTSI and PWUP would be prejudicial to workers because KAMADA members received
greater benefits from the ousted contractors;

On September 29, 1980, PIPSI filed a supplemental petition to annul the order of the
respondent judge denying the application for preliminary injunction and affirming the
orders issued on July 29 and August 22, 1980.1âwphi1

On October 14, 1980, PPA filed its comment with opposition to preliminary injunction
stating that the lifting of the restraining orders by respondent judge was intended to
preserve the status quo pending resolution of the preliminary injunction; that said orders
were issued without hearing or bond, therefore, the dissolution was proper considering
that it had been in force for one month and an early resolution of the motion for injunction
was not in sight, and that in dissolving an injunction already issued, the court cannot be
considered as having acted without jurisdiction or in excess thereof even if dissolution
had been made without previous notice to the adverse party and without a hearing.
Furthermore, it argued that when the purpose of an administrative determination is to
decide whether a right or privilege which an applicant does not possess shall be granted
to him or withheld in the exercise of a discretion vested by statute, notice and hearing are
not necessary. It also added that the policy of integration in the award by PPA to OTSI is
impressed with public interest while what is involved as far as petitioners were concerned
was merely their alleged right to operate stevedoring services, a property right the denial
of which could easily be restored in the event the respondent court decided that
petitioners are entitled to it.

In their consolidated reply, Anglo-Fil, et al., argued that the temporary order in their favor
was not issued ex-parte for the following reasons: a) it was issued when PIPSI and PPA
were already conducting hearings on the petition for preliminary injunction; b) it was
announced in open court; and c) PPA did not object to such issuance. Likewise, they
argued that although a permit to operate is a privilege, its withdrawal must comply with
due process of law just like the practice of law, medicine, or accountancy, and that not
only property rights are involved but their very livelihood, their right to live.

On October 21, 1980, we issued a resolution granting the temporary mandatory

restraining order "effective immediately ordering respondents to allow the workers
represented by said petitioner-intervenors to render the stevedoring services performed
by them on foreign vessels in the Manila South Harbor before the execution of the
exclusive stevedoring contract of June 27, 1980 until further orders of the Court, the order
of respondent Judge, dated September 1 and 15, 1980 as well as the implementing letter
of Philippine Ports Authority of September 5, 1980 to the contrary notwithstanding."

On October 24, 1980, PPA issued Memorandum Order No. 23 providing for guidelines in
implementing the temporary mandatory restraining order of the Supreme Court dated
October 21, 1980, to wit:

xxx xxx xxx

(1.) The Office of the Harbor Master shall determine which union has serviced a particular
vessel for the period from January 1, 1980 to June 26, 1980. The number of services
performed by a particular union for a given vessel shall be quantified for the said period
after which each union shall be identified whether they are affiliated with PWUP or
KAMADA.

(2.) The most number of times that a union has serviced a particular vessel with its
affiliation properly considered shall continue to service said vessel for its incoming calls
or arrivals.

(3.) If there is a tie in the number of services performed by both PWUP and KAMADA
affiliated unions, the last union that serviced said vessel shall be allowed to continue
servicing the same on all its incoming calls or arrivals.

(4.) Once the union has been properly identified during the berthing meeting, the Harbor
Master shall inform Ocean Terminal Services, Inc. accordingly and shall be authorized to
negotiate with the union or the gang leader concerned on the number of gangs as may
be required by the vessel or its agent.

(5.) All unions in this order shall refer only to South Harbor stevedoring union.

(6.) KAMADA shall have the duty and responsibility to certify that the stevedores deployed
in any given vessel allowed for their work are bona fide members of their group and that
they were the same stevedores who serviced assigned vessel prior to the stevedoring
services integration.

On November 7 and 10, 1980 OTSI and PPA filed their separate answers to KAMADA’s
petition in intervention. They assured this Court that none of the legitimate stevedores
who had joined the KAMADA would be displaced from work provided he joined PWUP.
Written guarantees of this assurance were separately submitted to this Court by both
OTSI and PWUP. OTSI further alleged in its answer that, contrary to the claim of
KAMADA, the CBA signed by OTSI with PWUP represented the best of employment ever
offered to the stevedores in the South Harbor.

On November 13, 1980, Anglo-Fil, et al., filed an urgent motion to cite PPA and OTSI in
contempt on the following grounds: 1) issuance of PPA-POM Memorandum No. 23, series
of 1980; 2) letter of October 29, 1980 of PPA to Anglo-Fil, et al., denying a "non-
existing" request for permission to operate by the latter; and 3) refusal of PPA authorities
to issue gate passes to KAMADA-affiliated stevedores to be used and employed by
Anglo-Fil, et al., in their resumption of work, pursuant to the Supreme Court order of
October 21, 1980.

On November 20, 1980, PPA filed a motion to lift the temporary mandatory restraining
order but the same was denied by this Court.

On November 26, 1980, an urgent motion for clarification of the resolution of October 21,
1980 was filed by KAMADA seeking clarification as to which company its workers should
work for, alleging that after Antranco Stevedores Union (Antranco) a KAMADA member,
had received a letter from OTSI to supply the necessary stevedores gang to service the
S/S "Success", Anglo-Fil Trading Corporation prohibited its employees who are members
of Antranco from working for OTSI in the light of the resolution of this Court and the
existing collective bargaining agreement between said union and Anglo-FilTrading
Corporation. As a consequence, the union was allegedly unable to service S/S "Success"
and from October 21, 1980 up to the present, OTSI failed to allow members of KAMADA
to service several vessels.

A joint manifestation was filed by respondents PPA and OTSI alleging compliance with
the above resolution to the effect that KAMADA workers have been and are being
employed on the vessels they used to serve prior to June 27, 1980, and justifying
issuance of PPA-POM Memorandum No. 23, as a means to avert possible conflict among
the competing union groups (PWUP and KAMADA) involved, to provide a reasonable and
fair system for determining which group had previously worked on a vessel and should
work on its subsequent calls, and to insure that only the bonafide stevedores
contemplated by the order of this Court are allowed to work.

On December 2, 1980, another motion for clarification was filed by KAMADA regarding
the phrase "foreign vessels" which it stated to be inaccurate as KAMADA members also
work on vessels of Philippine registry like those operated by Sweet Lines and Lorenzo
Shipping Lines whose vessels also dock at the Manila South Harbor. It suggested that
the basis should not be the foreign vessels but the shipping agents or charterers and
consignees and that the basis for determining and quantifying the vessels given to PWUP
or KAMADA should be from January 1, 1978 to September 7, 1980.

This Court in a resolution dated December 9, 1980, granted the motion of KAMADA to
wit:

xxx xxx xxx

x x x (3) GRANT the motion for clarification by petitioners-intervenors issuing a resolution

previously released, the pertinent portion of which reads, ‘for while the order of October
21, 1980 is on its face quite definite as to what it purports to require, this resolution may
remove any doubt as to its purpose and intent, thus assuring the utmost fidelity in its
compliance. The order requires and mandates that all workers represented by said
petitioners-invtervenors can continue rendering stevedoring services performed by them
on foreign vessels, in Manila South Harbor before the execution of the exclusive
stevedoring contract of June 27, 1980, until further orders of the Court, without any
reference to any particular vessel, the decisive factor being shipping lines involved and
the fact that they were at that time rendering stevedoring services, irrespective of the
labor unions to which they are affiliated. xxx."

Inspite of our clarificatory order, various problems in its implementation appear to have
beset the parties. Repeated motions and manifestations and countermotions and
countermanifestations were filed with unbroken regularity, swelling the records of these
petitions to unusual proportions. After requiring the parties to submit their respective
positions, we issued on January 6, 1983, a resolution which modified our earlier orders
as follows:

"G.R. No. 54958 (Anglo-Fil Trading Corporation, et al. vs. Hon.Alfredo Lazaro, et al.); and
G.R. No. 54966 (Philippine Integrated Port Services, Inc. vs. Hon. Alfredo Lazaro, et al.).
– Considering the urgent motion and manifestation of petitioners-intervenors filed on
March 20, 1982, the comment of respondent Ocean Terminal Services, Inc., filed on June
7, 1982, the comment of respondent Philippine Ports Authority filed on June 8, 1982, the
reply of petitioners-intervenors filed on June 28, 1982, the rejoinder of respondent Ocean
Terminal Services, Inc., filed on July 27, 1982, the rejoinder of respondent Philippine
Ports Authority filed on August 6, 1982 and the supplemental motion and manifestation
filed by petitioners-intervenors on September 15, 1982, the Court Resolved to direct the
parties concerned to observe the following guidelines in the allocation of stevedoring
assignments: 1. Any vessel belonging to a shipping line shall be assigned for stevedoring
work to the union that had served that shipping line the greatest number of times as
appearing in the PPA records for the six-month period immediately preceding the
execution of the stevedoring contract of OTSI. 2. The above notwithstanding, whenever
a vessel destined to or proceeding from the Port of Manila has been chartered for a
particular voyage by a consignee or any person having interest in the goods carried
therein, such vessel shall be assigned for stevedoring work to the union that served the
charterer the greater number of times as appearing in the PPA records for six-month
period immediately preceding the execution of the stevedoring contract of OTSI. In case
there are two or more charterer who pays the highest freight charges shall be the
determining fact in the assignment. 3. Vessels of new shipping lines calling at the Port of
Manila for the first time as well as vessels contracted by new charterers shall be assigned
to the union of choice of the new shipping line or charterer as the case may be."

The main issue in these petitions is whether or not the respondent judge acted with grave
abuse of discretion when he lifted ex-parte the temporary restraining order he had earlier
issued also ex-parte.

From the viewpoint of procedure, we see no grave abuse of discretion or want of

jurisdiction. Subsequent to the issuance to the questioned order, the respondent court
heard the parties on the petitioners’ application for a writ of preliminary injunction and,
after hearing the parties’ evidence and arguments, denied the application for the writ. We
also agree the with the respondents that it is not grave abuse of discretion when a court
dissolves ex-parte abuse of discretion when a court dissolves ex-parte a restraining order
also issued ex-parte. (Calaya v. Ramos, 79 Phil, 640; Clarke v. Philippine Ready Mix
Concrete Co., 88 Phil. 460; Larap Labor Union v. Victoriano, 97 Phil. 435.)

The restraining orders dated July 29, 1980 and August 22, 1980 respectively provide:

xxx xxx xxx

"Finding the allegations in the complaint to be sufficient in form and in substance, a

temporary restraining order is hereby issued x x x.

xxx xxx xxx

"and to maintain the status quo until further orders from this court.

x x x.

xxx xxx xxx

"It appearing that on July 29, 1980, this Court issued an order granting the prayer of the
original plaintiff for a temporary restraining order, the same order is hereby reiterated and
to include Anglo-Fil Trading Corporation. x x x.

xxx xxx xxx

"plaintiffs-intervenors herein and for the parties to serve the status quo until further orders
from this Court." (Italics supplied)

A restraining order is an order to maintain the subject of controversy in status quo until
the hearing of an application for a temporary injunction. Unless extended by the court, a
restraining order ceases to be operative at the expiration of the time fixed by its terms. In
cases where it has been granted ex-parte, it may be dissolved upon motion before
answer. (See the Revised Rules of Court, Francisco, pp. 184-186, citing 43 CJS, 28 Am.
Jur)

From the aforequoted dispositive portions, it is beyond doubt that the duration of the
restraining orders was "until further orders from the court." In lifting said restraining orders
on September 1, 1980, respondent judge merely exercised the prerogative he earlier
reposed upon himself to terminate such orders when circumstances so warranted.
Considering again that the previous grants of the restraining orders in favor of petitioners
were made ex-parte and without bond, the need for a notice and hearing in regard to such
lifting was not necessary, much less mandatory.

The petitioners’ contention that the lifting of the restraining order had rendered moot and
academic the injunction case in the trial court is likewise untenable. A restraining order is
distinguished from an injunction in that it is intended as a restraint on the defendant until
the propriety of granting an injunction pendente lite can be determined, and it goes no
further than to preserve the status quo until such determination. Therefore, the grant,
denial, or lifting of a restraining order does not in anyway pre-empt the court’s power to
decide the issue in the main action which in the case at bar, is the injunction suit. In fact,
the records will show that the trial court proceeded with the main suit for injunction after
the lifting of the restraining orders.

Petitioner PIPSI also maintains that there were no considerations of public interest which
supported the lifting. On the contrary, the lifting allegedly permitted a situation palpably
against public interest, that is, confiscation of petitioners’ business and those similarly
situated. This, again, is untenable.

The streamlining of the stevedoring activities in the various ports of the Philippines was
undertaken by PPA to implement LOI No. 1005-A. The public interest, public welfare, and
public policy sought to be subserved by said LOI are clearly set forth in its whereas
clauses. They areas follows:

xxx xxx xxx

"WHEREAS, it is a declared national policy to support and accelerate the development of

government port facilities as well as vital port development projects and services;

xxx xxx xxx

"WHEREAS, it is a prime concern of government to protect the interests of legitimate port

workers and port users in the country;

xxx xxx xxx

"WHEREAS, there is need to rationalize and integrate cargo-handling and other port-
related services as may have been contracted out or authorized by the PPA in the various
ports of the country;

"WHEREAS, the procedures of voluntary merger, consolidation and/or bidding for the
awarding or contracting of cargo-handling and other port-related services have heretofore
proven ineffective and resulted in prolonged and unproductive wrangling, all to the
detriment of efficient port operations and development; and

"WHEREAS, it now become necessary to revitalize and streamline the PPA to carry out
its functions and duties as a vital link in the governmental machinery and the thrust for
national economic development;"

xxx xxx xxx

Clearly, there is a reasonable relation between the undeniable existence of an
undesirable situation and the statutory attempt to avoid it. "Public welfare, then, lies at the
bottom of the enactment of said law, and the state in order to promote the general welfare
may interfere with personal liberty, with property, and with business and occupations."
(See Alalayan v. National Power Corporation, 24 SCRA 172; Ermita-Malate Hotel and
Motel Owners Association v. City Mayor, 20 SCRA 849) These considerations were
considered by the respondent judge when he issued his questioned order dated
September 1, 1980. He stated:

xxx xxx xxx

"While in the main this Court is not insensitive to the plight of the petitioners, the overriding
considerations of public interest, as impressed by the Office of the Solicitor General, must
be given greater weight and important. This is compounded by the way and manner by
which the parties are now fashioning and shaping their respective positions. The
proceedings, to say the least, have become accented with a myriad of contentious facts
and intercalated with complex legal issues. For the matter is not a simple determination
of right and wrong but a collision of ideas and viewpoints. All these, indeed, militate
against an early resolution of the application for a writ of preliminary injunction.

xxx xxx xxx

The above statement are sufficient bases for the lifting of the order. It is clear that not only
did the respondent judge base the lifting on consideration of public interest but also on
the fact that the restraining orders were issued ex-parte without bond and that the
resolution of the motion for preliminary injunction was still far from being decided.

The statement of the respondent judge that "it cannot sit in judgment, without prejudice
to public interest, on the truth and wisdom of the allegation in support of the Urgent
Motion" should not be interpreted to mean that courts cannot pass upon the greater issue
of whether or not public interest is served or is prejudiced. The determination by PPA that
the measure sought to be enforced is justified by public interest and the PPA manner of
implementing a Presidential Decree and Letters of Instruction are subject to judicial
review.

The Constitution defines the powers of government. Who is to determine the nature,
scope, and extent of such powers? The Constitution has provided for the instrumentality
of the judiciary as the rational way. In determining whether or not the exercise of powers
vested by the Constitution truly serves the general welfare or is affected by public interest,
the judiciary does not assert any superiority over the other departments but only fulfills
the solemn and sacred obligation assigned to it by the Constitutions to determine
conflicting claims of authority and to establish for the parties in an actual controversy the
rights which that instrument secures and guarantees to them. This is in truth all that is
involved in what is termed "judicial supremacy" which properly is the power of judicial
review under the Constitutions. (See Angara vs. Electoral Commission, 63 Phil. 139) This
is why questions of expropriation of private lands, we have upheld the court’s authority to
make inquiry on whether or not lands were private and whether the purpose was in fact,
public. (City of Manila v. Chinese Community of Manila, 40 Phil. 340). Similarly, in the
present cases, the question of whether or not the lifting of the restraining orders will
prejudice public interest and will run counter to the protection to labor provision of the
Constitution is determinable by the judiciary under the power of judicial review.

From the records of these petitions, it is evident that the writ of certiorari cannot be
granted. The respondent judge’s action was not tainted by any capricious or whimsical
exercise of judgment amounting to lack of jurisdiction.

It is settled to the point of being elementary that the only question involved in certiorari is
jurisdiction, either want of jurisdiction or excess thereof, and abuse of discretion shall
warrant the issuance of the extra-ordinary remedy of certiorari only when the same is
grave as when the power is exercised in an arbitrary or despotic manner. . . . (FS.
Divinagracia Agro Commercial, Inc. v. Court of Appeals, 104 SCRA 180; Abig v.
Constantino, 3 SCRA 299; Abad Santos v. Province of Tarlac, 67 Phil. 480; Alafriz v.
Nable, 72 Phil. 278; Travers Luna, Inc. v. Nable, 72 Phil. 278; and Villa Rey Transit, Inc.
v. Bello, 75 SCRA 735).

It is not sufficient, however, to resolve these petitions on whether or not there was grave
abuse of discretion tantamount to lack or exercise of jurisdiction.

The larger issue remains. Behind the maneuvering and skirmishing of the parties lies a
question of power. Does the PPA have the power and authority to award an exclusive
stevedoring contract in favor of respondent OTSI? Is the PPA-OTSI Management
Contract executed pursuant to P.D. No. 857 and LOI No. 1005-A, valid?

The facts bearing on this issue are not in dispute and are worth reiterating. They are
summarized by the respondent court as follows:

xxx xxx xxx

"Before the advent of Presidential Decree No. 505, as amended by Presidential Decree
No. 857, the administration and management of the South Harbor, Port of Manila, was
under the Bureau of Customs. It appears that the plaintiffs, among others, were engaged
in and allowed to operate stevedoring services on the basis of special permits granted by
the Bureau of Customs (Exhibit ‘A’).

"It further developed that the number of stevedoring operators or contractors made it
difficult for the Bureau of Customs to maintain order and discipline among them to the
detriment of efficiency and the desired performance at the South Harbor. This appears to
be true with other ports. Thus, an in-depth study and analysis of the problems attendant
to arrastre and stevedoring operations was initiated. The only solution appeared to be the
integration of contractors engaged in stevedoring services with the ultimate objective of
having only one stevedoring contractor to engage in cargo-handling service in a given
port. Accordingly, on May 8, 1975, the Bureau of Customs issued Customs Memorandum
Order No. 28-75 providing guidelines for the merger of the multi-operators in the same
ports (Exhibit ‘1’).

"On December 23, 1975, Presidential Decree No. 857 was promulgated superseding
Presidential Decree No. 505 whereby the jurisdiction of the Bureau of Customs
concerning arrastre operations, among others, were transferred and vested in the PPA.

"On May 4, 1976, the PPA, pursuant to its avowed objectives, approved the PPA policies
on port administration, management and operation, adopting as a policy the horizontal
and vertical integration of existing operators at each port (Exhibit ‘2’ and ‘3’).

"On January 19, 1977, a memorandum order was issued whereby the different port
operators or contractors who have existing permits, licenses, contracts, and other kinds
of memorandum agreement issued by the Bureau of Customs were Temporarily allowed
the continuance of their services on a hold-over capacity until such time when the PPA
implements its own pertinent policy guidelines on the matter (Exhibits ‘5’ and ‘6’).

On May 27, 1977, PPA Memorandum Order No. 21, series of 1977, was passed
reiterating the implementation of the policy on integration to ‘insure efficiency and
economic in cargo-handling operation and provide better service to port users and to
amply protect the interest of labor and the government as well.’ It is the declared policy
that there should only be one stevedoring contractor to engage in cargo-handling services
in a given port.

"On April 11, 1980, the Presidential issued Letter of Instruction No. 1005-A (Exhibit ‘7’)
which directed the PPA to accelerate the rationalization of all cargo-handling services and
to expeditiously evaluate all recognized cargo-handling contractors and port related
service operators under such criteria as the PPA may set and to determine the qualified
contractor or operator in order to insure effective utilization of port facilities, prevent
pilferage and/or pinpoint responsibility for it and provide services major ports vital to the
country’s trade and economy. This Letter of Instruction was dictated by experience where
the ‘procedures of voluntary mergers, consolidation and/or bidding for the awarding or
contracting of cargo-handling and other port related services have heretofore proven
ineffective and resulted in prolonged and unproductive wrangling, all to the detriment of
efficient port operations and development.’

"On April 18, 1980, the President issued a memorandum to the PPA (Annex ‘B’ of the
Answer and Opposition of OCEAN) to submit its report on the integration and
rationalization of the stevedoring operation in Manila South Harbor and the submission
for his approval of the resolution of the board regarding contracts entered into in
connection therewith. This memorandum was dictated by ‘heavy losses suffered by
shippers as well as the smuggling of textiles in the South Harbor.’

"Pursuant to and in compliance with the Letter of Instruction of April 11, 1980 and the
Memorandum of the President dated April 18, 1980, the PPA created a Special Evaluation
Committee composed of Atty. David R. Simon, member of the Legal Department of PPA
and concurrently Assistant to the Port of Manila, as Chairman; Mr. Leonardo Mejia, Chief
of the Commercial Development Division, Port of Manila; and, Capt. Jovito G. Tamayo,
Harbor Master and Chief of the Harbor Operations Division of the Port of Manila, as
members. The respective and individual duties of the members of the Committee taken
in their integral entirely could easily sum up to an almost complete overview of the
functions of stevedoring contractors and place them in a vantage position as to provide
proper evaluation and determination of the individual performance, qualification, and
compliance of PPA requirements by each stevedoring operator.

"The Committee took into account certain factors with their corresponding percentage
weights in its determination, who among the existing operators, is most qualified for an
award of an exclusive contract. In connection therewith, OCEAN was rated 95% topping
all the rest by a wide margin.

"On April 28, 1980, the Evaluation Committee submitted its report recommending the
conclusion of a management contract with OCEAN being the most qualified (Exhibit ‘8’)
which recommendation was adopted by the PPA.

"On June 27, 1980, a management contract was executed by and between PPA and
OCEAN (Exhibit ‘11’).

"On August 19, 1980, the President approved the exclusive management contract
between PPA and OCEAN (Exhibit ‘10’).

"In the meantime, in letters dated July 13, 1980 (Exhibit ‘N’) and July 14, 1980 (Exhibit
‘F’), PIPSI and INTERVENORS were informed of the management contract with OCEAN
as exclusive operator at the South harbor, Port of Manila, beginning August 27, 1980."

xxx xxx xxx

The petitioners are on extremely shaky grounds when they invoke the non-impairment
clause to sustain their charge of invalidity. According to the petitioners, contracts entered
into with local and foreign clients or customers would be impaired.

Even in the United States during the heyday of the laissez faire philosophy, we are
informed that the American Supreme Court’s interpretations have never allowed the
contract clause to be an inflexible barrier to public regulation. According to Gerald
Gunther, Professor of Constitutional Law at Stanford University, historians have probably
exaggerated the impact of the early contract clause decisions on American economic and
legal developments, that the protected position of corporations in the 19 th century was
due less to any shield supplied by the U.S. Supreme Court than to legislative
unwillingness to impose restraints-an unwillingness reflecting the laissez faire philosophy
of the day. After analyzing the leading cases on the contract clause from 1810 (Fletcher
v. Peck, 6 Cranch 87) to 1880 (Stone v. Mississippi, 101 U.S. 814) he cites the 1914
decision in Atlantic Coast Line R. Co. v. Goldsboro (232 U.S. 548) where the U.S. Court
ruled "It is settled that neither the contract clause nor the due process clause has the
effect of overriding the power of the State to establish all regulations that are reasonably
necessary to secure the health, safety, good order, comfort, or general welfare of the
community; that this power can neither be abdicated nor bargained away, and is
inalienable even by express grant; and that all contract and property rights are held
subject to its fair exercise" and Manigault v. Springs (199 U.S. 473) where the same Court
stated that "parties by entering itno contract may not stop the legislature from enacting
laws intended for the public good." (See Gunther, Cases and Materials On Constitutional
Law, 1980 Edition, pp. 554-570).

In the Philippines, the subservience of the contract clause to the police power enacting
public regulations intended for the general welfare of the community is even more
clearcut.

As pointed out by then Senior Associate, now Chief Justice Enrique M. Fernando, the
laissez faire or let alone philosophy has no place in our scheme of things, not even under
the 1935 Constitution. (See Fernando, The Constitution of the Philippines, Second
Edition, pp. 111-114) In his concurring opinion in Agricultural Credit and Cooperative
Financing Administration v. Confederation of Unions (30 SCRA 649, 682-683) Chief
Justice Fernando stated:

"xxx With the decision reached by us today, the Government is freed from the compulsion
exerted by the Bacani doctrine of the ‘constituent-ministrant’ test as a criterion for the type
of activity in which it may engage. Its constricting effect is consigned to oblivion. No doubts
or misgivings need assail us that governmental efforts to promote the public weal,
whether through regulatory legislation of vast scope and amplitude or through the
undertaking of business activities, would have to face a searching and rigorous scrutiny.
It is clear that their legitimacy cannot be challenged on the ground alone of their being
offensive to the implications of the laissez-faire concept. Unless there be a repugnancy
then to the limitations expressly set forth in the Constitution to protect individual rights,
the government enjoys a much wider latitude of action as to the means it chooses to cope
with grave social and economic problems that urgently press for solution. xxx"

The Manila South Harbor is public property owned by the State. The operations of this
premiere port of the country, including stevedoring work, are affected with public interest.
Stevedoring services are subject to regulation and control for the public good and in the
interest of general welfare.

Not only does the PPA, as an agency of the State enjoy the presumption of validity in
favor of its official acts implementing its statutory charter, it has more than adequately
proved that the integration of port services-is far from arbitrary and is related to the stated
governmental objective.

A single contractor furnishing the stevedoring requirements of a port has in its favor the
economy of scale and the maximum utilization of equipment and manpower. In turn,
effective supervision and control as well as collection and accounting of the government
share of revenues are rendered easier for PPA than where there are 23 contractors for it
to oversee. As respondent court found from the evidence, the multiple-contractor system
has bred cut-throat competitions in the port. Understandably, most contractors had been
unable to acquire sufficient modern facilities, observe labor standards for their workers,
maintain efficiency in services, and pay PPA dues. The questioned program would
accelerate the rationalization and integration of all cargo-handling activities and port-
related services in major ports and the development of vital port facilities, projects, and
services.

The contention of petitioners Anglo-Fil, et al., that due process was violated resulting to
a confiscatory effect on private property is likewise without merit.

In the first place, the petitioners were operating merely on "hold-over" permits. These
permits which were based on PPA memorandum Order No. 1, dated January 19, 1977
provided:

xxx xxx xxx

"In view thereof and pending proper evaluation by this Office of all existing permits,
licenses, contracts, and other kinds of memorandum agreements issued by the Bureau
of Customs to the different port operators or contractors, you may temporarily allow the
continuance of their services on a hold-over capacity until such time when the PPA
implements its own pertinent policy guidelines on the matter.

xxx xxx xxx

Clearly, all hold-over permits were by nature temporary and subject to subsequent policy
guidelines as may be implemented by PPA. Such should have served as sufficient notice
to petitioners that, at any time, their authorities may be terminated.

Petitioners PIPISI would also impress upon this Court that the certification issued to it and
its fellow contractors by PPA, dated August 30, 1979, showed that they were not only
kept in the dark as to PPA’s subsequent move to award OTSI an exclusive contract, but
that they were actually lulled into believing that their temporary permits were being given
pending issuance of their PTO or Permit to Operate.

We do not believe so. The second paragraph of the certification states that the hold-over
permit was still subject to the memorandum quoted above. The certification provided
that: "In accordance with PPA Memo Circular No. I, dated January 9, 1977…, the said
firm is allowed to continue operating at the South Harbor, Port manila." (italics supplied.)

Whether or not the petitioners would be issued a PTO depended on the sound discretion
of PPA and on the policies, rules and regulations that the latter may implement in
accordance with the statutory grant of power. Petitioners, therefore, cannot be said to
have been deprived of property without due process because, in this respect, what was
given them was not a property right but a mere privilege and they should have taken
cognizance in the South Harbor, their permits can be withdrawn anytime the public
welfare deems it best to do so.

The absence of arbitrariness or bad faith is manifest in the selection procedure adopted.
The award in fabvor of OTSI was the result of an evaluation of performance of existing
contractors made by a special committee created by the PPA. The respondent court
found from the evidence that the members of that committee were "in a vantage position
as to provide proper evaluation and determination of the individual performance,
qualification, and compliance of the PPA requirements by each stevedoring operator."
The committee rated OTSI with the highest grade of 95% in its evaluation.

And significantly, since no less than the President of the Philippines approved the award
of the management contract to OTSI presumptively after through consideration of all
factors relevant to efficient stevedoring services, it is difficult for this Court to find a
violation of due process in the selection procedure. In the language of the Chief Justice
in Lim v. Secretary (34 SCRA 751) if the task of overturning a decision of a department
head is attended with difficulty, the burden of persuasion becomes much heavier when
the challenged action is encased in the armor of an explicit presidential approval. In the
case at bar, there is nothing in the record remotely assailing the motives of the President
in giving his imprimatur to the award.

In seeking the nullification of the management contract, the petitioners also invoke the
constitutional provision on monopolies and combination. Section 2, Article XIV of the
Constitution provides:

The state shall regulate or prohibit private monopolies when the public interest so
requires.1âwphi1 No combinations in restraint of trade or unfair competition shall be
allowed.

Private monopolies are not necessarily prohibited by the Constitution. They may be
allowed to exist but under State regulation. A determination must first be made whether
public interest requires that the State should regulate or prohibit private monopolies. A
distinction prevails as regards combinations in restraint of trade and unfair competition
which are prohibited outright by the Constitution.

By their very nature, certain public services or public utilities such those which supply
water, electricity, transportation, telephone, telegraph, etc. must me given exclusive
franchises if public interest is to be served. Such exclusive franchises are not violative of
the law against monopolies. (58 Corpus Juris Segundum 958-964).

Neither is the management contract violative of the Anti-Graft Law. It is a contract

executed in pursuance to law and the instructions of the President to carry out
government objectives to promote public interest. The act did not cause "undue injury" to
the petitioners who as explained earlier had no vested property rights entitled to
protection. There is no undue injury to the government nor any unwarranted benefit to
OTSI consideration for PPA which is the payment by OTSI of ten percent (10%) of its
gross income, something which petitioner PIPSI is loathe to pay. The rationalization and
effective utilization of port facilities is to the advantage of the Government. Furthermore,
the discretion in choosing the stevedoring contractor for the south Harbor, Port Manila,
belongs by law to PPA. As long as standards are set in determining the contractor and
such standards are reasonable and related to the purpose for which they are used, the
courts should not inquire into the wisdom of PPA’s choice. The criterion used by PPA
namely, the identification of a contractor with the highest potential for operating an
exclusive service, appears reasonable. The factors which were taken into account in
determining the exclusive contractor are indicia of reasonableness. They are:

Productivity…………………. 25%
Equipment Requirement
Capability…………………… 25%
Financial Capability………… 15%
Promptness in Paying
Government share…………… 25%
Compliance with other
PPA Requirements…………... 20%
100%

It is settled rule that unless the case justifies it, the judiciary will not interfere in purely
administrative matters. (Monark International, Inc. v. Noriel, 83 SCRA 114) Such
discretionary power vested in the proper administrative body, in the absence of
arbitrariness and grave abuse so as to go beyond the statutory authority, is not subject to
the contrary judgment or control of others. (See Meralco Securities Corporation v.
Savellano, 117 SCRA 804). In general, courts have no supervisory power over the
proceedings and actions of the administrative departments of the government. This is
particularly true with respect to acts involving the exercise of judgment or discretion, and
to findings of fact. (Pajo v. Ago and Ortiz, 108 Phil.905)

In view of the foregoing, we find the PPA-OTSI Management Contract executed on June
27, 1980, valid and devoid of any constitutional or legal infirmity. The respondents,
however, should maintain the policy of absorption of bona-fide displaced port workers in
the integration scheme as mandated not only by LOI No. 1005-A but by the policy of the
State to assure the rights of workers to security of tenure. (sec. 9, Art. II, Constitution) We
note that both PPA and OTSI have given assurance in their answers that none of the
legitimate stevedores would be displaced from work although they added that their
bonafide stevedores should join PWUP. Which union a worker or various workers should
join cannot be ordained by this Court in these petitions where the basic issue is the validity
of the exclusive stevedoring contract given to one operator for one port. This matter will
have to be eventually threshed out by the workers themselves and the Ministry of Labor
and Employment before it may be elevated to us, if ever. However, we reiterate the
guidelines earlier issued that no bona fide stevedore or worker should be deprived of
employment he used to enjoy simply because of the execution and implementation of the
disputed Management Contract. This absorption of bona fide workers is an act of social
justice. When a person has no property, his job may possibly be his only possession or
means of livelihood. Therefore, he should be protected against any arbitrary and unjust
deprivation of his job. (See Bondoc v. People’s Bank and Trust Company, 103 SCRA
599)

As to the contempt charges, we note that the Order of this Court dated October 21, 1980
allowed "petitioners-intervenors" meaning KAMADA workers to work at the South Harbor
pending resolution of this case, "the order of respondent judge xxx as well as the
implementing letter of Philippine Ports Authority xxx to the contrary notwithstanding." It is
not clear from said orders that the petitioners who are stevedoring operators and
contactors were also specifically included. There was no mention of them being included
and allowed with KAMADA workers to resume operations at the South Harbor. The
petitioners read into the order something which was not there. The only clear import of
the Order was that KAMADA workers must be allowed to work notwithstanding any
contrary provisions in the Management Contract, a situation brought about by the lifting
of the restraining orders, the denial of the petition for preliminary injunction, and the
implementing letter of PPA. It is a settled rule that a party cannot be punished for contempt
unless the act which is forbidden or required to be done is clearly and exactly defined, so
that there can be no reasonable doubt or uncertainty as to what specific act or thing is
forbidden or required. (Lee Yick Hon v. Collector of Customs, 41 Phil. 548, citing U.S. v.
Achi-son, etc. R. Co., 146 Fed. 176, 183; 13 CJ 15)

WHEREFORE, the petitions in G.R. No. 54958 and G.R. No. 54966 are hereby
DISMISSED for lack of merit. The respondents are, however, directed to comply with the
guidelines in the above decision on the absorption of bonafide stevedores and as thus
modifies, the temporary restraining order dated October 21, 1980 is made PERMANENT.
No costs.

SO ORDERED.