6. HILARION F. DIMAGIBA, IRMA MENDOZA and ELLEN RASCO, petitioners, vs.

JULITA ESPARTERO, MA. BERNARDITA L. CARREON and MELINA SAN PEDRO,

respondents.

Administrative Law; Double Compensation; The prohibition against additional or double

compensation, except when specifically authorized by law, is considered a “constitutional
curb” on the spending power of the government.―Clearly, the only exception for an
employee to receive additional, double and indirect compensation is where the law allows
him to receive extra compensation for services rendered in another position which is an
extension or is connected with his basic work. The prohibition against additional or double
compensation, except when specifically authorized by law, is considered a “constitutional
curb” on the spending power of the government.

7. PHILIPPINE SOCIETY FOR THE PREVENTION OFCRUELTY TO ANIMALS,

petitioners, vs. COMMISSION ON AUDIT, DIR. RODULFO J. ARIESGA (in his
official capacity as Director of the Commission on Audit), MS. MERLE M.
VALENTIN and MS. SUSAN GUARDIAN (in their official capacities as Team Leader
and Team Member, respectively, of the audit Team of the Commission on Audit),
respondents.

Corporation Law; Amendments introduced by C.A. No. 148 made it clear that the petitioner
was a private corporation and not an agency of the government.—The amendments
introduced by C.A. No. 148 made it clear that the petitioner was a private corporation and
not an agency of the government. This was evident in Executive Order No. 63, issued by
then President of the Philippines Manuel L. Quezon, declaring that the revocation of the
powers of the petitioner to appoint agents with powers of arrest “corrected a serious defect”
in one of the laws existing in the statute books.

Same; A reading of petitioner’s charter shows that it is not subject to control or supervision
by any agency of the State, unlike government-owned and -controlled corporations.—A
reading of petitioner’s charter shows that it is not subject to control or supervision by any
agency of the State, unlike government-owned and -controlled corporations. No government
representative sits on the board of trustees of the petitioner. Like all private corporations,
the successors of its members are determined voluntarily and solely by the petitioner in
accordance with its bylaws, and may exercise those powers generally accorded to private
corporations, such as the powers to hold property, to sue and be sued, to use a common
seal, and so forth. It may adopt by-laws for its internal operations: the petitioner shall be
managed or operated by its officers “in accordance with its by-laws in force.”

Same; Fact that employees of the petitioner are registered and covered by the Social
Security System at the latter’s initiative, and not through the Government Service Insurance
System which should be the case if the employees are considered government employees is
another indication of petitioner’s nature as a private entity.—The employees of the petitioner
are registered and covered by the Social Security System at the latter’s initiative, and not
through the Government Service Insurance System, which should be the case if the
employees are considered government employees. This is another indication of petitioner’s
nature as a private entity.
Same; Fact that a certain juridical entity is impressed with public interest does not, by that
circumstance alone, make the entity a public corporation, inasmuch as a corporation may be
private though its charter contains provisions of a public character incorporated solely for
the public good.—The respondents contend that the petitioner is a “body politic” because its
primary purpose is to secure the protection and welfare of animals which, in turn, redounds
to the public good. This argument, is, at best, specious. The fact that a certain juridical
entity is impressed with public interest does not, by that circumstance alone, make the
entity a public corporation, inasmuch as a corporation may be private although its charter
contains provisions of a public character, incorporated solely for the public good. This class
of corporations may be considered quasi-public corporations, which are private corporations
that render public service, supply public wants, or pursue other eleemosynary objectives.
While purposely organized for the gain or benefit of its members, they are required by law
to discharge functions for the public benefit. Examples of these corporations are utility,
railroad, warehouse, telegraph, telephone, water supply corporations and transportation
companies. It must be stressed that a quasi-public corporation is a species of private
corporations, but the qualifying factor is the type of service the former renders to the
public: if it performs a public service, then it becomes a quasi-public corporation.

Same; The true criterion to determine whether a corporation is public or private is found in
the totality of the relation of the corporation to the State.—The true criterion, therefore, to
determine whether a corporation is public or private is found in the totality of the relation of
the corporation to the State. If the corporation is created by the State as the latter’s own
agency or instrumentality to help it in carrying out its governmental functions, then that
corporation is considered public; otherwise, it is private. Applying the above test, provinces,
chartered cities, and barangays can best exemplify public corporations. They are created by
the State as its own device and agency for the accomplishment of parts of its own public
works.
1. LA BUGAL-B’LAAN TRIBAL ASSOCIATION, INC., represented by its Chairman
F’LONG MIGUEL M. LUMAYONG et. al vs. VICTOR O. RAMOS, SECRETARY,
DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES (DENR) et. al
G.R. No. 127882. January 27, 2004

Same; Same; As the case involves constitutional questions, this Court is not concerned with
whether petitioners are real parties in interest, but with whether they have legal standing.—
The present action is not merely one for annulment of contract but for prohibition and
mandamus. Petitioners allege that public respondents acted without or in excess of
jurisdiction in implementing the FTAA, which they submit is unconstitutional. As the case
involves constitutional questions, this Court is not concerned with whether petitioners are
real parties in interest, but with whether they have legal standing. As held in Kilosbayan v.
Morato: x x x. “It is important to note . . . that standing because of its constitutional and
public policy underpinnings, is very different from questions relating to whether a particular
plaintiff is the real party in interest or has capacity to sue. Although all three requirements
are directed towards ensuring that only certain parties can maintain an action, standing
restrictions require a partial consideration of the merits, as well as broader policy concerns
relating to the proper role of the judiciary in certain areas.[”] (FRIEDENTHAL, KANE AND
MILLER, CIVIL PROCEDURE 328 [1985]) Standing is a special concern in constitutional law
because in some cases suits are brought not by parties who have been personally injured by
the operation of a law or by official action taken, but by concerned citizens, taxpayers or
voters who actually sue in the public interest. Hence, the question in standing is whether
such parties have “alleged such a personal stake in the outcome of the controversy as to
assure that concrete adverseness which sharpens the presentation of issues upon which the
court so largely depends for illumination of difficult constitutional questions.” (Baker v. Carr,
369 U.S. 186, 7 L.Ed.2d 633 [1962].)

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

Same; Prohibition; Words and Phrases; Prohibition is a preventive remedy; While the
execution of the contract itself may be fait accompli, its implementation is not.—Prohibition
is a preventive remedy. It seeks a judgment ordering the defendant to desist from
continuing with the commission of an act perceived to be illegal. The petition for prohibition
at bar is thus an appropriate remedy. While the execution of the contract itself may be fait
accompli, its implementation is not. Public respondents, in behalf of the Government, have
obligations to fulfill under said contract. Petitioners seek to prevent them from fulfilling such
obligations on the theory that the contract is unconstitutional and, therefore, void.

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

National Economy and Patrimony; Regalian Doctrine; The first sentence of Section 2, Article
XII of the Constitution, embodies the Regalian doctrine or jura regalia; Introduced by Spain
into these Islands, this feudal concept is based on the State’s power of dominium, which is
the capacity of the State to own or acquire property.—The first sentence of Section 2
embodies the Regalian doctrine or jura regalia. Introduced by Spain into these Islands, this
feudal concept is based on the State’s power of dominium, which is the capacity of the State
to own or acquire property. In its broad sense, the term “jura regalia” refers to royal rights,
or those rights which the King has by virtue of his prerogatives. In Spanish law, it refers to a
right which the sovereign has over anything in which a subject has a right of property or
propriedad. These were rights enjoyed during feudal times by the king as the sovereign. The
theory of the feudal system was that title to all lands was originally held by the King, and
while the use of lands was granted out to others who were permitted to hold them under
certain conditions, the King theoretically retained the title. By fiction of law, the King was
regarded as the original proprietor of all lands, and the true and only source of title, and
from him all lands were held. The theory of jura regalia was therefore nothing more than a
natural fruit of conquest.

Same; Same; The Regalian doctrine extends not only to land but also to “all natural wealth
that may be found in the bowels of the earth.”—The Philippines having passed to Spain by
virtue of discovery and conquest, earlier Spanish decrees declared that “all lands were held
from the Crown.” The Regalian doctrine extends not only to land but also to “all natural
wealth that may be found in the bowels of the earth.” Spain, in particular, recognized the
unique value of natural resources, viewing them, especially minerals, as an abundant source
of revenue to finance its wars against other nations. Mining laws during the Spanish regime
reflected this perspective.

Same; Same; Unlike Spain, the United States considered natural resources as a source of
wealth for its nationals and saw fit to allow both Filipino and American citizens to explore
and exploit minerals in public lands, and to grant patents to private mineral lands; The
Regalian doctrine and the American system, therefore, differ in one essential respect—under
the Regalian theory, mineral rights are not included in a grant of land by the state while
under the American doctrine, mineral rights are included in a grant of land by the
government.—Unlike Spain, the United States considered natural resources as a source of
wealth for its nationals and saw fit to allow both Filipino and American citizens to explore
and exploit minerals in public lands, and to grant patents to private mineral lands. A person
who acquired ownership over a parcel of private mineral land pursuant to the laws then
prevailing could exclude other persons, even the State, from exploiting minerals within his
property. Thus, earlier jurisprudence held that: A valid and subsisting location of mineral
land, made and kept up in accordance with the provisions of the statutes of the United
States, has the effect of a grant by the United States of the present and exclusive
possession of the lands located, and this exclusive right of possession and enjoyment
continues during the entire life of the location. x x x x x x. The discovery of minerals in the
ground by one who has a valid mineral location, perfect his claim and his location, not only
against third persons but also against the Government. x x x. [Italics in the original.] The
Regalian doctrine and the American system, therefore, differ in one essential respect. Under
the Regalian theory, mineral rights are not included in a grant of land by the state; under
the American doctrine, mineral rights are included in a grant of land by the government.

Same; Same; Concession System; Words and Phrases; Under the concession system, the
concessionaire makes a direct equity investment for the purpose of exploiting a particular
natural resource within a given area—the concession amounts to complete control by the
concessionaire over the country’s natural resource, for it is given exclusive and plenary
rights to exploit a particular resource at the point of extraction.—Section 21 also made
possible the concession (frequently styled “permit,” “license” or “lease”) system. This was
the traditional regime imposed by the colonial administrators for the exploitation of natural
resources in the extractive sector (petroleum, hard minerals, timber, etc.). Under the
concession system, the concessionaire makes a direct equity investment for the purpose of
exploiting a particular natural resource within a given area. Thus, the concession amounts to
complete control by the concessionaire over the country’s natural resource, for it is given
exclusive and plenary rights to exploit a particular resource at the point of extraction. In
consideration for the right to exploit a natural resource, the concessionaire either pays rent
or royalty, which is a fixed percentage of the gross proceeds.

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

Same; Same; Same; Nationalization; Objectives of Nationalization; The nationalization and

conservation of the natural resources of the country was one of the fixed and dominating
objectives of the 1935 Constitutional Convention.— The nationalization and conservation of
the natural resources of the country was one of the fixed and dominating objectives of the
1935 Constitutional Convention. The nationalization of the natural resources was intended
(1) to insure their conservation for Filipino posterity; (2) to serve as an instrument of
national defense, helping prevent the extension to the country of foreign control through
peaceful economic penetration; and (3) to avoid making the Philippines a source of
international conflicts with the consequent danger to its internal security and independence.

Same; Same; Same; Same; Parity Amendments; The swell of nationalism that suffused the
1935 Constitution was radically diluted when in November 1946, the Parity Amendment,
which came in the form of an “Ordinance Appended to the Constitution,” was ratified in a
plebiscite.—The swell of nationalism that suffused the 1935 Constitution was radically
diluted when on November l946, the Parity Amendment, which came in the form of an
“Ordinance Appended to the Constitution,” was ratified in a plebiscite. The Amendment
extended, from July 4, 1946 to July 3, 1974, the right to utilize and exploit our natural
resources to citizens of the United States and business enterprises owned or controlled,
directly or indirectly, by citizens of the United States. The Parity Amendment was
subsequently modified by the 1954 Revised Trade Agreement, also known as the Laurel-
Langley Agreement, embodied in Republic Act No. 1355.

Same; Same; Service Contracts; The Oil Exploration and Development Act of 1972
(Presidential Decree No. 87); Words and Phrases; The Oil Exploration and Development Act
of 1972 signaled a transformation from the concession system to the exploration for and
production of indigenous petroleum through “service contracts”; “Service contracts” is a
term that assumes varying meanings to different people, and it has carried many names in
different countries, like “work contracts” in Indonesia, “concession agreements” in Africa,
“production-sharing agreements” in the Middle East, and “participation agreements” in Latin
America.—The promulgation on December 31, 1972 of Presidential Decree No. 87, otherwise
known as THE OIL EXPLORATION AND DEVELOPMENT ACT OF 1972 signaled such a
transformation. P.D. No. 87 permitted the government to explore for and produce
indigenous petroleum through “service contracts.” “Service contracts” is a term that
assumes varying meanings to different people, and it has carried many names in different
countries, like “work contracts” in Indonesia, “concession agreements” in Africa,
“production-sharing agreements” in the Middle East, and “participation agreements” in Latin
America. A functional definition of “service contracts” in the Philippines is provided as
follows: A service contract is a contractual arrangement for engaging in the exploitation and
development of petroleum, mineral, energy, land and other natural resources by which a
government or its agency, or a private person granted a right or privilege by the
government authorizes the other party (service contractor) to engage or participate in the
exercise of such right or the enjoyment of the privilege, in that the latter provides financial
or technical resources, undertakes the exploitation or production of a given resource, or
directly manages the productive enterprise, operations of the exploration and exploitation of
the resources or the disposition of marketing or resources.

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

Same; Same; Same; While Section 9, Article XIV of the 1973 Constitution maintained the
Filipino-only policy in the enjoyment of natural resources, it also allowed Filipinos, upon
authority of the Batasang Pambansa, to enter into service contracts with any person or
entity for the exploration or utilization of natural resources.—On January 17, 1973, then
President Ferdinand E. Marcos proclaimed the ratification of a new Constitution. Article XIV
on the National Economy and Patrimony contained provisions similar to the 1935
Constitution with regard to Filipino participation in the nation’s natural resources. Section 8,
Article XIV thereof provides: While Section 9 of the same Article maintained the Filipino-only
policy in the enjoyment of natural resources, it also allowed Filipinos, upon authority of the
Batasang Pambansa, to enter into service contracts with any person or entity for the
exploration or utilization of natural resources.

Same; Same; Same; Conspicuously absent in Section 2, Article XII of the 1987 Constitution
is the provision in the 1935 and 1973 Constitutions authorizing the State to grant licenses,
concessions, or leases for the exploration, exploitation, development, or utilization of natural
resources—by such omission, the utilization of inalienable lands of public domain through
“license, concession or lease” is no longer allowed under the 1987 Constitution.—The 1987
Constitution retained the Regalian doctrine. The first sentence of Section 2, Article XII
states: “All lands of the public domain, waters, minerals, coal, petroleum, and other mineral
oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and
other natural resources are owned by the State.” Like the 1935 and 1973 Constitutions
before it, the 1987 Constitution, in the second sentence of the same provision, prohibits the
alienation of natural resources, except agricultural lands. The third sentence of the same
paragraph is new: “The exploration, development and utilization of natural resources shall
be under the full control and supervision of the State.” The constitutional policy of the
State’s “full control and supervision” over natural resources proceeds from the concept of
jura regalia, as well as the recognition of the importance of the country’s natural resources,
not only for national economic development, but also for its security and national defense.
Under this provision, the State assumes “a more dynamic role” in the exploration,
development and utilization of natural resources. Conspicuously absent in Section 2 is the
provision in the 1935 and 1973 Constitutions authorizing the State to grant licenses,
concessions, or leases for the exploration, exploitation, development, or utilization of natural
resources. By such omission, the utilization of inalienable lands of public domain through
“license, concession or lease” is no longer allowed under the 1987 Constitution.

Same; Same; Under the 1987 Constitution, the State itself may undertake the operation of a
concession or enter into joint ventures.—Having omitted the provision on the concession
system, Section 2 proceeded to introduce “unfamiliar language”: The State may directly
undertake such activities or it may enter into co-production, joint venture, or production-
sharing agreements with Filipino citizens, or corporations or associations at least sixty per
centum of whose capital is owned by such citizens. Consonant with the State’s “full
supervision and control” over natural resources, Section 2 offers the State two “options.”
One, the State may directly undertake these activities itself; or two, it may enter into
coproduction, joint venture, or productionsharing agreements with Filipino citizens, or
entities at least 60% of whose capital is owned-by such citizens.

Same; Same; Same; Limitations on Technical or Financial Assistance Agreements.—Although

Section 2 sanctions the participation of foreign-owned corporations in the exploration,
development, and utilization of natural resources, it imposes certain limitations or conditions
to agreements with such corporations. First, the parties to FTAAs. Only the President, in
behalf of the State, may enter into these agreements, and only with corporations. By
contrast, under the 1973 Constitution, a Filipino citizen, corporation or association may enter
into a service contract with a “foreign person or entity.” Second, the size of the activities:
only large-scale exploration, development, and utilization is allowed. The term “large-scale
usually refers to very capital-intensive activities.” Third, the natural resources subject of the
activities is restricted to minerals, petroleum and other mineral oils, the intent being to limit
service contracts to those areas where Filipino capital may not be sufficient. Fourth,
consistency with the provisions of statute. The agreements must be in accordance with the
terms and conditions provided by law. Fifth, Section 2 prescribes certain standards for
entering into such agreements. The agreements must be based on real contributions to
economic growth and general welfare of the country. Sixth, the agreements must contain
rudimentary stipulations for the promotion of the development and use of local scientific and
technical resources. Seventh, the notification requirement. The President shall notify
Congress of every financial or technical assistance agreement entered into within thirty days
from its execution. Finally, the scope of the agreements. While the 1973 Constitution
referred to “service contracts for financial, technical, management, or other forms of
assistance” the 1987 Constitution provides for “agreements . . . involving either financial or
technical assistance.” It bears noting that the phrases “service contracts” and “management
or other forms of assistance” in the earlier constitution have been omitted.

Same; Same; Same; Modes by Which the State May Explore, Develop and Utilize Natural
Resources.—The State, being the owner of the natural resources, is accorded the primary
power and responsibility in the exploration, development and utilization thereof. As such, it
may undertake these activities through four modes: The State may directly undertake such
activities. (2) The State may enter into co-production, joint venture or productionsharing
agreements with Filipino citizens or qualified corporations. (3) Congress may, by law, allow
small-scale utilization of natural resources by Filipino citizens. (4) For the large-scale
exploration, development and utilization of minerals, petroleum and other mineral oils, the
President may enter into agreements with foreign-owned corporations involving technical or
financial assistance. Except to charge the Mines and Geosciences Bureau of the DENR with
performing researches and surveys, and a passing mention of government-owned or
controlled corporations, R.A. No. 7942 does not specify how the State should go about the
first mode. The third mode, on the other hand, is governed by Republic Act No. 7076 (the
People’s Small-Scale Mining Act of 1991) and other pertinent laws. R.A. No. 7942 primarily
concerns itself with the second and fourth modes.

Same; Same; Same; Words and Phrases; “Production Sharing Agreements,” “Co-Production
Agreements,” and “Joint Venture Agreements,” Explained.—Mineral production sharing,
coproduction and joint venture agreements are collectively classified by R.A. No. 7942 as
“mineral agreements.” The Government participates the least in a mineral production
sharing agreement (MPSA). In an MPSA, the Government grants the contractor the exclusive
right to conduct mining operations within a contract area and shares in the gross output.
The MPSA contractor provides the financing, technology, management and personnel
necessary for the agreement’s implementation. The total government share in an MPSA is
the excise tax on mineral products under Republic Act No. 7729, amending Section 151 (a)
of the National Internal Revenue Code, as amended. In a coproduction agreement (CA), the
Government provides inputs to the mining operations other than the mineral resource, while
in a joint venture agreement (JVA), where the Government enjoys the greatest participation,
the Government and the JVA contractor organize a company with both parties having equity
shares. Aside from earnings in equity, the Government in a JVA is also entitled to a share in
the gross output. The Government may enter into a CA or JVA with one or more contractors.
Same; Statutes; Statutory Construction; Executive Order (E.O.) No. 279; There is nothing in
E.O. No. 200 that prevents a law from taking effect on a date other than—even before—the
15- day period after its publication; Where a law provides for its own date of effectivity,
such date prevails over that prescribed by E.O. No. 200.—It bears noting that there is
nothing in E.O. No. 200 that prevents a law from taking effect on a date other than—even
before—the 15-day period after its publication. Where a law provides for its own date of
effectivity, such date prevails over that prescribed by E.O. No. 200. Indeed, this is the very
essence, of the phrase “unless it is otherwise provided” in Section 1 thereof. Section 1, E.O.
No. 200, therefore, applies only when a statute does not provide for its own date of
effectivity. What is mandatory under E.O. No. 200, and what due process requires, as this
Court held in Tañada v. Tuvera, is the publication of the law for without such notice and
publication, there would be no basis for the application of the maxim “ignorantia legis
n[eminem] excusat.” It would be the height of injustice to punish or otherwise burden a
citizen for the transgression of a law of which he had no notice whatsoever, not even a
constructive one.

Same; Same; Same; From a reading then of Section 8 of E.O. No. 279, Section 1 of E.O. No.
200, and Tañada v. Tuvera, this Court holds that E.O. No. 279 became effective immediately
upon its publication in the Official Gazette on 3 August 1987.—While the effectivity clause of
E.O. No. 279 does not require its publication, it is not a ground for its invalidation since the
Constitution, being the fundamental, paramount and supreme law of the nation,” is deemed
written in the law. Hence, the due process clause, which, so Tañada held, mandates the
publication of statutes, is read into Section 8 of E.O. No. 279. Additionally, Section 1 of E.O.
No. 200 which provides for publication “either in the Official Gazette or in a newspaper of
general circulation in the Philippines,” finds suppletory application. It is significant to note
that E.O. No. 279 was actually published in the Official Gazette on August 3, 1987. From a
reading then of Section 8 of E.O. No. 279, Section 1 of E.O. No. 200, and Tañada v. Tuvera,
this Court holds that E.O. No. 279 became effective immediately upon its publication in the
Official Gazette on August 3, 1987.

Same; Same; Same; The convening of the first Congress merely precluded the exercise of
legislative powers by President Aquino—it did not prevent the effectivity of laws she had
previously enacted.—That such effectivity took place after the convening of the first
Congress is irrelevant. At the time President Aquino issued E.O. No. 279 on July 25, 1987,
she was still validly exercising legislative powers under the Provisional Constitution. Article
XVIII (Transitory Provisions) of the 1987 Constitution explicitly states: SEC. 6. The
incumbent President shall continue to exercise legislative powers until the first Congress is
convened. The convening of the first Congress merely precluded the exercise of legislative
powers by President Aquino; it did not prevent the effectivity of laws she had previously
enacted. There can be no question, therefore, that E.O. No. 279 is an effective, and a validly
enacted, statute. Same; Same; It is a cardinal rule in the interpretation of constitutions that
the instrument must be so construed as to give effect to the intention of the people who
adopted it; Following the literal text of the Constitution, assistance accorded by
foreignowned corporations in the large-scale exploration, development, and utilization of
petroleum, minerals and mineral oils should be limited to “technical” or “financial” assistance
only.—It is a cardinal rule in the interpretation of constitutions that the instrument must be
so construed as to give effect to the intention of the people who adopted it. This intention is
to be sought in the constitution itself, and the apparent meaning of the words is to be taken
as expressing it, except in cases where that assumption would lead to absurdity, ambiguity,
or contradiction. What the Constitution says according to the text of the provision, therefore,
compels acceptance and negates the power of the courts to alter it, based on the postulate
that the framers and the people mean what they say. Accordingly, following the literal text
of the Constitution, assistance accorded by foreign-owned corporations in the large-scale
exploration, development, and utilization of petroleum, minerals and mineral oils should be
limited to “technical” or “financial” assistance only.

Same; Same; The management or operation of mining activities by foreign contractors,

which is the primary feature of service contracts, was precisely the evil that the drafters of
the 1987 Constitution sought to eradicate.—As priorly pointed out, the phrase “management
or other forms of assistance” in the 1973 Constitution was deleted in the 1987 Constitution,
which allows only “technical or financial assistance.” Casus omisus pro omisso habendus est.
A person, object or thing omitted from an enumeration must be held to have been omitted
intentionally. As will be shown later, the management or operation of mining activities by
foreign contractors, which is the primary feature of service contracts, was precisely the evil
that the drafters of the 1987 Constitution sought to eradicate.

Same; Same; Service Contracts; If the Constitutional Commission intended to retain the
concept of service contracts under the 1973 Constitution, it could have simply adopted the
old terminology (“service contracts”) instead of employing new and unfamiliar terms
(“agreements . . . involving either technical or financial assistance”).—As earlier noted, the
phrase “service contracts” has been deleted in the 1987 Constitution’s Article on National
Economy and Patrimony. If the CONCOM intended to retain the concept of service contracts
under the 1973 Constitution, it could have simply adopted the old terminology (“service
contracts”) instead of employing new and unfamiliar terms (“agreements . . . involving
either technical or financial assistance”). Such a difference between the language of a
provision in a revised constitution and that of a similar provision in the preceding
constitution is viewed as indicative of a difference in purpose. If, as respondents suggest,
the concept of “technical or financial assistance” agreements is identical to that of “service
contracts,” the CONCOM would not have bothered to fit the same dog with a new collar. To
uphold respondents’ theory would reduce the first to a mere euphemism for the second and
render the change in phraseology meaningless. An examination of the reason behind the
change confirms that technical or financial assistance agreements are not synonymous to
service contracts. [T]he Court in construing a Constitution should bear in mind the object
sought to be accomplished by its adoption, and the evils, if any, sought to be prevented or
remedied. A doubtful provision will be examined in light of the history of the times, and the
condition and circumstances under which the Constitution was framed. The object is to
ascertain the reason which induced the framers of the Constitution to enact the particular
provision and the purpose sought to be accomplished thereby, in order to construe the
whole as to make the words consonant to that reason and calculated to effect that purpose.

Same; Same; Same; The insights of the proponents of the U.P. Law Draft are instructive in
interpreting the phrase “technical or financial assistance.”—It appears that Proposed
Resolution No. 496, which was the draft Article on National Economy and Patrimony,
adopted the concept of “agreements . . . involving either technical or financial assistance”
contained in the “Draft of the 1986 U.P. Law Constitution Project” (U.P. Law draft) which
was taken into consideration during the deliberation of the CONCOM. The former, as well as
Article XII, as adopted, employed the same terminology, x x x The insights of the
proponents of the U.P. Law draft are, therefore, instructive in interpreting the phrase
“technical or financial assistance.”

Same; Same; Same; The U.P. Law draft proponents viewed service contracts under the
1973 Constitution as grants of beneficial ownership of the country’s natural resources to
foreign owned corporations.—The U.P. Law draft proponents viewed service contracts under
the 1973 Constitution as grants of beneficial ownership of the country’s natural resources to
foreign owned corporations. While, in theory, the State owns these natural resources—and
Filipino citizens, their beneficiaries— service contracts actually vested foreigners with the
right to dispose, explore for, develop, exploit, and utilize the same. Foreigners, not Filipinos,
became the beneficiaries of Philippine natural resources. This arrangement is clearly
incompatible with the constitutional ideal of nationalization of natural resources, with the
Regalian doctrine, and on a broader perspective, with Philippine sovereignty.

Same; Same; Same; The replacement of “service contracts” with “agreements . . . involving
either technical or financial assistance,” as well as the deletion of the phrase “management
or other forms of assistance,” assumes greater significance when note is taken that the U.P.
Law draft proposed other equally crucial changes that were obviously heeded by the
CONCOM; In light of the deliberations of the CONCOM, the text of the Constitution, and the
adoption of other proposed changes, there is no doubt that the framers considered and
shared the intent of the U.P. Law proponents in employing the phrase “agreements . . .
involving either technical or financial assistance.”—The proponents nevertheless
acknowledged the need for capital and technical know-how in the large-scale exploitation,
development and utilization of natural resources—the second paragraph of the proposed
draft itself being an admission of such scarcity. Hence, they recommended a compromise to
reconcile the nationalistic provisions dating back to the 1935 Constitution, which reserved all
natural resources exclusively to Filipinos, and the more liberal 1973 Constitution, which
allowed foreigners to participate in these resources through service contracts. Such a
compromise called for the adoption of a new system in the exploration, development, and
utilization of natural resources in the form of technical agreements or financial agreements
which, necessity, are distinct concepts from service contracts. The replacement of “service
contracts” with “agreements . . . involving either technical or financial assistance,” as well as
the deletion of the phrase “management or other forms of assistance,” assumes greater
significance when note is taken that the U.P. Law draft proposed other equally crucial
changes that were obviously heeded by the CONCOM. These include the abrogation of the
concession system and the adoption of new “options” for the State in the exploration,
development, and utilization of natural resources. The proponents deemed these changes to
be more consistent with the State’s ownership of, and its “full control and supervision” (a
phrase also employed by the framers) over, such resources. In light of the deliberations of
the CONCOM, the text of the Constitution, and the adoption of other proposed changes,
there is no doubt that the framers considered and shared the intent of the U.P. Law
proponents in employing the phrase “agreements . . . involving either technical or financial
assistance.”

Same; Same; Same; Loose statements of some of the Commissioners in the CONCOM do
not necessarily translate to the adoption of the 1973 Constitution provision allowing service
contracts.—While certain commissioners may have mentioned the term “service contracts”
during the CONCOM deliberations, they may not have been necessarily referring to the
concept of service contracts under the 1973 Constitution. As noted earlier, “service
contracts” is a term that assumes different meanings to different people. The commissioners
may have been using the term loosely, and not in its technical and legal sense, to refer, in
general, to agreements concerning natural resources entered into by the Government with
foreign corporations. These loose statements do not necessarily translate to the adoption of
the 1973 Constitution provision allowing service contracts.

Same; Same; Same; Administrative Law; When an administrative or executive agency

renders an opinion or issues a statement of policy, it merely interprets a pre-existing law;
and the administrative interpretation of the law is at best advisory, for it is the courts that
finally determine what the law means.—WMCP cites Opinion No. 75, s. 1987, and Opinion
No. 175, s. 1990 of the Secretary of Justice, expressing the view that a financial or technical
assistance agreement “is no different in concept” from the service contract allowed under
the 1973 Constitution. This Court is not, however, bound by this interpretation. When an
administrative or executive agency renders an opinion or issues a statement of policy, it
merely interprets a preexisting law; and the administrative interpretation, of the law is at
best advisory, for it is the courts that finally determine what the law means. Same; Same;
Same; The President may enter into FTAAs with foreign-owned corporation in the
exploitation of our natural resources.—In any case, the constitutional provision allowing the
President to enter into FTAAs with foreign-owned corporations is an exception to the rule
that participation in the nation’s natural resources is reserved exclusively to Filipinos.
Accordingly, such provision must be construed strictly against their enjoyment by non-
Filipinos. As Commissioner Villegas emphasized, the provision is “very restrictive.”
Commissioner Nolledo also remarked that “entering into service contracts is an exception to
the rule on protection of natural resources for the interest of the nation and, therefore,
being an exception, it should be subject, whenever possible, to stringent rules.” Indeed,
exceptions should be strictly but reasonably construed; they extend only so far as their
language fairly warrants and all doubts should be resolved in favor of the general provision
rather than the exception.

Same; Same; Same; Philippine Mining Act of 1995 (Republic Act No. 7942); With the
foregoing discussion in mind, this Court finds that R.A. No. 7942 is invalid insofar as said Act
authorizes service contracts.—With the foregoing discussion in mind, this Court finds that
R.A. No. 7942 is invalid insofar as said Act authorizes service contracts. Although the statute
employs the phrase “financial and technical agreements” in accordance with the 1987
Constitution, it actually treats these agreements as service contracts that grant beneficial
ownership to foreign contractors contrary to the fundamental law. Same; Same; Same;
Same; The underlying assumption in all some of the provisions of R.A. No. 7942 is that the
foreign contractor manages the mineral resources, just like the foreign contractor in a
service contract; By allowing foreign contractors to manage or operate all the aspects of the
mining operation, the above-cited provisions of R.A. No. 7942 have in effect conveyed
beneficial ownership over the nation’s mineral resources to these contractors, leaving the
State with nothing but bare title thereto.— The underlying assumption in all these provisions
is that the foreign contractor manages the mineral resources, just like the foreign contractor
in a service contract. Furthermore, Chapter XII of the Act grants foreign contractors in
FTAAs the same auxiliary mining rights that it grants contractors in mineral agreements
(MPSA, CA and JV). Parenthetically, Sections 72 to 75 use the term “contractor,” without
distinguishing between FTAA and mineral agreement contractors. And so does “holders of
mining rights” in Section 76. A foreign contractor may even convert its FTAA into a mineral
agreement if the economic viability of the contract area is found to be inadequate to justify
large-scale mining operations, provided that it reduces its equity in the corporation,
partnership, association or cooperative to forty percent (40%). Finally, under the Act, an
FTAA contractor warrants that it “has or has access to all the financing, managerial, and
technical expertise . . . .” This suggests that an FTAA contractor is bound to provide some
management assistance—a form of assistance that has been eliminated and, therefore,
proscribed by the present Charter. By allowing foreign contractors to manage or operate all
the aspects of the mining operation, the above-cited provisions of R.A. No. 7942 have in
effect conveyed beneficial ownership over the nation’s mineral resources to these
contractors, leaving the State with nothing but bare title thereto.

Same; Same; Same; Same; Provisions of R.A. No. 7942 Violative of Section 2, Article XII of
the Constitution.—In sum, the Court finds the following provisions of R.A. No. 7942 to be
violative of Section 2, Article XII of the Constitution: (1) The proviso in Section 3 (aq), which
defines “qualified person,” to wit: Provided, That a legally organized foreign-owned
corporation shall be deemed a qualified person for purposes of granting an exploration
permit, financial or technical assistance agreement or mineral processing permit. (2) Section
23, which specifies the rights and obligations of an exploration permittee, insofar as said
section applies to a financial or technical assistance agreement; (3) Section 33, which
prescribes the eligibility of a contractor in a financial or technical assistance agreement; (4)
Section 35, which enumerates the terms and conditions for every financial or technical
assistance agreement; (5) Section 39, which allows the contractor in a financial and
technical assistance agreement to convert the same into a mineral production-sharing
agreement; Section 37, which prescribes the procedure for filing and evaluation of financial
or technical assistance agreement proposals; Section 38, which limits the term of financial or
technical assistance agreements; Section 40, which allows the assignment or transfer of
financial or technical assistance agreements; Section 41, which allows the withdrawal of the
contractor in an FTAA; The second and third paragraphs of Section 81, which provide for the
Government’s share in a financial and technical assistance agreement; and Section 90,
which provides for incentives to contractors in FTAAs insofar as it applies to said
contractors;

Same; Same; Same; Same; When the parts of the statute are so mutually dependent and
connected as conditions, considerations, inducements, or compensations for each other, as
to warrant a belief that the legislature intended them as a whole, and that if all could not be
carried into effect, the legislature would not pass the residue independently, then, if some
parts are unconstitutional, all the provisions which are thus dependent, conditional, or
connected, must fall with them.—When the parts of the statute are so mutually dependent
and connected as conditions, considerations, inducements, or compensations for each other,
as to warrant a belief that the legislature intended them as a whole, and that if all could not
be carried into effect, the legislature would not pass the residue independently, then, if
some parts are unconstitutional, all the provisions which are thus dependent, conditional, or
connected, must fall with them.

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

Same; Statutory Construction; A constitution is not to be interpreted as demanding the

impossible or the impracticable— and unreasonable or absurd consequences, if possible,
should be avoided—courts are not to give words a meaning that would lead to absurd or
unreasonable consequences and a literal interpretation is to be rejected if it would be unjust
or lead to absurd results.—One other matter requires clarification. Petitioners contend that,
consistent with the provisions of Section 2, Article XII of the Constitution, the President may
enter into agreements involving “either technical or financial assistance” only. The
agreement in question, however, is a technical and financial assistance agreement.
Petitioners’ contention does not lie. To adhere to the literal language of the Constitution
would lead to absurd consequences. As WMCP correctly put it: x x x such a theory of
petitioners would compel the government (through the President) to enter into contract with
two (2) foreign-owned corporations, one for financial assistance agreement and with the
other, for technical assistance over one and the same mining area or land; or to execute two
(2) contracts with only one foreignowned corporation which has the capability to provide
both financial and technical assistance, one for financial assistance and another for technical
assistance, over the same mining area. Such an absurd result is definitely not sanctioned
under the canons of constitutional construction. [Italics in the original.] Surely, the framers
of the 1987 Charter did not contemplate such an absurd result from their use of “either/or.”
A constitution is not to be interpreted as demanding the impossible or the impracticable;
and unreasonable or absurd consequences, if possible, should be avoided. Courts are not to
give words a meaning that would lead to absurd or unreasonable consequences and a literal
interpretation is to be rejected if it would be unjust or lead to absurd results. That is a
strong argument against its adoption. Accordingly, petitioners’ interpretation must be
rejected.
2. WILSON P. GAMBOA vs. FINANCE SECRETARY MARGARITO B. TEVES, FINANCE
UNDERSECRETARY JOHN P. SEVILLA, et. al
G.R. No. 176579. June 28, 2011

Actions; Locus Standi; Petitioner being a stockholder of Philippine Long Distance Telephone
(PLDT) has the right to question the subject sale which he claims to violate the nationality
requirement prescribed in Section 11, Article XII of the Constitution; Court upheld the right
of a citizen to bring a suit on matters of transcendental importance to the public.—There is
no dispute that petitioner is a stockholder of PLDT. As such, he has the right to question the
subject sale, which he claims to violate the nationality requirement prescribed in Section 11,
Article XII of the Constitution. If the sale indeed violates the Constitution, then there is a
possibility that PLDT’s franchise could be revoked, a dire consequence directly affecting
petitioner’s interest as a stockholder. More importantly, there is no question that the instant
petition raises matters of transcendental importance to the public. The fundamental and
threshold legal issue in this case, involving the national economy and the economic welfare
of the Filipino people, far outweighs any perceived impediment in the legal personality of the
petitioner to bring this action. In Chavez v. PCGG, 299 SCRA 744 (1998), the Court upheld
the right of a citizen to bring a suit on matters of transcendental importance to the public.

Corporation Law; Words and Phrases; “Capital”; The term “capital” in Section 11, Article XII
of the Constitution refers only to shares of stock entitled to vote in the election of directors,
and thus in the present case only to common shares, and not to the total outstanding
capital stock comprising both common and non-voting preferred shares.—We agree with
petitioner and petitioners-inintervention. The term “capital” in Section 11, Article XII of the
Constitution refers only to shares of stock entitled to vote in the election of directors, and
thus in the present case only to common shares, and not to the total outstanding capital
stock comprising both common and non-voting preferred shares.

Same; Capital; Common shares cannot be deprived of the right to vote in any corporate
meeting, and any provision in the articles of incorporation restricting the right of common
shareholders to vote is invalid.—Indisputably, one of the rights of a stockholder is the right
to participate in the control or management of the corporation. This is exercised through his
vote in the election of directors because it is the board of directors that controls or manages
the corporation. In the absence of provisions in the articles of incorporation denying voting
rights to preferred shares, preferred shares have the same voting rights as common shares.
However, preferred shareholders are often excluded from any control, that is, deprived of
the right to vote in the election of directors and on other matters, on the theory that the
preferred shareholders are merely investors in the corporation for income in the same
manner as bondholders. In fact, under the Corporation Code only preferred or redeemable
shares can be deprived of the right to vote. Common shares cannot be deprived of the right
to vote in any corporate meeting, and any provision in the articles of incorporation
restricting the right of common shareholders to vote is invalid.

Same; Same; The term “capital” in Section 11, Article XII of the Constitution refers only to
shares of stock that can vote in the election of directors.—Considering that common shares
have voting rights which translate to control, as opposed to preferred shares which usually
have no voting rights, the term “capital” in Section 11, Article XII of the Constitution refers
only to common shares. However, if the preferred shares also have the right to vote in the
election of directors, then the term “capital” shall include such preferred shares because the
right to participate in the control or management of the corporation is exercised through the
right to vote in the election of directors. In short, the term “capital” in Section 11,
Article XII of the Constitution refers only to shares of stock that can vote in the
election of directors.

Same; Same; The term “capital” in Section 11, Article XII of the Constitution to include both
voting and non-voting shares will result in the abject surrender of our telecommunications
industry to foreigners, amounting to a clear abdication of the State’s constitutional duty to
limit control of public utilities to Filipino citizens; The Court should never open to foreign
control what the Constitution has expressly reserved to Filipinos for that would be a betrayal
of the Constitution and of the national interest.— Indisputably, construing the term “capital”
in Section 11, Article XII of the Constitution to include both voting and non-voting shares
will result in the abject surrender of our telecommunications industry to foreigners,
amounting to a clear abdication of the State’s constitutional duty to limit control of public
utilities to Filipino citizens. Such an interpretation certainly runs counter to the constitutional
provision reserving certain areas of investment to Filipino citizens, such as the exploitation
of natural resources as well as the ownership of land, educational institutions and
advertising businesses. The Court should never open to foreign control what the
Constitution has expressly reserved to Filipinos for that would be a betrayal of the
Constitution and of the national interest. The Court must perform its solemn duty to defend
and uphold the intent and letter of the Constitution to ensure, in the words of the
Constitution, “a selfreliant and independent national economy effectively controlled by
Filipinos.”

Same; Securities and Exchange Commission; The Securities and Exchange Commission
(SEC) is vested with the power and function to suspend or revoke, after proper notice and
hearing, the franchise or certificate of registration of corporations, partnerships or
associations, upon any of the grounds provided by law.—Under Section 5(m) of the
Securities Regulation Code, the SEC is vested with the “power and function” to “suspend or
revoke, after proper notice and hearing, the franchise or certificate of
registration of corporations, partnerships or associations, upon any of the
grounds provided by law.” The SEC is mandated under Section 5(d) of the same Code
with the “power and function” to “investigate x x x the activities of persons to ensure
compliance” with the laws and regulations that SEC administers or enforces. The GIS that
all corporations are required to submit to SEC annually should put the SEC on guard against
violations of the nationality requirement prescribed in the Constitution and existing laws.
This Court can compel the SEC, in a petition for declaratory relief that is treated as a petition
for mandamus as in the present case, to hear and decide a possible violation of Section 11,
Article XII of the Constitution in view of the ownership structure of PLDT’s voting shares, as
admitted by respondents and as stated in PLDT’s 2010 GIS that PLDT submitted to SEC.
3. Roy III vs. Herbosa
G.R. No. 207246. November 22, 2016.

Judiciary; Judicial Review; Requisites for the exercise of the Supreme Court’s (SC’s) power
of judicial review.—The Court may exercise its power of judicial review and take cognizance
of a case when the following specific requisites are met: (1) there is an actual case or
controversy calling for the exercise of judicial power; (2) the petitioner has standing to
question the validity of the subject act or issuance, i.e., he has a personal and substantial
interest in the case that he has sustained, or will sustain, direct injury as a result of the
enforcement of the act or issuance; (3) the question of constitutionality is raised at the
earliest opportunity; and (4) the constitutional question is the very lis mota of the case.

Actual Controversy; An actual case or controversy is one which involves a conflict of legal
rights, an assertion of opposite legal claims, susceptible of judicial resolution as
distinguished from a hypothetical or abstract difference or dispute.—The Court in Belgica v.
Ochoa, Jr., 710 SCRA 1 (2013), stressed anew that an actual case or controversy is one
which involves a conflict of legal rights, an assertion of opposite legal claims, susceptible of
judicial resolution as distinguished from a hypothetical or abstract difference or dispute since
the courts will decline to pass upon constitutional issues through advisory opinions, bereft as
they are of authority to resolve hypothetical or moot questions. Related to the requirement
of an actual case or controversy is the requirement of “ripeness,” and a question is ripe for
adjudication when the act being challenged has a direct adverse effect on the individual
challenging it.

Same; As to injury, the party must show that (1) he will personally suffer some actual or
threatened injury because of the allegedly illegal conduct of the government; (2) the injury
is fairly traceable to the challenged action; and (3) the injury is likely to be redressed by a
favorable action.—As to injury, the party must show that (1) he will personally suffer some
actual or threatened injury because of the allegedly illegal conduct of the government; (2)
the injury is fairly traceable to the challenged action; and (3) the injury is likely to be
redressed by a favorable action. If the asserted injury is more imagined than real, or is
merely superficial and insubstantial, an excursion into constitutional adjudication by the
courts is not warranted.

Same; The locus standi requisite is not met by the expedient invocation of one’s citizenship
or membership in the bar who has an interest in ensuring that laws and orders of the
Philippine government are legally and validly issued as these supposed interests are too
general, which are shared by other groups and by the whole citizenry.—The locus standi
requisite is not met by the expedient invocation of one’s citizenship or membership in the
bar who has an interest in ensuring that laws and orders of the Philippine government are
legally and validly issued as these supposed interests are too general, which are shared by
other groups and by the whole citizenry. Per their allegations, the personal interest invoked
by petitioners as citizens and members of the bar in the validity or invalidity of SEC-MC No.
8 is at best equivocal, and totally insufficient.

Same; Taxpayer’s Suit; A taxpayer’s suit is allowed only when the petitioner has
demonstrated the direct correlation of the act complained of and the disbursement of public
funds in contravention of law or the Constitution, or has shown that the case involves the
exercise of the spending or taxing power of Congress.—As often reiterated by the Court, a
taxpayer’s suit is allowed only when the petitioner has demonstrated the direct correlation of
the act complained of and the disbursement of public funds in contravention of law or the
Constitution, or has shown that the case involves the exercise of the spending or taxing
power of Congress. SEC-MC No. 8 does not involve an additional expenditure of public funds
and the taxing or spending power of Congress.

Corporation Law; Public Utility Corporation; As defined in the Implementing Rules and
Regulations of the Securities Regulation Code (SRC-IRR), beneficial owner or beneficial
ownership means any person who, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise, has or shares voting power and/or investment
returns or power.—As defined in the SRC-IRR, “[b]eneficial owner or beneficial
ownership means any person who, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise, has or shares voting power (which
includes the power to vote or direct the voting of such security) and/or investment returns
or power (which includes the power to dispose of, or direct the disposition of such
security).”

Same; Same; The term “full beneficial ownership” found in the Foreign Investment Act-
Implementing Rules and Regulations (FIA defining the term “Philippine national.” Mere legal
title is not enough to meet the required Filipino equity, which means that it is not sufficient
that a share is registered in the name of a Filipino citizen or national, i.e., he should also
have full beneficial ownership of the share.—The term “full beneficial ownership” found in
the FIA-IRR is to be understood in the context of the entire paragraph defining the term
“Philippine national.” Mere legal title is not enough to meet the required Filipino equity,
which means that it is not sufficient that a share is registered in the name of a Filipino
citizen or national, i.e., he should also have full beneficial ownership of the share. If the
voting right of a share held in the name of a Filipino citizen or national is assigned or
transferred to an alien, that share is not to be counted in the determination of the required
Filipino equity. In the same vein, if the dividends and other fruits and accessions of the
share do not accrue to a Filipino citizen or national, then that share is also to be excluded or
not counted.

Same; Same; If a “specific stock” is owned by a Filipino in the books of the corporation, but
the stock’s voting power or disposing power belongs to a foreigner, then that “specific
stock” will not be deemed as “beneficially owned” by a Filipino.—Given that beneficial
ownership of the outstanding capital stock of the public utility corporation has to be
determined for purposes of compliance with the 60% Filipino ownership requirement, the
definition in the SRC-IRR can now be applied to resolve only the question of who is the
beneficial owner or who has beneficial ownership of each “specific stock” of the said
corporation. Thus, if a “specific stock” is owned by a Filipino in the books of the corporation,
but the stock’s voting power or disposing power belongs to a foreigner, then that “specific
stock” will not be deemed as “beneficially owned” by a Filipino.

Same; Same; If the Filipino has the “specific stock’s” voting power, or the Filipino has the
investment power over the “specific stock,” or he has both, then such Filipino is the
“beneficial owner” of that “specific stock” and that “specific stock” is considered as part of
the sixty percent (60%) Filipino ownership of the corporation.—If the Filipino has the
“specific stock’s” voting power (he can vote the stock or direct another to vote for him), or
the Filipino has the investment power over the “specific stock” (he can dispose of the stock
or direct another to dispose it for him), or he has both (he can vote and dis- pose of the
“specific stock” or direct another to vote or dispose it for him), then such Filipino is the
“beneficial owner” of that “specific stock” — and that “specific stock” is considered (or
counted) as part of the 60% Filipino ownership of the corporation. In the end, all those
“specific stocks” that are determined to be Filipino (per definition of “beneficial owner” or
“beneficial ownership”) will be added together and their sum must be equivalent to at least
60% of the total outstanding shares of stock entitled to vote in the election of directors and
at least 60% of the total number of outstanding shares of stock, whether or not entitled to
vote in the election of directors.

Same; Same; The “beneficial owner or beneficial ownership” definition in the Implementing
Rules and Regulations of the Securities Regulation Code (SRC-IRR) is understood only in
determining the respective nationalities of the outstanding capital stock of a public utility
corporation in order to determine its compliance with the percentage of Filipino ownership
required by the Constitution.—To reiterate, the “beneficial owner or beneficial ownership”
definition in the SRC-IRR is understood only in determining the respective nationalities of
the outstanding capital stock of a public utility corporation in order to determine its
compliance with the percentage of Filipino ownership required by the Constitution.

Same; Same; The application of the sixty-forty (60-40) Filipino-foreign ownership

requirement separately to each class of shares, whether common, preferred nonvoting,
preferred voting or any other class of shares fails to understand and appreciate the nature
and features of stocks as financial instruments.—To be sure, the application of the 60-40
Filipino-foreign ownership requirement separately to each class of shares, whether common,
preferred nonvoting, preferred voting or any other class of shares fails to understand and
appreciate the nature and features of stocks as financial instruments.

Same; Same; Stock Corporations; That stock corporations are allowed to create shares of
different classes with varying features is a flexibility that is granted, among others, for the
corporation to attract and generate capital (funds) from both local and foreign capital
markets.—That stock corporations are allowed to create shares of different classes with
varying features is a flexibility that is granted, among others, for the corporation to attract
and generate capital (funds) from both local and foreign capital markets. This access to
capital — which a stock corporation may need for expansion, debt relief/repayment, working
capital requirement and other corporate pursuits — will be greatly eroded with further
unwarranted limitations that are not articulated in the Constitution.

Same; Same; Constitutional Law; As mandated by Section 11, Article XII of the Constitution,
all the executive and managing officers of a public utility company must be Filipinos. Thus,
the all-Filipino management team must first be convinced that any of the eight (8) corporate
actions in Section 6 of the Corporation Code will be to the best interest of the company.—In
this regard, it should be noted that the 8 corporate matters enumerated in Section 6 of the
Corporation Code require, at the outset, a favorable recommendation by the management to
the board. As mandated by Section 11, Article XII of the Constitution, all the executive and
managing officers of a public utility company must be Filipinos. Thus, the all-Filipino
management team must first be convinced that any of the 8 corporate actions in Section 6
will be to the best interest of the company.
Same; Same; Allowing stockholders holding preferred shares without voting rights to vote in
the eight (8) corporate matters enumerated in Section 6 of the Corporation Code is an
acknowledgment of their right of ownership.—Allowing stockholders holding preferred
shares without voting rights to vote in the 8 corporate matters enumerated in Section 6 is
an acknowledgment of their right of ownership. If the owners of preferred shares without
right to vote/elect directors are not allowed to vote in any of those 8 corporate actions, then
they will not be entitled to the appraisal right provided under Section 81 of the Corporation
Code in the event that they dissent in the corporate act.

Same; Same; A too restrictive definition of “capital” will surely have a dampening effect on
the business milieu by eroding the flexibility inherent in the issuance of preferred shares
with varying terms and conditions.—As acknowledged in the Gamboa v. Teves, 652 SCRA
690 (2011) (Gamboa Decision), preferred shareholders are merely investors in the company
for income in the same manner as bondholders. Without a lucrative package, including an
attractive return of investment, preferred shares will not be subscribed and the much-
needed additional capital will be elusive. A too restrictive definition of “capital,” one which
was never contemplated in the Gamboa Decision, will surely have a dampening effect on the
business milieu by eroding the flexibility inherent in the issuance of preferred shares with
varying terms and conditions.

4. IDEALS, INC. vs. PSALM

GR No. 192088, Oct. 9, 2012

Electric Power Industry; Electric Power Industry Reform Act of 2001 (EPIRA); The Electric
Power Industry Reform Act of 2001 mandated that “all assets of National Power Corporation
(NPC) shall be sold in an open and transparent manner through public bidding.”—The EPIRA
was enacted to provide for “an orderly and transparent privatization” of NPC’s assets and
liabilities. Specifically, said law mandated that “[a]ll assets of NPC shall be sold in an open
and transparent manner through public bidding.”

Electric Power Industry; Electric Power Industry Reform Act of 2001 (EPIRA); With the
advent of Electric Power Industry Reform Act of 2001 (EPIRA) in 2001, Power Sector Assets
and Liabilities Management Corporation (PSALM) came into existence for the principal
purpose of managing the orderly sale, privatization and disposition of generation assets, real
estate and other disposable assets of the NPC including IPP Contracts.— With the advent of
EPIRA in 2001, PSALM came into existence for the principal purpose of managing the orderly
sale, privatization and disposition of generation assets, real estate and other disposable
assets of the NPC including IPP Contracts. Accordingly, PSALM was authorized to take title to
and possession of, those assets transferred to it. EPIRA mandated that all such assets shall
be sold through public bidding with the exception of Agus and Pulangui complexes in
Mindanao, the privatization of which was left to the discretion of PSALM in consultation with
Congress.

The Supreme Court finds that the operation and maintenance of a hydroelectric power plant
is not among the statutorily granted powers of Metropolitan Waterworks and Sewerage
System (MWSS).—The Court finds that the operation and maintenance of a hydroelectric
power plant is not among the statutorily granted powers of MWSS. Although MWSS was
granted authority to construct and operate dams and reservoirs, such was for the specific
purpose of supplying water for domestic and other uses, and the treatment, regulation and
control of water usage, and not power generation. Moreover, since the sale of AHEPP by
PSALM merely implements the legislated reforms for the electric power industry through
schemes that aim “[t]o enhance the inflow of private capital and broaden the ownership
base of the power generation, transmission and distribution sectors,” the proposed transfer
to MWSS which is another government entity contravenes that State policy.

Water Code of the Philippines (P.D. No. 1067); Presidential Decree No. 1067, otherwise
known as “The Water Code of the Philippines” is the basic law governing the ownership,
appropriation utilization, exploitation, development, conservation and protection of water
resources and rights to land related thereto.—The State’s policy on the management of
water resources is implemented through the regulation of water rights. Presidential Decree
No. 1067, otherwise known as “The Water Code of the Philippines” is the basic law
governing the ownership, appropriation utilization, exploitation, development, conservation
and protection of water resources and rights to land related thereto. The National Water
Resources Council (NWRC) was created in 1974 under P.D. No. 424 and was subsequently
renamed as National Water Resources Board (NWRB) pursuant to Executive Order No. 124-
A. The NWRB is the chief coordinating and regulating agency for all water resources
management development activities which is tasked with the formulation and development
of policies on water utilization and appropriation, the control and supervision of water
utilities and franchises, and the regulation and rationalization of water rates.

Electric Power Industry; Electric Power Industry Reform Act of 2001 (EPIRA); Power
generation shall not be considered a public utility operation, and hence no franchise is
necessary. Foreign investors are likewise allowed entry into the electric power industry.—
Under the EPIRA, the generation of electric power, a business affected with public interest,
was opened to private sector and any new generation company is required to secure a
certificate of compliance from the Energy Regulatory Commission (ERC), as well as health,
safety and environmental clearances from the concerned government agencies. Power
generation shall not be considered a public utility operation, and hence no franchise is
necessary. Foreign investors are likewise allowed entry into the electric power industry.
However, there is no mention of water rights in the privatization of multi-purpose
hydropower facilities.

Since only the power plant is to be sold and privatized, the operation of the non-power
components such as the dam and reservoir, including the maintenance of the surrounding
watershed, should remain under the jurisdiction and control of National Power Corporation
(NPC) which continue to be a government corporation.—Lease or transfer of water rights is
allowed under the Water Code, subject to the approval of NWRB after due notice and
hearing. However, lessees or transferees of such water rights must comply with the
citizenship requirement imposed by the Water Code and its IRR. But regardless of such
qualification of water permit holders/transferees, it is to be noted that there is no provision
in the EPIRA itself authorizing the NPC to assign or transfer its water rights in case of
transfer of operation and possession of multi-purpose hydropower facilities. Since only the
power plant is to be sold and privatized, the operation of the non-power components such
as the dam and reservoir, including the maintenance of the surrounding watershed, should
remain under the jurisdiction and control of NPC which continue to be a government
corporation.
5. NARRA NICKEL MINING AND DEVELOPMENT CORP., TESORO MINING AND
DEVELOPMENT, INC., and MCARTHUR MINING, INC., vs. REDMONT
CONSOLIDATED MINES CORP.
G.R. No. 195580. April 21, 2014.

Mercantile Law; Corporations; Control Test; Grandfather Rule; Basically, there are two
acknowledged tests in determining the nationality of a corporation: the control test and the
grandfather rule.—Basically, there are two acknowledged tests in determining the nationality
of a corporation: the control test and the grandfather rule. Paragraph 7 of DOJ Opinion No.
020, Series of 2005, adopting the 1967 SEC Rules which implemented the requirement of
the Constitution and other laws pertaining to the controlling interests in enterprises engaged
in the exploitation of natural resources owned by Filipino citizens, provides: Shares
belonging to corporations or partnerships at least 60% of the capital of which is owned by
Filipino citizens shall be considered as of Philippine nationality, but if the percentage of
Filipino ownership in the corporation or partnership is less than 60%, only the number of
shares corresponding to such percentage shall be counted as of Philippine nationality. Thus,
if 100,000 shares are registered in the name of a corporation or partnership at least 60% of
the capital stock or capital, respectively, of which belong to Filipino citizens, all of the shares
shall be recorded as owned by Filipinos. But if less than 60%, or say, 50% of the capital
stock or capital of the corporation or partnership, respectively, belongs to Filipino citizens,
only 50,000 shares shall be counted as owned by Filipinos and the other 50,000 shall be
recorded as belonging to aliens. The first part of paragraph 7, DOJ Opinion No. 020, stating
“shares belonging to corporations or partnerships at least 60% of the capital of which is
owned by Filipino citizens shall be considered as of Philippine nationality,” pertains to the
control test or the liberal rule. On the other hand, the second part of the DOJ Opinion which
provides, “if the percentage of the Filipino ownership in the corporation or partnership is less
than 60%, only the number of shares corresponding to such percentage shall be counted as
Philippine nationality,” pertains to the stricter, more stringent grandfather rule.

Same; Same; Corporate Layering; “Corporate layering” is admittedly allowed by the Foreign
Investments Act (FIA); but if it is used to circumvent the Constitution and pertinent laws,
then it becomes illegal.—“Corporate layering” is admittedly allowed by the FIA; but if it is
used to circumvent the Constitution and pertinent laws, then it becomes illegal. Further, the
pronouncement of petitioners that the grandfather rule has already been abandoned must
be discredited for lack of basis. Art. XII, Sec. 2 of the Constitution provides: Sec. 2. All lands
of the public domain, waters, minerals, coal, petroleum and other mineral oils, all forces of
potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural
resources are owned by the State. With the exception of agricultural lands, all other natural
resources shall not be alienated. The exploration, development, and utilization of natural
resources shall be under the full control and supervision of the State. The State may
directly undertake such activities, or it may enter into coproduction, joint venture
or production-sharing agreements with Filipino citizens, or corporations or
associations at least sixty per centum of whose capital is owned by such citizens.
Such agreements may be for a period not exceeding twenty-five years, renewable for not
more than twenty-five years, and under such terms and conditions as may be provided by
law.

Constitutional Law; Statutory Construction; Elementary in statutory construction is when

there is conflict between the Constitution and a statute, the Constitution will prevail.—
Elementary in statutory construction is when there is conflict between the Constitution and a
statute, the Constitution will prevail. In this instance, specifically pertaining to the provisions
under Art. XII of the Constitution on National Economy and Patrimony, Sec. 3 of the FIA will
have no place of application. As decreed by the honorable framers of our Constitution, the
grandfather rule prevails and must be applied.

Mercantile Law; Corporations; Pseudo-Partnerships; As a rule, corporations are prohibited

from entering into partnership agreements; consequently, corporations enter into joint
venture agreements with other corporations or partnerships for certain transactions in order
to form “pseudo partnerships.”—Though some claim that partnerships and joint ventures are
totally different animals, there are very few rules that differentiate one from the other; thus,
joint ventures are deemed “akin” or similar to a partnership. In fact, in joint venture
agreements, rules and legal incidents governing partnerships are applied. Accordingly, culled
from the incidents and records of this case, it can be assumed that the relationships entered
between and among petitioners and MBMI are no simple “joint venture agreements.” As a
rule, corporations are prohibited from entering into partnership agreements; consequently,
corporations enter into joint venture agreements with other corporations or partnerships for
certain transactions in order to form “pseudo partnerships.” Obviously, as the intricate web
of “ventures” entered into by and among petitioners and MBMI was executed to circumvent
the legal prohibition against corporations entering into partnerships, then the relationship
created should be deemed as “partnerships,” and the laws on partnership should be applied.
Thus, a joint venture agreement between and among corporations may be seen as similar to
partnerships since the elements of partnership are present. Considering that the
relationships found between petitioners and MBMI are considered to be partnerships, then
the CA is justified in applying Sec. 29, Rule 130 of the Rules by stating that “by entering into
a joint venture, MBMI have a joint interest” with Narra, Tesoro and McArthur.

Mines and Mining; Panel of Arbitrators; Jurisdiction; The Panel of Arbitrators (POA) has
jurisdiction to settle disputes over rights to mining areas.—We affirm the ruling of the CA in
declaring that the POA has jurisdiction over the instant case. The POA has jurisdiction to
settle disputes over rights to mining areas which definitely involve the petitions filed by
Redmont against petitioners Narra, McArthur and Tesoro. Redmont, by filing its petition
against petitioners, is asserting the right of Filipinos over mining areas in the Philippines
against alleged foreign-owned mining corporations. Such claim constitutes a “dispute” found
in Sec. 77 of RA 7942: Within thirty (30) days, after the submission of the case by the
parties for the decision, the panel shall have exclusive and original jurisdiction to hear and
decide the following: (a) Disputes involving rights to mining areas (b) Disputes involving
mineral agreements or permits.

Same; Same; Same; It is clear that the Panel of Arbitrators (POA) has exclusive and original
jurisdiction over any and all disputes involving rights to mining areas.—It is clear that POA
has exclusive and original jurisdiction over any and all disputes involving rights to mining
areas. One such dispute is an MPSA application to which an adverse claim, protest or
opposition is filed by another interested applicant. In the case at bar, the dispute arose or
originated from MPSA applications where petitioners are asserting their rights to mining
areas subject of their respective MPSA applications. Since respondent filed 3 separate
petitions for the denial of said applications, then a controversy has developed between the
parties and it is POA’s jurisdiction to resolve said disputes. Moreover, the jurisdiction of the
RTC involves civil actions while what petitioners filed with the DENR Regional Office or any
concerned DENRE or CENRO are MPSA applications. Thus POA has jurisdiction. Furthermore,
the POA has jurisdiction over the MPSA applications under the doctrine of primary
jurisdiction. Euro-med Laboratories v. Province of Batangas, 495 SCRA 301 (2006),
elucidates: The doctrine of primary jurisdiction holds that if a case is such that its
determination requires the expertise, specialized training and knowledge of an
administrative body, relief must first be obtained in an administrative proceeding before
resort to the courts is had even if the matter may well be within their proper jurisdiction.

Mercantile Law; Corporations; Control Test; The “control test” is still the prevailing mode of
determining whether or not a corporation is a Filipino corporation, within the ambit of Sec.
2, Art. II of the 1987 Constitution, entitled to undertake the exploration, development and
utilization of the natural resources of the Philippines.—The “control test” is still the prevailing
mode of determining whether or not a corporation is a Filipino corporation, within the ambit
of Sec. 2, Art. II of the 1987 Constitution, entitled to undertake the exploration,
development and utilization of the natural resources of the Philippines. When in the mind of
the Court there is doubt, based on the attendant facts and circumstances of the case, in the
60-40 Filipino-equity ownership in the corporation, then it may apply the “grandfather rule.”
 6. RESIDENT MARINE MAMMALS OF THE PROTECTED SEASCAPE TAÑON STRAIT
vs. SECRETARY ANGELO REYES, in his capacity as Secretary
G.R. No. 180771. April 21, 2015.*

Service Contracts; In La Bugal-B’laan Tribal Association, Inc. v. Ramos, 445 SCRA 1 (2004),
the Supreme Court (SC) held that the deletion of the words “service contracts” in the 1987
Constitution did not amount to a ban on them per se.—This Court has previously settled the
issue of whether service contracts are still allowed under the 1987 Constitution. In La Bugal-
B’laan Tribal Association, Inc. v. Ramos, 445 SCRA 1 (2004), we held that the deletion of the
words “service contracts” in the 1987 Constitution did not amount to a ban on them per se.
In fact, in that decision, we quoted in length, portions of the deliberations of the members
of the Constitutional Commission (ConCom) to show that in deliberating on paragraph 4,
Section 2, Article XII, they were actually referring to service contracts as understood in the
1973 Constitution, albeit with safety measures to eliminate or minimize the abuses prevalent
during the martial law regime.

Natural Resources; Oil Explorations; Oil Exploration and Development Act of 1972; The
disposition, exploration, development, exploitation, and utilization of indigenous petroleum
in the Philippines are governed by Presidential Decree (PD) No. 87 or the Oil Exploration and
Development Act of 1972.—The disposition, exploration, development, exploitation, and
utilization of indigenous petroleum in the Philippines are governed by Presidential Decree
No. 87 or the Oil Exploration and Development Act of 1972. This was enacted by then
President Ferdinand Marcos to promote the discovery and production of indigenous
petroleum through the utilization of government and/or local or foreign private resources to
yield the maximum benefit to the Filipino people and the revenues to the Philippine
Government. Contrary to the petitioners’ argument, Presidential Decree No. 87, although
enacted in 1972, before the adoption of the 1987 Constitution, remains to be a valid law
unless otherwise repealed.

Statutory Construction; In cases where the statute seems to be in conflict with the
Constitution, but a construction that it is in harmony with the Constitution is also possible,
that construction should be preferred.—In cases where the statute seems to be in conflict
with the Constitution, but a construction that it is in harmony with the Constitution is also
possible, that construction should be preferred. This Court, in Pangandaman v. Commission
on Elections, 319 SCRA 283 (1999), expounding on this point, pronounced: It is a basic
precept in statutory construction that a statute should be interpreted in harmony with the
Constitution and that the spirit, rather than the letter of the law determines its construction;
for that reason, a stat- ute must be read according to its spirit and intent. x x x. (Citation
omitted) Consequently, we find no merit in petitioners’ contention that SC-46 is prohibited
on the ground that there is no general law prescribing the standard or uniform terms,
conditions, and requirements for service contracts involving oil exploration and extraction.

Constitutional Law; Presidency; Oil Explorations; Natural Resources; Paragraph 4, Section 2,

Article XII of the 1987 Constitution requires that the President himself enter into any service
contract for the exploration of petroleum.—Paragraph 4, Section 2, Article XII of the 1987
Constitution requires that the President himself enter into any service contract for the
exploration of petroleum. SC-46 appeared to have been entered into and signed only by the
DOE through its then Secretary, Vicente S. Perez, Jr., contrary to the said constitutional
requirement. Moreover, public respondents have neither shown nor alleged that Congress
was subsequently notified of the execution of such contract. Public respondents’ implied
argument that based on the “alter ego principle,” their acts are also that of then President
Macapagal-Arroyo’s, cannot apply in this case. In Joson v. Torres, 290 SCRA 279 (1998), we
explained the concept of the alter ego principle or the doctrine of qualified political agency
and its limit in this wise: Under this doctrine, which recognizes the establishment of a single
executive, all executive and administrative organizations are adjuncts of the Executive
Department, the heads of the various executive departments are assistants and agents of
the Chief Executive, and, except in cases where the Chief Executive is required by
the Constitution or law to act in person or the exigencies of the situation demand
that he act personally, the multifarious executive and administrative functions of the
Chief Executive are performed by and through the executive departments, and the acts of
the Secretaries of such departments, performed and promulgated in the regular course of
business, are, unless disapproved or reprobated by the Chief Executive presumptively the
acts of the Chief Executive.

Same; Balanced and Healthful Ecology; National Integrated Protected Areas System Act of
1992; Natural Resources; True to the constitutional policy that the “State shall protect and
advance the right of the people to a balanced and healthful ecology in accord with the
rhythm and harmony of nature,” Congress enacted the National Integrated Protected Areas
System Act of 1992 (NIPAS Act) to secure the perpetual existence of all native plants and
animals through the establishment of a comprehensive system of integrated protected
areas.—True to the constitutional policy that the “State shall protect and advance the right
of the people to a balanced and healthful ecology in accord with the rhythm and harmony of
nature,” Congress enacted the NIPAS Act to secure the perpetual existence of all native
plants and animals through the establishment of a comprehensive system of integrated
protected areas. These areas possess common ecological values that were incorporated into
a holistic plan representative of our natural heritage. The system encompasses
outstandingly remarkable areas and biologically important public lands that are habitats of
rare and endangered species of plants and animals, biogeographic zones and related
ecosystems, whether terrestrial, wetland, or marine. It classifies and administers all the
designated protected areas to maintain essential ecological processes and life-support
systems, to preserve genetic diversity, to ensure sustainable use of resources found therein,
and to maintain their natural conditions to the greatest extent possible. The following
categories of protected areas were established under the NIPAS Act: a. Strict nature
reserve; b. Natural park; c. Natural monument; d. Wildlife sanctuary; e. Protected
landscapes and seascapes; f. Resource reserve; g. Natural biotic areas; and h. Other
categories established by law, conventions or international agreements which the Philippine
Government is a signatory.

Same; Same; Same; Same; Under Section 4 of the National Integrated Protected Areas
System Act of 1992 (NIPAS Act), a protected area refers to portions of land and water, set
aside due to their unique physical and biological significance, managed to enhance biological
diversity and protected against human exploitation.—Under Section 4 of the NIPAS Act, a
protected area refers to portions of land and water, set aside due to their unique physical
and biological significance, managed to enhance biological diversity and protected against
human exploitation. The Tañon Strait, pursuant to Proclamation No. 1234, was set aside and
declared a protected area under the category of Protected Seascape. The NIPAS Act defines
a Protected Seascape to be an area of national significance characterized by the harmonious
interaction of man and land while providing opportunities for public enjoyment through
recreation and tourism within the normal lifestyle and economic activity of this areas; thus a
management plan for each area must be designed to protect and enhance the permanent
preservation of its natural conditions. Consistent with this endeavor is the requirement that
an Environmental Impact Assessment (EIA) be made prior to undertaking any activity
outside the scope of the management plan. Unless an ECC under the EIA system is
obtained, no activity inconsistent with the goals of the NIPAS Act shall be implemented.
Same; Same; Same; Same; Environmentally Critical Area; Environmental Impact Statement
System; The Environmental Impact Statement System (EISS) prohibits any person,
partnership or corporation from undertaking or operating any declared environmentally
critical project or areas without first securing an Environmental Compliance Certificate (ECC)
issued by the President or his duly authorized representative.—The Environmental Impact
Statement System (EISS) was established in 1978 under Presidential Decree No. 1586. It
prohibits any person, partnership or corporation from undertaking or operating any declared
environmentally critical project or areas without first securing an ECC issued by the
President or his duly authorized representative. Pursuant to the EISS, which called for the
proper management of environmentally critical areas, Proclamation No. 2146 was enacted,
identifying the areas and types of projects to be considered as environmentally critical and
within the scope of the EISS, while DENR Administrative Order No. 2003-30 provided for its
Implementing Rules and Regulations (IRR).

Same; Same; Same; Same; Same; Words and Phrases; Department of Environment and
Natural Resources (DENR) Administrative Order No. 2003-30 defines an environmentally
critical area as “an area delineated as environmentally sensitive such that significant
environmental impacts are expected if certain types of proposed projects or programs are
located, developed, or implemented in it”; thus, before a project, which is “any activity,
regardless of scale or magnitude, which may have significant impact on the environment,” is
undertaken in it, such project must undergo an Environmental Impact Assessment (EIA) to
evaluate and predict the likely impacts of all its stages on the environment. —DENR
Administrative Order No. 2003-30 defines an environmentally critical area as “an area
delineated as environmentally sensitive such that significant environmental impacts are
expected if certain types of proposed projects or programs are located, developed, or
implemented in it”; thus, before a project, which is “any activity, regardless of scale or
magnitude, which may have significant impact on the environment,” is undertaken in it,
such project must undergo an EIA to evaluate and pre dict the likely impacts of all its stages
on the environment. An EIA is described in detail as follows: h. Environmental Impact
Assessment (EIA) — process that involves evaluating and predicting the likely impacts of a
project (including cumulative impacts) on the environment during construction,
commissioning, operation and abandonment. It also includes designing appropriate
preventive, mitigating and enhancement measures addressing these consequences to
protect the environment and the community’s welfare. The process is undertaken by, among
others, the project proponent and/or EIA Consultant, EMB, a Review Committee, affected
communities and other stakeholders.

Same; Same; Same; Natural Resources; Service Contracts; Oil Explorations; While
Presidential Decree (PD) No. 87 may serve as the general law upon which a service contract
for petroleum exploration and extraction may be authorized, the exploitation and utilization
of this energy resource in the present case may be allowed only through a law passed by
Congress, since the Tañon Strait is a National Integrated Protected Areas System (NIPAS)
area.—SC-46 was not executed for the mere purpose of gathering information on the
possible energy resources in the Tañon Strait as it also provides for the parties’ rights and
obligations relating to extraction and petroleum production should oil in commercial
quantities be found to exist in the area. While Presidential Decree No. 87 may serve
as the general law upon which a service contract for petroleum exploration and
extraction may be authorized, the exploitation and utilization of this energy
resource in the present case may be allowed only through a law passed by
Congress, since the Tañon Strait is a NIPAS area. Since there is no such law
specifically allowing oil exploration and/or extraction in the Tañon Strait, no
energy resource exploitation and utilization may be done in said protected
seascape.

Summary:
The disposition, exploration, development, exploitation, and utilization of indigenous
petroleum in the Philippines are governed by Presidential Decree No. 87 or the Oil
Exploration and Development Act of 1972. This was enacted by then President Ferdinand
Marcos to promote the discovery and production of indigenous petroleum through the
utilization of government and/or local or foreign private resources to yield the maximum
benefit to the Filipino people and the revenues to the Philippine Government. Contrary to
the petitioners’ argument, Presidential Decree No. 87, although enacted in 1972, before the
adoption of the 1987 Constitution, remains to be a valid law unless otherwise repealed.
7. METROPOLITAN CEBU WATER DISTRICT (MCWD) vs. MARGARITA A. ADALA,
G.R. No. 168914. July 4, 2007.

Administrative Law; Public Utilities; Franchises; Words and Phrases; The term “franchise”
has been construed broadly so as to include, not only authorizations issuing directly from
Congress in the form of statute, but also those granted by administrative agencies to which
the power to grant franchises has been delegated by Congress; It has been held that
privileges conferred by grant by local authorities as agents for the state constitute as much
a legislative franchise as though the grant had been made by an act of the Legislature.—
This Court, in Philippine Airlines, Inc. v. Civil Aeronautics Board, 270 SCRA 538 (1997), has
construed the term “franchise” broadly so as to include, not only authorizations issuing
directly from Congress in the form of statute, but also those granted by administrative
agencies to which the power to grant franchises has been delegated by Congress, to wit:
Congress has granted certain administrative agencies the power to grant licenses
for, or to authorize the operation of certain public utilities. With the growing
complexity of modern life, the multiplication of the subjects of governmental regulation, and
the increased difficulty of administering the laws, there is a constantly growing tendency
towards the delegation of greater powers by the legislature, and towards the approval of the
practice by the courts. It is generally recognized that a franchise may be derived
indirectly from the state through a duly designated agency, and to this extent,
the power to grant franchises has frequently been delegated, even to agencies
other than those of a legislative nature. In pursuance of this, it has been held
that privileges conferred by grant by local authorities as agents for the state
constitute as much a legislative franchise as though the grant had been made by
an act of the Legislature.

Same; Same; Same; Same; Water Districts; Presidential Decree No. 198 (P.D. 198); P.D.
198 itself gives the name “franchise” to an authorization that does not proceed directly from
the legislature.—It bears noting that once a district is “duly formed and existing” after
following the above procedure, it acquires the “exclusive franchise” referred to in Section 47.
Thus, P.D. 198 itself, in harmony with Philippine Airlines, Inc. v. Civil Aeronautics Board, 270
SCRA 538 (1997), gives the name “franchise” to an authorization that does not proceed
directly from the legislature. It would thus be incongruous to adopt in this instance the strict
interpretation proffered by respondent and exclude from the scope of the term “franchise”
the CPCs issued by the NWRB.

Public Utilities; Water Districts; Waterworks; Statutes; Section 47 of P.D. 198 must be
deemed void ab initio for being irreconcilable with Article XIV, Section 5 of the 1973
Constitution which was ratified on 17 January 1973—the constitution in force when P.D. 198
was issued on 25 May 1973—which prohibits against exclusive franchises.—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 utilities 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. (Emphasis and italics supplied)
This provision has been substantially reproduced in Article XII Section 11 of the 1987
Constitution, including the prohibition against exclusive franchises.

Same; Same; Same; Words and Phrases; Water districts fall under the term “public utility”—
a business or service engaged in regularly supplying the public with some commodity or
service of public consequence such as electricity, gas, water, transportation, telephone or
telegraph service.—In view of the purposes for which they are established, water districts
fall under the term “public utility” as defined in the case of National Power Corporation v.
Court of Appeals: 279 SCRA 506 (1997), A “public utility” is a business or service engaged in
regularly supplying the public with some commodity or service of public consequence such
as electricity, gas, water, transportation, telephone or telegraph service. x x x (Emphasis
and italics supplied) It bears noting, moreover, that as early as 1933, the Court held that a
particular water district—the Metropolitan Water District—is a public utility.
8. Manila International Airport Authority vs. Court of Appeals
G.R. No. 155650; July 20, 2006

Manila International Airport Authority; Taxation; MIAA’s Airport Lands and Buildings are
exempt from real estate tax imposed by local governments.—We rule that MIAA’s Airport
Lands and Buildings are exempt from real estate tax imposed by local governments. First,
MIAA is not a government-owned or controlled corporation but an instrumentality of the
National Government and thus exempt from local taxation. Second, the real properties of
MIAA are owned by the Republic of the Philippines and thus exempt from real estate tax.

Same; Same; While there is no dispute that a governmentowned or controlled corporation is

not exempt from real estate tax, MIAA is not a government-owned or controlled corporation;
A government-owned or controlled corporation must be “organized as a stock or non-stock
corporation,” of which MIAA is neither; MIAA is not a stock corporation because it has no
capital stock divided into shares.—There is no dispute that a government-owned or
controlled corporation is not exempt from real estate tax. However, MIAA is not a
government-owned or controlled corporation. Section 2(13) of the Introductory Provisions of
the Administrative Code of 1987 defines a government-owned or controlled corporation as
follows: SEC. 2. General Terms Defined. —x x x x (13) Government-owned or controlled
corporation refers to any agency organized as a stock or non-stock corporation,
vested with functions relating to public needs whether governmental or proprietary in
nature, and owned by the Government directly or through its instrumentalities either wholly,
or, where applicable as in the case of stock corporations, to the extent of at least fifty-one
(51) percent of its capital stock: x x x. (Emphasis supplied) A government-owned or
controlled corporation must be “organized as a stock or non-stock corporation.” MIAA is not
organized as a stock or non-stock corporation. MIAA is not a stock corporation because it
has no capital stock divided into shares.

Same; Same; Manila International Airport Authority (MIAA) is not a non-stock corporation
because it has no members; Section 11 of the MIAA Charter which mandates MIAA to remit
20% of its annual gross operating income to the National Treasury prevents it from
qualifying as a non-stock corporation.—MIAA is also not a non-stock corporation because it
has no members. Section 87 of the Corporation Code defines a non-stock corporation as
“one where no part of its income is distributable as dividends to its members, trustees or
officers.” A non-stock corporation must have members. Even if we assume that the
Government is considered as the sole member of MIAA, this will not make MIAA a non-stock
corporation. Non-stock corporations cannot distribute any part of their income to their
members. Section 11 of the MIAA Charter mandates MIAA to remit 20% of its annual gross
operating income to the National Treasury. This prevents MIAA from qualifying as a non-
stock corporation.

Administrative Law; Manila International Airport Authority (MIAA) is a government

instrumentality vested with corporate powers to perform efficiently its governmental
functions.—Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify
as a government-owned or controlled corporation. What then is the legal status of MIAA
within the National Government? MIAA is a government instrumentality vested with
corporate powers to perform efficiently its governmental functions. MIAA is like any other
government instrumentality, the only difference is that MIAA is vested with corporate
powers. Section 2(10) of the Introductory Provisions of the Administrative Code defines a
government “instrumentality” as follows: SEC. 2. General Terms Defined.––x x x x (10)
Instrumentality refers to any agency of the National Government, not integrated within the
department framework, vested with special functions or jurisdiction by law, endowed with
some if not all corporate powers, administering special funds, and enjoying
operational autonomy, usually through a charter. x x x (Emphasis supplied)

Same; When the law vests in a government instrumentality corporate powers, the
instrumentality does not become a corporation—unless the government instrumentality is
organized as a stock or non-stock corporation, it remains a government instrumentality
exercising not only governmental but also corporate powers.—When the law vests in a
government instrumentality corporate powers, the instrumentality does not become a
corporation. Unless the government instrumentality is organized as a stock or non-stock
corporation, it remains a government instrumentality exercising not only governmental but
also corporate powers. Thus, MIAA exercises the governmental powers of eminent domain,
police authority and the levying of fees and charges. At the same time, MIAA exercises “all
the powers of a corporation under the Corporation Law, insofar as these powers are not
inconsistent with the provisions of this Executive Order.” Same; When the law makes a
government instrumentality operationally autonomous, the instrumentality remains part of
the National Government machinery although not integrated with the department
framework.—Likewise, when the law makes a government instrumentality operationally
autonomous, the instrumentality remains part of the National Government machinery
although not integrated with the department framework. The MIAA Charter expressly states
that transforming MIAA into a “separate and autonomous body” will make its operation
more “financially viable.”

Same; Manila International Airport Authority; Taxation; Local Government Code; A

government instrumentality like MIAA falls under Section 133(o) of the Local Government
Code, which provision recognizes the basic principle that local governments cannot tax the
national government.—A government instrumentality like MIAA falls under Section 133(o) of
the Local Government Code, which states: SEC. 133. Common Limitations on the Taxing
Powers of Local Government Units.—Unless otherwise provided herein, the exercise
of the taxing powers of provinces, cities, municipalities, and barangays shall not
extend to the levy of the following: x x x x (o) Taxes, fees or charges of any kind
on the National Government, its agencies and instrumentalities and local
government units. (Emphasis and italics supplied) Section 133(o) recognizes the basic
principle that local governments cannot tax the national government, which historically
merely delegated to local governments the power to tax. While the 1987 Constitution now
includes taxation as one of the powers of local governments, local governments may only
exercise such power “subject to such guidelines and limitations as the Congress may
provide.”

Taxation; Local Government Code; Statutory Construction; When local governments invoke
the power to tax on national government instrumentalities, such power is construed strictly
against local governments, and when Congress grants an exemption to a national
government instrumentality from local taxation, such exemption is construed liberally in
favor of the national government instrumentality.—Section 133(o) recognizes the basic
principle that local governments cannot tax the national government, which historically
merely delegated to local governments the power to tax. While the 1987 Constitution now
includes taxation as one of the powers of local governments, local governments may only
exercise such power “subject to such guidelines and limitations as the Congress may
provide.” When local governments in- voke the power to tax on national government
instrumentalities, such power is construed strictly against local governments. The rule is that
a tax is never presumed and there must be clear language in the law imposing the tax. Any
doubt whether a person, article or activity is taxable is resolved against taxation. This rule
applies with greater force when local governments seek to tax national government
instrumentalities. Another rule is that a tax exemption is strictly construed against the
taxpayer claiming the exemption. However, when Congress grants an exemption to a
national government instrumentality from local taxation, such exemption is construed
liberally in favor of the national government instrumentality. As this Court declared in
Maceda v. Macaraig, Jr.: The reason for the rule does not apply in the case of exemptions
running to the benefit of the government itself or its agencies. In such case the practical
effect of an exemption is merely to reduce the amount of money that has to be handled by
government in the course of its operations. For these reasons, provisions granting
exemptions to government agencies may be construed liberally, in favor of non tax-liability
of such agencies. There is, moreover, no point in national and local governments taxing
each other, unless a sound and compelling policy requires such transfer of public funds from
one government pocket to another.

Same; Same; Taxation; Local Government Code; There is also no reason for local
governments to tax national government instrumentalities for rendering essential public
services to inhabitants of local governments, the only exception being when the legislature
clearly intended to tax government instrumentalities for the delivery of essential services for
sound and compelling policy considerations.—There is also no reason for local governments
to tax national government instrumentalities for rendering essential public services to
inhabitants of local governments. The only exception is when the legislature clearly intended
to tax government instrumentalities for the delivery of essential public services for sound
and compelling policy considerations. There must be express language in the law
empowering local governments to tax national government instrumentalities. Any doubt
whether such power exists is resolved against local governments.

Manila International Airport Authority; The Airport Lands and Buildings of the MIAA are
property of public dominion and therefore owned by the State or the Republic of the
Philippines.— The Airport Lands and Buildings of MIAA are property of public dominion
and therefore owned by the State or the Republic of the Philippines. The Civil Code
provides: ARTICLE 419. Property is either of public dominion or of private ownership.
ARTICLE 420. The following things are property of public dominion: (1) Those
intended for public use, such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, banks, shores, roadsteads, and others of similar character; (2)
Those which belong to the State, without being for public use, and are intended for some
public service or for the development of the national wealth. (Emphasis supplied) ARTICLE
421. All other property of the State, which is not of the character stated in the preceding
article, is patrimonial property. ARTICLE 422. Property of public dominion, when no longer
intended for public use or for public service, shall form part of the patrimonial property of
the State.
Same; Words and Phrases; The term “ports” in Article 420 (1) of the Civil Code includes
seaports and airports—the MIAA Airport Lands and Buildings constitute a “port” constructed
by the State.—No one can dispute that properties of public dominion mentioned in Article
420 of the Civil Code, like “roads, canals, rivers, torrents, ports and bridges
constructed by the State,” are owned by the State. The term “ports” includes
seaports and airports. The MIAA Airport Lands and Buildings constitute a “port”
constructed by the State. Under Article 420 of the Civil Code, the MIAA Airport Lands and
Buildings are properties of public dominion and thus owned by the State or the Republic of
the Philippines.

Same; Same; The Airport Lands and Buildings are devoted to public use because they are
used by the public for international and domestic travel and transportation; The charging of
fees to the public does not determine the character of the property whether it is of public
dominion or not.—The Airport Lands and Buildings are devoted to public use because they
are used by the public for international and domestic travel and transportation. The fact that
the MIAA collects terminal fees and other charges from the public does not remove the
character of the Airport Lands and Buildings as properties for public use. The operation by
the government of a tollway does not change the character of the road as one for public
use. Someone must pay for the maintenance of the road, either the public indirectly through
the taxes they pay the government, or only those among the public who actually use the
road through the toll fees they pay upon using the road. The tollway system is even a more
efficient and equitable manner of taxing the public for the maintenance of public roads. The
charging of fees to the public does not determine the character of the property whether it is
of public dominion or not. Article 420 of the Civil Code defines property of public dominion
as one “intended for public use.” Even if the government collects toll fees, the road is still
“intended for public use” if anyone can use the road under the same terms and conditions
as the rest of the public. The charging of fees, the limitation on the kind of vehicles that can
use the road, the speed restrictions and other conditions for the use of the road do not
affect the public character of the road.

Same; Taxation; User’s Tax; Words and Phrases; The terminal fees MIAA charges
passengers, as well as the landing fees MIAA charges airlines, are often termed user’s tax; A
user’s tax is more equitable—a principle of taxation mandated by the 1987 Constitution.—
The terminal fees MIAA charges to passengers, as well as the landing fees MIAA charges to
airlines, constitute the bulk of the income that maintains the operations of MIAA. The
collection of such fees does not change the character of MIAA as an airport for public use.
Such fees are often termed user’s tax. This means taxing those among the public who
actually use a public facility instead of taxing all the public including those who never use
the particular public facility. A user’s tax is more equitable—a principle of taxation mandated
in the 1987 Constitution.

Same; The Airport Lands and Buildings of MIAA, as properties of public dominion, are
outside the commerce of man.— The Airport Lands and Buildings of MIAA are devoted to
public use and thus are properties of public dominion. As properties of public dominion,
the Airport Lands and Buildings are outside the commerce of man. The Court has
ruled repeatedly that properties of public dominion are outside the commerce of man. As
early as 1915, this Court already ruled in Municipality of Cavite v. Rojas that properties
devoted to public use are outside the commerce of man, thus: According to article 344 of
the Civil Code: “Property for public use in provinces and in towns comprises the provincial
and town roads, the squares, streets, fountains, and public waters, the promenades, and
public works of general service supported by said towns or provinces.”

Same; Public Auctions; Property of public dominion, being outside the commerce of man,
cannot be the subject of an auction sale; Any encumbrance, levy on execution or auction
sale of any property of public dominion is void for being contrary to public policy.—Again in
Espiritu v. Municipal Council, the Court declared that properties of public dominion are
outside the commerce of man: x x x Town plazas are properties of public dominion, to
be devoted to public use and to be made available to the public in general. They are
outside the commerce of man and cannot be disposed of or even leased by the
municipality to private parties. While in case of war or during an emergency, town plazas
may be occupied temporarily by private individuals, as was done and as was tolerated by
the Municipality of Pozorrubio, when the emergency has ceased, said temporary occupation
or use must also cease, and the town officials should see to it that the town plazas should
ever be kept open to the public and free from encumbrances or illegal private constructions.
(Emphasis supplied) The Court has also ruled that property of public dominion, being
outside the commerce of man, cannot be the subject of an auction sale. Properties of public
dominion, being for public use, are not subject to levy, encumbrance or disposition through
public or private sale. Any encumbrance, levy on execution or auction sale of any property
of public dominion is void for being contrary to public policy. Essential public services will
stop if properties of public dominion are subject to encumbrances, foreclosures and auction
sale. This will happen if the City of Parañaque can foreclose and compel the auction sale of
the 600-hectare runway of the MIAA for nonpayment of real estate tax.

Same; Unless the President issues a proclamation withdrawing the Airport Lands and
Buildings from public use, these properties remain properties of public dominion and are
inalienable.—Before MIAA can encumber the Airport Lands and Buildings, the President must
first withdraw from public use the Airport Lands and Buildings. Sections 83 and 88 of the
Public Land Law or Commonwealth Act No. 141, which “remains to this day the existing
general law governing the classification and disposition of lands of the public domain other
than timber and mineral lands,” provide: x x x Thus, unless the President issues a
proclamation withdrawing the Airport Lands and Buildings from public use, these properties
remain properties of public dominion and are inalienable. Since the Airport Lands and
Buildings are inalienable in their present status as properties of public dominion, they are
not subject to levy on execution or foreclosure sale. As long as the Airport Lands and
Buildings are reserved for public use, their ownership remains with the State or the Republic
of the Philippines.

Same; Trusts; MIAA is merely holding title to the Airport Lands and Buildings in trust for the
Republic.—MIAA is merely holding title to the Airport Lands and Buildings in trust for the
Republic. Section 48, Chapter 12, Book I of the Administrative Code allows instrumentalities
like MIAA to hold title to real properties owned by the Republic. Same; The transfer of the
Airport Lands and Buildings from the Bureau of Air Transportation to MIAA was not meant to
transfer beneficial ownership of these assets from the Republic to MIAA—the Republic
remains the beneficial owner of the Airport Lands and Buildings.—The transfer of the Airport
Lands and Buildings from the Bureau of Air Transportation to MIAA was not meant to
transfer beneficial ownership of these assets from the Republic to MIAA. The purpose was
merely to reorganize a division in the Bureau of Air Transportation into a separate and
autonomous body. The Republic remains the beneficial owner of the Airport Lands and
Buildings. MIAA itself is owned solely by the Republic. No party claims any ownership rights
over MIAA’s assets adverse to the Republic. The MIAA Charter expressly provides that the
Airport Lands and Buildings “shall not be disposed through sale or through any other mode
unless specifically approved by the President of the Philippines.” This only means that the
Republic retained the beneficial ownership of the Airport Lands and Buildings because under
Article 428 of the Civil Code, only the “owner has the right to x x x dispose of a thing.” Since
MIAA cannot dispose of the Airport Lands and Buildings, MIAA does not own the Airport
Lands and Buildings. At any time, the President can transfer back to the Republic title to the
Airport Lands and Buildings without the Republic paying MIAA any consideration. Under
Section 3 of the MIAA Charter, the President is the only one who can authorize the sale or
disposition of the Airport Lands and Buildings. This only confirms that the Airport Lands and
Buildings belong to the Republic.

Taxation; Local Government Code; Section 234(a) of the Local Government Code exempts
from real estate tax any “real property owned by the Republic of the Philippines.”—Section
234(a) of the Local Government Code exempts from real estate tax any “[r]eal property
owned by the Republic of the Philippines.” Section 234(a) provides: SEC. 234. Exemptions
from Real Property Tax.—The following are exempted from payment of the real
property tax: (a) Real property owned by the Republic of the Philippines or any of
its political subdivisions except when the beneficial use thereof has been granted,
for consideration or otherwise, to a taxable person; x x x. (Emphasis supplied) This
exemption should be read in relation with Section 133(o) of the same Code, which prohibits
local governments from imposing “[t]axes, fees or charges of any kind on the National
Government, its agencies and instrumentalities x x x.” The real properties owned by the
Republic are titled either in the name of the Republic itself or in the name of agencies or
instrumentalities of the National Government. The Administrative Code allows real property
owned by the Republic to be titled in the name of agencies or instrumentalities of the
national government. Such real properties remain owned by the Republic and continue to be
exempt from real estate tax.

Manila International Airport Authority; Local Government Code; The Republic may grant the
beneficial use of its real property to an agency or instrumentality of the national
government, an arrangement which does not result in the loss of the tax exemption; MIAA,
as a government instrumental- ity, is not a taxable person under Section 133(o) of the Local
Government Code.—The Republic may grant the beneficial use of its real property to an
agency or instrumentality of the national government. This happens when title of the real
property is transferred to an agency or instrumentality even as the Republic remains the
owner of the real property. Such arrangement does not result in the loss of the tax
exemption. Section 234(a) of the Local Government Code states that real property owned by
the Republic loses its tax exemption only if the “beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person.” MIAA, as a government instrumentality, is
not a taxable person under Section 133(o) of the Local Government Code. Thus, even if we
assume that the Republic has granted to MIAA the beneficial use of the Airport Lands and
Buildings, such fact does not make these real properties subject to real estate tax.
Same; Same; Taxation; Portions of the Airport Lands and Buildings that MIAA leases to
private entities are not exempt from real estate tax.—Portions of the Airport Lands and
Buildings that MIAA leases to private entities are not exempt from real estate tax. For
example, the land area occupied by hangars that MIAA leases to private corporations is
subject to real estate tax. In such a case, MIAA has granted the beneficial use of such land
area for a consideration to a taxable person and therefore such land area is subject to real
estate tax. In Lung Center of the Philippines v. Quezon City, 433 SCRA 119, 138
(2004), the Court ruled: Accordingly, we hold that the portions of the land leased to private
entities as well as those parts of the hospital leased to private individuals are not exempt
from such taxes. On the other hand, the portions of the land occupied by the hospital and
portions of the hospital used for its patients, whether paying or non-paying, are exempt
from real property taxes.

Same; Taxation; By express mandate of the Local Government Code, local governments
cannot impose any kind of tax on national government instrumentalities like the MIAA.—By
express mandate of the Local Government Code, local governments cannot impose any kind
of tax on national government instrumentalities like the MIAA. Local governments are devoid
of power to tax the national government, its agencies and instrumentalities. The taxing
powers of local governments do not extend to the national government, its agencies and
instrumentalities, “[u]nless otherwise provided in this Code” as stated in the saving clause of
Section 133. The saving clause refers to Section 234(a) on the exception to the exemption
from real estate tax of real property owned by the Republic.

Same; Same; The determinative test whether MIAA is exempt from local taxation is not
whether MIAA is a juridical person, but whether it is a national government instrumentality
under Section 133(o) of the Local Government Code.—The minority’s theory violates Section
133(o) of the Local Government Code which expressly prohibits local governments from
imposing any kind of tax on national government instrumentalities. Section 133(o) does not
distinguish between national government instrumentalities with or without juridical
personalities. Where the law does not distinguish, courts should not distinguish. Thus,
Section 133(o) applies to all national government instrumentalities, with or without juridical
personalities. The determinative test whether MIAA is exempt from local taxation is not
whether MIAA is a juridical person, but whether it is a national government instrumentality
under Section 133(o) of the Local Government Code. Section 133(o) is the specific provision
of law prohibiting local governments from imposing any kind of tax on the national
government, its agencies and instrumentalities.

Taxation; The saving clause in Section 133 of the Local Government Code refers to the
exception to the exemption in Section 234(a) of the Code, which makes the national
government subject to real estate tax when it gives the beneficial use of its real properties
to a taxable entity; The exception to the exemption in Section 234(a) is the only instance
when the national government, its agencies and instrumentalities are subject to any kind of
tax by local governments.—The saving clause in Section 133 refers to the exception to the
exemption in Section 234(a) of the Code, which makes the national government subject to
real estate tax when it gives the beneficial use of its real properties to a taxable
entity. Section 234(a) of the Local Government Code provides: SEC. 234. Exemptions from
Real Property Tax.—The following are exempted from payment of the real property
tax: (a) Real property owned by the Republic of the Philippines or any of its political
subdivisions except when the beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person. x x x. (Emphasis supplied) Under
Section 234(a), real property owned by the Republic is exempt from real estate tax. The
exception to this exemption is when the government gives the beneficial use of the real
property to a taxable entity. The exception to the exemption in Section 234(a) is the only
instance when the national government, its agencies and instrumentalities are subject to
any kind of tax by local governments. The exception to the exemption applies only to real
estate tax and not to any other tax. The justification for the exception to the exemption is
that the real property, although owned by the Republic, is not devoted to public use or
public service but devoted to the private gain of a taxable person.

Same; Statutory Construction; When a provision of law grants a power but withholds such
power on certain matters, there is no conflict between the grant of power and the
withholding of power. —There is no conflict whatsoever between Sections 133 and 193
because Section 193 expressly admits its subordination to other provisions of the Code when
Section 193 states “[u]nless otherwise provided in this Code.” By its own words, Section 193
admits the superiority of other provisions of the Local Government Code that limit the
exercise of the taxing power in Section 193. When a provision of law grants a power but
withholds such power on certain matters, there is no conflict between the grant of power
and the withholding of power. The grantee of the power simply cannot exercise the power
on matters withheld from its power.

Same; Words and Phrases; By their very meaning and purpose, the “common limitations” on
the taxing power prevail over the grant or exercise of the taxing power.—Since Section 133
prescribes the “common limitations” on the taxing powers of local governments, Section 133
logically prevails over Section 193 which grants local governments such taxing powers. By
their very meaning and purpose, the “common limitations” on the taxing power prevail over
the grant or exercise of the taxing power. If the taxing power of local governments in
Section 193 prevails over the limitations on such taxing power in Section 133, then local
governments can impose any kind of tax on the national government, its agencies and
instrumentalities—a gross absurdity.

Administrative Law; The Administrative Law is the governing law defining the status and
relationship of government departments, bureaus, offices, agencies and instrumentalities.—
The third whereas clause of the Administrative Code states that the Code “incorporates in a
unified document the major structural, functional and procedural principles and rules of
governance.” Thus, the Administrative Code is the governing law defining the status and
relationship of government departments, bureaus, offices, agencies and instrumentalities.
Unless a statute expressly provides for a different status and relationship for a specific
government unit or entity, the provisions of the Administrative Code prevail.

Same; The government-owned or controlled corporations created through special charters

are those that meet the two conditions prescribed in Section 16, Article XII of the
Constitution, regarding their creation in the interest of common good and their being subject
to the test of economic viability.—The governmentowned or controlled corporations created
through special charters are those that meet the two conditions prescribed in Section 16,
Article XII of the Constitution. The first condition is that the government-owned or controlled
corporation must be established for the common good. The second condition is that the
government-owned or controlled corporation must meet the test of economic viability.
Section 16, Article XII of the 1987 Constitution provides: SEC. 16. The Congress shall not,
except by general law, provide for the formation, organization, or regulation of private
corporations. Government-owned or controlled corporations may be created or
established by special charters in the interest of the common good and subject to
the test of economic viability.

Same; The test of economic viability applies only to government-owned or controlled

corporations that perform economic or commercial activities and need to compete in the
market place—government instrumentalities vested with corporate powers and performing
governmental or public functions need not meet the test of economic viability.—The
Constitution expressly authorizes the legislature to create “government-owned or controlled
corporations” through special charters only if these entities are required to meet the twin
conditions of common good and economic viability. In other words, Congress has no power
to create government-owned or controlled corporations with special charters unless they are
made to comply with the two conditions of common good and economic viability. The test of
economic viability applies only to government-owned or controlled corporations that perform
economic or commercial activities and need to compete in the market place. Being
essentially economic vehicles of the State for the common good—meaning for economic
development purposes—these government-owned or controlled corporations with special
charters are usually organized as stock corporations just like ordinary private corporations.
In contrast, government instrumentalities vested with corporate powers and performing
governmental or public functions need not meet the test of economic viability. These
instrumentalities perform essential public services for the common good, services that every
modern State must provide its citizens. These instrumentalities need not be economically
viable since the government may even subsidize their entire operations. These
instrumentalities are not the “government-owned or controlled corporations” referred to in
Section 16, Article XII of the 1987 Constitution.

Manila International Airport Authority; Administrative Law; The MIAA need not meet the test
of economic viability because the legislature did not create MIAA to compete in the market
place.— The MIAA need not meet the test of economic viability because the legislature did
not create MIAA to compete in the market place. MIAA does not compete in the market
place because there is no competing international airport operated by the private sector.
MIAA performs an essential public service as the primary domestic and international airport
of the Philippines.

Same; Words and Phrases; The terminal fees that MIAA charges every passenger are
regulatory or administrative fees and not income from commercial transactions.—MIAA
performs an essential public service that every modern State must provide its citizens. MIAA
derives its revenues principally from the mandatory fees and charges MIAA imposes on
passengers and airlines. The terminal fees that MIAA charges every passenger are
regulatory or administrative fees and not income from commercial transactions.
9. Dante V. Liban, Reynaldo M. Bernardo And Salvador M. Viari Vs. Richard J.
Gordon; Philippine National Red Cross (Intervenor)
G.R. No. 175352; January 18, 2011

Corporation Law; Philippine National Red Cross; A closer look at the nature of the Philippine
National Red Cross (PNRC) would show that there is none like it not just in terms of
structure, but also in terms of history, public service and official status.—The passage of
several laws relating to the PNRC’s corporate existence notwithstanding the effectivity of the
constitutional proscription on the creation of private corporations by law, is a recognition
that the PNRC is not strictly in the nature of a private corporation contemplated by the
aforesaid constitutional ban. A closer look at the nature of the PNRC would show that there
is none like it not just in terms of structure, but also in terms of history, public service and
official status accorded to it by the State and the international community. There is merit in
PNRC’s contention that its structure is sui generis.

Same; Same; The sui generis character of Philippine National Red Cross (PNRC) requires us
to approach controversies involving the PNRC on a case-to-case basis.—Although it is
neither a subdivision, agency, or instrumentality of the government, nor a government-
owned or controlled corporation or a subsidiary thereof, as succinctly explained in the
Decision of July 15, 2009, so much so that respondent, under the Decision, was correctly
allowed to hold his position as Chairman thereof concurrently while he served as a Senator,
such a conclusion does not ipso facto imply that the PNRC is a “private corporation” within
the contemplation of the provision of the Constitution, that must be organized under the
Corporation Code. As correctly mentioned by Justice Roberto A. Abad, the sui generis
character of PNRC requires us to approach controversies involving the PNRC on a case-to-
case basis.

Same; Same; The Philippine National Red Cross (PNRC) has responded to almost all national
disasters since 1947, and is widely known to provide a substantial portion of the country’s
blood requirements.—It bears emphasizing that the PNRC has responded to almost all
national disasters since 1947, and is widely known to provide a substantial portion of the
country’s blood requirements. Its humanitarian work is unparalleled. The Court should not
shake its existence to the core in an untimely and drastic manner that would not only have
negative consequences to those who depend on it in times of disaster and armed hostilities
but also have adverse effects on the image of the Philippines in the international
community. The sections of the PNRC Charter that were declared void must
therefore stay.
10. Boy Scouts of the Philippines vs Commission on Audit
G.R. No. 177131; June 7, 2011

Corporation Law; Commission on Audit; Boy Scouts of the Philippines; The Boy Scouts of the
Philippines (BSP) is a public corporation and its funds are subject to the Commission on
Audit’s (COA’s) audit jurisdiction.—After looking at the legislative history of its amended
charter and carefully studying the applicable laws and the arguments of both parties, we
find that the BSP is a public corporation and its funds are subject to the COA’s audit
jurisdiction.

Same; Same; Same; Boy Scouts of the Philippines (BSP) as presently constituted under
Republic Act No. 7278, falls under the second classification of juridical persons under Article
44 of the Civil Code.—There are three classes of juridical persons under Article 44 of the
Civil Code and the BSP, as presently constituted under Republic Act No. 7278, falls under
the second classification. Article 44 reads: Art. 44. The following are juridical persons:
(1) The State and its political subdivisions; (2) Other corporations, institutions and
entities for public interest or purpose created by law; their personality begins as
soon as they have been constituted according to law; (3) Corporations, partnerships
and asso- ciations for private interest or purpose to which the law grants a juridical
personality, separate and distinct from that of each shareholder, partner or member.

Same; Same; Same; The Boy Scouts of the Philippines (BSP) which was created by a special
law to serve a public purpose in pursuit of a constitutional mandate, comes within the class
of “public corporations” defined by paragraph 2, Article 44 of the Civil Code.—Evidently, the
BSP, which was created by a special law to serve a public purpose in pursuit of a
constitutional mandate, comes within the class of “public corporations” defined by paragraph
2, Article 44 of the Civil Code and governed by the law which creates it, pursuant to Article
45 of the same Code.

Same; Same; Same; The Boy Scouts of the Philippines (BSP) is a public corporation or a
government agency or instrumentality with judicial personality, which does not fall within
the constitutional prohibition in Article XII, Section 16, notwithstanding the amendments to
its charter; Not all corporations, which are not government owned or controlled, are ipso
facto to be considered private corporations, as there exists another distinct class of
corporations or chartered institutions which are otherwise known as “public corporations.”—
The BSP is a public corporation or a government agency or instrumentality with juridical
personality, which does not fall within the constitutional prohibition in Article XII, Section 16,
notwithstanding the amendments to its charter. Not all corporations, which are not
government owned or controlled, are ipso facto to be considered private corporations as
there exists another distinct class of corporations or chartered institutions which are
otherwise known as “public corporations.” These corporations are treated by law as
agencies or instrumentalities of the government which are not subject to the tests of
ownership or control and economic viability but to different criteria relating to their public
purposes/interests or constitutional policies and objectives and their administrative
relationship to the government or any of its Departments or Offices.

Same; Same; Same; The ownership and control test is likewise irrelevant for a public
corporation like the Boy Scouts of the Philippines (BSP).—The ownership and control test is
likewise irrelevant for a public corporation like the BSP. To reiterate, the relationship of the
BSP, an attached agency, to the government, through the DECS, is defined in the Revised
Administrative Code of 1987. The BSP meets the minimum statutory requirement of an
attached government agency as the DECS Secretary sits at the BSP Board ex officio, thus
facilitating the policy and program coordination between the BSP and the DECS.

Same; Same; Same; Boy Scouts of the Philippines (BSP) is subject to the exercise by the
Commission on Audit (COA) of its audit jurisdiction in the manner consistent with the
provisions of the BSP charter.—Since the BSP, under its amended charter, continues to be a
public corporation or a government instrumentality, we come to the inevitable conclusion
that it is subject to the exercise by the COA of its audit jurisdiction in the manner consistent
with the provisions of the BSP Charter.