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G.R. No.

179408, March 05, 2014

PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, Petitioner, v. ABIGAIL R. RAZON


ALVAREZ AND VERNON R. RAZON, Respondents.

DECISION

BRION, J.:

Before the Court is a petition for review on certiorari1 assailing the decision2 dated August 11,
2006 and the resolution3 dated August 22, 2007 of the Court of Appeals (CA) in CA–G.R. SP No.
89213 on the validity of the four search warrants issued by the Regional Trial Court (RTC) of
Pasay City, Branch 115.

The CA rulings (i) quashed the first two search warrants, similarly docketed as Search Warrant
No. 03–063, issued for violation of Article 308, in relation to Article 309, of the Revised Penal
Code (RPC), and (ii) declared void paragraphs 7, 8 and 9 of the other two search warrants, also
similarly docketed as Search Warrant No. 03–064, issued for violation of Presidential Decree (PD)
No. 401.4

FACTUAL ANTECEDENTS

Philippine Long Distance Telephone Company (PLDT) is the grantee of a legislative franchise5
which authorizes it to carry on the business of providing basic and enhanced telecommunications
services in and between areas in the Philippines and between the Philippines and other countries
and territories,6 and, accordingly, to establish, operate, manage, lease, maintain and purchase
telecommunications system for both domestic and international calls.7 Pursuant to its franchise,
PLDT offers to the public wide range of services duly authorized by the National
Telecommunications Commission (NTC).

PLDT’s network is principally composed of the Public Switch Telephone Network, telephone
handsets and/or telecommunications equipment used by its subscribers, the wires and cables
linking these handsets and/or equipment, antennae, transmission facilities, the international
gateway facility (IGF) and other telecommunications equipment providing interconnections.8 To
safeguard the integrity of its network, PLDT regularly conducts investigations on various prepaid
cards marketed and sold abroad to determine alternative calling patterns (ACP) and network fraud
that are being perpetrated against it.

To prevent or stop network fraud, PLDT’s ACP Detection Division (ACPDD) regularly visits foreign
countries to conduct market research on various prepaid phone cards offered abroad that allow
their users to make overseas calls to PLDT subscribers in the Philippines at a cheaper rate.

The ACPDD bought The Number One prepaid card — a card principally marketed to Filipinos
residing in the United Kingdom for calls to the Philippines – to make test calls using two telephone
lines: the dialing phone – an IDD–capable9 telephone line which makes the call and through
which the access number and the PIN number printed at the back of the card are entered; and
the receiving phone – a caller identification (caller id) unit–equipped telephone line which would
receive the call and reflect the incoming caller’s telephone number.

During a test call placed at the PLDT–ACPDD office, the receiving phone reflected a PLDT
telephone number (2–8243285) as the calling number used, as if the call was originating from a
local telephone in Metro Manila. Upon verification with the PLDT’s Integrated Customer
Management (billing) System, the ACPDD learned that the subscriber of the reflected telephone
number is Abigail R. Razon Alvarez, with address at 17 Dominic Savio St., Savio Compound,
Barangay Don Bosco, Parañaque City. It further learned that several lines are installed at this
address with Abigail and Vernon R. Razon (respondents), among others, as subscribers.10

To validate its findings, the ACPDD conducted the same test calls on November 5, 2003 at the
premises of the NTC in Quezon City (and in the presence of an NTC representative 11) using the
same prepaid card (validation test). The receiving phone at the NTC premises reflected the
telephone numbers registered in the name of Abigail as the calling number from the United
Kingdom.12

Similar test calls subsequently conducted using the prepaid cards Unity Card and IDT
Supercalling Card revealed the same results. The caller–id–equipped receiving phone reflected
telephone numbers13 that are in the names of Experto Enterprises and Experto Phils, as
subscribers, with a common address at No. 38 Indonesia St., Better Living Subdivision, Barangay
Don Bosco, Parañaque City. It turned out that the actual occupant of these premises is also
Abigail. Subsequently, a validation test was also conducted, yielding several telephone numbers
registered in the name of Experto Phils./Experto Enterprises as the calling numbers supposedly
from the United Kingdom.14

According to PLDT, had an ordinary and legitimate call been made, the screen of the caller–id–
equipped receiving phone would not reflect a local number or any number at all. In the cards they
tested, however, once the caller enters the access and pin numbers, the respondents would route
the call via the internet to a local telephone number (in this case, a PLDT telephone number)
which would connect the call to the receiving phone. Since calls through the internet never pass
the toll center of the PLDT’s IGF, users of these prepaid cards can place a call to any point in the
Philippines (provided the local line is NDD–capable) without the call appearing as coming from
abroad.15

On November 6, 2003 and November 19, 2003, Mr. Lawrence Narciso of the PLDT’s Quality
Control Division, together with the operatives of the Philippine National Police (PNP), conducted
an ocular inspection at 17 Dominic Savio St., Savio Compound and at No. 38 Indonesia St., Better
Living Subdivision – both in Barangay Don Bosco, Paranaque City – and discovered that PLDT
telephone lines were connected to several pieces of equipment.16 Mr. Narciso narrated the results
of the inspection, thus –
10. During [the] ocular inspection [at 17 Dominic Savio St., Savio Compound], Ms. Abigail Razon
Alvarez allowed us to gain entry and check the telephone installations within their premises. First,
we checked the location of the telephone protectors that are commonly installed at a concrete
wall boundary inside the compound. Some of these protectors are covered with a fabricated
wooden cabinet. Other protectors are installed beside the said wooden cabinet, xxx. The inside
wiring installations from telephone protectors to connecting block were routed to the said adjacent
room passing through the house ceiling.

11. xxx. Upon entering the so–called adjacent room, we immediately noticed that the PLDT
telephone lines were connected to the equipment situated at multi–layered rack. The equipment
room contains the following:
a. 6 Quintum router;

b. 13 Com router;
c. 1 Cisco 800 router;

d. 1 Nokia Modem for PLDT DSL;

e. 1 Meridian Subscriber’s Unit[;]

f. 5 Personal Computers[;]

g. 1 Computer Printer[; and]

h. 1 Flat–bed Scanner[.]
12. We also noticed that these routers are connected to the Meridian’s subscriber unit ("SU” )
that has an outdoor antenna installed on the top of the roof. Meridian’s SU and outdoor antenna
are service components used to connect with wireless broadband internet access service of
Meridian Telekoms.

xxxx

18. During the site inspection [at No. 38 Indonesia St., Better Living Subdivision], we noticed that
the protector of each telephone line/number xxx were enclosed in a fabricated wooden cabinet
with safety padlock. Said wooden cabinet was situated on the concrete wall inside the compound
near the garage entrance gate. The telephone inside the wiring installations from the protector to
the connecting blocks were placed in a plastic electrical conduit routed to the adjacent room at
the second floor.17
On December 3, 2003, Police Superintendent Gilbert C. Cruz filed a consolidated application for
a search warrant18 before Judge Francisco G. Mendiola of the RTC, for the crimes of theft and
violation of PD No. 401. According to PLDT, the respondents are engaged in a form of network
fraud known as International Simple Resale (ISR) which amounts to theft under the RPC.

ISR is a method of routing and completing international long distance calls using lines, cables,
antennae and/or wave frequencies which are connected directly to the domestic exchange
facilities of the country where the call is destined (terminating country); and, in the process,
bypassing the IGF at the terminating country.19

Judge Mendiola found probable cause for the issuance of the search warrants applied for.
Accordingly, four search warrants20 were issued for violations of Article 308, in relation to Article
309, of the RPC (SW A–1 and SW A–2) and of PD No. 401, as amended (SW B–1 and SW B–2)
for the ISR activities being conducted at 17 Dominic Savio St., Savio Compound and at No. 38
Indonesia St., Better Living Subdivision, both in Barangay Don Bosco, Paranaque City. The four
search warrants enumerated the objects to be searched and seized as follows:
1. MERIDIAN SUBSCRIBERS UNIT AND PLDT DSL LINES and/or CABLES AND ANTENNAS
and/or similar equipment or device capable of transmitting air waves or frequency, such as a
Meridian Subscriber’s Unit, Broadband DSL and telephone lines;

2. PERSONAL COMPUTERS or any similar equipment or device capable of accepting


information applying the prescribed process of the information and supplying the result of this
process;

3. NOKIA MODEM or any similar equipment or device that enables data terminal equipment such
as computers to communicate with other data terminal equipment via a telephone line;

4. QUINTUM Equipment or any similar equipment capable of receiving digital signals from the
internet and converting those signals to voice;

5. QUINTUM, 3COM AND CISCO Routers or any similar equipment capable of switching packets
of data to their assigned destination or addresses;

6. LINKS DSL SWITCH or any similar equipment capable of switching data;

7. COMPUTER PRINTERS AND SCANNERS or any similar equipment or device used for
copying and/or printing data and/or information;

8. SOFTWARE, DISKETTES, TAPES or any similar equipment or device used for recording or
storing information; and

9. Manuals, phone cards, access codes, billing statements, receipts, contracts, checks, orders,
communications and documents, lease and/or subscription agreements or contracts,
communications and documents relating to securing and using telephone lines and/or
equipment[.]21
On the same date, the PNP searched the premises indicated in the warrants. On December 10,
2003, a return was made with a complete inventory of the items seized.22 On January 14, 2004,
the PLDT and the PNP filed with the Department of Justice a joint complaint–affidavit for theft and
for violation of PD No. 401 against the respondents.23

On February 18, 2004, the respondents filed with the RTC a motion to quash24 the search
warrants essentially on the following grounds: first, the RTC had no authority to issue search
warrants which were enforced in Parañaque City; second, the enumeration of the items to be
searched and seized lacked particularity; and third, there was no probable cause for the crime of
theft.

On March 12, 2004, PLDT opposed the respondents' motion.25

In a July 6, 2004 order,26 the RTC denied the respondents' motion to quash. Having been
rebuffed27 in their motion for reconsideration,28 the respondents filed a petition for certiorari with
the CA.” 29

RULING OF THE CA

On August 11, 2006, the CA rendered the assailed decision and resolution, granting the
respondents' petition for certiorari. The CA quashed SW A–l and SW A–2 (for theft) on the
ground that they were issued for “non–existent crimes.” 30 According to the CA, inherent in the
determination of probable cause for the issuance of search warrant is the accompanying
determination that an offense has been committed. Relying on this Court’s decision in Laurel v.
Judge Abrogar,31 the CA ruled that the respondents could not have possibly committed the crime
of theft because PLDT’s business of providing telecommunication services and these services
themselves are not personal properties contemplated under Article 308 of the RPC.

With respect to SW B–l and SW B–2 (for violation of PD No. 401), the CA upheld paragraphs
one to six of the enumeration of items subject of the search. The CA held that the stock phrase
“or similar equipment or device” found in paragraphs one to six of the search warrants did not
make it suffer from generality since each paragraph’s enumeration of items was sufficiently
qualified by the citation of the specific objects to be seized and by its functions which are inherently
connected with the crime allegedly committed.

The CA, however, nullified the ensuing paragraphs, 7, 8 and 9, for lack of particularity and ordered
the return of the items seized under these provisions. While the same stock phrase appears in
paragraphs 7 and 8, the properties described therein – i.e., printer and scanner, software, diskette
and tapes – include even those for the respondents' personal use, making the description of the
things to be seized too general in nature.

With the denial of its motion for reconsideration,32 PLDT went to this Court via this Rule 45 petition.

THE PETITIONER'S ARGUMENTS

PLDT faults the CA for relying on Laurel on three grounds: first, Laurel cannot be cited yet as an
authority under the principle of stare decisis because Laurel is not yet final and executory; in fact,
it is the subject of a pending motion for reconsideration filed by PLDT itself; second, even
assuming that Laurel is already final, the facts in Laurel vary from the present case. Laurel
involves the quashal of an information on the ground that the information does not charge any
offense; hence, the determination of the existence of the elements of the crime of theft is
indispensable in resolving the motion to quash. In contrast, the present case involves the quashal
of a search warrant. Third, accordingly, in resolving the motion, the issuing court only has to be
convinced that there is probable cause to hold that: (i) the items to be seized are connected to a
criminal activity; and (ii) these items are found in the place to be searched. Since the matter of
quashing a search warrant may be rooted on matters “extrinsic of the search warrant,” 33 the
issuing court does not need to look into the elements of the crime allegedly committed in the same
manner that the CA did in Laurel.

PLDT adds that a finding of grave abuse of discretion in the issuance of search warrant may be
justified only when there is “disregard of the requirements for the issuance of a search warrant[.]”
34
In the present case, the CA did not find (and could not have found) any grave abuse of discretion
on the part of the RTC because at the time the RTC issued the search warrants in 2003, Laurel
had not yet been promulgated.

In defending the validity of the nullified provisions of SW B–l and SW B–2, PLDT argues that PD
No. 401 also punishes unauthorized installation of telephone connections. Since the enumerated
items are connected to the computers that are illegally connected to PLDT telephone lines, then
these items bear a direct relation to the offense of violation of PD No. 401, justifying their seizure.

The enumeration in paragraph 8 is likewise a proper subject of seizure because they are the fruits
of the offense as they contain information on PLDT’s business profit and other information relating
to the commission of violation of PD No. 401. Similarly, paragraph 9 specifies the fruits and
evidence of violation of PD No. 401 since it supports PLDT’s claim that the respondents have
made a business out of their illegal connections to PLDT lines.

THE RESPONDENTS' ARGUMENTS

The respondents counter that while Laurel may not yet be final, at least it has a persuasive effect
as the current jurisprudence on the matter. Even without Laurel, the CA’s nullification of SW A–l
and SW A–2 can withstand scrutiny because of the novelty of the issue presented before it. The
nullification of paragraphs 7, 8 and 9 of SW B–l and SW B–2 must be upheld not only on the
ground of broadness but for lack of any relation whatsoever with PD No. 401 which punishes the
theft of electricity.

OUR RULING

We partially grant the petition.

Laurel and its reversal by the Court En Banc

Before proceeding with the case, a review of Laurel is in order as it involves substantially similar
facts as in the present case.

Baynet Co., Ltd. (Baynet) sells prepaid cards, “Bay Super Orient Card,” that allow their users to
place a call to the Philippines from Japan. PLDT asserted that Baynet is engaged in ISR activities
by using an international private leased line (IPL) to course Baynet’s incoming international long
distance calls. The IPL is linked to a switching equipment, which is then connected to PLDT
telephone lines/numbers and equipment, with Baynet as subscriber.

To establish its case, PLDT obtained a search warrant. On the strength of the items seized during
the search of Baynet’s premises, the prosecutor found probable cause for theft against Luis
Marcos Laurel (Laurel) and other Baynet officials. Accordingly, an information was filed, alleging
that the Baynet officials “take, steal and use the international long distance calls belonging to
PLDT by [ISR activities] xxx effectively stealing this business from PLDT while using its facilities
in the estimated amount of P20,370,651.92 to the damage and prejudice of PLDT[.]” 35

Laurel moved to quash the information on the bold assertion that ISR activities do not constitute
a crime under Philippine law. Laurel argued that an ISR activity cannot entail taking of personal
property because the international long distance telephone calls using PLDT telephone lines
belong to the caller himself; the amount stated in the information, if at all, represents the rentals
due PLDT for the caller’s usage of its facilities. Laurel argued that the business of providing
international long distance calls, i.e., PLDT’s service, and the revenue derived therefrom are not
personal property that can be appropriated.

Laurel went to the Court after failing to secure the desired relief from the trial and appellate
courts,36 raising the core issue of whether PLDT’s business of providing telecommunication
services for international long distance calls is a proper subject of theft under Article 308 of the
RPC. The Court’s First Division granted Laurel’s petition and ordered the quashal of the
information.

Taking off from the basic rule that penal laws are construed strictly against the State, the Court
ruled that international long distance calls and the business of providing telecommunication or
telephone services by PLDT are not personal properties that can be the subject of theft.
One is apt to conclude that “personal property” standing alone, covers both tangible and intangible
properties and are subject of theft under the Revised Penal Code. But the words “Personal
property” under the Revised Penal Code must be considered in tandem with the word “take” in
the law. The statutory definition of “taking” and movable property indicates that, clearly, not all
personal properties may be the proper subjects of theft. The general rule is that, only movable
properties which have physical or material existence and susceptible of occupation by another
are proper objects of theft, xxx.
xxxx

xxx. Business, like services in business, although are properties, are not proper subjects of theft
under the Revised Penal Code because the same cannot be “taken” or “occupied.” If it were
otherwise, xxx there would be no juridical difference between the taking of the business of a
person or the services provided by him for gain, vis–a–vis, the taking of goods, wares or
merchandise, or equipment comprising his business. If it was its intention to include “business”
as personal property under Article 308 of the Revised Penal Code, the Philippine Legislature
should have spoken in language that is clear and definite: that business is personal property under
Article 308 of the Revised Penal Code.

xxxx

The petitioner is not charged, under the Amended Information, for theft of telecommunication or
telephone services offered by PLDT. Even if he is, the term “personal property” under Article 308
of the Revised Penal Code cannot be interpreted beyond its seams so as to include
“telecommunication or telephone services” or computer services for that matter. xxx. Even at
common law, neither time nor services may be taken and occupied or appropriated. A service is
generally not considered property and a theft of service would not, therefore, constitute theft since
there can be no caption or asportation. Neither is the unauthorized use of the equipment and
facilities of PLDT by [Laurel] theft under [Article 308].

If it was the intent of the Philippine Legislature, in 1930, to include services to be the subject of
theft, it should have incorporated the same in Article 308 of the Revised Penal Code. The
Legislature did not. In fact, the Revised Penal Code does not even contain a definition of
services.37
PLDT38 moved for reconsideration and referral of the case to the Court En Banc. The Court’s First
Division granted the referral.

On January 13, 2009 (or while the present petition was pending in court), the Court En Banc
unanimously granted PLDT’s motion for reconsideration.39 The Court ruled that even prior to the
passage of the RPC, jurisprudence is settled that “any personal property, tangible or intangible,
corporeal or incorporeal, capable of appropriation can be the object of theft.” 40 This jurisprudence,
in turn, applied the prevailing legal meaning of the term “personal property” under the old Civil
Code as “anything susceptible of appropriation and not included in the foregoing chapter (not real
property).” 41 PLDT’s telephone service or its business of providing this was appropriable personal
property and was, in fact, the subject of appropriation in an ISR operation, facilitated by means of
the unlawful use of PLDT’s facilities.
In this regard, the Amended Information inaccurately describes the offense by making it appear
that what [Laurel] took were the international long distance telephone calls, rather than
respondent PLDT’s business.

xxxx

Indeed, while it may be conceded that “international long distance calls,” the matter alleged to be
stolen xxx, take the form of electrical energy, it cannot be said that such international long distance
calls were personal properties belonging to PLDT since the latter could not have acquired
ownership over such calls. PLDT merely encodes, augments, enhances, decodes and transmits
said calls using its complex communications infrastructure and facilities. PLDT not being the
owner of said telephone calls, then it could not validly claim that such telephone calls were taken
without its consent. It is the use of these communications facilities without the consent of PLDT
that constitutes the crime of theft, which is the unlawful taking of the telephone services and
business.

Therefore, the business of providing telecommunication and the telephone service are personal
property under Article 308 of the Revised Penal Code, and the act of engaging in ISR is an act of
“subtraction” penalized under said article.42
The Court En Banc’s reversal of its Laurel Division ruling during the pendency of this petition
significantly impacts on how the Court should resolve the present case for two
reasons:chanRoblesvirtualLawlibrary

First, the Laurel En Banc ruling categorically equated an ISR activity to theft under the RPC. In
so doing, whatever alleged factual variance there may be between Laurel and the present case
cannot render Laurel inapplicable.

Second, and more importantly, in a Rule 45 petition, the Court basically determines whether the
CA was legally correct in determining whether the RTC committed grave abuse of discretion.
Under this premise, the CA ordinarily gauges the grave abuse of discretion at the time the RTC
rendered its assailed resolution. In quashing SW A–l and SW A–2, note that the CA relied on the
Laurel Division ruling at the time when it was still subject of a pending motion for reconsideration.
The CA, in fact, did not expressly impute grave abuse of discretion on the RTC when the RTC
issued the search warrants and later refused to quash these. Understandably, the CA could not
have really found the presence of grave abuse of discretion for there was no Laurel ruling to speak
of at the time the RTC issued the search warrants.

These peculiar facts require us to more carefully analyze our prism of review under Rule 45.

Requisites for the issuance of search warrant; probable cause requires the probable
existence of an offense

Section 2, Article III of the 1987 Constitution guarantees the right of persons to be free from
unreasonable searches and seizures.
Section 2. The right of the people to be secure in their persons, houses, papers, and effects
against unreasonable searches and seizures of whatever nature and for any purpose shall be
inviolable, and no search warrant or warrant of arrest shall issue except upon probable cause
to be determined personally by the judge after examination under oath or affirmation of the
complainant and the witnesses he may produce, and particularly describing the place to be
searched and the persons or things to be seized.
The purposes of the constitutional provision against unlawful searches and seizures are to: (i)
prevent the officers of the law from violating private security in person and property and illegally
invading the sanctity of the home; and (ii) give remedy against such usurpations when attempted
or committed.43

The constitutional requirement for the issuance of a search warrant is reiterated under Sections
4 and 5, Rule 126 of the Revised Rules of Criminal Procedure. These sections lay down the
following requirements for the issuance of a search warrant: (1) the existence of probable cause;
(2) the probable cause must be determined personally by the judge; (3) the judge must examine,
in writing and under oath or affirmation, the complainant and the witnesses he or she may
produce; (4) the applicant and the witnesses testify on the facts personally known to them; and
(5) the warrant specifically describes the place to be searched and the things to be seized. 44
Should any of these requisites be absent, the party aggrieved by the issuance and enforcement
of the search warrant may file a motion to quash the search warrant with the issuing court or with
the court where the action is subsequently instituted.45

A search warrant proceeding is a special criminal and judicial process akin to a writ of discovery.
It is designed by the Rules of Criminal Procedure to respond only to an incident in the main case,
if one has already been instituted, or in anticipation thereof. Since it is at most incidental to the
main criminal case, an order granting or denying a motion to quash a search warrant may be
questioned only via a petition for certiorari under Rule 65.46

When confronted with this petition, the higher court must necessarily determine the validity of the
lower court’s action from the prism of whether it was tainted with grave abuse of discretion. By
grave abuse of discretion, jurisprudence refers to the capricious and whimsical exercise of
judgment equivalent to lack of jurisdiction, or to the exercise of power in an arbitrary or despotic
manner by reason of passion or personal hostility or in a manner so patent and gross as to amount
to an invasion of positive duty or to the virtual refusal to perform the duty enjoined or to act at all
in contemplation of the law.47

In a certiorari proceeding, the determination translates to an inquiry on whether the requirements


and limitations provided under the Constitution and the Rules of Court were properly complied
with, from the issuance of the warrant up to its implementation. In view of the constitutional
objective of preventing stealthy encroachment upon or the gradual depreciation of the rights
secured by the Constitution, strict compliance with the constitutional and procedural requirements
is required. A judge who issues a search warrant without complying with these requirements
commits grave abuse of discretion.48

One of the constitutional requirements for the validity of a search warrant is that it must be issued
based on probable cause which, under the Rules, must be in connection with one specific offense.
In search warrant proceedings, probable cause is defined as such facts and circumstances that
would lead a reasonably discreet and prudent man to believe that an offense has been
committed and that the objects sought in connection with the offense are in the place sought to
be searched.49

In the determination of probable cause, the court must necessarily determine whether an offense
exists to justify the issuance or quashal of the search warrant 50 because the personal properties
that may be subject of the search warrant are very much intertwined with the “one specific offense”
requirement of probable cause.51 Contrary to PLDT’s claim, the only way to determine whether a
warrant should issue in connection with one specific offense is to juxtapose the facts and
circumstances presented by the applicant with the elements of the offense that are alleged to
support the search warrant.

Reviewing the RTC’s denial of the motion to quash SWA–l and SW A–2

a. From the prism of Rule 65

The facts of the present case easily call to mind the case of Columbia Pictures, Inc. v. CA52
involving copyright infringement. In that case, the CA likewise voided the search warrant issued
by the trial court by applying a doctrine that added a new requirement (i.e., the production of the
master tape for comparison with the allegedly pirate copies) in determining the existence of
probable cause for the issuance of search warrant in copyright infringement cases. The doctrine
referred to was laid down in 20th Century Fox Film Corporation v. Court of Appeals. 20th Century
Fox, however, was promulgated more than eight months after the search warrants were issued
by the RTC. In reversing the CA, the Court ruled:chanRoblesvirtualLawlibrary

Mindful as we are of the ramifications of the doctrine of stare decisis and the rudiments of fair
play, it is our considered view that the 20th Century Fox ruling cannot be retroactively applied to
the instant case to justify the quashal of Search Warrant No. 87–053. [The] petitioners' consistent
position that the order of the lower court[,] xxx [which denied the respondents'] motion to lift the
order of search warrant^] was properly issued, [because there was] satisfactory compliance with
the then prevailing standards under the law for determination of probable cause, is indeed well
taken. The lower court could not possibly have expected more evidence from petitioners in their
application for a search warrant other than what the law and jurisprudence, then existing and
judicially accepted, required with respect to the finding of probable cause.53

Columbia could easily be cited in favor of PLDT to sustain the RTC’s refusal to quash the search
warrant. Indeed, in quashing SW A–l and SW A–2, the CA never intimated that the RTC
disregarded any of the requisites for the issuance of a search warrant as these requirements were
interpreted and observed under the then prevailing jurisprudence. The CA could not have done
so because precisely the issue of whether telephone services or the business of providing these
services could be the subject of theft under the RPC had not yet reached the Court when the
search warrants were applied for and issued.

However, what distinguishes Columbia from the present case is the focus of Columbia’s legal
rationale. Columbia’s focus was not on whether the facts and circumstances would reasonably
lead to the conclusion that an offense has been or is being committed and that the objects sought
in connection with the offense were in the place to be searched – the primary points of focus of
the present case. Columbia’s focus was on whether the evidence presented at the time the
search warrant was applied for was sufficient to establish the facts and circumstances
required for establishing probable cause to issue a search warrant.

Nonetheless, Columbia serves as a neat guide for the CA to decide the respondents' certiorari
petition. In Columbia, the Court applied the principle of non–retroactivity of its ruling in 20th Century
Fox, whose finality was not an issue, in reversing a CA ruling. The Court’s attitude in that case
should have been adopted by the CA in the present case a fortiori since the ruling that the CA
relied upon was not yet final at the time the CA resolved to quash the search warrants.

b. Supervening events justifying a broader review under Rule 65

Ordinarily, the CA’s determination under Rule 65 is limited to whether the RTC gravely abused its
discretion in granting or denying the motion to quash based on facts then existing. Nonetheless,
the Court recognizes that supervening facts may transpire after the issuance and implementation
of the search warrant that may provide justification for the quashal of the search warrant via a
petition for certiorari.

For one, if the offense for which the warrant is issued is subsequently decriminalized during the
pendency of the petition for certiorari, then the warrant may be quashed.54 For another, a
subsequent ruling from the Court that a similar set of facts and circumstances does not constitute
an offense, as alleged in the search warrant application, may be used as a ground to quash a
warrant.55 In both instances, the underlying reason for quashing the search warrant is the absence
of probable cause which can only possibly exist when the combination of facts and circumstances
points to the possible commission of an offense that may be evidenced by the personal properties
sought to be seized. To the CA, the second instance mentioned justified the quashal of the search
warrants.

We would have readily agreed with the CA if the Laurel Division ruling had not been subsequently
reversed. As things turned out, however, the Court granted PLDT’s motion for reconsideration of
the Court First Division’s ruling in Laurel and ruled that “the act of engaging in ISR is xxx penalized
under xxx article [308 of the RPC].” 56 As the RTC itself found, PLDT successfully established in
its application for a search warrant a probable cause for theft by evidence that Laurel’s ISR
activities deprived PLDT of its telephone services and of its business of providing these services
without its consent.

b1. the stare decisis aspect

With the Court En Banc’s reversal of the earlier Laurel ruling, then the CA’s quashal of these
warrants would have no leg to stand on. This is the dire consequence of failing to appreciate the
full import of the doctrine of stare decisis that the CA ignored.

Under Article 8 of the Civil Code, the decisions of this Court form part of the country’s legal system.
While these decisions are not laws pursuant to the doctrine of separation of powers, they evidence
the laws' meaning, breadth, and scope and, therefore, have the same binding force as the laws
themselves.57 Hence, the Court’s interpretation of a statute forms part of the law as of the date it
was originally passed because the Court’s construction merely establishes the contemporaneous
legislative intent that the interpreted law carries into effect.58

Article 8 of the Civil Code embodies the basic principle of stare decisis et non quieta movere (to
adhere to precedents and not to unsettle established matters) that enjoins adherence to judicial
precedents embodied in the decision of the Supreme Court. That decision becomes a judicial
precedent to be followed in subsequent cases by all courts in the land. The doctrine of stare
decisis, in turn, is based on the principle that once a question of law has been examined and
decided, it should be deemed settled and closed to further argument.59 The doctrine of (horizontal)
stare decisis is one of policy, grounded on the necessity of securing certainty and stability of
judicial decisions.60

In the field of adjudication, a case cannot yet acquire the status of a “decided” case that is
“deemed settled and closed to further argument” if the Court’s decision is still the subject of a
motion for reconsideration seasonably filed by the moving party. Under the Rules of Court, a party
is expressly allowed to file a motion for reconsideration of the Court’s decision within 15 days from
notice.61 Since the doctrine of stare decisis is founded on the necessity of securing certainty and
stability in law, then these attributes will spring only once the Court’s ruling has lapsed to finality
in accordance with law. In Ting v. Velez–Ting,62 we ruled that:
The principle of stare decisis enjoins adherence by lower courts to doctrinal rules established by
this Court in its final decisions. It is based on the principle that once a question of law has been
examined and decided, it should be deemed settled and closed to further argument.
In applying Laurel despite PLDT’s statement that the case is still subject of a pending motion for
reconsideration,63 the CA legally erred in refusing to reconsider its ruling that largely relied on a
non–fmal ruling of the Court. While the CA’s dutiful desire to apply the latest pronouncement of
the Court in Laurel is expected, it should have acted with caution, instead of excitement, on being
informed by PLDT of its pending motion for reconsideration; it should have then followed the
principle of stare decisis. The appellate court’s application of an exceptional circumstance when
it may order the quashal of the search warrant on grounds not existing at the time the warrant
was issued or implemented must still rest on prudential grounds if only to maintain the limitation
of the scope of the remedy of certiorari as a writ to correct errors of jurisdiction and not mere
errors of judgment.

Still, the respondents attempt to justify the CA’s action by arguing that the CA would still rule in
the way it did64 even without Laurel. As PLDT correctly pointed out, there is simply nothing in the
CA’s decision that would support its quashal of the search warrant independently of Laurel. We
must bear in mind that the CA’s quashal of SW A–l and SW A–2 operated under the strictures of
a certiorari petition, where the presence of grave abuse of discretion is necessary for the
corrective writ to issue since the appellate court exercises its supervisory jurisdiction in this case.
We simply cannot second–guess what the CA’s action could have been.

Lastly, the CA’s reliance on Savage v. Judge Taypin65 can neither sustain the quashal of SW A–
l and SW A–2. In Savage, the Court granted the certiorari petition and quashed the search warrant
because the alleged crime (unfair competition involving design patents) that supported the search
warrant had already been repealed, and the act complained of, if at all, gave rise only to civil
liability (for patent infringement). Having been decriminalized, probable cause for the crime
alleged could not possibly exist.

In the present case, the issue is whether the commission of an ISR activity, in the manner that
PLDT’s evidence shows, sufficiently establishes probable cause for the issuance of search
warrants for the crime of theft. Unlike in Savage, the Court in Laurel was not confronted with the
issue of decriminalization (which is a legislative prerogative) but whether the commission of an
ISR activity meets the elements of the offense of theft for purposes of quashing an information.
Since the Court, in Laurel, ultimately ruled then an ISR activity justifies the elements of theft that
must necessarily be alleged in the information a fortiori, the RTC’s determination should be
sustained on certiorari.

The requirement of particularity in SWB–1 and SWB–2

On the issue of particularity in SW B–l and SW B–2, we note that the respondents have not
appealed to us the CA ruling that sustained paragraphs 1 to 6 of the search warrants. Hence, we
shall limit our discussion to the question of whether the CA correctly ruled that the RTC gravely
abused its discretion insofar as it refused to quash paragraphs 7 to 9 of SW B–l and SWB–2.

Aside from the requirement of probable cause, the Constitution also requires that the search
warrant must particularly describe the place to be searched and the things to be seized. This
requirement of particularity in the description, especially of the things to be seized, is meant to
enable the law enforcers to readily identify the properties to be seized and, thus, prevent the
seizure of the wrong items. It seeks to leave the law enforcers with no discretion at all regarding
these articles and to give life to the constitutional provision against unreasonable searches and
seizures.66 In other words, the requisite sufficient particularity is aimed at preventing the law
enforcer from exercising unlimited discretion as to what things are to be taken under the warrant
and ensure that only those connected with the offense for which the warrant was issued shall be
seized.67

The requirement of specificity, however, does not require technical accuracy in the description of
the property to be seized. Specificity is satisfied if the personal properties' description is as far as
the circumstances will ordinarily allow it to be so described. The nature of the description should
vary according to whether the identity of the property or its character is a matter of concern.68 One
of the tests to determine the particularity in the description of objects to be seized under a search
warrant is when the things described are limited to those which bear direct relation to the offense
for which the warrant is being issued.69

Additionally, the Rules require that a search warrant should be issued “in connection with one
specific offense” to prevent the issuance of a scatter–shot warrant.70 The one–specific–offense
requirement reinforces the constitutional requirement that a search warrant should issue only on
the basis of probable cause.71 Since the primary objective of applying for a search warrant is to
obtain evidence to be used in a subsequent prosecution for an offense for which the search
warrant was applied, a judge issuing a particular warrant must satisfy himself that the evidence
presented by the applicant establishes the facts and circumstances relating to this specific offense
for which the warrant is sought and issued.72 Accordingly, in a subsequent challenge against the
validity of the warrant, the applicant cannot be allowed to maintain its validity based on facts and
circumstances that may be related to other search warrants but are extrinsic to the warrant in
question.

Under the Rules, the following personal property may be subject of search warrant: (i) the subject
of the offense; (ii) fruits of the offense; or (iii) those used or intended to be used as the means of
committing an offense. In the present case, we sustain the CA’s ruling nullifying paragraphs 7, 8
and 9 of SW B–l and SW B–2 for failing the test of particularity. More specifically, these provisions
do not show how the enumerated items could have possibly been connected with the crime for
which the warrant was issued, i.e., P.D. No. 401. For clarity, PD No. 401 punishes:
Section 1. Any person who installs any water, electrical, telephone or piped gas connection
without previous authority from xxx the Philippine Long Distance Telephone Company,
xxx, tampers and/or uses tampered water, electrical or gas meters, jumpers or other devices
whereby water, electricity or piped gas is stolen; steals or pilfers water, electric or piped gas
meters, or water, electric and/or telephone wires, or piped gas pipes or conduits; knowingly
possesses stolen or pilfered water, electrical or gas meters as well as stolen or pilfered water,
electrical and/or telephone wires, or piped gas pipes and conduits, shall, upon conviction, be
punished with prision correccional in its minimum period or a fine ranging from two thousand to
six thousand pesos, or both.73
Paragraphs 7 to 8 of SW B–l and SW B–2 read as follows:
7. COMPUTER PRINTERS AND SCANNERS or any similar equipment or device used for
copying and/or printing data and/or information;

8. SOFTWARE, DISKETTES, TAPES or any similar equipment or device used for recording or
storing information; and

9. Manuals, phone cards, access codes, billing statements, receipts, contracts, checks, orders,
communications and documents, lease and/or subscription agreements or contracts,
communications and documents relating to securing and using telephone lines and/or
equipment[.]74
According to PLDT, the items in paragraph 7 have a direct relation to violation of PD No. 401
because the items are connected to computers that, in turn, are linked to the unauthorized
connections to PLDT telephone lines. With regard to the software, diskette and tapes in paragraph
8, and the items in paragraph 9, PLDT argues that these items are “fruits of the offense” and that
the information it contains “constitutes the business profit” of PLDT. According to PLDT, it
corroborates the fact that the respondents have made a business out of their illegal connections
to its telephone lines.

We disagree with PLDT. The fact that the printers and scanners are or may be connected to the
other illegal connections to the PLDT telephone lines does not make them the subject of the
offense or fruits of the offense, much less could they become a means of committing an offense.

It is clear from PLDT’s submission that it confuses the crime for which SW B–l and SW B–2 were
issued with the crime for which SW A–l and SWA–2 were issued: SW B–l and SW B–2 were
issued for violation of PD No. 401, to be enforced in two different places as identified in the
warrants. The crime for which these search warrants were issued does not pertain to the crime
of theft – where matters of personal property and the taking thereof with intent to gain become
significant – but to PD No. 401.

These items could not be the subject of a violation of PD No. 401 since PLDT itself does not claim
that these items themselves comprise the unauthorized installations. For emphasis, what PD No.
401 punishes is the unauthorized installation of telephone connection without the previous
consent of PLDT. In the present case, PLDT has not shown that connecting printers, scanners,
diskettes or tapes to a computer, even if connected to a PLDT telephone line, would or should
require its prior authorization.

Neither could these items be a means of committing a violation of PD No. 401 since these copying,
printing and storage devices in no way aided the respondents in making the unauthorized
connections. While these items may be accessory to the computers and other equipment linked
to telephone lines, PD No. 401 does not cover this kind of items within the scope of the prohibition.
To allow the seizure of items under the PLDT’s interpretation would, as the CA correctly observed,
allow the seizure under the warrant of properties for personal use of the respondents.

If PLDT seeks the seizure of these items to prove that these installations contain the respondents'
financial gain and the corresponding business loss to PLDT, then that purpose is served by SW
A–l and SW A–2 since this is what PLDT essentially complained of in charging the respondents
with theft. However, the same reasoning does not justify its seizure under a warrant for violation
of PD No. 401 since these items are not directly connected to the PLDT telephone lines and PLDT
has not even claimed that the installation of these items requires prior authorization from it.

WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. The decision and
the resolution of the Court of Appeals in CA–G.R. SP No. 89213 are hereby MODIFIED in that
SW A–l and SW A–2 are hereby declared valid and constitutional.

SO ORDERED.
GR No. L-49090 February 28, 1947
TEODORA L. VDA.
De Miranda and others,
plaintiffs-appellants,
vs.
Feliciano IMPERIAL IMPERIAL AND JUANA, defendants-appellees.
Manuel M. Calleja and D. Ramon C. Fernandez on behalf of the appellants.
D.
P. Perez Toribio appellees.
BRIONES,
J.
:
This is a matter before the war.
The lawsuit was filed before the Court of First Instance of Albay
on November 25, 1941, ie, almost on the eve of the outbreak of the Pacific War.
The Court
delivered its judgment on March 17, 1943. The matter was taken to before this Supreme Court
under the appeal filed by the applicant on June 9, 1943. Before he could decide, the file is
burned
together with the other records of this Court in the conflagration of Manila for the battle of
liberation.
What we have, therefore, before us is a reconstituted with documents provided by the
lawyer of the appellant, namely record: (
a
) copies of the appeal record (record on appeal);
(
b
)
copies of the argument submitted by counsel for the appellant.
The respondent has not submitted
any allegation or if, or through his lawyer.
Lawyers for both parties were duly notified of the
proceedings of reconstitution by the commissioner of this Court, but the only ones who have
appeared have been lawyers for the appellant, delivering copies of which have been mentioned.
It is alleged in the lawsuit that before November 17, 1938 the defendants conjuges, Feliciano
and
Joan of Imperial Imperial, Imperial Elias debian the amount of P1,000;
that in consideration of
this debt and to guarantee payment had subsided, as antichresis Imperial Elias said the
possession and enjoyment of three plots of land paddy your propiedead;
that on that date
November 17, 1938, the defendants proposed to the applicant, Theodora L. Vda.Miranda, who
lend them the amount of P1,000 to rescue Elias Imperial grounds, subrogated it as a creditor in
place of Elias under the same terms and conditions of antichresis concluded with the latter;
that
inasmuch as the applicant had the quantity ordered and, moreover, the defendant is his sister, a
widow of a brother of this, I accept the proposal, effectively delivering the amount of P1,000 to
the defendants, who then see the returned Elias Imperial to rescue farms;
that in the case of
relatives, the contract was not reduced to writing, but after I did the rescatey Imperial Elias
stated
at the foot of the ownership documents for the three plots of land, the documents were handed
in
the act of redemption the applicant who was then present in the company of the defendant as
evidence of the loan and the transfer of the new contract antichresis;
that since the applicant was
enjoying the products, receiving his participation in the crops corresponding to 1939 and 1940 at
a rate of two harvests a year, and the first crop of 1941, or a total of 5 harvests from November
17 1938 to April 1941;
that the applicant could no longer enjoy the second harvest of 1941, ie
corresponding to October, as the defendants resolved since such appropriate harvest and
subsequent to the present;
the harvest gathered by the defendants in October, 1941, and should belong to the applicant,
was 50 cavanes of rice, whose price in the market was at P2.50 the dig
that is, a total of p120.
Therefore, the applicant requests that, "under the
first ground of action
,
the defendants be ordered to accord a document of mortgage in favor of the applicant to ensure
the three plots of land mentioned above to ensure payment to the applicant of the she pesos
paid
by Mr. Elias Imperial on behalf of such defendants, establishing therein within three months to
pay, or time that is reasonable in the prudent judgment of the Court and by interest at the rate of
twelve ( 12%) percent per year; "
and "under the s
econd cause of action
, the defendant is
ordered to pay the applicant the sum of P120 as the value of the rice crop raised plots of land
described in this lawsuit and illegally appropriated by these defendants, plus court costs; "
and
"calls, finally, any other just and equitable remedy."
Regarding the first ground of action the defendants are defended on the grounds that the
applicant only received the amount of P500, to which they added another P500 to rescue Elias
Imperial grounds;
and that this debt was more than P500 paid with the products of the land that
the applicant received on 5 consecutive harvests, "this automatically extinguished the rights and
contractual obligations of the parties."
Regarding the second ground of action, deny, and say the
crop in October 1941 and all that were collected after they legally belonged to the
defendants;
and that the October harvest, as in previous years, they reported as 70 cavanes
participation of palay.
The defendants raised, moreover, in its defense a counterclaim alleging (1) that between the
applicant and the defendant, Joan of Imperial, a verbal agreement was held in vitud which is
received in that the sum of P500 to rescue terrnos refefridos, on the understanding that the
applicant would make theirs every product under the same terms and conditions of the previous
contract with Imperial Elias until your credit quedase entirely paid for such products: (2) that,
indeed, the rescue was undertaken by returning Elias Joan documents with a note of
cancellation
of the debt at the foot of the same, but after the plaintiff took the documents provided under the
pretext familiar with the surrounding land, and this is the explanation of how the documents
ended up in the hands of the applicant holding them until the day of the hearing;
(3) that, in
addition to the 3 plots in question, the applicant's products enjoy a fourth plot of the defendants
amounts to 10 cavanes of rice each harvest;
(4) that the 4 plots the applicant came to receive as
participation in the five crops that collected a total of 400 cavanes of rice, and that then dig
traded at P2.50 on the market;
(5) Therefore, the applicant made no less than P1,000 with the
products received by it and deducting from this sum owed by the defendants P500, P100 more
in
interest at the legal rate, still remains in favor such a balance of P400, so ask for a judgment
against the applicant issued by the latter amount.
After seen the issue the Court delivered its judgment in which are estimated diguientes
conclusively proven the facts: (1) that for about 10 years prior to November 17, 1938 the
defendants had Eleas Imperal owing to the amount of P1,000: (2) between the creditor and the
debtor was held accessory contract antichresis under which one would enjoy as effectively
enjoy
during the period of 10 years for all products of the 3 land that has been mentioned, considering
these products and interests of the borrowed money;
(3) that during and enjoy the land, not a
single grain of rice produced is aplicio to pay or repay the principal of the loan;
(4) that the
November 17, 1938 the defendants received from the applicant not P500, as those claims, but
P1,000 to rescue farms hands of Imperial Elias being the agreement between the parties that
the applicant would be subrogated as a creditor instead of the Imperial Elias under the same
terms
and conditions of the contract signed with this antichresis;"After careful consideration of the
evidence and all the attendant circumstances, the Court concludes and, therefore, also states
that
the applicant pay the demandadosP1,000 atualmente and that the agreement between the
parties
was that the applicant would receive the products placed above the 3 plots in antichresis for
Elias
Imperial, as interest on the loan until it was entirely paid ";
that, indeed, the applicant was quietly
getting the products in 5 consecutive cosehcas, but after harvest in April, 1941, the defendants
completely dispossessed the plaintiff, appropriating all crops.
Of the facts established in the judgment, as this is extracted, it is clear that the contato versa
antichresis on that matter is defined in Article 1885 of the Civil Code which stipulates that: "The
contracting parties may stipulate that offset the interest on the debt with the fruits of the property
given in antichresis. "
However, the court a quo, instead of applying this article as it should by
imperative stating the facts proven and established at trial, made the following statement:
"However, despite this agreement, the claim that the defendants' the amount of the proceeds
received by the applicant should apply to the payment of the principal of its debt desu deducting
the interest at the legal rate, it must be sustained. "
That is, the Court applies to the case not
Article 1885 cited above but Article 1881 of the Civil Code which reads as follows: "For the
antichresis the creditor acquires the right to receive the fruits of a property of his debtor's liability
to apply to the payment of interest, if they ought to have been, and then to the capital of your
credit. "
And the Court bases its finding in the judgment delivered by the former Court of
Appeals in the case of Santa Rosa against Noble (GR No. 43769, Off Gaz 35, 2734;.. The
Lawyer's Journal, Vol V, No. 23. p. 1109), presentation of Judge Hon. Jose Lopez Vito.
So the court a quo, after making the corresponding arithmetic operation applying, first, the
payment of interest, and then to the principal of the debt, awarded for the applicant a balance of
P435.17 and orders will continue to apply to products satisfy the land until full payment, or
rectify the defendants at once with interest at the rate of 6 percent per year since 1 May 1941.
Against the failure so dictated the applicant has brought the present appeal, not asking more
questions of law, namely that the Court erred in failing to apply to this case in all its rigor to
Article 1885 of the Civil Code;
that the Court could not, of a fiat, create arbitrarily for the parties
not concluded a contract between them;
that Article 1885 refers specifically to a type of
antichresis and 1881 article and article to another;when the agreement is, as in the present
case,
the products of the farm given in in antichresis be offset by interest on the debt, no part of the
products should be applied to the repayment of capital;
and therefore, she, the appellant is
entitled to be returned integral capital of your credit, or the cantidada of P1,000, but the goods
or
interests.
The Court
a quo
founded his fault entirely analogous said two separate issues, especially since
both come from the same region - the Bicol - and relate to a contract very common in this
region,
there commonly called the contract "Sangla" or " garment, "and that in the Visayas where the
Cebuano dialect is spoken and Mindanao is called" saop "and also" pledge "sometimes.
It seems superfluous to say that only the sentences of this Supreme Court case law or doctrine
sit
in this jurisdiction.
However, this did not start that a conclusion or to the Court of Appeals that
covers some point of law still unresolved in our jurisprudence can serve as a legal standard to
the
lower courts, and that that conclusion or statement rises to doctrine if, after of being tested in
elcrisol the analysis and judicial review, hallaramos that had merit and sufficient carats for
consagracioncomo rule of law.
For this purpose and for this purpose we have examined carefully
and thoroughly the Court of Appeal in that case against Noble Santa Rosa, coming, as stated
above, the Bicol region as well as the hand.
No sign - we are not now called for it, nor is it necessary to do so - the interesting insights that
the Court of Appeals made in that judgment, we believe, however, that the court a quo erred in
applying to this case, as there are between cases fundamental differences, namely:
First difference
: In the matter of the Court of Appeals was usury "issue," capital controversial
point.
So says this Court in its judgment: "But the defendants argue that the contract stated in
Exhibit E is usury, which raises the question of whether the Act No. 2655 known Usury Act that
sets the rate of interest it is permissible to collect on the loans, it is applicable to contracts
antichresis. "
Although not say it in a way, the Court of Appeals ruling that the Act was
applicable Usuara, consequently fixing the chargeable interest in, practically prosecuted
statutory
rate of 6 percent and declare as usurious contract that antichresis He was.
In the case before us the question of usury was not raised in the pleadings nor ever even inthe
trial;
and the judgment there any pronouncement in fact usury;
and inasmuch as in this appeal not
Planteam more issues of law that it being established and accepted without question the facts
contained in the sentenica, that is this review that our faculty has to adhere strictly and inflexibly
to such facts, without us be allowed to go beyond their radio.After all, it is not surprising that the
defendants have not raised any question on usury, as popr 10 years had been indebted to Elias
Imperial without, apparently, differences endeavor relationships (in fact Elias I stated at the
hearing in favor of the defendants), and we have seen that the applicant has only just
subrogation
instead of Elias in the contract antichresis.
Second difference
: Clearly antichresis that that case is Santa Rosa against Noble is defined in
Article 1881 of the Civil Code, antichresis "the creditor acquires the right to receive the fruits of
a building of the debtor the obligation to apply to the payment of interest, if they ought to have
been, and then to the capital of your credit. "
Here is what the Court of Appeal, in its judgment
that commented on this subject: "As to whether the same rate set by the usury law should be
applied when there is an express stipulation that the fruits will began with debt interest pursuant
to Article 1885, with
quaere: not being the case that is submitted to our consideration today,
having declared us that Exhibit "E" falls low over the provisions of Article 1881 of the Civil
Code
".
(Emphasis added.)
Instead, the antichresis on that issue in the present case is defined in Article 1885, which
provides that "the contracting parties may stipulate that the interest on the debt with the fruits of
the property given in antichresis be compensated."
Here is the strict ruling of the court
a quo
on
the matter: "After a careful consideration of the evidence and all the attending Circumstances,
the court Concludes, and holds THEREFORE, whos That the plaintiff loaned the defendants
P1,000, and That the
agreement Between the parties Was That the plaintiff would receive the
products of the three parcels of land formerly conveyed in Antichresis to Elias Said Imperial as
interests on loan Until the same is paid
."
1
(emphasis added.)
Exist, according to the same conclusion court a quo, that covenant that farm products to be
offset
by interest on the debt, in accordance with Article 1885 of the Civil Code, the change is arbitrary
court, making for the parties to uncontrato they have not concluded, or to put it more
specifically,
truly transforming the pact agreed to something that falls under an article of the code that was
neither in the mind nor the will of the parties.
Article 1255 of the Civil Code stipulates that
"contracting parties may establish the covenants, terms and conditions as they see fit, provided
they are not contrary to law, morality or public order."
This excludes contracts
the
fiat
court.
Courts can interpret contracts;
what they can not do is mold, for jarlos the parties.
We agree with the Court of Appeals that the contract called "Sangla" or "pledge" (on property) in
Bicol, "soap" or "pledge" in Visayas and Mindanao, really has the characters of the antichresis
and therefore can considered as such.
Besides the sale pact retro, that contract is the best known
and usual in our towns and rural districts - Take hold of the peasant and farmer, and to improve
and expand their crops, and to buy new land to increase their possessions, and to marry their
children and provide them, and even sometimes to give a dignified and proper burial of their
dead.
And why not say so?
Per unhappy passion play culminating sometimes in that contract to
embitter the existence if north to work the ruin of the small owner.
The question we now have to determine is, namely: is automatic or ministerially antichresis
applicable to the usury, as appears to be inferred from the judgment appealed?
Certainly
not.
Antichresis as contract - either under Article 1881, and under Article 1885 of the Civil Code
- it is not necessarily usurious;
it can be, that if usurious.
But so that you can declare, is not only
absolutely necessary that usury be an "issue," a contentious capital allegations point and at trial,
so that each party has its "day in court," that is, that can defend properly and adequately, but
also,
must be demonstrated and positively established that usury is of such proportions that, on
shock
the conscience, tilt the mood to believe that the contract has been used as a costume or to
artilugo
violate or circumvent the usury law.
The reason for this is simple: in the antichresis there is a
contingent element random by nature.
The perception of the products by the creditor, which is its
main feature, is subject to various contingencies and eventualities.
There may come a poor
harvest, or none, and because he has vented a typhoon, and because they have overflowed
rivers
Coming up a flood, and because a flock of locusts devastated crops and plantations, and
because
deep social upheavals have subverted peace and order preventing tilling the fields, etcetera,
etcetera.
So the antichresis can not automatically apply ministerially, Articles 2, 3 and 8 of Law
No. 2655 on usury, as these relate to the perception of a fixed amount of products: the debtor
must submit unswervingly or its equivalent in money, whether good or bad harvest, whether or
not there.
The fact that sometimes antichresis the amount of fruits, to be the settlement exceeds
the rates set by the law of usury, usurious contract does not, because the law assumes that
such
excess is collecting the dividend the creditor in exchange for the risk premium and
contingencies
which has paid up capital of the credit.
In American jurisprudence also certain types of contract analogous to our "Sangla" or known
"saop."
as they demonstrate the following authorities:
In view, however, of the rule That a creditor's return need not be limited to the statutory
rate when it is Affected by a contingency putting the whole of it at hazard, a contract is
ordinarily not usurious under Which the creditor is to receive, in His consideration of
forbearance or loan, property or services of uncertain value, even though the likely value
is greater than lawful interest,
UNLESS the excess is so palpable as to show a corrupt
intent to violate or evade the usury laws
, UNLESS the contract is made Such for the
purpose of evasion or violation.
2
(66 CJ, 212.)
Where the lender is to receive money for something else than His loan, as property or
services, the value of Such profit Necessarily Being uncertain, the contract is not
usurious,
even though the likely value is greater than legal interest
, UNLESS the
consideration so Given . is so palpably in excess of the cetain profit allowed by law as to
show a corrupt intent to violate the usury laws "February 39 Cyc 959;. Wright vs.
McAlezander 11 Wing, 236;. Rapier v C. Gulf City Paper. 77 Ala., 126. (102 Southern
Reporter, p. 204.)
So, an agreement That Instead of interest, the lender of money Should receive the rents
and profits of Certain land for a term of years, is not usurious Where no intention to
evade the statue is shown;
and the
fact That Such rents and profits happen to amount to
more than lawful interests does not render the contract usurious
.
3
(Webb on Usury, p.
85.)
Manresa, lecturing on the relative convenience of the antichresis although sometimes, as a tool
of
usury, makes the following pertinent observations:
In doing so the authors of the Code, they responded with great success to a need imposed
by modern principles that the laws of mutual inspiration, according to which there is no
economic or legal reason to condemn the antichresis.
In addition, they sought thus avoid
damages to the debtor who, otherwise, were inevitable, since experience well palpably
had shown that, despite the prohicion laws, the anticretico covenant was very common in
practice, because the prohibitory provisions were being circumvented, disguising the
convention with the form or name sales pact retro, so far favored the borrower, as the
legislature intended, it caused him great grief, since it can not grant the creditor
enjoyment of the fruits to be applied to the repayment of interest or partial payment of
principal, they were forced to sell the goods in the manner, shedding a property that could
hardly acquire again.
(Manresa, Comm. In Cod. Civ. Spanish, Volume 12, p. 545.)
The rule, then, is, or should be, the following: (a) the antichresis known in this country with the
vernacular name "Sangla" or "saop" can not be assessed and reported as usurious, unless
usury in
itself it arises ocmo an "issue," a contentious issue between the parties, in accordance with the
procedural statutory rules on the matter;
(
b
) and that the contract is considered and declared
usury is not enough that the products of the property given in antichresis to perciberse by the
creditor exceeds any legal fees both in terms of interest, but it must be as excess palpable, so
repulsive and so shocking to the conscience necessarily the feeling that the contract has been
forged to hide the malicious intent to violate or evade usury law;
(
c
) no mediating these
circumstances, the "Sangla" or "saop" must be respected and compliance left expedited under
Article 1881 or Article 1885 of the Civil Code, as the case may be, and the courts anything done
to change the terms of antichresis which must be law between the parties.
The present case presents some difficulties with regard to the failure to be issued.
The plaintiff
sought judgment and oblique to the defendants to grant in its favor a mortgage document on the
three plots of land to secure payment of the debt of P1,000, "setting therein within three months
to the payment or the time limit reasonable under the preduente judgment of the Court and by
interest at a rate of 12 percent a year, or in place, any other remedy ineligible ".
In our view, this
would only delay the disposal and final settlement of the issue to the detriment of the parties
and
expeditious administration of justice.
Having defendants possession of the plots of land for them in antichresis transferred to
claimants
and enjoyed its fruits from the month of October 1941 up to date, and demostratod plaintiffs give
its agreement by teminado the contract to present anticretico demand the November 25, 1941,
not to recover these parceles of land, but to demand payment of the debt with interest from that
date, upon revocation of sentenciaapelada, we issued the following ruling :.
(1) the defendant was ordered to pay the applicants the sum of one thousand pesos (P1,000),
amount of credit of the latter, with interest at the rate of 6 percent a year from November 25,
1941 in that the suit was filed, and the court costs and must be paid that sum with interest and
costs to the plaintiffs, or deposited in the Court of First Instance of Albay within three months
after officially this moratorium is lifted ;
(2) In default of payment, as is required in the previous paragraph, the three plots of land on
which deals with this issue will be sold by the Sheriff at public auction in accordance with the
law on payment of mortgage credit;
(3) Meanwhile no payment is made, as is ordered in this judgment, the sum owed their legal
interests and court costs pass as a lien (lien) preferably on the three plots of land in question.
So
it is ordered.
Moran, Pres., Fair, Bengzon, Padilla and Tuazon, JJ.,
concur.
Separate Opinions
PARAS,
J.,
dissenting:
, Although the trial court held That "the plaintiff whos loaned the defendants P1,000, and That
the agreement Between the parties Was That the plaintiff would receive the products of the
three
parcels of land formerly conveyed in Antichresis to Elias Said Imperial as interests on loan Until
the same is paid, "it NEVERTHELESS sustained, citing the decision of the Court of Appeals in
the case of
Santa Rosa vs.
Noble
(35 Off. Gaz., 2724), "the contention of the defendants That the
value of the products received by the plaintiff, after deducting therefrom interests at the legal
rate, Should be applied to the principal of Their debt."
The plaintiff has appealed;
does not controvert the correctness of the appraisal made by the trial
court of the value of the products received by her from the lots in question: but contends That
Should Have Said court applied article 1885 of the Civil Code Which Provides That "May the
contracting parties That stipulate the interest of the debt be off in September against the fruits of
the estate Given in Antichresis. "
In other words, it is the view of the plaintiff That the products,
Regardless of Their value, Should belong to her in payment of the interest on defendant's loan
of
P1,000.
Also this is the view Expressed in the majority opinion.
I dissent.
The right of the contracting parties to Establish any PACTS, clauses, and conditions
They deem Advisable May, is subject to the proviso That "they are not Contrary to law, morals,
or public order."
(Article 1255, Civil Code.) After the enactment of the Usury Law (Act No.
2655), Which fixes the rate of interest, in the absence of express stipulation, at six per centum
per annum (section 1) and provides (section 8) That "all loans under Which payment is to be
made in agricultural products or seed or in any other kind of commodities Shall Also be null and
void UNLESS That They Provide Such products or seeds or other commodities Shall be
appraised at the time When the obligation falls due at the current market price locally, "article
1885 of the Civil Code must be Considered modified, if not repealed under the repealing clause
(section 11) of the Usury Law.
In other words, any antichretic agreement, Either under article
1881 or article 1885, may now be validly enforced only in the light of the Provisions of the
Usury Law.
The unrestricted freedom conceded in article 1855 was good before the Government
HAD ITS policy laid down Regarding interest on loans.
Article 1881 punishes therefore the general rule to govern necessarily always enforced
and that there is no special agreement indicated and 1885 establishes the exception to that
rule if the pact stipulated.
This is a result of the freedom granted to the fixing of the interest rate for legal abolished
by law in 1856, the parties are free to set the amount and condition of such interest, may
perceive them in money than in kind, and therefore compensated with the fruits
interests.
(12 Manresa, Civil Code, p. 482.)
That the majority argue the Usury Law can not be applied Because the defense of usury was
not
set up.
It Appears, however, that, as amitted by the majority, the defendant Alleged In His answer
That "the applicant made no less than P1,000 in products received by it and deducting from this
amount the P500 owed by the defendants, more P100 in interest at the legal rate, still remains
in
favor of these a balance of P400, so ask for a judgment against the applicant issued by the
latter
amount. "
If This allegation did not amount to a charge That the plaintiff received more than the
legal interest, it was sufficient to apprise the court and the plaintiff That it was the contention of
the defendant That the plaintiff HAD right not to apply the products entirely in compensation
Their interest notwithstanding of the agreement, and This Issue Should be decided in the light of
Existing law Which was it NOT necessary for the defendant to specify in His answer.
We would
not just thus be digressing from the issues raised by the parties, or creating new ones, by simply
adjudicating cases concrete conformably to law.
.
.
.
It is clear that the courts may in each case determine the nature of the obligation and
conditions attached to it, if the agreement is given to the effects from law.
.
.
.
(11
Manresa, Civil Code, p. 550.)
The contingent character of the arrangement Contemplated by Article 1885, ITS can not warrant
continued existence.
The Usury Law, Which is of later date and controlling THEREFORE,
Protects Borrowers and at the same time Eliminate the element of chance That May prove
disadvantageous to Lenders Who are to be paid in agricultural products.
The appealed judgment Should be Affirmed.
Footnotes
1
"After careful consideration of the evidence and surrounding circumstances, the Court
concludes, therefore also stated that the applicant now ready to P1,000 defendants, and
that the agreement between the parties was that the applicant would receive the products
of the three plots given above in antichresis Elias Imperial as
interest on that loan
, until
it paid regardless. "
2
"In view, however, the rule that revenue from a creditor should not be limited to the
legal rate when it is affected by a contingency that puts everything at risk, a contract is
not ordinarily usurious when the creditor receives in consideration of its loan or largesse,
property or services of doubtful value, even if it is greater than or legal interest rate,
unless the
excess is so palpable that show a corrupt intent to violate or evade usury law,
or unless the contract was made
for the purpose of such violation or evasion
"(66 CJ,
212).
3
"When the contract is for the lender to get something other than money for his loan, that
is, in kind or services, siendoel necessarily uncertain value of such profits,
usurious
contract is likely although the value is greater than the interest legal
, unless the
consideration is also given so palpably in excess of the profit permitted by law it is
deduced and demonstrated the vicious intention of violating usury laws. "
(39 Cyc, 959;.
Wright vs. McAlexander 11 Wing, 236;. Rapier vs. Gulf City Paper Co., 77 Wing, 126.).
4
"So, a contract in which, instead of interest, the lender receives the income and gains
some ground for a period of years, is not usurious if it is proven that there was intent to
evade the law, and the
fact that such income and gains mounted to or more than the legal
interest rate does the usurious contract
."
(Webb on Usury, p. 85.)
TEODORA L. VDA.
De Miranda and others,
plaintiffs-appellants,
vs.
Feliciano IMPERIAL IMPERIAL AND JUANA, defendants-appellees.
GR No. L-49090 February 28, 1947
FACTS: Defendants Feliciano and Juana Imperial barrowed from plaintiff Miranda the amount
of P1,000;
that in consideration of this debt and to guarantee payment they executed verbal
antichresis in favor of the latter. In an action filed by Miranda against Imperial, the lower court in
deciding based its finding in the judgment delivered by the Court of Appeals in the case of Santa
Rosa vs. Noble. Obtaining a negative judgment, appellant has brought the present appeal
claiming that the court erred in applying the case of Santa Rosa vs. Noble alleging that cases
decided by the court of appeals does not constitute precedent and hence may not be applied in
deciding cases.
ISSUE:
Whether the decisions of the Court of Appeals constitute precedents.
HELD:
Only the decisions of Supreme Court establish jurisprudence or doctrines in the
jurisdiction. However, this does not prevent that a conclusion or pronouncement of the Court
of
Appeals which covers a point of law still undecided in our jurisprudence may serve as
juridical guide to the inferior courts, and that such conclusion or pronouncement be raised as a
doctrine if, after it has been subjected to test in the crucible of analysis and revision, this
Supreme Court should find that it has merits and qualities sufficient for its consecration as a rule
of jurisprudence.

G.R. No. L-25291 January 30, 1971

THE INSULAR LIFE ASSURANCE CO., LTD., EMPLOYEES ASSOCIATION-NATU, FGU


INSURANCE GROUP WORKERS and EMPLOYEES ASSOCIATION-NATU, and INSULAR
LIFE BUILDING EMPLOYEES ASSOCIATION-NATU, petitioners,
vs.
THE INSULAR LIFE ASSURANCE CO., LTD., FGU INSURANCE GROUP, JOSE M. OLBES
and COURT OF INDUSTRIAL RELATIONS, respondents.

Lacsina, Lontok and Perez and Luis F. Aquino for petitioners.

Francisco de los Reyes for respondent Court of Industrial Relations.

Araneta, Mendoza and Papa for other respondents.

CASTRO, J.:

Appeal, by certiorari to review a decision and a resolution en banc of the Court of Industrial
Relations dated August 17, 1965 and October 20, 1965, respectively, in Case 1698-ULP.

The Insular Life Assurance Co., Ltd., Employees Association-NATU, FGU Insurance Group
Workers & Employees Association-NATU, and Insular Life Building Employees Association-
NATU (hereinafter referred to as the Unions), while still members of the Federation of Free
Workers (FFW), entered into separate collective bargaining agreements with the Insular Life
Assurance Co., Ltd. and the FGU Insurance Group (hereinafter referred to as the Companies).

Two of the lawyers of the Unions then were Felipe Enaje and Ramon Garcia; the latter was
formerly the secretary-treasurer of the FFW and acting president of the Insular Life/FGU unions
and the Insular Life Building Employees Association. Garcia, as such acting president, in a
circular issued in his name and signed by him, tried to dissuade the members of the Unions
from disaffiliating with the FFW and joining the National Association of Trade Unions (NATU), to
no avail.

Enaje and Garcia soon left the FFW and secured employment with the Anti-Dummy Board of
the Department of Justice. Thereafter, the Companies hired Garcia in the latter part of 1956 as
assistant corporate secretary and legal assistant in their Legal Department, and he was soon
receiving P900 a month, or P600 more than he was receiving from the FFW. Enaje was hired on
or about February 19, 1957 as personnel manager of the Companies, and was likewise made
chairman of the negotiating panel for the Companies in the collective bargaining with the
Unions.

In a letter dated September 16, 1957, the Unions jointly submitted proposals to the Companies
for a modified renewal of their respective collective bargaining contracts which were then due to
expire on September 30, 1957. The parties mutually agreed and to make whatever benefits
could be agreed upon retroactively effective October 1, 1957.

Thereafter, in the months of September and October 1957 negotiations were conducted on the
Union's proposals, but these were snagged by a deadlock on the issue of union shop, as a
result of which the Unions filed on January 27, 1958 a notice of strike for "deadlock on collective
bargaining." Several conciliation conferences were held under the auspices of the Department
of Labor wherein the conciliators urged the Companies to make reply to the Unions' proposals
en toto so that the said Unions might consider the feasibility of dropping their demand for union
security in exchange for other benefits. However, the Companies did not make any counter-
proposals but, instead, insisted that the Unions first drop their demand for union security,
promising money benefits if this was done. Thereupon, and prior to April 15, 1958, the petitioner
Insular Life Building Employees Association-NATU dropped this particular demand, and
requested the Companies to answer its demands, point by point, en toto. But the respondent
Insular Life Assurance Co. still refused to make any counter-proposals. In a letter addressed to
the two other Unions by the joint management of the Companies, the former were also asked to
drop their union security demand, otherwise the Companies "would no longer consider
themselves bound by the commitment to make money benefits retroactive to October 1, 1957."
By a letter dated April 17, 1958, the remaining two petitioner unions likewise dropped their
demand for union shop. April 25, 1958 then was set by the parties to meet and discuss the
remaining demands.

From April 25 to May 6, 1958, the parties negotiated on the labor demands but with no
satisfactory result due to a stalemate on the matter of salary increases. On May 13, 1958 the
Unions demanded from the Companies final counter-proposals on their economic demands,
particularly on salary increases. Instead of giving counter-proposals, the Companies on May 15,
1958 presented facts and figures and requested the Unions to submit a workable formula which
would justify their own proposals, taking into account the financial position of the former.
Forthwith the Unions voted to declare a strike in protest against what they considered the
Companies' unfair labor practices.

Meanwhile, eighty-seven (87) unionists were reclassified as supervisors without increase in


salary nor in responsibility while negotiations were going on in the Department of Labor after the
notice to strike was served on the Companies. These employees resigned from the Unions.

On May 20, 1958 the Unions went on strike and picketed the offices of the Insular Life Building
at Plaza Moraga.

On May 21, 1958 the Companies through their acting manager and president, the respondent
Jose M. Olbes (hereinafter referred to as the respondent Olbes), sent to each of the strikers a
letter (exhibit A) quoted verbatim as follows:

We recognize it is your privilege both to strike and to conduct picketing.

However, if any of you would like to come back to work voluntarily, you
may:

1. Advise the nearest police officer or security guard of your intention to


do so.

2. Take your meals within the office.

3. Make a choice whether to go home at the end of the day or to sleep


nights at the office where comfortable cots have been prepared.

4. Enjoy free coffee and occasional movies.

5. Be paid overtime for work performed in excess of eight hours.


6. Be sure arrangements will be made for your families.

The decision to make is yours — whether you still believe in the motives
of the strike or in the fairness of the Management.

The Unions, however, continued on strike, with the exception of a few unionists who were
convinced to desist by the aforesaid letter of May 21, 1958.

From the date the strike was called on May 21, 1958, until it was called off on May 31, 1958,
some management men tried to break thru the Unions' picket lines. Thus, on May 21, 1958
Garcia, assistant corporate secretary, and Vicente Abella, chief of the personnel records
section, respectively of the Companies, tried to penetrate the picket lines in front of the Insular
Life Building. Garcia, upon approaching the picket line, tossed aside the placard of a picketer,
one Paulino Bugay; a fight ensued between them, in which both suffered injuries. The
Companies organized three bus-loads of employees, including a photographer, who with the
said respondent Olbes, succeeded in penetrating the picket lines in front of the Insular Life
Building, thus causing injuries to the picketers and also to the strike-breakers due to the
resistance offered by some picketers.

Alleging that some non-strikers were injured and with the use of photographs as evidence, the
Companies then filed criminal charges against the strikers with the City Fiscal's Office of Manila.
During the pendency of the said cases in the fiscal's office, the Companies likewise filed a
petition for injunction with damages with the Court of First Instance of Manila which, on the
basis of the pendency of the various criminal cases against striking members of the Unions,
issued on May 31, 1958 an order restraining the strikers, until further orders of the said court,
from stopping, impeding, obstructing, etc. the free and peaceful use of the Companies' gates,
entrance and driveway and the free movement of persons and vehicles to and from, out and in,
of the Companies' building.

On the same date, the Companies, again through the respondent Olbes, sent individually to the
strikers a letter (exhibit B), quoted hereunder in its entirety:

The first day of the strike was last 21 May 1958.

Our position remains unchanged and the strike has made us even more
convinced of our decision.

We do not know how long you intend to stay out, but we cannot hold your
positions open for long. We have continued to operate and will continue
to do so with or without you.

If you are still interested in continuing in the employ of the Group


Companies, and if there are no criminal charges pending against you, we
are giving you until 2 June 1958 to report for work at the home office. If by
this date you have not yet reported, we may be forced to obtain your
replacement.

Before, the decisions was yours to make.

So it is now.
Incidentally, all of the more than 120 criminal charges filed against the members of the Unions,
except three (3), were dismissed by the fiscal's office and by the courts. These three cases
involved "slight physical injuries" against one striker and "light coercion" against two others.

At any rate, because of the issuance of the writ of preliminary injunction against them as well as
the ultimatum of the Companies giving them until June 2, 1958 to return to their jobs or else be
replaced, the striking employees decided to call off their strike and to report back to work on
June 2, 1958.

However, before readmitting the strikers, the Companies required them not only to secure
clearances from the City Fiscal's Office of Manila but also to be screened by a management
committee among the members of which were Enage and Garcia. The screening committee
initially rejected 83 strikers with pending criminal charges. However, all non-strikers with
pending criminal charges which arose from the breakthrough incident were readmitted
immediately by the Companies without being required to secure clearances from the fiscal's
office. Subsequently, when practically all the strikers had secured clearances from the fiscal's
office, the Companies readmitted only some but adamantly refused readmission to 34 officials
and members of the Unions who were most active in the strike, on the ground that they
committed "acts inimical to the interest of the respondents," without however stating the specific
acts allegedly committed. Among those who were refused readmission are Emiliano
Tabasondra, vice president of the Insular Life Building Employees' Association-NATU; Florencio
Ibarra, president of the FGU Insurance Group Workers & Employees Association-NATU; and
Isagani Du Timbol, acting president of the Insular Life Assurance Co., Ltd. Employees
Association-NATU. Some 24 of the above number were ultimately notified months later that they
were being dismissed retroactively as of June 2, 1958 and given separation pay checks
computed under Rep. Act 1787, while others (ten in number) up to now have not been
readmitted although there have been no formal dismissal notices given to them.

On July 29, 1958 the CIR prosecutor filed a complaint for unfair labor practice against the
Companies under Republic Act 875. The complaint specifically charged the Companies with (1)
interfering with the members of the Unions in the exercise of their right to concerted action, by
sending out individual letters to them urging them to abandon their strike and return to work,
with a promise of comfortable cots, free coffee and movies, and paid overtime, and,
subsequently, by warning them that if they did not return to work on or before June 2, 1958, they
might be replaced; and (2) discriminating against the members of the Unions as regards
readmission to work after the strike on the basis of their union membership and degree of
participation in the strike.

On August 4, 1958 the Companies filed their answer denying all the material allegations of the
complaint, stating special defenses therein, and asking for the dismissal of the complaint.

After trial on the merits, the Court of Industrial Relations, through Presiding Judge Arsenio
Martinez, rendered on August 17, 1965 a decision dismissing the Unions' complaint for lack of
merit. On August 31, 1965 the Unions seasonably filed their motion for reconsideration of the
said decision, and their supporting memorandum on September 10, 1965. This was denied by
the Court of Industrial Relations en banc in a resolution promulgated on October 20, 1965.

Hence, this petition for review, the Unions contending that the lower court erred:
1. In not finding the Companies guilty of unfair labor practice in sending
out individually to the strikers the letters marked Exhibits A and B;

2. In not finding the Companies guilty of unfair labor practice for


discriminating against the striking members of the Unions in the matter of
readmission of employees after the strike;

3. In not finding the Companies guilty of unfair labor practice for


dismissing officials and members of the Unions without giving them the
benefit of investigation and the opportunity to present their side in regard
to activities undertaken by them in the legitimate exercise of their right to
strike; and

4. In not ordering the reinstatement of officials and members of the


Unions, with full back wages, from June 2, 1958 to the date of their actual
reinstatement to their usual employment.

I. The respondents contend that the sending of the letters, exhibits A and B, constituted a
legitimate exercise of their freedom of speech. We do not agree. The said letters were directed
to the striking employees individually — by registered special delivery mail at that — without
being coursed through the Unions which were representing the employees in the collective
bargaining.

The act of an employer in notifying absent employees individually during


a strike following unproductive efforts at collective bargaining that the
plant would be operated the next day and that their jobs were open for
them should they want to come in has been held to be an unfair labor
practice, as an active interference with the right of collective bargaining
through dealing with the employees individually instead of through their
collective bargaining representatives. (31 Am. Jur. 563, citing NLRB v.
Montgomery Ward & Co. [CA 9th] 133 F2d 676, 146 ALR 1045)

Indeed, it is an unfair labor practice for an employer operating under a collective bargaining
agreement to negotiate or to attempt to negotiate with his employees individually in connection
with changes in the agreement. And the basis of the prohibition regarding individual bargaining
with the strikers is that although the union is on strike, the employer is still under obligation to
bargain with the union as the employees' bargaining representative (Melo Photo Supply
Corporation vs. National Labor Relations Board, 321 U.S. 332).

Indeed, some such similar actions are illegal as constituting unwarranted acts of interference.
Thus, the act of a company president in writing letters to the strikers, urging their return to work
on terms inconsistent with their union membership, was adjudged as constituting interference
with the exercise of his employees' right to collective bargaining (Lighter Publishing, CCA 7th,
133 F2d 621). It is likewise an act of interference for the employer to send a letter to all
employees notifying them to return to work at a time specified therein, otherwise new
employees would be engaged to perform their jobs. Individual solicitation of the employees or
visiting their homes, with the employer or his representative urging the employees to cease
union activity or cease striking, constitutes unfair labor practice. All the above-detailed activities
are unfair labor practices because they tend to undermine the concerted activity of the
employees, an activity to which they are entitled free from the employer's molestation.1
Moreover, since exhibit A is a letter containing promises of benefits to the employees in order to
entice them to return to work, it is not protected by the free speech provisions of the Constitution
(NLRB v. Clearfield Cheese Co., Inc., 213 F2d 70). The same is true with exhibit B since it
contained threats to obtain replacements for the striking employees in the event they did not
report for work on June 2, 1958. The free speech protection under the Constitution is
inapplicable where the expression of opinion by the employer or his agent contains a promise of
benefit, or threats, or reprisal (31 Am. Jur. 544; NLRB vs. Clearfield Cheese Co., Inc., 213 F2d
70; NLRB vs. Goigy Co., 211 F2d 533, 35 ALR 2d 422).

Indeed, when the respondents offered reinstatement and attempted to "bribe" the strikers with
"comfortable cots," "free coffee and occasional movies," "overtime" pay for "work performed in
excess of eight hours," and "arrangements" for their families, so they would abandon the strike
and return to work, they were guilty of strike-breaking and/or union-busting and, consequently,
of unfair labor practice. It is equivalent to an attempt to break a strike for an employer to offer
reinstatement to striking employees individually, when they are represented by a union, since
the employees thus offered reinstatement are unable to determine what the consequences of
returning to work would be.

Likewise violative of the right to organize, form and join labor organizations are the following
acts: the offer of a Christmas bonus to all "loyal" employees of a company shortly after the
making of a request by the union to bargain; wage increases given for the purpose of mollifying
employees after the employer has refused to bargain with the union, or for the purpose of
inducing striking employees to return to work; the employer's promises of benefits in return for
the strikers' abandonment of their strike in support of their union; and the employer's statement,
made about 6 weeks after the strike started, to a group of strikers in a restaurant to the effect
that if the strikers returned to work, they would receive new benefits in the form of
hospitalization, accident insurance, profit-sharing, and a new building to work in.2

Citing paragraph 5 of the complaint filed by the acting prosecutor of the lower court which states
that "the officers and members of the complainant unions decided to call off the strike and return
to work on June 2, 1958 by reason of the injunction issued by the Manila Court of First
Instance," the respondents contend that this was the main cause why the strikers returned to
work and not the letters, exhibits A and B. This assertion is without merit. The circumstance that
the strikers later decided to return to work ostensibly on account of the injunctive writ issued by
the Court of First Instance of Manila cannot alter the intrinsic quality of the letters, which were
calculated, or which tended, to interfere with the employees' right to engage in lawful concerted
activity in the form of a strike. Interference constituting unfair labor practice will not cease to be
such simply because it was susceptible of being thwarted or resisted, or that it did not
proximately cause the result intended. For success of purpose is not, and should not, be the
criterion in determining whether or not a prohibited act constitutes unfair labor practice.

The test of whether an employer has interfered with and coerced


employees within the meaning of subsection (a) (1) is whether the
employer has engaged in conduct which it may reasonably be said tends
to interfere with the free exercise of employees' rights under section 3 of
the Act, and it is not necessary that there be direct evidence that any
employee was in fact intimidated or coerced by statements of threats of
the employer if there is a reasonable inference that anti-union conduct of
the employer does have an adverse effect on self-organization and
collective bargaining. (Francisco, Labor Laws 1956, Vol. II, p. 323, citing
NLRB v. Ford, C.A., 1948, 170 F2d 735).

Besides, the letters, exhibits A and B, should not be considered by themselves alone but should
be read in the light of the preceding and subsequent circumstances surrounding them. The
letters should be interpreted according to the "totality of conduct doctrine,"

... whereby the culpability of an employer's remarks were to be evaluated


not only on the basis of their implicit implications, but were to be
appraised against the background of and in conjunction with collateral
circumstances. Under this "doctrine" expressions of opinion by an
employer which, though innocent in themselves, frequently were held to
be culpable because of the circumstances under which they were uttered,
the history of the particular employer's labor relations or anti-union bias or
because of their connection with an established collateral plan of coercion
or interference. (Rothenberg on Relations, p. 374, and cases cited
therein.)

It must be recalled that previous to the petitioners' submission of proposals for an amended
renewal of their respective collective bargaining agreements to the respondents, the latter hired
Felipe Enage and Ramon Garcia, former legal counsels of the petitioners, as personnel
manager and assistant corporate secretary, respectively, with attractive compensations. After
the notice to strike was served on the Companies and negotiations were in progress in the
Department of Labor, the respondents reclassified 87 employees as supervisors without
increase in salary or in responsibility, in effect compelling these employees to resign from their
unions. And during the negotiations in the Department of Labor, despite the fact that the
petitioners granted the respondents' demand that the former drop their demand for union shop
and in spite of urgings by the conciliators of the Department of Labor, the respondents
adamantly refused to answer the Unions' demands en toto. Incidentally, Enage was the
chairman of the negotiating panel for the Companies in the collective bargaining between the
former and the Unions. After the petitioners went to strike, the strikers were individually sent
copies of exhibit A, enticing them to abandon their strike by inducing them to return to work
upon promise of special privileges. Two days later, the respondents, thru their president and
manager, respondent Jose M. Olbes, brought three truckloads of non-strikers and others,
escorted by armed men, who, despite the presence of eight entrances to the three buildings
occupied by the Companies, entered thru only one gate less than two meters wide and in the
process, crashed thru the picket line posted in front of the premises of the Insular Life Building.
This resulted in injuries on the part of the picketers and the strike-breakers.lâwphî1.ñèt Then the
respondents brought against the picketers criminal charges, only three of which were not
dismissed, and these three only for slight misdemeanors. As a result of these criminal actions,
the respondents were able to obtain an injunction from the court of first instance restraining the
strikers from stopping, impeding, obstructing, etc. the free and peaceful use of the Companies'
gates, entrance and driveway and the free movement of persons and vehicles to and from, out
and in, of the Companies' buildings. On the same day that the injunction was issued, the letter,
Exhibit B, was sent — again individually and by registered special delivery mail — to the
strikers, threatening them with dismissal if they did not report for work on or before June 2,
1958. But when most of the petitioners reported for work, the respondents thru a screening
committee — of which Ramon Garcia was a member — refused to admit 63 members of the
Unions on the ground of "pending criminal charges." However, when almost all were cleared of
criminal charges by the fiscal's office, the respondents adamantly refused admission to 34
officials and union members. It is not, however, disputed that all-non-strikers with pending
criminal charges which arose from the breakthrough incident of May 23, 1958 were readmitted
immediately by the respondents. Among the non-strikers with pending criminal charges who
were readmitted were Generoso Abella, Enrique Guidote, Emilio Carreon, Antonio Castillo,
Federico Barretto, Manuel Chuidian and Nestor Cipriano. And despite the fact that the fiscal's
office found no probable cause against the petitioning strikers, the Companies adamantly
refused admission to them on the pretext that they committed "acts inimical to the interest of the
respondents," without stating specifically the inimical acts allegedly committed. They were soon
to admit, however, that these alleged inimical acts were the same criminal charges which were
dismissed by the fiscal and by the courts..

Verily, the above actuations of the respondents before and after the issuance of the letters,
exhibit A and B, yield the clear inference that the said letters formed of the respondents scheme
to preclude if not destroy unionism within them.

To justify the respondents' threat to dismiss the strikers and secure replacements for them in
order to protect and continue their business, the CIR held the petitioners' strike to be an
economic strike on the basis of exhibit 4 (Notice of Strike) which states that there was a
"deadlock in collective bargaining" and on the strength of the supposed testimonies of some
union men who did not actually know the very reason for the strike. It should be noted that
exhibit 4, which was filed on January 27, 1958, states, inter alia:

TO: BUREAU OF LABOR RELATIONS


DEPARTMENT OF LABOR
MANILA

Thirty (30) days from receipt of this notice by the Office, this [sic] unions
intends to go on strike against

THE INSULAR LIFE ASSURANCE CO., LTD.


Plaza Moraga, Manila

THE FGU INSURANCE GROUP


Plaza Moraga, Manila

INSULAR LIFE BUILDING ADMINISTRATION


Plaza Moraga, Manila .

for the following reason: DEADLOCK IN COLLECTIVE BARGAINING...

However, the employees did not stage the strike after the thirty-day period, reckoned from
January 27, 1958. This simply proves that the reason for the strike was not the deadlock on
collective bargaining nor any lack of economic concessions. By letter dated April 15, 1958, the
respondents categorically stated what they thought was the cause of the "Notice of Strike,"
which so far as material, reads:

3. Because you did not see fit to agree with our position on the union
shop, you filed a notice of strike with the Bureau of Labor Relations on 27
January 1958, citing `deadlock in collective bargaining' which could have
been for no other issue than the union shop." (exhibit 8, letter dated April
15, 1958.)

The strike took place nearly four months from the date the said notice of strike was filed. And
the actual and main reason for the strike was, "When it became crystal clear the management
double crossed or will not negotiate in good faith, it is tantamount to refusal collectively and
considering the unfair labor practice in the meantime being committed by the management such
as the sudden resignation of some unionists and [who] became supervisors without increase in
salary or change in responsibility, such as the coercion of employees, decided to declare the
strike." (tsn., Oct. 14, 1958, p. 14.) The truth of this assertion is amply proved by the following
circumstances: (1) it took the respondents six (6) months to consider the petitioners' proposals,
their only excuse being that they could not go on with the negotiations if the petitioners did not
drop the demand for union shop (exh. 7, respondents' letter dated April 7, 1958); (2) when the
petitioners dropped the demand for union shop, the respondents did not have a counter-offer to
the petitioners' demands. Sec. 14 of Rep. Act 875 required the respondents to make a reply to
the petitioners' demands within ten days from receipt thereof, but instead they asked the
petitioners to give a "well reasoned, workable formula which takes into account the financial
position of the group companies." (tsn., Sept. 8, 1958, p. 62; tsn., Feb. 26, 1969, p. 49.)

II. Exhibit H imposed three conditions for readmission of the strikers, namely: (1) the employee
must be interested in continuing his work with the group companies; (2) there must be no
criminal charges against him; and (3) he must report for work on June 2, 1958, otherwise he
would be replaced. Since the evidence shows that all the employees reported back to work at
the respondents' head office on June 2, 1953, they must be considered as having complied with
the first and third conditions.

Our point of inquiry should therefore be directed at whether they also complied with the second
condition. It is not denied that when the strikers reported for work on June 2, 1958, 63 members
of the Unions were refused readmission because they had pending criminal charges. However,
despite the fact that they were able to secure their respective clearances 34 officials and union
members were still refused readmission on the alleged ground that they committed acts inimical
to the Companies. It is beyond dispute, however, that non-strikers who also had criminal
charges pending against them in the fiscal's office, arising from the same incidents whence the
criminal charges against the strikers evolved, were readily readmitted and were not required to
secure clearances. This is a clear act of discrimination practiced by the Companies in the
process of rehiring and is therefore a violation of sec. 4(a) (4) of the Industrial Peace Act.

The respondents did not merely discriminate against all the strikers in general. They separated
the active from the less active unionists on the basis of their militancy, or lack of it, on the picket
lines. Unionists belonging to the first category were refused readmission even after they were
able to secure clearances from the competent authorities with respect to the criminal charges
filed against them. It is significant to note in this connection that except for one union official who
deserted his union on the second day of the strike and who later participated in crashing
through the picket lines, not a single union officer was taken back to work. Discrimination
undoubtedly exists where the record shows that the union activity of the rehired strikers has
been less prominent than that of the strikers who were denied reinstatement.

So is there an unfair labor practice where the employer, although


authorized by the Court of Industrial Relations to dismiss the employees
who participated in an illegal strike, dismissed only the leaders of the
strikers, such dismissal being evidence of discrimination against those
dismissed and constituting a waiver of the employer's right to dismiss the
striking employees and a condonation of the fault committed by them."
(Carlos and Fernando, Labor and Social Legislation, p. 62, citing Phil. Air
Lines, Inc. v. Phil. Air Lines Emloyees Association, L-8197, Oct. 31,
1958.)

It is noteworthy that — perhaps in an anticipatory effort to exculpate themselves from charges of


discrimination in the readmission of strikers returning to work — the respondents delegated the
power to readmit to a committee. But the respondent Olbes had chosen Vicente Abella, chief of
the personnel records section, and Ramon Garcia, assistant corporate secretary, to screen the
unionists reporting back to work. It is not difficult to imagine that these two employees — having
been involved in unpleasant incidents with the picketers during the strike — were hostile to the
strikers. Needless to say, the mere act of placing in the hands of employees hostile to the
strikers the power of reinstatement, is a form of discrimination in rehiring.

Delayed reinstatement is a form of discrimination in rehiring, as is having


the machinery of reinstatement in the hands of employees hostile to the
strikers, and reinstating a union official who formerly worked in a
unionized plant, to a job in another mill, which was imperfectly organized.
(Morabe, The Law on Strikes, p. 473, citing Sunshine Mining Co., 7 NLRB
1252; Cleveland Worsted Mills, 43 NLRB 545; emphasis supplied.)

Equally significant is the fact that while the management and the members of the screening
committee admitted the discrimination committed against the strikers, they tossed back and
around to each other the responsibility for the discrimination. Thus, Garcia admitted that in
exercising for the management the authority to screen the returning employees, the committee
admitted the non-strikers but refused readmission to the strikers (tsn., Feb. 6, 1962, pp. 15-19,
23-29). Vicente Abella, chairman of the management's screening committee, while admitting the
discrimination, placed the blame therefor squarely on the management (tsn., Sept. 20, 1960, pp.
7-8, 14-18). But the management, speaking through the respondent Olbes, head of the
Companies, disclaimed responsibility for the discrimination. He testified that "The decision
whether to accept or not an employee was left in the hands of that committee that had been
empowered to look into all cases of the strikers." (tsn., Sept. 6, 1962, p. 19.)

Of course, the respondents — through Ramon Garcia — tried to explain the basis for such
discrimination by testifying that strikers whose participation in any alleged misconduct during the
picketing was not serious in nature were readmissible, while those whose participation was
serious were not. (tsn., Aug. 4, 1961, pp. 48-49, 56). But even this distinction between acts of
slight misconduct and acts of serious misconduct which the respondents contend was the basis
for either reinstatement or discharge, is completely shattered upon a cursory examination of the
evidence on record. For with the exception of Pascual Esquillo whose dismissal sent to the
other strikers cited the alleged commission by them of simple "acts of misconduct."

III. Anent the third assignment of error, the record shows that not a single dismissed striker was
given the opportunity to defend himself against the supposed charges against him. As earlier
mentioned, when the striking employees reported back for work on June 2, 1958, the
respondents refused to readmit them unless they first secured the necessary clearances; but
when all, except three, were able to secure and subsequently present the required clearances,
the respondents still refused to take them back. Instead, several of them later received letters
from the respondents in the following stereotyped tenor:

This will confirm the termination of your employment with the Insular Life-
FGU Insurance Group as of 2 June 1958.

The termination of your employment was due to the fact that you
committed acts of misconduct while picketing during the last strike.
Because this may not constitute sufficient cause under the law to
terminate your employment without pay, we are giving you the amount of
P1,930.32 corresponding to one-half month pay for every year of your
service in the Group Company.

Kindly acknowledge receipt of the check we are sending herewith.

Very truly
yours,

(Sgd.) JOSE
M. OLBES
President,
Insurance Life
Acting
President,
FGU.

The respondents, however, admitted that the alleged "acts of misconduct" attributed to the
dismissed strikers were the same acts with which the said strikers were charged before the
fiscal's office and the courts. But all these charges except three were dropped or dismissed.

Indeed, the individual cases of dismissed officers and members of the striking unions do not
indicate sufficient basis for dismissal.

Emiliano Tabasondra, vice-president of the petitioner FGU Insurance Group Workers &
Employees Association-NATU, was refused reinstatement allegedly because he did not report
for duty on June 2, 1958 and, hence, had abandoned his office. But the overwhelming evidence
adduced at the trial and which the respondents failed to rebut, negates the respondents' charge
that he had abandoned his job. In his testimony, corroborated by many others, Tabasondra
particularly identified the management men to whom he and his group presented themselves on
June 2, 1958. He mentioned the respondent Olbes' secretary, De Asis, as the one who received
them and later directed them — when Olbes refused them an audience — to Felipe Enage, the
Companies' personnel manager. He likewise categorically stated that he and his group went to
see Enage as directed by Olbes' secretary. If Tabasondra were not telling the truth, it would
have been an easy matter for the respondents to produce De Asis and Enage — who testified
anyway as witnesses for the respondents on several occasions — to rebut his testimony. The
respondents did nothing of the kind. Moreover, Tabasondra called on June 21, 1958 the
respondents' attention to his non-admission and asked them to inform him of the reasons
therefor, but instead of doing so, the respondents dismissed him by their letter dated July 10,
1958. Elementary fairness required that before being dismissed for cause, Tabasondra be given
"his day in court."
At any rate, it has been held that mere failure to report for work after notice to return, does not
constitute abandonment nor bar reinstatement. In one case, the U.S. Supreme Court held that
the taking back of six of eleven men constituted discrimination although the five strikers who
were not reinstated, all of whom were prominent in the union and in the strike, reported for work
at various times during the next three days, but were told that there were no openings. Said the
Court:

... The Board found, and we cannot say that its finding is unsupported,
that, in taking back six union men, the respondent's officials discriminated
against the latter on account of their union activities and that the excuse
given that they did not apply until after the quota was full was an
afterthought and not the true reason for the discrimination against them.
(NLRB v. Mackay Radio & Telegraph Co., 304 U.S. 333, 58 Sup. Ct. 904,
82 L. Ed. 1381) (Mathews, Labor Relations and the Law, p. 725, 728)

The respondents' allegation that Tabasondra should have returned after being refused
readmission on June 2, 1958, is not persuasive. When the employer puts off reinstatement
when an employee reports for work at the time agreed, we consider the employee relieved from
the duty of returning further.

Sixto Tongos was dismissed allegedly because he revealed that despite the fact that the
Companies spent more than P80,000 for the vacation trips of officials, they refused to grant
union demands; hence, he betrayed his trust as an auditor of the Companies. We do not find
this allegation convincing. First, this accusation was emphatically denied by Tongos on the
witness stand. Gonzales, president of one of the respondent Companies and one of the officials
referred to, took a trip abroad in 1958. Exchange controls were then in force, and an outgoing
traveller on a combined business and vacation trip was allowed by the Central Bank, per its
Circular 52 (Notification to Authorized Agent Banks) dated May 9, 1952, an allocation of $1,000
or only P2,000, at the official rate of two pesos to the dollar, as pocket money; hence, this was
the only amount that would appear on the books of the Companies. It was only on January 21,
1962, per its Circular 133 (Notification to Authorized Agent Banks), that the Central Bank lifted
the exchange controls. Tongos could not therefore have revealed an amount bigger than the
above sum. And his competence in figures could not be doubted considering that he had
passed the board examinations for certified public accountants. But assuming arguendo that
Tongos indeed revealed the true expenses of Gonzales' trip — which the respondents never
denied or tried to
disprove — his statements clearly fall within the sphere of a unionist's right to discuss and
advertise the facts involved in a labor dispute, in accordance with section 9(a)(5) of Republic Act
875 which guarantees the untramelled exercise by striking employees of the right to give
"publicity to the existence of, or the fact involved in any labor dispute, whether by advertising,
speaking, patrolling or by any method not involving fraud or violence." Indeed, it is not only the
right, it is as well the duty, of every unionist to advertise the facts of a dispute for the purpose of
informing all those affected thereby. In labor disputes, the combatants are expected to expose
the truth before the public to justify their respective demands. Being a union man and one of the
strikers, Tongos was expected to reveal the whole truth on whether or not the respondent
Companies were justified in refusing to accede to union demands. After all, not being one of the
supervisors, he was not a part of management. And his statement, if indeed made, is but an
expression of free speech protected by the Constitution.
Free speech on both sides and for every faction on any side of the labor
relation is to me a constitutional and useful right. Labor is free ... to turn
its publicity on any labor oppression, substandard wages, employer
unfairness, or objectionable working conditions. The employer, too,
should be free to answer and to turn publicity on the records of the
leaders of the unions which seek the confidence of his men ...
(Concurring opinion of Justice Jackson in Thomas v. Collins, 323 U.S.
516, 547, 65 Sup. Ct. 315, 89 L. Ed. 430.) (Mathews, Labor Relations and
the Law, p. 591.)

The respondents also allege that in revealing certain confidential information, Tongos committed
not only a betrayal of trust but also a violation of the moral principles and ethics of accountancy.
But nowhere in the Code of Ethics for Certified Public Accountants under the Revised Rules and
Regulations of the Board of Accountancy formulated in 1954, is this stated. Moreover, the
relationship of the Companies with Tongos was that of an employer and not a client. And with
regard to the testimonies of Juan Raymundo and Antolin Carillo, both vice-presidents of the
Trust Insurance Agencies, Inc. about the alleged utterances made by Tongos, the lower court
should not have given them much weight. The firm of these witnesses was newly established at
that time and was still a "general agency" of the Companies. It is not therefore amiss to
conclude that they were more inclined to favor the respondents rather than Tongos.

Pacifico Ner, Paulino Bugay, Jose Garcia, Narciso Daño, Vicente Alsol and Hermenigildo
Ramirez, opined the lower court, were constructively dismissed by non-readmission allegedly
because they not only prevented Ramon Garcia, assistant corporate secretary, and Vicente
Abella, chief of the personnel records section of the Companies, from entering the Companies'
premises on May 21, 1958, but they also caused bruises and abrasions on Garcia's chest and
forehead — acts considered inimical to the interest of the respondents. The Unions, upon the
other hand, insist that there is complete lack of evidence that Ner took part in pushing Garcia;
that it was Garcia who elbowed his way through the picket lines and therefore Ner shouted
"Close up," which the picketers did; and that Garcia tossed Paulino Bugay's placard and a fight
ensued between them in which both suffered injuries. But despite these conflicting versions of
what actually happened on May 21, 1958, there are grounds to believe that the picketers are not
responsible for what happened.lâwphî1.ñèt The picketing on May 21, 1958, as reported in the
police blotter, was peaceful (see Police blotter report, exh. 3 in CA-G.R. No. 25991-R of the
Court of Appeals, where Ner was acquitted). Moreover, although the Companies during the
strike were holding offices at the Botica Boie building at Escolta, Manila; Tuason Building at San
Vicente Street, Manila; and Ayala, Inc. offices at Makati, Rizal, Garcia, the assistant corporate
secretary, and Abella, the chief of the personnel records section, reported for work at the Insular
Life Building. There is therefore a reasonable suggestion that they were sent to work at the
latter building to create such an incident and have a basis for filing criminal charges against the
petitioners in the fiscal's office and applying for injunction from the court of first instance.
Besides, under the circumstances the picketers were not legally bound to yield their grounds
and withdraw from the picket lines. Being where the law expects them to be in the legitimate
exercise of their rights, they had every reason to defend themselves and their rights from any
assault or unlawful transgression. Yet the police blotter, about adverted to, attests that they did
not resort to violence.

The heated altercations and occasional blows exchanged on the picket line do not affect or
diminish the right to strike. Persuasive on this point is the following commentary: .
We think it must be conceded that some disorder is unfortunately quite
usual in any extensive or long drawn out strike. A strike is essentially a
battle waged with economic weapons. Engaged in it are human beings
whose feelings are stirred to the depths. Rising passions call forth hot
words. Hot words lead to blows on the picket line. The transformation
from economic to physical combat by those engaged in the contest is
difficult to prevent even when cool heads direct the fight. Violence of this
nature, however much it is to be regretted, must have been in the
contemplation of the Congress when it provided in Sec. 13 of Act 29
USCA Sec. 163, that nothing therein should be construed so as to
interfere with or impede or diminish in any way the right to strike. If this
were not so, the rights afforded to employees by the Act would indeed be
illusory. We accordingly recently held that it was not intended by the Act
that minor disorders of this nature would deprive a striker of the possibility
of reinstatement. (Republic Steel Corp. v. N. L. R. B., 107 F2d 472, cited
in Mathews, Labor Relations and the Law, p. 378)

Hence the incident that occurred between Ner, et al. and Ramon Garcia was but a necessary
incident of the strike and should not be considered as a bar to reinstatement. Thus it has been
held that:

Fist-fighting between union and non-union employees in the midst of a strike is no bar to
reinstatement. (Teller, Labor Disputes and Collective Bargaining, Vol. II, p. 855 citing Stackpole
Carbon, Co. 6 NLRB 171, enforced 105 F2d 167.)

Furthermore, assuming that the acts committed by the strikers were transgressions of law, they
amount only to mere ordinary misdemeanors and are not a bar to reinstatement.

In cases involving misdemeanors the board has generally held that unlawful acts are not bar to
reinstatement. (Teller, Labor Disputes and Collective Bargaining, Id., p. 854, citing Ford Motor
Company, 23 NLRB No. 28.)

Finally, it is not disputed that despite the pendency of criminal charges against non-striking
employees before the fiscal's office, they were readily admitted, but those strikers who had
pending charges in the same office were refused readmission. The reinstatement of the strikers
is thus in order.

[W]here the misconduct, whether in reinstating persons equally guilty with


those whose reinstatement is opposed, or in other ways, gives rise to the
inference that union activities rather than misconduct is the basis of his
[employer] objection, the Board has usually required reinstatement."
(Teller, supra, p. 853, citing the Third Annual Report of NLRB [1938], p.
211.)

Lastly, the lower Court justified the constructive dismissal of Florencio Ibarra allegedly because
he committed acts inimical to the interest of the respondents when, as president of the FGU
Workers and Employees Association-NATU, he advised the strikers that they could use force
and violence to have a successful picket and that picketing was precisely intended to prevent
the non-strikers and company clients and customers from entering the Companies' buildings.
Even if this were true, the record discloses that the picket line had been generally peaceful, and
that incidents happened only when management men made incursions into and tried to break
the picket line. At any rate, with or without the advice of Ibarra, picketing is inherently explosive.
For, as pointed out by one author, "The picket line is an explosive front, charged with the
emotions and fierce loyalties of the union-management dispute. It may be marked by colorful
name-calling, intimidating threats or sporadic fights between the pickets and those who pass the
line." (Mathews, Labor Relations and the Law, p. 752). The picket line being the natural result of
the respondents' unfair labor practice, Ibarra's misconduct is at most a misdemeanor which is
not a bar to reinstatement. Besides, the only evidence presented by the Companies regarding
Ibarra's participation in the strike was the testimony of one Rodolfo Encarnacion, a former
member of the board of directors of the petitioner FGU Insurance Group Workers and
Employees Union-NATU, who became a "turncoat" and who likewise testified as to the union
activities of Atty. Lacsina, Ricardo Villaruel and others (annex C, Decision, p. 27) — another
matter which emphasizes the respondents' unfair labor practice. For under the circumstances,
there is good ground to believe that Encarnacion was made to spy on the actvities of the union
members. This act of the respondents is considered unjustifiable interference in the union
activities of the petitioners and is unfair labor practice.

It has been held in a great number of decisions at espionage by an


employer of union activities, or surveillance thereof, are such instances of
interference, restraint or coercion of employees in connection with their
right to organize, form and join unions as to constitute unfair labor
practice.

... "Nothing is more calculated to interfere with, restrain and coerce


employees in the exercise of their right to self-organization than such
activity even where no discharges result. The information obtained by
means of espionage is in valuable to the employer and can be used in a
variety of cases to break a union." The unfair labor practice is committed
whether the espionage is carried on by a professional labor spy or
detective, by officials or supervisory employees of the employer, or by
fellow employees acting at the request or direction of the employer, or an
ex-employee..." (Teller, Labor Disputes and Collective Bargaining, Vol. II,
pp. 765-766, and cases cited.) .

IV. The lower court should have ordered the reinstatement of the officials and members of the
Unions, with full back wages from June 2, 1958 to the date of their actual reinstatement to their
usual employment. Because all too clear from the factual and environmental milieu of this case,
coupled with settled decisional law, is that the Unions went on strike because of the unfair labor
practices committed by the respondents, and that when the strikers reported back for work —
upon the invitation of the respondents — they were discriminatorily dismissed. The members
and officials of the Unions therefore are entitled to reinstatement with back pay.

[W]here the strike was induced and provoked by improper conduct on the
part of an employer amounting to an 'unfair labor practice,' the strikers are
entitled to reinstatement with back pay. (Rothenberg on Labor Relations,
p. 418.)

[A]n employee who has been dismissed in violation of the provisions of


the Act is entitled to reinstatement with back pay upon an adjudication
that the discharge was illegal." (Id., citing Waterman S. S. Corp. v. N. L.
R. B., 119 F2d 760; N. L. R. B. v. Richter's Bakery, 140 F2d 870; N. L. R.
B. v. Southern Wood Preserving Co., 135 F. 2d 606; C. G. Conn, Ltd. v.
N. L. R. B., 108 F2d 390; N. L. R. B. v. American Mfg. Co., 106 F2d 61;
N. L. R. B. v. Kentucky Fire Brick Co., 99 F2d 99.)

And it is not a defense to reinstatement for the respondents to allege that the positions of these
union members have already been filled by replacements.

[W]here the employers' "unfair labor practice" caused or contributed to the


strike or where the 'lock-out' by the employer constitutes an "unfair labor
practice," the employer cannot successfully urge as a defense that the
striking or lock-out employees position has been filled by replacement.
Under such circumstances, if no job sufficiently and satisfactorily
comparable to that previously held by the aggrieved employee can be
found, the employer must discharge the replacement employee, if
necessary, to restore the striking or locked-out worker to his old or
comparable position ... If the employer's improper conduct was an initial
cause of the strike, all the strikers are entitled to reinstatement and the
dismissal of replacement employees wherever necessary; ... . (Id., p. 422
and cases cited.)

A corollary issue to which we now address ourselves is, from what date should the backpay
payable to the unionists be computed? It is now a settled doctrine that strikers who are entitled
to reinstatement are not entitled to back pay during the period of the strike, even though it is
caused by an unfair labor practice. However, if they offer to return to work under the same
conditions just before the strike, the refusal to re-employ or the imposition of conditions
amounting to unfair labor practice is a violation of section 4(a) (4) of the Industrial Peace Act
and the employer is liable for backpay from the date of the offer (Cromwell Commercial
Employees and Laborers Union vs. Court of Industrial Relations, L-19778, Decision, Sept. 30,
1964, 12 SCRA 124; Id., Resolution on motion for reconsideration, 13 SCRA 258; see also
Mathews, Labor Relations and the Law, p. 730 and the cited cases). We have likewise ruled
that discriminatorily dismissed employees must receive backpay from the date of the act of
discrimination, that is, from the date of their discharge (Cromwell Commercial Employees and
Laborers Union vs. Court of Industrial Relations, supra).

The respondents notified the petitioner strikers to report back for work on June 2, 1958, which
the latter did. A great number of them, however, were refused readmission because they had
criminal charges against them pending before the fiscal's office, although non-strikers who were
also facing criminal indictments were readily readmitted. These strikers who were refused
readmission on June 2, 1958 can thus be categorized as discriminatorily dismissed employees
and are entitled to backpay from said date. This is true even with respect to the petitioners Jose
Pilapil, Paulino Bugay, Jr. and Jose Garcia, Jr. who were found guilty only of misdemeanors
which are not considered sufficient to bar reinstatement (Teller, Labor Disputes and Collective
Bargaining, p. 854), especially so because their unlawful acts arose during incidents which were
provoked by the respondents' men. However, since the employees who were denied
readmission have been out of the service of the Companies (for more than ten years) during
which they may have found other employment or other means of livelihood, it is only just and
equitable that whatever they may have earned during that period should be deducted from their
back wages to mitigate somewhat the liability of the company, pursuant to the equitable
principle that no one is allowed to enrich himself at the expense of another (Macleod & Co. of
the Philippines v. Progressive Federation of Labor, 97 Phil. 205 [1955]).

The lower court gave inordinate significance to the payment to and acceptance by the
dismissed employees of separation pay. This Court has ruled that while employers may be
authorized under Republic Act 1052 to terminate employment of employees by serving the
required notice, or, in the absence thereof, by paying the required compensation, the said Act
may not be invoked to justify a dismissal prohibited by law, e.g., dismissal for union activities.

... While Republic Act No. 1052 authorizes a commercial establishment to


terminate the employment of its employee by serving notice on him one
month in advance, or, in the absence thereof, by paying him one month
compensation from the date of the termination of his employment, such
Act does not give to the employer a blanket authority to terminate the
employment regardless of the cause or purpose behind such termination.
Certainly, it cannot be made use of as a cloak to circumvent a final order
of the court or a scheme to trample upon the right of an employee who
has been the victim of an unfair labor practice. (Yu Ki Lam, et al. v. Nena
Micaller, et al., 99 Phil. 904 [1956].)

Finally, we do not share the respondents' view that the findings of fact of the Court of Industrial
Relations are supported by substantial and credible proof. This Court is not therefore precluded
from digging deeper into the factual milieu of the case (Union of Philippine Education
Employees v. Philippine Education Company, 91 Phil. 93; Lu Do & Lu Ym Corporation v.
Philippine-Land-Air-Sea Labor Union, 11 SCRA 134 [1964]).

V. The petitioners (15 of them) ask this Court to cite for contempt the respondent Presiding
Judge Arsenio Martinez of the Court of Industrial Relations and the counsels for the private
respondents, on the ground that the former wrote the following in his decision subject of the
instant petition for certiorari, while the latter quoted the same on pages 90-91 of the
respondents' brief: .

... Says the Supreme Court in the following decisions:

In a proceeding for unfair labor practice, involving a


determination as to whether or not the acts of the
employees concerned justified the adoption of the
employer of disciplinary measures against them, the mere
fact that the employees may be able to put up a valid
defense in a criminal prosecution for the same acts, does
not erase or neutralize the employer's right to impose
discipline on said employees. For it is settled that not even
the acquittal of an employee of the criminal charge against
him is a bar to the employer's right to impose discipline on
its employees, should the act upon which the criminal
charged was based constitute nevertheless an activity
inimical to the employer's interest... The act of the
employees now under consideration may be considered as
a misconduct which is a just cause for dismissal. (Lopez,
Sr., et al. vs. Chronicle Publication Employees Ass'n. et al.,
G.R. No. L-20179-81, December 28, 1964.) (emphasis
supplied)

The two pertinent paragraphs in the above-cited decision * which contained the underscored
portions of the above citation read however as follows:

Differently as regard the dismissal of Orlando Aquino and Carmelito


Vicente, we are inclined to uphold the action taken by the employer as
proper disciplinary measure. A reading of the article which allegedly
caused their dismissal reveals that it really contains an insinuation albeit
subtly of the supposed exertion of political pressure by the Manila
Chronicle management upon the City Fiscal's Office, resulting in the non-
filing of the case against the employer. In rejecting the employer's theory
that the dismissal of Vicente and Aquino was justified, the lower court
considered the article as "a report of some acts and omissions of an
Assistant Fiscal in the exercise of his official functions" and, therefore,
does away with the presumption of malice. This being a proceeding for
unfair labor practice, the matter should not have been viewed or gauged
in the light of the doctrine on a publisher's culpability under the Penal
Code. We are not here to determine whether the employees' act could
stand criminal prosecution, but only to find out whether the aforesaid act
justifies the adoption by the employer of disciplinary measure against
them. This is not sustaining the ruling that the publication in question is
qualified privileged, but even on the assumption that this is so, the
exempting character thereof under the Penal Code does not necessarily
erase or neutralize its effect on the employer's interest which may warrant
employment of disciplinary measure. For it must be remembered that not
even the acquittal of an employee, of the criminal charges against him, is
a bar to the employer's right to impose discipline on its employees, should
the act upon which the criminal charges was based constitute
nevertheless an activity inimical to the employer's interest.

In the herein case, it appears to us that for an employee to publish his


"suspicion," which actually amounts to a public accusation, that his
employer is exerting political pressure on a public official to thwart some
legitimate activities on the employees, which charge, in the least, would
sully the employer's reputation, can be nothing but an act inimical to the
said employer's interest. And the fact that the same was made in the
union newspaper does not alter its deleterious character nor shield or
protect a reprehensible act on the ground that it is a union activity,
because such end can be achieved without resort to improper conduct or
behavior. The act of the employees now under consideration may be
considered as a misconduct which is a just cause for dismissal.**
(Emphasis ours)

It is plain to the naked eye that the 60 un-underscored words of the paragraph quoted by the
respondent Judge do not appear in the pertinent paragraph of this Court's decision in L-20179-
81. Moreover, the first underscored sentence in the quoted paragraph starts with "For it is
settled ..." whereas it reads, "For it must be remembered ...," in this Court's decision. Finally, the
second and last underlined sentence in the quoted paragraph of the respondent Judge's
decision, appears not in the same paragraph of this Court's decision where the other sentence
is, but in the immediately succeeding paragraph.

This apparent error, however, does not seem to warrant an indictment for contempt against the
respondent Judge and the respondents' counsels. We are inclined to believe that the
misquotation is more a result of clerical ineptitude than a deliberate attempt on the part of the
respondent Judge to mislead. We fully realize how saddled with many pending cases are the
courts of the land, and it is not difficult to imagine that because of the pressure of their varied
and multifarious work, clerical errors may escape their notice. Upon the other hand, the
respondents' counsels have the prima facie right to rely on the quotation as it appears in the
respondent Judge's decision, to copy it verbatim, and to incorporate it in their brief. Anyway, the
import of the underscored sentences of the quotation in the respondent Judge's decision is
substantially the same as, and faithfully reflects, the particular ruling in this Court's decision, i.e.,
that "[N]ot even the acquittal of an employee, of the criminal charges against him, is a bar to the
employer's right to impose discipline on its employees, should the act upon which the criminal
charges were based constitute nevertheless an activity inimical to the employer's interest."

Be that as it may, we must articulate our firm view that in citing this Court's decisions and
rulings, it is the bounden duty of courts, judges and lawyers to reproduce or copy the same
word-for-word and punctuation mark-for-punctuation mark. Indeed, there is a salient and
salutary reason why they should do this. Only from this Tribunal's decisions and rulings do all
other courts, as well as lawyers and litigants, take their bearings. This is because the decisions
referred to in article 8 of the Civil Code which reads, "Judicial decisions applying or interpreting
the laws or the Constitution shall form a part of the legal system of the Philippines," are only
those enunciated by this Court of last resort. We said in no uncertain terms in Miranda, et al. vs.
Imperial, et al. (77 Phil. 1066) that "[O]nly the decisions of this Honorable Court establish
jurisprudence or doctrines in this jurisdiction." Thus, ever present is the danger that if not
faithfully and exactly quoted, the decisions and rulings of this Court may lose their proper and
correct meaning, to the detriment of other courts, lawyers and the public who may thereby be
misled. But if inferior courts and members of the bar meticulously discharge their duty to check
and recheck their citations of authorities culled not only from this Court's decisions but from
other sources and make certain that they are verbatim reproductions down to the last word and
punctuation mark, appellate courts will be precluded from acting on misinformation, as well as
be saved precious time in finding out whether the citations are correct.

Happily for the respondent Judge and the respondents' counsels, there was no substantial
change in the thrust of this Court's particular ruling which they cited. It is our view, nonetheless,
that for their mistake, they should be, as they are hereby, admonished to be more careful when
citing jurisprudence in the future. ACCORDINGLY, the decision of the Court of Industrial
Relations dated August 17, 1965 is reversed and set aside, and another is entered, ordering the
respondents to reinstate the dismissed members of the petitioning Unions to their former or
comparatively similar positions, with backwages from June 2, 1958 up to the dates of their
actual reinstatements. Costs against the respondents.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Fernando, Teehankee, Barredo, Villamor
and Makasiar, JJ., concur.

Zaldivar, J., took no part.


G.R. No. 134284, December 1, 2000.

AYALA CORPORATION, petitioner.


vs.
ROSA-DIANA REALTY AND DEVELOPMENT CORPORATION, respondent.

DE LEON, J.:

Before us is a petition for review on certiorari seeking the reversal of a decision rendered by the
Court of Appeals in C.A. G.R. C.V. No. 4598 entitled "Ayala Corporation vs. Rosa-Diana Realty
and Development Corporation, ‘ dismissing Ayala Corporation’s petition for lack of merit.

The facts of the case are not in dispute:

Petitioner Ayala Corporation (herein-after referred to as Ayala) was the registration owner of a
parcel of land located in Alfaro Street, Salcedo Village, Makati City with an area of 840 square
meters, more or less and covered by Transfer Certificate of Title (TCT) No. 233435 of the Register
of Deeds of Rizal.

On April 20, 1976, Ayala sold the lot to Manuel Sy married to Vilma Po and Sy Ka Kieng married
to Rosa Chan. The Deed of Sale executed between Ayala and the buyers contained Special
conditions of sale and Deed Restrictions. Among the Special Conditions of Sale were.

a. The vendee shall build on the lot and submit the building plans to the vendor
before September 30, 1976 for the latter’s approval.
b. The construction of the building shall start on or before March 30, 1977 and
completed before 1979. Before such completion, neither no the title released
even if the purchase price shall have been fully paid.
c. There shall be no resale of the property.
The Deed Restrictions, on the other hand, contained the stipulation that the gross floor area of
the building to be constructed shall not be more than five (5) times the lot area and the total height
shall not exceed forty two (42) meters. The restrictions were to expire in the year 2025.

Manuel Sy and Sy Ka Kieng failed to construct the building in violation of the Special Conditions
of Sale. Notwithstanding the violation, Manuel Sy anf Sy Ka Kieng, in April 1989, were able to sell
the lot to respondent Rosa-Diana Realty and Development Corporation (hereinafter referred to
as Rosa-Diana) with Ayala’s approval. As a consideration for Ayala to release the Certificate of
title of the subject property, Rosa Diana, on July 27, 1989 executed an Undertaking, together with
the buildings plans for a condominium project, known as "The Peak", Ayala released title to the
lot, thereby enabling Rosa-Diana t register the deed of sale in its favor and obtain Certificate of
Title No. 165720 in its name. The title carried as encumbrances the special conditions of sale and
the deed restrictions. Rosa-Diana’s building plans as approved by Ayala were ‘subject to strict
compliance of cautionary notices appearing on the building plans and to the restrictions
encumbering the Lot regarding the use and occupancy of the same.’

Thereafter, Rosa-Diana submitted to the building official of Makati another set of building plans
for "The Peak" which Rosa-Diana submitted to Ayala for approval envisioned a 24-meter high,
seven (7) storey condominium project with a gross floor area of 3,968.56 square meters, the
building plans which Rosa-Diana submitted to the building official of Makati, contemplated a 91.65
meter high, 38 storey condominium building with a gross floor area of 23,305.09 square meters.1
Needless to say, while the first set of building plans complied with the deed restrictions, the latter
set seceded the same.

During the construction of Rosa-Diana’s condominium project, Ayala filed an action with the
Regional Trial Court (RTC) of Makati, Branch 139 for specific performance, with application for a
writ of preliminary injunction/temporary restraining order against Rosa-Diana Realty seeking to
compel the latter to comply with the contractual obligations under the deed of restrictions
annotated on its title as well as with the building plans it submitted to the latter. In the alternative,
Ayala prayed for rescission of the sale of the subject lot to Rosa-Diana Realty.

The lower court denied Ayala’s prayer for injunctive relief, thus enabling Rosa-Diana to complete
the construction of the building. Undeterred, Ayala tried to cause the annotation of a notice of lis
pendens on Rosa-Diana’s title. The Register of Deeds of Makati, however, refused registration of
the notice of lis pendens on the ground that the case pending before the trial court, being an
action for specific performance and/or rescission, is an action in personal which does not involve
the title, use or possession of the property.2 The Land Registration Authority (LRA) reversed the
ruling of the Register of Deeds saying that an action for specific performance or recession may
be classified as a proceeding of any kind in court directly affecting title to the land or the use or
occupation thereof for which a notice of lis pendens may be held proper.3 The decision of the
LRA, however, was overturned by the Court of Appeals in C.A. G.R. S.P. No. 29157. In G.R. No.
112774, We affirmed the ruling of the CA on February 16, 1994 saying.

We agree with respondent court that the notice of lis pendens is not proper in this
instance. The case before the trial court is a personal action since the cause of
action thereof arises primarily from the alleged violation of the Deed of
Restriction.

In the meantime, Ayala completed its presentation of evidence before the trial court. Rosa-Diana
filed a Demurrer to Evidence averring that Ayala failed to establish its right to the relief sought in-
as much as (a) Ayala admittedly does not enforce the deed restrictions uniformly and strictly (b)
Ayala has lost its right/power to enforce the restrictions due to its own acts and omissions; and
(c) the deed restrictions are no longer valid and effective against lot buyers in Ayala’s controlled
subdivision.

The trial court sustained Rosa-Diana’s Demurrer to Evidence saying that Ayala was guilty of
abandonment and/or estoppel due to its failure to enforce the terms of deed of restrictions and
special conditions of sale against Manuel Sy and Sy Ka Kieng. The trial court noted that
notwithstanding the violation of the special conditions of sale, Manuel Sy and Sy Ka Kieng were
able to transfer the title to Rosa-Diana with the approval of Ayala. The trial court added that
Ayala’s failure to enforce the restrictions with respect to Trafalgar, Shellhouse, Eurovilla, LPL
Plaza, Parc Regent, LPL Mansion and Leronville, which are located within Salcedo Village, shows
that Ayala discriminated against those which it wants to have the obligation enforced. The trial
court then concluded that for Ayala to discriminatory choose which obligor would be made to
follow certain conditions and which should not, did not seem fair and legal.

The Court of Appeals affirmed the ruling of the trial court saying that the "appeal is seated by the
doctrine of the law of the case in C.A. G.R. S.P. No. 29157" where it was stated that

xxx Ayala is bared from enforcing the Deed of Restriction in question pursuant to the doctrine of
waiver and estoppel. Under the terms of the deed of sale, the vendee Sy Ka Kieng assumed
faithful compliance with the special conditions of sale and with the Salcedo Village Deed of
Restrictions. One of the conditions was that a building would be constructed within one year.
However, Sy Ka Kieng failed to construct the building as required under the Deed Sale. Ayala did
nothing to enforce the terms of the contract. In fact, it even agreed to the sale of the lot by Sy Ka
Kieng in favor of petitioner Realty in 1989 or thirteen (13) years later. We, therefore, see no
justifiable reason for Ayala to attempt to enforce the terms of the conditions of sale against the
petitioner.

xxx

The Court of Appeals also cited C.A. G.R. C.V. No. 46488 entitled, "Ayala Corporation vs. Ray
Burton Development Corporation’ which relied on C.A. G.R. S.P. No. 29157 in ruling that Ayala
is barred from enforcing the deed restrictions in dispute. Upon a motion for reconsideration filed
by herein petitioner, the Court of Appeals clarified that "the citation of the decision in Ayala
Corporation vs. Ray Burton Development Corporation, Ca G.R. C.V. No. 46488, February 27,
1996, was made not because said decision is res judicata to the case at bar but rather because
it is precedential under the doctrine of stare decisis."

Upon denial of said motion for reconsideration, Ayala filed the present appeal.

Ayala contends that the pronouncement of the Court of Appeals in C.A. G.R. S.P. No. 29157 that
it is estopped from enforcing the deed restrictions is merely obiter dicta inasmuch as the only
issue raised in the aforesaid case was the propriety of a lis pendens annotation on Rosa-Diana’s
certificate of title.

Ayala avers that Rosa-Diana presented no evidence whatsoever on Ayala’s supposed waiver or
estoppel in C.A. G.R. S.P. No. 29157. Ayala likewise pointed out that at the time C.A. G.R. S.P.
No. 29157 was on appeal, the issues of the validity and continued viability of the deed of
restrictions and their enforceability by Ayala were joined and then being tried before the trial court.
Petitioner’s assignment of errors in the present appeal may essentially be summarized as follows:

I. The Court of Appeals acted in manner not in accord with law and the applicable
decisions of the Supreme Court in holding that the doctrine of the law of the
case, or stare decisis, operated to dismiss Ayala’s appeal.
II. The Court of Appeals erred as a matter of law and departed from the accepted
and usual course of judicial proceedings when it failed to expressly pass upon
the specific errors assigned in Ayala’s appeal.

A discussion on the distinctions between law of the case, stare decisis and obiter dicta is in order.

The doctrine of the law of the case has certain affinities with, but is clearly distinguishable from,
the doctrines of res judicata and stare decisis, principally on the ground that the rule of the law of
the case operates only in the particular case and only as a rule of policy and not as one of law. 4
At variance with the doctrine of stare decisis, the ruling adhered to in the particular case under
the doctrine of the law of the case need not be followed as a precedent in subsequent litigation
between other parties, neither by the appellate court which made the decision followed on a
subsequent appeal in the same case, nor by any other court. The ruling covered by the doctrine
of the law of the case is adhered to in the single case where it arises, but is not carried into other
cases as a precedent.5 On the other hand, under the doctrine of stare decisis, once a point of law
has been established by the court, that point of law will, generally, be followed by the same court
and by all courts of lower rank in subsequent cases where the same legal issue is raised. 6 Stare
decisis proceeds from the first principle of justice that, absent powerful countervailing
considerations, like cases ought to be decided alike.7

The Court of Appeals, in ruling against petitioner Ayala Corporation stated that the appeal is
‘sealed’ by the doctrine of the law of the case, referring to G.R. No. 112774 entitled "Ayala
Corporation, petitioner vs. Courts of Appeals, et al., respondents". The Court of Appeals likewise
made reference to C.A. G.R. C.V. No. 46488 entitled, "Ayala Corporation vs. Ray Burton
Development Corporation, Inc." in ruling against petitioner saying that it is jurisprudentially under
the doctrine of stare decisis.

It must be pointed out that the only issue that was raised before the Court of Appeals in C.A. G.R.
S.P. No. 29157 was whether or not the annotation of lis pendens is proper. The Court of Appeals,
in its decision, in fact stated "the principal issue to be resolved is: whether or not an action for
specific performance, or in the alternative, rescission of deed of sale to enforce the deed of
restrictions governing the use of property, is a real or personal action, or one that affects title
thereto and its use or occupation thereof.8

In the aforesaid decision, the Court of Appeals even justified the cancellation of the notice of lis
pendens on the ground that Ayala had ample protection should it succeed in proving its allegations
regarding the violation of the deed of restrictions, without unduly curtailing the right of the
petitioner to fully enjoy its property in the meantime that there is as yet no decision by the trial
court.9

From the foregoing, it is clear that the Court of Appeals was aware that the issue as to whether
petitioner is estopped from enforcing the deed of restrictions has yet to be resolved by the trial
court. Though it did make a pronouncement that the petitioner is estopped from enforcing the
deed of restrictions, it also mentioned at the same time that this particular issue has yet to be
resolved by the trial court. Notably, upon appeal to this Court, We have affirmed the ruling of the
Court of Appeals only as regards the particular issue of the propriety of the cancellation of the
notice of lis pendens.

We see no reason then, how the law of the case or stare decisis can be held to be applicable in
the case at bench. If at all, the pronouncement made by the Court of Appeals that petitioner Ayala
is barred from enforcing the deed of restrictions can only be considered as obiter dicta. As earlier
mentioned the only issue before the Court of Appeals at the time was the propriety of the
annotation of the lis pendens. The additional pronouncement of the Court of Appeals that Ayala
is estopped from enforcing the deed of restrictions even as it recognized that this said issue is
being tried before the trial court was not necessary to dispose of the issue as to the propriety of
the annotation of the lis pendens. A dictum is an opinion of a judge which does not embody the
resolution or determination of the court, and made without argument, or full consideration of the
point, not the proffered deliberate opinion of the judge himself.10 It is not necessarily limited to
issues essential to the decision but may also include expressions of opinion which are not
necessary to support the decision reached by the court. Mere dicta are not binding under the
doctrine of stare decisis11.

While the Court of Appeals did not err in ruling that the present petition is not barred by C.A. G.R.
C.V. No. 46488 entitled "Ayala Corporation vs. Ray Burton Development Inc." under the doctrine
of res judicata, neither, however, can the latter case be cited as presidential under the doctrine of
stare decisis. It must be pointed out that at the time the assailed decision was rendered, C.A. G.R.
C.V. No. 46488 was on appeal with this Court. Significantly, in the decision. We have rendered in
Ayala Corporation vs. Ray Burton Development Corporation12 which became final and executory
on July 5, 1999 we have clearly stated that "An examination of the decision in the said Rosa-
Diana case reveals that the sole issue raised before the appellate court was the propriety of the
lis pendens annotation. However, the appellate court went beyond the sole issue and made
factual findings bereft of any basis in the record to inappropriately rule that AYALA is in estoppel
and has waived its right to enforce the subject restrictions. Such ruling was immaterial to the
annotation of the lis pendens. The finding of estoppel was thus improper and made in excess of
jurisdiction."

Coming now to the merits of the case, petitioner avers that the Court of Appeals departed from
the usual course of judicial proceedings when it failed to expressly pass upon the specific errors
assigned in its appeal. Petitioner reiterates its contention that law and evidence do not support
the trial court’s findings that Ayala has waived its right to enforce the deed of restrictions.

We find merit in the petition.

It is basic that findings of fact of the trial court and the Court of Appeals are conclusive upon the
Supreme Court when supported by substantial evidence.13 We are constrained, however, to
review the trial court'’ findings of fact, which the Court of Appeals chose not to pass upon, in as
much as there is ample evidence on record to show that certain facts were overlooked which
would affect the disposition of the case.

In its assailed decision of February 4, 1994, the trial court, ruled in favor of respondent Rosa-
Diana Realty on the ground that Ayala had not acted fairly when it did not institute an action
against the original vendees despite the latter’s violation of the Special Conditions of Sale but
chose instead to file an action against herein respondent Rosa-Diana. The trial court added that
although the 38-storey building of Rosa-Diana is beyond the total height restriction, it was not
violative of the National Building Code. According to the trial court the construction of the 38 storey
building known as "The Peak" has not been shown to have been prohibited by law and neither is
it against public policy.

It bears emphasis that as complainant, Ayala had the prerogative to initiate an action against
violators of the deed restrictions. That Rosa-Diana had acted in bad faith is manifested by the fact
that it submitted two sets of building plans, one which was in conformity with the deed restrictions
submitted to Ayala and MACEA, and the other, which exceeded the height requirement in the
deed restrictions to the Makati building official for the purpose of procuring a building permit from
the latter. Moreover, the violation of the deed restrictions committed by respondent can hardly be
denominated as a minor violation. It should be pointed out that the original building plan which
was submitted to and approved by petitioner Ayala Corporation, envisioned a twenty four (24)
meter high, seven (7) storey condominium whereas the respondent’s building plan which was
submitted to and approved by the building official of Makati is that of a thirty eight (38) storey,
91.65 meters high, building. At present, the Peak building of respondent which actually stands at
133.65 meters with a total gross floor area of 23,305.09 square meters, seriously violates the
dimensions indicated in the building plans submitted by Rosa-Diana to petitioner Ayala for
approval in as much as the Peak building exceeds the approved height limit by about 109 meters
and the allowable gross floor area under the applicable deed restrictions by about 19,105 square
meters. Clearly, there was a gross violation of the deed restrictions and evident bad faith by the
respondent.

It may not be amiss to mention that the deed restrictions were revised in a general membership
meeting of the association of lot owners in Makati Central Business District the Makati Commercial
Estate Association, Inc. (MACEA).

Whereby direct height restrictions were abolished in lieu of floor area limits. Respondent,
however, did not vote for the approval of this revision during the General Membership meeting,
which was held on July 11, 1990 at the Manila Polo Clud Pavilion, Makati, and Metro Manila.
Hence, respondent continues to be bound by the original deed restrictions applicable to Lot 7,
Block 1 and annotated on its title to said lot. In any event, assuming arguendo that respondent
voted for the approval of direct height restrictions in lieu of floor area limits, the total floor area of
its Peak building would still be violative of the floor area limits to the extent of about 9,865 square
meters of allowable floor area under the MACEA revised restrictions.

Respondent Rosa-Diana avers that there is nothing illegal or unlawful in the building plans which
it used in the construction of the Peak condominium ‘inasmuch as it bears the imprimatur of the
building official of Makati, who is tasked to determine whether building and construction plans are
in accordance with the law, notably, the National Building Code."

Respondent Rosa-Diana, however, misses the point inasmuch as it has freely consented to be
bound by the deed restrictions when it entered into a contract of sale with spouses Manuel Sy
and Sy Ka Kieng. While respondent claims that it was under the impression that Ayala was no
longer enforcing the deed restrictions, the Undertaking14 it executed belies this same claim. In
said Undertaking, respondent agreed to ‘construct and complete the construction of the house on
said lot as required under the special condition of sale." Respondent likewise bound itself to abide
and comply with x x x the condition of the rescission of the scale by Ayala Land, Inc. on the
grounds therein stated x x x.
Contractual obligations between parties have the force of law between them and absent any
allegation that the same are contrary to law, morals, good custom, public order or public policy,
they must be complied with in good faith. Hence, Article 1159 of the New Civil Code provides.

"Obligations arising from contracts have the force of law between the contracting
parties and should be complied with in good faith."

Respondent Rosa-Diana insists that the trial court had already ruled that the undertaking
executed by its Chairman and President cannot validly bind Rosa-Diana and hence, it should not
be held bound by the deed restrictions.

We agree with petitioner Ayala’s observation that respondent Rosa-Diana’s special and
affirmative defenses before the trial court never mentioned any allegation that its president and
chairman were not authorized to execute the Undertaking. It was inappropriate therefore for the
trial court to rule that in the absence of any authority or confirmation from the Board of Directors
of respondent Rosa-Diana, its Chairman and the President cannot validly enter into an
undertaking relative to the construction of the building on the lot within one year from July 27,
1989 and in accordance with the deed restrictions, Curiously, while the trial court stated that it
cannot be presumed that the Chairman and the President can validly bind respondent Rosa-Diana
to enter into the aforesaid Undertaking in the absence of any authority or confirmation from the
Board of Directors, the trial court held that the ordinary presumption of regularity of business
transactions is applicable as regards the Deed of Sale which was executed by Manuel Sy and Sy
Ka Kieng and respondent Rosa-Diana. In the light of the fact that respondent Rosa-Diana never
alleged in its Answer that its president and chairman were not authorized to execute the
Undertaking, the aforesaid ruling of the trial court is without factual and legal basis and
suppressing to say the least.

The fact alone that respondent Rosa-Diana conveniently prepared two sets of building plans –
with one set which fully conformed to the Deed Restrictions and another in gross violation of the
same – should have cautioned the trial court to conclude that respondent Rose-Diana was under
the erroneous impression that the Deed Restrictions were no longer enforceable and that it never
intended to be bound by the Undertaking signed by its President and Chairman. We reiterate that
contractual obligations have the force of law between parties and unless the same is contrary to
public policy morals and good customs, they must be complied by the parties in good faith.

Petitioners, in its Petition, prays that judgement be rendered:

a. ordering Rosa-Diana Realty and Development Corporation to comply with its


contractual obligations in the construction of the Peak by removing, or closing
down and prohibiting Rosa-Diana from using, selling, leasing or otherwise
disposing, of the portions of areas thereof constructed beyond or in excess of the
approved height, as shown by the building plans submitted to, and approved by,
Ayala, including any other portion of the building constructed not in accordance
with the said building plans, during the effectivity of the Deed Restrictions;
b. Alternatively, in the event specific performance has become impossible;

1. ordering the cancellation and recession of the April 20, 1976 Deed of Sale by
Ayala in favor of the original vendees thereof as well as the subsequent Deed of
Sale executed by such original vendees in favor of Rosa-Diana, and ordering
Rosa-Diana to return Ayala Lot 7, Block 1 of Salcedo Village;
2. ordering the cancellation of Transfer Certificate of Title No. 165720 (in the name
of Rosa-Diana) and directing the office of the Register of Deeds of Makati to
issue a new title over the lot in the name of Ayala; and
3. Ordering Rosa-Diana to pay Ayala attorney’s fees in the amount of P500, 000.00,
exemplary damages in the amount of P5, 000,000.00 and the costs of suit.

It must be noted that during the trial respondent Rosa-Diana was able to complete the construction
of The Peak as a building with a height of thirty-eight (38) floors or 133.65 meters. Having been
completed for a number of years already, it would be reasonable to assume that it is now fully
tenanted. Consequently, the remedy of specific performance by respondent is no longer feasible.
However, neither can we grant petitioner’s prayer for the cancellation and rescission of the April
20, 1976 Deed of Sale by petitioner Ayala in favor of respondent Rosa-Diana inasmuch as the
resale of the property by the original vendees, spouses Manuel Sy and Ka Kieng to comply with
their obligation to construct a building within one year from April 20, 1976, has effectively waived
its right to rescind the sale of the subject lot to the original vendees.

Faced with the same question as to the proper remedy available to petitioner in the case of "Ayala
Corporation vs. Ray Burton Development Inc., ‘ a case which is on all fours with the case at bench,
we ruled therein that the party guilty of violating the deed restrictions may only be held alternatively
liable for substitute performance of its obligation, that is, for the payment of damages. In the
aforesaid case it was observed that the Consolidated and Revised Deed Restrictions (CRDR)
imposed development charges on constructions which exceed the estimated Gross Limits
permitted under the original Deed Restrictions but which are within the limits of the
CRDR’s.1âwphi1.nêt

The pertinent portion of the Deed of Restrictions reads:

3. DEVELOPMENT CAHRGE For building construction within the Gross Floor Area limits defined
under Paragraphs C-2.1 to C-2.4 above, but which will result in a Gross Floor Area exceeding
certain standards defined in Paragraphs C-3.1-C below, the OWNER shall pay MACEA, prior to
the construction of any new building a DEVELOPMENT CHARGE as a contribution to a trust fund
to be administered by MACEA. This trust fund shall be used to improve facilities and utilities in
Makati Central District.

3.1 The amount of the development charge that shall be due from the OWNER shall be
computed as follows:

DEVELOPMENT

CAHRGE = A x (B-C-D)

Where:

A – is equal to the a Area Assessment which shall be set at Five Hundred Pesos (P500.00) until
December 31, 1990. Each January 1st thereafter, such amount shall increase by ten percent
(10%) over the immediately preceding year; provided that beginning 1995 and at the end of
every successive five-year period thereafter, the increase in the Area Assessment shall be
reviewed and adjusted by the VENDOR to correspond to the accumulated increase in the
construction cost index during the immediately preceding five years as based on the weighted
average of wholesale price and wage indices of the National Census and Statistics Office and
the Bureau of Labor Statistics.

B – Is equal to the Gross Floor Area of the completed or expanded building in square meters.

C – is equal to the estimated Gross Floor Area permitted under the original deed restrictions,
derived by multiplying the lot area by the effective original FAR shown below for each location.

We then ruled in the aforesaid case that the development; charges are a fair measure of
compensatory damages which therein respondent Ray Burton Development Inc. is liable to Ayala
Corporation. The dispositive portion of the decision in the said case, which is squarely applicable
to the case at bar, reads as, follows:

WHEREFORE, premises considered, the assailed Decision of the Court of Appeals dated
February 27, 1996, in CA G.R. C.V. No. 46488, and its Resolution dated October 7, 1996 are
hereby REVERSED and SET ASIDE, and in lieu thereof judgement is hereby rendered finding
that:

1. The Deed Restrictions are valid and petitioner AYALA is not estopped from
enforcing them against lot owners who have not yet adopted the Consolidated
and Revised Deed Restrictions.
2. Having admitted that the Consolidated and Revised Deed Restrictions are the
applicable Deed Restrictions to Ray Burton Development Corporation, RBDC
should be, and is bound by the same.
3. Considering that Ray Burton Development Corporation’s Trafalgar plaza exceeds
the floor area limits of the Deed Restrictions, RBDC is hereby ordered to pay
development charges as computed under the provisions of the consolidated and
Revised Deed Restrictions currently in force.
4. Ray Burton Development corporation is further ordered to pay AYALA exemplary
damages in the amount of P2, 500,000.00 attorney’s fees in the amount of
P250,000.00

SO ORDERED:

There is no reason why the same rule should not be followed in the case at bar, the remedies of
specific performance and/or rescission prayed for by petitioner no longer being feasible. In
accordance with the peculiar circumstances of the case at bar, the development charges would
certainly be a fair measure of compensatory damages to petitioner Ayala.

Exemplary damages in the sum of P2, 500,000.00 as prayed for by petitioner are also in order
inasmuch as respondent Rosa-Diana was in evident bad faith when it submitted a set of building
plans in conformity with the deed restrictions to petitioner Ayala for the sole purpose of obtaining
title to the property, but only to prepare and later on submit another set of buildings plans which
are in gross violation of the Deed Restrictions. Petitioner Ayala is likewise entitled to an award of
attorney’s fees in the sum of P250, 000.00.

WHEREFORE, the assailed Decision of the Court of Appeals dated December 4, 1997 and its
Resolution dated June 19, 1998, C.A. G.R. C.V. No. 4598, are REVERSED and SET ASIDE. In
lieu thereof, judgement is rendered.
a. orderings respondent Rosa-Diana Realty and Development Corporation to pay
development charges as computed under the provisions of the consolidated and
Revised Deed Restrictions currently in force; and
b. ordering respondent Rosa-Diana Realty and Development Corporation to pay
petitioner Ayala Corporation exemplary damages in the sum of P2,500,00.00,
attorney’s fees in the sum of P250,000.00 and the costs of the suit.
b. G.R. No. 147387 December 10, 2003
c. RODOLFO C. FARIÑAS, MANUEL M. GARCIA, FRANCIS G. ESCUDERO,
and AGAPITO A. AQUINO, AS MEMBERS OF THE HOUSE OF
REPRESENTATIVES AND ALSO AS TAXPAYERS, IN THEIR OWN BEHALF
AND IN REPRESENTATION OF THE MEMBERS OF THE MINORITY IN THE
HOUSE OF REPRESENTATIVES, petitioners,
vs.
THE EXECUTIVE SECRETARY, COMMISSION ON ELECTIONS, HON.
FELICIANO R. BELMONTE, JR., SECRETARY OF THE INTERIOR AND
LOCAL GOVERNMENT, SECRETARY OF THE SENATE, AND SECRETARY
GENERAL OF THE HOUSE OF REPRESENTATIVES, respondents.
d. x-----------------------x
e. G.R. No. 152161
f. CONG. GERRY A. SALAPUDDIN, petitioner,
vs.
COMMISSION ON ELECTIONS, respondent.
g. D E C I S I O N
h. CALLEJO, SR., J.:
i. Before the Court are two Petitions under Rule 65 of the Rules of Court, as
amended, seeking to declare as unconstitutional Section 14 of Republic Act No.
9006 (The Fair Election Act), insofar as it expressly repeals Section 67 of Batas
Pambansa Blg. 881 (The Omnibus Election Code) which provides:
j. SEC. 67. Candidates holding elective office. – Any elective official, whether
national or local, running for any office other than the one which he is holding in a
permanent capacity, except for President and Vice-President, shall be
considered ipso facto resigned from his office upon the filing of his certificate of
candidacy.
k. The petition for certiorari and prohibition in G.R. No. 147387 was filed by Rodolfo
C. Fariñas, Manuel M. Garcia, Francis G. Escudero and Agapito A. Aquino. At
the time of filing of the petition, the petitioners were members of the minority bloc
in the House of Representatives. Impleaded as respondents are: the Executive
Secretary, then Speaker of the House of Representatives Feliciano R. Belmonte,
Jr., the Commission on Elections, the Secretary of the Department of the Interior
and Local Government (DILG), the Secretary of the Senate and the Secretary
General of the House of Representatives.
l. The petition for prohibition in G.R. No. 152161 was filed by Gerry A. Salapuddin,
then also a member of the House of Representatives. Impleaded as respondent
is the COMELEC.
m. Legislative History of Republic Act No. 9006
n. Rep. Act No. 9006, entitled "An Act to Enhance the Holding of Free, Orderly,
Honest, Peaceful and Credible Elections through Fair Election Practices," is a
consolidation of the following bills originating from the House of Representatives
and the Senate, respectively:
o. House Bill (HB) No. 9000 entitled "AN ACT ALLOWING THE USE OF MASS
MEDIA FOR ELECTION PROPAGANDA, AMENDING FOR THE PURPOSE
BATAS PAMBANSA BILANG 881, OTHERWISE KNOWN AS THE ‘OMNIBUS
ELECTION CODE,’ AS AMENDED, AND FOR OTHER PURPOSES;"1
p. …
q. Senate Bill (SB) No. 1742 entitled "AN ACT TO ENHANCE THE HOLDING OF
FREE, ORDERLY, HONEST, PEACEFUL, AND CREDIBLE ELECTIONS
THROUGH FAIR ELECTION PRACTICES."2
r. A Bicameral Conference Committee, composed of eight members of the Senate3
and sixteen (16) members of the House of Representatives,4 was formed to
reconcile the conflicting provisions of the House and Senate versions of the bill.
s. On November 29, 2000, the Bicameral Conference Committee submitted its
Report,5 signed by its members, recommending the approval of the bill as
reconciled and approved by the conferees.
t. During the plenary session of the House of Representatives on February 5, 2001,
Rep. Jacinto V. Paras proposed an amendment to the Bicameral Conference
Committee Report. Rep. Didagen P. Dilangalen raised a point of order
commenting that the House could no longer submit an amendment thereto. Rep.
Sergio A.F. Apostol thereupon moved that the House return the report to the
Bicameral Conference Committee in view of the proposed amendment thereto.
Rep. Dilangalen expressed his objection to the proposal. However, upon viva
voce voting, the majority of the House approved the return of the report to the
Bicameral Conference Committee for proper action.6
u. In view of the proposed amendment, the House of Representatives elected anew
its conferees7 to the Bicameral Conference Committee.8 Then again, for unclear
reasons, upon the motion of Rep. Ignacio R. Bunye, the House elected another
set of conferees9 to the Bicameral Conference Committee.10
v. On February 7, 2001, during the plenary session of the House of
Representatives, Rep. Bunye moved that the House consider the Bicameral
Conference Committee Report on the contrasting provisions of HB No. 9000 and
SB No. 1742. Rep. Dilangalen observed that the report had been recommitted to
the Bicameral Conference Committee. The Chair responded that the Bicameral
Conference Report was a new one, and was a result of the reconvening of a new
Bicameral Conference Committee. Rep. Dilangalen then asked that he be given
time to examine the new report. Upon motion of Rep. Apostol, the House
deferred the approval of the report until the other members were given a copy
thereof.11
w. After taking up other pending matters, the House proceeded to vote on the
Bicameral Conference Committee Report on the disagreeing provisions of HB
No. 9000 and SB No. 1742. The House approved the report with 125 affirmative
votes, 3 negative votes and no abstention. In explaining their negative votes,
Reps. Fariñas and Garcia expressed their belief that Section 14 thereof was a
rider. Even Rep. Escudero, who voted in the affirmative, expressed his doubts on
the constitutionality of Section 14. Prior to casting his vote, Rep. Dilangalen
observed that no senator signed the Bicameral Conference Committee Report
and asked if this procedure was regular.12
x. On the same day, the Senate likewise approved the Bicameral Conference
Committee Report on the contrasting provisions of SB No. 1742 and HB No.
9000.
y. Thereafter, Rep. Act No. 9006 was duly signed by then Senate President
Aquilino Pimentel, Jr. and then Speaker of the House of Representatives
Feliciano R. Belmonte, Jr. and was duly certified by the Secretary of the Senate
Lutgardo B. Barbo and the Secretary General of the House of Representatives
Robert P. Nazareno as "the consolidation of House Bill No. 9000 and Senate Bill
No. 1742," and "finally passed by both Houses on February 7, 2001."
z. President Gloria Macapagal-Arroyo signed Rep. Act No. 9006 into law on
February 12, 2001.
aa. The Petitioners’ Case
bb. The petitioners now come to the Court alleging in the main that Section 14 of
Rep. Act No. 9006, insofar as it repeals Section 67 of the Omnibus Election
Code, is unconstitutional for being in violation of Section 26(1), Article VI of the
Constitution, requiring every law to have only one subject which should be
expressed in its title.
cc. According to the petitioners, the inclusion of Section 14 repealing Section 67 of
the Omnibus Election Code in Rep. Act No. 9006 constitutes a proscribed rider.
They point out the dissimilarity in the subject matter of Rep. Act No. 9006, on the
one hand, and Section 67 of the Omnibus Election Code, on the other. Rep. Act
No. 9006 primarily deals with the lifting of the ban on the use of media for
election propaganda and the elimination of unfair election practices, while
Section 67 of the Omnibus Election Code imposes a limitation on elective
officials who run for an office other than the one they are holding in a permanent
capacity by considering them as ipso facto resigned therefrom upon filing of the
certificate of candidacy. The repeal of Section 67 of the Omnibus Election Code
is thus not embraced in the title, nor germane to the subject matter of Rep. Act
No. 9006.
dd. The petitioners also assert that Section 14 of Rep. Act No. 9006 violates the
equal protection clause of the Constitution because it repeals Section 67 only of
the Omnibus Election Code, leaving intact Section 66 thereof which imposes a
similar limitation to appointive officials, thus:
ee. SEC. 66. Candidates holding appointive office or position. – Any person holding
a public appointive office or position, including active members of the Armed
Forces of the Philippines, and officers and employees in government-owned or
controlled corporations, shall be considered ipso facto resigned from his office
upon the filing of his certificate of candidacy.
ff. They contend that Section 14 of Rep. Act No. 9006 discriminates against
appointive officials. By the repeal of Section 67, an elective official who runs for
office other than the one which he is holding is no longer considered ipso facto
resigned therefrom upon filing his certificate of candidacy. Elective officials
continue in public office even as they campaign for reelection or election for
another elective position. On the other hand, Section 66 has been retained; thus,
the limitation on appointive officials remains - they are still considered ipso facto
resigned from their offices upon the filing of their certificates of candidacy.
gg. The petitioners assert that Rep. Act No. 9006 is null and void in its entirety as
irregularities attended its enactment into law. The law, not only Section 14
thereof, should be declared null and void. Even Section 16 of the law which
provides that "[t]his Act shall take effect upon its approval" is a violation of the
due process clause of the Constitution, as well as jurisprudence, which require
publication of the law before it becomes effective.
hh. Finally, the petitioners maintain that Section 67 of the Omnibus Election Code is
a good law; hence, should not have been repealed. The petitioners cited the
ruling of the Court in Dimaporo v. Mitra, Jr.,13 that Section 67 of the Omnibus
Election Code is based on the constitutional mandate on the "Accountability of
Public Officers:"14
ii. Sec. 1. Public office is a public trust. Public officers and employees must at all
times be accountable to the people, serve them with utmost responsibility,
integrity, loyalty and efficiency, act with patriotism and justice, and lead modest
lives.
jj. Consequently, the respondents Speaker and Secretary General of the House of
Representatives acted with grave abuse of discretion amounting to excess or
lack of jurisdiction for not considering those members of the House who ran for a
seat in the Senate during the May 14, 2001 elections as ipso facto resigned
therefrom, upon the filing of their respective certificates of candidacy.
kk. The Respondents’ Arguments
ll. For their part, the respondents, through the Office of the Solicitor General, urge
this Court to dismiss the petitions contending, preliminarily, that the petitioners
have no legal standing to institute the present suit. Except for the fact that their
negative votes were overruled by the majority of the members of the House of
Representatives, the petitioners have not shown that they have suffered harm as
a result of the passage of Rep. Act No. 9006. Neither do petitioners have any
interest as taxpayers since the assailed statute does not involve the exercise by
Congress of its taxing or spending power.
mm. Invoking the "enrolled bill" doctrine, the respondents refute the petitioners’
allegations that "irregularities" attended the enactment of Rep. Act No. 9006. The
signatures of the Senate President and the Speaker of the House, appearing on
the bill and the certification signed by the respective Secretaries of both houses
of Congress, constitute proof beyond cavil that the bill was duly enacted into law.
nn. The respondents contend that Section 14 of Rep. Act No. 9006, as it repeals
Section 67 of the Omnibus Election Code, is not a proscribed rider nor does it
violate Section 26(1) of Article VI of the Constitution. The title of Rep. Act No.
9006, "An Act to Enhance the Holding of Free, Orderly, Honest, Peaceful and
Credible Elections through Fair Election Practices," is so broad that it
encompasses all the processes involved in an election exercise, including the
filing of certificates of candidacy by elective officials.
oo. They argue that the repeal of Section 67 is germane to the general subject of
Rep. Act No. 9006 as expressed in its title as it eliminates the effect of
prematurely terminating the term of an elective official by his filing of a certificate
of candidacy for an office other than the one which he is permanently holding,
such that he is no longer considered ipso facto resigned therefrom. The
legislature, by including the repeal of Section 67 of the Omnibus Election Code in
Rep. Act No. 9006, has deemed it fit to remove the "unfairness" of considering an
elective official ipso facto resigned from his office upon the filing of his certificate
of candidacy for another elective office. With the repeal of Section 67, all elective
officials are now placed on equal footing as they are allowed to finish their
respective terms even if they run for any office, whether the presidency, vice-
presidency or other elective positions, other than the one they are holding in a
permanent capacity.
pp. The respondents assert that the repeal of Section 67 of the Omnibus Election
Code need not be expressly stated in the title of Rep. Act No. 9006 as the
legislature is not required to make the title of the act a complete index of its
contents. It must be deemed sufficient that the title be comprehensive enough
reasonably to include the general subject which the statute seeks to effect
without expressing each and every means necessary for its accomplishment.
Section 26(1) of Article VI of the Constitution merely calls for all the parts of an
act relating to its subject to find expression in its title. Mere details need not be
set forth.
qq. According to the respondents, Section 14 of Rep. Act No. 9006, insofar as it
repeals Section 67, leaving Section 66 of the Omnibus Election Code intact and
effective, does not violate the equal protection clause of the Constitution. Section
67 pertains to elective officials while Section 66 pertains to appointive officials. A
substantial distinction exists between these two sets of officials; elective officials
occupy their office by virtue of their mandate based upon the popular will, while
the appointive officials are not elected by popular will. The latter cannot,
therefore, be similarly treated as the former. Equal protection simply requires that
all persons or things similarly situated are treated alike, both as to rights
conferred and responsibilities imposed.
rr. Further, Section 16, or the "Effectivity" clause, of Rep. Act No. 9006 does not run
afoul of the due process clause of the Constitution as it does not entail any
arbitrary deprivation of life, liberty and property. Specifically, the section providing
for penalties in cases of violations thereof presume that the formalities of the law
would be observed, i.e., charges would first be filed, and the accused would be
entitled to a hearing before judgment is rendered by a court having jurisdiction. In
any case, the issue about lack of due process is premature as no one has, as
yet, been charged with violation of Rep. Act No. 9006.
ss. Finally, the respondents submit that the respondents Speaker and Secretary
General of the House of Representatives did not commit grave abuse of
discretion in not excluding from the Rolls those members thereof who ran for the
Senate during the May 14, 2001 elections. These respondents merely complied
with Rep. Act No. 9006, which enjoys the presumption of validity until declared
otherwise by the Court.
tt. The Court’s Ruling
uu. Before resolving the petitions on their merits, the Court shall first rule on the
procedural issue raised by the respondents, i.e., whether the petitioners have the
legal standing or locus standi to file the petitions at bar.
vv. The petitions were filed by the petitioners in their capacities as members of the
House of Representatives, and as taxpayers and registered voters.
ww. Generally, a party who impugns the validity of a statute must have a
personal and substantial interest in the case such that he has sustained, or will
sustain, direct injury as a result of its enforcement.15 The rationale for requiring a
party who challenges the constitutionality of a statute to allege such a personal
stake in the outcome of the controversy is "to assure that concrete adverseness
which sharpens the presentation of issues upon which the court so largely
depends for illumination of difficult constitutional questions."16
xx. However, being merely a matter of procedure, this Court, in several cases
involving issues of "overarching significance to our society,"17 had adopted a
liberal stance on standing. Thus, in Tatad v. Secretary of the Department of
Energy,18 this Court brushed aside the procedural requirement of standing, took
cognizance of, and subsequently granted, the petitions separately filed by then
Senator Francisco Tatad and several members of the House of Representatives
assailing the constitutionality of Rep. Act No. 8180 (An Act Deregulating the
Downstream Oil Industry and For Other Purposes).
yy. The Court likewise took cognizance of the petition filed by then members of the
House of Representatives which impugned as unconstitutional the validity of a
provision of Rep. Act No. 6734 (Organic Act for the Autonomous Region in
Muslim Mindanao) in Chiongbian v. Orbos.19 Similarly, the Court took cognizance
of the petition filed by then members of the Senate, joined by other petitioners,
which challenged the validity of Rep. Act No. 7716 (Expanded Value Added Tax
Law) in Tolentino v. Secretary of Finance.20
zz. Members of Congress, such as the petitioners, were likewise allowed by this
Court to challenge the validity of acts, decisions, rulings, or orders of various
government agencies or instrumentalities in Del Mar v. Philippine Amusement
and Gaming Corporation,21 Kilosbayan, Inc. v. Guingona, Jr.,22 Philippine
Constitution Association v. Enriquez,23 Albano v. Reyes,24 and Bagatsing v.
Committee on Privatization.25
aaa. Certainly, the principal issue posed by the petitions, i.e., whether Section
67 of the Omnibus Election Code, which this Court had declared in Dimaporo26
as deriving its existence from the constitutional provision on accountability of
public officers, has been validly repealed by Section 14 of Rep. Act No. 9006, is
one of "overarching significance" that justifies this Court’s adoption of a liberal
stance vis-à-vis the procedural matter on standing. Moreover, with the national
elections barely seven months away, it behooves the Court to confront the issue
now and resolve the same forthrightly. The following pronouncement of the Court
is quite apropos:
bbb. ... All await the decision of this Court on the constitutional question.
Considering, therefore, the importance which the instant case has assumed and
to prevent multiplicity of suits, strong reasons of public policy demand that [its]
constitutionality . . . be now resolved. It may likewise be added that the
exceptional character of the situation that confronts us, the paramount public
interest, and the undeniable necessity for a ruling, the national elections beings
barely six months away, reinforce our stand.27
ccc. Every statute is presumed valid.28 The presumption is that the legislature
intended to enact a valid, sensible and just law and one which operates no
further than may be necessary to effectuate the specific purpose of the law. 29
ddd. It is equally well-established, however, that the courts, as guardians of the
Constitution, have the inherent authority to determine whether a statute enacted
by the legislature transcends the limit imposed by the fundamental law.30 And
where the acts of the other branches of government run afoul of the Constitution,
it is the judiciary’s solemn and sacred duty to nullify the same.31
eee. Proceeding from these guideposts, the Court shall now resolve the
substantial issues raised by the petitions.
fff. Section 14 of Rep. Act No. 9006 Is Not a Rider32
ggg. At the core of the controversy is Section 14, the repealing clause of Rep.
Act No. 9006, which provides:
hhh. Sec. 14. Sections 67 and 85 of the Omnibus Election Code (Batas
Pambansa Blg. 881) and Sections 10 and 11 of Republic Act No. 6646 are
hereby repealed. As a consequence, the first proviso in the third paragraph of
Section 11 of Republic Act No. 8436 is rendered ineffective. All laws, presidential
decrees, executive orders, rules and regulations, or any part thereof inconsistent
with the provisions of this Act are hereby repealed or modified or amended
accordingly.
iii. The repealed provision, Section 67 of the Omnibus Election Code, quoted earlier,
reads:
jjj. SEC. 67. Candidates holding elective office. – Any elective official, whether
national or local, running for any office other than the one which he is holding in a
permanent capacity, except for President and Vice-President, shall be
considered ipso facto resigned from his office upon the filing of his certificate of
candidacy.
kkk. Section 26(1), Article VI of the Constitution provides:
lll. SEC. 26 (1). Every bill passed by the Congress shall embrace only one subject
which shall be expressed in the title thereof.
mmm. The proscription is aimed against the evils of the so-called omnibus bills
and log-rolling legislation as well as surreptitious and/or unconsidered
encroaches. The provision merely calls for all parts of an act relating to its
subject finding expression in its title.33
nnn. To determine whether there has been compliance with the constitutional
requirement that the subject of an act shall be expressed in its title, the Court laid
down the rule that –
ooo. Constitutional provisions relating to the subject matter and titles of
statutes should not be so narrowly construed as to cripple or impede the power
of legislation. The requirement that the subject of an act shall be expressed in its
title should receive a reasonable and not a technical construction. It is sufficient if
the title be comprehensive enough reasonably to include the general object
which a statute seeks to effect, without expressing each and every end and
means necessary or convenient for the accomplishing of that object. Mere details
need not be set forth. The title need not be an abstract or index of the Act.34
ppp. The title of Rep. Act No. 9006 reads: "An Act to Enhance the Holding of
Free, Orderly, Honest, Peaceful and Credible Elections through Fair Election
Practices." Section 2 of the law provides not only the declaration of principles but
also the objectives thereof:
qqq. Sec. 2. Declaration of Principles. – The State shall, during the election
period, supervise or regulate the enjoyment or utilization of all franchises or
permits for the operation of media of communication or information to guarantee
or ensure equal opportunity for public service, including access to media time
and space, and the equitable right to reply, for public information campaigns and
fora among candidates and assure free, orderly, honest, peaceful and credible
elections.
rrr. The State shall ensure that bona fide candidates for any public office shall be
free from any form of harassment and discrimination.35
sss. The Court is convinced that the title and the objectives of Rep. Act No.
9006 are comprehensive enough to include the repeal of Section 67 of the
Omnibus Election Code within its contemplation. To require that the said repeal
of Section 67 of the Code be expressed in the title is to insist that the title be a
complete index of its content.36
ttt. The purported dissimilarity of Section 67 of the Omnibus Election Code, which
imposes a limitation on elective officials who run for an office other than the one
they are holding, to the other provisions of Rep. Act No. 9006, which deal with
the lifting of the ban on the use of media for election propaganda, does not
violate the "one subject-one title" rule. This Court has held that an act having a
single general subject, indicated in the title, may contain any number of
provisions, no matter how diverse they may be, so long as they are not
inconsistent with or foreign to the general subject, and may be considered in
furtherance of such subject by providing for the method and means of carrying
out the general subject.37
uuu. The deliberations of the Bicameral Conference Committee on the
particular matter are particularly instructive:
vvv. SEN. LEGARDA-LEVISTE:
www. Yes, Mr. Chairman, I just wanted to clarify.
xxx. So all we’re looking for now is an appropriate title to make it broader so
that it would cover this provision [referring to the repeal of Section 67 of the
Omnibus Election Code], is that correct? That’s all. Because I believe ...
yyy. THE CHAIRMAN (REP. SYJUCO):
zzz. We are looking for an appropriate coverage which will result in the
nomenclature or title.
aaaa. SEN. LEGARDA-LEVISTE:
bbbb. Because I really do not believe that it is out of place. I think that even with
the term "fair election practice," it really covers it, because as expressed by
Senator Roco, those conditions inserted earlier seemed unfair and it is an
election practice and, therefore, I think, I’m very comfortable with the title "Fair
Election Practice" so that we can get over with these things so that we don’t
come back again until we find the title. I mean, it’s one provision which I think is
fair for everybody. It may seem like a limitation but this limitation actually
provides for fairness in election practices as the title implies.
cccc. THE CHAIRMAN (REP. SYJUCO):
dddd. Yes.
eeee. SEN. LEGARDA-LEVISTE:
ffff. So I would want to beg the House contingent, let’s get it over with. To me, ha, it’s
not a very touchy issue. For me, it’s even a very correct provision. I feel very
comfortable with it and it was voted in the Senate, at least, so I would like to
appeal to the ... para matapos na, then we come back as a Bicam just for the title
Is that what you’re ...?
gggg. THE CHAIRMAN (REP. SYJUCO):
hhhh. It’s not the title per se, it’s the coverage. So if you will just kindly bear with
us. I’m happy that there is already one comfortable senator there among ...
several of us were also comfortable with it. But it would be well that when we rise
from this Bicam that we’re all comfortable with it.
iiii. THE CHAIRMAN (SEN. ROCO):
jjjj. Yes. Anyway, let’s listen to Congressman Marcos.
kkkk. REP. MARCOS:
llll. Mr. Chairman, may I just make the observation that although it is true that the
bulk of provisions deals with the area of propaganda and political advertising, the
complete title is actually one that indulge full coverage. It says "An Act to
enhance the holding of free, orderly, honest ... elections through fair election
practices." But as you said, we will put that aside to discuss later one.
mmmm. Secondly, I think the Declaration of Principles contained in Section 2,
paragraph 2 is perfectly adequate in that it says that it shall ensure candidates for
public office that may be free from any form of harassment and discrimination.
nnnn. Surely this provision in Section 67 of the old Election Code of the existing
Omnibus Election Code is a form of harassment or discrimination. And so I think
that in the effort at leveling the playing field, we can cover this and it should not
be considered a rider.
oooo. SEN. LEGARDA-LEVISTE:
pppp. I agree, Mr. Chairman. I think the Congresswoman from Ilocos had very
clearly put it, that it is covered in the Declaration of Principles and in the objective
of this bill. And therefore, I hope that the House contingent would agree to this so
that we can finish it now. And it expressly provides for fair election practices
because ...
qqqq. THE CHAIRMAN (SEN. ROCO):
rrrr.Yeah, I think what is on the table is that we are not disputing this, but we are
looking for a title that is more generic so that then we have less of an objection
on constitutionality. I think that’s the theory. So, there is acceptance of this.
ssss. Maybe we should not call it na limitation on elected officials. Maybe we
should say the special provision on elected officials. So how is that? Alam mo ito
...
tttt. REP. MARCOS:
uuuu. I think we just change the Section 1, the short title.
vvvv. THE CHAIRMAN (SEN. ROCO):
wwww. Also, Then we say - - on the short title of the Act, we say ...
xxxx. REP. MARCOS:
yyyy. What if we say fair election practices? Maybe that should be changed...
zzzz. THE CHAIRMAN (SEN. ROCO):
aaaaa. O, sige, fine, fine. Let’s a brainstorm. Equal...
bbbbb. REP. PADILLA:
ccccc. Mr. Chairman, why don’t we use "An Act rationalizing the holding of free,
orderly, honest, peaceful and credible elections, amending for the purpose
Batasang Pambansa known as the Omnibus Election Code?"
ddddd. THE CHAIRMAN (SEN. ROCO):
eeeee. Why don’t we remove "fair" and then this shall be cited as Election
Practices Act?"
fffff. REP. PICHAY:
ggggg. That’s not an election practice. That’s a limitation.
hhhhh. THE CHAIRMAN (SEN. ROCO):
iiiii. Ah - - - ayaw mo iyong practice. O, give me another noun.
jjjjj. REP. MARCOS:
kkkkk. The Fair Election.
lllll. THE CHAIRMAN (SEN. ROCO):
mmmmm. O, Fair Election Act.
nnnnn. REP. MACARAMBON:
ooooo. Nagbi-brainstorm tayo dito, eh. How about if we change the title to
enhance the holding of free, orderly, honest, peaceful and ensure equal
opportunity for public service through fair election practices?
ppppp. REP. PICHAY:
qqqqq. Fair election practices?
rrrrr. REP. MACARAMBON:
sssss. Yeah. To ensure equal opportunity for public service through fair ...
ttttt. THE CHAIRMAN (SEN. ROCO):
uuuuu. Wala nang practices nga.
vvvvv. REP. PICHAY:
wwwww. Wala nang practices.
xxxxx. THE CHAIRMAN (SEN. ROCO):
yyyyy. It shall be cited as Fair Election Act.
zzzzz. (Informal discussions)
aaaaaa. REP. PICHAY:
bbbbbb. Approve na iyan.
cccccc. THE CHAIRMAN (SEN. ROCO):
dddddd. Done. So, okay na iyon. The title will be "Fair Election Act."
eeeeee. The rest wala nang problema ano?
ffffff. VOICES:
gggggg. Wala na.
hhhhhh. REP. MACARAMBON:
iiiiii. Wala na iyong practices?
jjjjjj.THE CHAIRMAN (SEN. ROCO):
kkkkkk. Wala na, wala na. Mahina tayo sa practice, eh.
llllll. O, wala na? We will clean up.
mmmmmm. REP. MARCOS:
nnnnnn. Title?
oooooo. THE CHAIRMAN (SEN. ROCO):
pppppp. The short title, "This Act ..."
qqqqqq. THE CHAIRMAN (REP. SYJUCO):
rrrrrr. You’re back to your No. 21 already.
ssssss. REP. MARCOS:
tttttt. The full title, the same?
uuuuuu. THE CHAIRMAN (SEN. ROCO):
vvvvvv. Iyon na nga. The full title is "An Act to enhance the holding ..." That’s the
House version, eh, dahil pareho, hindi ba? Then the short title "This Act shall be
known as the Fair Election Act."38
wwwwww. The legislators considered Section 67 of the Omnibus Election Code as a
form of harassment or discrimination that had to be done away with and
repealed. The executive department found cause with Congress when the
President of the Philippines signed the measure into law. For sure, some sectors
of society and in government may believe that the repeal of Section 67 is bad
policy as it would encourage political adventurism. But policy matters are not the
concern of the Court. Government policy is within the exclusive dominion of the
political branches of the government.39 It is not for this Court to look into the
wisdom or propriety of legislative determination. Indeed, whether an enactment is
wise or unwise, whether it is based on sound economic theory, whether it is the
best means to achieve the desired results, whether, in short, the legislative
discretion within its prescribed limits should be exercised in a particular manner
are matters for the judgment of the legislature, and the serious conflict of
opinions does not suffice to bring them within the range of judicial cognizance.40
Congress is not precluded from repealing Section 67 by the ruling of the Court in
Dimaporo v. Mitra41 upholding the validity of the provision and by its
pronouncement in the same case that the provision has a laudable purpose.
Over time, Congress may find it imperative to repeal the law on its belief that the
election process is thereby enhanced and the paramount objective of election
laws – the fair, honest and orderly election of truly deserving members of
Congress – is achieved.
xxxxxx. Moreover, the avowed purpose of the constitutional directive that the
subject of a bill should be embraced in its title is to apprise the legislators of the
purposes, the nature and scope of its provisions, and prevent the enactment into
law of matters which have not received the notice, action and study of the
legislators and the public.42 In this case, it cannot be claimed that the legislators
were not apprised of the repeal of Section 67 of the Omnibus Election Code as
the same was amply and comprehensively deliberated upon by the members of
the House. In fact, the petitioners, as members of the House of Representatives,
expressed their reservations regarding its validity prior to casting their votes.
Undoubtedly, the legislators were aware of the existence of the provision
repealing Section 67 of the Omnibus Election Code.
yyyyyy. Section 14 of Rep. Act No. 9006
Is Not Violative of the Equal
Protection Clause of the Constitution43
zzzzzz. The petitioners’ contention, that the repeal of Section 67 of the Omnibus
Election Code pertaining to elective officials gives undue benefit to such officials
as against the appointive ones and violates the equal protection clause of the
constitution, is tenuous.
aaaaaaa. The equal protection of the law clause in the Constitution is not absolute,
but is subject to reasonable classification. If the groupings are characterized by
substantial distinctions that make real differences, one class may be treated and
regulated differently from the other.44 The Court has explained the nature of the
equal protection guarantee in this manner:
bbbbbbb. The equal protection of the law clause is against undue favor and
individual or class privilege, as well as hostile discrimination or the oppression of
inequality. It is not intended to prohibit legislation which is limited either in the
object to which it is directed or by territory within which it is to operate. It does not
demand absolute equality among residents; it merely requires that all persons
shall be treated alike, under like circumstances and conditions both as to
privileges conferred and liabilities enforced. The equal protection clause is not
infringed by legislation which applies only to those persons falling within a
specified class, if it applies alike to all persons within such class, and reasonable
grounds exist for making a distinction between those who fall within such class
and those who do not.45
ccccccc. Substantial distinctions clearly exist between elective officials and
appointive officials. The former occupy their office by virtue of the mandate of the
electorate. They are elected to an office for a definite term and may be removed
therefrom only upon stringent conditions.46 On the other hand, appointive officials
hold their office by virtue of their designation thereto by an appointing authority.
Some appointive officials hold their office in a permanent capacity and are
entitled to security of tenure47 while others serve at the pleasure of the appointing
authority.48
ddddddd. Another substantial distinction between the two sets of officials is that
under Section 55, Chapter 8, Title I, Subsection A. Civil Service Commission,
Book V of the Administrative Code of 1987 (Executive Order No. 292), appointive
officials, as officers and employees in the civil service, are strictly prohibited from
engaging in any partisan political activity or take part in any election except to
vote. Under the same provision, elective officials, or officers or employees
holding political offices, are obviously expressly allowed to take part in political
and electoral activities.49
eeeeeee. By repealing Section 67 but retaining Section 66 of the Omnibus Election
Code, the legislators deemed it proper to treat these two classes of officials
differently with respect to the effect on their tenure in the office of the filing of the
certificates of candidacy for any position other than those occupied by them.
Again, it is not within the power of the Court to pass upon or look into the wisdom
of this classification.
fffffff. Since the classification justifying Section 14 of Rep. Act No. 9006, i.e.,
elected officials vis-a-vis appointive officials, is anchored upon material and
significant distinctions and all the persons belonging under the same
classification are similarly treated, the equal protection clause of the Constitution
is, thus, not infringed.
ggggggg. The Enrolled Bill Doctrine
Is Applicable In this Case
hhhhhhh. Not content with their plea for the nullification of Section 14 of Rep. Act
No. 9006, the petitioners insist that the entire law should be nullified. They
contend that irregularities attended the passage of the said law particularly in the
House of Representatives catalogued thus:
iiiiiii. a. Creation of two (2) sets of BCC (Bicameral Conference Committee)
members by the House during its session on February 5, 2001;
jjjjjjj. b. No communication from the Senate for a conference on the
compromise bill submitted by the BCC on November 29, 2000;
kkkkkkk. c. The new Report submitted by the 2nd/3rd BCC was presented for
approval on the floor without copies thereof being furnished the members;
lllllll. d. The 2nd/3rd BCC has no record of its proceedings, and the Report
submitted by it was not signed by the Chairman (Sen. Roco) thereof as well as its
senator-members at the time it was presented to and rammed for approval by the
House;
mmmmmmm. e. There was no meeting actually conducted by the 2nd/3rd BCC
and that its alleged Report was instantly made and passed around for the
signature of the BCC members;
nnnnnnn. f. The Senate has no record of the creation of a 2nd BCC but only of the
first one that convened on November 23, 2000;
ooooooo. g. The "Effectivity" clauses of SB No. 1741 and HB No. 9000, as well as
that of the compromise bill submitted by the BCC that convened on November
20, 2000, were couched in terms that comply with the publication required by the
Civil Code and jurisprudence, to wit:
ppppppp. ...
qqqqqqq. However, it was surreptitiously replaced in its final form as it appears in §
16, R.A. No. 9006, with the provision that "This Act shall take effect immediately
upon its approval;"
rrrrrrr. h. The copy of the compromise bill submitted by the 2nd/3rd BCC that
was furnished the members during its consideration on February 7, 2001, did not
have the same § 16 as it now appears in RA No. 9006, but § 16 of the
compromise bill, HB 9000 and SB 1742, reasons for which no objection thereto
was made;
sssssss. i. The alleged BCC Report presented to the House on February 7, 2001,
did not "contain a detailed, sufficiently explicit statement of the changes in or
amendments to the subject measure;" and
ttttttt. j. The disappearance of the "Cayetano amendment," which is Section 12
of the compromise bill submitted by the BCC. In fact, this was the subject of the
purported proposed amendment to the compromise bill of Member Paras as
stated in paragraph 7 hereof. The said provision states, thusly:
uuuuuuu. Sec. 12. Limitation on Elected Officials. – Any elected official who runs for
president and vice-president shall be considered ipso facto resigned from his
office upon the filing of the certificate of candidacy.50
vvvvvvv. The petitioners, thus, urge the Court to go behind the enrolled copy of the
bill. The Court is not persuaded. Under the "enrolled bill doctrine," the signing of
a bill by the Speaker of the House and the Senate President and the certification
of the Secretaries of both Houses of Congress that it was passed are conclusive
of its due enactment. A review of cases51 reveals the Court’s consistent
adherence to the rule. The Court finds no reason to deviate from the salutary rule
in this case where the irregularities alleged by the petitioners mostly involved the
internal rules of Congress, e.g., creation of the 2nd or 3rd Bicameral Conference
Committee by the House. This Court is not the proper forum for the enforcement
of these internal rules of Congress, whether House or Senate. Parliamentary
rules are merely procedural and with their observance the courts have no
concern.52 Whatever doubts there may be as to the formal validity of Rep. Act No.
9006 must be resolved in its favor. The Court reiterates its ruling in Arroyo v. De
Venecia,53 viz.:
wwwwwww. But the cases, both here and abroad, in varying forms of
expression, all deny to the courts the power to inquire into allegations that, in
enacting a law, a House of Congress failed to comply with its own rules, in the
absence of showing that there was a violation of a constitutional provision or the
rights of private individuals. In Osmeña v. Pendatun, it was held: "At any rate,
courts have declared that ‘the rules adopted by deliberative bodies are subject to
revocation, modification or waiver at the pleasure of the body adopting them.’
And it has been said that ‘Parliamentary rules are merely procedural, and with
their observance, the courts have no concern. They may be waived or
disregarded by the legislative body.’ Consequently, ‘mere failure to conform to
parliamentary usage will not invalidate the action (taken by a deliberative body)
when the requisite number of members have agreed to a particular measure.’"
xxxxxxx. The Effectivity Clause
Is Defective
yyyyyyy. Finally, the "Effectivity" clause (Section 16) of Rep. Act No. 9006 which
provides that it "shall take effect immediately upon its approval," is defective.
However, the same does not render the entire law invalid. In Tañada v. Tuvera,54
this Court laid down the rule:
zzzzzzz. ... the clause "unless it is otherwise provided" refers to the date of
effectivity and not to the requirement of publication itself, which cannot in any
event be omitted. This clause does not mean that the legislator may make the
law effective immediately upon approval, or on any other date without its
previous publication.
aaaaaaaa. Publication is indispensable in every case, but the legislature may in its
discretion provide that the usual fifteen-period shall be shortened or
extended….55
bbbbbbbb. Following Article 2 of the Civil Code56 and the doctrine enunciated in
Tañada, Rep. Act No. 9006, notwithstanding its express statement, took effect
fifteen days after its publication in the Official Gazette or a newspaper of general
circulation.
cccccccc. In conclusion, it bears reiterating that one of the firmly entrenched
principles in constitutional law is that the courts do not involve themselves with
nor delve into the policy or wisdom of a statute. That is the exclusive concern of
the legislative branch of the government. When the validity of a statute is
challenged on constitutional grounds, the sole function of the court is to
determine whether it transcends constitutional limitations or the limits of
legislative power.57 No such transgression has been shown in this case.
dddddddd. WHEREFORE, the petitions are DISMISSED. No pronouncement as to
costs.
eeeeeeee. SO ORDERED.
ffffffff. Davide, Jr., C.J., Puno, Vitug, Panganiban, Quisumbing, Ynares-
Santiago, Sandoval-Gutierrez, Carpio, Austria-Martinez, Corona, Carpio-Morales,
Azcuna, and Tinga, JJ., concur.
gggggggg.
hhhhhhhh. Footnotes
1
iiiiiiii. Annex "A," Petition.
2
jjjjjjjj. Annex "B," id.
3
kkkkkkkk. Senators Raul S. Roco, Francisco S. Tatad, Vicente C. Sotto III,
Gregorio B. Honasan, Robert S. Jaworski, Teresa Aquino-Oreta, Loren Legarda-
Leviste and Sergio Osmeña III.
4
llllllll. Representatives Augusto L. Syjuco, Jr., Imee R. Marcos, Benasing O.
Macarambon, Jr., Rodolfo C. Fariñas, Roseller L. Barinaga, Hussin U. Amin,
Edmundo O. Reyes, Jr., Constantino G. Jaraula, Alipio Cirilo V. Badelles, Francis
Joseph G. Escudero, Eleandro Jesus F. Madrona, Ernesto A Nieva, Aniceto G.
Saludo, Eduardo R. Gullas, Feliciano R. Belmonte, Jr., Sergio Antonio F.
Apostol, Prospero A. Pichay, Jr. and Roy Padilla, Jr.
mmmmmmmm. 5 Annex "C," Petition.
nnnnnnnn. 6 Journal of the House of Representatives, Vol. 62, February 5, 2001, pp.
12-13.
oooooooo. 7 Representatives Edmundo O. Reyes, Jr., Jacinto V. Paras, Augusto
"Boboy" Syjuco, Prospero A. Pichay, Jr., Carlos M. Padilla, Aniceto G. Saludo,
Jr., Gerardo S. Espina, Ricardo V. Quintos and Isidro S. Rodriguez, Jr.
pppppppp. 8 See note 6.
qqqqqqqq. 9 Representatives Carlos M. Padilla, Salvio B. Fortuno, Dante V. Liban,
Roan I. Libarios, Nestor C. Ponce, Jr., Loretta Ann P. Rosales, Magtanggol T.
Gunigundo and Edmundo O. Reyes, Jr.
10
rrrrrrrr. See note 6 at 20.
ssssssss. 11 Journal of the House of Representatives, Vol. 64, February 7, 2001, p.
29.
12
tttttttt. Id. at 32-35.
uuuuuuuu. 13 202 SCRA 779 (1991).
vvvvvvvv. 14 SECTION 1, ARTICLE XI, CONSTITUTION.
15
wwwwwwww. People v. Vera, 65 Phil. 56 (1937).
16
xxxxxxxx. Baker v. Carr, 369 U.S. 186, 7 L.Ed.2d 633 (1962).
yyyyyyyy. 17 Del Mar v. Philippine Amusement and Gaming Corporation, 346 SCRA
485 (2000); Carpio v. Executive Secretary, 206 SCRA 290 (1992); Osmeña v.
Comelec, 199 SCRA 750 (1991); Basco v. PAGCOR, 197 SCRA 52 (1991);
Guingona v. Carague, 196 SCRA 221 (1991); Civil Liberties Union v. Executive
Secretary, 194 SCRA 317 (1991); Philconsa v. Gimenez, 15 SCRA 479 (1965).
zzzzzzzz. 18 281 SCRA 330 (1997).
19
aaaaaaaaa. 245 SCRA 253 (1995).
20
bbbbbbbbb. 235 SCRA 630 (1994).
ccccccccc. 21 Supra.
22
ddddddddd. 232 SCRA 110 (1994).
23
eeeeeeeee. 235 SCRA 506 (1994).
24
fffffffff. 175 SCRA 264 (1989).
25
ggggggggg. 246 SCRA 334 (1995).
26
hhhhhhhhh. Supra.
27
iiiiiiiii. Gonzales v. Commission on Elections, 27 SCRA 835 (1969).
28
jjjjjjjjj. Samson v. Aguirre, 315 SCRA 53 (1999).
29
kkkkkkkkk. In re Guarina, 24 Phil. 37 (1913).
30
lllllllll. Tatad v. Secretary of Department of Energy, supra.
mmmmmmmmm. 31 SECTION 1, ARTICLE VIII, CONSTITUTION reads:
nnnnnnnnn. Sec. 1. The judicial power shall be vested in one Supreme Court
and in such lower courts as may be established by law.
ooooooooo. Judicial power includes the duty of the courts of justice to settle
actual controversies involving rights which are legally demandable and
enforceable, and to determine whether or not there has been a grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government.
32
ppppppppp. A rider is a provision not germane to the subject matter of the
bill. (Alalayan v. NPC, 24 SCRA 172 [1968]).
33
qqqqqqqqq. Alalayan v. NPC, supra.
34
rrrrrrrrr. Cordero v. Cabatuando, 6 SCRA 418 (1962).
sssssssss. 35 Underscoring ours.
36
ttttttttt. Tolentino v. Secretary of Finance, supra.
37
uuuuuuuuu. Tio v. Videogram Regulatory Board, 151 SCRA 208 (1987).
38
vvvvvvvvv. Records of the Bicameral Conference Committee on the Disagreeing
Provisions of Senate Bill No. 1742 and House Bill No. 9000 (Committee on
Electoral Reforms), November 23, 2000, pp. 95-99.
wwwwwwwww. 39 Valmonte v. Belmonte, Jr., 170 SCRA 256 (1989).
xxxxxxxxx. 40 Bayside Fish Flour Co. v. Gentry, 297 US 422, 80 L Ed 772 (1935). See
also Garcia v. Corona, 321 SCRA 218 (1999); Samson v. Aguirre, 315 SCRA 54
(1999); Victoriano v. Elizalde Rope Workers Union, 59 SCRA 54 (1974); Morfe v.
Mutuc, 22 SCRA 424 (1968).
yyyyyyyyy. 41 Supra.
zzzzzzzzz. 42 Ichong v. Hernandez, 101 Phil. 1155 (1957).
43
aaaaaaaaaa. No person shall be deprived of life, liberty, or property without
due process of law, nor shall any person be denied the equal protection of the
laws (SECTION 1, ARTICLE III, CONSTITUTION).
44
bbbbbbbbbb. Tiu v. Court of Appeals, 301 SCRA 278 (1999).
45
cccccccccc. Ichong v. Hernandez, supra, citing 2 Cooley, Constitutional
Limitations, pp. 824-825.
46
dddddddddd. For example, under the Constitution, the grounds by which the
tenure of the members of the House of Representatives and the Senate may be
shortened may be summarized as follows:
eeeeeeeeee. a) Sec. 16, Art. VI: Forfeiture of his seat by holding any other
office or employment in the government or any subdivision, agency or
instrumentality thereof, including government-owned or controlled corporations or
subsidiaries;
ffffffffff. b) Sec. 16 (3), Art. VI: Expulsion as a disciplinary action for disorderly
behavior;
gggggggggg. c) Sec. 17, Art. VI: Disqualification as determined by resolution of
the appropriate Electoral Tribunal in an election contest; and
hhhhhhhhhh. d) Sec. 7, par. 2, Art. VI: Voluntary renunciation of office.
iiiiiiiiii. Further, under Sec. 2, Art. XI of the Constitution, the President and the
Vice-President, along with other impeachable officers, may be removed from
office "on impeachment for, and conviction of, culpable violation of the
Constitution, treason, bribery, graft and corruption, other high crimes, or betrayal
of public trust."
47
jjjjjjjjjj. Section 46, Chapter 7, Title I, Subtitle A. Civil Service Commission,
Book V of the 1987 Administrative Code provides, in part, that "No officer or
employee in the Civil Service shall be suspended or dismissed except for cause
as provided by law and after due process." Further, Section 23, Rule XIV of the
Omnibus Rules Implementing Book V of the 1987 Administrative Code
enumerates the "grave offenses" which are grounds for dismissal upon the
commission of first offense as follows: dishonesty, gross neglect of duty, gross
misconduct, being notoriously undesirable, conviction of a crime involving moral
turpitude, falsification of official document, physical or mental incapacity or
disability due to vicious habits, among others.
48
kkkkkkkkkk. Officers and employees holding primarily confidential positions
have terms of office which expire upon loss of confidence in them by the
appointing authority. (Hernandez v. Villegas, 14 SCRA 544 [1965]).
49
llllllllll. Section 55, Chapter 8, Title I Subsection A. Civil Service Commission,
Book V of the Administrative Code of 1987 (Executive Order No. 292) reads in
full:
mmmmmmmmmm. Sec. 55. Political Activity. – No officer or employee in the
Civil Service including members of the Armed Forces, shall engage, directly or
indirectly, in any partisan political activity or take part in any election except to
vote nor shall he use his official authority or influence to coerce the political
activity of any other person or body. Nothing herein provided shall be understood
to prevent any officer or employee from expressing his views on current political
problems or issues, or from mentioning the names of his candidates for public
office whom he supports: Provided, That public officers and employees holding
political offices may take part in political and electoral activities but it shall be
unlawful for them to solicit contributions from their subordinates or subject them
to any of the acts involving subordinates prohibited in the Election Code.
50
nnnnnnnnnn. MEMORANDUM of the Petitioners in G.R. No. 147387, pp. 19-
20.
51
oooooooooo. Tolentino v. Secretary of Finance, supra; Morales v. Subido, 27
SCRA 131 (1969); Casco (Phil.) Inc. v. Gimenez, 7 SCRA 347 (1963); Mabanag
v. Lopez Vito, 78 Phil. 1 (1947).
52
pppppppppp. Osmeña, Jr. v. Pendatun, 109 Phil. 863 (1960).
53
qqqqqqqqqq. 277 SCRA 268 (1997).
54
rrrrrrrrrr. 146 SCRA 446 (1986).
55
ssssssssss. Id. at 452.
56
tttttttttt. Laws shall take effect after fifteen days following the completion of their
publication in the Official Gazette, unless it is otherwise provided. This Code shall
take effect one year after publication.
57
uuuuuuuuuu. See Tatad v. Secretary of the Department of Energy, supra;
Tañada v. Angara, 272 SCRA 18 (1997); Bondoc v. Pineda, 201 SCRA 792
(1991); Osmeña v. COMELEC, 199 SCRA 750 (1991); Luz Farms v. Secretary of
the Department of Agrarian Reform, 192 SCRA 51 (1990); Gonzales v.
COMELEC, 21 SCRA 774 (1967).
vvvvvvvvvv.
The Lawphil Project - Arellano Law Foundation
G.R. No. 147387 December 10, 2003

RODOLFO C. FARIÑAS, MANUEL M. GARCIA, FRANCIS G. ESCUDERO, and AGAPITO A.


AQUINO, AS MEMBERS OF THE HOUSE OF REPRESENTATIVES AND ALSO AS
TAXPAYERS, IN THEIR OWN BEHALF AND IN REPRESENTATION OF THE MEMBERS OF
THE MINORITY IN THE HOUSE OF REPRESENTATIVES, petitioners,
vs.
THE EXECUTIVE SECRETARY, COMMISSION ON ELECTIONS, HON. FELICIANO R.
BELMONTE, JR., SECRETARY OF THE INTERIOR AND LOCAL GOVERNMENT,
SECRETARY OF THE SENATE, AND SECRETARY GENERAL OF THE HOUSE OF
REPRESENTATIVES, respondents.

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

G.R. No. 152161

CONG. GERRY A. SALAPUDDIN, petitioner,


vs.
COMMISSION ON ELECTIONS, respondent.

DECISION

CALLEJO, SR., J.:

Before the Court are two Petitions under Rule 65 of the Rules of Court, as amended, seeking to
declare as unconstitutional Section 14 of Republic Act No. 9006 (The Fair Election Act), insofar
as it expressly repeals Section 67 of Batas Pambansa Blg. 881 (The Omnibus Election Code)
which provides:
SEC. 67. Candidates holding elective office. – Any elective official, whether national or local,
running for any office other than the one which he is holding in a permanent capacity, except for
President and Vice-President, shall be considered ipso facto resigned from his office upon the
filing of his certificate of candidacy.

The petition for certiorari and prohibition in G.R. No. 147387 was filed by Rodolfo C. Fariñas,
Manuel M. Garcia, Francis G. Escudero and Agapito A. Aquino. At the time of filing of the
petition, the petitioners were members of the minority bloc in the House of Representatives.
Impleaded as respondents are: the Executive Secretary, then Speaker of the House of
Representatives Feliciano R. Belmonte, Jr., the Commission on Elections, the Secretary of the
Department of the Interior and Local Government (DILG), the Secretary of the Senate and the
Secretary General of the House of Representatives.

The petition for prohibition in G.R. No. 152161 was filed by Gerry A. Salapuddin, then also a
member of the House of Representatives. Impleaded as respondent is the COMELEC.

Legislative History of Republic Act No. 9006

Rep. Act No. 9006, entitled "An Act to Enhance the Holding of Free, Orderly, Honest, Peaceful
and Credible Elections through Fair Election Practices," is a consolidation of the following bills
originating from the House of Representatives and the Senate, respectively:

House Bill (HB) No. 9000 entitled "AN ACT ALLOWING THE USE OF MASS MEDIA FOR
ELECTION PROPAGANDA, AMENDING FOR THE PURPOSE BATAS PAMBANSA BILANG
881, OTHERWISE KNOWN AS THE ‘OMNIBUS ELECTION CODE,’ AS AMENDED, AND FOR
OTHER PURPOSES;"1

Senate Bill (SB) No. 1742 entitled "AN ACT TO ENHANCE THE HOLDING OF FREE,
ORDERLY, HONEST, PEACEFUL, AND CREDIBLE ELECTIONS THROUGH FAIR ELECTION
PRACTICES."2

A Bicameral Conference Committee, composed of eight members of the Senate3 and sixteen
(16) members of the House of Representatives,4 was formed to reconcile the conflicting
provisions of the House and Senate versions of the bill.

On November 29, 2000, the Bicameral Conference Committee submitted its Report,5 signed by
its members, recommending the approval of the bill as reconciled and approved by the
conferees.

During the plenary session of the House of Representatives on February 5, 2001, Rep. Jacinto
V. Paras proposed an amendment to the Bicameral Conference Committee Report. Rep.
Didagen P. Dilangalen raised a point of order commenting that the House could no longer
submit an amendment thereto. Rep. Sergio A.F. Apostol thereupon moved that the House
return the report to the Bicameral Conference Committee in view of the proposed amendment
thereto. Rep. Dilangalen expressed his objection to the proposal. However, upon viva voce
voting, the majority of the House approved the return of the report to the Bicameral Conference
Committee for proper action.6
In view of the proposed amendment, the House of Representatives elected anew its conferees7
to the Bicameral Conference Committee.8 Then again, for unclear reasons, upon the motion of
Rep. Ignacio R. Bunye, the House elected another set of conferees9 to the Bicameral
Conference Committee.10

On February 7, 2001, during the plenary session of the House of Representatives, Rep. Bunye
moved that the House consider the Bicameral Conference Committee Report on the contrasting
provisions of HB No. 9000 and SB No. 1742. Rep. Dilangalen observed that the report had been
recommitted to the Bicameral Conference Committee. The Chair responded that the Bicameral
Conference Report was a new one, and was a result of the reconvening of a new Bicameral
Conference Committee. Rep. Dilangalen then asked that he be given time to examine the new
report. Upon motion of Rep. Apostol, the House deferred the approval of the report until the
other members were given a copy thereof.11

After taking up other pending matters, the House proceeded to vote on the Bicameral
Conference Committee Report on the disagreeing provisions of HB No. 9000 and SB No. 1742.
The House approved the report with 125 affirmative votes, 3 negative votes and no abstention.
In explaining their negative votes, Reps. Fariñas and Garcia expressed their belief that Section
14 thereof was a rider. Even Rep. Escudero, who voted in the affirmative, expressed his doubts
on the constitutionality of Section 14. Prior to casting his vote, Rep. Dilangalen observed that no
senator signed the Bicameral Conference Committee Report and asked if this procedure was
regular.12

On the same day, the Senate likewise approved the Bicameral Conference Committee Report
on the contrasting provisions of SB No. 1742 and HB No. 9000.

Thereafter, Rep. Act No. 9006 was duly signed by then Senate President Aquilino Pimentel, Jr.
and then Speaker of the House of Representatives Feliciano R. Belmonte, Jr. and was duly
certified by the Secretary of the Senate Lutgardo B. Barbo and the Secretary General of the
House of Representatives Robert P. Nazareno as "the consolidation of House Bill No. 9000 and
Senate Bill No. 1742," and "finally passed by both Houses on February 7, 2001."

President Gloria Macapagal-Arroyo signed Rep. Act No. 9006 into law on February 12, 2001.

The Petitioners’ Case

The petitioners now come to the Court alleging in the main that Section 14 of Rep. Act No.
9006, insofar as it repeals Section 67 of the Omnibus Election Code, is unconstitutional for
being in violation of Section 26(1), Article VI of the Constitution, requiring every law to have only
one subject which should be expressed in its title.

According to the petitioners, the inclusion of Section 14 repealing Section 67 of the Omnibus
Election Code in Rep. Act No. 9006 constitutes a proscribed rider. They point out the
dissimilarity in the subject matter of Rep. Act No. 9006, on the one hand, and Section 67 of the
Omnibus Election Code, on the other. Rep. Act No. 9006 primarily deals with the lifting of the
ban on the use of media for election propaganda and the elimination of unfair election practices,
while Section 67 of the Omnibus Election Code imposes a limitation on elective officials who run
for an office other than the one they are holding in a permanent capacity by considering them as
ipso facto resigned therefrom upon filing of the certificate of candidacy. The repeal of Section 67
of the Omnibus Election Code is thus not embraced in the title, nor germane to the subject
matter of Rep. Act No. 9006.

The petitioners also assert that Section 14 of Rep. Act No. 9006 violates the equal protection
clause of the Constitution because it repeals Section 67 only of the Omnibus Election Code,
leaving intact Section 66 thereof which imposes a similar limitation to appointive officials, thus:

SEC. 66. Candidates holding appointive office or position. – Any person holding a public
appointive office or position, including active members of the Armed Forces of the Philippines,
and officers and employees in government-owned or controlled corporations, shall be
considered ipso facto resigned from his office upon the filing of his certificate of candidacy.

They contend that Section 14 of Rep. Act No. 9006 discriminates against appointive officials. By
the repeal of Section 67, an elective official who runs for office other than the one which he is
holding is no longer considered ipso facto resigned therefrom upon filing his certificate of
candidacy. Elective officials continue in public office even as they campaign for reelection or
election for another elective position. On the other hand, Section 66 has been retained; thus, the
limitation on appointive officials remains - they are still considered ipso facto resigned from their
offices upon the filing of their certificates of candidacy.

The petitioners assert that Rep. Act No. 9006 is null and void in its entirety as irregularities
attended its enactment into law. The law, not only Section 14 thereof, should be declared null
and void. Even Section 16 of the law which provides that "[t]his Act shall take effect upon its
approval" is a violation of the due process clause of the Constitution, as well as jurisprudence,
which require publication of the law before it becomes effective.

Finally, the petitioners maintain that Section 67 of the Omnibus Election Code is a good law;
hence, should not have been repealed. The petitioners cited the ruling of the Court in Dimaporo
v. Mitra, Jr.,13 that Section 67 of the Omnibus Election Code is based on the constitutional
mandate on the "Accountability of Public Officers:"14

Sec. 1. Public office is a public trust. Public officers and employees must at all times be
accountable to the people, serve them with utmost responsibility, integrity, loyalty and efficiency,
act with patriotism and justice, and lead modest lives.

Consequently, the respondents Speaker and Secretary General of the House of


Representatives acted with grave abuse of discretion amounting to excess or lack of jurisdiction
for not considering those members of the House who ran for a seat in the Senate during the
May 14, 2001 elections as ipso facto resigned therefrom, upon the filing of their respective
certificates of candidacy.

The Respondents’ Arguments

For their part, the respondents, through the Office of the Solicitor General, urge this Court to
dismiss the petitions contending, preliminarily, that the petitioners have no legal standing to
institute the present suit. Except for the fact that their negative votes were overruled by the
majority of the members of the House of Representatives, the petitioners have not shown that
they have suffered harm as a result of the passage of Rep. Act No. 9006. Neither do petitioners
have any interest as taxpayers since the assailed statute does not involve the exercise by
Congress of its taxing or spending power.
Invoking the "enrolled bill" doctrine, the respondents refute the petitioners’ allegations that
"irregularities" attended the enactment of Rep. Act No. 9006. The signatures of the Senate
President and the Speaker of the House, appearing on the bill and the certification signed by the
respective Secretaries of both houses of Congress, constitute proof beyond cavil that the bill
was duly enacted into law.

The respondents contend that Section 14 of Rep. Act No. 9006, as it repeals Section 67 of the
Omnibus Election Code, is not a proscribed rider nor does it violate Section 26(1) of Article VI of
the Constitution. The title of Rep. Act No. 9006, "An Act to Enhance the Holding of Free,
Orderly, Honest, Peaceful and Credible Elections through Fair Election Practices," is so broad
that it encompasses all the processes involved in an election exercise, including the filing of
certificates of candidacy by elective officials.

They argue that the repeal of Section 67 is germane to the general subject of Rep. Act No. 9006
as expressed in its title as it eliminates the effect of prematurely terminating the term of an
elective official by his filing of a certificate of candidacy for an office other than the one which he
is permanently holding, such that he is no longer considered ipso facto resigned therefrom. The
legislature, by including the repeal of Section 67 of the Omnibus Election Code in Rep. Act No.
9006, has deemed it fit to remove the "unfairness" of considering an elective official ipso facto
resigned from his office upon the filing of his certificate of candidacy for another elective office.
With the repeal of Section 67, all elective officials are now placed on equal footing as they are
allowed to finish their respective terms even if they run for any office, whether the presidency,
vice-presidency or other elective positions, other than the one they are holding in a permanent
capacity.

The respondents assert that the repeal of Section 67 of the Omnibus Election Code need not be
expressly stated in the title of Rep. Act No. 9006 as the legislature is not required to make the
title of the act a complete index of its contents. It must be deemed sufficient that the title be
comprehensive enough reasonably to include the general subject which the statute seeks to
effect without expressing each and every means necessary for its accomplishment. Section
26(1) of Article VI of the Constitution merely calls for all the parts of an act relating to its subject
to find expression in its title. Mere details need not be set forth.

According to the respondents, Section 14 of Rep. Act No. 9006, insofar as it repeals Section 67,
leaving Section 66 of the Omnibus Election Code intact and effective, does not violate the equal
protection clause of the Constitution. Section 67 pertains to elective officials while Section 66
pertains to appointive officials. A substantial distinction exists between these two sets of
officials; elective officials occupy their office by virtue of their mandate based upon the popular
will, while the appointive officials are not elected by popular will. The latter cannot, therefore, be
similarly treated as the former. Equal protection simply requires that all persons or things
similarly situated are treated alike, both as to rights conferred and responsibilities imposed.

Further, Section 16, or the "Effectivity" clause, of Rep. Act No. 9006 does not run afoul of the
due process clause of the Constitution as it does not entail any arbitrary deprivation of life,
liberty and property. Specifically, the section providing for penalties in cases of violations thereof
presume that the formalities of the law would be observed, i.e., charges would first be filed, and
the accused would be entitled to a hearing before judgment is rendered by a court having
jurisdiction. In any case, the issue about lack of due process is premature as no one has, as yet,
been charged with violation of Rep. Act No. 9006.
Finally, the respondents submit that the respondents Speaker and Secretary General of the
House of Representatives did not commit grave abuse of discretion in not excluding from the
Rolls those members thereof who ran for the Senate during the May 14, 2001 elections. These
respondents merely complied with Rep. Act No. 9006, which enjoys the presumption of validity
until declared otherwise by the Court.

The Court’s Ruling

Before resolving the petitions on their merits, the Court shall first rule on the procedural issue
raised by the respondents, i.e., whether the petitioners have the legal standing or locus standi to
file the petitions at bar.

The petitions were filed by the petitioners in their capacities as members of the House of
Representatives, and as taxpayers and registered voters.

Generally, a party who impugns the validity of a statute must have a personal and substantial
interest in the case such that he has sustained, or will sustain, direct injury as a result of its
enforcement.15 The rationale for requiring a party who challenges the constitutionality of a
statute to allege such a personal stake in the outcome of the controversy is "to assure that
concrete adverseness which sharpens the presentation of issues upon which the court so
largely depends for illumination of difficult constitutional questions."16

However, being merely a matter of procedure, this Court, in several cases involving issues of
"overarching significance to our society,"17 had adopted a liberal stance on standing. Thus, in
Tatad v. Secretary of the Department of Energy,18 this Court brushed aside the procedural
requirement of standing, took cognizance of, and subsequently granted, the petitions separately
filed by then Senator Francisco Tatad and several members of the House of Representatives
assailing the constitutionality of Rep. Act No. 8180 (An Act Deregulating the Downstream Oil
Industry and For Other Purposes).

The Court likewise took cognizance of the petition filed by then members of the House of
Representatives which impugned as unconstitutional the validity of a provision of Rep. Act No.
6734 (Organic Act for the Autonomous Region in Muslim Mindanao) in Chiongbian v. Orbos. 19
Similarly, the Court took cognizance of the petition filed by then members of the Senate, joined
by other petitioners, which challenged the validity of Rep. Act No. 7716 (Expanded Value Added
Tax Law) in Tolentino v. Secretary of Finance.20

Members of Congress, such as the petitioners, were likewise allowed by this Court to challenge
the validity of acts, decisions, rulings, or orders of various government agencies or
instrumentalities in Del Mar v. Philippine Amusement and Gaming Corporation,21 Kilosbayan,
Inc. v. Guingona, Jr.,22 Philippine Constitution Association v. Enriquez,23 Albano v. Reyes,24 and
Bagatsing v. Committee on Privatization.25

Certainly, the principal issue posed by the petitions, i.e., whether Section 67 of the Omnibus
Election Code, which this Court had declared in Dimaporo26 as deriving its existence from the
constitutional provision on accountability of public officers, has been validly repealed by Section
14 of Rep. Act No. 9006, is one of "overarching significance" that justifies this Court’s adoption
of a liberal stance vis-à-vis the procedural matter on standing. Moreover, with the national
elections barely seven months away, it behooves the Court to confront the issue now and
resolve the same forthrightly. The following pronouncement of the Court is quite apropos:
... All await the decision of this Court on the constitutional question. Considering, therefore, the
importance which the instant case has assumed and to prevent multiplicity of suits, strong
reasons of public policy demand that [its] constitutionality . . . be now resolved. It may likewise
be added that the exceptional character of the situation that confronts us, the paramount public
interest, and the undeniable necessity for a ruling, the national elections beings barely six
months away, reinforce our stand.27

Every statute is presumed valid.28 The presumption is that the legislature intended to enact a
valid, sensible and just law and one which operates no further than may be necessary to
effectuate the specific purpose of the law.29

It is equally well-established, however, that the courts, as guardians of the Constitution, have
the inherent authority to determine whether a statute enacted by the legislature transcends the
limit imposed by the fundamental law.30 And where the acts of the other branches of government
run afoul of the Constitution, it is the judiciary’s solemn and sacred duty to nullify the same. 31

Proceeding from these guideposts, the Court shall now resolve the substantial issues raised by
the petitions.

Section 14 of Rep. Act No. 9006 Is Not a Rider32

At the core of the controversy is Section 14, the repealing clause of Rep. Act No. 9006, which
provides:

Sec. 14. Sections 67 and 85 of the Omnibus Election Code (Batas Pambansa Blg. 881) and
Sections 10 and 11 of Republic Act No. 6646 are hereby repealed. As a consequence, the first
proviso in the third paragraph of Section 11 of Republic Act No. 8436 is rendered ineffective. All
laws, presidential decrees, executive orders, rules and regulations, or any part thereof
inconsistent with the provisions of this Act are hereby repealed or modified or amended
accordingly.

The repealed provision, Section 67 of the Omnibus Election Code, quoted earlier, reads:

SEC. 67. Candidates holding elective office. – Any elective official, whether national or local,
running for any office other than the one which he is holding in a permanent capacity, except for
President and Vice-President, shall be considered ipso facto resigned from his office upon the
filing of his certificate of candidacy.

Section 26(1), Article VI of the Constitution provides:

SEC. 26 (1). Every bill passed by the Congress shall embrace only one subject which shall be
expressed in the title thereof.

The proscription is aimed against the evils of the so-called omnibus bills and log-rolling
legislation as well as surreptitious and/or unconsidered encroaches. The provision merely calls
for all parts of an act relating to its subject finding expression in its title.33

To determine whether there has been compliance with the constitutional requirement that the
subject of an act shall be expressed in its title, the Court laid down the rule that –
Constitutional provisions relating to the subject matter and titles of statutes should not be so
narrowly construed as to cripple or impede the power of legislation. The requirement that the
subject of an act shall be expressed in its title should receive a reasonable and not a technical
construction. It is sufficient if the title be comprehensive enough reasonably to include the
general object which a statute seeks to effect, without expressing each and every end and
means necessary or convenient for the accomplishing of that object. Mere details need not be
set forth. The title need not be an abstract or index of the Act.34

The title of Rep. Act No. 9006 reads: "An Act to Enhance the Holding of Free, Orderly, Honest,
Peaceful and Credible Elections through Fair Election Practices." Section 2 of the law provides
not only the declaration of principles but also the objectives thereof:

Sec. 2. Declaration of Principles. – The State shall, during the election period, supervise or
regulate the enjoyment or utilization of all franchises or permits for the operation of media of
communication or information to guarantee or ensure equal opportunity for public service,
including access to media time and space, and the equitable right to reply, for public information
campaigns and fora among candidates and assure free, orderly, honest, peaceful and credible
elections.

The State shall ensure that bona fide candidates for any public office shall be free from any form
of harassment and discrimination.35

The Court is convinced that the title and the objectives of Rep. Act No. 9006 are comprehensive
enough to include the repeal of Section 67 of the Omnibus Election Code within its
contemplation. To require that the said repeal of Section 67 of the Code be expressed in the title
is to insist that the title be a complete index of its content.36

The purported dissimilarity of Section 67 of the Omnibus Election Code, which imposes a
limitation on elective officials who run for an office other than the one they are holding, to the
other provisions of Rep. Act No. 9006, which deal with the lifting of the ban on the use of media
for election propaganda, does not violate the "one subject-one title" rule. This Court has held
that an act having a single general subject, indicated in the title, may contain any number of
provisions, no matter how diverse they may be, so long as they are not inconsistent with or
foreign to the general subject, and may be considered in furtherance of such subject by
providing for the method and means of carrying out the general subject.37

The deliberations of the Bicameral Conference Committee on the particular matter are
particularly instructive:

SEN. LEGARDA-LEVISTE:

Yes, Mr. Chairman, I just wanted to clarify.

So all we’re looking for now is an appropriate title to make it broader so that it would cover this
provision [referring to the repeal of Section 67 of the Omnibus Election Code], is that correct?
That’s all. Because I believe ...

THE CHAIRMAN (REP. SYJUCO):

We are looking for an appropriate coverage which will result in the nomenclature or title.
SEN. LEGARDA-LEVISTE:

Because I really do not believe that it is out of place. I think that even with the term "fair election
practice," it really covers it, because as expressed by Senator Roco, those conditions inserted
earlier seemed unfair and it is an election practice and, therefore, I think, I’m very comfortable
with the title "Fair Election Practice" so that we can get over with these things so that we don’t
come back again until we find the title. I mean, it’s one provision which I think is fair for
everybody. It may seem like a limitation but this limitation actually provides for fairness in
election practices as the title implies.

THE CHAIRMAN (REP. SYJUCO):

Yes.

SEN. LEGARDA-LEVISTE:

So I would want to beg the House contingent, let’s get it over with. To me, ha, it’s not a very
touchy issue. For me, it’s even a very correct provision. I feel very comfortable with it and it was
voted in the Senate, at least, so I would like to appeal to the ... para matapos na, then we come
back as a Bicam just for the title Is that what you’re ...?

THE CHAIRMAN (REP. SYJUCO):

It’s not the title per se, it’s the coverage. So if you will just kindly bear with us. I’m happy that
there is already one comfortable senator there among ... several of us were also comfortable
with it. But it would be well that when we rise from this Bicam that we’re all comfortable with it.

THE CHAIRMAN (SEN. ROCO):

Yes. Anyway, let’s listen to Congressman Marcos.

REP. MARCOS:

Mr. Chairman, may I just make the observation that although it is true that the bulk of provisions
deals with the area of propaganda and political advertising, the complete title is actually one that
indulge full coverage. It says "An Act to enhance the holding of free, orderly, honest ... elections
through fair election practices." But as you said, we will put that aside to discuss later one.

Secondly, I think the Declaration of Principles contained in Section 2, paragraph 2 is perfectly


adequate in that it says that it shall ensure candidates for public office that may be free from any
form of harassment and discrimination.

Surely this provision in Section 67 of the old Election Code of the existing Omnibus Election
Code is a form of harassment or discrimination. And so I think that in the effort at leveling the
playing field, we can cover this and it should not be considered a rider.

SEN. LEGARDA-LEVISTE:
I agree, Mr. Chairman. I think the Congresswoman from Ilocos had very clearly put it, that it is
covered in the Declaration of Principles and in the objective of this bill. And therefore, I hope
that the House contingent would agree to this so that we can finish it now. And it expressly
provides for fair election practices because ...

THE CHAIRMAN (SEN. ROCO):

Yeah, I think what is on the table is that we are not disputing this, but we are looking for a title
that is more generic so that then we have less of an objection on constitutionality. I think that’s
the theory. So, there is acceptance of this.

Maybe we should not call it na limitation on elected officials. Maybe we should say the special
provision on elected officials. So how is that? Alam mo ito ...

REP. MARCOS:

I think we just change the Section 1, the short title.

THE CHAIRMAN (SEN. ROCO):

Also, Then we say - - on the short title of the Act, we say ...

REP. MARCOS:

What if we say fair election practices? Maybe that should be changed...

THE CHAIRMAN (SEN. ROCO):

O, sige, fine, fine. Let’s a brainstorm. Equal...

REP. PADILLA:

Mr. Chairman, why don’t we use "An Act rationalizing the holding of free, orderly, honest,
peaceful and credible elections, amending for the purpose Batasang Pambansa known as the
Omnibus Election Code?"

THE CHAIRMAN (SEN. ROCO):

Why don’t we remove "fair" and then this shall be cited as Election Practices Act?"

REP. PICHAY:

That’s not an election practice. That’s a limitation.

THE CHAIRMAN (SEN. ROCO):

Ah - - - ayaw mo iyong practice. O, give me another noun.

REP. MARCOS:
The Fair Election.

THE CHAIRMAN (SEN. ROCO):

O, Fair Election Act.

REP. MACARAMBON:

Nagbi-brainstorm tayo dito, eh. How about if we change the title to enhance the holding of free,
orderly, honest, peaceful and ensure equal opportunity for public service through fair election
practices?

REP. PICHAY:

Fair election practices?

REP. MACARAMBON:

Yeah. To ensure equal opportunity for public service through fair ...

THE CHAIRMAN (SEN. ROCO):

Wala nang practices nga.

REP. PICHAY:

Wala nang practices.

THE CHAIRMAN (SEN. ROCO):

It shall be cited as Fair Election Act.

(Informal discussions)

REP. PICHAY:

Approve na iyan.

THE CHAIRMAN (SEN. ROCO):

Done. So, okay na iyon. The title will be "Fair Election Act."

The rest wala nang problema ano?

VOICES:

Wala na.
REP. MACARAMBON:

Wala na iyong practices?

THE CHAIRMAN (SEN. ROCO):

Wala na, wala na. Mahina tayo sa practice, eh.

O, wala na? We will clean up.

REP. MARCOS:

Title?

THE CHAIRMAN (SEN. ROCO):

The short title, "This Act ..."

THE CHAIRMAN (REP. SYJUCO):

You’re back to your No. 21 already.

REP. MARCOS:

The full title, the same?

THE CHAIRMAN (SEN. ROCO):

Iyon na nga. The full title is "An Act to enhance the holding ..." That’s the House version, eh,
dahil pareho, hindi ba? Then the short title "This Act shall be known as the Fair Election Act."38

The legislators considered Section 67 of the Omnibus Election Code as a form of harassment or
discrimination that had to be done away with and repealed. The executive department found
cause with Congress when the President of the Philippines signed the measure into law. For
sure, some sectors of society and in government may believe that the repeal of Section 67 is
bad policy as it would encourage political adventurism. But policy matters are not the concern of
the Court. Government policy is within the exclusive dominion of the political branches of the
government.39 It is not for this Court to look into the wisdom or propriety of legislative
determination. Indeed, whether an enactment is wise or unwise, whether it is based on sound
economic theory, whether it is the best means to achieve the desired results, whether, in short,
the legislative discretion within its prescribed limits should be exercised in a particular manner
are matters for the judgment of the legislature, and the serious conflict of opinions does not
suffice to bring them within the range of judicial cognizance.40 Congress is not precluded from
repealing Section 67 by the ruling of the Court in Dimaporo v. Mitra41 upholding the validity of
the provision and by its pronouncement in the same case that the provision has a laudable
purpose. Over time, Congress may find it imperative to repeal the law on its belief that the
election process is thereby enhanced and the paramount objective of election laws – the fair,
honest and orderly election of truly deserving members of Congress – is achieved.
Moreover, the avowed purpose of the constitutional directive that the subject of a bill should be
embraced in its title is to apprise the legislators of the purposes, the nature and scope of its
provisions, and prevent the enactment into law of matters which have not received the notice,
action and study of the legislators and the public.42 In this case, it cannot be claimed that the
legislators were not apprised of the repeal of Section 67 of the Omnibus Election Code as the
same was amply and comprehensively deliberated upon by the members of the House. In fact,
the petitioners, as members of the House of Representatives, expressed their reservations
regarding its validity prior to casting their votes. Undoubtedly, the legislators were aware of the
existence of the provision repealing Section 67 of the Omnibus Election Code.

Section 14 of Rep. Act No. 9006


Is Not Violative of the Equal
Protection Clause of the Constitution43

The petitioners’ contention, that the repeal of Section 67 of the Omnibus Election Code
pertaining to elective officials gives undue benefit to such officials as against the appointive
ones and violates the equal protection clause of the constitution, is tenuous.

The equal protection of the law clause in the Constitution is not absolute, but is subject to
reasonable classification. If the groupings are characterized by substantial distinctions that
make real differences, one class may be treated and regulated differently from the other.44 The
Court has explained the nature of the equal protection guarantee in this manner:

The equal protection of the law clause is against undue favor and individual or class privilege,
as well as hostile discrimination or the oppression of inequality. It is not intended to prohibit
legislation which is limited either in the object to which it is directed or by territory within which it
is to operate. It does not demand absolute equality among residents; it merely requires that all
persons shall be treated alike, under like circumstances and conditions both as to privileges
conferred and liabilities enforced. The equal protection clause is not infringed by legislation
which applies only to those persons falling within a specified class, if it applies alike to all
persons within such class, and reasonable grounds exist for making a distinction between those
who fall within such class and those who do not.45

Substantial distinctions clearly exist between elective officials and appointive officials. The
former occupy their office by virtue of the mandate of the electorate. They are elected to an
office for a definite term and may be removed therefrom only upon stringent conditions.46 On the
other hand, appointive officials hold their office by virtue of their designation thereto by an
appointing authority. Some appointive officials hold their office in a permanent capacity and are
entitled to security of tenure47 while others serve at the pleasure of the appointing authority.48

Another substantial distinction between the two sets of officials is that under Section 55,
Chapter 8, Title I, Subsection A. Civil Service Commission, Book V of the Administrative Code
of 1987 (Executive Order No. 292), appointive officials, as officers and employees in the civil
service, are strictly prohibited from engaging in any partisan political activity or take part in any
election except to vote. Under the same provision, elective officials, or officers or employees
holding political offices, are obviously expressly allowed to take part in political and electoral
activities.49

By repealing Section 67 but retaining Section 66 of the Omnibus Election Code, the legislators
deemed it proper to treat these two classes of officials differently with respect to the effect on
their tenure in the office of the filing of the certificates of candidacy for any position other than
those occupied by them. Again, it is not within the power of the Court to pass upon or look into
the wisdom of this classification.

Since the classification justifying Section 14 of Rep. Act No. 9006, i.e., elected officials vis-a-vis
appointive officials, is anchored upon material and significant distinctions and all the persons
belonging under the same classification are similarly treated, the equal protection clause of the
Constitution is, thus, not infringed.

The Enrolled Bill Doctrine


Is Applicable In this Case

Not content with their plea for the nullification of Section 14 of Rep. Act No. 9006, the petitioners
insist that the entire law should be nullified. They contend that irregularities attended the
passage of the said law particularly in the House of Representatives catalogued thus:

a. Creation of two (2) sets of BCC (Bicameral Conference Committee) members


by the House during its session on February 5, 2001;

b. No communication from the Senate for a conference on the compromise bill


submitted by the BCC on November 29, 2000;

c. The new Report submitted by the 2nd/3rd BCC was presented for approval on
the floor without copies thereof being furnished the members;

d. The 2nd/3rd BCC has no record of its proceedings, and the Report submitted
by it was not signed by the Chairman (Sen. Roco) thereof as well as its senator-
members at the time it was presented to and rammed for approval by the House;

e. There was no meeting actually conducted by the 2nd/3rd BCC and that its
alleged Report was instantly made and passed around for the signature of the
BCC members;

f. The Senate has no record of the creation of a 2nd BCC but only of the first one
that convened on November 23, 2000;

g. The "Effectivity" clauses of SB No. 1741 and HB No. 9000, as well as that of
the compromise bill submitted by the BCC that convened on November 20, 2000,
were couched in terms that comply with the publication required by the Civil
Code and jurisprudence, to wit:

...

However, it was surreptitiously replaced in its final form as it appears in § 16, R.A. No. 9006,
with the provision that "This Act shall take effect immediately upon its approval;"

h. The copy of the compromise bill submitted by the 2nd/3rd BCC that was
furnished the members during its consideration on February 7, 2001, did not
have the same § 16 as it now appears in RA No. 9006, but § 16 of the
compromise bill, HB 9000 and SB 1742, reasons for which no objection thereto
was made;

i. The alleged BCC Report presented to the House on February 7, 2001, did not
"contain a detailed, sufficiently explicit statement of the changes in or
amendments to the subject measure;" and

j. The disappearance of the "Cayetano amendment," which is Section 12 of the


compromise bill submitted by the BCC. In fact, this was the subject of the
purported proposed amendment to the compromise bill of Member Paras as
stated in paragraph 7 hereof. The said provision states, thusly:

Sec. 12. Limitation on Elected Officials. – Any elected official who runs for president and vice-
president shall be considered ipso facto resigned from his office upon the filing of the certificate
of candidacy.50

The petitioners, thus, urge the Court to go behind the enrolled copy of the bill. The Court is not
persuaded. Under the "enrolled bill doctrine," the signing of a bill by the Speaker of the House
and the Senate President and the certification of the Secretaries of both Houses of Congress
that it was passed are conclusive of its due enactment. A review of cases51 reveals the Court’s
consistent adherence to the rule. The Court finds no reason to deviate from the salutary rule in
this case where the irregularities alleged by the petitioners mostly involved the internal rules of
Congress, e.g., creation of the 2nd or 3rd Bicameral Conference Committee by the House. This
Court is not the proper forum for the enforcement of these internal rules of Congress, whether
House or Senate. Parliamentary rules are merely procedural and with their observance the
courts have no concern.52 Whatever doubts there may be as to the formal validity of Rep. Act
No. 9006 must be resolved in its favor. The Court reiterates its ruling in Arroyo v. De Venecia,53
viz.:

But the cases, both here and abroad, in varying forms of expression, all deny to the courts the
power to inquire into allegations that, in enacting a law, a House of Congress failed to comply
with its own rules, in the absence of showing that there was a violation of a constitutional
provision or the rights of private individuals. In Osmeña v. Pendatun, it was held: "At any rate,
courts have declared that ‘the rules adopted by deliberative bodies are subject to revocation,
modification or waiver at the pleasure of the body adopting them.’ And it has been said that
‘Parliamentary rules are merely procedural, and with their observance, the courts have no
concern. They may be waived or disregarded by the legislative body.’ Consequently, ‘mere
failure to conform to parliamentary usage will not invalidate the action (taken by a deliberative
body) when the requisite number of members have agreed to a particular measure.’"

The Effectivity Clause


Is Defective

Finally, the "Effectivity" clause (Section 16) of Rep. Act No. 9006 which provides that it "shall
take effect immediately upon its approval," is defective. However, the same does not render the
entire law invalid. In Tañada v. Tuvera,54 this Court laid down the rule:

... the clause "unless it is otherwise provided" refers to the date of effectivity and not to the
requirement of publication itself, which cannot in any event be omitted. This clause does not
mean that the legislator may make the law effective immediately upon approval, or on any other
date without its previous publication.

Publication is indispensable in every case, but the legislature may in its discretion provide that
the usual fifteen-period shall be shortened or extended….55

Following Article 2 of the Civil Code56 and the doctrine enunciated in Tañada, Rep. Act No.
9006, notwithstanding its express statement, took effect fifteen days after its publication in the
Official Gazette or a newspaper of general circulation.

In conclusion, it bears reiterating that one of the firmly entrenched principles in constitutional law
is that the courts do not involve themselves with nor delve into the policy or wisdom of a statute.
That is the exclusive concern of the legislative branch of the government. When the validity of a
statute is challenged on constitutional grounds, the sole function of the court is to determine
whether it transcends constitutional limitations or the limits of legislative power. 57 No such
transgression has been shown in this case.

WHEREFORE, the petitions are DISMISSED. No pronouncement as to costs.

SO ORDERED.

Davide, Jr., C.J., Puno, Vitug, Panganiban, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez,


Carpio, Austria-Martinez, Corona, Carpio-Morales, Azcuna, and Tinga, JJ., concur.

Footnotes

1
Annex "A," Petition.

2
Annex "B," id.

3
Senators Raul S. Roco, Francisco S. Tatad, Vicente C. Sotto III, Gregorio B.
Honasan, Robert S. Jaworski, Teresa Aquino-Oreta, Loren Legarda-Leviste and
Sergio Osmeña III.

4
Representatives Augusto L. Syjuco, Jr., Imee R. Marcos, Benasing O.
Macarambon, Jr., Rodolfo C. Fariñas, Roseller L. Barinaga, Hussin U. Amin,
Edmundo O. Reyes, Jr., Constantino G. Jaraula, Alipio Cirilo V. Badelles, Francis
Joseph G. Escudero, Eleandro Jesus F. Madrona, Ernesto A Nieva, Aniceto G.
Saludo, Eduardo R. Gullas, Feliciano R. Belmonte, Jr., Sergio Antonio F.
Apostol, Prospero A. Pichay, Jr. and Roy Padilla, Jr.

5
Annex "C," Petition.

6
Journal of the House of Representatives, Vol. 62, February 5, 2001, pp. 12-13.
7
Representatives Edmundo O. Reyes, Jr., Jacinto V. Paras, Augusto "Boboy"
Syjuco, Prospero A. Pichay, Jr., Carlos M. Padilla, Aniceto G. Saludo, Jr.,
Gerardo S. Espina, Ricardo V. Quintos and Isidro S. Rodriguez, Jr.

8
See note 6.

9
Representatives Carlos M. Padilla, Salvio B. Fortuno, Dante V. Liban, Roan I.
Libarios, Nestor C. Ponce, Jr., Loretta Ann P. Rosales, Magtanggol T.
Gunigundo and Edmundo O. Reyes, Jr.

10
See note 6 at 20.

11
Journal of the House of Representatives, Vol. 64, February 7, 2001, p. 29.

12
Id. at 32-35.

13
202 SCRA 779 (1991).

14
SECTION 1, ARTICLE XI, CONSTITUTION.

15
People v. Vera, 65 Phil. 56 (1937).

16
Baker v. Carr, 369 U.S. 186, 7 L.Ed.2d 633 (1962).

17
Del Mar v. Philippine Amusement and Gaming Corporation, 346 SCRA 485
(2000); Carpio v. Executive Secretary, 206 SCRA 290 (1992); Osmeña v.
Comelec, 199 SCRA 750 (1991); Basco v. PAGCOR, 197 SCRA 52 (1991);
Guingona v. Carague, 196 SCRA 221 (1991); Civil Liberties Union v. Executive
Secretary, 194 SCRA 317 (1991); Philconsa v. Gimenez, 15 SCRA 479 (1965).

18
281 SCRA 330 (1997).

19
245 SCRA 253 (1995).

20
235 SCRA 630 (1994).

21
Supra.

22
232 SCRA 110 (1994).

23
235 SCRA 506 (1994).

24
175 SCRA 264 (1989).

25
246 SCRA 334 (1995).

26
Supra.

27
Gonzales v. Commission on Elections, 27 SCRA 835 (1969).
28
Samson v. Aguirre, 315 SCRA 53 (1999).

29
In re Guarina, 24 Phil. 37 (1913).

30
Tatad v. Secretary of Department of Energy, supra.

31
SECTION 1, ARTICLE VIII, CONSTITUTION reads:

Sec. 1. The judicial power shall be vested in one Supreme Court and in such
lower courts as may be established by law.

Judicial power includes the duty of the courts of justice to settle actual
controversies involving rights which are legally demandable and enforceable, and
to determine whether or not there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government.

32
A rider is a provision not germane to the subject matter of the bill. (Alalayan v.
NPC, 24 SCRA 172 [1968]).

33
Alalayan v. NPC, supra.

34
Cordero v. Cabatuando, 6 SCRA 418 (1962).

35
Underscoring ours.

36
Tolentino v. Secretary of Finance, supra.

37
Tio v. Videogram Regulatory Board, 151 SCRA 208 (1987).

38
Records of the Bicameral Conference Committee on the Disagreeing
Provisions of Senate Bill No. 1742 and House Bill No. 9000 (Committee on
Electoral Reforms), November 23, 2000, pp. 95-99.

39
Valmonte v. Belmonte, Jr., 170 SCRA 256 (1989).

40
Bayside Fish Flour Co. v. Gentry, 297 US 422, 80 L Ed 772 (1935). See also
Garcia v. Corona, 321 SCRA 218 (1999); Samson v. Aguirre, 315 SCRA 54
(1999); Victoriano v. Elizalde Rope Workers Union, 59 SCRA 54 (1974); Morfe v.
Mutuc, 22 SCRA 424 (1968).

41
Supra.

42
Ichong v. Hernandez, 101 Phil. 1155 (1957).

43
No person shall be deprived of life, liberty, or property without due process of
law, nor shall any person be denied the equal protection of the laws (SECTION
1, ARTICLE III, CONSTITUTION).
44
Tiu v. Court of Appeals, 301 SCRA 278 (1999).

45
Ichong v. Hernandez, supra, citing 2 Cooley, Constitutional Limitations, pp.
824-825.

46
For example, under the Constitution, the grounds by which the tenure of the
members of the House of Representatives and the Senate may be shortened
may be summarized as follows:

a) Sec. 16, Art. VI: Forfeiture of his seat by holding any other office or
employment in the government or any subdivision, agency or
instrumentality thereof, including government-owned or controlled
corporations or subsidiaries;

b) Sec. 16 (3), Art. VI: Expulsion as a disciplinary action for disorderly


behavior;

c) Sec. 17, Art. VI: Disqualification as determined by resolution of the


appropriate Electoral Tribunal in an election contest; and

d) Sec. 7, par. 2, Art. VI: Voluntary renunciation of office.

Further, under Sec. 2, Art. XI of the Constitution, the President and the
Vice-President, along with other impeachable officers, may be removed
from office "on impeachment for, and conviction of, culpable violation of
the Constitution, treason, bribery, graft and corruption, other high crimes,
or betrayal of public trust."

47
Section 46, Chapter 7, Title I, Subtitle A. Civil Service Commission, Book V of
the 1987 Administrative Code provides, in part, that "No officer or employee in
the Civil Service shall be suspended or dismissed except for cause as provided
by law and after due process." Further, Section 23, Rule XIV of the Omnibus
Rules Implementing Book V of the 1987 Administrative Code enumerates the
"grave offenses" which are grounds for dismissal upon the commission of first
offense as follows: dishonesty, gross neglect of duty, gross misconduct, being
notoriously undesirable, conviction of a crime involving moral turpitude,
falsification of official document, physical or mental incapacity or disability due to
vicious habits, among others.

48
Officers and employees holding primarily confidential positions have terms of
office which expire upon loss of confidence in them by the appointing authority.
(Hernandez v. Villegas, 14 SCRA 544 [1965]).

49
Section 55, Chapter 8, Title I Subsection A. Civil Service Commission, Book V
of the Administrative Code of 1987 (Executive Order No. 292) reads in full:

Sec. 55. Political Activity. – No officer or employee in the Civil Service


including members of the Armed Forces, shall engage, directly or
indirectly, in any partisan political activity or take part in any election
except to vote nor shall he use his official authority or influence to coerce
the political activity of any other person or body. Nothing herein provided
shall be understood to prevent any officer or employee from expressing
his views on current political problems or issues, or from mentioning the
names of his candidates for public office whom he supports: Provided,
That public officers and employees holding political offices may take part
in political and electoral activities but it shall be unlawful for them to solicit
contributions from their subordinates or subject them to any of the acts
involving subordinates prohibited in the Election Code.

50
MEMORANDUM of the Petitioners in G.R. No. 147387, pp. 19-20.

51
Tolentino v. Secretary of Finance, supra; Morales v. Subido, 27 SCRA 131
(1969); Casco (Phil.) Inc. v. Gimenez, 7 SCRA 347 (1963); Mabanag v. Lopez
Vito, 78 Phil. 1 (1947).

52
Osmeña, Jr. v. Pendatun, 109 Phil. 863 (1960).

53
277 SCRA 268 (1997).

54
146 SCRA 446 (1986).

55
Id. at 452.

56
Laws shall take effect after fifteen days following the completion of their
publication in the Official Gazette, unless it is otherwise provided. This Code shall
take effect one year after publication.

57
See Tatad v. Secretary of the Department of Energy, supra; Tañada v. Angara,
272 SCRA 18 (1997); Bondoc v. Pineda, 201 SCRA 792 (1991); Osmeña v.
COMELEC, 199 SCRA 750 (1991); Luz Farms v. Secretary of the Department of
Agrarian Reform, 192 SCRA 51 (1990); Gonzales v. COMELEC, 21 SCRA 774
(1967).

The Lawphil Project - Arellano Law Foundation


Today is Friday, October 04, 2019
EN BANC

UEL M. LUMAYONG; WIGBERTO E. TAÑADA; PONCIANO BENNAGEN; JAIME TADEO; RENATO R. CONSTANTINO JR.
N; LOMINGGES D. LAWAY; BENITA P. TACUAYAN; Minors JOLY L. BUGOY, Represented by His Father UNDERO D. BU
epresented by His Father MIGUEL M. LUMAYONG; RENE T. MIGUEL, Represented by His Mother EDITHA T. MIGUEL; A
MARIO L. MANGCAL; ALDEN S. TUSAN; AMPARO S. YAP; VIRGILIO CULAR; MARVIC M.V.F. LEONEN; JULIA REGINA C
LIZABETH PUA-VILLAMOR; ANA GININA R. TALJA, Represented by Her Father MARIO JOSE B. TALJA; SHARMAINE R
s Father MANUEL E. NARVADEZ JR.; ROSERIO MARALAG LINGATING, Represented by Her Father RIO OLIMPIO A. L
ILIA S. ROMANO; ROBERTO S. VERZOLA; EDUARDO AURELIO C. REYES; LEAN LOUEL A. PERIA, Represented by Hi
NGO SA KAUNLARAN NG KANAYUNAN AT REPORMANG PANSAKAHAN (KAISAHAN);3 PARTNERSHIP FOR AGRARI
NC. (PHILDHRRA); WOMEN'S LEGAL BUREAU (WLB); CENTER FOR ALTERNATIVE DEVELOPMENT INITIATIVES, INC
TURAL RESOURCES CENTER, INC. (LRC), petitioners,

HORACIO RAMOS, Director, Mines and Geosciences Bureau (MGB-DENR); RUBEN TORRES, Executive Secretary; and

RESOLUTION

must always be subject to the full control and supervision of the State. More specifically, given the inadequacy of Filipino capita
e State maintains its right of full control. The foreign assistor or contractor assumes all financial, technical and entrepreneurial r

retains the power to direct overall strategy; and to set aside, reverse or modify plans and actions of the contractor. The idea of
o subordinate officers or given to contractual entities, but the board retains full residual control of the business.

he Constitution is crystal clear: the President. Indeed, the Chief Executive is the official constitutionally mandated to "enter into
nal] provision within thirty days from its execution." In contrast to this express mandate of the President and Congress in the ED
- in a proper case -- exercise their residual duty under Article VIII. Clearly then, the judiciary should not inordinately interfere in t
onomic growth or to serve narrow, parochial interests. Rather, it should be construed to grant the President and Congress suffi

Law, its Implementing Rules and Regulations -- insofar as they relate to financial and technical agreements -- as well as the su

Background

epublic Act No. [RA] 7942 (The Philippine Mining Act of 1995); (2) its Implementing Rules and Regulations (DENR Administrati

ng the unconstitutionality of certain provisions of RA 7942, DAO 96-40, as well as of the entire FTAA executed between the gov

rmitted under the 1973 Constitution,10 were subsequently denounced for being antithetical to the principle of sovereignty over o

er alia, vesting in the foreign contractor exclusive management and control of the enterprise, including operation of the field in th
rship of the natural resource at the point of extraction; and beneficial ownership of our economic resources. According to the D

h 9, 2004, the Court required petitioners to comment thereon. In the Resolution of June 8, 2004, it set the case for Oral Argume

da in amplification of their arguments. In a Resolution issued later the same day, June 29, 2004, the Court noted, inter alia, the
or Intervention filed by the Chamber of Mines of the Philippines, Inc. (CMP) and was in fact joining and adopting the latter's Mot

nd private respondent, dwelling at length on the three issues discussed below. Later, WMCP submitted its Reply Memorandum

Three Issues Identified by the Court

ersy, as follows:

t of Sagittarius' equity is owned by Filipinos and/or Filipino-owned corporations while 40 percent is owned by Indophil Resource

nality of the assailed provisions of the Mining Law, DAO 96-40 and the WMCP FTAA?

l Assistance contained in paragraph 4 of Section 2 of Article XII of the Constitution?

Should the Motion for Reconsideration Be Granted?

ussed below. The foregoing three issues identified by the Court shall now be taken up seriatim.

First Issue:

Mootness
majority Decision agreed with petitioners' contention that the subject FTAA had been executed in violation of Section 2 of Articl
ents involving only technical or financial assistance for large-scale exploration, development and utilization of minerals, petroleu
nership" of our mineral resources.

ary 23, 2001, WMC had sold all its shares in WMCP to Sagittarius Mines, Inc., 60 percent of whose equity was held by Filipinos
of the FTAA to a Filipino-owned corporation, and that the validity of the said transfer remained in dispute and awaited final jud

ened to be wholly owned by WMC Resources International Pty., Ltd. (WMC), which in turn was a wholly owned subsidiary of W

ad the FTAA been originally issued to a Filipino-owned corporation, there would have been no constitutionality issue to speak o
the same land to a Filipino citizen. The conveyance would be validated, as the property in question would no longer be owned

ble for the Court to declare it unconstitutional. The case pending in the Court of Appeals is a dispute between two Filipino comp
ino company. Considering that there is no longer any justiciable controversy, the plea to nullify the Mining Law has become a v

ring the invalidity of the alleged sale of the shares in WMCP from WMC to Sagittarius, and of the transfer of the FTAA from WM
ity of RA 7942 and its Implementing Rules and Regulations (DAO 96-40). Presently, we shall discuss petitioners' objections to

olates the fourth paragraph of Section 2 of Article XII of the Constitution; second, that it is contrary to the provisions of the WMC

ment to enter into FTAAs only with foreign-owned corporations. Petitioners insist that the first paragraph of this constitutional pr
venture -- to the exclusion of all other arrangements or variations thereof, and the WMCP FTAA may therefore not be validly as

ers' argument. The pertinent part of the said provision states: "Sec. 2. x x x The exploration, development and utilization of natu
eements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned by such citize

believe that the framers of the Constitution, a majority of whom were obviously concerned with furthering the development and
g preference and priority to Filipinos and Filipino corporations in the development of our natural resources.

corporations from holding and implementing an FTAA actually exists, nevertheless, such provision would apply only to the trans
ould ensue. Petitioners' argument must therefore fail.

pply solely to a foreign corporation, as can allegedly be seen from the provisions therein. They manage to cite only one WMCP
tional Chamber of Commerce, after local remedies are exhausted. This provision, however, does not necessarily imply that the
e need to litigate it in a separate case. Section 40 of RA 7942 (the Mining Law) allegedly requires the President's prior approva

ansfer -- A financial or technical assistance agreement may be assigned or transferred, in whole or in part, to a qualified person
provision within thirty (30) days from the date of the approval thereof."

of shares of stock in WMCP. Moreover, when the transferee of an FTAA is another foreign corporation, there is a logical applic
ification are appropriate safeguards, considering that the new contractor is the subject of a foreign government.

for such safeguard is not critical; hence, the lack of prior approval and notification may not be deemed fatal as to render the tra
f the cases brought by Lepanto against Sagittarius in GR No. 162331. That case involved the review of the Decision of the Cou
approving the assignment of the WMCP FTAA to Sagittarius.

Deed of Absolute Sale dated January 23, 2001, executed between WMC and Sagittarius, the price of the WMCP shares was f
f approval of the sale by the DENR, the debt-to-equity ratio of the transferee was over 9:1 -- hardly ideal for an FTAA contracto

of the purchase price would take place only after Sagittarius' commencement of commercial production from mining operations,
negative implications for the enterprise; and it would certainly be improper to invalidate the sale on that basis, as petitioners pr

ence cannot be transferred; and that its transfer does not operate to cure the constitutional infirmity that is inherent in it; neither

MR) did ratiocinate that this Court had declared the FTAA to be void because, at the time it was executed with WMCP, the latter
ns of paragraph 4 of Section 2 of Article XII of the Constitution. And since the FTAA was per se void, no valid right could be tran

sion of this Court declaring the FTAA void has not yet become final. That was precisely the reason the Court still heard Oral Arg
of the government. This point will be dealt with in greater detail below; but for now, suffice it to say that a perusal of the FTAA p
dgets are subject to its review and approval or disapproval.

nd dip its hands into the day-to-day management of the enterprise in order to be considered as having overall control and direc
FTAA void still has to be revisited, reexamined and reconsidered.

at the doctrines in these cases are wholly inapplicable to the instant case.

nd to an alien who later sells the land to a Filipino, the invalidity of the first transfer is corrected by the subsequent sale to a citiz
een achieved. In short, the law disregards the constitutional disqualification of the buyer to hold land if the land is subsequently

was not what was assailed for alleged unconstitutionality. Rather, it was the transaction that was assailed; hence subsequent c
petitioners claim that the subsequent transfer of a void FTAA to a Filipino corporation would not cure the defect.

antee of the FTAA was a wholly owned subsidiary of a foreign corporation. It cannot be gainsaid that anyone would have assert
een issued to an allegedly non-qualified, foreign-owned corporation.
was re-conveyed to a qualified vendee and the original transaction was thereby cured. Paraphrasing Halili, the same rationale
led; the objective of the constitutional provision -- to keep the exploration, development and utilization of our natural resources i

which the original sale to a non-Filipino was clearly and indisputably violative of the constitutional prohibition and thus void ab in
or adjudication as to whether the FTAA and the Mining Law had indeed violated the Constitution. Since, up to this point, the de

by the government only with a foreign corporation, never with a Filipino enterprise. Indeed, the nationalistic provisions of the Co
reference for the Filipino in the exploration, development and utilization of our natural resources. It does not take deep knowled

Second Issue:

Whether the Court Can Still Decide the Case,


Even Assuming It Is Moot

assuming it to be moot.

is no more actual controversy between the parties or no useful purpose can be served in passing upon the merits,"18 what is at
ot operate to cure the law of its alleged unconstitutionality or to divest this Court of its jurisdiction to decide. Third, the Constituti

onform to constitutional strictures (assuming that, at present, it does not); that public respondents will continue to implement an
ghts.

es and Geosciences Bureau (MGB), with an aggregate area of 2,064,908.65 hectares -- spread over Luzon, the Visayas and M
long as the constitutional issues are not resolved with finality. Nevertheless, we must concede that there exists the distinct poss

which is even now scaring away foreign investments. Attesting to this climate of anxiety is the fact that the Chamber of Mines of
thority (NEDA) requested this Court to allow him to speak, during that Oral Argument, on the economic consequences of the De

uation and the paramount public interest involved, as well as the necessity for a ruling to put an end to the uncertainties plaguin
avert a multiplicity of suits. Paraphrasing Gonzales v. Commission on Elections,21 it is evident that strong reasons of public polic

cop v. Guingona,23 to the effect that the courts will decide a question -- otherwise moot and academic -- if it is "capable of repet
t be achieved until after it has become too late for our mining industry to grow out of its infancy. They also recall Salonga v. Cru
ating the bench and bar on the extent of protection given by constitutional guarantees. x x x."

s dissent to the Decision that there was no more justiciable controversy and the plea to nullify the Mining Law has become a vir
DAO 96-40 which converts the case to one for prohibition27 in the enforcement of the said law and regulations.

on 2 of Article XII of the Constitution is contravened by RA 7942 and DAO 96-40, not whether it was violated by specific acts im
y the mere enactment of the questioned law or the approval of the challenged action, the dispute is said to have ripened into a

the Constitution, the petition no doubt raises a justiciable controversy. Where an action of the legislative branch is seriously all
xxxxxxxxx

digress from or abandon its sacred duty and authority to uphold the Constitution in matters that involve grave abuse of discretio

arising from the standing or legal interest of the original parties.

utional issues in this case.

Third Issue:

The Proper Interpretation of the Constitutional Phrase


"Agreements Involving Either Technical or Financial Assistance"

II of the 1987 Constitution. In order to appreciate its context, Section 2 is reproduced in full:

mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are o
under the full control and supervision of the State. The State may directly undertake such activities, or it may enter into co-prod
ch agreements may be for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and under
ficial use may be the measure and limit of the grant.

l sea, and exclusive economic zone, and reserve its use and enjoyment exclusively to Filipino citizens.

no citizens, as well as cooperative fish farming, with priority to subsistence fishermen and fish-workers in rivers, lakes, bays an

g either technical or financial assistance for large-scale exploration, development, and utilization of minerals, petroleu
uch agreements, the State shall promote the development and use of local scientific and technical resources.

with this provision, within thirty days from its execution."31

on should prevail; that the primary method of interpreting it is to seek the ordinary meaning of the words used in its provisions. T

source from which to ascertain constitutional intent or purpose is the language of the provision itself. The presumption is that th
sed is unclear and equivocal should resort be made to extraneous aids of construction and interpretation, such as the proceedin

o reiterate the well-settled principles of constitutional construction:

be given their ordinary meaning except where technical terms are employed. x x x.

xxxxxxxxx

n should be interpreted in accordance with the intent of its framers. x x x.

xxxxxxxxx
e."34

ed Section 2 as follows:

resources cannot be alienated by the State.

nder the full control and supervision of the State.

s with Filipino citizens or corporations, at least 60 percent of the capital of which is owned by such citizens

no citizens.

may enter into "agreements with foreign-owned corporations involving either technical or financial assistance according to the ge

State may undertake such EDU activities by itself or in tandem with Filipinos or Filipino corporations, except in two instances: f
ndertaken by the State via "agreements with foreign-owned corporations involving either technical or financial assistance" as p

simply means technical assistance or financial assistance agreements, nothing more and nothing else. They insist that there i
s merely an agreement for either financial or technical assistance only, for the large-scale exploration, development and utilizati

Constitution reserving to Filipino citizens and corporations the use and enjoyment of the country's natural resources. They main
ive management of a mining enterprise. Allowing such a privilege not only runs counter to the "full control and supervision" that
" of our mineral resources. It will be recalled that the Decision of January 27, 2004 zeroed in on "management or other forms of
feature of service contracts, was precisely the evil that the drafters of the 1987 Constitution sought to eradicate."

ph 4 is not merely an agreement for supplying limited and specific financial or technical services to the State. Rather, such FTA
greement, therefore, authorizes the foreign contractor's rendition of a whole range of integrated and comprehensive services, r

ably lead to the conclusions arrived at in the ponencia. First, the drafters' choice of words -- their use of the phrase agreements
reements for financial or technical assistance, if that was their intention to begin with. In this case, the limitation would be very

of assistance or activities having to do with, otherwise related to or compatible with financial or technical assistance. The wo
or "necessitating"; and three, "including," "containing" or "comprising."38

" when understood in the sense of "including," as in including technical or financial assistance, necessarily implies that there ar
nd covered or may be covered by, the said agreement.

e part of the agreement. Thus, we are now led to the conclusion that the use of the word "involving" implies that these agreeme
al assistance" against "agreements including technical or financial assistance." This much is unalterably clear in a verba legis
cal assistance and nothing more, their language would have certainly been so unmistakably restrictive and stringent as to le
peration of mining or similar ventures or words of similar import. A search for such stringent wording yields negative results. Th
eements x x x involving either technical or financial assistance" in an exclusionary and limiting manner.

peration of mining activities by foreign contractors, which is the primary feature of service contracts, was precisely the evil that
activities or the plan to eradicate service contracts as these were understood in the 1973 Constitution. Still, petitioners maintain
ent of the affected enterprises.

failure to carry the same expression or term over to the new Constitution, absent a more specific, explicit and unequivocal stat
rt of bringing about a momentous sea change in the economic and developmental policies; and the fundamentally capitalist, fre
omy in general, merely on the basis of the omission of the terms service contract from or the failure to carry them over to the n

uffers from certain internal logical inconsistencies that generate ambiguities in the understanding of the provision. As the interve
cial or technical assistance to companies engaged in mining or the development of any other natural resource. The taking out o
- has never been restricted in favor of Filipino citizens or corporations having a certain minimum percentage of Filipino equity. S
mining industry anytime with open arms, on account of the dearth of local capital and the need to continually update technolog

rations to render financial or technical assistance, whether in respect of mining or some other resource development or comme
cale mining operations, as there would be far greater need for them in the smaller-scale mining activities (and even in

s, if only financial or technical assistance agreements are involved. Such agreements are in the nature of foreign loans that -- p
o report to Congress within thirty days from the end of every quarter of the calendar year, not thirty days after the agreement is

tance, what is the point of requiring that they be based on real contributions to the economic growth and general welfare of the
t or a technical-assistance agreement for, say, the refurbishing of an existing power generating plant for a mining operation som

to be understood as one limited only to foreign loans (or other forms of financial support) and to technical assistance. There is d
ons based on economic growth and general welfare. These were neither accidentally inserted into the Constitution nor
n companies to include more than mere financial or technical assistance.

d limited financial service or technical assistance by a foreign company. This argument begs the question "To whom or for whom
velopment and utilization of a mineral resource, so it follows that the State must itself bear the liability and cost of repaying the f

or many many years been financially strapped, to the point that even the most essential services have suffered serious curtailm
sfer and similar arrangements with the private sector, in order to get vital infrastructure projects built without any governmental o

t the ordinary citizen has suspected all along. After the reality check, one will have to admit the implausibility of a direct underta
ents, but also the attendant risk of never finding and developing economically viable quantities of minerals, petroleum and other
only financial or technical assistance to the government was deliberately crafted by the drafters of the Constitution, who were
amount to asserting that the provision was purposely designed to ladle the large-scale development and utilization of mineral,

nces. The drafters chose to emphasize and highlight agreements x x x involving either technical or financial assistance in relatio
l corporations are the ones with the resources and know-how to provide technical and/or financial assistance of the magnitude

cians and government officials -- were not unfamiliar with the practices of foreign corporations and multinationals.

tionalities or some quid pro quo. Definitely, as business persons well know and as a matter of judicial notice, this matter is not j
operations of the joint venture. They would demand the appointment of their own men as, for example, operations managers,
and the repayment of the loans and other financial assistance and to make certain that the funding and the technology they sup

foreign entities will not enter into such "agreements involving assistance" without requiring arrangements for the protection of th

ssent to everything that these agreements necessarily entailed; or that could reasonably be deemed necessary to make them t
D THAT Philippine sovereignty over natural resources and full control over the enterprise undertaking the EDU activities remain

esults from it is the fact that there is nothing by way of transitory provisions that would serve to confirm the theory that the omiss

t and in force and effect, including those in the petroleum industry. Many of these service contracts were long-term (25 years) a
would have supplied the specifics and the when and how of effecting the extinguishment of these existing contracts (or at least
recovery thereof.

nstructions to Congress to deal with these closing-out issues, perhaps by way of general guidelines and a timeline within which

of this Constitution shall have five years from its ratification to comply on a graduated and proportionate basis with the minimum

xxxxxxxxx

he Philippines and the United States of America concerning military bases, foreign military bases, troops, or facilities shall not b
nal referendum held for that purpose, and recognized as a treaty by the other contracting State.

n No. 3 dated March 25, 1986 in relation to the recovery of ill-gotten wealth shall remain operative for not more than eighteen m

ase. The order and the list of the sequestered or frozen properties shall forthwith be registered with the proper court. For orders
ation, the judicial action or proceeding shall be commenced within six months from the issuance thereof.
r proceeding is commenced as herein provided." 43]

pression of sovereignty as it were -- indefinitely hanging in the air in a formless and ineffective state. Indeed, the complete abse

ba legis approach to paragraph 4 of Section 2 of Article XII compel a resort to other aids to interpretation.

ply the deficiencies of the plain-language approach, there is a need for recourse to the proceedings of the 1986 Constitutional C

conclusively show that they discussed agreements involving either technical or financial assistance in the same breadth as serv
nvolving technical or financial assistance" were none other than service contracts.

n 3, my amendment by substitution reads: THE PRESIDENT MAY ENTER INTO AGREEMENTS WITH FOREIGN-OWNED CO
URCES ACCORDING TO THE TERMS AND CONDITIONS PROVIDED BY LAW.

give the background.

larly known before as service contracts, among other things, is that correct?

ut subject to the guidelines that may be promulgated by Congress?

e President, not upon Congress?


ade strictly in accordance with guidelines prescribed by Congress?

situations of the same nature?

ng with: service contracts.

ecial service contracts which was accepted by the Committee. Since the Committee has accepted it, I would like to ask some

y the President with the guidelines of a general law on service contract to be enacted by Congress. Is that correct?

a particular agreement, he would need the concurrence of Congress. Now that it has been changed by the proposal of Commis
into service contracts. Is that correct?

ast to my proposed amendment, so I would like to object and present my proposed amendment to the body.

xxxxxxxxx

ents which the President will enter into might be too general or since we do not know the content yet of such a law, it might be
on of service contracts.

President when entering into service contract agreements, I propose that every service contract entered into by the Preside
ndment, which we will discuss later, reads: THAT THE PRESIDENT SHALL ENTER INTO SUCH AGREEMENTS ONLY WITH

xxxxxxxxx

sal could breed corruption. By the way, this is not just confined to service contracts but also to financial assistance. If we are
separately – then (1) there is a very great chance that each contract will be different from another; and (2) there is a great temp
n statements of motherhood. Congress can build all the restrictions that it wishes into that general law so that every contract en

f such a general law as to how much constraints there will be in it. And to my mind, although the Committee's contention that th
whose membership will be changing regularly as there will be changing circumstances every time certain agreements are made
echnical or financial assistance for large-scale exploration, development and utilization of natural resources or servic

xxxxxxxxx

ner Gascon needs a few minutes, I can fill up the remaining time while he completes his proposed amendment. I just wanted to
OF EVERY SERVICE CONTRACT ENTERED INTO IN ACCORDANCE WITH THE GENERAL LAW. I think the reason is, if I
contracts. But the only way Congress can do this is if there were a notification requirement from the Office of the President tha
ed into, and all that this amendment seeks is the reporting requirement from the Office of the President. Will Commissioner Jam

xxxxxxxxx

ce contracts and the past service contracts under Mr. Marcos is the general law to be enacted by the legislature and the noti

ate that the drafters knew that the agreements with foreign corporations were going to entail not mere technical or financial assi

to speak for only two minutes in favor of the amendment of Commissioner Gascon.

ner Jamir, I am in favor of the objection of Commissioner Gascon.


on, and one of the reasons is that there were many provisions in the Transitory Provisions therein that favored aliens. I was sh
providing for exceptional instances where aliens may circumvent Filipino control of our economy. And one way of circumventing

deletion of this provision. However, we are presenting a compromise in the sense that we are requiring a two-thirds vote of
We cannot claim that they are less patriotic than we are. I think the Members of this Commission should know that entering into
possible, to stringent rules. It seems to me that we are liberalizing the rules in favor of aliens.

a nationalist, but I love my country. Although we need investments, we must adopt safeguards that are truly reflective of the

e limitations of the scope of such service contracts -- they are valid only in regard to minerals, petroleum and other mineral oils

ndment and also to the Ople amendment. I propose to delete "NATURAL RESOURCES" and substitute it with the following: M
E EXECUTION OF THE SERVICE CONTRACT.

t in lieu of "NATURAL RESOURCES"?

would necessarily include all lands of the public domain, our marine resources, forests, parks and so on. So we would like to lim
ils. And so, we believe that we should really, if we want to grant service contracts at all, limit the same to only those particul

ssioner made those enumerations and specifications, I suppose he deliberately did not include "agricultural land"?

es are into which service contracts may enter. So, beyond the reach of any service contract will be lands of the public doma

Commissioner Davide made the following statement, which is very relevant to our quest:

eum and mineral oils. The Commission has just approved the possible foreign entry into the development, exploration and utiliz
usively Filipino citizens and corporations wholly owned by Filipino citizens the right to utilize the other natural resources. This m
endment, since we feel that Filipino capital may not be enough for the development and utilization of minerals, petroleum and ot
that we will stagnate in the development of minerals, petroleum and mineral oils because we now allow service contracts. x

agreements x x x involving either technical or financial assistance, which ultimately became paragraph 4 of Section 2 of Article X

ssioners Gascon, Garcia and Tadeo indicated that they had voted to reject this provision on account of their objections to the "c

ould always be with the concurrence of Congress and not guided only by a general law to be promulgated by Congress." 49 Mr.
ophole for the exploitation of our natural resources for the benefit of foreign interests."50 Likewise, Mr. Tadeo cited inter alia the
sly, had the provision called for mere technical or financial assistance and nothing more.
m for doubt that the service contract concept precisely underpinned the commissioners' understanding of the "agreements invol

ations, as follows:

m service contracts in referring to agreements x x x involving either technical or financial assistance.

ution.

ervice contracts.

liminate or minimize the abuses prevalent during the marital law regime. In brief, they were going to permit service contracts w
e XII. This provision reserves or limits to Filipino citizens -- and corporations at least 60 percent of which is owned by such citize

e felt need for foreign investments in the EDU of minerals and petroleum resources.

onsidered adequate and reasonable. But some of them, having more "radical" leanings, wanted to ban service contracts altoget

tire body. They sounded off their individual opinions, openly enunciated their philosophies, and supported or attacked the provi

aragraph 4 allowing service contracts with foreign corporations as an exception to the general norm in paragraph 1 of Section 2

cal or financial assistance, referred to in paragraph 4, are in fact service contracts. But unlike those of the 1973 variety, the new
ctors provide capital, technology and technical know-how, and managerial expertise in the creation and operation of large-scal

ral oils. The grant thereof is subject to several safeguards, among which are these requirements:

standard or uniform terms, conditions and requirements, presumably to attain a certain uniformity in provisions and avoid the p

ore an agreement is presented to the President for signature, it will have been vetted several times over at different levels to en

ress to give that branch of government an opportunity to look over the agreement and interpose timely objections, if any.
and the criticism hurled by petitioners who quote a ruling of this Court:

he constitutional convention in order to arrive at the reason and purpose of the resulting Constitution, resort thereto may be had
showing the views of the individual members, and as indicating the reason for their votes, but they give us no light as to the view
rue the constitution from what appears upon its face.' The proper interpretation therefore depends more on how it was understo

views of the majority who remained silent should be clarified. We must never forget that those who spoke out were heard by th
tions. By remaining silent, they are deemed to have signified their assent to and/or conformity with at least some of the views p
they did not see eye to eye with the proponents of the draft provisions.

e on the matter. Moreover, the individual explanations of votes are on record, and they show where each delegate stood on the

ulation that participated in the referendum and ratified the Constitution. Verily, whether we like it or not, it is a bit too much to as

ead the draft Charter actually understood the import of its provisions, much less analyzed it vis-à-vis the previous Constitutions
telligent, dedicated and trustworthy men and women of integrity and conviction, whose love of country and fidelity to duty could

orsed the proposed Constitution. What this fact translates to is the inescapable conclusion that many of the voters in the refere
mendation of the framers as a group. In other words, by voting yes, they may be deemed to have signified their voluntary adop
ances, "If it's good enough for President Cory Aquino, it's good enough for me."

here is no evidence available to indicate that their assessment or understanding of its provisions was in fact different from that o
y the framers had, an assumption that would account for the favorable votes.

group were supposed to represent the entire Filipino people. Thus, we cannot but regard their views as being very much indica

bove arguments. As written by the framers and ratified and adopted by the people, the Constitution allows the continu
the State -- sans the abuses of the past regime. The purpose is clear: to develop and utilize our mineral, petroleum an

now hold a view different from that of the Decision, which had these findings: (a) paragraph 4 of Section 2 of Article XII limits fo
e management of local mining operations, as such agreements are purportedly in the nature of service contracts as these were
titution; (d) since the WMCP FTAA contains provisions permitting the foreign contractor to manage the concern, the said FTAA
nal.

le collision of constitutional provisions. On the one hand, paragraph 1 of Section 2 of Article XII explicitly mandates the State to
actors. Normally, pursuant thereto, the contractors exercise management prerogatives over the mining operations and the ente
r; or, the other way around, allowing the foreign contractor full management prerogatives may ultimately negate the State's full
m pereat -- every part of the Constitution is to be given effect, and the Constitution is to be read and understood as a harmonio
urther discussion, we must stress the primacy and supremacy of the principle of sovereignty and State control and supervision

ly to mean that the State controls and supervises everything involved, down to the minutest details, and makes all decisions re
e of management prerogative and authority necessary and indispensable to their proper functioning.

velopment and utilization activities; and result in the unmitigated stagnation of this sector, to the detriment of our nation's develo
p its hands into the day-to-day affairs of the enterprise in order for it to be considered as having full control and supervision.

al, all-encompassing control; but nevertheless sufficient to give the State the power to direct, restrain, regulate and govern the
d enable the government to control the conduct of affairs in various enterprises and restrain activities deemed not desirable or

eral welfare of the country, conserve the environment, and uplift the well-being of the affected local communities. Such a conce
ntly and profitably, to protect its investments and to enable it to succeed.

e government to exercise that degree of control sufficient to direct and regulate the conduct of affairs of individual en

s of the Philippine Mining Act of 1995 (RA 7942) and its Implementing Rules and Regulations (DAO 96-40), as well as the WMC

s it possible for FTAA contracts to cede full control and management of mining enterprises over to fully foreign-owned corporat
t as the owner of the natural resources for and on behalf of the Filipino people; it practically has little effective say in the decisio
.

. Paraphrasing the Constitution, Section 4 of the statute clearly affirms the State's control thus:

e and the exploration, development, utilization and processing thereof shall be under its full control and supervision. The State

es to their ancestral lands as provided for by the Constitution."

the territory and exclusive economic zone of the Republic of the Philippines are owned by the State. It shall be the responsibili
ce national growth in a way that effectively safeguards the environment and protects the rights of affected communities."

isions thereof establish the mechanism of inspection and visitorial rights over mining operations and institute reportorial require

eview for "the conservation, management, development and proper use of the State's mineral resources";

NR to exercise "direct charge in the administration and disposition of mineral resources", and empowers the MGB to "monitor th
nit of the Phil. National Police, barangay, duly registered non-governmental organization (NGO) or any qualified person to polic

pections of all installations, whether surface or underground", utilized in mining operations.


ranties:

f the Act and its IRR.

gy and facilities to protect the environment and restore or rehabilitate mined-out areas.

ing and other relevant data for its mining operation, and that books of accounts and records shall be open for inspection by the

nd more advantageous terms and conditions.

this Act as the Secretary may deem to be for the best interest of the State and the welfare of the Filipino people."

emented in Section 56 (g), (h), (l), (m) and (n) of the Implementing Rules, DAO 96-40.

ontrol over mining enterprises:

not needed for mining operations and not covered by any declaration of mining feasibility (Section 35-e, RA 7942; Section 60,

d environmental protection (Chapter XI, RA 7942; Chapters XV and XVI, DAO 96-40).

Chapter XVII, RA 7942; Chapter XXIV, DAO 96-40).

ion by the government (Section 56-m, DAO 96-40).

market price and register with the MGB a copy of the sales agreement (Section 56-n, DAO 96-40).

ons of the FTAA; and to deputize, when necessary, any member or unit of the Philippine National Police, the barangay or a DE

(Section 40, RA 7942; Section 66, DAO 96-40).

ilization stage, unless its Declaration of Mining Project Feasibility has been approved by government (Section 24, RA 7942).

ved without submission of the following documents:


, RA 7942)

RA 7942; Section 27, RA 7160)

uding payment of royalties through a Memorandum of Agreement (Section 16, RA 7942; Section 59, RA 8371)

y, promotion of the general welfare of its inhabitants, and development of science and mining technology (Section 57, RA 7942

ual basis as the case may be; per Section 270, DAO 96-40), pertaining to the following:

hout a written clearance from the government agencies concerned (Section 19, RA 7942; Section 54, DAO 96-40).

vernment in an amount equivalent to its expenditures obligations for any particular year. This requirement is apart from the repr
(Section 35-b, -e, and -f, RA 7942).

as follows: an environmental report on the rehabilitation of the mined-out area and/or mine waste/tailing covered area, and anti-
ort of exploration activities (Section 56-2).

are the following: a safety and health program (Section 144); an environmental work program (Section 168); an annual environ

AA contractor by the statute and regulations easily overturns petitioners' contention. The setup under RA 7942 and DAO 96-40
rove -- hence, to influence, direct and change -- the various work programs and the corresponding minimum expenditure comm
s therein. Figures for mineral production and sales are regularly monitored and subjected to government review, in order to ens
d to open its books of accounts and records for scrutiny, so as to enable the State to determine if the government share has bee

afety, health and environmental protection, and the use of anti-pollution technology and facilities. Moreover, the contractor is al

oncompliance with statutes or regulations. This general, all-around, multipurpose sanction is no trifling matter, especially to a c

the State definitely possesses the means by which it can have the ultimate word in the operation of the enterprise, set direction

; on the contrary, it will have to follow the government line if it wants to stay in the enterprise. Ineluctably then, RA 794

or to apply for and hold an exploration permit -- is unconstitutional. The reasoning is that Section 2 of Article XII of the Constituti
exploitation of its natural resources, must hold through the government all exploration permits and similar authorizations. Hence

ull control and supervision over the exploitation of mineral resources, nowhere does it require the government to hold all explor

ht to conduct exploration for all minerals in specified areas. Such a permit does not amount to an authorization to extract and ca
e no revenues or incomes to speak of. In short, the exploration permit is an authorization for the grantee to spend its own funds
ses nothing by granting these permits to local or foreign firms; in fact, it stands to gain in the form of data generated by the explo

iability of a mining area may, within the term of the permit, file with the MGB a declaration of mining project feasibility accompa
or any other mineral agreement, or to an FTAA.

ment, or an FTAA over the permit area, and the application shall be approved if the permit grantee meets the necessary qualific
or an FTAA, is granted. At that point, the contractor's rights and obligations will be covered by an FTAA or a mineral agreemen

spective contractor) cannot yet be deemed to have entered into any contract or agreement with the State, and the grantee wou
ant to Sections 3(aq), 20 and 23 of RA 7942.

e interests and preserves the rights of the exploration permit grantee (the would-be contractor) -- foreign or local -- du
d the protection it affords, the exploration works and expenditures may end up benefiting only claim-jumpers. Such a possibility

ervision:
als (Clause 1.4).

half of the State (Clause 2.1).

).

area (Clause 4.3-c).

the inclusion of forest reserves as part of the FTAA contract area (Clause 4.5).

eded for exploration and development (Clause 4.6).

ause 4.6-b).

.9).

ceeding two-year periods, containing the proposed work activities and expenditures budget related to exploration (Clause 5.1).

or exploration activities (Clause 5.2).

geochemical and other information relating to its explorations within the FTAA area (Clause 5.3-a).

a final report on all its findings in the contract area (Clause 5.3-b).

mining feasibility, along with a description of the area to be developed and mined, a description of the proposed mining operation

struction of the production facilities, within the period stated in the approved work program (Clause 6.1).

program covering each period of three fiscal years (Clause 6.2).

reserves, work accomplished and work in progress, profile of its work force and management staff, and other technical informa

es shall be subject to the approval of the secretary (Clause 6.4).

borrow within the Philippines (Clause 7.2).

g issues (Clause 10.1-a).

within ten years of recovering specified expenditures, unless not so required by subsequent legislation (Clause 10.1).

bstantial breach thereof (Clause 13.2);

to an entity other than an affiliate (Clause 14.1).

the State's ability to exercise full control and effective supervision over the enterprise. For instance, throughout the initial five-y
R secretary for approval. The programs will detail the contractor's proposed exploration activities and budget covering each sub
loration activities and expenditures of the contractor for each succeeding two-year period, with the right to approve/disapprove

n activities during the first contract year of the exploration period was fixed at not less than P24 million; and then for the succee
ous year's expenditure commitment shall apply.

ation phase of the project. This fact is not something to be taken lightly, considering that the government has absolutely no con
er the project and, resultantly, over the mining enterprise itself.

contract area is likely to contain an economic mineral resource, it shall submit to the DENR secretary a declaration of mining fe
nology to be used, a work program for development, an environmental impact statement, and a description of the contributions

oval, the contractor must comply with it and complete the development of the mine, including the construction of production faci

n of the government. It cannot be emphasized enough that the proper and timely construction and deployment of the productio
ork program for development to the DENR secretary for approval is particularly noteworthy, considering that so many millions o

roval, copy furnished the director of MGB, work programs covering each period of three fiscal years (per Clause 6.2). During th
n terms of ores and concentrates, with corresponding grades, values and destinations; reports of sales; total ore reserves, total

o the DENR secretary (copy furnished the director of MGB) the work program and corresponding budget for the contract area,
pose revisions thereto. Once the program/budget has been approved, the contractor shall comply therewith.

f control and a grant of beneficial ownership of mineral resources to the contractor in question, bestow upon the State more t

unt to a relinquishment of control by the State, since it "cannot truly impose its own discretion" in respect of the submitted work

get or variation thereof submitted by the Contractor unless within sixty (60) days after submission by the Contractor the Secreta

deavor to agree on amendments to the Work Programme or Budget. If the Secretary and the Contractor fail to agree on the pro
o as not to unnecessarily delay the performance of the Agreement.

gramme and Budget. It is recognized by the Secretary and the Contractor that the details of any Work Programmes or Budgets
objective of any Work Programme, nor entail a downward variance of more than twenty per centum (20percent) of the relevant B

participate in making critical decisions regarding the operations of the mining firm. Furthermore, while the State can require the
ance, Clause 8.2 merely provides a mechanism for preventing the business or mining operations from grinding to a complete h
secretary more than sufficient time (60 days) to react to submitted work programs and budgets. It cannot be supposed that pro

eement over the submitted work program or budget arises between the State and the contractor and results in a stalemate or im

he government will inexorably be aggrieved if and when these temporary remedies come into play. First, avoidance of long del
roved under Clause 8.3 would not be the better or more reasonable or more effective alternative? The contractor, being the "in
er the circumstances.

ient nonentity whom the contractor can overrule at will, on account of Clause 8.3. And neither is it true that under the same clau
control over the contract area and it may, as sovereign authority, prohibit work thereon until the dispute is resolved. And ultimat
mineral resources.

that no one can accurately forecast under all circumstances, or predict how situations may change. Hence, while approved wo
ape and unfold with suddenness and urgency. Thus, Clause 8.5 allows the contractor to move ahead and make changes withou
ing very far from what has been approved.

e still guaranteeing that the approved work programs and budgets are not abandoned altogether. Clause 8.5 does not constitut
e DENR secretary may resort to cancellation/termination of the FTAA as the ultimate sanction.

no say whatsoever as to -- the parts of the contract area to be relinquished pursuant to Clause 4.6 of the WMCP FTAA.56 This
of the contract area do not contain minerals in commercial quantities sufficient to justify developing the same and ought therefo

shment. According to private respondent,57 a mining company tries to relinquish as much non-mineral areas as soon as possib
amount of occupation fees to be paid by the contractor. Accordingly, relinquishment is not an issue, given that the contractor wi

eminent domain to acquire surface areas within the contract area for the contractor's use. Clause 10.2 (e) of the WMCP FTAA p
the Contractor at such price and terms as may be acceptable to the contractor. At the termination of this Agreement such area

ount of this provision, be compelled "to make use of its power of eminent domain, not for public purposes but on behalf of a priv
cted away by the government, on account of the latter's commitment that the acquisition shall be at such terms as may be acce

contemplates a situation applicable to foreign-owned corporations. WMCP, at the time of the execution of the FTAA, was a fore
other infrastructure -- needed for the large-scale mining operations. It will then have to identify and pinpoint, within the FTAA c
earth, and is also qualified to own land.

land, identifies to the government the specific surface areas within the FTAA contract area to be acquired for the mine infrastru
after termination of the FTAA, to be reimbursed from proceeds of the sale of the surface areas, which the government will dispo
d land. As such, it may therefore freely negotiate with the surface rights owners and acquire the surface property in its own righ

rationale for the said provision. That provision does not call for the exercise of the power of eminent domain -- and determinati

purchasing is a better alternative. This will at least cause the government to be aware of such transaction/s and foster transpar
avoid a technical violation of the Anti-Dummy Law.

ractor to sell the mineral products at posted or market prices is not a problem. Apart from Clause 1.4 of the FTAA obligating the
warranties, including the following:

other relevant data for its mining operation, and that books of accounts and records shall be open for inspection by the govern

advantageous terms and conditions."

the minerals and by-products at the highest market price and to register with the MGB a copy of the sales agreement. After all,

encumber not only its rights and interests in the FTAA and the infrastructure and improvements introduced, but also the minera
actor WMCP to secure the lendings made or to be made to the latter. Ordinarily, banks lend not only on the security of mortgag
of accounts receivable that are collectible within 90 days.59

ecurity" over the production for the next twelve months and/or the proceeds of the sale thereof -- or the corresponding accounts
eceivable.

e, as will be explained below, even if it is allowed to mortgage or encumber the mineral end-products themselves, the contracto

. Just the same, the contractor must account for the value of mineral production and the sales proceeds therefrom. Likewise, u
ght to receive its share of net mining revenues.

y structure at any time." This provision may seem somewhat unusual, but considering that WMCP then was 100 percent foreign
y. Such eventuality is as it should be.

holders in the contractor to freely transfer, dispose of or encumber their shareholdings, consonant with the unfettered exercise o
s of whether these shareholders decide to take the company public, float bonds and other fixed-income instruments, or allow th
government.
to allow amendments to the FTAA if required by banks and other financial institutions as part of the conditions for new lendings
the Government shall) cooperate with the Contractor in such efforts provided that such financing arrangements will in no event
sed amendments.

est from [the] Contractor for amendments of this Agreement which are necessary in order for the Contractor to successfully ob

i) only obliges the State to favorably consider any such request, which is not at all unreasonable, as it is not equivalent to sayin
prise. The clause should not be given an interpretation that enables the contractor to wiggle out of the restrictions imposed upo

A are indispensable, as they enable the contractor to obtain the needed financing; that without such contract changes, the funde
he work programs will not proceed. But the bottom line is, in the exercise of its power of control, the government has the final sa

ently overturns petitioners' litany of objections to and criticisms of the State's alleged lack of control.

d in the Decision that beneficial ownership of the mineral resources had been conveyed to the contractor. This finding was base
o. "By allowing foreign contractors to manage or operate all the aspects of the mining operation, the above-cited provisions of R
ned similar provisions deemed by the ponente to be abhorrent to the Constitution, the Decision struck down the Contract as we

ced in the courts at the suit of the beneficial owner.61 Black's Law Dictionary indicates that the term is used in two senses: first, t
holder is not registered in the corporation's books as the owner.62 Usually, beneficial ownership is distinguished from naked own

wnership, beneficial or otherwise, of the mining property it is to develop, the minerals to be produced, or the proceeds of their s

e mining operation is merely the equivalent of the consideration the government has undertaken to pay for its services. All lawf
rn it is to be compensated out of the net mining revenues generated from the sale of mineral products. What would be objection

O 99-56 can be said to convey beneficial ownership of any mineral resource or product to any foreign FTAA contractor.

hnical Assistance Agreements" aims to ensure an equitable sharing of the benefits derived from mineral resources. These bene
t; and a fair, equitable, competitive and stable investment regime for the large-scale exploration, development and commercial
th and general welfare of the country, while the contractor expects a reasonable return on its investments in the project. 63

re from the taxes and fees normally paid by a mining enterprise. On the other hand, the FTAA contractor is granted by the gove
cing countries. After the contractor has recovered its initial investment, it will pay all the normal taxes and fees comprising the b
o as "the Government Share," composed of a basic government share and an additional government share.

ayments made by the contractor during the term of the FTAA. These are amounts paid directly to (i) the national government (th
he mining activity is conducted, and (iii) persons and communities directly affected by the mining project. The major taxes and o

rations

e Tariff and Customs Code (3-7 percent for chemicals; 3-10 percent for explosives; 3-15 percent for mechanical and electrical

ns, if applicable – 5 percent of the actual market value of the minerals produced

ount of interest

of the dividend

rate varies among local government units)

on an assessment level set by the local government

r if located in a mineral reservation

f the FTAA - the rate and the type depend on the local government
ut from mining operations

actor in accordance with the second paragraph of Section 81 of RA 7942, which provides that the government share shall be co

her things, the contractor's corporate income tax, excise tax, special allowance, withholding tax due from the contractor's foreig
old types supplied.)

g other things as signifying that the government is entitled to an "additional government share" to be paid by the contractor apa

d in DAO 99-56: (1) a fifty-fifty sharing in the cumulative present value of cash flows; (2) the share based on excess profits; and
nt of the development and construction phase of the mining project.66

d by the different levels of government in the following proportions:

s is what goes to the contractor.

ertinent at this juncture to mention the criticism leveled at the second paragraph of Section 81 of RA 7942, quoted earlier. The
a share in the after-tax income of the enterprise. In the face of this allegation, one has to consider that the law does not define

ately avoided setting unnecessary limitations as to what may constitute compensation to the State for the exploitation and use o
thing in that phrase -- or in the second paragraph of Section 81 -- that would suggest that such phrase should be interpreted as

er things in the second paragraph of Section 81,67 the DENR structured and formulated in DAO 99-56 the said additional gove
on top of the basic share, so as to achieve a fifty-fifty sharing -- between the government and the contractor -- of net benefits fr
the claim that the government's take from an FTAA consists solely of taxes, fees and duties.

ed to fully replicate or echo the pertinent elucidation in the Ramos-DeVera paper regarding the three schemes or options for co
hare.
e abstruse mathematical jargon employed in DAO 99-56, the OSG omitted any mention of the three options. Instead, the OSG
pointed out in Justice Antonio T. Carpio's Opinion, that the OSG had taken the position that the additional government share co

has nothing to do with taxes -- direct or indirect -- or with duties, fees or charges. To repeat, it is over and above the basic gov
nterprise; (b) an amount equivalent to 25 percent of the additional or excess profits of the enterprise, reckoned against a bench
actor is required to select one of the three options or formulae for computing the additional share, an option it will apply to all of

endar year, less deductible expenses (inclusive of taxes, duties and fees). Such revenue would roughly be equivalent to "taxab
e is a better and much more reasonable basis for such computation, as it gives a truer picture of the profitability of the company

de Vera also performed some quantifications of the government share via a financial modeling of each of the three options disc
c and the additional shares; and that, even though production rate decreases, the government share will actually increase whe

ndirect taxes70 and other financial contributions71 of mining projects. These indirect taxes and other contributions are real and ac
overnment share increases to 60 percent or higher -- in one instance, as much as 77 percent and even 89 percent -- of the net
s all the risks, without the government having to contribute or risk anything.

he phrase among other things refers only to taxes, duties and fees. We are bewildered by his position. On the one hand, he con
tion of the DENR/MGB. To remove all doubts then, we hold that the State's share is not limited to taxes, duties and fees only a
nt.

r things and, instead, leaving it to the agencies concerned to devise and develop the various modes of arriving at a reasonable
ee different formulae for arriving at the additional government share. Each of these options is quite fair and reasonable; and, as

neficial to the government, as it will have that innate flexibility to adjust to and cope with rapidly changing circumstances, particu
d shifting economic scenarios.

s under RA 7942, the government's share is limited to taxes, fees and duties. Consequently, we find the attacks on the

lected when the contractor shall have recovered its pre-operating expenses and exploration and development expenditures. Th

concerned agencies, which are, on account of their technical expertise and training, in a better position to determine the approp
velopments and advances in technology and in the geosciences, we cannot discount the possibility of shorter recovery periods.
the date of commercial operation, shall be for a period not exceeding five years, or until the date of actual recovery, whichever

on and development expenses of the foreign contractors, who are in effect given unfettered discretion to determine the amount
on, with the result that the share of the State will be zero for the first 10 or 15 years. Moreover, under the circumstances, the go

ertain crucial provisions in the Mining Law were overlooked. Section 23, dealing with the rights and obligations of the exploratio
ess of the yearly budget of the approved work program may be carried forward and credited to the succeeding years covering
t -- for approval by the government -- a proposed work program for exploration, containing a yearly budget of proposed expend
re-operating expenses that the contractor will have to recoup over the grace period. That is not all.

covering a mining area may, within the term of the permit, file with the Mines and Geosciences Bureau a declaration of mining
greement (MPSA), or some other mineral agreement. At this stage, too, the government obviously has the opportunity to appro
have to be recovered by the contractor.

evelopment/construction phases, the government will be able to scrutinize and approve or reject such expenditures. It will be w
herefore no way the contractor can just randomly post any amount of pre-operating expenses and expect to recover the same.

, which deals with the terms and conditions exclusively applicable to FTAAs. The said provision requires certain terms and con
tations and warranties x x x to timely deploy these [financing, managerial and technical expertise and technological] resources

oposed expenditures under an FTAA and approve or reject them. It has access to all the information it may need in order to det

ny manner unconstitutional.

ve), Sections 80, 84 and 112 of RA 7942 also operate to deprive the State of beneficial rights of ownership over mineral resourc
on 81, an ingenious attempt to resurrect the old and discredited system of "license, concession or lease."

agreement (MPSA) to just the excise tax on the mineral product. Under Section 151(A) of the Tax Code, such tax is only 2 perc

ve no application to FTAAs. These particular statutory provisions do not come within the issues that were defined and delineate
e any pronouncement in this case regarding the constitutionality of Sections 80 and 84 without violating the fundamental rules o

ments to the old and discredited "license, concession or lease" system. This Section states in relevant part that "the provisions o
erscoring supplied) This provision is construed as signifying that the 2 percent excise tax which, pursuant to Section 80, compris
any other nature or from any other source.

rt during the Oral Argument, and was never touched upon by the parties in their pleadings, it must also be noted that the criticis
venture agreements, the fact of the matter is that it cannot be made to apply to FTAAs.

to them at all is the fact that it happens to use the word "contractor." Hence, it is a bit of a stretch to insist that it covers FTAAs
nd, FTAAs are covered by and in fact are the subject of Chapter VI, an entirely different chapter altogether. The law obviously
which have not been made applicable to mineral agreements -- to be incorporated into FTAAs.

AA into a mineral agreement at any time during the term if the economic viability of the contract area is inadequate to sustain la
that it apparently demands from contractors under the three forms of mineral agreements. In brief, Section 112 does not app

st rule now on the constitutionality of Sections 80, 84 and 112, allegedly because the WMCP FTAA contains a provision which g
e 2 percent excise tax. Justice Carpio adds that there are five MPSAs already signed just awaiting the judgment of this Court o
cal assumptions, without firm factual anchor. We repeat: basic due process requires that we hear the parties who have a real l
y and capricious.

must comply with the law, particularly Section 39 of RA 7942; inter alia, it must convincingly show that the "economic viability o
s; and third, it will have to risk a possible declaration of the unconstitutionality (in a proper case) of Sections 80, 84 and 112.

TAA has already been executed and entered into, and is presumably being implemented, when the contractor "discovers" that t
explain why, despite its exploration activities, including the conduct of various geologic and other scientific tests and procedure
ctivities, it decided to file a declaration of mining feasibility, and to apply for an FTAA, thereby leading the State to believe that t
wise prove that its new findings, also based on scientific tests and procedures, are correct. Right away, this puts the contractor's
tence to continue the activity under an MPSA.

n considerations of due process -- cannot rule upon them here. Anyway, if later on these Sections are declared uncons

urces are effectively given away for free by the law (RA 7942) in general and by Sections 80, 81, 84 and 112 in particular.

ources without paying anything. In order to get at the minerals, they have to invest huge sums of money (tens or hundreds of m
he local economy, to remain there permanently. The benefits therefrom cannot be simply ignored. And assuming that the foreig
s; dig mine shafts and connecting tunnels; prepare tailing ponds, storage areas and vehicle depots; install their machinery and

fuel, salaries of local labor and technical staff, and other operating expenses. In the meantime, they also have to pay taxes,75 d
ally shell out funds for the duration of over a decade, before they can commence commercial production from which they would

that eventuality will happen only after they shall have first put out the cash and fueled the economy. Moreover, in the process o
ction by not paying a portion of the basic government share corresponding to national taxes, along with the additional governme

n the meantime that the contractors are recouping costs, they need to continue operating; in order to do so, they have to disbur

tors are allowed to recover their investments and costs, the end result is that they practically get the minerals for free, which lea

s in general, have to recoup their investments and costs. That is one of the first things a student learns in business school. Reg
ense. Recovery of investments is absolutely indispensable for business survival; and business survival ensures soundness of th
n. And, as the preceding discussion has shown, there is no business that gets ahead or earns profits without any cost to it.

accessible or transformable into usable and negotiable currency without the intervention of the credible mining companies. Tho
m, and the country needs the foreign contractor's funds, technology and know-how for that.

actors will have just broken even. Is it likely that they would at that point stop their operations and leave? Certainly not. They ha
government share which, taken together with indirect taxes and other contributions, amount to approximately 60 percent or mo
lot of hard cash to even begin to do what they do. And what they do in this country ultimately benefits the local economy, grows
ontribution to the growth of the economy or to the general welfare of the country. This is not a plea for foreign contractors. Rath
grounded upon fact.

conomic growth and general welfare of the country, as mandated by Section 2 of Article XII of the Constitution. Pursuant to Sec
said after-tax income to their home countries, thereby resulting in no real contribution to the economic growth of this country. C

the second paragraph of Section 81 of RA 7942 to mean that the government is entitled to an additional share, to be computed
rect to say that all of the after-tax income will accrue to the foreign FTAA contractor, as the government effectively receives a s

tries." Even a bit of knowledge of corporate finance will show that it will be impossible to maintain a business as a "going conce
g to cash in the bank, or other quick assets. In order to produce and set aside cash in an amount equivalent to the bottom line fi

actually in use in the normal course of business operations. Pulling out such net income disrupts the cash flows and cash posi
business person, concerned with maintaining the mining enterprise as a going concern and keeping a foothold in its m

e must receive at least 60 percent of the after-tax income from the exploitation of its mineral resources. This share is the equiv

ct at least 60 percent of the after-tax income from a mining company run by a foreign contractor. The argument is that the Chart

We are, after all, dealing with an essentially different equation, one that involves different elements. The Charter did not intend
lack and white. Verba legis will serve to dispel unwarranted and untenable conclusions.

ess) of what we are demanding of the foreign contractor. Let us use a simplified illustration. Let us base it on gross revenues of
ome going to the government, leaving the mining firm with P68. Government then takes 60 percent thereof, equivalent to P40.8

of taxable income, leaving the mining firm with only P27.20. But that is not all. The government has also taken 2 percent excise
income of P100 (assuming gross revenues of P500, for purposes of illustration). On the other hand, the foreign contractor, whi
ble, considering the nature of the mining business. The amount of P82.80 out of P100.00 is really a lot – it does not matter that
But we have to ask ourselves if we are really serious in attracting the investments that are the indispensable and key element in

g business. The reason happens to be the fact that in petroleum operations, the bulk of expenditures is in exploration, but once
of piping, transporting and storing. Not so in mineral mining. The ore body does not pop out on its own. Even after it has been lo
ock.

uirements, cost structures and investment needs render it highly inappropriate to use petroleum operations FTAAs as benchma
-tax income of a mining company operated by a foreign contractor is fair and reasonable under most if not all circumstances. Th
ng companies) as well. We can take judicial notice of the fact that there are, after all, numerous intrinsic differences involved in

ment share in the same way petroleum companies apparently can. What we have is a suggestion to enforce the 60 percent quo

petroleum companies. In Republic Act No. 7729 -- "An Act Reducing the Excise Tax Rates on Metallic and Non-Metallic Minera
c minerals at two percent of the actual market value of the annual gross output at the time of removal. However, in the case of p

xcise tax rate. We cannot assume, without proof, that our honorable legislators acted arbitrarily, capriciously and whimsically in

evenues does not necessarily imply that mining contracts should likewise yield a minimum of 60 percent for the State. Jumping

es is struck and the wells are put in place, the risk is relatively over and black gold simply flows out continuously with comparati

esh capital and expertise to dig the mineral ores from the mines. Just because deposits of mineral ores are found in one area i

neral industry. As mines are explored and extracted, vast employment is created, roads and other infrastructure are built, and o
o basis for saying that government revenues from the oil industry and from the mineral industries are to be identical all the time

e the hands of government, ultimately hampering the country's competitiveness in the international market, to the detriment of
he foreign contractor during good years, when international market prices are up and the mining firm manages to keep its costs
mal profits.

e mining venture, scare away potential investors, and thereby further worsen the already dismal economic scenario. Moreover,
y less attractive as an investment option compared with other countries.

0 percent of the after-tax income of FTAA contractors at all times is nothing short of dictating upon the government. The result,
"minimum 60 percent" rule. It is sufficient that the State has the power and means, should it so decide, to get a 60 percent sha
case, regardless of circumstances.

al, negotiate and transact with contractors and third parties as it sees fit; and upon terms that it ascertains to be most favorable
erwise the State will be deprived of full control over mineral exploitation that the Charter has vested in it.

overnment in an FTAA at 60 percent of the net profit. For this Court to decree such minimum is to wade into judicial legislation
ations, the President can secure 60 percent,78 or even 90 percent, then all the better for our people. But, if under the peculiar c
ongress, and eventually to the people.

ment, the officials responsible for entering into such a contract on its behalf will have to answer to the courts for their malfeasanc
actor in an FTAA provides all the needed capital, technical and managerial expertise, and technology required to undertake the

outset, to make capital investments of up to US$50 million in that single mining project. WMCP claims to have already poured in
provides no assurance whatsoever that any part of the investment will be ultimately recouped.

social obligations, for which it also commits to make significant expenditures of funds. Throughout, the contractor assumes all
m in commercially viable quantities is estimated to be about 1:1,000 only. On that slim chance rides the contractor's hope of rec
the State ever being in peril of incurring costs, expenses and losses.

y development -- the contractor would already have spent several million pesos for exploration works, before arriving at the poin
llion. The FTAA therefore clearly ensures benefits for the local economy, courtesy of the contractor.

e; it certainly cannot be said to convey beneficial ownership of our mineral resources to foreign contractors.

ctive. They cite the so-called "suspicious" deductions allowed by the WMCP FTAA in arriving at the net mining revenue, which i
s,"80 "consulting fees incurred both inside and outside the Philippines for work related directly to the Mining Operations,"81 and "
onably related to the performance of the Contractor's obligations and exercise of its rights under this Agreement."82

in respect of selling their mineral products and by-products. Hence, it would not be improper to allow the deduction of reasona
rly allocatable to the mining operations and reasonably related to the performance of the contractor's obligations and exercise o

ction 7.9 of the WMCP FTAA. While Section 7.7 gives the government a 60 percent share in the net mining revenues of WMCP
originally owned 100 percent of the equity -- sell 60 percent or more of its outstanding capital stock to a Filipino citizen or corpo

use 7.7 shall be reduced by 1percent of Net Mining Revenues for every 1percent ownership interest in the Contractor (i.e., WM

ut any offsetting compensation to the State. Thus, in reality, the State has no vested right to receive any income from the FTAA
overnment's entire 60 percent share. They can do so by simply selling 60 percent of WMCP's outstanding capital stock to a Phil

ned and 40 percent foreign-owned will still trigger the operation of Section 7.9. Effectively, the State will lose its right to receive
4 percent pro-rata share in the buyer-corporation.84

WMCP to Sagittarius Mines, Inc. -- a domestic corporation at least 60 percent Filipino owned -- may be deemed to have autom
revenues of WMCP without any offset or compensation whatsoever. It is possible that the inclusion of the offending provision
o citizens and corporations. However, as finally structured, Section 7.9 has the deleterious effect of depriving government of the

generations included. And the State as sovereign and custodian of the nation's natural wealth is mandated to protect, conserve
as essential guiding principles to be kept in mind when negotiating the terms and conditions of FTAAs.

otiate and transact with contractors and third parties as it sees fit, and upon terms that it ascertains to be most favorable or mos
f circumstances; and (3) that should the State be prevented from agreeing to a share less than 60 percent as it deems fit, it will

to serve and protect the national interest. In this instance, national interest finds particular application in the protection of the na
he country. Undoubtedly, such full control can be misused and abused, as we now witness.

ovided for in Section 7.7) without anything in exchange. Moreover, this outcome constitutes unjust enrichment on the part of the
fall. Their share in the net mining revenues of WMCP is automatically increased, without their having to pay the government an

any agreements, terms and conditions that they deem convenient; but these should not be contrary to law, morals, good custo

awareness of the ill consequences, is of no moment. It is hornbook doctrine that the principle of estoppel does not operate agai
ay also say that the FTAA in question does not involve mere contractual rights; being impressed as it is with public interest, the

e deletion of Section 7.9 can be done without affecting or requiring the invalidation of the WMCP FTAA itself. Such a deletion w
s operations of the contractor are not needlessly disrupted.

cluding excise tax, corporate income tax, customs duty, sales tax, value added tax, occupation and regulatory fees, Governmen
from the Mining Operations and any tax on interest on domestic and foreign loans or other financial arrangements or accomm

ies, costs, imposts, duties, royalties, occupation and regulatory fees and infrastructure contributions;

s people or Claimowners;

o national development in accordance with Clause 10.1(i) (1) and 10.1(i) (2);

uture by the Government to the Contractor or to financial or technical assistance agreement contractors in general;

e Government Share in an earlier Fiscal Year, adjusted for inflation." (underscoring supplied)
government for the benefit of the contractor in building roads leading to the mine site should still be deductible from the State'
, since the latter is effectively being made to pay twice for the same item. 91 For being grossly disadvantageous and prejudicial t
ing the rest of the FTAA.

items of deduction from the State's 60 percent share. After taking these into account, will the State ever receive anything for its

us items of "deduction" listed in Section 7.8 of the WMCP FTAA, we will find that they correspond closely to the components or

n listed in Section 7.8 --corresponds closely to the additional government share provided for in DAO 99-56 which, we once a

following formulation:

c. 7.8 of the FTAA + balance of Gov't share, payable 4 months from the end of the fiscal year

under DAO 99-56, with the "balance of government share payable 4 months from end of fiscal year" being the equivalent of th
three options for computing the additional government share -- as presented in DAO 99-56 -- to be sound and reasonable.

P FTAA, and certainly nothing to warrant the invalidation of the FTAA in its entirety.

erm of FTAAs. The provision in question reads:

nty-five (25) years under the same terms and conditions provided that the Contractor lodges a request for renewal with the Gov
ment."

ates:

mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are o
under the full control and supervision of the State. The State may directly undertake such activities, or it may enter into co-prod
ch agreements may be for a period not exceeding twenty-five years, renewable for not more than twenty-five years, an
ter power, beneficial use may be the measure and limit of the grant.

l sea, and exclusive economic zone, and reserve its use and enjoyment exclusively to Filipino citizens.

no citizens, as well as cooperative fish farming, with priority to subsistence fishermen and fish-workers in rivers, lakes, bays an

either technical or financial assistance for large-scale exploration, development, and utilization of minerals, petroleum, and oth
eements, the State shall promote the development and use of local scientific and technical resources.
e with this provision, within thirty days from its execution."93

above provision is found within paragraph 1 of Section 2 of Article XII, which refers to mineral agreements -- co-production agr
ino citizens. The word "such" clearly refers to these three mineral agreements -- CPAs, JVAs and MPSAs -- not to FTAAs.

. It will be noted that there are no term limitations provided for in the said paragraphs dealing with FTAAs. This shows that FTA
s, JVAs and CPAs. The reason the framers did not fix term limitations applicable to FTAAs is that they preferred to leave the m
ircumstances.

hereafter, a few more years would be gobbled up in start-up operations. It may take fifteen years before an FTAA contractor ca
quantities of minerals are found, the contractor bears all financial losses. To compensate for this long gestation period and ext

the government to renew the WMCP FTAA for another 25 years and deprives the State of any say on whether to renew the co

actor, this provision does not violate any constitutional limits, since the said term limitation does not apply at all to FTAAs. Neith
tract.

n, but it did not. It appears that, in the process of negotiations, the other contracting party was able to convince the government
f the State. If government believes that it is or will be aggrieved by the effects of Section 3.3, the remedy is the renegotiation of

the Constitution somehow forbids foreign-owned corporations from deriving financial benefits from the development of our natu

nterest" in the development of Philippine natural resources. The State itself need not directly undertake exploration, developmen
agreements (MPSAs) with contractors who are Filipino citizens or corporations that are at least 60 percent Filipino-owned. The

on-Filipino stakeholders obviously participate in the beneficial interest derived from the development and utilization of our natura
ce they are entitled to representation therein to the extent of their equity participation, which the Constitution permits to be up to
s is permitted by our Constitution, for any natural resource, and without limitation even in regard to the magnitude of the mining

idea of foreign individuals and entities having or enjoying "beneficial interest" in -- and participating in the management of oper

osition for the government as compared with other agreements permitted by the Constitution. In a CPA that the government en

g equity shares (investments); and the contractor is granted the exclusive right to conduct mining operations and to extract mine
and the contractor provides the necessary financing, technology, management and manpower.

government has to ante up some risk capital for the enterprise. In other words, government funds (public moneys) are withdraw
arrangements -- in the hands of the contractor, with the government being mainly a silent partner. The three types of agreemen
he FTAA is limited to large-scale projects and only for minerals, petroleum and other mineral oils. Here, the Constitution remov
he foreign entity may have to ante up all the risk capital.

respect of the particular FTAA granted to it, WMCP (then 100 percent foreign owned) was responsible, as contractor, for provi
of the net beneficial interest, because the other 60 percent is the share of the government, which will never be exposed to any r

ment of the mining operations. Still such management is subject to the overall control and supervision of the State in terms of re

benefits derived or to be derived from a CPA, a JVA or an MPSA vis-à-vis those pertaining to an FTAA. It may not be realisticall
round, the government is definitely better off with an FTAA than a CPA, a JVA or an MPSA.

consider whether mining as an industry and economic activity deserved to be accorded priority, preference and government su
c performance of all local US counties that were dependent on mining and 20 percent of whose labor earnings between 1970 a

ncome grew about 30 percent less in mining-dependent communities in the 1980s and 25 percent less for the entire period 198

g brings with it serious economic problems, including increased regional inequality, unemployment and poverty. They also cite
sharing of benefits with local communities that bear the negative social and environmental impact. The Report suggests that co
nable development once the resources run out.

ctivities is a question of policy that the President and Congress will have to address; it is not for this Court to decide. This Court

proper balancing of interests. More pointedly, such control will enable the President to demand the best mining practices and th
during and after mining. It can likewise provide for the mechanisms to protect the rights of indigenous communities, and thereb

y 6, 1997, then President Fidel V. Ramos captured the essence of balanced and sustainable mining in these words:

decent jobs for the population, more raw materials to feed the engines of downstream and allied industries, and improved chanc

xxxxxxxxx

ainable mining, we take a middle ground where both production and protection goals are balanced, and where parties-in-interes

perations. Recently, on January 16, 2004 and April 20, 2004, President Gloria Macapagal Arroyo issued Executive Orders Nos.
ustainable development and with due regard for justice and equity, sensitivity to the culture of the Filipino people and respect fo

REFUTATION OF DISSENTS

o and Morales.

estern Mining Corporation (WMC) and former president of the Australian Mining Industry Council, who spearheaded the vocifer
sources quoted by our esteemed colleague, Morgan was also a racist and a bigot. In the course of protesting Mabo, Morgan
the likes of Hugh Morgan and his hordes of alleged racist-bigots at WMC. With all due respect, such scare tactics should have
ning, a Filipino corporation. We are not discussing the apparition of white Anglo-Saxon racists/bigots massing at our gates.

tance, Justice Morales points out that at times we "conveniently omitted" the use of the disjunctive either…or, which according

chnical or financial assistance would, strictly speaking, literally mean that a foreign contractor may provide only one or the othe
technical assistance. And following on that, a foreign contractor, though very much qualified to provide both kinds of assistanc

contractors who are willing to participate in one single project -- one to provide the "financial assistance" only and the other the
otherwise competitors). And it would be superb if no conflicts would arise between or among them in the entire course of the co
istic, or incredibly naïve. This begs the question -- What laudable objective or purpose could possibly be served by such strict a

operty right which merits protection by the due process clause of the Constitution, but merely a license or privilege which may b

latter cases dealt specifically with timber licenses only. Oposa allegedly reiterated that a license is merely a permit or privileg
y right, nor does it create a vested right; nor is it taxation. Thus this Court held that the granting of license does not create irrevo

also involved in this situation? We do not think so. A grantee of a timber license, permit or license agreement gets to cut the tim
mining contractor. If a timber license were revoked, the licensee packs up its gear and moves to a new area applied for, and star

to the ground, so to speak, for exploration activities, for development of the mine site and infrastructure, and for the actual exca
recovery of investments), most of which cannot be pulled out.

perty rights which merit protection by the due process clause of the Constitution, and may therefore be revoked or cancelled in
the mining industry, whose investments, operations and expenditures do contribute to the general welfare of the people, the co
c growth and move this country out of the rut of poverty. In sum, Oposa is not applicable.

serve our natural resources exclusively for the Filipino people. She then quoted from the records of the ConCom deliberations a
oes not suffice to capture the tenor or substance of the entire extensive deliberations of the commissioners, or to reveal the cle

elay in the exploration, development or utilization of the nation's natural resources is merely secondary to the protection and pre
delay in the development and utilization of our natural resources, why did they bother to write paragraph 4 at all? Were they me
dment. But we have to harmonize every part of the Constitution and to interpret each provision in a manner that would give life

our contention that the framers, by specifying such agreements involving financial or technical assistance, necessarily gave imp
to-day operations. As proof thereof, she quotes one single passage from the ConCom deliberations, consisting of an exchange

. Christian Monsod was quoted as saying: "xxx I think we have to make a distinction that it is not really realistic to say that we w
hould only borrow on our own terms is a bit unrealistic." Comm. Monsod is one who knew whereof he spoke.

s after completion of the exploration phase and just before undertaking the development and construction phase, on account of
eign contractor need merely comply with minimum ground expenditures. Thus by converting, the foreign contractor maximizes it
o come anywhere near profitability, the contractor must first extract and sell the mineral ore. In order to do that, it must also dev
cides to cut back on investments and expenditures, it will necessarily sacrifice the pace of development and utilization; it will ne
cover variable expenses, let alone overhead expenses; this is a dismal situation anyone would want to avoid. In order to make

ng to Justice Morales since the contractor was from the beginning obliged to provide all financing needed for the mining operatio
cial capability to undertake large-scale operations. Mortgaging of mineral products, just like the assignment (by way of security
nowadays, even the richest and best managed corporations make use of bank credit facilities -- it does not necessarily signify th

tled to reimbursement for the costs of acquisition and maintenance, adjusted for inflation? We think not. The "reimbursement" i
ets reimbursement from the sales proceeds. The contractor has to pay out the acquisition price for the land. That money will be
erm of the contract -- 25 or 50 years, depending. If we calculate the cost of money at say 12 percent per annum, that is the cos
refore at least 600 percent of the original acquisition cost; it is in addition to the acquisition cost. "For free"? Not by a long shot.

tate of land for the contractor is just to enable the contractor to establish its mine site, build its facilities, establish a tailings pond
ng and digging underground, which will not require possessing or using any land surface. 5,000 hectares is way too much for th

ction 81 of the Mining Act) is being incorrectly treated as a delegation of legislative power to the DENR secretary to issue DAO 9
ecretary, much less could it be deemed a valid delegation of legislative power, since there is nothing in the second paragraph o
ated power shall be exercised.

elegation of legislative power to the DENR secretary, it does not mean that DAO 99-56 is invalid per se, or that the secretary ac
he Constitution is crystal clear: the President. Indeed, the Chief Executive is the official constitutionally mandated to 'enter into
al] provision within thirty days from its execution.'" It is the President who is constitutionally mandated to enter into FTAAs wit
he net mining revenues between the contractor and the State.

e DENR secretary, acting for the President, is necessarily clothed with the requisite authority and power to draw up guidelines d
in existence for almost six years, and has not been amended or revoked by the President.

ure did not delegate the power to determine the nature, extent and composition of the items that would come under the phrase
AAs was withheld from Congress, and reserved for the President. In determining the sharing of mining benefits, i.e., in specifyin
unt of INCOME to be derived from minerals to be extracted and sold, income which belongs to the State as owner of the minera

of, among other things, the contractor's corporate income tax, excise tax, special allowance, withholding tax due from the contra
provided for under existing laws." (Italics supplied)

ms as part of the government share, without foreclosing or in any way preventing (as in fact Congress could not validly prevent)
r the owner of the resources, in the government's share, while adopting the items enumerated by Congress as part of the gover

phrase among other things is therefore useless, and must fall by the wayside. There is no point trying to construe that phrase in
ate and mining companies," to quote Justice Carpio pursuant to an FTAA is constitutionally lodged with the President, no

6 any time even without the approval of the President, and the secretary is the sole authority to determine the amount of consid
he Negotiation Panel and the recommendation of the Secretary for approval of the President xxx". Allegedly, because of that pr
ecretary has the final authority, and approval of the President may be dispensed with; hence the secretary is more powerful tha
ection 5 of DAO 99-56 reads as follows:

s Administrative Order shall remain valid and be recognized by the Government: Provided, That should a Contractor desire to a
A, it may do so by seeking for the amendment of its FTAA's whole fiscal regime by adopting the fiscal regime provided hereof:
cretary for approval of the President of the Republic of the Philippines." (underscoring supplied)

tually preceded by a phrase that requires a contractor desiring to amend the fiscal regime of its FTAA, to amend the same by a
esumed approval of the President, the amendment of an FTAA by merely adopting the fiscal regime prescribed in said
kes the secretary more powerful than the President, or that the former is trying to hide things from the President or Congress.

to the effectivity of this Administrative Order shall remain valid and be recognized by the Government", Justice Carpio conclud
es, duties and fees.

DAO came into effect are to continue to be valid and will be recognized by the State. Nothing is said about their fiscal regimes.

hare. The WMCP FTAA has its own fiscal regime -- Section 7.7 -- which gives the government a 60 percent share in the

TAA has a consideration. Hence, we find quite out of place Justice Carpio's statement that ironically, DAO 99-56, the very auth
ssuance of DAO 99-56, like the WMCP FTAA. The majority's position has allegedly no leg to stand on since even DAO 99-56,
ts own fiscal regime, found in Section 7.7 thereof. Hence, there is no such thing as "want of consideration" here.

TAA, which grant a sham consideration to the State, are void. Since the majority agrees that the WMCP FTAA has a sham cons
der Section 80. Indeed the only recourse of WMCP to save the validity of its contract is to convert it into an MPSA.

ageous to government and detrimental to the interests of the Filipino people, as well as violative of public policy, and must ther
fecting or requiring the invalidation of the WMCP FTAA itself, and such deletion will preserve for government its due share of th

SUMMATION

echnical or financial assistance, the framers' choice of words does not indicate the intent to exclude other modes of assistance,
nd stringent phraseology; a verba legis scrutiny of Section 2 of Article XII of the Constitution discloses not even a hint of a desir
amental economic and developmental policies of the State. That change requires a much more definite and irrefutable basis tha

A constitutional provision specifically allowing foreign-owned corporations to render financial or technical assistance in respect

point in requiring that they be "based on real contributions to the economic growth and general welfare of the country." And co
nd closing-out of the then existing service contracts strongly militates against the theory that the mere omission of "service cont

scrutiny thereof conclusively shows that the ConCom members discussed agreements involving either technical or financial as
financial assistance but, rather, foreign investment in and management of an enterprise for large-scale exploration, developme
It is obvious from their discussions that they did not intend to ban or eradicate service contracts. Instead, they were intent on c
corporations as contractors, but with safety measures to prevent abuses, as an exception to the general norm establi
pment and utilization of mineral or petroleum resources. This was prompted by the perceived insufficiency of Filipino capita

ational Economy and Patrimony -- including paragraph 4 allowing service contracts with foreign corporations as an exception to

ans knew that foreign entities will not enter into agreements involving assistance without requiring measures of protection to en
s, by specifying such agreements involving assistance, necessarily gave implied assent to everything that these agreements en
asures for the protection of the interests of the foreign corporation, at least to the extent that they are consistent with Philippine

red to in paragraph 4 are in fact service contracts, but such new service contracts are between foreign corporations acting as c
d managerial expertise in the creation and operation of the large-scale mining/extractive enterprise, and government through its

ral oils. The grant of such service contracts is subject to several safeguards, among them: (1) that the service contract be crafte
eement to Congress within thirty days.

nd its full control and supervision over all aspects of exploration, development and utilization of natural resources must be uphe
nder impossible the legitimate exercise by the contractor of a reasonable degree of management prerogative and authority, indi
cising full control and supervision.

enable the State to direct, restrain, regulate and govern the affairs of the extractive enterprises. Control by the State may be o
erprises, and restrain activities deemed not desirable or beneficial, with the end in view of ensuring that these enterprises contr
atible with permitting the foreign contractor sufficient and reasonable management authority over the enterprise it has invested

s make it possible for FTAA contracts to cede full control and management of mining enterprises over to fully foreign owned cor
ecision-making of the enterprise, for which reasons "beneficial ownership" of the mineral resources is allegedly ceded to the fo

ed through the following provisions in RA 7942: Sections 8, 9, 16, 19, 24, 35[(b), (e), (f), (g), (h), (k), (l), (m) and (o)], 40, 57, 66
270, and also Chapters XV, XVI and XXIV.

or disapprove -- hence, in a position to influence, direct, and change -- the various work programs and the corresponding minim
erein will be monitored. Figures for mineral production and sales are regularly monitored and subjected to government review,

ate to determine that the government share has been fully paid. The State may likewise compel compliance by the contractor w
the mining community, and pay royalties to the indigenous peoples concerned. And violation of any of the FTAA's terms and co
reds of millions of dollars sunk into a mining project.

et directions and objectives, detect deviations and non-compliances by the contractor, and enforce compliance and impose san
to apply for and hold an exploration permit. During the exploration phase, the permit grantee (and prospective contractor) is sp
ch allows exploration but not extraction, serves to protect the interests and rights of the exploration permit grantee (and would-b
942 is not unconstitutional.

s (Clause 1.4); requires that the contractor's work program, activities and budgets be approved by the State (Clause 2.1); gives
Development approval for inclusion of forest reserves as part of the FTAA contract area (Clause 4.5); obligates the contractor to
use 4.6-b); obligates the contractor to report to the State the results of its exploration activities (Clause 4.9); requires the contra
he contractor to obtain State approval for its proposed expenditures for exploration activities (Clause 5.2); requires the contracto
months after expiration of exploration period a final report on all its findings in the contract area (Clause 5.3-b); requires the cont
and the technology to be employed, and the proposed work program for the development phase, for approval by the DENR se
se 6.1); requires the contractor to submit for approval a work program covering each period of three fiscal years (Clause 6.2); r
cal information (Clause 6.3); subjects any expansions, modifications, improvements and replacements of mining facilities to the
echnical, financial and marketing issues (Clause 10.1-a); obligates the contractor to ensure 60 percent Filipino equity in the con
breach thereof by the contractor (Clause 13.2); requires State approval for any assignment of the FTAA by the contractor to an

trol and a grant of beneficial ownership of mineral resources to the contractor in question, vest the State with control and super

Clause 8.2 provides a mechanism to prevent the mining operations from grinding to a complete halt as a result of possible dela
etween the State and the contractor (over the proposed work program or budget submitted by the contractor) should result in a

ority, prohibit work thereon until the dispute is resolved, or it may terminate the FTAA, citing substantial breach thereof. Hence,

without the prior approval of the DENR secretary, subject to certain limitations with respect to the variance/s, merely provides th
sagrees with the actions taken by the contractor in this instance, he may also resort to cancellation/termination of the FTAA as

be relinquished. The State is not in a position to substitute its judgment for that of the contractor, who knows exactly which por
arage of the contract area, net of the areas relinquished, the contractor's self-interest will assure proper and efficient relinquishm

se its power of eminent domain. It contemplates a situation in which the contractor is a foreign-owned corporation, hence, not q
ormer. The provision does not call for the exercise of the power of eminent domain (or determination of just compensation); it s

neral products extracted may have been a result of conditions imposed by creditor-banks to secure the loan obligations of WMC
ething out of the ordinary. Neither is it objectionable, because even though the contractor is allowed to mortgage or encumber
mortgage the minerals does not negate the State's right to receive its share of net mining revenues.

ns that WMCP, which was then 100 percent foreign owned, could permit Filipino equity ownership. Moreover, what is important

other financial institutions as part of the conditions of new lendings. There is nothing objectionable here, since Clause 10.4(e)
ll "favourably consider" any request for amendments of this agreement necessary for the contractor to successfully obtain finan
sted changes. The government always has the final say on whether to approve or disapprove such requests.
e's share in FTAAs with foreign contractors to just taxes, fees and duties, and depriving the State of a share in the after-tax inco
ect more than just the usual taxes, duties and fees.

nce Agreements," spells out the financial benefits government will receive from an FTAA, as consisting of not only a basic gove
hare in the earnings or cash flows of the mining enterprise, so as to achieve a fifty-fifty sharing of net benefits from mining

in DAO 99-56, viz., (1) the fifty-fifty sharing of cumulative present value of cash flows; (2) the excess profit-related additional go
xes, duties, fees or charges. The portion of revenues remaining after the deduction of the basic and additional government sha

ndirect taxes and other financial contributions of mining projects, which are real and actual benefits enjoyed by the Filipino peop
he project.

vernment share in FTAAs until after the contractor shall have recovered its pre-operating expenses, exploration and developm
grace period, the concerned agencies (DENR and MGB) in formulating the 1995 and 1996 Implementing Rules and Regulation

on and development expenses of the foreign contractors, it is feared that such expenses could be bloated to wipe out mining rev

work program for exploration, containing a yearly budget of proposed expenditures, which the State passes upon and either app

easibility, it must submit a work program for development, with corresponding budget, for approval by the Bureau, before gove
ment works, which will become the pre-operating and development costs that will have to be recovered. Government is able to
35, which deals with the terms and conditions exclusively applicable to FTAAs. In sum, the third or last paragraph of Section 81

(MPSA) to just the excise tax on the mineral product, i.e., only 2 percent of market value of the minerals. The colatilla in Section
he issues defined by this Court. Hence, on due process grounds, no pronouncement can be made in this case in respe

ssion or lease" system, because it allegedly effectively reduces the government share in FTAAs to just the 2 percent excise tax
he parties in their pleadings. Moreover, Section 112 may not properly apply to FTAAs. The mining law obviously meant to treat
excise tax) that it apparently demands from contractors under the three forms of mineral agreements.

ot be ruled upon here. In any event, they are separable; thus, a later finding of nullity will not affect the rest of RA 7942.

om an FTAA to the foreign contractors.

must receive at least 60 percent of the after-tax income from the exploitation of its mineral resources, and that such share is the
tled to a 60 percent share from other mineral agreements (CPA, JVA and MPSA), that would not create a parallel or analogous

gardless of circumstances. There is no indication of such an intention on the part of the framers. Moreover, the terms and condi
etroleum exploration and drilling companies do not have the remotest resemblance to those of on-shore mining comp

FTAA contractors is nothing short of this Court dictating upon the government. The State resultantly ends up losing control. To
State has the power and means, should it so decide, to get a 60 percent share (or greater); and it is not necessary that the Stat
enues. Under Section 7.9, should WMCP's foreign stockholders (who originally owned 100 percent of the equity) sell 60 percen
nd what is given to the State in Section 7.7 is by mere tolerance of WMCP's foreign stockholders, who can at any time cut off th

y in WMCP to Sagittarius Mines, Inc., a domestic corporation at least 60 percent Filipino owned, can be deemed to have autom
g in exchange.

P, because by the mere act of divestment, the local and foreign stockholders get a windfall, as their share in the net mining reve

ative of public policy, Section 7.9 must therefore be stricken off as invalid. The FTAA in question does not involve mere contrac
s very much separable from the rest of the FTAA, the deletion of Section 7.9 can be done without affecting or requiring the inva

ent for the benefit of the contractor to be deductible from the State's share in net mining revenues, it results in benefiting the con
ublic policy, Section 7.8(e) must also be declared without effect. It may likewise be stricken off without affecting the rest of the F

EPILOGUE

e key principle that the State must exercise full control and supervision over the exploration, development and utilization of min

articularly the President of the Republic, in respect of negotiations over the terms of FTAAs, particularly when it comes to the go
agreements, the humongous amounts of capital and financing required for large-scale mining operations, the complicated tech
arkets.

tion in high places, duplicity in the negotiation of multi-billion peso government contracts, huge payoffs to government officials,
an FTAA is not the solution. It sets a bad precedent since such a move institutionalizes the very reduction if not deprivation o
s or detrimental to government may be challenged in court, and the culprits haled before the bar of justice.

ches of government, this Court must restrain itself from intruding into policy matters and must allow the President and Congres
ment opportunities in the country.

official functions."99 As aptly spelled out seven decades ago by Justice George Malcolm, "Just as the Supreme Court, as the gu
y implication conferred on it by the Organic Act."100 Let the development of the mining industry be the responsibility of the politic

ations and hopes of all the people. We fully sympathize with the plight of Petitioner La Bugal B'laan and other tribal groups, and
legal and binding FTAA contract.

s who deserve the attention of this Court; rather, all parties concerned -- including the State itself, the contractor (whether Filipin
erve the great majority of our fellow citizens. They have as much right and interest in the proper and well-ordered development

an appropriate balancing of interests and needs -- the need to develop our stagnating mining industry and extract what NED
hand, and on the other, the need to enhance our nationalistic aspirations, protect our indigenous communities, and prevent irre

nly the cultural communities which lodged the instant Petition, and not only the larger community of the Filipino people now stru
n its delivery of basic services by a severe lack of resources, but also countless future generations of Filipinos.
basic services, their overall level of well-being, the very shape of their lives are even now being determined and affected partly

ect group of people living in the areas locally affected by mining activities, but the entire Filipino nation, present and future, to w
ALL, not just for some; JUSTICE FOR THE PRESENT AND THE FUTURE, not just for the here and now.

Reconsideration; to REVERSE and SET ASIDE this Court's January 27, 2004 Decision; to DISMISS the Petition; and to issue t
o. 9640 -- insofar as they relate to financial and technical assistance agreements referred to in paragraph 4 of Section 2 of Artic
CP), except Sections 7.8 and 7.9 of the subject FTAA which are hereby INVALIDATED for being contrary to public policy and fo

e is on leave.

CONCURRING OPINION

an. I feel obligated, however, to add the following observations:

menting rules, and the Financial Assistance Agreement between the Philippine Government and WMPC (Philippines) Inc. (WM

e full control and supervision of the State. x x x. (Emphasis supplied)

utional Commission that the term "control" does not have the meaning it ordinarily has in political law which is the power of a su

ces and, of course, there are decisions made by the governing board of that judicial entity, can the state change the decisions o

te the laws of the land. 2

lected as members of the board of a corporation doing business under, say, a co-production, joint venture or profit-sharing agre
in management would make a co-production, joint venture and production sharing illusory."4
by Commissioner, now Mr. Chief Justice Davide, that the governing and managing bodies of such corporations shall be vested

ed Davide amendment was approved with regard to educational institutions, viz:

ps and mission boards, shall be owned solely by citizens of the Philippines or corporations or associations at least sixty per cen

s of the Philippines. (Emphasis supplied)

stitution to deprive governing boards of domestic corporations with non-Filipino members, the right to control and administer the
mendment would have been approved and, like the prohibition in above-quoted Section 4(2), Article XIV, control and supervisio

oration and use of natural resources, to that extent the "full control and supervision" thereof by the State is diminished.

lows itself to surrender part of its sovereign right to full control and supervision of said activities, the State having the right to pa

tural resources as corporate directors of domestic corporations, there is no justification for holding that foreign corporations who
nd other mineral oils are prohibited from managing such business.

of the exploration, development and utilization of minerals when undertaken in a large scale under agreements with foreign corp
ent of the business.

ossible undertaking.7 It must therefore be presumed that the Constitution did not at all intend an interpretation of Section 2, Artic
alm of the possible the enterprise the Constitution envisions thereunder.

orales, that it is of no moment that the declaration of Rep. Act No. 7942 may discourage foreign assistance and/or retard or del
ction and preservation of their ownership of these natural resources. With due respect, I find such proposition not legally justifiab
ization of the nation's marine wealth to allow the State to take advantage of foreign funding or technical assistance. As long as
rces by and through foreign corporations, such FTAAs are not unconstitutional.

and conservation" of the State-owned mineral resources "through the combined efforts of government and the private sector in
eeping with the constitutional precept that FTAAs must be based on real contributions to the economic growth and general welf
y the law."9 In this regard, much has been said about the alleged unconstitutionality of Section 81 of Rep. Act No. 7942 as it all
or clarity, the provision states –

nment in co-production and joint-venture agreements shall be negotiated by the Government and the contractor taking into con
between the Government and the contractor. The Government shall also be entitled to compensations for its other contribution
oreign stockholders, arising from dividend or interest payments to the said foreign stockholders, in case of a foreign national, an

, among other things, the contractor's corporate income tax, excise tax, special allowance, withholding tax due from the contr
s provided for under existing laws.
hall commence after the financial or technical assistance agreement contractor has fully recovered its pre-operating expenses,

ond paragraph of Section 81. Mr. Justice Carpio is of the opinion that "among other things" could only mean "among other taxes
truly, the provision is unconstitutional as a sharing based only on taxes cannot be considered as contributing to the economic g
er existing laws" since it would render the former phrase superfluous. In other words, there would have been no need to include
nce to the object of the law, then I find the view of Mr. Justice Panganiban – that "all other things" means "additional governmen
which would then be in keeping with the rudimentary principle that a law shall not be declared invalid unless the conflict with th

ctivities under FTAAs must be based on real contributions to the economic growth and general welfare of the country is both a

ontributions to the economy can be realized and, in the final analysis, the business will redound to the general welfare of the co

public involves a "judgment call" by our policy makers who are answerable to our people during the appropriate electoral exerc

DISSENTING OPINION

n 39, Section 80, the second paragraph of Section 81, the proviso in Section 84, and the first proviso in Section 112 of Republic

ion over mineral resources. These provisions also abdicate the State's constitutional duty to control and supervise fully

or O. Ramos, in issuing the rules to implement RA 7942, gravely abused his discretion amounting to lack or excess of jurisdicti

xploit mineral resources in a manner contrary to Section 2, paragraph 4, Article XII of the Constitution";

rations of the nation's marine wealth contrary to Section 2, paragraph 2 of Article XII of the Constitution";

oration, development and utilization of mineral resources contrary to Article XII of the Constitution";

graph 1, and Section 2, paragraph 4, Article XII of the Constitution."2 (Emphasis supplied)

e Philippine Government and WMCP (Philippines), Inc. dated 2 March 19953 ("WMCP FTAA") for violation of Section 2, Article X

Section 2, Article XII of the 1987 Constitution.


urces are owned by the State. x x x The exploration, development, and utilization of natural resources shall be under the full

ownership of all mineral resources. Second, the Constitution mandates the State to exercise full control and supervision

ources since the arrival of the Spaniards in the Philippines in the 16th century. The 1935, 1973 and 1987 Constitutions incorpora
o receive the income from any commercial exploitation of the natural resources.7

Filipino people. The framers of the 1987 Constitution introduced the second principle to avoid the adverse effects of the "licens
oitation of natural resources. However, the "license, concession or lease" system left the Filipino people impoverished, starkly e

system prevailing under the 1935 and 1973 Constitutions. This exchange in the deliberations of the Constitutional Commission

ain, all the other natural resources cannot be alienated and in respect to lands of the public domain, private corporations with th
develop, explore and utilize the same. However, the State may enter into a joint venture, co-production or production-s

no timber or forest concessions, permits or authorization can be exclusively granted to any citizen of the Philippines n

nswer is "yes."

y the Philippine government to private corporations or to Filipino citizens? Would they be deemed repealed?

s supplied)

5 and 1973 Constitutions. The previous Constitutions used the phrase "license, concession or lease" in referring to exploitation
uage was a clear rejection of the old system of "license, concession or lease."

hus declaring that natural resources "belong to the State." The 1987 Constitution uses the word "owned," thus prescribing that n
ed. 11

resources. The payment of taxes, fees and charges, derived from the taxing or police power of the State, is not a subst
textbook writer:

from such activities only through fees, charges and taxes. Such benefits were very minimal compared with the enormous pr
of them disregarded the conservation of natural resources. With the new role, the State will be able to obtain a greater share in

exploitation of natural resources to insure that the State receives its fair share of the income. In Miners Association of the Ph
has been disallowed by Article XII, Section 2 of the 1987 Constitution." The Court explained:
umed a more dynamic role in the exploration, development and utilization of the natural resources of the country. Arti
e State. Consonant therewith, the exploration, development and utilization of natural resources may be undertaken by means o
s involving either technical or financial assistance for large-scale exploration, development, and utilization of minerals, petroleum
mphasis supplied)

of taxes, fees and charges is now buried in history. Any attempt to resurrect it is unconstitutional and deserves outright rejectio

stitution, however, allows the State to exploit commercially its natural resources and sell the marketable products from such ex
e, as owner of the natural resources, must receive a fair share of the income from such commercial operation. The State may

p its own company to engage in the exploitation of natural resources. Alternatively, the State may enter into a financial or techn
ng on the State's own needs. Under an FTAA, the contractor, foreign or local, manages the contracted work or operations to the

wned companies. The State pays such contractors, for their technical services or financial assistance, a share of the income fro

State to contract with "foreign-owned corporations" under an FTAA. This is still a direct exploitation by the State but using
The State pays the foreign contractor, for its technical services or financial assistance, a share of the income from the exploitati

m the exploitation of the natural resources that it owns. To insure it retains its fair share of the income, the State must exercise
es, with the FTAA contractor providing technical services or financing to the State. Since the State is directly undertaking the ex

oreign contractor. However, the State does not exercise control and supervision over the foreign contractor itself or its board o
o conflict of power between the State and the foreign contractor's board of directors. By entering into an FTAA, the foreign cont

n's natural resources without the State receiving any income as owner of the natural resources. Natural resources are non-rene
ad poverty among its people.

. First, the State owns the country's natural resources and must benefit as owner from any exploitation of its natural resources.

on of its mineral resources. These provisions are Sections 39, 80, 81, 84 and 112:

option to convert the financial or technical assistance agreement to a mineral agreement at any time during the term o
ded for under the implementing rules and regulations: Provided, That the mineral agreement shall only be for the remaining per

he corporation, partnership, association, or cooperative. Upon compliance with this requirement by the contractor, the Sec

al government share in a mineral production sharing agreement shall be the excise tax on mineral products as provide
overnment in co-production and joint-venture agreements shall be negotiated by the Government and the contractor taking into
sharing between the Government and the contractor. The Government shall also be entitled to compensation for its other contr
ontractor's foreign stockholders arising from dividend or interest payments to the said foreign stockholders, in case of a foreign

sist of, among other things, the contractor's corporate income tax, excise tax, special allowance, withholding tax due
duties and fees as provided for under existing laws.

ment shall commence after the financial or technical assistance agreement contractor has fully recovered its pre-opera

he excise tax on mineral products as provided for under Section 151 of the National Internal Revenue Code: Provided, howev

sting mining lease contracts, permits/licenses, leases pending renewal, mineral production–sharing agreements granted unde
n-sharing agreement x x x shall immediately govern and apply to a mining lessee or contractor unless the mining lessee

reement ("MPSA"). Section 80 expressly states that the excise tax on mineral products shall constitute the "total government

ral products and quarry resources, excise tax as follows:

d on the actual market value of the gross output thereof at the time of removal, in the case of those locally extracted or produce

ut thereof at the time of removal, in the case of those locally extracted or produced; or the value used by the Bureau of Custom

ne percent (1%);
al resources. The proviso in Section 84 of RA 7942 reiterates this when it states that "the excise tax on mineral products sh
osed not only on mineral products, but also on alcohol, tobacco and automobiles17 produced by companies that do not exploit n
ection 80 of RA 7942, the State does not receive as owner of the mineral resources any income from the exploitation of its m

contractors to taxes, duties and fees. Section 81 of RA 7942 provides that the State's share in FTAAs with foreign contractors –

ax, special allowance, withholding tax due from the contractor's foreign stockholders arising from dividend or interest payments

at the phrase refers to taxes.19 The phrase is an ejusdem generis phrase, and means "among other taxes, duties and fees" sin
r that the phrase "among other things" refers to taxes, duties and fees.

ctor to negotiate the State's share. In contrast, the first paragraph of Section 81 expressly provides that the "share of the Gover

addition to its mineral resources.20 Thus, the first paragraph of Section 81 requires the Government and the 60% Filipino owned
on 81 does not require the Government and the foreign contractor to negotiate the State's share from the net proceeds because

fees and duties. The taxes include "withholding tax due from the contractor's foreign stockholders arising from dividend or inte
ot they are stockholders of mining companies. These taxes, fees and duties are not contractual payments to the State as owne

on. Section 112 "immediately" reverts all mineral agreements to the old and discredited "license, concession or lease" syste
nd apply to a mining lessee or contractor." The contractor, local or foreign, will now pay only the "government share in a m
al products - 2% on metallic and non-metallic minerals and 3% on indigenous petroleum.

ment, whether co-production, joint venture or production-sharing, Section 112 of RA 7942 reinstates the old "license, concessi
7942 is a sweeping negation of the clear letter and intent of the 1987 Constitution that the exploitation of the State's natural res

s in the guise that the enactment of RA 7942 shall not impair pre-existing mining rights, as the heading of Section 112 states. It

ction 39 grants the foreign contractor the option to convert the FTAA into a "mineral production-sharing agreement" if the foreig
o the excise tax on mineral products.

tem which the 1987 Constitution has banned. The only requirement for the exercise of the option is for the foreign contractor to
e the conversion and execute the mineral production-sharing agreement." The foreign contractor only needs to give "prop
unconstitutional.

ng from its ownership of mineral resources. What Section 2, Article XII of the 1987 Constitution vests in absolute ownership to

a business or product, it is free to determine the rate or amount of the tax, provided it is not confiscatory.22 The legislature has t
e emanates from the State's taxing power, a power vested solely in the legislature.

wnership of mineral resources. Absent considerations of social justice, the legislature has no power to give away for free what fo
atrimony. Mineral resources form part of the national patrimony under Article XII (National Economy and Patrimony) of the 198
taxes) in FTAAs with foreign contractors is not even certain. This paragraph provides that the State's "share x x x shall comme
for this grace period when the collection of the State's "share" does not run.23

ment expenses of the foreign contractor. The determination of the amount of pre-operating, exploration and development expen
it anticipates for the first 10 years. If that happens, the State's share is ZERO for the first 10 years.

sting of taxes) in mining revenues under the FTAA. The Executive Department cannot correct these deficiencies in RA 7942 thr

urces. This was the mode of payment used under the old system of "license, concession or lease" which the 1987 Constitution
tlawed. Under the 1987 Constitution, the State must receive its fair share as owner of the mineral resources, separate from tax

es is unconstitutional. Such law negates Section 2, Article XII of the 1987 Constitution vesting ownership of mineral resources
he exploitation of mineral resources, Section 80, the second paragraph of Section 81, the proviso in Section 84, and Section 11

ploitation of natural resources. The purpose of this mandatory directive is to insure that the State receives its fair share in the ex
ave full control to the concessionaires who enriched themselves while paying the State minimal taxes, fees and charges.

e valid the State must exercise full control and supervision over the mining operations. This means that the State should appro
ng expenses determines the reasonable amounts deductible from the annual income from mining operations. Such approvals a
pital and operating expenses when the State approves them, or if the State disapproves them and a dispute arises, when their

over mining operations. The reason is obvious. The State's so-called "share" in a mineral production-sharing agreement under
es of the mining contractor.

expenses of the foreign contractor. The State's "share" constitutes the same excise tax on mineral products, in addition to othe
of the mining contractor. Consequently, RA 7942 does not give the State any control and supervision over mining operations co

gn contractors must make "real contributions to the economic growth and general welfare of the country." Under Section
ally repatriate the entire after-tax net proceeds to its home country. Sections 94(a) and 94(b) of RA 7942 guarantee the foreign

y or to the general welfare of the country. The foreign contractor, after it ceases to operate in the country, can even remit to its
reign contractor should make a real contribution to the national economy and general welfare.

he Philippine Government's contract with the foreign contractor extracting petroleum in Malampaya, Palawan.25 On the contrary
ercises control and supervision over the exploitation of the petroleum. The petroleum FTAA provides enough safeguards to ins
y, and Occidental Philippines, Inc. and Shell Exploration B.V. as the second party26 ("Occidental-Shell FTAA"), covering offsho

e under the full control and supervision of the Office of Energy Affairs,"27 now Department of Energy ("DOE"), and that th
FFAIRS;"28

while the foreign contractor receives the remaining 40%;29

and accounts relating to the petroleum operations, and object in writing to any expense (operating and capital expenses)

m the sale of petroleum in the same year, and any excess may be carried over in succeeding years;32

books and records of the foreign contractor relating to the petroleum operations upon 24 hours written notice;33

hare of the net proceeds, including withholding tax on dividends or remittances of profits.35 (Emphasis supplied)

s of the foreign contractor. There is no question that the State receives its rightful share, amounting to 60% of the net procee
lso gives the State, through the DOE and BIR, full control and supervision over the petroleum operations of the foreign contract
protect the interest of the State as owner of the petroleum resources. While the foreign contractor manages the contracted work
Shell FTAA are fair to the State and to Occidental-Shell.

from the exploitation of its mineral resources. This share is the equivalent of the constitutional requirement that at least 60% of
ning operations under an FTAA with a foreign contractor. Intervenor CMP asserts that the Philippine Government "stands
the mineral resources, will retain the remaining 60% of the net proceeds.

vernment and the Contractor is also in accordance with the 60%-40% equity requirement for Filipino-owned corporatio
imarily from the exploration, development, and utilization of the Philippines' natural resources."40 If the State has a 60%

ts are remitted abroad, precluding any real contribution to the national economy or the general welfare. The constitutional requi
e.

0% of the net proceeds and exercises full control and supervision of the petroleum operations. The State's right to receive 60%
"Service Contract" or any other name - provided these two essential constitutional requirements are present. Thus, the designa

he petroleum operations in the Occidental-Shell FTAA are legally and in fact 60% owned and controlled by Filipinos. Indeed, the
ccidental-Shell precisely because the State itself is directly undertaking the petroleum exploitation.

A. However, Section 2, Article XII of the 1987 Constitution does not allow foreign owned corporations to undertake directly minin
s. The State, as the party directly undertaking the exploitation of its natural resources, must hold through the Government all ex

ns, is a model for emulation if foreign contractors want to comply with the constitutional requirements. Section 112 of RA 7942,
oceeds from the exploitation of petroleum. Section 112 allows the foreign contractor to pay only the "government share in a m
and 3% on petroleum. Section 112 of RA 7942 is unconstitutional since it is contrary to Section 2, Article XII of the 1987 Consti

60% share is illusory. Section 7.7 of the WMCP FTAA provides that:

vernment share of sixty per centum (60%) of Net Mining Revenues, calculated in accordance with the following provisions

quity to a Philippine citizen or corporation, the State loses its right to receive its 60% share of the net mining revenues under Se

o Clause 7.7 shall be reduced by 1% of Net Mining Revenues for every 1% ownership interest in the Contractor held by

the State. In reality, the State has no vested right to receive any income from the exploitation of its mineral resources. What the
P's equity to a Philippine citizen or corporation.42 The proceeds of such sale do not accrue to the State but belong entirely t

ned and 40% foreign owned. 43 WMCP's foreign stockholders can sell 60% of WMCP's equity to such corporation and the sale w
their remaining 40% equity and 24% pro-rata share in the buyer-corporation. WMCP will then invoke Section 39 of RA 7942 al
II of the 1987 Constitution requiring that only corporations "at least sixty per centum of whose capital is owned by such citizens

mercial exploitation of its mineral resources. Mineral resources form part of the national patrimony, and so are the net proceeds

gn contractor, the Philippine Government "stands in the place of the 60% Filipino owned company" and hence must retain

of the 60% Filipino-owned company, and the 100% foreign-owned contractor company takes all the risks of failure to find a c

FTAA is limited to a maximum of 40% of the net production."45 Intervenor CMP further insists that "60% of its (contractor
nder Section 7.9 of the WMCP FTAA the foreign stockholders of WMCP can reduce at any time to ZERO percent the Governme

n or corporation, the State in the meantime receives its 60% share. However, under Section 7.10 of the WMCP FTAA, the State

uding excise tax, corporate income tax, customs duty, sales tax, value added tax, occupation and regulatory fees, Governmen
m the Mining Operations and any tax on interest on domestic and foreign loans or other financial arrangements or accommoda

es, costs, imposts, duties, royalties, occupation and regulatory fees and infrastructure contributions;

s people or Claim-owners;

national development in accordance with Clause 10.1(i)(1) and 10.1(i)(2);

ure by the Government to the Contractor or to financial or technical assistance agreement contractors in general;
e Government Share in an earlier Fiscal year, adjusted for inflation.

Clause 7.7 shall be reduced by 1% of Net Mining Revenues for every 1% ownership interest in the Contractor held by a Qualif

contractor, like building roads leading to the mine site, is deductible from the State's 60% share of the Net Mining Revenues. Un
ever receive anything for its ownership of the mineral resources. Even assuming the State will receive something, the foreign sto

s under the WMCP FTAA. The stipulated 60% share of the Government is illusory. The State is left to collect only the 2% excise

ius Mines, Inc., a domestic corporation 60% Filipino owned and 40% foreign owned.47 This sale automatically triggered the o
, the State has no right under the WMCP FTAA to receive any share in the mining revenues of the contractor, even though the

he State 60% of the net income of the foreign contractor. Thus, intervenor CMP states that "60% of its (WMCP's) net returns fr

guaranteed" a 60% share of the foreign contractor's Net Mining Revenues. Respondent WMCP contends, after quoting Section

ining Revenues, or 60% of the actual fruits of the endeavor. This is in line with the intent behind Section 2 of Article XI

tractor is also in accordance with the 60%-40% equity requirement for Filipino-owned corporations in Paragraph 1 of S

of the WMCP FTAA provides that the State's share "shall be reduced by 1% of Net Mining Revenues for every 1% owners
ders. The Executive Department cannot give away for free, especially to foreigners, what forms part of the national patrimony. T

the State's share in accordance with Section 80 of RA 7942. WMCP will end up paying only the 2% excise tax to the Philippin

ize, process and dispose of all mineral products produced under the WMCP FTAA. Section 1.3 of the WMCP FTAA provide

dispose of all Mineral products and by-products thereof that may be derived or produced from the Contract Area but shall not, b

neral resources to the exclusion of third parties and even the Philippine Government. Since WMCP's right is exclusive, the G
ve to accept whatever operating expenses the contractor decides to incur in exploiting, utilizing and processing mineral resourc

n the mining operations. This means that the contractor can sell the minerals to any buyer, local or foreign, at the price and term
as the sole right to "mortgage, charge or encumber" the "Minerals produced from the Mining Operations."50

he foreign contractor's Work Program. Section 8.3 provides:

our to agree on amendments to the Work Program or budget. If the Secretary and the Contractor fail to agree on the propo
proved, so as not to unnecessarily delay the performance of the Agreement. (Emphasis supplied)

R Secretary implements the mining laws, including RA 7942. Section 8.3, however, treats the DENR Secretary like a subservie
Constitution means by full control and supervision by the State of mining operations.
by the foreign contractor to amend the WMCP FTAA to satisfy the conditions of creditors of the contractor. Thus, Section 1

amendments of this Agreement which are necessary in order for the Contractor to successfully obtain the financing;

h means that the Government must render a response favorable to the contractor. In effect, the contractor has the right to

s will in no event reduce the Contractor's obligations or the Government's rights." However, Section 10.4(i) binds the Governme
ol and supervision in the exploitation of mineral resources.

ions of the contractor. Provisions in the WMCP FTAA that grant the State full control and supervision are negated by other prov

I of the 1987 Constitution limits the term of a mineral agreement to "a period not exceeding twenty-five years, renewable fo
ment or the contracting party may decide not to renew the mineral agreement. However, both the Government and the contracti
e mineral agreement at the end of the original term.

erm. Section 3.3 compels the Government to renew the FTAA for another 25 years after the original 25-year term expire

nty-five (25) years under the same terms and conditions provided that the Contractor lodges a request for a renewal with
greement. (Emphasis supplied)

rnment has no such option and must renew the agreement once the contractor makes a request for renewal. Section 3.3 violate

oitation of minerals, petroleum and other mineral oils –

by the Contractor during the term of the FTAA. The amounts are paid to the (i) national government, (ii) local governments, and

of the actual market value of the minerals produced


ssment level set by the local government

year if located in a mineral concession

gross output from mining operations

ction 81 of RA 7942 means that the State "is entitled to an additional government share to be paid by the Contractor." The So

tent of Section 81 of RA No. 7942, to wit:

ngs, the Contractor's corporate income tax, excise tax, special allowance, withholding tax due from the Contractor's foreign stoc
ed for in existing laws. (Underscoring supplied)

ditional share to be paid by the Contractor, aside from the basic share in order to achieve the fifty-fifty sharing of net benefits fr

tax; employees' payroll and fringe benefits; various withholding taxes on royalties to land owners and claim owners, a
etc.) and development of host and neighboring communities, geosciences and mining technology, the government sh

financial contributions in the form of fuel tax; employees' payroll and fringe benefits; various withholding taxes on roy
ms that under Section 81 of RA 7942 the State only receives taxes, duties and fees under the FTAA. The State does not receiv
ents. The "additional share" of the State consists of indirect taxes including even fringe benefits to employees and comp
esources. Fringe benefits of employees are compensation for services rendered under an employer-employee relationship. Co
s of the contractor, do not constitute payment for the share of the State as owner of the mineral resources.

operating expenses not even payable to the State. The Solicitor General in effect concedes that under the second paragraph o
f the mineral resources and exercises full control over the mining operations of the FTAA contractor. The Solicitor General has
on of the owner is that the FTAA contractor pays taxes to the Government.

RA 7942, the "collection of Government share in financial and technical assistance agreement shall commence after the fina
of the State's "share," but prevents the accrual of the State's "share" until the contractor has fully recovered all its pre-operatin
er Section 81.52 The Solicitor General has interpreted these taxes to include "other national taxes and fees" as well as "other l

ed this Court of the supposed dire repercussions to the nation's long-term economic growth if this Court declares the assailed p
oined the chorus of the foreign chambers of commerce to uphold the validity of RA 7942 as essential to entice foreign investors

s of foreign investors. We are, however, saddened that the NEDA Secretary is willing to give away for free to foreign investors t
neral resources for free, the only obligation of the foreign contractor being to pay taxes to the Government?

against the present collection of P2 billion. Secretary Neri adds that the potential tax collection from incremental activities linke
lth in the Philippines" at P47 trillion or US$840 billion, 15 times our total foreign debt of US$56 billion.56

t and indirect taxes, then the State will truly receive only a pittance. The P157 billion in taxes constitute a mere .33% or a third
or a mere 8.35% of the total mineral wealth. The rest of the country's mineral wealth will flow out of the country if foreign contra

t ten years will find their investments illegal if the Court declares unconstitutional the assailed provisions of RA 7942.57 Such sp
acquired the local cement factories, they spun off the quarry operations into separate companies 60% owned by Filipino citizens

e. Such activity does not constitute large-scale exploitation of mineral resources. It definitely cannot qualify for FTAAs with fore

vestments, the State can negotiate and secure at least 60% of the net proceeds from the exploitation of mineral resources. For
% share of the net proceeds. Even intervenor CMP and respondent WMCP agree that the State has a 60% interest in min

mining revenues, will only impoverish further the Filipino people. The nation's potential mineral wealth of P47 trillion will contrib

determining the State's share in the mining income of the foreign FTAA contractor. The DENR Secretary issued DAO 56-99 pur
slative intent to have the State collect more than just the usual taxes, duties and fees." The majority opinion anchors on
s. Thus, on the phrase "among other things" depends whether the State and the Filipino people are entitled under RA
icle XII of the 1987 Constitution. In short, while co-production, joint venture and production-sharing agreements cannot excee
ajority opinion states that the "constitutional term limitations do not apply to FTAAs." Thus, the majority opinion upholds th

er the fiscal regime prescribed in Section 80 of RA 7942, does not apply to FTAAs. Thus, the majority opinion states, "[W]hethe

ermits, despite Section 2, Article XII of the 1987 Constitution reserving to Philippine citizens and to corporations 60% Filipino ow
contractors holding exploration permits."

agreements should be at least 60% of the net mining revenues. Thus, the majority opinion states that "the Charter did not int

under Section 81 or MPSAs under Section 80, do not allow the State to receive any share from the income of mining companie

h of Section 81 as the authority of the State to collect in FTAAs a share in the mining income separate from taxes, duties and fe
duties and fees is unconstitutional. Thus, the majority opinion's case rises or falls on whether the phrase "among other

ate to collect any share in MPSAs separate from taxes, duties and fees. The language of Section 80 is so crystal clear – "the t
s that the constitutionality of Section 80 is not in issue in the present case. Section 81, the constitutionality of which the majority
s 39, 80, 84 and 112.

81 but also by Sections 39, 80 and 112. The reason is that the WMCP FTAA is a reversible contract that gives WMCP the abs

ees, unless the State contributes equity in addition to the mineral resources. RA 7942 does not recognize the mere contribution
a mineral production sharing agreement shall be the excise tax on mineral products." Section 84 reiterates this by statin
an MPSA is the excise tax. Ironically, Sections 80 and 84 disallow the State from sharing in the production or income, even as

mineral resources, the first paragraph of Section 81 expressly requires that "the share of the government x x x shall be nego

, among other things, the contractor's corporate income tax, excise tax, special allowance, withholding tax due from the contrac
under existing laws.

are" refer to taxes, duties and fees. The phrase "all such other taxes, duties and fees as provided for under existing laws

7942 under the fiscal regime prescribed in Section 80. Section 112 expressly states that the "government share in mineral p

xisting mining lease contracts, permits/licenses, leases pending renewal, mineral production-sharing agreements granted un
sions of Chapter XIV on government share in mineral production-sharing agreement and of Chapter XVI on incentives
vail of said provisions: Provided, further, That no renewal of mining lease contracts shall be made after the expiration of its term
implementing rules and regulations. (Emphasis supplied)

only the excise tax - 2% on metallic and non-metallic minerals and 3% on petroleum58 - instead of the stipulated mining income

before the enactment of RA 7942. This reduces the State's share in the Malampaya gas extraction from 60% of net pro
omy because Malampaya under the original Occidental-Shell FTAA generates annually some US$0.5 billion to the Nati

TAA expressly states in its Section 1.1, "This Agreement is a Financial & Technical Assistance Agreement entered into pu

A "at any time during the term" of the FTAA if the contract areas are not economically viable for large-scale mining. Once the

option to convert the financial or technical assistance agreement to a mineral agreement at any time during the term o
der the implementing rules and regulations: Provided, That the mineral agreement shall only be for the remaining period of the

partnership, association, or cooperative. Upon compliance with this requirement by the contractor, the Secretary shall ap

e its foreign equity to 40%. The second paragraph states, "Upon compliance with this requirement, the Secretary shall app
e foreign contractor with "proper notice" only to the DENR Secretary, is not even made a condition for the conversion.

e physical exploration. The foreign contractor controls the release of the technical data on the mineral resources. The foreign c
hether the contract area is viable for large-scale mining. Obviously, such a situation gives the foreign contractor actual cont

e contractor can choose at any time to sell 60% of its equity to a Philippine citizen. The price or consideration for the sale of the
e is the 2% excise tax on mineral products. Thus, under RA 7942 the FTAA contractor has the absolute option to pay the S

structure: unless the State contributes equity in addition to the mineral resources, the State shall receive only taxes, duties and

consideration: how much will the State receive from the exploitation of its non-renewable and exhaustible mineral reso

m the mining income apart from taxes, duties and fees. The second paragraph of Section 81, just like Section 80, only allows the
s, duties and fees, based only on the mineral resources that the State contributes to the mining operations.

to direct and indirect taxes. Thus, the Solicitor General agrees that Section 81 does not allow the State to collect any
e State any share of the net mining income apart from taxes, duties and fees.

ority to require the FTAA contractor to pay a consideration separate from taxes, duties and fees. The majority opinion cites the
axes, duties and fees.

ve power to the DENR Secretary to adopt the formulae on the share of the State from mining operations. The issue now is wh
s a valid delegation of legislative power. I reproduce again the second paragraph of Section 81 for easy reference:
f, among other things, the contractor's corporate income tax, excise tax, special allowance, withholding tax due from the
as provided for under existing laws. (Emphasis supplied)

formulae in determining the share of the State. There is absolutely no language in the second paragraph of Section 81 gr
second paragraph of Section 81. This makes DAO 56-99 void.

power to the DENR Secretary to adopt the formulae in DAO 56-99, such delegation is void. Section 81 has no standards by
n the extent of the delegated power to the DENR Secretary are found in Section 81. Neither were such parameters ever discus

production and joint venture agreements, expressly specifies the standards in determining the State's share as follows: "(a)
he contractor." The reason for the absence of similar standards in the succeeding paragraph of Section 81 in determining the S

the formulae supposedly determine the consideration of the FTAA. The consideration is the most important part of the FTAA a
on 81 and other pertinent provisions of Republic Act No. 7942." Without the phrase "among other things," the majority opinion c

alid contract – the commercial value or consideration that the State will receive. The majority opinion in effect says that Congre

the President or Congress. The DENR Secretary is the sole authority to determine the amount of consideration that the State s

equire the negotiation with the Negotiation Panel and the recommendation of the Secretary for approval of the President of the

s the approval of the President. However, if the amendment involves a change in the fiscal regime –referring to the consideratio

n mandating that the President shall approve all FTAAs and send copies of all approved FTAAs to Congress. The consideration
approve FTAAs, a power vested by the Constitution solely in the President. By not even informing the President of chang
is clearly unconstitutional and void.

trative Order shall remain valid and be recognized by the Government." This means that the fiscal regime of an FTAA exec
l prevail. In effect, DAO 56-99 exempts an FTAA approved prior to its effectivity from paying the State the share prescribed in t

axes, duties and fees, this makes DAO 56-99 unconstitutional and void. DAO 56-99 does not require prior FTAAs to pay the Sta
s and fees as a "valid" consideration. Certainly, the DENR Secretary has no authority to exempt foreign FTAA contractors from

P FTAA has a consideration, does not apply to the WMCP FTAA. By its own express terms, DAO 56-99 does not apply to F
e WMCP FTAA from want of consideration.

no relationship whatsoever between the phrase "among other things" and the highly esoteric formulae prescribed in DAO 56-9
yet the majority opinion trumpets DAO 56-99 as the savior of Section 81 from certain constitutional infirmity.

he majority understand fully the formulae in DAO 56-99. Can the majority tell the Court and the Filipino people the minimum sh
ncome sharing provisions in the Occidental-Shell FTAA or in the case of Consolidated Mines, Inc. v. Court of Tax Appeals.6

rpretation that contradicts the DENR Secretary's interpretation under DAO 56-99. The Solicitor General is correct. The ejusdem
or kind is 'accompanied by words of a generic character, the generic words will usually be limited to things of a kindred nature w

he phrase "absence, suspension or other temporary disability of the mayor" in Section 2195 of the Revised Administrative Code

words 'absence' and 'suspension' and is used as a modifier of the two preceding words, under the principle of statutory constru

any others" or "other matters," when accompanied by an enumeration of items of the same kind or class, "are usually to be re

e of "ejusdem generis" to construe the purview of a general phrase "other matters" appearing after an enumeration of specific
at a matter may come under said general clause, it is necessary that it belongs to the same kind or class of cases therein speci

as appearing in Section 81 of RA 7942. First, the general phrase "among other things" is accompanied by an enumeration of
ments to the said foreign stockholder in case of a foreign national and all such other taxes, duties and fees as provided for u
ch other taxes, duties and fees" are included. Thus, the enumeration of specific items is merely illustrative. Fourth, there is no i
to taxes, duties and fees.

her things" is even followed at the end of the sentence by the phrase "and all such other taxes, duties, and fees," reinforcin
are not exhaustive but merely illustrative.

99. Thus, the majority opinion states:

nceiving and developing not just one formula, but three different formulas for arriving at the additional government share

99. The formulae are the creation of DENR, not of Congress.

firmity, but also from blatantly depriving the State and Filipino people from any share in the income of mining companies. Howe
s the constitutional power to prescribe the sharing of mining income between the State and mining companies, the act the DEN

itutes sufficient legal basis to issue DAO 56-99, the FTAA contractor can still prevent the State from collecting any share of the
of DAO 56-99 which expressly applies only to FTAAs.

production agreement to place its contract under Section 80 and outside of Section 81. Section 112 automatically and immedia
the constitutionality of Sections 39 and 112 of RA 7942 in the present case.

hat the President has the prerogative to prescribe the terms and conditions of FTAAs, including the fiscal regime of FT

reign corporations, and in doing so, it is within the President's prerogative to specify certain terms and conditions of the FTA
Article XII of the 1987 Constitution expressly provides:

either technical or financial assistance for large-scale exploration, development, and utilization of minerals, petroleum, and othe

o the general terms and conditions provided by law." There is no doubt whatsoever that it is Congress that prescribes the t
ss for FTAAs.

at the "following terms, conditions, and warranties shall be incorporated in the financial or technical assistance agreem

AAs – i.e., the sharing of the net mining revenues between the contractor and the State." This claim of the majority opinio
and FTAAs. The constitutionality of Sections 80 and 81 of Chapter XIV - whether the fiscal regimes prescribed in these sections

ess prescribing the fiscal regime of FTAAs. If it is the President who has the constitutional authority to prescribe the fiscal regim
itself.

TAAs, the majority opinion contradicts its basic theory that DAO 56-99 draws life from the phrase "among other things" in Sec
xistent Presidential power that directly collides with the express constitutional power of Congress to prescribe the "general term

ty opinion. The majority opinion agrees that the 1987 Constitution requires the mining contractor to pay the State "more than j
perations. Section 80 provides:

al government share in a mineral production sharing agreement shall be the excise tax on mineral products as provide

l production sharing agreement, the excise tax on mineral products shall be the government share under said agreem
ty opinion, expressly applies only to FTAAs and not to MPSAs. By any legal yardstick, even by the arguments of the majority o

e in the present case. The majority opinion forgets that petitioners have assailed the constitutionality of RA 7942 and the WMCP
ontrary to Section 1, paragraph 1, and Section 2, paragraph 4, Article XII of the Constitution."

cretary, to convert the FTAA into an MPSA under Section 80. The "sharing of wealth" in Section 80 is "inequitable" and "contrar
the economic growth and general welfare of the country" as required in paragraph 4, Section 2, Article XII of the 1987 Constitut

R Secretary, to convert their FTAAs into MPSAs under Section 80. Necessarily, the constitutionality of the WMCP FTAA must be

re notice to the DENR Secretary, WMCP can convert the contract from an FTAA to an MPSA, a copy of which, complete wit
ion: the reduction of foreign equity in WMCP to 40%, and notice to the DENR Secretary. The first condition is already fulfilled si

ENR Secretary, immediately becomes an MPSA. The majority opinion agrees that the provisions of the WMCP FTAA, which gra
lid contract. The majority opinion should declare the WMCP FTAA void for want of consideration unless the majority o
n MPSA. This squarely puts in issue whether an MPSA is constitutional if the only consideration or payment to the State is the 2

ate as owner of the mineral resources. Petitioners call this the "inequitable sharing of wealth." The constitutionality of the consid
s 80 and 81.

ction 80 for its consideration. If this issue is not resolved now, then the WMCP FTAA has no consideration. The majority opinion

principal consideration of the FTAA. The majority opinion claims that the principal consideration of the FTAA is the "develop
short develop the mines. What will the State and the Filipino people benefit from such activities unless they receive a share of
fter the expiration of the FTAA.

an FTAA, as far as the State and Filipino people are concerned, is the development of the mines. It is obvious why the majorit
ement of a valid contract - the consideration. This will compel the majority opinion to admit that the WMCP FTAA is void ab initio

and thus apply Section 80 of RA 7942. This puts in issue the constitutionality of Section 80. The majority opinion, however, refu

o declare Section 80 unconstitutional. The majority opinion agrees that the 1987 Constitution requires the State to collect "mor

rts its FTAA into an MPSA to avoid paying "more than the usual taxes, duties and fees," petitioners will immediately question th
h necessarily involves a determination of the constitutionality of Section 80. Clearly, this Court has no recourse but to decide no

ve MPSAs with different parties. 66 These five MPSAs uniformly contain the following provision:

neral products at the time of removal and at the rate provided for in Republic Act No. 7729 amending Section 151(a) o

AA once converted into an MPSA, will remain in limbo. There will be no implementation of these MPSAs until the Court finally re

of this litigation, most probably even between the same parties. To avoid unnecessary delay, this Court must rule now on the co

hus, Section 3.3 provides:

nty-five (25) years under the same terms and conditions provided that the Contractor lodges a request for a renewal with t
greement. (Emphasis supplied)

nother 25-year term upon mere lodging of a request or notice to the Philippine Government. WMCP has the absolute rig

tion, the first paragraph of which provides:

ils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by
under the full control and supervision of the State. The State may directly undertake such activities, or it may enter into co-prod
ch agreements may be for a period not exceeding twenty-five years, renewable for not more than twenty-five years, an
ter power, beneficial use may be the measure and limit of the grant. (Emphasis supplied)

m limit under Section 2, Article XII of the 1987 Constitution. The majority opinion states:

that the above provision is found within paragraph 1 of Section 2 of Article XII, which refers to mineral agreements –
60 percent owned by Filipino citizens. (Emphasis supplied)

ction 2, then the other limitations in the same first paragraph of Section 2 do not also apply to FTAAs. These limitations are thre
ploitation of natural resources. Under the majority opinion's interpretation, these three limitations will no longer apply to
tion of natural resources.

the 1973 Constitution, which state:

neral oils, all forces of potential energy, fisheries, wildlife, and other natural resources of the Philippines belong to the State. Wit
or lease for the exploration, or utilization of any of the natural resources shall be granted for a period exceeding twenty-five yea
d the limit of the grant.

y of the natural resources of the Philippines shall be limited to citizens of the Philippines, or to corporations or associations at le
ervice contracts for financial, technical, management, or other forms of assistance with any foreign person or entity for the explo
d as such.

eserving the exploration, development and utilization of natural resources to Philippine citizens or corporations 60% F
did not apply to FTAAs, then it should not also have applied to non-FTAA mining contracts, an interpretation that is obviously w

e 1973 Constitution into one section, the present Section 2, Article XII of the 1987 Constitution. The consolidation necessitated
-year term limit. If anything, the consolidation merely strengthened the need, following the rules of statutory construction, to rea

oaquin G. Bernas, S.J., who was a leading member of the 1986 Constitutional Commission, discussed the limitations on the e

twenty-five years. This twenty-five year limit dates back to the 1935 Constitution and is considered to be a "reasonable time t
ble to "water rights for irrigation, water supply, fisheries, or industrial uses other than the development of water power." In these

s. They also limit franchises for public utilities, leases of alienable lands of public domain, and water rights for power developme
eparate term for FTAAs other than the 25-year term for the exploitation of natural resources.

nt Corazon C. Aquino when she still exercised legislative powers. Section 1.1 of the WMCP FTAA expressly states, "This Agre

ing mining laws, and their implementing rules and regulations, or parts thereof, which are not inconsistent with the provisions of

5, provides:
en verified as to its mineral contents and its actual location on the ground as determined through reports submitted to the Direc
expiration thereof for another period not exceeding twenty-five (25) years under such terms and conditions as provide

cts to 25-year terms. PD 463 merely implemented the mandate of the 1973 Constitution on the 25-year term limit, which is the
Therefore, Section 3.3 of the WMCP FTAA providing for a 50-year term is void.

e issuing Executive Order No. 279. Section 3 of Executive Order No. 211 states:

ations of locations, operating agreements and service contracts as provided for in Section 2 above, shall be governed by Presid
and conditions thereof shall be subject to any and all modifications or alterations which Congress may adopt pursuan

1995, more than seven years after the issuance of Executive Order No. 211. Subsequently, Congress enacted RA 7942 to pre

ements like the WMCP FTAA subject to "any and all modifications or alterations which Congress may adopt pursuant to

technical assistance agreement shall have a term not exceeding twenty-five (25) years to start from the execution ther

TAA. Again, Section 3.3 of the WMCP FTAA providing for a 50-year term is void.

an implementation of the 25-year constitutional term limit, whether under the 1935, 1973 or 1987 Constitutions. The majority o

n 112 provides:

xisting mining lease contracts, permits/licenses, leases pending renewal, mineral production-sharing agreements granted u
sions of Chapter XIV on government share in mineral production-sharing agreement and of Chapter XVI on incentives
o avail of said provisions: Provided, further, That no renewal of mining lease contracts shall be made after the expiration of its te
implementing rules and regulations. (Emphasis supplied)

g agreement" to "all valid and existing mining" contracts, including those "granted under Executive Order No. 279." If Section 1

venture agreements, the fact of the matter is that it cannot be made to apply to FTAAs." This position of the majority op
nstitution requires the FTAA contractor to pay the State "more than the usual taxes, duties and fees." If Section 112 applies to F

ence of the majority opinion collides with the very clear and plain language of Section 112 of RA 7942 and Section 1.1

valid and existing mining" contracts means the entire or total mining contracts in existence "at the date of effectivity" of RA
or if it is, that it is not a valid contract.

ce agreements shall comply with the applicable provisions of this Act and its implementing rules and regulations." Th
y opinion can assert that Section 112 cannot apply to FTAAs.
"Government Share" and covers Sections 80, 81 and 82 of RA 7942. Section 81, as the majority opinion concedes, applies
ments shall be entitled to the fiscal and non-fiscal incentives as provided under Executive Order No. 226 x x x." Clearly, Section

nical Assistance Agreement entered into pursuant to Executive Order No. 279." Section 112 states in unequivocal languag
xecutive Order No. 279 are expressly among the agreements included in Section 112 and placed under the fiscal regime p

Executive Department to the terms and conditions of new mining laws that Congress might enact in the future. Thus, Section 3

ations of locations, operating agreements and service contracts as provided for in Section 2 above, shall be governed by Presid
and conditions thereof shall be subject to any and all modifications or alterations which Congress may adopt pursuan

applies to the WMCP FTAA. There is also no dispute that RA 7942 took effect after the issuance of Executive Order No. 211 a

were executed prior to the enactment of RA 7942. Section 112 is found in Chapter XX of RA 7942 on "Transitory and Miscellan
FTAAs. In fact, Chapter VI of RA 7942, covering nine sections, deals exclusively on FTAAs. The fiscal regime in FTAAs e
tensibly to avoid impairment of contract obligations. Clearly, Section 112 applies to FTAAs.

FTAAs, like the WMCP FTAA, subject to Section 112. We repeat the express words of Section 112 -

ng agreements granted under Executive Order No. 279, at the date of effectivity of this Act x x x."

shall immediately govern and apply to a mining lessee or contractor x x x."

ble provisions of this Act and its implementing rules and regulations."

112 "cannot be made to apply to FTAAs"? It defies common sense, simple logic and plain English to assert that Section 112

w speaks in clear and categorical language, there is no room for interpretation. There is only room for application.68

ply the law as they find it, not as they like it to be. Fidelity to such a task precludes construction or interpretation, unless applica

ys and the court has no choice but to see to it that its mandate is obeyed.70

govern FTAAs executed before the enactment of RA 7942, like the WMCP FTAA? Section 112 expressly addresses FTAA
ore the execution of the WMCP FTAA, requires all FTAAs subsequently executed to comply with the terms and conditions of an

RA 7942 which expressly governs "all" mining agreements, whether MPSAs or FTAAs. This means that the WMCP FTAA is no
more than the usual taxes, duties and fees."

that the WMCP FTAA is subject to the phrase "among other things" in Section 81. At the same time, the majority opinion asser
dictions.

legislation. Why is the WMCP FTAA so special that the majority opinion wants it exempted from Section 112 of RA 7942? Wh
ons or contractors holding exploration permits." This is another assertion of the majority opinion that directly collides with th

ons 60% Filipino owned the "exploration, development and utilization of natural resources." The majority opinion rationaliz

alified person the right to conduct exploration for minerals in specified areas. Such a permit does not amount to an au

mineral resources, for apparently by its language alone a mere exploration permit does not. There is no dispute that an explorat
citizens or corporations 60% Filipino owned can engage in the "exploration x x x of natural resources."

ns or to corporations 60% Filipino owned the right to engage in the "exploration x x x of natural resources." To engage in "e
y to engage in the exploration of natural resources.

to foreign contractors or foreign corporations. Foreign contractors and foreign corporations cannot secure exploration permits b
ey can engage in the "exploration x x x of natural resources." This violates Section 2, Article XII of the 1987 Constitution.

rporation shall be deemed a qualified person for purposes of granting an exploration permit," is void and unconstitutional.

o do this the State may contract a foreign corporation to conduct the physical act of exploration in the State's behalf, as in an
s directly undertaking the exploration, development and utilization of the natural resources.

porations 60% Filipino owned is not a matter of constitutional whim. The State cannot allow foreign corporations, except as con

e Spratlys, the technical information obtained by the Chinese company may only bolster the resolve of the Chinese Governmen
the Philippine Government the important technical data obtained from such exploration.

hift their support back and forth between government and rebel forces depending on who can give them better terms in exploitin
s the majority opinion would want us to believe.

n we expect them to disclose fully to the Philippine Government all the technical data they obtain on our mineral resources? Th
o the Philippine Government technical data justifying a higher share for the Philippine Government and a lower share for the for
ources" to Philippine citizens and to corporations 60% Filipino owned, it also now requires the State to exercise "full control a

other mineral agreements should be at least 60% of the net mining revenues. Thus, the majority opinion states that "the Char

ondent WMCP that the State, as owner of the natural resources, is entitled to 60% of the net mining revenues. The intervenor C
ncedes that:

of the 60% Filipino-owned company, and the 100% foreign-owned contractor company takes all the risks of failure to find a c
nder the WMCP FTAA is limited to a maximum of 40% of the net production."72 Intervenor CMP further insists that "60% o

eed" a 60% share of the foreign contractor's Net Mining Revenues. Respondent WMCP admits that:

ining Revenues, or 60% of the actual fruits of the endeavor. This is in line with the intent behind Section 2 of Article XI

tractor is also in accordance with the 60%-40% equity requirement for Filipino-owned corporations in Paragraph 1 of S

a share equivalent to 60% of the net mining revenues. Even the foreign contractor WMCP agrees to pay the State 60% of its ne

dustry is willing to pay the State. Incredibly, the majority opinion claims that "there is no independent showing that the takin
ngness of the entire mining industry to pay the State a 60% share without exception, the majority opinion insists that such shar
ncedes and accepts that the State is entitled, without exception, to 60% of the net mining revenues?

been engaged in private business for many years." The majority opinion even states, in insisting that the State should receive le
s judgment cannot supplant the unanimous business judgment of the entire mining industry, as manifested by intervenor CMP b
willingness of the entire mining industry to pay the Filipino people their rightful share.

hare of the net proceeds from mining revenues. The majority opinion states:

nses, but prior to income tax, suppose a mining makes a taxable income of P100. A corporate income tax of 32 percent results
ng firm.

der the exploration, development and capital expenses. The majority opinion's "simplified illustration" deducts from gross reven
ctions from gross revenues. In the early years of commercial production, the exploration, development and capital expenses, if

even zero out the taxable income by simply jacking up the operating expenses. A "simplified illustration" of an income statemen
absolute amount that goes to the contractor may be smaller than what goes to the State. However, the amount that goes to th

eeds are not subject to income tax since there is no separate taxable entity. The State is an entity but not a taxable corporate e
e 32% corporate income tax. On this score alone, the majority opinion's "simplified illustration" is wrong.

7 Constitution their admission that the State is entitled to 60% of the net mining revenues. Their common position is based on th

ome from any exploitation of the mineral resources. The owner may share its income with the contractor as compensation to the

and technology, the State receives 60% of the net proceeds. In addition, Occidental-Shell's 40% share is subject to the 32% P
more capital intensive and riskier than land-based mineral extraction. Over the 20-year life of the natural gas reserves, the State

on, Consolidated Mines, the concessionaire of the mines, shared equally the net mining income with Benguet Consolidated M

sements as aforesaid the net profits from the operation shall be divided between Benguet and Consolidated share and share
ements of any nature whatsoever as may be made in order to carry out the terms of this agreement. (Emphasis supplied)
ecause of the "license, concession or lease" system under the 1935 and 1973 Constitutions. The State and the Filipino people r

es. "Full control" as used in the Constitution means more than ordinary majority control. In corporate practice, ordinary contr
er of the two-thirds equity to amend any provision in the charter of the corporation. However, since foreigners can own up to 40
ond to its 60% interest and control in mining companies.

butions to the economic growth and general welfare of the country." As respondent WMCP aptly admits, "the intent behin
resources." For the Filipino people to benefit primarily from the exploitation of natural resources, and for FTAAs to make rea

tion's mineral resources are part of our national patrimony. The State can "conserve" our mineral resources only if the majorit

of the net proceeds from mining operations. The principal parties involved in this case do not object that the State shall receive
to such share.

eive the bulk of the income from mining operations. Only Congress, through a law, may allow a share lesser than 60% if certain

are from mining revenues. The President will be hard put accepting anything less than 60% of the net proceeds. If the Presiden
has already agreed to pay 60% of the net proceeds to the State. The only way to avoid this is for Congress to enact a law provi

serves. A foreigner offers to extract the gold and pay for all development, capital and operating expenses. How much will the go
lows the manifestation of intervenor CMP and respondent WMCP before this Court, he or she will also demand a 60% share in
of the operating expenses to be paid by the foreigner but deducted from the gross proceeds.

uld the State demand from the foreigner as the State's share of the gold that is extracted? If we follow Sections 39, 80, 81, 84

at the 1987 Constitution mandates when it says that (a) the State must conserve and develop the nation's patrimony, (b) the Sta
nomy and the general welfare?

, or whether we can progress as a nation. Based on NEDA's estimates, the total mineral wealth of the nation is P47 trillion, or U
nation?

f "license, concession or lease" and instead installed full State control and supervision over the exploitation of natural resources
without any visible benefit to the Filipino people.

e denudation of our forestlands that did not even make any real contribution to the economic growth of the nation. This Court m
no people.

neral resources by ruling that the phrase "among other things" is sufficient to insure that FTAAs will "make real contributions
patrimony." This Court cannot tell the Filipino people that the phrase "among other things" means that they will receive the bu

things" to guarantee that the Filipino people will receive their equitable share from mining revenues of foreign contractors. This
aq), Section 39, Section 80, the second paragraph of Section 81, the proviso in Section 84, and the first proviso in Section 112
discretion amounting to lack or excess of jurisdiction.

Article XII of the 1987 Constitution. However, WMCP may negotiate with the Philippine Government for a new mineral agreeme

DISSENTING OPINION

sion in La Bugal-B'Laan Tribal Association, Inc. v. Ramos1 by which it declared certain provisions2 of the Mining Act of 19953 on
2, 1995 Financial and Technical Assistance Agreement (FTAA) executed between the Government of the Republic of the Philip

plated by the fourth paragraph of Section 2, Article XII of the 1987 Constitution are distinct and dissimilar from the "service con
ol over Philippine mineral and petroleum resources to foreign contractors, I most respectfully dissent.

Antecedents

sentially that FTAAs are the same as service contracts which were sanctioned under the 1973 Constitution.

PCM), as respondent-in-intervention. Intervenor PCM argues that the "agreements" referred to in paragraph 4 of Section 2, Art

ackled: first, the proper interpretation of the phrase "agreements… involving either technical or financial assistance" in Section 2

rt. However, despite the verbal request of Associate Justice Artemio V. Panganiban during the oral arguments,5 intervenor PCM

Issues for Resolution

be confined to the issues taken up during the oral arguments on June 29, 2004. These were: (1) the proper interpretation of the

antageous to the government could not be passed upon because the same was supposedly not raised in the original petition.

a case to the issues taken up in the oral arguments. The reason is obvious. The issues for resolution in any given case are de
uch points as the court may deem necessary. Thus, Section 1 of Rule 49 provides:

may hear the parties in oral argument on the merits of a case, or on any material incident in connection therewith.

its order or resolution (Emphasis supplied)

y since often not all the relevant issues can be thoroughly discussed without unduly imposing on the time of the Court. Howeve
the State a just share in the proceeds of its natural resources was in fact raised by the petitioners, viz:

g Republic Act No. 7942, the latter being unconstitutional in that it allows fully foreign owned corporations to explore, develop, u

II

g Republic Act No. 7942, the latter being unconstitutional in that it allows the taking of private property without the determinatio

III

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

IV

g Republic Act No. 7942, the latter being unconstitutional in that it allows enjoyment by foreign citizens as well as fully foreign o

g Republic Act No. 7942, the latter being unconstitutional in that it allows priority to foreign and fully foreign owned corporations

VI

enting Republic Act No. 7942, the latter being unconstitutional in that it allows the inequitable sharing of wealth contr

VII

sistance Agreement between the President of the Republic of the Philippines and Western Mining Corporation Philippines Inc. b

sofar as said Act authorizes service contracts. Although the statute employs the phrase "financial and technical agreements" in
fundamental law.9 (Emphasis and underscoring supplied)

as touched upon by the parties in their memoranda. Thus, respondent WMCP argues that:

s of the exploration. In fact, Section 7.7 of the COLUMBIO FTAA provides:


y a government share of sixty per centum (60%) of Net Mining Revenues, calculated in accordance with the following provision

ning Revenues, or 60% of the actual fruits of the endeavor. This is in line with the intent behind Section 2 of Article XII that
and underscoring supplied)

mining revenue is gross mining revenue less, among others, deductible expenses. Some of the allowable deductions from
a," consulting fees for work done "outside the Philippines," and the "establishment and administration of field offices including a

xxx

NCTAD defines this as the "pricing of transfers of goods, services and other assets within a TNC network." If government doe
arent. 11 (Emphasis supplied; footnotes omitted)

us, passed upon in its Decision of January 27, 2004 and argued by the parties in the present Motion for Reconsideration.

ad categories: first, the arguments pertaining to the constitutionality of FTAA provisions of the Mining Act; and second, those pe
able political question is passed upon; (2) whether the FTAAs contemplated in Section 2, Article XII of the 1987 Constitution are
considered; (4) whether the question of validity of the WMCP FTAA was rendered moot before the promulgation of the Decision

ion for reconsideration.

Constitutionality of the Philippine Mining Act of 1995

ering its Decision of January 27, 2004.

diciary.12 Whether the first and second great departments of government exceeded those parameters is the function of the third
any branch or instrumentality of the Government."14

pon the wisdom, not the legality, of a particular measure.15 The reason is that, under our system of government, policy issues a

stion of whether there are constitutionally imposed limits on powers or functions conferred upon political bodies.18 If there are c

are matters of policy, in other words, political matters or questions," over which this Court has no jurisdiction.

graph 4, Section 2 of Article XII of the Constitution, including the phrase "agreements… involving either technical or financial a
wers of the Executive to enter into them. In its Decision, this Court found that, by enacting the objectionable portions of the Min
ir constitutional powers.
I contemplates not only financial or technical assistance but, just like the service contracts which were allowed under the 1973

Art. XII

National Economy and Patrimony

xxx

ineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are ow
under the full control and supervision of the State. The State may directly undertake such activities or it may enter into co-pr
ch agreements may be for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and under
icial use may be the measure and limit of the grant.

sea, and exclusive economic zone, and reserve its use and enjoyment exclusively to Filipino citizens.

no citizens, as well as cooperative fish farming, with priority to subsistence fishermen and fish workers in rivers, lakes, bays, an

olving either technical or financial assistance for large-scale exploration, development, and utilization of minerals, petr
f the country. In such agreements, the State shall promote the development and use of local scientific and technical re

dance with this provision, within thirty days from its execution. (Emphasis and underscoring supplied)

ows:

the natural resources of the Philippines shall be limited to citizens, or to corporations or associations at least sixty per centum
nancial, technical, management, or other forms of assistance with any person or entity for the exploration, developme
by recognized as such. (Emphasis and underscoring supplied)

participation in the country's natural resources is reserved to Filipinos.21 It hastens to add, however, that the word "may" therein
porations should not be confined to technical or financial, but also to management forms.23 And it notes that the Constitution us

practice under the 1973 Constitution of allowing foreigners to circumvent the capitalization requirement, 25 as well as to address
of assistance that the State needs and which foreign corporations may provide in the large-scale exploration, development and
re properly be called "agreements for large-scale exploration, development, and utilization of minerals, petroleum, and other m
If the framers of the Constitution intended to limit the service of foreign corporations to "passive assistance," such as simple loa
ntry?31 Why the condition in the last paragraph of Section 2 that the President report to Congress?32 Finally, the OSG asserts th
financial assistance" were construed to mean the same concept as the service contracts under the 1973 Constitution.

agreement for [the] rendition of a whole range of services of an integrated and comprehensive character, ranging from discove
on does not relate to the substance of the agreement,35 otherwise, the State itself would be compelled to conduct the exploratio
e the concepts of (a) "beneficial ownership," (b) "full control and supervision," and (c) "real contributions to the economic growt

ards and advantages generated by the property.37

olds the legal title to or ownership of the property entrusted to him, he is nevertheless not the beneficial owner. Rather, he hold
stee, who is the "naked owner," less any lawful fees due to the latter, accrue to the cestui que trust, who is the "beneficial" or "e

tution that "[a]ll lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential ener

efers to both the legal title to and the beneficial ownership of the natural resources. Similarly, "State" should be understood as d

he nation's natural resources in the Government, and the beneficial ownership of these resources in the sovereign Filipino peop

in their Memorandum state:

State should not merely be concerned about passing laws. It is expected that it holds these natural resources covered in A

ereignty resides in the Filipino people, and the prime duty of government or the State is to serve and protect the people. Thus, t

es, and the State is merely the guardian-in-trust therof.42 (Emphasis and underscoring supplied; italics in the original; citatio

ment is in a position analogous to a trustee, holding title to and managing these resources for the benefit of the Filipino people,
ccrue to the benefit of the Filipino people. Corollary to this, the Government cannot, without violating its sacred trust, enter into
the resources, or the profit generated from the resources, is bargained away in favor of a foreign entity.

on, development and utilization of the nation's natural resources, in its most basic and fundamental sense, is accomplished by

he exploration, development and utilization of these resources by itself or together with a third party.44 In the first case, where n
pation in the operation of the venture and ask for compensation in proportion to its contribution(s), the Government must still ma

d party to explore, develop or utilize certain natural resources through a jointly owned corporation, wherein the government has

rs (holding nominal shares) on the governing board and executive committee(s) of the private corporation contracted to underta
ttee(s) may afford sufficient protection to the interest of the people.
ment, when dealing with prospective mining partners, to joint ventures or representation in the contractor's board of directors. T
cale exploration, development and utilization, "agreements with foreign-owned corporations involving either technical or financia
the Government can effectively perform its fiduciary duty to safeguard the beneficial interest of the Filipino people in their natur

e" be "based on real contributions to the economic growth and general welfare of the country." This provision articulates the v
but, perhaps to a greater extent, affects Philippine society as a whole as well.

ople. By pursuing large scale exploration, development and utilization of these resources, the State would be allowing the consu
l residents. Its negative effects on the environment are well-documented.47

ey must yield profits over and above 1) the capital and operating costs incurred, 2) the resulting damage to the environment, an

ficient to offset the corresponding loss of these resources to future generations. Real benefits are intergenerational benefits be

are being undertaken directly by the Government or with the aid of Filipinos or Filipino corporations. But it takes on greater sig
e benefiting from an activity (i.e. mining) which also results in numerous, serious and long term harmful consequences to the en

ion of Philippine natural resources has serious implications on national security. As recounted by delegate Jose Aruego:

tional defense. The Convention felt that to permit foreigners to own or control the natural resources would be to weake
xxx

uld prevent making the Philippines a source of international conflicts with the consequent danger to its internal securi
mong them might arise inviting danger to the safety and independence of the nation. 49 (Emphasis supplied)

nt takes the form of "active" participation in the mining concern or "passive" assistance such as a foreign mining loan or the licen
gains, rewards and advantages generated by Philippine natural resources will be diverted to foreign hands even as the long te

a foreign corporation in the large scale exploration, development and utilization of Philippine natural resources, must carefully

President "notify the Congress of every contract entered into in accordance with this provision, within thirty days from its execut
timely opportunity to scrutinize and evaluate the Executive's decision.

nts… involving either technical or financial assistance" in paragraph 4 of Section 2, Article XII of the Constitution.

nt the circumvention, prevalent under the 1973 Constitution, of the 60-40 capital requirement does not persuade, it being too n
greements… involving either technical or financial assistance."

n the present Constitution that the President, not Congress or the Batasan Pambansa (under the 1973 Constitution), may ent
ontemplated, and thus obviated confusion, especially since the term was employed by the legal system then prevailing 50 and ha
g law that led to the abuse of service contracts, is equally unpersuasive. In truth, there were a host of laws governing service co

n to the rule limiting the exploration, development and utilization of the nation's natural resources to Filipinos. As an exception,
against foreign participation.

th foreign-owned corporations is an exception to the rule that participation in the nation's natural resources is reserved exclusiv
trictive." Commissioner Nolledo also remarked that "entering into service contracts is an exception to the rule on prot
should be strictly but reasonably construed; they extend only so far as their language fairly warrants and all doubts should be re

oes make the provision permissive, but only as opposed to mandatory,53 and operates to confer discretion upon a party.54 Thus
ces, the "State [itself] may directly undertake such activities."55 If the President opts to exercise the prerogative to enter into FT

e first paragraph, that is, that the State "may enter into… agreements with Filipino citizens, or corporations or association at lea

" referred to in paragraph 4 of Section 2 of Article XII of the 1987 Constitution are indeed service contracts. In support of this co
he use of the word "involving" signifies the possibility of the inclusion of other forms of assistance or activities. And it proffers th
uding, containing or comprising. None of these three connotations, it is contended, convey a sense of exclusivity. Thus, it conclu
al or financial assistance."

s, would run counter to the restrictive spirit of the provision. Notably, the 1987 Constitution uses "involving" not "including." As a
either technical or financial assistance" means "agreements…concerning either technical or financial assistance." And the wor
tution not only deleted the term "management" in the 1973 Constitution, but also the catch-all phrase "or other forms of ass

technical or financial assistance" does not detract from the provision's restrictive nature. Moreover, the majority opinion's illustr

oun or (3) a conjunction or (4) an adverb. As an adjective, the word "either" means (1) any one of two; one or the other; or (2) o
ss or function joined usually by "or" to indicate what immediately follows is the first of two or more alternatives. Lastly
tems and that "any" is required when more than two items are involved.58 However, modern English usage has relaxed this rule

wo) concepts – financial and technical. The use of the word "either" clearly limits the President to only two possibilities, financia

s deemed restrictive and not just descriptive. It is a condition, a limitation, not a mere description.

go beyond technical or financial assistance, with a foreign-owned corporation, does not impress. The first paragraph of Section
icipation in the country's natural resources equal to, perhaps even greater than, that of Filipino citizens or corporations.

e premise that the State itself may undertake the exploration, development and utilization of natural resources, a foreign-owned

zing the country's natural resources, and, for this purpose, it may, I submit, enter into the necessary agreements with individual

he government and WMCP recognizes this vital principle. Thus, two of the agreement's clauses provide:
s in Article XII, Section 2 that all lands of the public domain, waters, minerals, coal, petroleum, and other natural resources are

into agreements with foreign-owned corporations involving either technical or financial assistance for large scale exploration, d

ntioned constitutional mandate. Hence, Section 10.2(a) of the FTAA, for instance, which states that "the Contractor shall have t
ract Area and to otherwise conduct Mining Operations in the Contract Area in accordance with the terms and conditions hereof
s and conditions of the agreement acting for and in behalf of the State. In exchange for the financial and technical assistance, i

fourth paragraph by allowing foreign corporations to render more than technical or financial assistance on the pretext that it is
equences. If followed to its logical conclusion, nothing would stop the State from engaging the services of a foreign corporation
ale."

limit the participation of foreign corporations only to areas where they are needed.

undertaken by the State, or it may enter into co-production, joint venture or production-sharing agreement with … corporations

ment and utilization of natural resources, the President with the concurrence of Congress may enter into agreements with forei

his point for fear that foreign investors will use their enormous capital resources to facilitate the actual exploitation or
rowing money from foreign sources. What I refer to is that foreign interest should be allowed to participate only to the
ources by out people.

rmit foreign investors to participate. It is only technical or financial assistance – they do not own anything – but on con

acts which we said yesterday were avenues used in the previous regime to go around the 60-40 requirement.62 (Empha

here that the Filipino people are sovereign and that one of the objectives for the creation or establishment of a government is to
must be allowed to enjoy, exploit and develop our natural resources. As a matter of fact, that principle proceeds from
atural resources.

e granted to the alien corporations but only for them to render financial or technical assistance. It is not for them to en
o exploit our natural resources, there will be no more natural resources for the next generations of Filipinos. It may last long if w
nd control. The aliens are interested in coming to the Philippines because they would like to enjoy the bounty of nature exclusiv
the Preamble "to preserve and develop the national patrimony for the sovereign Filipino people and for the generations to com

n in small or medium-scale ventures.

ce by foreign corporations are allowable only where there is no Filipino or Filipino-owned corporation (including corporations at

opment and utilization of natural resources to Filipinos.

ources was that Filipino nationals or corporations may not possess the necessary capital, technical knowledge or technology to
M: 64

greements may be entered into, and only for large-scale activities. These are contract forms which recognize and asse
posal recognizes the need for capital and technology to develop our natural resources without sacrificing our soverei

corporation "so long as such assistance requires specialized knowledge or skills, and are related to the exploration, developme

ies of its Philippine counterparts, an FTAA with such a corporation would be highly questionable. Similarly, where the scope of

cal or financial assistance contemplated by the 1987 Constitution are different and dissimilar from the service contracts under th
age, like that found in the Bill of Rights. 68 For the framers to expressly prohibit "management and other forms of assistance" wo

ragraph, which specifically denominates the agreements that the State may enter into with Filipinos or Filipino-owned corporatio
oration, development, and utilization of minerals, petroleum, and other mineral oils…." On the other hand, the fourth paragraph
corporations.

atures of service contracts bear restating:

on 9, Article XIV of the 1973 Constitution as amended. This 1973 provision shattered the framework of nationalism in our funda
ed under the 1935 constitution—the exploitation of the country's natural resources by foreign nationals. Through the se
e enterprise to the service contractor, not unlike the old concession regime where the concessionaire had complete co
p of that resource at the point of extraction (see Agabin, "Service Contracts: Old Wine in New Bottles"). Service contracts, h
tural resources.69 (Emphasis supplied)

ution Project and now counsel for intervenor PCM, stated in his position paper:

tution and reaffirm ownership over our natural resources. That is the only way we can exercise effective control over our natu
gn investment. Other contract forms which are less derogatory to our sovereignty and control over natural resources – like te
without violating constitutional provisions. In other words, we can adopt contract forms which recognize and assert our sovereign
d),

nt from the 1973 Constitution service contracts.

assistance" in Section 2, Article XII of the Constitution must be interpreted as restricting foreign involvement in the exploration,
eement under the sun.

ervice contracts" found in the 1973 Constitution does not sufficiently prove the drafters' intent to exclude foreigners from manag

Province of Cebu v. Province of Cebu,72 this Court held that a person, object or thing omitted from an enumeration must be held
ution is gathered from the omission of the phrase "management or other forms of assistance."

ution's Article on National Economy and Patrimony. If the CONCOM intended to retain the concept of service contracts under th
nancial assistance.") Such a difference between the language of a provision in a revised constitution and that of a simila
ents is identical to that of "service contracts," the CONCOM would not have bothered to fit the same dog with a new collar. To u
n omitted)

consequence excludes all others.76

implied.78 Since the constitutional provision, by its terms, is expressly limited to financial or technical agreements, it may not, by

, proceed from the premise that the Constitutional Commission would not have made specific enumerations in the provision if it
and include therein situations not provided nor intended by the framers. To do so would be to do violence to the very language

erations of the members of the Constitutional Commission conclusively show that they discussed agreements involving either t
been addressed in this Court's Decision of January 27, 2004, (the Decision) viz:

g the CONCOM deliberations, they may not have been necessarily referring to the concept of service contracts under the 1973
and not in its technical and legal sense, to refer, in general, to agreements concerning natural resources entered into
.

COM, in response to Sr. Tan's question, Commissioner Villegas commented that, other than congressional notification, the onl
outweighed by his more categorical statement in his exchange with Commissioner Quesada that the draft article "doe
ssistance."

work that the present charter prohibits service contracts. Commissioner Gascon was not totally averse to foreign participation,
spectrum and their objections may be interpreted as votes against any foreign participation in our natural resources whatsoeve

, 2004 Decision should leave no doubt as to the intention of the framers to eliminate service contracts altogether.

tution, foreign investors (fully alien-owned) can NOT participate in Filipino enterprises except to provide: (1) Technical Assistan

o prevent the practice (prevalent in the Marcos government) of skirting the 60/40 equation using the cover of service contracts.

they would have provided for the termination or pre-termination of the existing service contracts.
ting service contracts since the intention of the framers was to apply the rule banning service contracts prospectively.

ain, all other natural resources cannot be alienated and in respect to lands of the public domain, private corporations with the re
ore and utilize the same. However, the State may enter into a joint venture, coproduction (sic) or production-sharing. Is that not

mber or forest concessions, permits or authorization can be exclusively granted to any citizen of the Philippines nor to any corpo

nswer is "yes."

y the Philippine government to private corporations or to Filipino citizens? Would they be deemed repealed?

s protection by the due process clause of the Constitution. Thus in the landmark case of Oposa v. Factoran, Jr,83 this Court held

ve action. It is not a contract, property or a property right protected by the due process clause of the Constitution. In T

d disposition of forest resources to the end that public welfare is promoted. A timber license is not a contract within the purview

ful, and is not a contract between the authority, federal, state, or municipal, granting it and the person to whom it is granted; ne
able rights, neither is it property or property rights."

by which the State regulates the utilization and disposition of forest resources to the end that public welfare is promoted. And it
concession area and the forest products therein. They may be validly amended, modified, replaced or rescinded by the C

ot involve a law or even an executive issuance declaring the cancellation or modification of existing timber licenses. Hence, the
as a violation of the non-impairment clause. This is because by its very nature and purpose, such a law could have only been
re. In Abe vs. Foster Wheeler Corp., this Court stated:

ute. The same is understood to be subject to reasonable legislative regulation aimed at the promotion of public health, moral, sa
erest of public health, safety, moral and general welfare."
fe Insurance Co. vs. Auditor General, to wit:

ormally matters of private and not of public concern. The general rule is that both shall be free of governmental interference. Bu
contract to work them harm. Equally fundamental with the private right is that of the public to regulate it in the common interest

84
(Emphasis and underscoring supplied; citations omitted)

sion is not as substantial an investment as that of a large scale mining contractor. Such a contention is patently absurd. Taken t
t the legislature would, for example, be powerless to revoke or amend legislative franchises of public utilities, such as power an

ow that foreign entities would not enter into such agreements without requiring arrangements for the protection of their investme
ent to everything that these agreements necessarily entailed; or that could reasonably be deemed necessary to make them ten

oing contentions.

me friendly foreigners to lend us their technical expertise in helping develop our country?

at the entry of foreign capital, technology and business enterprises into the national economy shall be effectively regulated to en

our position on loans. We welcome loans as long as they are paid on our own terms, on our ability to pay, not on their
s a very commendable position given the economic situation of a country such as Peru. The Philippines is a similar case, espec

really realistic to say that we will borrow on our own terms. Maybe we can say that we inherited unjust loans, and we would like

o borrow. If we have to borrow, it must be on our terms. In other words, banks do not lend out of the goodness of their

forgotten the scriptural injunction that the borrower becomes a slave to the lender. That is the trouble with our country

840 billion or P47 trillion or 10 times our annual GDP, and 15 times our total foreign debt of $56 billion. Globally, the Philippines
erve ownership of their natural resources at the expense of retarding or postponing the exploration, development, and utilization
nment into conceding to certain conditions incompatible with the Constitution.

ment of the exploration, development and utilization of natural resources.

s investment and/or to facilitate the technical assistance and transfer of technology may be unavoidable and not necessarily un
limited participation in the management assistance or participation so long as it is incidental to the financial or technical as

cial or technical assistance only.


ce should be allowed.

g rig your Honor, and that is the sole contract, then we cannot imagine a situation were it is not the technicians that we

parts of management, isn't it? Its reasonable in other words if I may re state it, it's reasonable to expect that entities, fore
would want to have a say a little bit of say management and sometimes even in auditing of the company, isn't it reason

It means if it's for development and utilization of the minerals.

osium then that would be all right your Honor. Mining companies do symposiums also.

r financial.
on from my perspective, your Honor.

supervision, full control and supervision to the State.

ate.

s still with the State.

ple we represent.

xxx

ards on contracts with foreigners was left by the Constitutional Commission or by Constitution itself to Congress to craft out.

Congress, but it was delimited by the fact, that they removed the word management and other arrangement and put the

e some form of management or other things to protect the investment or the technology being put by the foreign com
it?

is co-extensive with and strictly limited to the degree of financial or technical assistance extended. The scope of the assistance

the mining concern may be, full control and supervision, sufficient to protect the interest of the Filipino people, over all
guessing every decision made by the foreign corporation, it does mean that sufficient safeguards must be incorporated into the

ion, should not effectively grant foreign-owned corporations beneficial ownership over the natural resources.

al Commission and Chair of its Committee on National Economy and Patrimony, is not inconsistent with the foregoing conclusi

1987 Constitution because there was the general perception among the Concom members that it was used during the Marcos
service contract concept in the 1973 Constitution was tantamount to ownership by the foreign partner.

ippine economy for foreign capital and technology in the exploitation of natural resources to benefit Filipinos, especially the poo

AA involved more than borrowing money and/or buying technology from foreigners. If an FTAA involved only a loan and/or purc

o the FTAA provision that an FTAA also involves the participation in management of the foreign partner. What was then assum
ers in a business other than the stockholders or equity owners who participate actively in the management of a business enterp

TAA because some CONCOM delegates identified management with beneficial ownership. In order not to prolong the deb
at the FTAA included more than just a loan and/or purchase of technology from foreigners but necessarily allowed the

mmission whereby a foreign contractor is given blanket and unfettered discretion to do whatever it deems necessary – denude

xtensively in the Decision,89 "managerial assistance" – a euphemism by which full control and beneficial ownership of natural re

es that the Constitution tries to veer away from the old concession system,90 which vested foreign-owned corporations control a
cessions, or leases for the exploration, exploitation, development, or utilization of natural resources.91
paper as follows:

or the purpose of exploiting a particular natural resource within a given area. Thus, the concession amounts to a complete c
ership of that resource at the point of extraction. In consideration for the right to exploit a natural resource, the concessiona
l implications which give the concessionaire great economic power arising from its exclusive equity holding. This inclu
e natural resource, such as volume of production, expansion, research and development; and fourth, exclusive respo
being exploited, it has been shorn of all elements of control over such natural resource because of the exclusive natur
ple embodied in our Constitution that natural resources belong to the State and shall not be alienated, not to mention the fact th

he contractor of the management of the enterprise, as well as the control of production and other matters, such as expansion a

ion system persist in the Mining Act of 1995. The statute allows a foreign-owned corporation to carry out mining operations,95 w
ight to possess explosives,102 easement rights,103 and entry into private lands and concession areas.104 These are the very sa

ns. Thus, in the opening paragraphs it states:

that the State retains the power to direct overall strategy; and to set aside, reverse, or modify plans and actions of the

rol" in this wise:

s than dictatorial, all-encompassing control; but nevertheless sufficient to give the State the power to direct, restrain, regu
stry standards and similar measures that would enable the government to control the conduct of affairs in various ent

atically presumed to exercise over all business activities by virtue of the Police Power. This definition of the "full control and sup
erely places it at par with any other business activity or industry regulated by the Government.

ing Act pertaining to FTAAs do not pass the test of constitutionality.

eign FTAA contractor is obliged to submit or make available under the Mining Act and DAO 96-40. However, the mere fact tha
contract107 systems, but did not serve to place full control and supervision of the country's natural resources in the hands of the

ct the beneficial interest of the Filipino people in the exploration, development and utilization of their resources. It appears from
oration's actual operations.

el compliance with the foregoing requirements as well as the other terms and conditions of the Mining Act, DAO 96-40 and DAO

CHAPTER XVII

Ground for Cancellation, Revocation, and Termination

actor to comply with any of the requirements provided in this Act or in its implementing rules and regulations, without a valid rea
olation of the terms and conditions of the permits or agreements shall be a sufficient ground for cancellation of the same.

the Government for two (2) consecutive years shall cause the cancellation of the exploration permit, mineral agreement, financ

o abide by the terms and conditions of tax incentives and credits shall cause the suspension or cancellation of said incentives a

de in the exploration permit, mining agreement and financial or technical assistance agreement shall be considered as conditio
may cause the revocation and termination of the exploration permit, mining agreement and financial or technical assistance agre

nder Section 97 for nonpayment of taxes and fees (comprising the "basic share" of the government) for two consecutive years f
el compliance with the anti-pollution and other requirements?109 If minerals are found to have been sold overseas at less than t

ive, and, worse, perceptibly less than the analogous provisions of other Government Regulatory Agencies.

stitution to exercise supervision (but not full control and supervision) over banks,110 is empowered to (1) appoint a conservator
thout need for prior hearing forbid a bank from doing business in the Philippines and appoint the Philippine Deposit Insurance C
s, (c) suspension of lending or foreign exchange operations or authority to accept new deposits or make new investments, (d) s

ode115 grants the Secretary of Labor the power to (1) issue compliance orders to give effect to the labor standards provisions of

nd the business operations of a taxpayer found to have committed certain specified violations;118 (2) order the constructive distr

ith anything remotely analogous to the foregoing regulatory and enforcement powers of other government agencies.

lip service to the constitutional mandate for the State to exercise full control and supervision over the exploration, dev
menting Rules fail to meet even the reduced standard of effective regulatory control over mining operations. In effect, t
declared unconstitutional and void.

trol on behalf of the State.

FTAA? What specific powers are subsumed within the constitutionally mandated "power of control?" On these particular matter

mining operation to the foreign corporation. Thus the second and third paragraphs of Section 81 of the law provide:

t of, among other things, the contractor's corporate income tax, excise tax, special allowance, withholding tax due from
as provided for under existing laws.

shall commence after the financial or technical assistance agreement contractor has fully recovered its pre-operating
e mining operation. All it receives are taxes and fees from the foreign corporation, just as in the old concession121 and service
nder the State's power to generate funds to finance the needs of the citizenry and to advance the common weal.123 They are no

e (composed only of taxes and fees) shall not be collected until after the foreign corporation has "fully recovered its pre-operatin
nment's (and People's) share to chance.

beneficial ownership over the resources covered by the agreement to a foreigner, in contravention of the letter and spirit of the

ges the mineral resources, just like the foreign contractor in a service contract.125

cidental" participation in management, over the entire operations.

ership of the natural resources to the foreign contractor and does little to affirm the State's ownership over them, and i

lipino people, entitling them to gains, rewards and advantages generated by these minerals, the majority opinion nevertheless
e or product to any foreign FTAA contractor." The majority opinion adds that the State's share, as expounded by DAO 99-56, a

re" composed of a number of taxes and fees127 and (2) an "additional government share"128 computed according to one of three
mining revenue131 – at the option of the contractor.

vernment share" and the "additional government share," will achieve "a fifty-fifty sharing – between the government and the con

annot be considered a return on the resources mined corresponding to the beneficial ownership of the Filipino people

ntractor to circumvent all the provisions of DAO 99-56, including its intended "50-50 sharing" of the net benefits from

A into a Mineral Production-Sharing Agreement (MPSA) by the simple expedient of reducing its equity in the corporation underta

he option to convert the financial or technical assistance agreement to a mineral agreement at any time during the term
der the implementing rules and regulations: Provided, That the mineral agreement shall only be for the remaining period of the

%) in the corporation, partnership, association, or cooperative. Upon compliance with this requirement by the contractor, t

evenue Code132 (Tax Code), the TOTAL GOVERNMENT SHARE in an MPSA is ONLY TWO PERCENT (2%) of the value of th

total government share in a mineral production sharing agreement shall be the excise tax on mineral products as prov
d and collected on mineral, mineral products and quarry resources, excise tax as follows:

ased on the actual market value of the annual gross output thereof at the time of removal, in the case of those locally extracted

put thereof at the time of removal, in the case of those locally extracted or produced; or the value used by the Bureau of Custo

ent (1%);

arket price thereof, on the first taxable sale, such tax to be paid by the buyer or purchaser within 15 days from the date of actua
ginal state to a first taxable transferee. The fair international market price shall be determined in consultation with an appropriat

ted mineral oil, hydrocarbon gas, bitumen, crude asphalt, mineral gas and all other similar or naturally associated substances w

n (such as any of the members of respondent-in-intervention Philippine Chamber of Mines) a foreign contractor can easily redu

owned and 40% foreign-owned (a "60-40" Filipino corporation such as Sagittarius Mines, the putative purchaser of WMC's 100
ld, at most,134 amount to 36% – 34% for the Filipino stockholders of the 60-40 Filipino corporation and 2% for the Government (

entical to that embodied in Section 7.9 of the WMCP FTAA which the majority opinion itself found to be "without a dou

venues of WMCP from the commencement of commercial production; Section 7.9 deprives the government of part or all of
capital stock to a Filipino citizen or corporation, the State loses its right to receive its 60 percent share in net mining revenues

use 7.7 shall be reduced by 1percent of Net Mining Revenues for every 1percent ownership interest in the Contractor (i.e., WM

ction 7.9 without any offsetting compensation to the State. Thus, in reality, the State has no vested right to receive any inc
n stockholders, who can at any time cut off the government's entire 60 percent share. They can do so by simply selling
WMCP, not to the State.

ent Filipino-owned and 40 percent foreign-owned will still trigger the operation of Section 7.9. Effectively, the State will lose it
remaining 40percent foreign equity therein, plus the 24 percent pro-rata share in the buyer-corporation.
xxx

he net mining revenues of WMCP without any offset or compensation whatsoever. It is possible that the inclusion of the off
ion and ultimately divest itself thereof in favor of Filipino citizens and corporations. However, as finally structured, Sec
Such an outcome is completely unacceptable.

people, future generations included. And the State as sovereign and custodian of the nation's natural wealth is mandated to pro
eneral welfare of the country" [Footnote 75 of the Dissent omitted] as essential guiding principles to be kept in mind when negot

xxx

mining revenues (provided for in Section 7.7) without anything in exchange. Moreover, this outcome constitutes unjust enric
al and foreign stockholders get a windfall. Their share in the net mining revenues of WMCP is automatically increased, without
ts of the Filipino people, and violative of public policy. (Emphasis supplied; italics and underscoring in the original; footnote

its outstanding equity to a 60% Filipino-owned and 40% foreign-owned corporation, the foreign contractor can readily convert
to merely 2%. What is given to the State by Section 81 and DAO 99-56 is all but eliminated by Sections 39 and 80. At th
yer-corporation.

provide some form of incentive for the foreign FTAA contractor to eventually reduce its equity position and ultimately divest its
ome is completely unacceptable and cannot be sanctioned by this Court.

ill obtain a windfall at the expense of the Government, which is the trustee of the Filipino people. The share of these stockholde

st concede that the provisions of the Mining Act are grossly disadvantageous to the government, detrimental to the in

t its agreement to an MPSA "at any time during the term of the agreement."

al time for the foreign contractor to convert its FTAA into an MPSA is after the completion of the exploration phase and just befo
0,000,000.00)135 is only applicable during the development, construction and utilization phase and NOT during the exploration p

and warranties shall be incorporated in the FTAA, namely:

greement, that the Contractor shall comply with minimum ground expenditures during the exploration and pre-feasibility p
ilippine Peso equivalent in the case of Filipino Contractor for infrastructure and development in the contract area. If a
ear of the exploration period of the FTAA.

y one (1) year, the amount in excess may be carried forward and deducted from the minimum expenditure required in the subse
pended amount may be spent on the subsequent year(s) of the exploration period. (Emphasis supplied)

n activities, a foreign contractor further maximizes its profits by avoiding its obligation to make a minimum investment of US$ 50

millions of dollars in direct foreign investments is merely hypothetical and ultimately illusory.

a qualified entity for the purposes of granting exploration permits, is "not unconstitutional."

wing terms, whether in singular or plural, shall mean:

xxx

or a corporation, partnership, association, or cooperative organized or authorized for the purpose of engaging in mining, with te
by citizens of the Philippines: Provided, That a legally organized foreign-owned corporation shall be deemed a qualified p

, the majority opinion states that: (1) "there is no prohibition at all against foreign or local corporations or contractors holding exp
od of time that it is spending heavily on exploration works, without yet being able to earn revenues x x x."

spend its funds on exploration programs that are pre-approved by the government." And it comments that "[t]he State risks not

cle XII of the Constitution, the following, at the very least, may be said to have been conclusively determined by this Court: (1) t
2) said provision requires that an agreement be entered into (3) between the President and the foreign corporation (4) for the la
e economic growth and general welfare of the country; (7) such agreements will promote the development and use of local scie

ven contemplate the entry into an agreement between the State and the applicant foreign corporation since "prior to the issuan

construed as being favorably sanctioned by paragraph 4 of Section 2, Article XII of the Constitution which refers to "agreements
ration is prohibited and the proviso providing for such grant in Section 3 (aq) of the Mining Act is void for being unconstitutional

early evident that to allow the grant of exploration permits to foreign corporations is to allow the whole-sale circumvention of the
n corporations, the principal rights conferred on an FTAA contractor during the exploration phase, including (1) the right to ente
nder Sections 23 and 24; 138 but requires none of the obligations of an FTAA – not even the obligation under Section 56 of DAO

e Government's revenue from mining operations is to apply for an exploration permit and content itself with the "smaller" permit
xpenditures during the exploration period.

-56 by divesting 60% of its equity in favor of a Philippine corporation and opting to enter into an MPSA. By doing so it automati

e Corporation, then the beneficial interest of foreigners in the minerals mined would be a minimum of 64%.

reign corporations, is patently unconstitutional, hence, null and void.

II

Invalidity of the WMCP FTAA Sale of foreign


interest in WMCP to a Filipino corporation
did not render the case moot and academic.

e has been rendered moot since "[e]xcept for the nominal shares of directors, 100% of TMRC's share are now owned by Sagitt
ssue.142

uently becomes a Filipino citizen or transfers it to one, the infirmity in the original transaction is considered cured and the title o
of Filipinos, that aim or purpose would not be thwarted but achieved by making lawful the acquisition of real estate by Filipino c

he FTAA has been transferred from a foreigner to a Filipino is irrelevant. What is relevant is whether a foreigner has improperly

nstitution in prohibiting alien ownership of agricultural land is to retain the ownership or legal title of the land in the hands of Fi
preserve to the Filipino people the beneficial ownership of their natural resources – i.e. the right to the gains, rewards and ad
hese resources, much less from profiting from them.

e illegal character of the right being divested or sold. Indeed, such divestment or sale is obviously a method by which the foreig

erests in violation of the Constitution with the assurance that they can escape liability and at the same time make a tidy sum by
ntentionally inflate the value of their illegally–acquired mineral rights to the detriment of their Filipino purchasers as the past Bre

s the letter and intent of Article XII of the Constitution. It facilitates rather than prevents the rape and plunder of the nation's natu

on and management of the WMCP FTAA is in the hands of a Filipino company, no serious question as to the FTAA's validity ne

y for US$10,000,000.00 – directly leads to some very serious questions concerning the WMCP FTAA and its validity. First, if a
by petitioners147 and admitted by respondent WMCP,148 Sagittarius, WMCP's putative new owner, is capitalized at less than hal
implementation of the FTAA, as it claims,150 why did WMC sell 100% of its shares in WMCP for only US$10,000,000.00? Finall
quired a beneficial interest in any minerals mined in the FTAA area to the extent of US$10,000,000.00? If so, is the acquisition
gn owned corporation, has acquired a more than half billion peso152 interest in Philippine mineral resources located in a co

est in WMCP to a Filipino corporation, whether the latter be Sagittarius or Lepanto. If the FTAA is held to be valid under the Con
ikewise valid. However, if the FTAA is held to be invalid, then neither WMC's interest nor the sale which gave rise to said intere
ional, the WMCP FTAA is void ab initio for being contrary to the fundamental law and no rights may arise from it, either in favor

a foreign-owned corporation, to a Filipino-owned one, whether Sagittarius or Lepanto, now presently engaged in a dispute over
s Sagittarius and Lepanto with nothing to dispute.

onstitution. In the Decision under reconsideration, this Court observed:

utilise[,] process and dispose of all Minerals products and by-products thereof that may be produced from the Contract Area."

pose of conducting tests and studies in respect thereof;

pment/Operating Period and the project facilities to be constructed during the Development and Construction Period;

ess and the right to occupy the same, subject to the provisions of Presidential Decree No. 512 (if applicable) and not be preven

xxx

ies and all other types of works on the Contract Area;

equipment relating to the Mining Operations and to use, sell or otherwise dispose of, modify, remove or diminish any and all pa

s, easement rights and the use of timber, sand, clay, stone, water and other natural resources in the Contract Area without cos

xxx

tions under this Agreement, the plant, equipment and infrastructure and the Minerals produced from the Mining Operations;

x x x.

act Area remain the property of WMCP, which has the right to deal with and remove such items within twelve months from the t

, management and personnel necessary for the Mining Operations." The mining company binds itself to "perform all Mining Op
quired for carrying on all Mining Operations." WMCP may make expansions, improvements and replacements of the mining fac

er natural resources that properly belong to the State and are intended for the benefit of its citizens. These stipulations are abho
spring must be struck down.155 (Citations omitted)
al production sharing agreement. Respondent WMCP admitted as much in its Memorandum.156 The first paragraph of Section

s the cause is understood to be, for each contracting party, the prestation or promise of a thing or service by the other. 157 On the
ed by the FTAA are not merely incidental to the two other forms of assistance, but virtually grant WMCP full control over its min

which is prohibited from entering into such contracts not only by the fourth paragraph of Section 2, Article XII of the Constitutio

.159 They produce no effect whatsoever.160 They cannot be ratified,161 and so cannot the WMCP FTAA.

sadvantageous to the government, detrimental to the interests of the Filipino people, and violative of public policy" since it "effe

xxx

he future by the Government to the Contractor or to financial or technical assistance agreement contractors in genera

hy, for instance, money spent by the government for the benefit of the contractor in building roads leading to the mine site shou
t enrichment on the part of the contractor at the expense of the government, since the latter is effectively being made
and must be declared to be without effect. xxx (Emphasis supplied; citations omitted; underscore in the original)

AA on the theory that Section 7.9 and 7.8 are separable from the rest of the agreement, which may supposedly be given effect w

s conversion of its FTAA into an MPSA under the provisions of the Mining Act. Hence, merely striking out Sections 7.9 and 7.8(

eficial ownership of mineral resources to a foreign corporation.

gage and encumber, not only its rights and interests in the FTAA, but the very minerals themselves:

tions under this Agreement, the plant, equipment and infrastructure and the Minerals produced from the Mining Operations
oregoing provision is necessitated by the conditions that may be imposed by creditor-banks on the FTAA contractor:

editor-banks of the then foreign contractor WMCP to secure the lendings made to the latter. Ordinarily, banks lend not only on t
Banks even lend on the security of accounts receivable that are collectible within 90 days. (Citations omitted; underscore in the

quisites of a contract of mortgage:

mortgage:

mortgaged;

eir property, and in the absence thereof, that they be legally authorized for the purpose.

pledging or mortgaging their own property. (Emphasis and underscoring supplied)

erals has the right to mortgage the same, and under Section 2, Article XII of the Constitution the absolute owner of the

titution, is reserved solely to the State. In purporting to grant such power to a foreign FTAA contractor, Section 10.2 (l) of the W

contractor's obligations is anomalous since Section 1.2 of the WMCP FTAA provides that "[a]ll financing, technology, managem

the FTAA contractor have the financial capability to undertake the large-scale exploration, development and utilization of mine
63

he Government to acquire surface rights in its behalf at such price and terms acceptable to it:

xxx

rchase or acquire surface areas for and on behalf of the Contractor at such price and terms as may be acceptable to t
quisition and maintenance, adjusted for inflation, from the proceeds of sale; (Emphasis supplied)

tor may compel the Government to exercise its power of eminent domain to acquire the title to the land under which the minera

s:

qualified to own land, identifies to the government the specific surface areas within the FTAA contract area to be acquired for th

sion allows it, after the termination of the FTAA to be reimbursed from proceeds of the sale of the surface areas, which the gove
and the determination of just compensation.

y owned by the Government – i.e. when the land over which the minerals are located is owned by some private person.

overnment purchase or acquire the land, but for the foreign FTAA contractor to negotiate a lease over the property with the priv

son or another, it is unable to lease the land in question at the price it is willing to pay. In that situation, it would have the power
FTAA contractor.

on 10.2 (e) of the WMCP FTAA. It is the very instrument by which the contractor assures itself that it can obtain the "surface righ

cquires the "surface right" for free since under the same provision of the WMCP FTAA it is entitled to reimbursement of the cos
"surface area" for a maximum of 50 years, at its option.

s given the power to hold inalienable mineral land of up to 5,000 hectares, with the assistance of the State's power of e

mineral lands, and national parks. Agricultural lands of the public domain may be further classified by law according to the use
nable lands of the public domain except by lease, for a period not exceeding twenty-five years, renewable for not more
twelve hectares thereof by purchase, homestead, or grant.

d subject to the requirements of agrarian reform, the Congress shall determine, by law, the size of lands of the public domain w

orporation of the beneficial ownership of both the minerals and the surface rights to the same in contravention of the clear prov

ble the contractor to establish its mine site, build its facilities, establish a tailings pond, set up its machinery and equipment, and

ng, as differentiated from methods that require tunneling into the earth, is a method of extracting minerals by their removal from
ore contained in them. During the mining process, the surface of the land is excavated forming a deeper and deeper pit until the
is considered the most cost-effective mining method.169

of mineral resources and that the original contract area of the WMCP FTAA was 99,387 hectares, an open pit mining operation

disputed that under Section 60 of DAO 40-96, which is among the enactments under review, the contractor may, after final relin
actor.

e end of the contract term, the FTAA contractor does not acquire its surface rights for free since "the contractor will have been
s decision to use its money to acquire the surface rights instead of leaving it in the bank.

n actual and, for that reason, is not an allowable deduction from gross income in an income statement. In layman's terms it is eq
does not find its way to the pockets of either the previous land owner (in this case, the Bugal B'Laans) or the State.

years. The fact remains that, under the terms of the WMCP FTAA, the contractor is given the power to hold inalienable mi
tion.
mount to a conveyance to a foreign corporation of the beneficial ownership of both the minerals and the surface rights over the s

similarly unpersuasive. These Sections provide:

Budget or variation thereof submitted by the Contractor unless within sixty (60) days after submission by the Contracto

eavour to agree on amendments to the Work Programme or budget. If the Secretary and the Contractor fail to agree on the
deemed approved so as not to unnecessarily delay the performance of this Agreement.

side, reverse, or modify plans and actions of the contractor; or (2) regulatory control – the foregoing provisions cannot pass mu

op-gap solutions. The determination of the FTAA contractor permanently reverses the "Rejection Notice" of the DENR since, by

e benefit of the State as well as to the contractor. Second, who is to say that the work program or budget proposed by the
s it were, may be said to be in a better position than the State – an outsider looking in – to determine what work progra

and that of the Government are identical. They are not.

expertise, are primarily concerned with maximizing the pecuniary returns to their owners or shareholders. To this extent, they ca

terest. With respect to the nation's natural wealth, as the majority opinion points out, the Government is mandated to preserve,
se resources results in real contributions to the economic growth and general welfare of the nation. To achieve these broader g

nion" would always be superior to the Government's administrative or regulatory determination with respect to mining operation
at least with respect to the conduct of mining operations.

erminations of the regulatory agency?

nations over an FTAA contractor, except to terminate the contract itself, falls far too short of the concept of "full control and supe

y since, by its provisions, it conveys both the beneficial ownership of Philippine minerals and control over their explor
d and of no effect whatsoever.

A Final Note
n of foreign powers – whether political or corporate. Philippine mineral wealth, viciously wrenched from the bosom of the mothe

they have struggled to assert their legal control and ownership over their patrimony only to have their efforts repeatedly subver

mplore this Court to reverse itself if only to perpetuate its otherwise economically unsustainable conduct. It is even understanda
l legislation in the hope, however false or empty, of obtaining fabulous amounts of hard currency.

people as embodied in their Constitution. The Constitution which gives life to and empowers this Court. The same Constitution

Court has chosen to reverse its earlier Decision which, to me, would once again open the doors to foreign control and ownersh

SEPARATE OPINION

Understandably, the resultant document is accommodative of these distinct, at times competing philosophies. Untidy as any mé

d from this Court. In turn, there is a need to balance and reconcile the diverse views that animate the provisions of the Constitu

ational Patrimony, in a manner akin to Article II on Declaration of Principles and State Policies. Some of the provisions impress
close the door on foreign handling of our natural resources, but at the same time it leaves open a window for alien participation

XII in conjunction with the proper understanding of the nature of the power vested on the President under Section 2. It has to b

The Contract-Making Power of the President

re not brought to bear by direct popular action, but through representative government in accord with the principles of republica
er, such as the provision on control over all executive departments, bureaus and offices,5 as well as the so-called "Commander-

owers as are expressly granted by the Constitution. Marcos v. Manglapus7 concedes that the President has powers other than
Manglapus may be controvertible,10 but the cogency of its analysis of the scope of executive power is indisputable. Neither is t

legislative nor judicial has to be executive. Thus, in the landmark decision of Springer v. Government of the Philippine Islands,
the National Coal Company and the Philippine National Bank, the U.S. Supreme Court, in upholding the power of the Governo
rd" and "committee" respectively, are not charged with the performance of any legislative functions or with the doing of anythin
ested by the Organic Act in the Governor-General, it is clear that they are not legislative in character, and still more clear that th
maining one among which the powers of government are divided . . . [At 202-203; emphasis supplied.]

dissent we find reinforcement for the view that it would indeed be a folly to construe the powers of a branch of government to e

black and white. Even the more specific of them are found to terminate in a penumbra shading gradually from one extreme to th

xxx xxx xxx

by veiling words we do not and cannot carry out the distinction between legislative and executive action with mathematical prec
0-211.]11

mers of the 1987 Constitution to limit the powers of the President as a reaction to abuses under President Marcos, for as the Co
wer."12 The critical perspective of this case should spring from a recognition of this elemental fact.

f the Constitution. Still, it originates from the concept of executive power that is not explicitly provided for by the Constitution. As
her or not otherwise assigned to the other great branches of government, even if such general power is not categorically recog

dical person vested with the full panoply of powers and attributes which are compendiously described as "legal personality."13 A
eory, does not require a constitutional provision, or even a Constitution, in order to be operative. It is a power possessed by eve

e or judicial. This is easily discernible through the process of exclusion. The other branches of government — the legislative an

limitless. The Constitution frowns on unchecked executive power, mandating in broad strokes, the power of judicial review15 an
n several regards.

Constitutional Limitations under Section 2, Article XII

gn corporations regarding the exploration, development and utilization of our natural resources?

on 2. These are that the State retains legal ownership of all natural resources,17 and that the State shall have full control and su
ns laid down in the fourth paragraph of Section 2 on the power of the President to enter into agreements with foreign corporatio

nerals, petroleum, and other mineral oils. Among the natural resources which are excluded from these agreements are lands of

the 1987 Constitutional Commission allowed agreements with foreign-owned corporations with respect to all classes of natural
which Commissioner Davide recognized as "those particular areas where Filipino capital may not be sufficient."20

nts marks a significant distinction from the service contracts of old. This does not come as a surprise, considering we
nsive collateral damage has been reported for the petroleum and mining industry, capital-intensive industries whose p
esources.

scale exploration, development and utilization of minerals, petroleum, and other mineral oils.
ange from the 1973 Constitution, which allowed private persons to enter into service contracts with foreign corporations.

This proviso by itself, and more so when taken together, as it should, with another provision, 22 entails legislative intervention an
ugh legislation. The value of legislative input as a means of influencing policy should not be discounted. Policy initiatives groun
s of diverse interests, assuring that economic decisions need not be made solely from an ivory tower. There is also the possible

tributions to the economic growth and general welfare of the country." In terms of real limitations, this condition has admittedly l
l wisdom of a co-equal branch, generally deserves respect from the courts.

nstitution to limit foreign participation in natural resource-oriented enterprises. They provide a vivid contrast to the 1973 Constit
e exploration or utilization of any of the natural resources.23 These requisites imposed by the 1987 Constitution, which are signi

Not Strictly Technical or Financial Assistance

mposed by the fourth paragraph of Section 2. It is argued that foreign–owned corporations are allowed to render only technical o
n limits foreign involvement only to areas where they are needed, the overpowering intent being to allow Filipinos to benefit from
mitations that generally attach to the grant of privileges.

ing under our Constitution does not and cannot conform to judicial definitions of the power of any of its branches based on isola

functions, and is connected with the power of the executive branch to determine economic policy. Hence, the proper approac
cessitate adopting as a fundamental premise that absent an express grant of power, the executive branch has no capa

or financial assistance only, then this unambiguous limitation should be affirmed. Yet the Constitution does not express such an
e scope of the agreement so as to pertain exclusively either to technical or financial assistance.

ment and utilization of natural resources, is cognizant of the sad truth that such activities entail significant outlay of capital and a
hese two facets are the indispensable requisites to qualify foreign participants in the exploration, development, and ut

ar would have materialized that our mineral reserves could remain untapped for a significant period of time, owing to the paucit
o undertake the extraction without need of foreign aid. Obviously, the more pragmatic view won the day.

n is that it is up to the State to do all the rest. Considering the lack of know-how and financial capital, matters which w
sive capital and extensive training such enterprise would entail. By allowing this expansive set-up under Section 2, th
atypical cession of several State prerogatives in the development of its mineral and petroleum resources.

stance," shorn of context, implies a charitable grant offered without any quid pro quo attached. Unconditional foreign aid may be
ning industry. There is no such entity as an International Benevolent Association for Extraction of Minerals. If "assistance" is to

ources does not arise from a philanthropic impulse. It is a pure and simple investment, and one that is not engaged in unless the
vestments in the extractive enterprises involving petroleum and other mineral oils, subject of course to limitations under the law
nter into agreements for the purpose of enticing foreign investments.
estment," as intimated before, the term is useful in underscoring the essential facets of the foreign investment which
orations which in turn are entitled to expect a return on their investments.

t that those provisions authorized service contracts. But while the 1987 Constitution does not utilize the term "service con
s, these are subjected to more stringent restrictions than what had been allowed under the 1973 Constitution. Thus, the test sh
ate or defeat the State's ownership thereof.

damental prerogative of the presidency. Such "liberal interpretation" does not equate to a wholesale concession of mining resou
contract-making power. On the other hand, the second paragraph of Section 2 lays down the fundamental limitations which likew

ements under Section 2 are not strictly limited to financial or technical assistance, I would consider the following questioned pro
an agreement which to my mind is still within the contemplation of Section 2, Article XII.

State Ownership over Mineral and Petroleum Resources

ertion of ownership, full control and supervision.

ate should receive from the exploration, development and utilization of mineral resources. I perceive that all the members of the
y through taxes arises as an attribute of ownership unequivocally reserved by the Constitution for the State, such right may not

rofits. There are, as probably should be, political consequences if the President opts to surrender all of the State's profits to a fo
e regalian doctrine should be given due respect, and an interpretation allowing "beneficial ownership" by the foreign corporation

hat the Court had previously erred in invalidating certain provisions of Rep. Act No. 7942 and the WMC FTAA on the mistaken n

gh it is silent on the operational terms of such ownership. Of course, such general submission would not be in itself curative of w

se it purportedly precludes the Government from obtaining profits under the agreement from sources other than its share in tax
y view is anchored on a rule of statutory construction that concludes that "among other things" refers only to taxes. Yet, there i
d of statutory invalidation, is highly preferable.

ance into a mineral production sharing agreement (MPSA) turned out to be just as controversial. In this regard, the minority wis
s to only the excise tax on mineral products under internal revenue law.

ng called upon to rule on a premature question. There is no such creature yet as an FTAA converted into an MPSA, and so the
h may prove illuminating and even crucial to the proper disposition of the case. By seeking invalidation of these "MPSA provisio
ch of government. Assuming that the provisions are indeed invalid, the Court will not hesitate, at the proper time, to strike them
.

ent of ownership without offsetting compensation. The provisions of the FTAA are fair game for judicial review considering their
y in WMCP to a domestic corporation. It is within the competence of this Court to invalidate Section 7.9 here and now. For that

"Full Control and Supervision" of the State

mandate that the State exercise management over the activity, or exclude the exercise of managerial control by the foreign corp
be at all yielded or delegated, for reasons I shall elaborate upon. Instead, "full" should be read as pertaining to the encompassi

elbow room in the exercise of management prerogatives. Management is in the most informed position to make resources prod
the buccaneer entrepreneur chartering his industry solely on gut feel is over. The vagaries of international finance have dictate
s not prescribe a particular manner of management; thus, we can conclude that the State is not compelled to adopt outmoded m

, namely the President and the foreign corporations. They would be in the best position to determine who is best qualified to ex
is Court has little control over. And even if the State cedes management to a different entity such as the foreign corporat

minority concede that these foreign corporations are not precluded from participating in the management of the project. I think it
s rule to that effect, nor any law of construction that necessitates such interpretation. Ideally of course, the most qualified party
ed construction would be inconvenient and absurd,30 not to mention potentially wasteful.

large-scale exploration, development and utilization of mineral and petroleum resources. This is evinced by the allowance of fo
of the activity, then it could have phrased the provision in such a way that would strictly limit the foreign participation to moneta

e critique on yielding too many management prerogatives to a remote overseer such as the State. An early United Nations repo
r away a decision-maker is to the market, the higher the information cost, or the opportunity cost to the gaining of information.32
of the hierarchy to higher levels, the ultimate basis of a decision may be misleading at best and erroneous at worst.33

The foreign player necessarily at least has a reasonable say in how the mining venture is run. The interest of the investor in see
project. It must be noted that mineral and petroleum resources are non-renewable, thus a paramount interest arises to ensure a

ation, or even to a private domestic corporation for that matter. What should be the proper dichotomy, if any, between the privat

l and supervision in the mining activity. This was certainly done with the WMC FTAA, which is replete with stipulations delineati
e can similarly be enforced through statutes, as well as executive or administrative issuances. The Mining Act itself is an expres

of the Mining Act or the FTAA precludes the application of the laws and regulations of the Philippines, enunciatory as they are o
ents pertaining to such areas as environmental concerns. Violations of these laws uttered in the name of the FTAA are punisha

a more activist role on the part of the State in the operations of the mining enterprise, perhaps to the prejudice of the laissez-fai
as well as with future issuances. It may compel the foreign corporation payment of all assessable levies. It may evict officers of
s which are established to be disasters or nuisances to the affected communities. The power of the State to enforce its police p

ofit of the enterprise as a whole. This may involve visitorial activity, the conduct of periodic audits, and such powers normally at
al.

vision over the exploration, development and utilization of the country's mineral resources in the State would be best served by
vides sufficient protection to the State's interests while affording flexibility and efficiency in the conduct of mining operations.34

e control and supervision of extractive activities concerning our mineral resources by entities which have the funds and/or tech
oard of directors and craft policies which implement and further concretize the broad aims of R.A. No. 7942, taking into conside
orate officers and employees to take charge of the day-to-day operations of the mining activities pursuant to the corporation's co
activities in favor of the foreign entities rendering financial and/or technical assistance would be greatly diminished. It would be
ould not have the power to determine the course of the project or the major policies involved therein because these functions w

ecutive branch, but also that of the legislative. Such executive-legislative coordination is necessary since public corporations m

Section 3.3 of WMC FTAA Constitutional

the Constitution, which imposes a limitation on the term of mineral agreements. I agree with the ponencia that the constitutiona
aring agreements, which are all referred to in Section 1, and not the FTAAs mentioned only in Section 4. Accordingly, Section 3

Epilogue

y opinionated views can develop, even from the members of this Court. The promise brought about by the large-scale exploitat
ne from cooperation to subservience to foreign partners in development. Popular Western wisdom aside, what is good for Gene
t is complicit, either through active participation or benign neglect, to abuses committed by the mining industry against the Filipi
ult of the large-scale mining venture. Political capital is more fickle than financial capital.

l electorate. The limits of judicial power would exasperate any well-meaning judge who feels duty-bound to affirm a constitution

erstanding of the constitutional powers of the executive branch. This is in line with my perception of the judicial duty as being lim
because it gives due regard to the discretion of the Executive to determine what is good for the economy. This judicial attitude
nce the duty of formulating and implementing economic policies falls exclusively within their purview.

p. 12.

include Louel A. Peria as one of the petitioners; only the name of his father, Elpidio V. Peria, appears therein.

" in the caption of the Petition, but "Philippine Kaisahan Tungo sa Kaunlaran at Repormang Pansakahan (KAISAHAN)" in the b

Id., p. 212.

7.9 of the subject FTAA, for violation of the Civil Code and the Anti-Graft Law -- these provisions being contrary to public policy

al deposits in South Cotabato, Sultan Kudarat, Davao del Sur and North Cotabato, covering an area of 99,387 hectares.

Resources International Pty., Ltd. (WMC) -- "a wholly owned subsidiary of Western Mining Corporation Holdings Limited, a publi

arius), a corporation organized under Philippine laws, 60% the equity of which is owned by Filipino citizens or Filipino-owned co
e of the sale and transfer of shares, it has ceased to be connected in any way with WMC. On account of such sale and transfer
nsolidated Mining Co., which was interested in acquiring the shares in WMCP, appealed this Order of the DENR Secretary, but
lgated on a vote of 8-5-1. Chief Justice Davide and Justices Puno, Quisumbing, Carpio, Corona, Callejo, and Tinga concurred

n as "The Oil Exploration and Development Act of 1972" in §1 thereof) permitted the government to explore for and produce ind
energy, land and other natural resources, whereby a government or an agency thereof, or a private person granted a right or p
financial or technical resources, undertaking the exploitation or production of a given resource, or directly managing the produ
Natural Resources, 9 World Bulletin 1, 4 (1993).

ns subject to government oversight. The service contractor was required to be technically competent and financially capable to
t recover any of its expenditures, if no petroleum was produced. In the event petroleum is discovered in commercial quantity, th
imburse it for its operating expenses incurred.

wed Filipino citizens, with the approval of the Batasang Pambansa, to enter into service contracts with any person or entity for th

f the natural resources of the Philippines shall be limited to citizens, or to corporations or associations at least sixty per centum
, technical, management or other forms of assistance with any person or entity for the exploration or utilization of any of the nat

evelopment of the natural resources, given the lack of Filipino capital and technical skills needed therefor. The original proposa
rivate entity to be party to such contract. Following the ratification of the 1973 Charter, PD Nos. 151, 463, 704, 705, 1442 were
ms and the processing and marketing of the products thereof; production, storage, marketing and processing of fish and fishery

-GR No. 74161 and lodged by Lepanto Consolidated Mining -- of the decision of the Office of the President which upheld the o

mber 11, 2003.

to be reconsidered. §4 of Rule 52, and §4 of Rule 56B of the Rules of Court.

of June 30, 2002 prepared by the Mines and Geosciences Bureau's (MGB) Mining Tenements Management Division, cited in p

its Resolution of June 29, 2004 required him to submit his Position Paper through the Office of the Solicitor General. Said pape

CJ.), citing People v. Vera, 65 Phil. 56, 94, November 16, 1937, per Laurel, J.
31, 1997 and Viola v. Alunan III, 343 Phil. 184, 191, August 15, 1997.

1911, per McKenna, J.

t or other written instrument, whose rights are affected by a statute, executive order or regulation, ordinance, or any other gove
for a declaration of his rights or duties, thereunder."

rporation, board, officer or person, whether exercising judicial, quasi-judicial or ministerial functions, are without or in excess of
e ordinary course of law, a person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certa
ch incidental reliefs as law and justice may require."

ganiban, J., citing JM Tuason & Co., Inc. v. LTA, 31 SCRA 413, 422-423, February 18, 1970, as cited in Agpalo, Statutory Con

0342, 160343, 160360, 160365, 160370, 160376, 160392, 160397, 160403, and 160405, November 10, 2003, per Carpio Mora

, 2003, per Carpio Morales, J. Citations omitted.

the foreign contractor may exercise limited management prerogatives to the extent of the financial or technical assistance give

on 2 of Art. XII limits foreign involvement in the local mining industry to agreements strictly for financial and/or technical assistan
e contracts, as this concept was understood under the 1973 Constitution. Such contracts were supposedly deconstitutionalized
concern, the Decision struck down the FTAA for being a prohibited service contract. Provisions of RA 7942 which granted man

d involve travel.

e police.
he governor in the scandal.

st of the evening.

ans on behalf of the Republic of the Philippines with the prior concurrence of the Monetary Board, and subject to such limitatio
on applications for loans to be contracted or guaranteed by the Government or government-owned and controlled corporations

ng or hydrocarbon projects is about 1:1,000. It goes without saying that such a miniscule success ratio hardly encourages the in

s after the assassination in August 21, 1983 of former Senator Benigno "Ninoy" Aquino, Jr. During the early part of this three-ye
d critical importations of raw materials, panic-buying, hoarding of commodities, and grave lack of foreign exchange needed to fu
he critical condition of the Philippine economy and the penury of its government.

profit. The second is to stay solvent, that is, to have on hand sufficient cash to pay debts as they fall due. Other objectives may
The Basis for Business Decisions (5th ed., 1982), p. 11.

1991, per Fernan, CJ.


directing influence over; to regulate; to have power over; to rule; to govern. The noun 'control' refers to an act or instance of co
ne, Online Dictionary, www.m-w.com.

the Philippines with capacity to contract, or a corporation, partnership, association, or cooperative organized or authorized for
centum (60 percent) of the capital of which is owned by citizens of the Philippines: Provided, That a legally organized foreign-ow
ing supplied.

ar during the exploration period at least ten percent (10%) of the original contract area, by identifying and dropping from the FT
nly 5,000 hectares.

deration), p. 61.

nt of receivables, which is a borrowing arrangement with receivables pledged as security on the loan; (2) factoring receivables, w
d of the other two forms of receivable financing. Smith and Skousen, Intermediate Accounting, (1992, 11th ed.), pp. 317-321.

y postdated checks. They refer to these facilities as "bills discounting lines."

om a contract, or the ownership of an estate as distinct from the legal ownership or control." Christiansen v. Department of Soc

as exists where the legal title is in one person and the right to such beneficial use or interest is in another x x x." Montana Cath

eements", p. 2. A photocopy of their paper is attached as Annex 2 to the Motion for Reconsideration of public respondents.

ecovery period of the FTAA. During such period, the contractor pays only part of the basic government's share in taxes consist
e, and royalty payments to indigenous cultural communities, if any.

minerals; (ii) contractor's income tax; (iii) customs duties and fees on imported capital equipment; (iv) value added tax on purch
ies due the government on mineral reservations.

of 1997; those for the use of pollution control devices and facilities; income tax carry-forward of losses (five-year net loss carry

pra, who are, respectively, the director of the MGB and chief of the Mineral Economics, Information and Publication Division of
vations and indigenous cultural communities, income tax and real property tax.

divided into a pre-operating period, a cost recovery period and a post recovery period. The pre-operating period consists of the
nd, consists of the initial years of commercial operation where the contractor is allowed to recover its pre-operating expenses. T
om commencement of commercial production, whichever comes first. The post recovery period is the remaining term of the FTA
computation of the additional government share as spelled out in DAO 99-56, is significant:

itional share aside from the normal taxes and fees paid during operation. Simple as it was formulated, the phrase is another ch
ned with taxation and incentives and other stakeholders of the mining industry to formulate the possible modes of determining th

n the government and the contractor.

their objections to the imposition of an additional government share. However, since Government is firmly committed to adhere
ly making part of the mining regulation through the issuance by the Department of Environment and Natural Resources of Adm

esented in the administrative order.

calendar year less deductible expenses. These deductible expenses consist of expenses incurred by the Contractor directly, re

ng and refining costs other than smelting and refining costs paid to third parties;

ctor in the Philippines;

those expenses incurred outside of the Philippines are justifiable and allowable subject to the approval of the Director of Mines

necessary to fully comply with its environmental obligations;

and for the development of geoscience and mining technology together with training costs and expenses;

the Contract Area during the Operating Phase;

ontract Area after the pre-operating period; and

xpenses incurred by the Contractor subject to limitations in debt/equity ratio as given in the contract and which shall not be mo
operations; and
ce between 50% of the cumulative annual net mining revenues CNi and the cumulative total government share CGi (basic and
mula:

he interest expense; PE is unrecovered pre-operating expense; and OC is on-going capital expenditures. This option provides t
than 50% of the cumulative present value of the project cash flows. The additional government share AGS is therefore the diffe
The cumulative present value of project cash flow for any year i is given by the following formula:

with allowance for inflation of the US dollar. The cumulative present value of the total government share before additional gove

ve of the additional government share during the year is CGAi = CGBi + AGSi.

f twenty-five percent (25%) of the additional or excess profits during a taxable year when the two-year average ratio of the net
ed on the life of the project. Investors have indicated that their minimum return on investment before they would invest on a min
e is then an additional or excess profits. The computation of the 0.40 trigger shall be based on a 2-year moving average which i
he Bureau of Internal Revenue in computing the income tax of the contractor during a taxable year.

at 20% or higher return on investment.

ed on prevailing foreign exchange rate at the time the expenses were incurred. Alternatives or options aside from these three s
s than fifty percent of the sharing.

cost recovery period and a post recovery period. The pre-operating period consists of the exploration, pre-feasibility, feasibility,
s of commercial operation where the contractor is allowed to recover its pre-operating expenses. The end of this period is when
ommercial production, whichever comes first. The post recovery period is the remaining term of the FTAA immediately following

a of the financial capacity of the enterprise, rather than net income or taxable income, which are arrived at after netting out non-

ns, and its investing and financing transactions. Smith and Skousen, supra, p. 184.

payments to claim owners and surface owners and on royalty payments for technology transfer; value added tad on local equip

ols, public markets, churches, and the like) and social development projects; payroll and fringe benefits (direct and indirect emp
r social infrastructures; and the resulting multiplier effects of mining operations.

n financial or technical assistance agreement shall commence after the financial or technical assistance agreement contractor h

overnment share in a mineral production sharing agreement shall be the excise tax on mineral products as provided in Republic

excise tax on mineral products as provided for under Section 151 of the National Internal Revenue Code: Provided, however, Th

existing mining lease contracts, permits/licenses, leases pending renewal, mineral production-sharing agreements granted und
visions of Chapter XIV on government share in mineral production sharing agreement and of Chapter XVI on incentives of this
ch provisions: Provided, further, That no renewal of mining lease contracts shall be made after the expiration of its term: Provide
ementing rules and regulations. (Underscoring supplied)
of the basic government share consisting of local government taxes and fees, such as local business taxes, real property taxes

ofit; CMP likewise agrees to 60 percent; the Malampaya-Shell FTAA provides for 60 percent also; so the Court should decree a
ampeded into the realm of legislation.

ecessary for the Mining Operations shall be provided by the Contractor in accordance with the provisions of this Agreement. If
ng Operations."

er into a mineral production sharing agreement with the Government under the laws restricting foreign ownership and equity in n

hould be a citizen of the Philippines or a corporation at least 60 percent of the capital of which is owned by citizens of the Philipp

is 60% Filipino-owned and 40% foreign-owned, therefore, the foreign stockholders in such buyer-corporation hold 24% benefic

pine Telegraph and Telephone Co. v. NLRC, 338 Phil. 1093, 1111, May 23, 1997.

ipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good cu

wise, §11 of Book I of Chapter 3 of Exec. Order No. 292, otherwise known as "The Administrative Code of 1987," states: "Sec.
the laws by its duly authorized representatives. (2) The State shall not be bound by the mistakes or errors of its officers or agen

ms can be separated from the legal ones, the latter may be enforced."
5, 1932, per Malcolm, J.

CRA 968,973) the Court discussed the concept of auto-limitation in this wise: "It is to be admitted that any State may by its cons
erty of a state-force due to which it has the exclusive capacity of legal-self determination and self-restriction.' A State then, if it c

SCRA 548

st 1991, 200 SCRA 246

CP FTAA on behalf of then President Fidel V. Ramos upon recommendation of then DENR Secretary Angel C. Alcala.

domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wild
development, and utilization of natural resources shall be under the full control and supervision of the State. The State may dire
y per centum of whose capital is owned by such citizens. Such agreements may be for a period not exceeding twenty-five year
strial uses other than the development of water power, beneficial use may be the measure and limit of the grant.

sea, and exclusive economic zone, and reserve its use and enjoyment exclusively to Filipino citizens.

no citizens, as well as cooperative fish farming, with priority to subsistence fishermen and fishworkers in rivers, lakes, bays, and

either technical or financial assistance for large-scale exploration, development, and utilization of minerals, petroleum, and othe
eements, the State shall promote the development and use of local scientific and technical resources.

with this provision, within thirty days from its execution."

agricultural lands. However, the State can exploit commercially its natural resources and sell the marketable products from such

nstitution.

95).

ption of agricultural lands, all other natural resources shall not be alienated."

20 October 2004 Compliance of the Solicitor General uniformly contain the following provision:

x on mineral products at the time of removal and at the rate provided for in Republic Act No. 7729 amending Section 1

e old system of "license, concession or lease." See the (1) Mineral Production Sharing Agreement between the Republic of the
Philippines and Ungay-Malobago Mines, Inc. and TVI Resource Development (Phils.), Inc. dated 17 June 1998; (3) Mineral Pr
uction Sharing Agreement between the Republic of the Philippines and Philex Gold Philippines, Inc. dated 29 December 1999
PSA No. 149-99-XIII).
une 2003, 403 SCRA 634; City of Baguio v. De Leon, 134 Phil. 912 (1968).

od to five years. Thus, Section 236 of the Implementing Rules states that the "period of recovery which is reckoned from the da
also states, "For clarification, the Government's entitlement to its share shall commence after the FTAA contractor has fully rec
gulations do not arise until this time." What the first sentence limits the succeeding sentence cancels. The 1996 Revised Imple

he entire proceeds of the liquidation of the foreign investment in the currency in which the investment was originally made and
as originally made and at the exchange rate prevailing at the time of remittance."

ing Procedures.

sists of the Philippine Government's nominee, Occidental-Shell's nominee, and a third member mutually chosen by the nomine
and ARIMCO Mining Corporation dated 20 June 1994. ARIMCO, a domestic corporation owned and controlled by an Australian
hilippine citizen or to a 60% Filipino owned corporation. In such event, the share of the Philippine Government in the mining reve
pliance of Solicitor General dated 20 October 2004.

relevant time is qualified to enter into a mineral production sharing agreement with the Government under the laws restricting f

over 10 years from the start of commercial production.

al Assistance Agreements Pursuant to Section 81 and other pertinent provisions of Republic Act No. 7942, otherwise known as
re hereby promulgated.
Contractors shall adopt for the large-scale exploration, development and commercial utilization of mineral resources in the cou

me established herein and such other terms and conditions as provided in the Mining Act and the Implementing Rules and Reg

d Local, the FTAA Contractor and the concerned communities of the benefits derived from mineral resources to ensure sustaina

e large scale exploration, development and commercial utilization of minerals.

the FTAA Contractor shall enter into shall have a Fiscal Regime embodying the following provisions:

s after the Date of Commencement of Commercial Production shall be determined in accordance with this Section.

e date every year thereafter, the Contractor shall pay to the concerned Treasurer of the municipality(ies) or city(ies) the require

xpenses incurred by the Contractor directly, reasonably and necessarily related to the Mining Operations in the Contract Area i

d refining costs other than smelting and refining costs paid to third parties;

the Philippines;

hat such fees are justifiable and subject to the approval of the Director.

sary to fully comply with its environmental obligations as stipulated in the environmental protection provision of the FTAA and in

r the development of geoscience and mining technology as stipulated in the FTAA and in the IRR together with the training cos

ontract Area during the Operating Phase;

t Area after the pre-operating period;

es incurred by the Contractor subject to the financing requirement in the FTAA, which shall not be more than the prevailing inte
ct to Depreciation Charges.

ns of equipment and approved construction of buildings necessary for the Mining Operations as provided in its approved Mining

ating Income for the use of fixed assets that are subject to exhaustion, wear and tear and obsolescence during their employmen
l be in accordance to the provisions of the Mining Act and the IRR.

e "Gross Output" has the meaning ascribed to it in the National Internal Revenue Code.

ay all the taxes and fees required by the Government in carrying out the activities covered in the FTAA and in such amount, ven
ovided for in relevant laws, rules and regulations. In case of non-collection as covered by Clause 3-g-1 of this Section, the Con
regulations do not fully recognize and implement the provisions covered by Clause 3-g-1 of this Section, the Government shall

and long term nature of Mining Operations, the Contractor is given the opportunity to recover its Pre-Operating Expenses incurr
o the Contractor to recover its Pre-Operating Expenses as provided in the Mining Act and the IRR, shall be for a maximum of fi
e of Commencement of Commercial Production, whichever comes first. The basis for determining the Recovery Period shall be

erating Expenses, Ongoing Capital Expenditures and Working Capital charges.

y which shall be approved by the Secretary upon recommendation of the Director shall consist of actual expenses and capital e

nements or agreements covered by the FTAA;

mining, milling, processing and rehabilitation,

and mineral products;

e Indigenous Cultural Communities, if any;

ational development and training of Philippine personnel;

directly to the Mining Operations;

g administrative overheads incurred within the Philippines which are properly allocatable to the Mining Operations and directly r

within or outside the Philippines, subject to the financing requirements required in the FTAA and to a limit on debt-equity ratio of
of the investment which exceeds 200 Million US Dollars: Provided, That the interests shall not be more than the prevailing inter

e of Commencement of Commercial Production, including capital and property as hereinafter defined irrespective as to their me
ng, purchasing or similar financing arrangements including all payments made to Government both National and Local; and
or the benefit of the Contract Area.

ation of its actual expenditure by an independent audit recognized by the Government and chargeable against the Contractor.

s shall constitute the Basic Government Share:

es;

of the FTAA;

unity(ies).

nstituting the Basic Government Share, if applicable, shall be paid by the Contractor: Provided, That above items (a) to (g) shal
nces or other imposts, which should not be collected by the Government, but nevertheless paid by the Contractor and are not r
or credited shall not form part of Government Share.

and Construction Phase, the Contractor may select one of the formula for calculating the Additional Government Share set ou
formula so selected shall thereafter apply to all of the Contractor's Mining Operations.
vernment shall collect an Additional Government Share from the Contractor equivalent to an amount which when aggregated w
mum of fifty percent (50%) of the Cumulative Present Value of Project Cash Flow before financing for the current Contract Year

mence immediately after the Recovery Period. If the computation covers a period of less than one year, the Additional Governm
ar after recovery. The Additional Government Share shall be computed as follows:

e calculated as follows:

e present value of the cumulative present value of project cash flow during the previous year (CP i-1 x 1.10) and the Project Ca

ernment Share ("CGB") shall be the sum of: the present value of the cumulative present value of the Total Government Share d

se 3-g-1 hereof;

nternal Revenue Code;

c hereof;

equivalent to those referred to in Clause 3-c-8 hereof;

r; and

us year.
an Additional Government Share from the Contractor based on twenty-five percent (25%) of the additional profits once the arith
higher rounded off to the nearest two decimal places.

tional profit shall commence immediately after the Recovery Period. If the computation covers a period of less than a year, the
ery.

g the following formula:

on.

ng the income tax of the Contractor during the taxable year.

ditional Government Share for a given taxable year shall be calculated as follows:

Recovery Period to the end of that taxable year;

lause 3-g-1 hereof;

ncing at the end of the Recovery Period and expiring at the end of the taxable year immediately preceding the taxable year in q

g a Calendar year less Deductible Expenses, plus Government taxes, duties and fees included as part of Deductible Expenses
e time contemplated by Clause 3-g-2 of the formula for calculating the Additional Government Share which the Contractor wishe

onal Government Share shall commence after the Recovery Period. The Additional Government Share shall be computed, filed
nd payment of the Additional Government Share shall be subject to the same penalties applicable to late filing of income tax ret

nment Share shall be maintained by the Contractor and shall be made available to the Secretary or his/her authorized represen

minerals and by-products produced in the Contract Area at the highest commercially achievable market price and lowest comme
ons. The Contractor may enter into long term sales and marketing contracts or foreign exchange and commodity hedging contra
ales are less favorable, than those available elsewhere.

rketing agreement with both foreign and local buyers. The Contractor shall provide the Government a copy of the final marketin

on of minerals and/or mineral products including the terms and conditions of all sales commitments.

on or equivalent to arm's length sales and in accordance with such terms and conditions at which such agreement would be ma
o greater than the prevailing rate so that such discounts or commissions will not reduce the net proceeds of sales to the Contra
evidence of the correctness of the figures used in computing the prices discounts and commissions, and a copy of the sales co

y the Contractor shall be conducted in accordance with such generally accepted international standards as are economically an
es and metallurgical recovery of minerals from the Ore: Provided, That it is economically and technically feasible to do so.

ore of the shares;

ctor's shares;

ated company of the Contractor is itself considered an affiliated company for purposes of the FTAA;

s, or is under common control by the Contractor;

affiliated company; or

actor or of any affiliated company.

the direction of the management and policies of a company exercised by any other company and shall include the right to exerc
g power of the Contractor. For this purpose, a creditor who lends, directly or indirectly, to the contractor, unless he has lent mon
pital or voting power of the Contractor if the amount of the total of its loan is not less than fifty percent (50%) of the total loan ca

basis of the above definition but would be an affiliate if each reference in that definition to "fifty percent (50%)" was read as a re
tractor being notified in writing by the Government of that belief and the grounds therefore, "x" and "y" shall be deemed to be af

sactions involving price or cost transfers in the sale of minerals or mineral products and in the purchase of input goods and serv
ted company in the sale of its mineral products or in providing goods, services, loans or other forms of financing hereunder, it s
he Mining Act and IRR shall be embodied in a Pro Forma FTAA Contract to be prepared by the Department of Environment and
ed for that purpose with concerned entities.

anel and the mining applicant for negotiation of the terms and conditions of the FTAA: Provided, That the terms and conditions

shall remain valid and be recognized by the Government: Provided, That should a Contractor desire to amend its FTAA
TAA, it may do so by seeking for the amendment of its FTAA's whole fiscal regime by adopting the fiscal regime provi
d the recommendation of the Secretary for approval of the President of the Republic of the Philippines.

ovisions of this Order are hereby repealed, amended or modified accordingly.

newspaper of general circulation and fifteen (15) days after registration with the Office of the National Administrative Register.

missioner of Customs v. Court of Appeals, G.R. No. 33471, 31 January 1972, 43 SCRA 192; Asturias Sugar Central, Inc. v. Com

n to convert this Agreement either in whole or in part into one or more Mineral Production Sharing Agreements in the f

20 October 2004 Compliance of the Solicitor General are: (1) Mineral Production Sharing Agreement between the Republic of
f the Philippines and Ungay-Malobago Mines, Inc. and TVI Resource Development (Phils.), Inc. dated 17 June 1998; (3) Minera
Sharing Agreement between the Republic of the Philippines and Philex Gold Philippines, Inc. dated 29 December 1999 (MPSA
49-99-XIII).

5 (1968).
Development Bank of the Phils., et al., 146 Phil. 283 (1970); Chartered Bank Employees Association v. Ople, No. L-44717, 28 A

ection 90.

004 Decision in this case would adversely affect the ability of domestic mining companies to contract with their foreign counterp

ideration) at 42-43.
onfidence is reposed as regards property for the benefit of another person is known as the trustee; and the person for whose be

uitable title or beneficial enjoyment of property, real or personal, and another having the legal title thereto. The person who esta
erson for whose benefit the trust has been created is referred to as the beneficiary (cestui que trust). The Code has adopted th
aw 175 (2003); citations omitted]

06 (1995).

r environmental disaster:

poundment at Marcopper's copper mine on the island of Marinduque in the Philippines on March 24, 1996, when a concrete dra
ions and the Philippine Department of Science and Technology have concluded that the escaped material is not toxic," the incr
uld be viable in the river again and predicted a seventy percent reduction in the "salt water fish catch from the mouth of the Boa
e water supplies along the banks of the river and necessitated airdrops of food and medical supplies. [P. Thompson, II. Mining

ugal-B'Laan Tribal Association, Inc. v. Ramos, supra at 192, note 111.

r 2, 1972, and Promulgating an Amended Act to Promote the Discovery and Production of Indigenous Petroleum and Appropria
zens to Enter into Service Contracts with Foreign Persons, Corporations for the Exploration, Development, Exploitation or Utiliz
ation and Disposition of Mineral Lands and to Promote and Encourage the Development and Exploitation thereof), and Pres. D

52.
process of law, nor shall any person be denied of the equal protection of the laws."); Section 4 ("No law shall be passed abridg
w shall be made respecting an establishment of religion, or prohibiting the exercise thereof. The free exercise and enjoyment of

e 1986 U.P. Law Constitution Project 16, cited in La Bugal-B'Laan Tribal Association, Inc. v. Ramos, supra at 229.

th
ed., 1991)]

1 (6th ed., 1991)]

rnal Revenue v. Michel J. Lhuiller Pawnshop, Inc., 406 SCRA 178, 186 (2003); National Power Corporation v. City of Cabanatu
mac, 332 SCRA 547, 556 (2000); Mathay, Jr. v. Court of Appeals, 320 SCRA 703, 711 (1999); Miranda v. Abaya, 311 SCRA 6
nce Company v. Ansaldo, 234 SCRA 509, 515 (1994); Commissioner of Customs v. Court of Tax Appeals, 224 SCRA 665, 669
30 SCRA 472, 479 (1984); Vera v. Fernandez, 89 SCRA 199, 203 (1979); Central Barrio v. City Treasurer of Davao, 23 SCRA
otto v. Commission on Elections, 76 Phil. 516, 530 (1946).

ary 581 (6th ed., 1991)]

on on Election 390 SCRA 480, 491 (2002); National Electrification Administration v. Commission on Audit, 377 SCRA 223, 232

or a law to govern service contracts and that, in fact, there were then no such laws is inaccurate. The 1973 Charter required sim
ontracts …" As previously noted in this Court's Decision of January 27, 2004, however, laws authorizing service contracts were
mote the Discovery and Production of Indigenous Petroleum and Appropriate Funds therefore), Pres. Decree No. 151 (Allowing
ons, Corporations for the Exploration, Development, Exploitation or Utilization of Lands of the Public Domain, amending for the
te and Encourage the Development and Exploitation thereof), and Pres. Decree No. 1442 (An Act to Promote the Exploration a

ociation of the Philippines v. Factoran, 240 SCRA 100, 104 (1995).

e 1986 U.P. Law Constitution Project 3-4.

supra, at 15-16.
n of reports under Section 111 of the Mining Act, but the majority opinion either overlooked this provision or considered it too in

an environmental compliance certificate, but this remedy is judicial and not administrative. In any event, what is the likelihood o
).

reements.

s shall constitute the Basic Government Share:

d services;
ve date of the FTAA;

Community (ies).

nstituting the Basic Government Share, if applicable, shall be paid by the Contractor: Provided, That above items (a) to (g) shal
nces or other imposts, which should not be collected by the Government, but nevertheless paid by the Contractor and are not r
or credited shall not form part of Government Share.

and Construction Phase, the Contractor may select one of the formula for calculating the Additional Government Share set ou
formula so selected shall thereafter apply to all of the Contractor's Mining Operations.

xxx

vernment shall collect an Additional Government Share from the Contractor equivalent to an amount which when aggregated w
mum of fifty percent (50%) of the Cumulative Present Value of Project Cash Flow before financing for the current Contract Year

mence immediately after the Recovery Period. If the computation covers a period of less than one year, the Additional Governm
ar after recovery. The Additional Government Share shall be computed as follows:

e calculated as follows:

e present value of the cumulative present value of project cash flow during the previous year (CP i-1 x 1.10) and the Project Ca

ernment Share ("CGB") shall be the sum of: the present value of the cumulative present value of the Total Government Share d
an Additional Government Share from the Contractor based on twenty-five percent (25%) of the additional profits once the arith
higher rounded off to the nearest two decimal places.

tional profit shall commence immediately after the Recovery Period. If the computation covers a period of less than a year, the
ery.
g the following formula:

on.

ng the income tax of the Contractor during the taxable year.

ditional Government Share for a given taxable year shall be calculated as follows:

Recovery Period to the end of that taxable year;

lause 3-g-1 hereof;

ncing at the end of the Recovery Period and expiring at the end of the taxable year immediately preceding the taxable year in q

g a Calendar year less Deductible Expenses, plus Government taxes, duties and fees included as part of Deductible Expenses

anslate to a 24% (40% x 60%) beneficial interest in the corporation undertaking the MPSA.

d by another 60-40 Filipino corporation or corporations, further diluting actual Filipino beneficial interest and increasing foreign

13), unlike E.O. 279, the Mining Act does not define "large-scale" in terms of capital expenditure although this was evidently the
ver, a comparison of the maximum areas for exploration in Section 22 for Exploration Permits (400 meridional blocks onshore f
"large-scale" under the Mining Act refers to the size of the contract area.

0 minimum capital investment prescribed by E.O. 279 is made.

n FTAA contractor began with the maximum contract area of 1,000 meridional blocks onshore, (2) an exploration period of 6 yea

for a 20-year exploration period is US$ 7.7 million.

Mines and Geosciences Bureau www.mgb.gov.ph/epprimer.htm)

ermit shall grant to the permittee, his heirs or successors-in-interest, the right to enter, occupy and explore the area: Provide
d in case of disagreement, a panel of arbitrators shall resolve the conflict or disagreement.

y its permit based on an approved work program.

may be carried forward and credited to the succeeding years covering the duration of the permit. The Secretary, through the D

nt venture agreement, co-production agreement or financial or technical assistance agreement over the permit area, which a
od covered by the exploration permit shall be included as part of the exploration period of the mineral agreement or financial or

on permit who determines the commercial viability of a project covering a mining area may, within the term of the permit, file wit
h other requirements provided in this Act shall entitle the holder to an exclusive right to a mineral production sharing a

um requirement for ground expenditures, much less the minimum required investment of US$ 50,000,000.00 for development,

g or holding title to private lands or to lands of the public domain, except only by way of legal succession.

ective amount of gold deposits in its Busang, Indonesia mining operation by "salting" and tampering with gold samples taken fr
www.businessweek.com/1997/15/b352267.htm]

ified from "proven" to merely "probable" or other even less certain categories. As a result, Shell's share prices fell by 7% ['Shel
shares in WMCP is worth approximately P560,000,000.00.

endeavour to agree on amendments to the Work Programme or budget. If the Secretary and the Contractor fail to agree on
hall be deemed approved, so as not to unnecessarily delay the performance of this Agreement. (Emphasis supplied; Rollo, p.

wenty-five (25) years under the same terms and conditions provided that the Contractor lodges a request for renewal with the G
ment.

pen-pit_mining htm.

other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources
hall be under the full control and supervision of the State. The State may directly undertake such activities, or it may enter into c
Such agreements may be for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and und
beneficial use may be the measure and limit of the grant.

erritorial sea, and exclusive economic zone, and reserve its use and enjoyment exclusively to Filipino citizens.

y Filipino citizens, as well as cooperative fish farming, with priority to subsistence fishermen and fishworkers in rivers, lakes, ba

ns involving either technical or financial assistance for large-scale exploration, development, and utilization of minera
d general welfare of the country. In such agreements, the State shall promote the development and use of local scient

rdance with this provision, within thirty days from its execution. (Emphasis supplied)

e Constitution.

, Constitution. "Republicanism, in so far as it implies the adoption of a representative type of government, necessarily points to
s v. Cabili, 136 Phil. 383, 395-396 (1969).

d in the President of the Philippines."

ntrol of all the executive departments, bureaus and offices. He shall ensure that the laws be faithfully executed."

Commander-in-Chief of all armed forces of the Philippines and whenever it becomes necessary, he may call out such armed fo

t US jurisprudence makes clear "that the constitutional concept of inherent power is not a synonym for power without limit; rath
of "executive" power, authority is implied unless there or elsewhere expressly limited." Ibid.

opined elsewhere on the grant of plenary executive powers on the President, "[who] personifies the executive branch. There is
branch can be more immediate and direct than the United States president because he is given by express provision of the co
ecretary et al., G.R. Nos. 159086, 159103, 159185, 159196, 3 February 2004.

ced out of office and into exile after causing twenty years of political, economic and social havoc in the country and who within t

e famed Steel Seizure case, Youngstown Sheet v. Sawyer, supra note 2, and the competing analyses of Justice Black (whose "
tional approach), Gunther and Sullivan note that "[m]uch scholarly commentary on separation of powers has endorsed the func
t on branches as such. [Its] silence about the shape of the inevitable, actual government was a product both of drafting compro
Gunther and K. Sullivan, Constitutional Law (14th ed., 2001), at 342; citing Strauss, "Formal and Functional Approaches to Sep

inherent presidential power has existed "from the earliest days of the country." E. Chemerinsky, Constitutional Law: Principles
inion of Justice Black seems to deny the existence of any inherent presidential power, the concurring opinions of Justices Doug
erent presidential authority had been affirmed in the earlier case of U.S. v. Curtiss-Wright Export Corporation, 299 U.S. 304 (193
S. presidency by an American historian, "As our Chief of State, and as such the embodiment of the people's elective will, the P
eginning he has been the sole organ of the nation in its external relations, and its sole representative with foreign nations. While

here has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the executive, a duty which

committees may conduct inquiries in aid of legislation in accordance with its duly published rules of procedure. The rights of pe

nsent of the President, or upon the request of either House, as the rules of each House shall provide, appear before and be hea
esentatives at least three days before their scheduled appearance. Interpellations shall not be limited to written questions, but m
xecutive session.

domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wild

he full control and supervision of the State." Id.

which read "The President may enter into agreements with foreign-owned corporations involving either technical or financial as
ong-term growth of the economy." 3 Record of the Constitutional Commission: Proceedings and Debates (1987), at 351.

ed, the government has earned over 1.882 Billion Pesos and 10.160 Billion Pesos in revenues from oil and natural gas produc

f every contract entered into in accordance with this provision, within thirty days from its execution.

79 (1952).

n indicate that the absence of domestic capital for mineral and petroleum development was duly considered by the framers.

y areas for our economic development, are there areas where there is much need for foreign investments?

and oil exploration industries, who presented a very strong case, that foreign investment is actually indispensable because the
xploration and up to now, no oil has been found, and all that money was foreign money. These people asked a rhetorical quest

xxx

, petroleum and mineral oils. The Commission has just approved the possible foreign entry into the development, exploration a
vesting in exclusively Filipino citizens and corporations wholly owned by Filipino citizens the right to utilize the other natural res
virtue of the Jamir amendment, since we feel that Filipino capital may not be enough for the development and utilization of min
3 Record of the Constitutional Commission: Proceedings and Debates (1987), at 361.

gatives need not always be the proper remedy, considering, as Justice Vitug noted in his separate opinion in this case, that "[t]h

onal and Confused Delegation of Executive Power to Legislators, 25 William Mitchell Law Rev. 1204, 1235 (1999).

e, bears noting:

uld be independent of the executive and the legislature, but "[I]n matters of general and public policy, the corporation must nece
ency of the public corporation. However, Thurston perceived a dilemma in balancing the need "to ensure that the corporation fu

m. Where there is ambiguity, such interpretation as will avoid inconvenience and absurdity is to be adopted. Cosico v. NLRC, 33

zation and Administration of Public Enterprise in the Industrial Field 8 (1954), cited in Hamilton, supra note 35, at 1230. "As lon
procedures." Ibid.

essor of Regulatory Policy in the William Mitchell College of Law, in his article analyzing the effectiveness and economic efficie
branches of government would have control over the general and public policy concerning the operation of iron mines and sho
ntrol over day-to-day operations. ("The Iron Range Resources and Rehabilitation Board: An Unconstitutional and Confused Del

eserve contemplation:

d to new social problems, namely human rights problems and dislocation of indigenous peoples. The country has experienced i
itate the entry of corporations into mining areas. Mining operations are severely infringing on communities and their livelihoods
http://www.foe.org/camps/intl/imf/selling/asia4.html.

nomic sovereignty. Mining legislation opens up the country to further foreign domination and control. It perpetuates the semi-feu
s have an abominable history of creating environmental disasters as well, and turning virgin forests and clean water sources an
s will bring militarization as the owners will guard mining areas." B.J. Warden, at http://www.canadianliberty.bcca/relatedinfo/mi
G.R. No. 75217-18 September 21, 1987

VICTOR QUE, petitioner,


vs.
PEOPLE OF THE PHILIPPINES and INTERMEDIATE APPELLATE COURT, respondents.

RESOLUTION

PARAS, J.:

Before Us is a Motion for Reconsideration of Our minute resolution 1 dated September 22, 1986
denying the main Petition for Review on certiorari of the decision 2 and resolution 3 of the
respondent Court of Appeals which affirmed the judgment 4 of the Regional Trial Court of
Quezon City convicting herein petitioner of the crime of violating Batas Pambansa Blg. 22 on
two (2) counts.

In the main Petition filed on August 25, 1986, petitioner seeks a review by certiorari of the
appellate court's decision dated January 14, 1986 and the resolution denying petitioner's motion
for reconsideration of the same, on the grounds that respondent appellate court not only
decided a substantial question of jurisdiction not in accordance with law and applicable
jurisprudence but also sanctioned the departure by the lower court from the accepted judicial
procedures on the issue of jurisdiction.

In his Motion for Reconsideration, petitioner raises the following grounds:

1. That the denial of the petition by way of a minute resolution is for no stated
reason except for "lack of merit. "

2. That the respondent-appellate court erred in not considering material facts as


well as the principal element of the crime charged showing that the lower court
had no jurisdiction to try the instant case.

3. The respondent-appellate court erred in failing to consider that one of the most
important elements of the offense charged under Batas Pambansa Blg. 22 which
is the place of the issuance of the check is clearly absent in the instant case.

Or simply stated, the issue is whether the decision of both the trial court and appellate court and
the denial of the Petition for Review are in accordance with law and evidence.

The motion is without merit.

There is no question that the Regional Trial Court of Quezon City had jurisdiction over the case
as provided for in Secs. 10 and 15 (a) Rule 110 of the New Rules of Court. The findings of fact
of the trial court reveal that the checks in question were issued at Quezon City as admitted by
petitioner himself in his answer when he was sued by the complainant on his civil liability. Thus,
the trial court held:
In his answer (Exhibit "H") to the civil complaint for collection of sum of money,
docketed as Civil Case No. Q-32445 of the Court of First Instance, Branch IX,
Quezon City (Exhibit "G"), the accused inferentially admitted that the purchases
and issuance of the check in question were made at Francis Hill Supply located
at No. 194 Speaker Perez Street, Sta. Mesa Heights, Quezon City. (Exhibit "G-1"
and Exhibit "H-1"). (p. 4, Dec.) (p. 62, Rollo)

It is of no moment whether the said checks were deposited by the complainant in a bank located
outside of Quezon City. The determinative factor is the place of issuance which is in Quezon
City and thus within the court's jurisdiction.

The argument on petitioner's second issue has likewise no leg to stand on. On this argument
that he issued the checks in question merely to guarantee the payment of the purchases by
Powerhouse Supply, Inc. of which he is the Manager, We give our stamp of approval on the
findings of the appellate court, to wit:

Neither may appellant's claim in his second assignment of error that the accused
issued the checks in question merely to guarantee the payment of the purchases
by Powerhouse Supply, Inc. serve to exculpate accused from criminal liability for
his act of issuing the checks in question.

It is now settled that Batas Pambansa Bilang 22 applies even in cases where
dishonored checks are issued merely in the form of a deposit or a guarantee.
The enactment in question does not make any distinction as to whether the
checks within its contemplation are issued in payment of an obligation or merely
to guarantee the said obligation. In accordance with the pertinent rule of statutory
construction, inasmuch as the law has not made any distinction in this regard, no
such distinction can be made by means of interpretation or application.
Furthermore, the history of the enactment of subject statute evinces the definite
legislative intent to make the prohibition all- embracing, without making any
exception from the operation thereof in favor of a guarantee. This intent may be
gathered from the statement of the sponsor of the bill (Cabinet Bill No. 9) which
was enacted later into Batas Pambansa Bilang 22, when it was introduced before
the Batasan Pambansa, that the bill was introduced to discourage the issuance
of bouncing checks, to prevent checks from becoming "useless scraps of paper"
and to restore respectability to checks, all without distinction as to the purpose of
the issuance of the checks. The legislative intent as above said is made all the
more clear when it is considered that while the original text of Cabinet Bill No. 9,
supra, had contained a proviso excluding from the coverage of the law a check
issued as a mere guarantee, the final version of the bill as approved and enacted
by the Committee on the Revision of Laws in the Batasan deleted the
abovementioned qualifying proviso deliberately for the purpose of making the
enforcement of the act more effective (Batasan Record, First Regular Session,
December 4, 1978, Volume II, pp- 1035-1036).

Consequently, what are important are the facts that the accused had deliberately
issued the checks in question to cover accounts and that the checks were
dishonored upon presentment regardless of whether or not the accused merely
issued the checks as a guarantee. (pp. 4-5. Dec. IAC (pp. 37-38, Rollo)
From the aforequoted paragraphs, it is clear that is the intention of the framers of Batas
Pambansa Bilang 22 to make the mere act of issuing a worthless check malum prohibitum and
thus punishable under such law.

Finally, We now come to the third argument regarding the denial of the petition by a minute
resolution. Although, petitioner in his Reply, thru his counsel, Atty. Joanes G. Caacbay has
never questioned the power of this Court to deny petition for review by the issuance of a mere
minute resolution as there is no violation whatsoever of the provisions of the Constitution and at
the same time, same counsel disowns having knowledge or a hand in the preparation of the
motion for reconsideration which was prepared by a certain Atty. Victor T. Avena, We deemed it
worthwhile to mention here the case of In Re: Almacen, 31 SCRA 562, 574 where We held that.

Six years ago in Novino, et al. vs. Court of Appeals, et al., L-21098, May 31,
1963 (60 O.G. 8099), this Court through the then Chief Justice Cesar Bengzon,
articulated its considered view on this matter. There, the petitioner's counsel
urged that a "lack of merit" resolution violates Section 12 of Article VIII of the
Constitution. Said Chief Justice Bengzon:

In connection with Identical short resolutions, the same question has been raised
before; and we held that these 'resolutions' are not 'decisions' within the above
constitutional requirement. They merely hold that the petition for review should
not be entertained in view of the provisions of Rule 46 of the Rules of Court; and
even ordinary lawyers have all this time so understood it. It should be
remembered that a petition to review the decision of the Court of Appeals is not a
matter of right, but of sound judicial discretion; and so there is no need to fully
explain the court's denial. For one thing, the facts and the law are already
mentioned in the Court of Appeals' opinion.

WHEREFORE, premises considered. the motion for reconsideration of the denial of the instant
petition for certiorari, is hereby DENIED.

Fernan, Gutierrez, Jr., Padilla, Bidin and Cortes, JJ., concur.


G.R. No. 159333 July 31, 2006

ARSENIO T. MENDIOLA, petitioner,


vs.
COURT OF APPEALS, NATIONAL LABOR RELATIONS COMMISSION, PACIFIC FOREST
RESOURCES, PHILS., INC. and/or CELLMARK AB, respondents.

DECISION

PUNO, J.:

On appeal are the Decision1 and Resolution2 of the Court of Appeals, dated January 30, 2003
and July 30, 2003, respectively, in CA-G.R. SP No. 71028, affirming the ruling3 of the National
Labor Relations Commission (NLRC), which in turn set aside the July 30, 2001 Decision4 of the
labor arbiter. The labor arbiter declared illegal the dismissal of petitioner from employment and
awarded separation pay, moral and exemplary damages, and attorney's fees.

The facts are as follows:

Private respondent Pacific Forest Resources, Phils., Inc. (Pacfor) is a corporation organized and
existing under the laws of California, USA. It is a subsidiary of Cellulose Marketing International,
a corporation duly organized under the laws of Sweden, with principal office in Gothenburg,
Sweden.

Private respondent Pacfor entered into a "Side Agreement on Representative Office known as
Pacific Forest Resources (Phils.), Inc."5 with petitioner Arsenio T. Mendiola (ATM), effective May
1, 1995, "assuming that Pacfor-Phils. is already approved by the Securities and Exchange
Commission [SEC] on the said date."6 The Side Agreement outlines the business relationship of
the parties with regard to the Philippine operations of Pacfor. Private respondent will establish a
Pacfor representative office in the Philippines, to be known as Pacfor Phils, and petitioner ATM
will be its President. Petitioner's base salary and the overhead expenditures of the company shall
be borne by the representative office and funded by Pacfor/ATM, since Pacfor Phils. is equally
owned on a 50-50 equity by ATM and Pacfor-usa.

On July 14, 1995, the SEC granted the application of private respondent Pacfor for a license to
transact business in the Philippines under the name of Pacfor or Pacfor Phils.7 In its application,
private respondent Pacfor proposed to establish its representative office in the Philippines with
the purpose of monitoring and coordinating the market activities for paper products. It also
designated petitioner as its resident agent in the Philippines, authorized to accept summons and
processes in all legal proceedings, and all notices affecting the corporation.8
In March 1997, the Side Agreement was amended through a "Revised Operating and Profit
Sharing Agreement for the Representative Office Known as Pacific Forest Resources
(Philippines),"9 where the salary of petitioner was increased to $78,000 per annum. Both
agreements show that the operational expenses will be borne by the representative office and
funded by all parties "as equal partners," while the profits and commissions will be shared among
them.

In July 2000, petitioner wrote Kevin Daley, Vice President for Asia of Pacfor, seeking confirmation
of his 50% equity of Pacfor Phils.10 Private respondent Pacfor, through William Gleason, its
President, replied that petitioner is not a part-owner of Pacfor Phils. because the latter is merely
Pacfor-USA's representative office and not an entity separate and distinct from Pacfor-USA. "It's
simply a 'theoretical company' with the purpose of dividing the income 50-50."11 Petitioner
presumably knew of this arrangement from the start, having been the one to propose to private
respondent Pacfor the setting up of a representative office, and "not a branch office" in the
Philippines to save on taxes.12

Petitioner claimed that he was all along made to believe that he was in a joint venture with them.
He alleged he would have been better off remaining as an independent agent or representative
of Pacfor-USA as ATM Marketing Corp.13 Had he known that no joint venture existed, he would
not have allowed Pacfor to take the profitable business of his own company, ATM Marketing
Corp.14 Petitioner raised other issues, such as the rentals of office furniture, salary of the
employees, company car, as well as commissions allegedly due him. The issues were not
resolved, hence, in October 2000, petitioner wrote Pacfor-USA demanding payment of unpaid
commissions and office furniture and equipment rentals, amounting to more than one million
dollars.15

On November 27, 2000, private respondent Pacfor, through counsel, ordered petitioner to turn
over to it all papers, documents, files, records, and other materials in his or ATM Marketing
Corporation's possession that belong to Pacfor or Pacfor Phils.16 On December 18, 2000, private
respondent Pacfor also required petitioner to remit more than three hundred thousand-peso
Christmas giveaway fund for clients of Pacfor Phils.17 Lastly, private respondent Pacfor withdrew
all its offers of settlement and ordered petitioner to transfer title and turn over to it possession of
the service car.18

Private respondent Pacfor likewise sent letters to its clients in the Philippines, advising them not
to deal with Pacfor Phils. In its letter to Intercontinental Paper Industries, Inc., dated November
21, 2000, private respondent Pacfor stated:

Until further notice, please course all inquiries and communications for Pacific Forest
Resources (Philippines) to:

Pacific Forest Resources


200 Tamal Plaza, Suite 200
Corte Madera, CA, USA 94925
(415) 927 1700 phone
(415) 381 4358 fax

Please do not send any communication to Mr. Arsenio "Boy" T. Mendiola or to the
offices of ATM Marketing Corporation at Room 504, Concorde Building, Legaspi Village,
Makati City, Philippines.19
In another letter addressed to Davao Corrugated Carton Corp. (DAVCOR), dated December
2000, private respondent directed said client "to please communicate directly with us on any
further questions associated with these payments or any future business. Do not communicate
with [Pacfor] and/or [ATM]."20

Petitioner construed these directives as a severance of the "unregistered partnership" between


him and Pacfor, and the termination of his employment as resident manager of Pacfor Phils.21 In
a memorandum to the employees of Pacfor Phils., dated January 29, 2001, he stated:

I received a letter from Pacific Forest Resources, Inc. demanding the turnover of all
records to them effective December 19, 2000. The company records were turned over
only on January 26, 2001. This means our jobs with Pacific Forest were terminated
effective December 19, 2000. I am concerned about your welfare. I would like to help
you by offering you to work with ATM Marketing Corporation.

Please let me know if you are interested.22

On the basis of the "Side Agreement," petitioner insisted that he and Pacfor equally own Pacfor
Phils. Thus, it follows that he and Pacfor likewise own, on a 50/50 basis, Pacfor Phils.' office
furniture and equipment and the service car. He also reiterated his demand for unpaid
commissions, and proposed to offset these with the remaining Christmas giveaway fund in his
possession.23 Furthermore, he did not renew the lease contract with Pulp and Paper, Inc., the
lessor of the office premises of Pacfor Phils., wherein he was the signatory to the lease
agreement.24

On February 2, 2001, private respondent Pacfor placed petitioner on preventive suspension and
ordered him to show cause why no disciplinary action should be taken against him. Private
respondent Pacfor charged petitioner with willful disobedience and serious misconduct for his
refusal to turn over the service car and the Christmas giveaway fund which he applied to his
alleged unpaid commissions. Private respondent also alleged loss of confidence and gross
neglect of duty on the part of petitioner for allegedly allowing another corporation owned by
petitioner's relatives, High End Products, Inc. (HEPI), to use the same telephone and facsimile
numbers of Pacfor, to possibly steal and divert the sales and business of private respondent for
HEPI's principal, International Forest Products, a competitor of private respondent.25

Petitioner denied the charges. He reiterated that he considered the import of Pacfor President
William Gleason's letters as a "cessation of his position and of the existence of Pacfor Phils." He
likewise informed private respondent Pacfor that ATM Marketing Corp. now occupies Pacfor
Phils.' office premises,26 and demanded payment of his separation pay.27 On February 15, 2001,
petitioner filed his complaint for illegal dismissal, recovery of separation pay, and payment of
attorney's fees with the NLRC.28

In the meantime, private respondent Pacfor lodged fresh charges against petitioner. In a
memorandum dated March 5, 2001, private respondent directed petitioner to explain why he
should not be disciplined for serious misconduct and conflict of interest. Private respondent
charged petitioner anew with serious misconduct for the latter's alleged act of fraud and
misrepresentation in authorizing the release of an additional peso salary for himself, besides the
dollar salary agreed upon by the parties. Private respondent also accused petitioner of disloyalty
and representation of conflicting interests for having continued using the Pacfor Phils.' office for
operations of HEPI. In addition, petitioner allegedly solicited business for HEPI from a competitor
company of private respondent Pacfor.29

Labor Arbiter Felipe Pati ruled in favor of petitioner, finding there was constructive dismissal. By
directing petitioner to turn over all office records and materials, regardless of whether he may
have retained copies, private respondent Pacfor virtually deprived petitioner of his job by the
gradual diminution of his authority as resident manager. Petitioner's position as resident manager
whose duty, among others, was to maintain the security of its business transactions and
communications was rendered meaningless. The dispositive portion of the decision of the Labor
Arbiter reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering herein


respondents Cellmark AB and Pacific Forest Resources, Inc., jointly and severally to
compensate complainant Arsenio T. Mendiola separation pay equivalent to at least one
month for every year of service, whichever is higher (sic), as reinstatement is no longer
feasible by reason of the strained relations of the parties equivalent to five (5) months in
the amount of $32,000.00 plus the sum of P250,000.00; pay complainant the sum of
P500,000.00 as moral and exemplary damages and ten percent (10%) of the amounts
awarded as and for attorney's fees.

All other claims are dismissed for lack of basis.

SO ORDERED.30

Private respondent Pacfor appealed to the NLRC which ruled in its favor. On December 20, 2001,
the NLRC set aside the July 30, 2001 decision of the labor arbiter, for lack of jurisdiction and lack
of merit.31 It held there was no employer-employee relationship between the parties. Based on
the two agreements between the parties, it concluded that petitioner is not an employee of private
respondent Pacfor, but a full co-owner (50/50 equity).

The NLRC denied petitioner's Motion for Reconsideration.32

Petitioner was not successful on his appeal to the Court of Appeals. The appellate court upheld
the ruling of the NLRC.

Petitioner's Motion for Reconsideration33 of the decision of the Court of Appeals was denied.

Hence, this appeal.34

Petitioner assigns the following errors:

A. The Respondent Court of Appeals committed reversible error and abused its
discretion in rendering judgment against petitioner since jurisdiction has been acquired
over the subject matter of the case as there exists employer-employee relationship
between the parties.

B. The Respondent Court of Appeals committed reversible error and abused its
discretion in ruling that jurisdiction over the subject matter cannot be waived and may be
alleged even for the first time on appeal or considered by the court motu prop[r]io.35
The first issue is whether an employer-employee relationship exists between petitioner and
private respondent Pacfor.

Petitioner argues that he is an industrial partner of the partnership he formed with private
respondent Pacfor, and also an employee of the partnership. Petitioner insists that an industrial
partner may at the same time be an employee of the partnership, provided there is such an
agreement, which, in this case, is the "Side Agreement" and the "Revised Operating and Profit
Sharing Agreement." The Court of Appeals denied the appeal of petitioner, holding that "the legal
basis of the complaint is not employment but perhaps partnership, co-ownership, or independent
contractorship." Hence, the Labor Code cannot apply.

We hold that petitioner is an employee of private respondent Pacfor and that no partnership or
co-ownership exists between the parties.

In a partnership, the members become co-owners of what is contributed to the firm capital and of
all property that may be acquired thereby and through the efforts of the members.36 The property
or stock of the partnership forms a community of goods, a common fund, in which each party has
a proprietary interest.37 In fact, the New Civil Code regards a partner as a co-owner of specific
partnership property.38 Each partner possesses a joint interest in the whole of partnership
property. If the relation does not have this feature, it is not one of partnership.39 This essential
element, the community of interest, or co-ownership of, or joint interest in partnership property is
absent in the relations between petitioner and private respondent Pacfor. Petitioner is not a part-
owner of Pacfor Phils. William Gleason, private respondent Pacfor's President established this
fact when he said that Pacfor Phils. is simply a "theoretical company" for the purpose of dividing
the income 50-50. He stressed that petitioner knew of this arrangement from the very start, having
been the one to propose to private respondent Pacfor the setting up of a representative office,
and "not a branch office" in the Philippines to save on taxes. Thus, the parties in this case, merely
shared profits. This alone does not make a partnership.40

Besides, a corporation cannot become a member of a partnership in the absence of express


authorization by statute or charter.41 This doctrine is based on the following considerations: (1)
that the mutual agency between the partners, whereby the corporation would be bound by the
acts of persons who are not its duly appointed and authorized agents and officers, would be
inconsistent with the policy of the law that the corporation shall manage its own affairs separately
and exclusively; and, (2) that such an arrangement would improperly allow corporate property to
become subject to risks not contemplated by the stockholders when they originally invested in the
corporation.42 No such authorization has been proved in the case at bar.

Be that as it may, we hold that on the basis of the evidence, an employer-employee relationship
is present in the case at bar. The elements to determine the existence of an employment
relationship are: (a) the selection and engagement of the employee; (b) the payment of wages;
(c) the power of dismissal; and (d) the employer's power to control the employee's conduct. The
most important element is the employer's control of the employee's conduct, not only as to the
result of the work to be done, but also as to the means and methods to accomplish it.43

In the instant case, all the foregoing elements are present. First, it was private respondent Pacfor
which selected and engaged the services of petitioner as its resident agent in the Philippines.
Second, as stipulated in their Side Agreement, private respondent Pacfor pays petitioner his
salary amounting to $65,000 per annum which was later increased to $78,000. Third, private
respondent Pacfor holds the power of dismissal, as may be gleaned through the various
memoranda it issued against petitioner, placing the latter on preventive suspension while charging
him with various offenses, including willful disobedience, serious misconduct, and gross neglect
of duty, and ordering him to show cause why no disciplinary action should be taken against him.

Lastly and most important, private respondent Pacfor has the power of control over the means
and method of petitioner in accomplishing his work.

The power of control refers merely to the existence of the power, and not to the actual exercise
thereof. The principal consideration is whether the employer has the right to control the manner
of doing the work, and it is not the actual exercise of the right by interfering with the work, but the
right to control, which constitutes the test of the existence of an employer-employee relationship.44
In the case at bar, private respondent Pacfor, as employer, clearly possesses such right of control.
Petitioner, as private respondent Pacfor's resident agent in the Philippines, is, exactly so, only an
agent of the corporation, a representative of Pacfor, who transacts business, and accepts service
on its behalf.

This right of control was exercised by private respondent Pacfor during the period of November
to December 2000, when it directed petitioner to turn over to it all records of Pacfor Phils.; when
it ordered petitioner to remit the Christmas giveaway fund intended for clients of Pacfor Phils.;
and, when it withdrew all its offers of settlement and ordered petitioner to transfer title and turn
over to it the possession of the service car. It was also during this period when private respondent
Pacfor sent letters to its clients in the Philippines, particularly Intercontinental Paper Industries,
Inc. and DAVCOR, advising them not to deal with petitioner and/or Pacfor Phils. In its letter to
DAVCOR, private respondent Pacfor replied to the client's request for an invoice payment
extension, and formulated a revised payment program for DAVCOR. This is one unmistakable
proof that private respondent Pacfor exercises control over the petitioner.

Next, we shall determine if petitioner was constructively dismissed from employment.

The evidence shows that when petitioner insisted on his 50% equity in Pacfor Phils., and would
not quit however, private respondent Pacfor began to systematically deprive petitioner of his
duties and benefits to make him feel that his presence in the company was no longer wanted.
First, private respondent Pacfor directed petitioner to turn over to it all records of Pacfor Phils.
This would certainly make the work of petitioner very difficult, if not impossible. Second, private
respondent Pacfor ordered petitioner to remit the Christmas giveaway fund intended for clients of
Pacfor Phils. Then it ordered petitioner to transfer title and turn over to it the possession of the
service car. It also advised its clients in the Philippines, particularly Intercontinental Paper
Industries, Inc. and DAVCOR, not to deal with petitioner and/or Pacfor Phils. Lastly, private
respondent Pacfor appointed a new resident agent for Pacfor Phils.45

Although there is no reduction of the salary of petitioner, constructive dismissal is still present
because continued employment of petitioner is rendered, at the very least, unreasonable.46 There
is an act of clear discrimination, insensibility or disdain by the employer that continued
employment may become so unbearable on the part of the employee so as to foreclose any
choice on his part except to resign from such employment.47

The harassing acts of the private respondent are unjustified. They were undertaken when
petitioner sought clarification from the private respondent about his supposed 50% equity on
Pacfor Phils. Private respondent Pacfor invokes its rights as an owner. Allegedly, its issuance of
the foregoing directives against petitioner was a valid exercise of management prerogative. We
remind private respondent Pacfor that the exercise of management prerogative is not absolute.
"By its very nature, encompassing as it could be, management prerogative must be exercised in
good faith and with due regard to the rights of labor – verily, with the principles of fair play at heart
and justice in mind." The exercise of management prerogative cannot be utilized as an implement
to circumvent our laws and oppress employees.48

As resident agent of private respondent corporation, petitioner occupied a position involving trust
and confidence. In the light of the strained relations between the parties, the full restoration of an
employment relationship based on trust and confidence is no longer possible. He should be
awarded separation pay, in lieu of reinstatement.

IN VIEW WHEREOF, the petition is GRANTED. The Court of Appeals' January 30, 2003 Decision
in CA-G.R. SP No. 71028 and July 30, 2003 Resolution, affirming the December 20, 2001
Decision of the National Labor Relations Commission, are ANNULED and SET ASIDE. The July
30, 2001 Decision of the Labor Arbiter is REINSTATED with the MODIFICATION that the amount
of P250,000.00 representing an alleged increase in petitioner's salary shall be deducted from the
grant of separation pay for lack of evidence.

SO ORDERED.

G.R. No. L-37048 March 7, 1933

MANUELA BARRETTO GONZALEZ, Plaintiff-Appellee, vs. AUGUSTO C. GONZALEZ,


Defendant-Appellant.
AUGUSTO C. GONZALEZ, Jr., ET AL., intervenors-appellees.

Quintin Paredes and Barrera and Reyes for appellant.


DeWitt, Perkins and Brady for plaintiff-appellee.
Camus and Delgado for intervenors-appellees.

HULL, J.:

Plaintiff and defendant are citizens of the Philippine Islands and at present residents of the City
of Manila. They were married in the City of Manila on January 19, 1919, and lived together as
man and wife in the Philippine Islands until the spring of 1926. They voluntarily separated and
since that time have not lived together as man and wife. Of this union four children were born who
are now 11, 10, 8 and 6 years of age. Negotiations between the parties, both being represented
by attorneys, continued for several months, whereupon it was mutually agreed to allow the plaintiff
for her support and that of her children, five hundred pesos (P500) monthly; this amount to be
increased in case of illness or necessity, and the title of certain properties to be put in her name.
Shortly after this agreement the husband left the Islands, betook himself to Reno, Nevada, and
secured in that jurisdiction an absolute divorce on the ground of desertion, which decree was
dated November 28, 1927. Shortly thereafter the defendant moved to California and returned to
these Islands in August 1928, where he has since remained. On the same date that he secured
a divorce in Nevada he went through the forms of marriage with another citizen of these Islands
and now has three children as a result of that marriage. Defendant, after his departure from these
Islands, reduced the amount he had agreed to pay monthly for the support of his wife and four
minor children and has not made the payments fixed in the Reno divorce as
alimony.chanroblesvirtualawlibrary chanrobles virtual law library

Shortly after his return his wife brought action in the Court of First Instance of Manila requesting
that the courts of the Philippine Islands confirm and ratify the decree of divorce issued by the
courts of the State of Nevada; that section 9 of Act No. 2710, which reads as follows:

The decree of divorce shall dissolve the community of property as soon as such decree
becomes final, but shall not dissolve the bonds of matrimony until one year
thereafter.chanroblesvirtualawlibrary chanrobles virtual law library

The bonds of matrimony shall not be considered as dissolved with regard to the spouse who,
having legitimate children, has not delivered to each of them or to the guardian appointed by the
court, within said period of one year, the equivalent of what would have been due to them as
their legal portion if said spouse had died intestate immediately after the dissolution of the
community of property.

be enforced, and that she and the defendant deliver to the guardian ad litem the equivalent of
what would have been due to their children as their legal portion from the respective estates had
their parents did intestate on November 28, 1927. It is also prayed that the community existing
between plaintiff and defendant be declared dissolved and the defendant be ordered to render an
accounting and to deliver to the plaintiff her share of the community property, that the defendant
be ordered to pay the plaintiff alimony at the rate of five hundred pesos (P500) per month, that
the defendant be ordered to pay the plaintiff, as counsel fees, the sum of five thousand pesos
(P5000), and that the defendant be ordered to pay plaintiff the expenses incurred in educating
the three minor sons.chanroblesvirtualawlibrary chanrobles virtual law library

A guardian ad litem was appointed for the minor children, and they appear as intervenors and join
their mother in these proceedings. The Court of First Instance, after hearing, found against the
defendant and granted judgment as prayed for by the plaintiff and intervenors, with the exception
of reducing attorneys fees to three thousand, and also granted costs of the action against the
defendant. From this judgment defendant appeals and makes the following assignment of errors:

I. The lower court erred in not declaring that paragraph 2 of section 9 of the Philippine Divorce
Law, is unconstitutional, null and void.chanroblesvirtualawlibrary chanrobles virtual law library

II. The lower court erred in holding that section 9 of Act No. 2710 (Divorce Law) applies to the
Nevada decree of divorce issued in favor of appellant Augusto C. Gonzalez, said decree being
entitled to confirmation and recognition.chanroblesvirtualawlibrary chanrobles virtual law library

III. The lower court erred in not dismissing the complaint in intervention for lack of cause of
action against appellant and appellee.chanroblesvirtualawlibrary chanrobles virtual law library
IV. The lower court erred in not declaring the notice of lis pendens filed by intervenors to be null
and void.chanroblesvirtualawlibrary chanrobles virtual law library

V. The lower court erred in ordering the appellant to pay the sum of P500 per month for the
support not only of his children but also of his ex-wife, appellee herein, Manuela
Barretto.chanroblesvirtualawlibrary chanrobles virtual law library

VI. The lower court erred in not holding that plaintiff- appellee, Manuela Barretto, is not entitled
to support from her ex-husband, herein appellant, over and beyond the alimony fixed by the
divorce decree in Exhibit A.chanroblesvirtualawlibrary chanrobles virtual law library

VII. The lower court erred in condemning defendant appellant to pay to plaintiff-appellee P3,000
attorney's fees.chanroblesvirtualawlibrary chanrobles virtual law library

VIII. The lower court erred in denying appellant's motion for new trial.

While the parties in this action are in dispute over financial matters they are in unity in trying to
secure the courts of this jurisdiction to recognize and approve of the Reno divorce. On the record
here presented this can not be done. The public policy in this jurisdiction on the question of divorce
is clearly set forth in Act No. 2710, and the decisions of this court: Goitia vs. Campos Rueda (35
Phil., 252); Garcia Valdez vs. Sotera�a Tuason (40 Phil., 943-952); Ramirez vs. Gmur (42 Phil.,
855); Chereau vs. Fuentebella (43 Phil., 216); Fernandez vs. De Castro (48 Phil., 123); Gorayeb
vs. Hashim (50 Phil., 22); Francisco vs. Tayao (50 Phil., 42); Alkuino Lim Pang vs. Uy Pian Ng
Shun and Lim Tingco (52 Phil., 571); and the late case of Cousins Hix vs. Fluemer, decided March
21, 1931, and reported in 55 Phil., 851.chanroblesvirtualawlibrary chanrobles virtual law library

The entire conduct of the parties from the time of their separation until the case was submitted to
this court, in which they all prayed that the Reno divorce be ratified and confirmed, clearly
indicates a purpose to circumvent the laws of the Philippine Islands regarding divorce and to
secure for themselves a change of status for reasons and under conditions not authorized by our
law. At all times the matrimonial domicile of this couple has been within the Philippine Islands and
the residence acquired in the State of Nevada by the husband of the purpose of securing a divorce
was not a bona fide residence and did not confer jurisdiction upon the Court of that State to
dissolve the bonds if matrimony in which he had entered in 1919. While the decisions of this court
heretofore in refusing to recognize the validity of foreign divorce has usually been expressed in
the negative and have been based upon lack of matrimonial domicile or fraud or collusion, we
have not overlooked the provisions of the Civil Code now in force in these Islands. Article 9 thereof
reads as follows:

The laws relating to family rights and duties, or to the status, condition and legal capacity or
persons, are binding upon Spaniards even though they reside in a foreign country.

And article 11, the last part of which reads:

. . . the prohibitive laws concerning persons, their acts and their property, and those intended to
promote public order and good morals, shall nor be rendered without effect by any foreign laws
or judgments or by anything done or any agreements entered into a foreign country.

It is therefore a serious question whether any foreign divorce relating to citizens of the Philippine
Islands, will be recognized in this jurisdiction, except it be for a cause, and under conditions for
which the courts of Philippine Islands would grant a divorce. The lower court in granting relief as
prayed for frankly stated that the securing of the divorce, the contracting of another marriage and
the bringing into the world of innocent children brings about such a condition that the court must
grant relief. The hardships of the existing divorce laws of the Philippine Islands are well known to
the members of the Legislature. It is of no moment in this litigation what he personal views of the
writer on the subject of divorce may be. It is the duty of the courts to enforce the laws of divorce
as written by the Legislature if they are constitutional. Courts have no right to say that such laws
are too strict or too liberal.chanroblesvirtualawlibrary chanrobles virtual law library

Litigants by mutual agreement can not compel the courts to approve of their own actions or permit
the personal relations of the citizens of these Islands to be affected by decrees of foreign courts
in a manner which our Government believes is contrary to public order and good morals. Holding
the above views it becomes unnecessary to discuss the serious constitutional question presented
by appellant in his first assignment of error.chanroblesvirtualawlibrary chanrobles virtual law
library

The judgment of the Court of First Instance of the City of Manila must therefore be reversed and
defendant absolved from the demands made against him in this action. This, however, without
prejudice to any right of maintenance that plaintiff and the intervenors may have against
defendant. No special pronouncement as to costs. So ordered.

Avance�a, C.J., Street, Villamor Ostrand, Abad Santos, Vickers, Imperial and Butte JJ.,
concur.

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