EN BANC

HON. EXECUTIVE SECRETARY, G.R. No. 164171 HON. SECRETARY OF THE DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS (DOTC), COMMISSIONER OF CUSTOMS, ASSISTANT SECRETARY, LAND TRANSPORTATION OFFICE (LTO), COLLECTOR OF CUSTOMS, SUBIC BAY FREE PORT ZONE, AND CHIEF OF LTO, SUBIC BAY FREE PORT ZONE, Petitioners, Present: Panganiban, C.J., Puno, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Carpio, Austria-Martinez, Corona, Carpio-Morales, Callejo, Sr., Azcuna, Tinga, Chico-Nazario, and Garcia, JJ.

- versus -

SOUTHWING HEAVY INDUSTRIES, INC., represented by its President JOSE T. DIZON, UNITED AUCTIONEERS, INC., represented by its President DOMINIC SYTIN, and MICROVAN, INC., represented by its President MARIANO C. SONON,

Respondents. x -------------------------------------------------------- x HON. EXECUTIVE SECRETARY, SECRETARY OF THE DEPARTMENT OF TRANSPORTATION AND COMMUNICATION (DOTC), COMMISSIONER OF CUSTOMS, ASSISTANT SECRETARY, LAND TRANSPORTATION OFFICE (LTO), COLLECTOR OF CUSTOMS, SUBIC BAY FREE PORT ZONE AND CHIEF OF LTO, SUBIC BAY FREE PORT ZONE, Petitioners, - versus SUBIC INTEGRATED MACRO VENTURES CORP., represented by its President YOLANDA AMBAR, Respondent. x -------------------------------------------------------- x HON. EXECUTIVE SECRETARY, HON. SECRETARY OF FINANCE, THE CHIEF OF THE LAND TRANSPORTATION OFFICE, THE COMMISSIONER OF CUSTOMS, and THE COLLECTOR OF CUSTOMS, SUBIC SPECIAL ECONOMIC ZONE, Petitioners, G.R. No. 168741 G.R. No. 164172

- versus MOTOR VEHICLE IMPORTERS ASSOCIATION OF SUBIC BAY FREEPORT, INC., represented by its President ALFREDO S. GALANG, Respondent.

Promulgated: February 20, 2006

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

DECISION
YNARES-SANTIAGO, J.:
The instant consolidated petitions seek to annul and set aside the Decisions of the Regional Trial Court of Olongapo City, Branch 72, in Civil Case No. 20-0-04 and Civil Case No. 22-0-04, both dated May 24, 2004; and the February 14, 2005 Decision of the Court of Appeals in CA-G.R. SP. No. 83284, which declared Article 2, Section 3.1 of Executive Order No. 156 (EO 156) unconstitutional. Said executive issuance prohibits the importation into the country, inclusive of the Special Economic and Freeport Zone or the Subic Bay Freeport (SBF or Freeport), of used motor vehicles, subject to a few exceptions. The undisputed facts show that on December 12, 2002, President Gloria Macapagal-Arroyo, through Executive Secretary Alberto G. Romulo, issued EO 156, entitled PROVIDING FOR A COMPREHENSIVE INDUSTRIAL POLICY AND DIRECTIONS FOR THE MOTOR VEHICLE DEVELOPMENT PROGRAM AND ITS IMPLEMENTING GUIDELINES. The challenged provision states:
3.1 The importation into the country, inclusive of the Freeport, of all types of used motor vehicles is prohibited, except for the following: 3.1.1 A vehicle that is owned and for the personal use of a returning resident or immigrant and covered by an authority to import issued under the No-dollar Importation Program. Such vehicles cannot be resold for at least three (3) years;

3.1.2 A vehicle for the use of an official of the Diplomatic Corps and authorized to be imported by the Department of Foreign Affairs; 3.1.3 Trucks excluding pickup trucks; 1. with GVW of 2.5-6.0 tons covered by an authority to import issued by the DTI. 2. With GVW above 6.0 tons. 3.1.4 Buses: 1. with GVW of 6-12 tons covered by an authority to import issued by DTI; 2. with GVW above 12 tons. 3.1.5 Special purpose vehicles: 1. fire trucks 2. ambulances 3. funeral hearse/coaches 4. crane lorries 5. tractor heads and truck tractors 6. boom trucks 7. tanker trucks 8. tank lorries with high pressure spray gun 9. reefers or refrigerated trucks 10. mobile drilling derricks 11. transit/concrete mixers 12. mobile radiological units 13. wreckers or tow trucks 14. concrete pump trucks 15. aerial/bucket flat-form trucks 16. street sweepers 17. vacuum trucks 18. garbage compactors 19. self loader trucks 20. man lift trucks 21. lighting trucks 22. trucks mounted with special purpose equipment 23. all other types of vehicle designed for a specific use.

The issuance of EO 156 spawned three separate actions for declaratory relief before Branch 72 of the Regional Trial Court of Olongapo City, all seeking the declaration of the unconstitutionality of Article 2, Section 3.1 of said executive order. The cases were filed by herein respondent entities, who or whose

members, are classified as Subic Bay Freeport Enterprises and engaged in the business of, among others, importing and/or trading used motor vehicles. G.R. No. 164171: On January 16, 2004, respondents Southwing Heavy Industries, Inc., (SOUTHWING) United Auctioneers, Inc. (UNITED AUCTIONEERS), and Microvan, Inc. (MICROVAN), instituted a declaratory relief case docketed as Civil Case No. 20-0-04,[1] against the Executive Secretary, Secretary of Transportation and Communication, Commissioner of Customs, Assistant Secretary and Head of the Land Transportation Office, Subic Bay Metropolitan Authority (SBMA), Collector of Customs for the Port atSubic Bay Freeport Zone, and the Chief of the Land Transportation Office at Subic Bay Freeport Zone. SOUTHWING, UNITED AUCTIONEERS and MICROVAN prayed that judgment be rendered (1) declaring Article 2, Section 3.1 of EO 156 unconstitutional and illegal; (2) directing the Secretary of Finance, Commissioner of Customs, Collector of Customs and the Chairman of the SBMA to allow the importation of used motor vehicles; (2) ordering the Land Transportation Office and its subordinates inside the Subic Special Economic Zone to process the registration of the imported used motor vehicles; and (3) in general, to allow the unimpeded entry and importation of used motor vehicles subject only to the payment of the required customs duties. Upon filing of petitioners answer/comment, respondents SOUTHWING and MICROVAN filed a motion for summary judgment which was granted by the trial court. OnMay 24, 2004, a summary judgment was rendered declaring that Article 2, Section 3.1 of EO 156 constitutes an unlawful usurpation of legislative power vested by the Constitution with Congress. The trial court further held that the proviso is contrary to the mandate of Republic Act No. 7227 (RA 7227) or the Bases Conversion and Development Act of 1992 which allows the free flow of goods and capital within the Freeport. The dispositive portion of the said decision reads:
WHEREFORE, judgment is hereby rendered in favor of petitioner declaring Executive Order 156 [Article 2, Section] 3.1 for being unconstitutional

and illegal; directing respondents Collector of Customs based at SBMA to allow the importation and entry of used motor vehicles pursuant to the mandate of RA 7227; directing respondent Chief of the Land Transportation Office and its subordinates inside the Subic Special Economic Zone or SBMA to process the registration of imported used motor vehicle; and in general, to allow unimpeded entry and importation of used motor vehicles to the Philippines subject only to the payment of the required customs duties. SO ORDERED.[2]

From the foregoing decision, petitioners sought relief before this Court via a petition for review on certiorari, docketed as G.R. No. 164171. G.R. No. 164172: On January 20, 2004, respondent Subic Integrated Macro Ventures Corporation (MACRO VENTURES) filed with the same trial court, a similar action for declaratory relief docketed as Civil Case No. 22-0-04,[3] with the same prayer and against the same parties[4] as those in Civil Case No. 20-0-04. In this case, the trial court likewise rendered a summary judgment on May 24, 2004, holding that Article 2, Section 3.1 of EO 156, is repugnant to the constitution.[5] Elevated to this Court via a petition for review on certiorari, Civil Case No. 22-0-04 was docketed as G.R. No. 164172. G.R. No. 168741 On January 22, 2003, respondent Motor Vehicle Importers Association of Subic Bay Freeport, Inc. (ASSOCIATION), filed another action for declaratory relief with essentially the same prayer as those in Civil Case No. 22-0-04 and Civil Case No. 20-0-04, against the Executive Secretary, Secretary of Finance, Chief of the Land Transportation Office, Commissioner of Customs, Collector of Customs at SBMA and the Chairman of SBMA. This was docketed as Civil Case No. 30-02003,[6] before the same trial court.

In a decision dated March 10, 2004, the court a quo granted the ASSOCIATIONs prayer and declared the assailed proviso as contrary to the Constitution, to wit:
WHEREFORE, judgment is hereby rendered in favor of petitioner declaring Executive Order 156 [Article 2, Section] 3.1 for being unconstitutional and illegal; directing respondents Collector of Customs based at SBMA to allow the importation and entry of used motor vehicles pursuant to the mandate of RA 7227; directing respondent Chief of the Land Transportation Office and its subordinates inside the Subic Special Economic Zone or SBMA to process the registration of imported used motor vehicles; directing the respondent Chairman of the SBMA to allow the entry into the Subic Special Economic Zone or SBMA imported used motor vehicle; and in general, to allow unimpeded entry and importation of used motor vehicles to the Philippines subject only to the payment of the required customs duties. SO ORDERED.[7]

Aggrieved, the petitioners in Civil Case No. 30-0-2003, filed a petition for certiorari[8] with the Court of Appeals (CA-G.R. SP. No. 83284) which denied the petition onFebruary 14, 2005 and sustained the finding of the trial court that Article 2, Section 3.1 of EO 156, is void for being repugnant to the constitution. The dispositive portion thereof, reads:
WHEREFORE, the instant petition for certiorari is hereby DENIED. The assailed decision of the Regional Trial Court, Third Judicial Region, Branch 72, Olongapo City, in Civil Case No. 30-0-2003, accordingly, STANDS. SO ORDERED.[9]

The aforequoted decision of the Court of Appeals was elevated to this Court and docketed as G.R. No. 168741. In a Resolution dated October 4, 2005,[10] said case was consolidated with G.R. No. 164171 and G.R. No. 164172. Petitioners are now before this Court contending that Article 2, Section 3.1 of EO 156 is valid and applicable to the entire country, including the Freeeport. In support of their arguments, they raise procedural and substantive issues bearing on the constitutionality of the assailed proviso. The procedural issues are: the lack of respondents locusstandi to question the validity of EO 156, the propriety

of challenging EO 156 in a declaratory relief proceeding and the applicability of a judgment on the pleadings in this case. Petitioners argue that respondents will not be affected by the importation ban considering that their certificate of registration and tax exemption do not authorize them to engage in the importation and/or trading of used cars. They also aver that the actions filed by respondents do not qualify as declaratory relief cases. Section 1, Rule 63 of the Rules of Court provides that a petition for declaratory relief may be filed before there is a breach or violation of rights. Petitioners claim that there was already a breach of respondents supposed right because the cases were filed more than a year after the issuance of EO 156. In fact, in Civil Case No. 30-0-2003, numerous warrants of seizure and detention were issued against imported used motor vehicles belonging to respondent ASSOCIATIONs members. Petitioners arguments lack merit. The established rule that the constitutionality of a law or administrative issuance can be challenged by one who will sustain a direct injury as a result of its enforcement[11]has been satisfied in the instant case. The broad subject of the prohibited importation is all types of used motor vehicles. Respondents would definitely suffer a direct injury from the implementation of EO 156 because their certificate of registration and tax exemption authorize them to trade and/or import new and used motor vehicles and spare parts, except used cars.[12] Other types of motor vehicles imported and/or traded by respondents and not falling within the category of used cars would thus be subjected to the ban to the prejudice of their business. Undoubtedly, respondents have the legal standing to assail the validity of EO 156. As to the propriety of declaratory relief as a vehicle for assailing the executive issuance, suffice it to state that any breach of the rights of respondents will not affect the case. In Commission on Audit of the Province of Cebu v. Province of Cebu,[13] the Court entertained a suit for declaratory relief to finally settle the doubt as to the proper interpretation of the conflicting laws involved, notwithstanding a violation of the right of the party affected. We find no reason

to deviate from said ruling mindful of the significance of the present case to the national economy. So also, summary judgments were properly rendered by the trial court because the issues involved in the instant case were pure questions of law. A motion for summary judgment is premised on the assumption that the issues presented need not be tried either because these are patently devoid of substance or that there is no genuine issue as to any pertinent fact. It is a method sanctioned by the Rules of Court for the prompt disposition of a civil action in which the pleadings raise only a legal issue, not a genuine issue as to any material fact.[14] At any rate, even assuming the procedural flaws raised by petitioners truly exist, the Court is not precluded from brushing aside these technicalities and taking cognizance of the action filed by respondents considering its importance to the public and in keeping with the duty to determine whether the other branches of the government have kept themselves within the limits of the Constitution.[15] We now come to the substantive issues, which are: (1) whether there is statutory basis for the issuance of EO 156; and (2) if the answer is in the affirmative, whether the application of Article 2, Section 3.1 of EO 156, reasonable and within the scope provided by law. The main thrust of the petition is that EO 156 is constitutional because it was issued pursuant to EO 226, the Omnibus Investment Code of the Philippines and that its application should be extended to the Freeport because the guarantee of RA 7227 on the free flow of goods into the said zone is merely an exemption from customs duties and taxes on items brought into the Freeport and not an open floodgate for all kinds of goods and materials without restriction. In G.R. No. 168741, the Court of Appeals invalidated Article 2, Section 3.1 of EO 156, on the ground of lack of any statutory basis for the President to issue the same. It held that the prohibition on the importation of used motor vehicles is an exercise of police power vested on the legislature and absent any enabling law, the exercise thereof by the President through an executive issuance, is void.

Police power is inherent in a government to enact laws, within constitutional limits, to promote the order, safety, health, morals, and general welfare of society. It is lodged primarily with the legislature. By virtue of a valid delegation of legislative power, it may also be exercised by the President and administrative boards, as well as the lawmaking bodies on all municipal levels, including the barangay.[16] Such delegation confers upon the President quasilegislative power which may be defined as the authority delegated by the lawmaking body to the administrative body to adopt rules and regulations intended to carry out the provisions of the law and implement legislative policy. [17] To be valid, an administrative issuance, such as an executive order, must comply with the following requisites:
(1) (2) (3) (4) Its promulgation must be authorized by the legislature; It must be promulgated in accordance with the prescribed procedure; It must be within the scope of the authority given by the legislature; and It must be reasonable.[18]

Contrary to the conclusion of the Court of Appeals, EO 156 actually satisfied the first requisite of a valid administrative order. It has both constitutional and statutory bases. Delegation of legislative powers to the President is permitted in Section 28(2) of Article VI of the Constitution. It provides:
(2) The Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations and restrictions as it may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts within the framework of the national development program of the Government.[19] (Emphasis supplied)

The relevant statutes to execute this provision are: 1) The Tariff and Customs Code which authorizes the President, in the interest of national economy, general welfare and/or national security, to, inter alia, prohibit the importation of any commodity. Section 401 thereof, reads:

Sec. 401. Flexible Clause. a. In the interest of national economy, general welfare and/or national security, and subject to the limitations herein prescribed, the President, upon recommendation of the National Economic and Development Authority (hereinafter referred to as NEDA), is hereby empowered: x x x (2) to establish import quota or to ban imports of any commodity, as may be necessary; x x x Provided, That upon periodic investigations by the Tariff Commission and recommendation of the NEDA, the President may cause a gradual reduction of protection levels granted in Section One hundred and four of this Code, including those subsequently granted pursuant to this section. (Emphasis supplied)

2) Executive Order No. 226, the Omnibus Investment Code of the Philippines which was issued on July 16, 1987, by then President Corazon C. Aquino, in the exercise of legislative power under the Provisional Freedom Constitution,[20] empowers the President to approve or reject the prohibition on the importation of any equipment or raw materials or finished products. Pertinent provisions thereof, read:
ART. 4. Composition of the board. The Board of Investments shall be composed of seven (7) governors: The Secretary of Trade and Industry, three (3) Undersecretaries of Trade and Industry to be chosen by the President; and three (3) representatives from the government agencies and the private sector x x x. ART. 7. Powers and duties of the Board. xxxx (12) Formulate and implement rationalization programs for certain industries whose operation may result in dislocation, overcrowding or inefficient use of resources, thus impeding economic growth. For this purpose, the Board may formulate guidelines for progressive manufacturing programs, local content programs, mandatory sourcing requirements and dispersal of industries. In appropriate cases and upon approval of the President, the Board may restrict, either totally or partially, the importation of any equipment or raw materials or finished products involved in the rationalization program; (Emphasis supplied)

3) Republic Act No. 8800, otherwise known as the Safeguard Measures Act (SMA), and entitled An Act Protecting Local Industries By Providing

Safeguard Measures To Be Undertaken In Response To Increased Imports And Providing Penalties For Violation Thereof,[21] designated the Secretaries[22] of the Department of Trade and Industry (DTI) and the Department of Agriculture, in their capacity as alter egos of the President, as the implementing authorities of the safeguard measures, which include,inter alia, modification or imposition of any quantitative restriction on the importation of a product into the Philippines. The purpose of the SMA is stated in the declaration of policy, thus:
SEC. 2. Declaration of Policy. The State shall promote competitiveness of domestic industries and producers based on sound industrial and agricultural development policies, and efficient use of human, natural and technical resources. In pursuit of this goal and in the public interest, the State shall provide safeguard measures to protect domestic industries and producers from increased imports which cause or threaten to cause serious injury to those domestic industries and producers.

There are thus explicit constitutional and statutory permission authorizing the President to ban or regulate importation of articles and commodities into the country. Anent the second requisite, that is, that the order must be issued or promulgated in accordance with the prescribed procedure, it is necessary that the nature of the administrative issuance is properly determined. As in the enactment of laws, the general rule is that, the promulgation of administrative issuances requires previous notice and hearing, the only exception being where the legislature itself requires it and mandates that the regulation shall be based on certain facts as determined at an appropriate investigation. [23] This exception pertains to the issuance of legislative rules as distinguished from interpretative rules which give no real consequence more than what the law itself has already prescribed;[24] and are designed merely to provide guidelines to the law which the administrative agency is in charge of enforcing.[25] A legislative rule, on the other hand, is in the nature of subordinate legislation, crafted to implement a primary legislation. In Commissioner of Internal Revenue v. Court of [26] Appeals, and Commissioner of Internal Revenue v. Michel [27] J. Lhuillier Pawnshop, Inc., the Court enunciated the doctrine that when an

administrative rule goes beyond merely providing for the means that can facilitate or render less cumbersome the implementation of the law and substantially increases the burden of those governed, it behooves the agency to accord at least to those directly affected a chance to be heard and, thereafter, to be duly informed, before the issuance is given the force and effect of law. In the instant case, EO 156 is obviously a legislative rule as it seeks to implement or execute primary legislative enactments intended to protect the domestic industry by imposing a ban on the importation of a specified product not previously subject to such prohibition. The due process requirements in the issuance thereof are embodied in Section 401[28] of the Tariff and Customs Code and Sections 5 and 9 of the SMA[29] which essentially mandate the conduct of investigation and public hearings before the regulatory measure or importation ban may be issued. In the present case, respondents neither questioned before this Court nor with the courts below the procedure that paved the way for the issuance of EO 156. What they challenged in their petitions before the trial court was the absence of substantive due process in the issuance of the EO. [30] Their main contention before the court a quo is that the importation ban is illogical and unfair because it unreasonably drives them out of business to the prejudice of the national economy. Considering the settled principle that in the absence of strong evidence to the contrary, acts of the other branches of the government are presumed to be valid,[31] and there being no objection from the respondents as to the procedure in the promulgation of EO 156, the presumption is that said executive issuance duly complied with the procedures and limitations imposed by law. To determine whether EO 156 has complied with the third and fourth requisites of a valid administrative issuance, to wit, that it was issued within the scope of authority given by the legislature and that it is reasonable, an examination of the nature of a Freeport under RA 7227 and the primordial purpose of the importation ban under the questioned EO is necessary.

RA 7227 was enacted providing for, among other things, the sound and balanced conversion of the Clark and Subic military reservations and their extensions into alternative productive uses in the form of Special Economic and Freeport Zone, or the Subic Bay Freeport, in order to promote the economic and social development of Central Luzon in particular and the country in general. The Rules and Regulations Implementing RA 7227 specifically defines the territory comprising the Subic Bay Freeport, referred to as the Special Economic and Freeport Zone in Section 12 of RA 7227 as "a separate customs territory consisting of the City of Olongapo and the Municipality of Subic, Province of Zambales, the lands occupied by the Subic Naval Base and its contiguous extensions as embraced, covered and defined by the 1947 Philippine-U.S. Military Base Agreement as amended and within the territorial jurisdiction of Morong and Hermosa, Province of Bataan, the metes and bounds of which shall be delineated by the President of the Philippines; provided further that pending establishment of secure perimeters around the entire SBF, the SBF shall refer to the area demarcated by the SBMA pursuant to Section 13[32] hereof." Among the salient provisions of RA 7227 are as follows:
SECTION 12. Subic Special Economic Zone. xxxx The abovementioned zone shall be subject to the following policies: xxxx (a) Within the framework and subject to the mandate and limitations of the Constitution and the pertinent provisions of the Local Government Code, the Subic Special Economic Zone shall be developed into a self-sustaining, industrial, commercial, financial and investment center to generate employment opportunities in and around the zone and to attract and promote productive foreign investments; (b) The Subic Special Economic Zone shall be operated and managed as a separate customs territory ensuring free flow or movement of goods and capital within, into and exported out of theSubic Special Economic Zone, as well as provide incentives such as tax and duty-free importations of raw materials, capital and equipment. However, exportation or removal of goods from the

territory of the Subic Special Economic Zone to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of the Philippines;

The Freeport was designed to ensure free flow or movement of goods and capital within a portion of the Philippine territory in order to attract investors to invest their capital in a business climate with the least governmental intervention. The concept of this zone was explained by Senator Guingona in this wise:
Senator Guingona. Mr. President, the special economic zone is successful in many places, particularly Hong Kong, which is a free port. The difference between a special economic zone and an industrial estate is simply expansive in the sense that the commercial activities, including the establishment of banks, services, financial institutions, agro-industrial activities, maybe agriculture to a certain extent. This delineates the activities that would have the least of government intervention, and the running of the affairs of the special economic zone would be run principally by the investors themselves, similar to a housing subdivision, where the subdivision owners elect their representatives to run the affairs of the subdivision, to set the policies, to set the guidelines. We would like to see Subic area converted into a little Hong Kong, Mr. President, where there is a hub of free port and free entry, free duties and activities to a maximum spur generation of investment and jobs. While the investor is reluctant to come in the Philippines, as a rule, because of red tape and perceived delays, we envision this special economic zone to be an area where there will be minimum government interference. The initial outlay may not only come from the Government or the Authority as envisioned here, but from them themselves, because they would be encouraged to invest not only for the land but also for the buildings and factories. As long as they are convinced that in such an area they can do business and reap reasonable profits, then many from other parts, both local and foreign, would invest, Mr. President.[33] (Emphasis, added)

With minimum interference from the government, investors can, in general, engage in any kind of business as well as import and export any article into and out of theFreeport. These are among the rights accorded to Subic Bay

Freeport Enterprises under Section 39 of the Rules and Regulations Implementing RA 7227, thus
SEC. 39. Rights and Obligations.- SBF Enterprises shall have the following rights and obligations: a. To freely engage in any business, trade, manufacturing, financial or service activity, and to import and export freely all types of goods into and out of the SBF, subject to the provisions of the Act, these Rules and other regulations that may be promulgated by the SBMA;

Citing, inter alia, the interpellations of Senator Enrile, petitioners claim that the free flow or movement of goods and capital only means that goods and material brought within the Freeport shall not be subject to customs duties and other taxes and should not be construed as an open floodgate for entry of all kinds of goods. They thus surmise that the importation ban on motor vehicles is applicable within the Freeport. Pertinent interpellations of Senator Enrile on the concept of Freeport is as follows:
Senator Enrile: Mr. President, I think we are talking here of sovereign concepts, not territorial concepts. The concept that we are supposed to craft here is to carve out a portion of our terrestrial domain as well as our adjacent waters and say to the world: Well, you can set up your factori es in this area that we are circumscribing, and bringing your equipment and bringing your goods, you are not subject to any taxes and duties because you are not within the customs jurisdiction of the Republic of the Philippines, whether you store the goods or only for purposes of transshipment or whether you make them into finished products again to be reexported to other lands. xxxx My understanding of a free port is, we are in effect carving out a part of our territory and make it as if it were foreign territory for purposes of our customs laws, and that people can come, bring their goods, store them there and bring them out again, as long as they do not come into the domestic commerce of the Republic. We do not really care whether these goods are stored here. The only thing that we care is for our people to have an employment because of the entry of these goods that are being discharged, warehoused and reloaded into the ships so that they can be exported. That will generate employment for us. For

as long as that is done, we are saying, in effect, that we have the least contact with our tariff and customs laws and our tax laws. Therefore, we consider these goods as outside of the customs jurisdiction of the Republic of the Philippines as yet, until we draw them from this territory and bring them inside our domestic commerce. In which case, they have to pass through our customs gate. I thought we are carving out this entire area and convert it into this kind of concept.[34]

However, contrary to the claim of petitioners, there is nothing in the foregoing excerpts which absolutely limits the incentive to Freeport investors only to exemption from customs duties and taxes. Mindful of the legislative intent to attract investors, enhance investment and boost the economy, the legislature could not have limited the enticement only to exemption from taxes. The minimum interference policy of the government on the Freeport extends to the kind of business that investors may embark on and the articles which they may import or export into and out of the zone. A contrary interpretation would defeat the very purpose of the Freeport and drive away investors. It does not mean, however, that the right of Freeport enterprises to import all types of goods and article is absolute. Such right is of course subject to the limitation that articles absolutely prohibited by law cannot be imported into the Freeport.[35] Nevertheless, in determining whether the prohibition would apply to the Freeport, resort to the purpose of the prohibition is necessary. In issuing EO 156, particularly the prohibition on importation under Article 2, Section 3.1, the President envisioned to rationalize the importation of used motor vehicles and to enhance the capabilities of the Philippine motor manufacturing firms to be globally competitive producers of completely build-up units and their parts and components for the local and export markets. [36] In justifying the issuance of EO 156, petitioners alleged that there has been a decline in the sales of new vehicles and a remarkable growth of the sales of imported used motor vehicles. To address the same, the President issued the questioned EO to prevent further erosion of the already depressed market base of the local motor vehicle industry and to curtail the harmful effects of the increase in the importation of used motor vehicles.[37]

Taking our bearings from the foregoing discussions, we hold that the importation ban runs afoul the third requisite for a valid administrative order. To be valid, an administrative issuance must not be ultra vires or beyond the limits of the authority conferred. It must not supplant or modify the Constitution, its enabling statute and other existing laws, for such is the sole function of the legislature which the other branches of the government cannot usurp. As held in United BF Homeowners Association v. BF Homes, Inc.:[38]
The rule-making power of a public administrative body is a delegated legislative power, which it may not use either to abridge the authority given it by Congress or the Constitution or to enlarge its power beyond the scope intended. Constitutional and statutory provisions control what rules and regulations may be promulgated by such a body, as well as with respect to what fields are subject to regulation by it. It may not make rules and regulations which are inconsistent with the provisions of the Constitution or a statute, particularly the statute it is administering or which created it, or which are in derogation of, or defeat, the purpose of a statute.

In the instant case, the subject matter of the laws authorizing the President to regulate or forbid importation of used motor vehicles, is the domestic industry. EO 156, however, exceeded the scope of its application by extending the prohibition on the importation of used cars to the Freeport, which RA 7227, considers to some extent, a foreign territory. The domestic industry which the EO seeks to protect is actually the customs territory which is defined under the Rules and Regulations Implementing RA 7227, as follows:
the portion of the Philippines outside the Subic Bay Freeport where the Tariff and Customs Code of the Philippines and other national tariff and customs laws are in force and effect.[39]

The proscription in the importation of used motor vehicles should be operative only outside the Freeport and the inclusion of said zone within the ambit of the prohibition is an invalid modification of RA 7227. Indeed, when the application of an administrative issuance modifies existing laws or exceeds the intended scope, as in the instant case, the issuance becomes void, not only for being ultra vires, but also for being unreasonable.

This brings us to the fourth requisite. It is an axiom in administrative law that administrative authorities should not act arbitrarily and capriciously in the issuance of rules and regulations. To be valid, such rules and regulations must be reasonable and fairly adapted to secure the end in view. If shown to bear no reasonable relation to the purposes for which they were authorized to be issued, then they must be held to be invalid.[40] There is no doubt that the issuance of the ban to protect the domestic industry is a reasonable exercise of police power. The deterioration of the local motor manufacturing firms due to the influx of imported used motor vehicles is an urgent national concern that needs to be swiftly addressed by the President. In the exercise of delegated police power, the executive can therefore validly proscribe the importation of these vehicles. Thus, in Taxicab Operators of Metro Manila, Inc. v. Board of Transportation,[41] the Court held that a regulation phasing out taxi cabs more than six years old is a valid exercise of police power. The regulation was sustained as reasonable holding that the purpose thereof was to promote the convenience and comfort and protect the safety of the passengers. The problem, however, lies with respect to the application of the importation ban to the Freeport. The Court finds no logic in the all encompassing application of the assailed provision to the Freeport which is outside the customs territory. As long as the used motor vehicles do not enter the customs territory, the injury or harm sought to be prevented or remedied will not arise. The application of the law should be consistent with the purpose of and reason for the law. Ratione cessat lex, et cessat lex. When the reason for the law ceases, the law ceases. It is not the letter alone but the spirit of the law also that gives it life.[42] To apply the proscription to the Freeport would not serve the purpose of the EO. Instead of improving the general economy of the country, the application of the importation ban in the Freeport would subvert the avowed purpose of RA 7227 which is to create a market that would draw investors and ultimately boost the national economy. In similar cases, we also declared void the administrative issuance or ordinances concerned for being unreasonable. To illustrate, in De la Cruz v. Paras,[43] the Court held as unreasonable and unconstitutional an ordinance

characterized by overbreadth. In that case, the Municipality of Bocaue, Bulacan, prohibited the operation of all night clubs, cabarets and dance halls within its jurisdiction for the protection of public morals. As explained by the Court:
x x x It cannot be said that such a sweeping exercise of a lawmaking power by Bocaue could qualify under the term reasonable. The objective of fostering public morals, a worthy and desirable end can be attained by a measure that does not encompass too wide a field. Certainly the ordinance on its face is characterized by overbreadth. The purpose sought to be achieved could have been attained by reasonable restrictions rather than by an absolute prohibition. The admonition in Salaveria should be heeded: The Judiciary should not lightly set aside legislative action when there is not a clear invasion of personal or property rights under the guise of police regulation. It is clear that in the guise of a police regulation, there was in this instance a clear invasion of personal or property rights, personal in the case of those individuals desirous of patronizing those night clubs and property in terms of the investments made and salaries to be earned by those therein employed.

Lupangco v. Court of Appeals,[44] is a case involving a resolution issued by the Professional Regulation Commission which prohibited examinees from attending review classes and receiving handout materials, tips, and the like three days before the date of examination in order to preserve the integrity and purity of the licensure examinations in accountancy. Besides being unreasonable on its face and violative of academic freedom, the measure was found to be more sweeping than what was necessary, viz:
Needless to say, the enforcement of Resolution No. 105 is not a guarantee that the alleged leakages in the licensure examinations will be eradicated or at least minimized. Making the examinees suffer by depriving them of legitimate means of review or preparation on those last three precious days when they should be refreshing themselves with all that they have learned in the review classes and preparing their mental and psychological make-up for the examination day itself would be like uprooting the tree to get rid of a rotten branch. What is needed to be done by the respondent is to find out the source of such leakages and stop it right there. If corrupt officials or personnel should be terminated from their loss, then so be it. Fixers or swindlers should be flushed out. Strict guidelines to be observed by examiners should be set up and if violations are committed, then licenses should be suspended or revoked. x x x

In Lucena Grand Central Terminal, Inc. v. JAC Liner, Inc.,[45] the Court likewise struck down as unreasonable and overbreadth a city ordinance granting an exclusive franchise for 25 years, renewable for another 25 years, to one entity for the construction and operation of one common bus and jeepney terminal facility in Lucena City. While professedly aimed towards alleviating the traffic congestion alleged to have been caused by the existence of various bus and jeepney terminals within the city, the ordinance was held to be beyond what is reasonably necessary to solve the traffic problem in the city. By parity of reasoning, the importation ban in this case should also be declared void for its too sweeping and unnecessary application to the Freeport which has no bearing on the objective of the prohibition. If the aim of the EO is to prevent the entry of used motor vehicles from the Freeport to the customs territory, the solution is not to forbid entry of these vehicles into the Freeport, but to intensify governmental campaign and measures to thwart illegal ingress of used motor vehicles into the customs territory. At this juncture, it must be mentioned that on June 19, 1993, President Fidel V. Ramos issued Executive Order No. 97-A, Further Clarifying The Tax And Duty-Free Privilege Within The Subic Special Economic And Free Port Zone, Section 1 of which provides:
SECTION 1. The following guidelines shall govern the tax and duty-free privilege within the Secured Area of the Subic Special Economic and Free Port Zone: 1.1. The Secured Area consisting of the presently fenced-in former Subic Naval Base shall be the only completely tax and duty-free area in the SSEFPZ. Business enterprises and individuals (Filipinos and foreigners) residing within the Secured Area are free to import raw materials, capital goods, equipment, and consumer items tax and dutry-free. Consumption items, however, must be consumed within the Secured Area. Removal of raw materials, capital goods, equipment and consumer items out of the Secured Area for sale to non-SSEFPZ registered enterprises shall be subject to the usual taxes and duties, except as may be provided herein.

In Tiu v. Court of Appeals[46] as reiterated in Coconut Oil Refiners Association, Inc. v. Torres,[47] this provision limiting the special privileges on tax

and duty-free importation in the presently fenced-in former Subic Naval Base has been declared valid and constitutional and in accordance with RA 7227. Consistent with these rulings and for easier management and monitoring of activities and to prevent fraudulent importation of merchandise and smuggling, the free flow and importation of used motor vehicles shall be operative only within the secured area. In sum, the Court finds that Article 2, Section 3.1 of EO 156 is void insofar as it is made applicable to the presently secured fenced-in former Subic Naval Base area as stated in Section 1.1 of EO 97-A. Pursuant to the separability clause[48] of EO 156, Section 3.1 is declared valid insofar as it applies to the customs territory or the Philippine territory outside the presently secured fenced-in former Subic Naval Base area as stated in Section 1.1 of EO 97A. Hence, used motor vehicles that come into the Philippine territory via the secured fenced-in former Subic Naval Base area may be stored, used or traded therein, or exported out of the Philippine territory, but they cannot be imported into the Philippine territory outside of the secured fenced-in former Subic Naval Base area. WHEREFORE, the petitions are PARTIALLY GRANTED and the May 24, 2004 Decisions of Branch 72, Regional Trial Court of Olongapo City, in Civil Case No. 200-04 and Civil Case No. 22-0-04; and the February 14, 2005 Decision of the Court of Appeals in CA-G.R. SP No. 63284, are MODIFIED insofar as they declared Article 2, Section 3.1 of Executive Order No. 156, void in its entirety. Said provision is declared VALID insofar as it applies to the Philippine territory outside the presently fenced-in former Subic Naval Base area and VOID with respect to its application to the secured fenced-in former Subic Naval Base area. SO ORDERED.

CONSUELO YNARES-SANTIAGO Associate Justice

WE CONCUR:

ARTEMIO V. PANGANIBAN Chief Justice

REYNATO S. PUNO Associate Justice

LEONARDO A. QUISUMBING Associate Justice

ANGELINA SANDOVAL-GUTIERREZ Associate Justice

ANTONIO T. CARPIO Associate Justice

MA. ALICIA AUSTRIA-MARTINEZ Associate Justice

RENATO C. CORONA Associate Justice

CONCHITA CARPIO-MORALES Associate Justice

ROMEO J. CALLEJO, SR. Associate Justice

ADOLFO S. AZCUNA Associate Justice

DANTE O. TINGA Associate Justice

MINITA V. CHICO-NAZARIO Associate Justice

CANCIO C. GARCIA Associate Justice

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court.

ARTEMIO V. PANGANIBAN Chief Justice

[1] [2]

Rollo (G.R. No. 164171), pp. 81-90. Id. at 68; rollo (G.R. No. 164172), p. 65. Penned by Judge Eliodoro G. Ubiadas. [3] Rollo (G.R. No. 164172), pp. 78-86. [4] The Executive Secretary, Secretary of Transportation and Communication, Commissioner of Customs, Assistant Secretary and Head of the Land Transportation Office, Subic Bay Metropolitan Authority (SBMA), Collector of Customs for the Port atSubic Bay Freeport Zone, and the Chief of the Land Transportation Office at Subic Bay Freeport Zone. [5] The dispositive portion thereof is identically worded as the quoted decretal portion of the decision in Civil Case No. 20-0-04. [6] Rollo (G.R. No. 168741), pp. 139-153. [7] Id. at 264. Penned by Judge Eliodoro G. Ubiadas. [8] Docketed as CA-G.R. SP. No. 83284. [9] Dated February 14, 2005, rollo (G.R. No. 168741), p. 125. Penned by Associate Justice Perlita J. Tria Tirona and concurred in by Associate Justices Delilah Vidallon-Magtolis and Jose C. Reyes, Jr. Petitioners filed a motion for reconsideration but was denied by the Court of Appeals on June 28, 2004, id. at 126. [10] Id. at 354. [11] Miranda v. Aguirre, 373 Phil. 386, 397 (1999). [12] Rollo (G.R. No. 164171), pp. 94-96 and rollo (G.R. No. 164172), p. 88. [13] 422 Phil. 519, 531 (2001). [14] Republic v. Sandiganbayan, G.R. No. 152154, November 18, 2003, 416 SCRA 133, 140. [15] Coconut Oil Refiners Association, Inc. v. Torres, G.R. No. 132527, July 29, 2005, 465 SCRA 47, 62. [16] Camarines Norte Electric Cooperative, Inc. v. Torres, 350 Phil. 315, 331 (1998). [17] Cruz, Philippine Administrative Law, 2003 Edition, p. 24. [18] Id. at 41. [19] Essentially the same provision is embodied in the 1935 and 1973 Constitutions. Constitution (1935), Art. VI, Sec 22, par. (2): The Congress may by law authorize the President, subject to such limitations and restrictions as it may impose, to fix, within specified limits, tariff rates, import or export quotas, and tonnage and wharfage dues. Constitution (1973), Art. VII, Sec 17, par. (2): The Batasang Pambansa may by law authorize the President to fix within specified limits, and subject to such limitations and restrictions as it may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts. [20] Bernas, S.J., The 1987 Constitution of the Philippines: A Commentary, 1996 Edition, p. 610.

[21]

Enacted on July 17, 2000. See Filipino Metals Corporation v. Secretary of Trade and Industry , G.R. No. 157498, July 15, 2005, 463 SCRA 616, 619. [22] Secretary as defined under Section 4 (n) of the SMA refers to either the Secretary of the Department of Trade and Industry in the case of non-agricultural products or the Secretary of the Department of Agriculture in the case of agricultural products. [23] Cruz, supra note 17 at 53. [24] Commissioner of Internal Revenue v. Court of Appeals, 329 Phil. 987, 1007 (1996). [25] Misamis Oriental Association of Coco Traders, Inc. v. Department of Finance Secretary, G.R. No. 108524, November 10, 1994, 238 SCRA 63, 69. [26] Supra. [27] 453 Phil. 1043, 1058 (2003). [28] Sec. 401. Flexible Clause. a. In the interest of national economy, general welfare and/or national security, and subject to the limitations herein prescribed, the President, upon recommendation of the National Economic and Development Authority (hereinafter referred to as NEDA), is hereby empowered: (1) to increase, reduce or remove existing protective rates of import duty (including any necessary change in classification). The existing rates may be increased or decreased but in no case shall the reduced rate of import duty be lower than the basic rate of ten (10) per cent ad valorem, nor shall the increased rate of import duty be higher than a maximum of one hundred (100) per cent ad valorem; (2) to establish import quota or to ban imports of any commodity, as may be necessary; and (3) to impose an additional duty on all imports not exceeding ten (10) per cent ad valorem whenever necessary; Provided, That upon periodic investigations by the Tariff Commission and recommendation of the NEDA, the President may cause a gradual reduction of protection levels granted in Section One Hundred and Four of this Code, including those subsequently granted pursuant to this section. b. Before any recommendation is submitted to the President by the NEDA pursuant to the provisions of this section, except in the imposition of an additional duty not exceeding ten (10) per cent ad valorem, the Commission shall conduct an investigation in the course of which they shall hold public hearings wherein interested parties shall be afforded reasonable opportunity to be present, produce evidence and to be heard. The Commission shall also hear the views and recommendations of any government office, agency or instrumentality concerned. The Commission shall submit their findings and recommendations to the NEDA within thirty (30) days after the termination of the public hearings. [29] SEC. 5. Conditions for the Application of General Safeguard Measures. The Secretary shall apply a general safeguard measure upon a positive final determination of the Commission that a product is being imported into the country in increased quantities, whether absolute or relative to the domestic production, as to be a substantial cause of serious injury or threat thereof to the domestic industry; however, in the case of non-agricultural products, the secretary shall first establish that the application of such safeguard measures will be in the public interest. SEC. 9. Formal Investigation. Within five (5) working days from receipt of the request from the Secretary, the Commission shall publish the notice of the commencement of the investigation, and public hearings which shall afford interested parties and consumers an opportunity to be present, or to present evidence, to respond to the presentation of other parties and consumers, and otherwise be heard. Evidence and positions with respect to the importation of the subject article shall be submitted to the Commission within fifteen (15) days after the initiation of the investigation by the Commission. The Commission shall complete its investigation and submit its report to the Secretary within one hundred twenty (120) calendar days from receipt of the referral by the Secretary, except when the Secretary certifies that the same is urgent, in which case the Commission shall complete the investigation and submit the report to the Secretary within sixty (60) days. [30] Rollo (G.R. No. 168741), pp. 144-145; rollo (G.R. No. 164172), pp. 205-206; rollo (G.R. No. 164171), pp. 87-86. [31] Coconut Oil Refiners Association, Inc. v. Torres, supra note 15 at 62-63. [32] Section 13 of the Rules and Regulations Implementing RA 7227 provides: Establishment of Secure Perimeters, Points of Entry and Duty and Tax Free Areas of the SBF. - Pending the establishment of secure perimeters around the entire SBF, the SBMA shall have the authority to establish and demarcate areas of the SBF with secure perimeters within which articles and merchandise free of duties and internal revenue taxes may be limited, without prejudice to the availment of other benefits conferred by the Act and these Rules in the SBF outside such

areas. The SBMA shall furthermore have the authority to establish, regulate and maintain points of entry to the SBF or to any limited duty and tax-free areas of the SBF. [33] RECORDS, SENATE 8TH CONGRESS, SESSION (JANUARY 14, 1992). [34] Id. [35] SEC. 45. Importation of Articles. In general, all articles may be imported by SBF Enterprises into the SBF free of customs and import duties and national internal revenue taxes, except those articles prohibited by the SBMA and those absolutely prohibited by law. (Rules and Regulations Implementing RA 7227) [36] Whereas clauses of EO 156. [37] Rollo (G.R. No. 168741), pp. 77-79; rollo (G.R. No. 164172), p. 46; rollo (G.R. No. 164171), p. 48. [38] 369 Phil. 568, 579-580 (1999). [39] Definitions, Section 3 (n). [40] Lupangco v. Court of Appeals, G.R. No. L-77372, April 29, 1988, 160 SCRA 848, 858-859. [41] 202 Phil. 925, 935-936 (1982). [42] Vergara v. People, G.R. No. 160328, February 4, 2005, 450 SCRA 495, 508. [43] 208 Phil. 490, 499-500 (1983). [44] Supra note 40 at 860. [45] G.R. No. 148339, February 23, 2005, 452 SCRA 174. [46] 361 Phil. 229 (1999). [47] Supra note 15. [48] Article 7, Section 3: Sec. 3. Separability Clause. The provisions of this Executive Order are hereby declared separable and in the event any of such provisions is declared unconstitutional, the other provisions, which are not affected, thereby remain in force and effect.

EN BANC
LOUIS BAROK C. BIRAOGO, Petitioner, - versus THE PHILIPPINE TRUTH COMMISSION OF 2010, Respondent. x-----------------------x REP. EDCEL C. LAGMAN, REP. RODOLFO B. ALBANO, JR., REP. SIMEON A. DATUMANONG, and REP. ORLANDO B. FUA, SR., Petitioners, G.R. No. 192935

G.R. No. 193036 Present: CORONA, C.J., CARPIO, CARPIO MORALES, VELASCO, JR., NACHURA, LEONARDO-DE CASTRO, BRION, PERALTA, BERSAMIN, DEL CASTILLO, ABAD, VILLARAMA, JR., PEREZ, MENDOZA, and SERENO, JJ. Promulgated: December 7, 2010

- versus -

EXECUTIVE SECRETARY PAQUITO N. OCHOA, JR. and DEPARTMENT OF BUDGET AND MANAGEMENT SECRETARY FLORENCIO B. ABAD, Respondents.

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

DECISION
MENDOZA, J.:
When the judiciary mediates to allocate constitutional boundaries, it does not assert any superiority over the other departments; it does not in reality nullify or invalidate an act of the legislature, but only asserts the solemn and sacred obligation assigned to it by the Constitution to determine conflicting claims of authority under the Constitution and to establish for the parties in an actual controversy the rights which that instrument secures and guarantees to them. --- Justice Jose P. Laurel[1] The role of the Constitution cannot be overlooked. It is through the Constitution that the fundamental powers of government are established, limited and defined, and by which these powers are distributed among the several departments.[2] The Constitution is the basic and paramount law to which all other laws must conform and to which all persons, including the highest officials of the land, must defer.[3] Constitutional doctrines must remain steadfast no matter what may be the tides of time. It cannot be simply made to sway and accommodate the call of situations and much more tailor itself to the whims and caprices of government and the people who run it.[4] For consideration before the Court are two consolidated cases[5] both of which essentially assail the validity and constitutionality of Executive Order No. 1, dated July 30, 2010, entitled Creating the Philippine Truth Commission of 2010.

The first case is G.R. No. 192935, a special civil action for prohibition instituted by petitioner Louis Biraogo (Biraogo) in his capacity as a citizen and taxpayer. Biraogo assails Executive Order No. 1 for being violative of the legislative power of Congress under Section 1, Article VI of the Constitution[6] as it usurps the constitutional authority of the legislature to create a public office and to appropriate funds therefor.[7] The second case, G.R. No. 193036, is a special civil action for certiorari and prohibition filed by petitioners Edcel C. Lagman, Rodolfo B. Albano Jr., Simeon A. Datumanong, and Orlando B. Fua, Sr. (petitioners-legislators) as incumbent members of the House of Representatives. The genesis of the foregoing cases can be traced to the events prior to the historic May 2010 elections, when then Senator Benigno Simeon Aquino III declared his staunch condemnation of graft and corruption with his slogan, Kung walang corrupt, walang mahirap. The Filipino people, convinced of his sincerity and of his ability to carry out this noble objective, catapulted the good senator to the presidency. To transform his campaign slogan into reality, President Aquino found a need for a special body to investigate reported cases of graft and corruption allegedly committed during the previous administration. Thus, at the dawn of his administration, the President on July 30, 2010, signed Executive Order No. 1 establishing the Philippine Truth Commission of 2010 (Truth Commission). Pertinent provisions of said executive order read:
EXECUTIVE ORDER NO. 1 CREATING THE PHILIPPINE TRUTH COMMISSION OF 2010 WHEREAS, Article XI, Section 1 of the 1987 Constitution of the Philippines solemnly enshrines the principle that a public office is a public trust and mandates that public officers and employees, who are servants of the people, must at all times be accountable to the latter, serve them with utmost responsibility, integrity, loyalty and efficiency, act with patriotism and justice, and lead modest lives; WHEREAS, corruption is among the most despicable acts of defiance of this principle and notorious violation of this mandate;

WHEREAS, corruption is an evil and scourge which seriously affects the political, economic, and social life of a nation; in a very special way it inflicts untold misfortune and misery on the poor, the marginalized and underprivileged sector of society; WHEREAS, corruption in the Philippines has reached very alarming levels, and undermined the peoples trust and confidence in the Government and its institutions; WHEREAS, there is an urgent call for the determination of the truth regarding certain reports of large scale graft and corruption in the government and to put a closure to them by the filing of the appropriate cases against those involved, if warranted, and to deter others from committing the evil, restore the peoples faith and confidence in the Government and in their public servants; WHEREAS, the Presidents battlecry during hi s campaign for the Presidency in the last elections kung walang corrupt, walang mahirap expresses a solemn pledge that if elected, he would end corruption and the evil it breeds; WHEREAS, there is a need for a separate body dedicated solely to investigating and finding out the truth concerning the reported cases of graft and corruption during the previous administration, and which will recommend the prosecution of the offenders and secure justice for all; WHEREAS, Book III, Chapter 10, Section 31 of Executive Order No. 292, otherwise known as the Revised Administrative Code of the Philippines, gives the President the continuing authority to reorganize the Office of the President. NOW, THEREFORE, I, BENIGNO SIMEON AQUINO III, President of the Republic of the Philippines, by virtue of the powers vested in me by law, do hereby order: SECTION 1. Creation of a Commission. There is hereby created the PHILIPPINE TRUTH COMMISSION, hereinafter referred to as the COMMISSION, which shall primarily seek and find the truth on, and toward this end, investigate reports of graft and corruption of such scale and magnitude that shock and offend the moral and ethical sensibilities of the people, committed by public officers and employees, their co-principals, accomplices and accessories from the private sector, if any, during the previous administration; and thereafter recommend the appropriate action or measure to be taken thereon to ensure that the full measure of justice shall be served without fear or favor. The Commission shall be composed of a Chairman and four (4) members who will act as an independent collegial body. SECTION 2. Powers and Functions. The Commission, which shall have all the powers of an investigative body under Section 37, Chapter 9, Book I of the Administrative Code of 1987, is primarily tasked to conduct a thorough fact-finding investigation of reported cases of graft and corruption referred to in Section 1, involving third level public officers and higher, their co-principals, accomplices and accessories

from the private sector, if any, during the previous administration and thereafter submit its finding and recommendations to the President, Congress and the Ombudsman. In particular, it shall: a) Identify and determine the reported cases of such graft and corruption which it will investigate; b) Collect, receive, review and evaluate evidence related to or regarding the cases of large scale corruption which it has chosen to investigate, and to this end require any agency, official or employee of the Executive Branch, including government-owned or controlled corporations, to produce documents, books, records and other papers; c) Upon proper request or representation, obtain information and documents from the Senate and the House of Representatives records of investigations conducted by committees thereof relating to matters or subjects being investigated by the Commission; d) Upon proper request and representation, obtain information from the courts, including the Sandiganbayan and the Office of the Court Administrator, information or documents in respect to corruption cases filed with the Sandiganbayan or the regular courts, as the case may be; e) Invite or subpoena witnesses and take their testimonies and for that purpose, administer oaths or affirmations as the case may be; f) Recommend, in cases where there is a need to utilize any person as a state witness to ensure that the ends of justice be fully served, that such person who qualifies as a state witness under the Revised Rules of Court of the Philippines be admitted for that purpose; g) Turn over from time to time, for expeditious prosecution, to the appropriate prosecutorial authorities, by means of a special or interim report and recommendation, all evidence on corruption of public officers and employees and their private sector coprincipals, accomplices or accessories, if any, when in the course of its investigation the Commission finds that there is reasonable ground to believe that they are liable for graft and corruption under pertinent applicable laws; h) Call upon any government investigative or prosecutorial agency such as the Department of Justice or any of the agencies under it, and the Presidential Anti-Graft Commission, for such assistance and cooperation as it may require in the discharge of its functions and duties; i) Engage or contract the services of resource persons, professionals and other personnel determined by it as necessary to carry out its mandate; j) Promulgate its rules and regulations or rules of procedure it deems necessary to effectively and efficiently carry out the objectives of this Executive Order and to ensure

the orderly conduct of its investigations, proceedings and hearings, including the presentation of evidence; k) Exercise such other acts incident to or are appropriate and necessary in connection with the objectives and purposes of this Order. SECTION 3. Staffing Requirements. x x x. SECTION 4. Detail of Employees. x x x. SECTION 5. Engagement of Experts. x x x SECTION 6. Conduct of Proceedings. x x x. SECTION 7. Right to Counsel of Witnesses/Resource Persons. x x x. SECTION 8. Protection of Witnesses/Resource Persons. x x x. SECTION 9. Refusal to Obey Subpoena, Take Oath or Give Testimony. Any government official or personnel who, without lawful excuse, fails to appear upon subpoena issued by the Commission or who, appearing before the Commission refuses to take oath or affirmation, give testimony or produce documents for inspection, when required, shall be subject to administrative disciplinary action. Any private person who does the same may be dealt with in accordance with law. SECTION 10. Duty to Extend Assistance to the Commission. x x x.

SECTION 11. Budget for the Commission. The Office of the President shall provide the necessary funds for the Commission to ensure that it can exercise its powers, execute its functions, and perform its duties and responsibilities as effectively, efficiently, and expeditiously as possible. SECTION 12. Office. x x x. SECTION 13. Furniture/Equipment. x x x. SECTION 14. Term of the Commission. The Commission shall accomplish its mission on or before December 31, 2012. SECTION 15. Publication of Final Report. x x x. SECTION 16. Transfer of Records and Facilities of the Commission. x x x. SECTION 17. Special Provision Concerning Mandate. If and when in the judgment of the President there is a need to expand the mandate of the Commission as defined in Section 1 hereof to include the investigation of cases and instances of graft and

corruption during the prior administrations, such mandate may be so extended accordingly by way of a supplemental Executive Order.

SECTION 18. Separability Clause. If any provision of this Order is declared unconstitutional, the same shall not affect the validity and effectivity of the other provisions hereof. SECTION 19. Effectivity. This Executive Order shall take effect immediately. DONE in the City of Manila, Philippines, this 30th day of July 2010. (SGD.) BENIGNO S. AQUINO III By the President: (SGD.) PAQUITO N. OCHOA, JR. Executive Secretary

Nature of the Truth Commission As can be gleaned from the above-quoted provisions, the Philippine Truth Commission (PTC) is a mere ad hoc body formed under the Office of the President with theprimary task to investigate reports of graft and corruption committed by third-level public officers and employees, their co-principals, accomplices and accessories during the previous administration, and thereafter to submit its finding and recommendations to the President, Congress and the Ombudsman. Though it has been described as an independent collegial body, it is essentially an entity within the Office of the President Proper and subject to his control. Doubtless, it constitutes a public office, as an ad hoc body is one.[8] To accomplish its task, the PTC shall have all the powers of an investigative body under Section 37, Chapter 9, Book I of the Administrative Code of 1987. It is not, however, a quasi-judicial body as it cannot adjudicate, arbitrate, resolve, settle, or render awards in disputes between contending parties. All it can do is gather, collect and assess evidence of graft and corruption and make recommendations. It may have subpoena powers but it has no power to cite people in contempt, much less order their arrest. Although it is a fact-finding body, it cannot determine from such facts if probable cause exists as to warrant

the filing of an information in our courts of law. Needless to state, it cannot impose criminal, civil or administrative penalties or sanctions. The PTC is different from the truth commissions in other countries which have been created as official, transitory and non-judicial fact-finding bodies to establish the facts and context of serious violations of human rights or of international humanitarian law in a countrys past.[9] They are usually established by states emerging from periods of internal unrest, civil strife or authoritarianism to serve as mechanisms for transitional justice. Truth commissions have been described as bodies that share the following characteristics: (1) they examine only past events; (2) they investigate patterns of abuse committed over a period of time, as opposed to a particular event; (3) they are temporary bodies that finish their work with the submission of a report containing conclusions and recommendations; and (4) they are officially sanctioned, authorized or empowered by the State.[10] Commissions members are usually empowered to conduct research, support victims, and propose policy recommendations to prevent recurrence of crimes. Through their investigations, the commissions may aim to discover and learn more about past abuses, or formally acknowledge them. They may aim to prepare the way for prosecutions and recommend institutional reforms.[11] Thus, their main goals range from retribution to reconciliation. The Nuremburg and Tokyo war crime tribunals are examples of a retributory or vindicatory body set up to try and punish those responsible for crimes against humanity. A form of a reconciliatory tribunal is the Truth and Reconciliation Commission of South Africa, the principal function of which was to heal the wounds of past violence and to prevent future conflict by providing a cathartic experience for victims. The PTC is a far cry from South Africas model. The latter placed mo re emphasis on reconciliation than on judicial retribution, while the marching order of the PTC is the identification and punishment of perpetrators. As one writer[12] puts it:

The order ruled out reconciliation. It translated the Draconian code spelled out by Aquino in his inaugural speech: To those who talk about reconciliation, if they mean that they would like us to simply forget about the wrongs that they have committed in the past, we have this to say: There can be no reconciliation without justice. When we allow crimes to go unpunished, we give consent to their occurring over and over again.

The Thrusts of the Petitions Barely a month after the issuance of Executive Order No. 1, the petitioners asked the Court to declare it unconstitutional and to enjoin the PTC from performing its functions. A perusal of the arguments of the petitioners in both cases shows that they are essentially the same. The petitioners-legislators summarized them in the following manner: (a) E.O. No. 1 violates the separation of powers as it arrogates the power of the Congress to create a public office and appropriate funds for its operation. (b) The provision of Book III, Chapter 10, Section 31 of the Administrative Code of 1987 cannot legitimize E.O. No. 1 because the delegated authority of the President to structurally reorganize the Office of the President to achieve economy, simplicity and efficiency does not include the power to create an entirely new public office which was hitherto inexistent like the Truth Commission. (c) E.O. No. 1 illegally amended the Constitution and pertinent statutes when it vested the Truth Commission with quasi-judicial powers duplicating, if not superseding, those of the Office of the Ombudsman created under the 1987 Constitution and the Department of Justice created under the Administrative Code of 1987. (d) E.O. No. 1 violates the equal protection clause as it selectively targets for investigation and prosecution officials and personnel of the previous administration as if corruption is their

peculiar species even as it excludes those of the other administrations, past and present, who may be indictable. (e) The creation of the Philippine Truth Commission of 2010 violates the consistent and general international practice of four decades wherein States constitute truth commissions to exclusively investigate human rights violations, which customary practice forms part of the generally accepted principles of international law which the Philippines is mandated to adhere to pursuant to the Declaration of Principles enshrined in the Constitution. (f) The creation of the Truth Commission is an exercise in futility, an adventure in partisan hostility, a launching pad for trial/conviction by publicity and a mere populist propaganda to mistakenly impress the people that widespread poverty will altogether vanish if corruption is eliminated without even addressing the other major causes of poverty. (g) The mere fact that previous commissions were not constitutionally challenged is of no moment because neither laches nor estoppel can bar an eventual question on the constitutionality and validity of an executive issuance or even a statute.[13]

In their Consolidated Comment,[14] the respondents, through the Office of the Solicitor General (OSG), essentially questioned the legal standing of petitioners and defended the assailed executive order with the following arguments: 1] E.O. No. 1 does not arrogate the powers of Congress to create a public office because the Presidents executive power and power of control necessarily include the inherent power to conduct investigations to ensure that laws are faithfully executed and that, in any event, the Constitution, Revised Administrative Code of 1987 (E.O. No. 292), [15] Presidential Decree (P.D.) No. 1416[16] (as amended by P.D. No. 1772), R.A. No. 9970,[17] and settled jurisprudence that authorize the President to create or form such bodies.

2] E.O. No. 1 does not usurp the power of Congress to appropriate funds because there is no appropriation but a mere allocation of funds already appropriated by Congress. 3] The Truth Commission does not duplicate or supersede the functions of the Office of the Ombudsman (Ombudsman) and the Department of Justice (DOJ),because it is a fact-finding body and not a quasi-judicial body and its functions do not duplicate, supplant or erode the latters jurisdiction. 4] The Truth Commission does not violate the equal protection clause because it was validly created for laudable purposes. The OSG then points to the continued existence and validity of other executive orders and presidential issuances creating similar bodies to justify the creation of the PTC such as Presidential Complaint and Action Commission (PCAC) by President Ramon B. Magsaysay, Presidential Committee on Administrative Performance Efficiency (PCAPE)by President Carlos P. Garcia and Presidential Agency on Reform and Government Operations (PARGO) by President Ferdinand E. Marcos.[18] From the petitions, pleadings, transcripts, and memoranda, the following are the principal issues to be resolved: 1. Whether or not the petitioners have the legal standing to file their respective petitions and question Executive Order No. 1; 2. Whether or not Executive Order No. 1 violates the principle of separation of powers by usurping the powers of Congress to create and to appropriate funds for public offices, agencies and commissions; 3. Whether or not Executive Order No. 1 supplants the powers of the Ombudsman and the DOJ;

4. Whether or not Executive Order No. 1 violates the equal protection clause; and 5. Whether or not petitioners are entitled to injunctive relief. Essential requisites for judicial review Before proceeding to resolve the issue of the constitutionality of Executive Order No. 1, the Court needs to ascertain whether the requisites for a valid exercise of its power of judicial review are present. Like almost all powers conferred by the Constitution, the power of judicial review is subject to limitations, to wit: (1) there must be an actual case or controversy calling for the exercise of judicial power; (2) the person challenging the act must have the standing to question the validity of the subject act or issuance; otherwise stated, he must have a personal and substantial interest in the case such that he has sustained, or will sustain, direct injury as a result of its enforcement; (3) the question of constitutionality must be raised at the earliest opportunity; and (4) the issue of constitutionality must be the very lis mota of the case.[19] Among all these limitations, only the legal standing of the petitioners has been put at issue. Legal Standing of the Petitioners The OSG attacks the legal personality of the petitioners-legislators to file their petition for failure to demonstrate their personal stake in the outcome of the case. It argues that the petitioners have not shown that they have sustained or are in danger of sustaining any personal injury attributable to the creation of the PTC. Not claiming to be the subject of the commissions investigations, petitioners will not sustain injury in its creation or as a result of its proceedings.[20] The Court disagrees with the OSG in questioning the legal standing of the petitioners-legislators to assail Executive Order No. 1. Evidently, their petition primarily invokes usurpation of the power of the Congress as a body to which

they belong as members. This certainly justifies their resolve to take the cudgels for Congress as an institution and present the complaints on the usurpation of their power and rights as members of the legislature before the Court. As held in Philippine Constitution Association v. Enriquez,[21]
To the extent the powers of Congress are impaired, so is the power of each member thereof, since his office confers a right to participate in the exercise of the powers of that institution. An act of the Executive which injures the institution of Congress causes a derivative but nonetheless substantial injury, which can be questioned by a member of Congress. In such a case, any member of Congress can have a resort to the courts.

Indeed, legislators have a legal standing to see to it that the prerogative, powers and privileges vested by the Constitution in their office remain inviolate. Thus, they are allowed to question the validity of any official action which, to their mind, infringes on their prerogatives as legislators.[22] With regard to Biraogo, the OSG argues that, as a taxpayer, he has no standing to question the creation of the PTC and the budget for its operations.[23] It emphasizes that the funds to be used for the creation and operation of the commission are to be taken from those funds already appropriated by Congress. Thus, the allocation and disbursement of funds for the commission will not entail congressional action but will simply be an exercise of the Presidents power over contingent funds. As correctly pointed out by the OSG, Biraogo has not shown that he sustained, or is in danger of sustaining, any personal and direct injury attributable to the implementation of Executive Order No. 1. Nowhere in his petition is an assertion of a clear right that may justify his clamor for the Court to exercise judicial power and to wield the axe over presidential issuances in defense of the Constitution. The case of David v. Arroyo[24] explained the deep-seated rules on locus standi. Thus:
Locus standi is defined as a right of appearance in a court of justice on a given question. In private suits, standing is governed by the real -parties-in

interest rule as contained in Section 2, Rule 3 of the 1997 Rules of Civil Procedure, as amended. It provides that every action must be prosecuted or defended in the name of the real party in interest . Accordingly, the realparty-in interest is the party who stands to be benefited or injured by the judgment in the suit or the party entitled to the avails of the suit. Succinctly put, the plaintiffs standing is based on his own right to the relief sought. The difficulty of determining locus standi arises in public suits. Here, the plaintiff who asserts a public right in assailing an al legedly illegal official action, does so as a representative of the general public. He may be a person who is affected no differently from any other person. He could be suing as a stranger, or in the category of a citizen, or taxpayer. In either case, he has to adequately show that he is entitled to seek judicial protection. In other words, he has to make out a sufficient interest in the vindication of the public order and the securing of relief as a citizen or taxpayer. Case law in most jurisdictions now allows both citizen and taxpayer standing in public actions. The distinction was first laid down in Beauchamp v. Silk, where it was held that the plaintiff in a taxpayers suit is in a different category from the plaintiff in a citizens suit. In the former, the plaintiff is affected by the expenditure of public funds, while in the latter, he is but the mere instrument of the public concern. As held by the New York Supreme Court in People ex rel Case v. Collins: In matter of mere public right, howeverthe people are the real partiesIt is at least the right, if not the duty, of every citizen to interfere and see that a public offence be properly pursued and punished, and that a public grievance be remedied. With respect to taxpayers suits, Terr v. Jordan held that the right of a citizen and a taxpayer to maintain an action in courts to restrain the unlawful use of public funds to his injury cannot be denied. However, to prevent just about any person from seeking judicial interference in any official policy or act with which he disagreed with, and thus hinders the activities of governmental agencies engaged in public service, the United State Supreme Court laid down the more stringent direct injury test in Ex Parte Levitt, later reaffirmed in Tileston v. Ullman. The same Court ruled that for a private individual to invoke the judicial power to determine the validity of an executive or legislative action, he must show that he has sustained a direct injury as a result of that action, and it is not sufficient that he has a general interest common to all members of the public. This Court adopted the direct injury test in our jurisdiction. In People v. Vera, it held that the person 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 . The Vera doctrine was

upheld in a litany of cases, such as, Custodio v. President of the Senate, Manila Race Horse Trainers Association v. De la Fuente, Pascual v. Secretary of Public Works and Anti-Chinese League of the Philippines v. Felix. [Emphases included. Citations omitted]

Notwithstanding, the Court leans on the doctrine that the rule on standing is a matter of procedure, hence, can be relaxed for nontraditional plaintiffs like ordinary citizens, taxpayers, and legislators when the public interest so requires, such as when the matter is of transcendental importance, of overreaching significance to society, or of paramount public interest.[25] Thus, in Coconut Oil Refiners Association, Inc. v. Torres,[26] the Court held that in cases of paramount importance where serious constitutional questions are involved, the standing requirements may be relaxed and a suit may be allowed to prosper even where there is no direct injury to the party claiming the right of judicial review. In the firstEmergency Powers Cases,[27] ordinary citizens and taxpayers were allowed to question the constitutionality of several executive orders although they had only an indirect and general interest shared in common with the public. The OSG claims that the determinants of transcendental importance [28] laid down in CREBA v. ERC and Meralco[29] are non-existent in this case. The Court, however, finds reason in Biraogos assertion that the petition covers matters of transcendental importance to justify the exercise of jurisdiction by the Court. There are constitutional issues in the petition which deserve the attention of this Court in view of their seriousness, novelty and weight as precedents. Where the issues are of transcendental and paramount importance not only to the public but also to the Bench and the Bar, they should be resolved for the guidance of all.[30] Undoubtedly, the Filipino people are more than interested to know the status of the Presidents first effort to bring about a promised change to the country. The Court takes cognizance of the petition not due to overwhelming political undertones that clothe the issue in the eyes of the public, but because the Court stands firm in its oath to perform its constitutional duty to settle legal controversies with overreaching significance to society. Power of the President to Create the Truth Commission

In his memorandum in G.R. No. 192935, Biraogo asserts that the Truth Commission is a public office and not merely an adjunct body of the Office of the President.[31]Thus, in order that the President may create a public office he must be empowered by the Constitution, a statute or an authorization vested in him by law. According to petitioner, such power cannot be presumed[32] since there is no provision in the Constitution or any specific law that authorizes the President to create a truth commission.[33] He adds that Section 31 of the Administrative Code of 1987, granting the President the continuing authority to reorganize his office, cannot serve as basis for the creation of a truth commission considering the aforesaid provision merely uses verbs such as reorganize, transfer, consolidate, merge, and abolish.[34] Insofar as it vests in the President the plenary power to reorganize the Office of the President to the extent of creating a public office, Section 31 is inconsistent with the principle of separation of powers enshrined in the Constitution and must be deemed repealed upon the effectivity thereof.[35] Similarly, in G.R. No. 193036, petitioners-legislators argue that the creation of a public office lies within the province of Congress and not with the executive branch of government. They maintain that the delegated authority of the President to reorganize under Section 31 of the Revised Administrative Code: 1) does not permit the President to create a public office, much less a truth commission; 2) is limited to the reorganization of the administrative structure of the Office of the President; 3) is limited to the restructuring of the internal organs of the Office of the President Proper, transfer of functions and transfer of agencies; and 4) only to achieve simplicity, economy and efficiency. [36] Such continuing authority of the President to reorganize his office is limited, and by issuing Executive Order No. 1, the President overstepped the limits of this delegated authority. The OSG counters that there is nothing exclusively legislative about the creation by the President of a fact-finding body such as a truth commission. Pointing to numerous offices created by past presidents, it argues that the authority of the President to create public offices within the Office of the President Proper has long been recognized.[37]According to the OSG, the Executive, just like the other two branches of government, possesses the inherent

authority to create fact-finding committees to assist it in the performance of its constitutionally mandated functions and in the exercise of its administrative functions.[38] This power, as the OSG explains it, is but an adjunct of the plenary powers wielded by the President under Section 1 and his power of control under Section 17, both of Article VII of the Constitution.[39] It contends that the President is necessarily vested with the power to conduct fact-finding investigations, pursuant to his duty to ensure that all laws are enforced by public officials and employees of his department and in the exercise of his authority to assume directly the functions of the executive department, bureau and office, or interfere with the discretion of his officials. [40] The power of the President to investigate is not limited to the exercise of his power of control over his subordinates in the executive branch, but extends further in the exercise of his other powers, such as his power to discipline subordinates,[41] his power for rule making, adjudication and licensing purposes[42] and in order to be informed on matters which he is entitled to know.[43] The OSG also cites the recent case of Banda v. Ermita,[44] where it was held that the President has the power to reorganize the offices and agencies in the executive department in line with his constitutionally granted power of control and by virtue of a valid delegation of the legislative power to reorganize executive offices under existing statutes. Thus, the OSG concludes that the power of control necessarily includes the power to create offices. For the OSG, the President may create the PTC in order to, among others, put a closure to the reported large scale graft and corruption in the government.[45] The question, therefore, before the Court is this: Does the creation of the PTC fall within the ambit of the power to reorganize as expressed in Section 31 of the Revised Administrative Code? Section 31 contemplates reorganization as limited by the following functional and structural lines: (1) restructuring the internal organization of the Office of the President Proper by abolishing, consolidating or merging units thereof or transferring functions from one unit to another; (2) transferring any function under the Office of the President to any other Department/Agency or vice versa; or (3) transferring any agency under the

Office of the President to any other Department/Agency or vice versa. Clearly, the provision refers to reduction of personnel, consolidation of offices, or abolition thereof by reason of economy or redundancy of functions. These point to situations where a body or an office is already existent but a modification or alteration thereof has to be effected. The creation of an office is nowhere mentioned, much less envisioned in said provision. Accordingly, the answer to the question is in the negative. To say that the PTC is borne out of a restructuring of the Office of the President under Section 31 is a misplaced supposition, even in the plainest meaning attributable to the term restructure an alteration of an existing structure. Evidently, the PTC was not part of the structure of the Office of the President prior to the enactment of Executive Order No. 1. As held in Buklod ng Kawaning EIIB v. Hon. Executive Secretary,[46]
But of course, the list of legal basis authorizing the President to reorganize any department or agency in the executive branch does not have to end here. We must not lose sight of the very source of the power that which constitutes an express grant of power. Under Section 31, Book III of Executive Order No. 292 (otherwise known as the Administrative Code of 1987), "the President, subject to the policy in the Executive Office and in order to achieve simplicity, economy and efficiency, shall have the continuing authority to reorganize the administrative structure of the Office of the President." For this purpose, he may transfer the functions of other Departments or Agencies to the Office of the President. In Canonizado v. Aguirre [323 SCRA 312 (2000)], we ruled that reorganization "involves the reduction of personnel, consolidation of offices, or abolition thereof by reason of economy or redundancy of functions." It takes place when there is an alteration of the existing structure of government offices or units therein, including the lines of control, authority and responsibility between them. The EIIB is a bureau attached to the Department of Finance. It falls under the Office of the President. Hence, it is subject to the Presidents continuing authority to reorganize. [Emphasis Supplied]

In the same vein, the creation of the PTC is not justified by the Presidents power of control. Control is essentially the power to alter or modify or nullify or set aside what a subordinate officer had done in the performance of his duties

and to substitute the judgment of the former with that of the latter.[47] Clearly, the power of control is entirely different from the power to create public offices. The former is inherent in the Executive, while the latter finds basis from either a valid delegation from Congress, or his inherent duty to faithfully execute the laws. The question is this, is there a valid delegation of power from Congress, empowering the President to create a public office? According to the OSG, the power to create a truth commission pursuant to the above provision finds statutory basis under P.D. 1416, as amended by P.D. No. 1772.[48]The said law granted the President the continuing authority to reorganize the national government, including the power to group, consolidate bureaus and agencies, to abolish offices, to transfer functions, to create and classify functions, services and activities, transfer appropriations, and to standardize salaries and materials. This decree, in relation to Section 20, Title I, Book III of E.O. 292 has been invoked in several cases such as Larin v. Executive Secretary.[49] The Court, however, declines to recognize P.D. No. 1416 as a justification for the President to create a public office. Said decree is already stale, anachronistic and inoperable. P.D. No. 1416 was a delegation to then President Marcos of the authority to reorganize the administrative structure of the national government including the power to create offices and transfer appropriations pursuant to one of the purposes of the decree, embodied in its last Whereas clause:
WHEREAS, the transition towards the parliamentary form of government will necessitate flexibility in the organization of the national government.

Clearly, as it was only for the purpose of providing manageability and resiliency during the interim, P.D. No. 1416, as amended by P.D. No. 1772, became functus oficioupon the convening of the First Congress, as expressly provided in Section 6, Article XVIII of the 1987 Constitution. In fact, even the Solicitor General agrees with this view. Thus:

ASSOCIATE JUSTICE CARPIO: Because P.D. 1416 was enacted was the last whereas clause of P.D. 1416 says it was enacted to prepare the transition from presidential to parliamentary. Now, in a parliamentary form of government, the legislative and executive powers are fused, correct? SOLICITOR GENERAL CADIZ: ASSOCIATE JUSTICE CARPIO: Yes, Your Honor. That is why, that P.D. 1416 was issued. Now would you agree with me that P.D. 1416 should not be considered effective anymore upon the promulgation, adoption, ratification of the 1987 Constitution. Not the whole of P.D. [No.] 1416, Your Honor. The power of the President to reorganize the entire National Government is deemed repealed, at least, upon the adoption of the 1987 Constitution, correct. Yes, Your Honor.[50]

SOLICITOR GENERAL CADIZ: ASSOCIATE JUSTICE CARPIO:

SOLICITOR GENERAL CADIZ:

While the power to create a truth commission cannot pass muster on the basis of P.D. No. 1416 as amended by P.D. No. 1772, the creation of the PTC finds justification under Section 17, Article VII of the Constitution, imposing upon the President the duty to ensure that the laws are faithfully executed. Section 17 reads:
Section 17. The President shall have control of all the executive departments, bureaus, and offices. He shall ensure that the laws be faithfully executed. (Emphasis supplied).

As correctly pointed out by the respondents, the allocation of power in the three principal branches of government is a grant of all powers inherent in them. The Presidents power to conduct investigations to aid him in ensuring the faithful

execution of laws in this case, fundamental laws on public accountability and transparency is inherent in the Presidents powers as the Chief Executive. That the authority of the President to conduct investigations and to create bodies to execute this power is not explicitly mentioned in the Constitution or in statutes does not mean that he is bereft of such authority.[51] As explained in the landmark case of Marcos v. Manglapus:[52]
x x x. The 1987 Constitution, however, brought back the presidential system of government and restored the separation of legislative, executive and judicial powers by their actual distribution among three distinct branches of government with provision for checks and balances. It would not be accurate, however, to state that "executive power" is the power to enforce the laws, for the President is head of state as well as head of government and whatever powers inhere in such positions pertain to the office unless the Constitution itself withholds it. Furthermore, the Constitution itself provides that the execution of the laws is only one of the powers of the President. It also grants the President other powers that do not involve the execution of any provision of law, e.g., his power over the country's foreign relations.

On these premises, we hold the view that although the 1987 Constitution imposes limitations on the exercise of specific powers of the President, it maintains intact what is traditionally considered as within the scope of "executive power." Corollarily, the powers of the President cannot be said to be limited only to the specific powers enumerated in the Constitution. In other words, executive power is more than the sum of specific powers so enumerated. It has been advanced that whatever power inherent in the government that is neither legislative nor judicial has to be executive. x x x.

Indeed, the Executive is given much leeway in ensuring that our laws are faithfully executed. As stated above, the powers of the President are not limited to those specific powers under the Constitution.[53] One of the recognized powers of the President granted pursuant to this constitutionally-mandated duty is the power to create ad hoccommittees. This flows from the obvious need to ascertain facts and determine if laws have been faithfully executed. Thus, in Department of Health v. Camposano,[54] the authority of the President to issue Administrative Order No. 298, creating an investigative committee to look into the administrative

charges filed against the employees of the Department of Health for the anomalous purchase of medicines was upheld. In said case, it was ruled:
The Chief Executives power to create the Ad hoc Investigating Committee cannot be doubted. Having been constitutionally granted full control of the Executive Department, to which respondents belong, the President has the obligation to ensure that all executive officials and employees faithfully comply with the law. With AO 298 as mandate, the legality of the investigation is sustained. Such validity is not affected by the fact that the investigating team and the PCAGC had the same composition, or that the former used the offices and facilities of the latter in conducting the inquiry. [Emphasis supplied]

It should be stressed that the purpose of allowing ad hoc investigating bodies to exist is to allow an inquiry into matters which the President is entitled to know so that he can be properly advised and guided in the performance of his duties relative to the execution and enforcement of the laws of the land. And if history is to be revisited, this was also the objective of the investigative bodies created in the past like the PCAC, PCAPE, PARGO, the Feliciano Commission, the Melo Commission and the Zenarosa Commission. There being no changes in the government structure, the Court is not inclined to declare such executive power as non-existent just because the direction of the political winds have changed. On the charge that Executive Order No. 1 transgresses the power of Congress to appropriate funds for the operation of a public office, suffice it to say that there will be no appropriation but only an allotment or allocations of existing funds already appropriated. Accordingly, there is no usurpation on the part of the Executive of the power of Congress to appropriate funds. Further, there is no need to specify the amount to be earmarked for the operation of the commission because, in the words of the Solicitor General, whatever funds the Congress has provided for the Office of the President will be the very source of the funds for the commission.[55] Moreover, since the amount that would be allocated to the PTC shall be subject to existing auditing rules and regulations, there is no impropriety in the funding. Power of the Truth Commission to Investigate

The Presidents power to conduct investigations to ensure that laws are faithfully executed is well recognized. It flows from the faithful-execution clause of the Constitution under Article VII, Section 17 thereof.[56] As the Chief Executive, the president represents the government as a whole and sees to it that all laws are enforced by the officials and employees of his department. He has the authority to directly assume the functions of the executive department. [57] Invoking this authority, the President constituted the PTC to primarily investigate reports of graft and corruption and to recommend the appropriate action. As previously stated, no quasi-judicial powers have been vested in the said body as it cannot adjudicate rights of persons who come before it. It has been said that Quasi-judicial powers involve the power to hear and determine questions of fact to which the legislative policy is to apply and to decide in accordance with the standards laid down by law itself in enforcing and administering the same law.[58] In simpler terms, judicial discretion is involved in the exercise of these quasi-judicial power, such that it is exclusively vested in the judiciary and must be clearly authorized by the legislature in the case of administrative agencies. The distinction between the power to investigate and the power to adjudicate was delineated by the Court in Cario v. Commission on Human Rights.[59] Thus:
"Investigate," commonly understood, means to examine, explore, inquire or delve or probe into, research on, study. The dictionary definition of "investigate" is "to observe or study closely: inquire into systematically: "to search or inquire into: x x to subject to an official probe x x: to conduct an official inquiry." The purpose of investigation, of course, is to discover, to find out, to learn, obtain information. Nowhere included or intimated is the notion of settling, deciding or resolving a controversy involved in the facts inquired into by application of the law to the facts established by the inquiry. The legal meaning of "investigate" is essentially the same: "(t)o follow up step by step by patient inquiry or observation. To trace or track; to search into; to examine and inquire into with care and accuracy; to find out by careful inquisition; examination; the taking of evidence; a legal inquiry;" "to inquire; to make an investigation," "investigation" being in turn described as "(a)n administrative function, the exercise of which ordinarily does not require a

hearing. 2 Am J2d Adm L Sec. 257; x x an inquiry, judicial or otherwise, for the discovery and collection of facts concerning a certain matter or matters." "Adjudicate," commonly or popularly understood, means to adjudge, arbitrate, judge, decide, determine, resolve, rule on, settle. The dictionary defines the term as "to settle finally (the rights and duties of the parties to a court case) on the merits of issues raised: x x to pass judgment on: settle judicially: x x act as judge." And "adjudge" means "to decide or rule upon as a judge or with judicial or quasi-judicial powers: x x to award or grant judicially in a case of controversy x x." In the legal sense, "adjudicate" means: "To settle in the exercise of judicial authority. To determine finally. Synonymous with adjudge in its strictest sense;" and "adjudge" means: "To pass on judicially, to decide, settle or decree, or to sentence or condemn. x x. Implies a judicial determination of a fact, and the entry of a judgment." [Italics included. Citations Omitted]

Fact-finding is not adjudication and it cannot be likened to the judicial function of a court of justice, or even a quasi-judicial agency or office. The function of receiving evidence and ascertaining therefrom the facts of a controversy is not a judicial function. To be considered as such, the act of receiving evidence and arriving at factual conclusions in a controversy must be accompanied by the authority of applying the law to the factual conclusions to the end that the controversy may be decided or resolved authoritatively, finally and definitively, subject to appeals or modes of review as may be provided by law.[60] Even respondents themselves admit that the commission is bereft of any quasi-judicial power.[61] Contrary to petitioners apprehension, the PTC will not supplant the Ombudsman or the DOJ or erode their respective powers. If at all, the investigative function of the commission will complement those of the two offices. As pointed out by the Solicitor General, the recommendation to prosecute is but a consequence of the overall task of the commission to conduct a fact-finding investigation.[62] The actual prosecution of suspected offenders, much less adjudication on the merits of the charges against them,[63] is certainly not a function given to the commission. The phrase, when in the course of its investigation, under Section 2(g), highlights this fact and gives credence to a contrary interpretation from that of the petitioners. The function of determining probable cause for the filing of the appropriate complaints before the courts remains to be with the DOJ and the Ombudsman.[64]

At any rate, the Ombudsmans power to investigate under R.A. No. 6770 is not exclusive but is shared with other similarly authorized government agencies. Thus, in the case of Ombudsman v. Galicia,[65] it was written:
This power of investigation granted to the Ombudsman by the 1987 Constitution and The Ombudsman Act is not exclusive but is shared with other similarly authorized government agencies such as the PCGG and judges of municipal trial courts and municipal circuit trial courts. The power to conduct preliminary investigation on charges against public employees and officials is likewise concurrently shared with the Department of Justice. Despite the passage of the Local Government Code in 1991, the Ombudsman retains concurrent jurisdiction with the Office of the President and the local Sanggunians to investigate complaints against local elective officials. [Emphasis supplied].

Also, Executive Order No. 1 cannot contravene the power of the Ombudsman to investigate criminal cases under Section 15 (1) of R.A. No. 6770, which states:
(1) Investigate and prosecute on its own or on complaint by any person, any act or omission of any public officer or employee, office or agency, when such act or omission appears to be illegal, unjust, improper or inefficient. It has primary jurisdiction over cases cognizable by the Sandiganbayan and, in the exercise of its primary jurisdiction, it may take over, at any stage, from any investigatory agency of government, the investigation of such cases. [Emphases supplied]

The act of investigation by the Ombudsman as enunciated above contemplates the conduct of a preliminary investigation or the determination of the existence of probable cause. This is categorically out of the PTCs sphere of functions. Its power to investigate is limited to obtaining facts so that it can advise and guide the President in the performance of his duties relative to the execution and enforcement of the laws of the land. In this regard, the PTC commits no act of usurpation of the Ombudsmans primordial duties.

The same holds true with respect to the DOJ. Its authority under Section 3 (2), Chapter 1, Title III, Book IV in the Revised Administrative Code is by no means exclusive and, thus, can be shared with a body likewise tasked to investigate the commission of crimes. Finally, nowhere in Executive Order No. 1 can it be inferred that the findings of the PTC are to be accorded conclusiveness. Much like its predecessors, the Davide Commission, the Feliciano Commission and the Zenarosa Commission, its findings would, at best, be recommendatory in nature. And being so, the Ombudsman and the DOJ have a wider degree of latitude to decide whether or not to reject the recommendation. These offices, therefore, are not deprived of their mandated duties but will instead be aided by the reports of the PTC for possible indictments for violations of graft laws. Violation of the Equal Protection Clause Although the purpose of the Truth Commission falls within the investigative power of the President, the Court finds difficulty in upholding the constitutionality of Executive Order No. 1 in view of its apparent transgression of the equal protection clause enshrined in Section 1, Article III (Bill of Rights) of the 1987 Constitution. Section 1 reads:
Section 1. 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.

The petitioners assail Executive Order No. 1 because it is violative of this constitutional safeguard. They contend that it does not apply equally to all members of the same class such that the intent of singling out the previous administration as its sole object makes the PTC an adventure in partisan hostility.[66] Thus, in order to be accorded with validity, the commission must also cover reports of graft and corruption in virtually all administrations previous to that of former President Arroyo.[67]

The petitioners argue that the search for truth behind the reported cases of graft and corruption must encompass acts committed not only during the administration of former President Arroyo but also during prior administrations where the same magnitude of controversies and anomalies[68] were reported to have been committed against the Filipino people. They assail the classification formulated by the respondents as it does not fall under the recognized exceptions because first, there is no substantial distinction between the group of officials targeted for investigation by Executive Order No. 1 and other groups or persons who abused their public office for personal gain; and second, the selective classification is not germane to the purpose of Executive Order No. 1 to end corruption.[69] In order to attain constitutional permission, the petitioners advocate that the commission should deal with graft and grafters prior and subsequent to the Arroyo administration with the strong arm of the law with equal force.[70] Position of respondents According to respondents, while Executive Order No. 1 identifies the previous administration as the initial subject of the investigation, following Section 17 thereof, the PTC will not confine itself to cases of large scale graft and corruption solely during the said administration.[71] Assuming arguendo that the commission would confine its proceedings to officials of the previous administration, the petitioners argue that no offense is committed against the equal protection clause for the segregation of the transactions of public officers during the previous administration as possible subjects of investigation is a valid classification based on substantial distinctions and is germane to the evils which the Executive Order seeks to correct.[72] To distinguish the Arroyo administration from past administrations, it recited the following: First. E.O. No. 1 was issued in view of widespread reports of large scale graft and corruption in the previous administration which have eroded public confidence in public institutions. There is, therefore, an urgent call for the determination of the truth regarding certain reports of large scale graft and corruption in the government and to put a closure to them by the filing of the appropriate cases against those involved, if warranted, and to deter others from

committing the evil, restore the peoples faith and confidence in the Government and in their public servants. Second. The segregation of the preceding administration as the object of fact-finding is warranted by the reality that unlike with administrations long gone, the current administration will most likely bear the immediate consequence of the policies of the previous administration. Third. The classification of the previous administration as a separate class for investigation lies in the reality that the evidence of possible criminal activity, the evidence that could lead to recovery of public monies illegally dissipated, the policy lessons to be learned to ensure that anti-corruption laws are faithfully executed, are more easily established in the regime that immediately precede the current administration. Fourth. Many administrations subject the transactions of their predecessors to investigations to provide closure to issues that are pivotal to national life or even as a routine measure of due diligence and good housekeeping by a nascent administration like the Presidential Commission on Good Government (PCGG), created by the late President Corazon C. Aquino under Executive Order No. 1 to pursue the recovery of ill-gotten wealth of her predecessor former President Ferdinand Marcos and his cronies, and the Saguisag Commission created by former President Joseph Estrada under Administrative Order No, 53, to form an ad-hoc and independent citizens committee to investigate all the facts and circumstances surrounding Philippine Centennial projects of his predecessor, former President Fidel V. Ramos.[73] [Emphases supplied] Concept of the Equal Protection Clause One of the basic principles on which this government was founded is that of the equality of right which is embodied in Section 1, Article III of the 1987 Constitution. The equal protection of the laws is embraced in the concept of due

process, as every unfair discrimination offends the requirements of justice and fair play. It has been embodied in a separate clause, however, to provide for a more specific guaranty against any form of undue favoritism or hostility from the government. Arbitrariness in general may be challenged on the basis of the due process clause. But if the particular act assailed partakes of an unwarranted partiality or prejudice, the sharper weapon to cut it down is the equal protectionclause.[74] According to a long line of decisions, equal protection simply requires that all persons or things similarly situated should be treated alike, both as to rights conferred and responsibilities imposed.[75] It requires public bodies and institutions to treat similarly situated individuals in a similar manner.[76] The purpose of the equal protection clause is to secure every person within a states jurisdiction against intentional and arbitrary discrimination, whether occasioned by the express terms of a statue or by its improper execution through the states duly constituted authorities.[77] In other words, the concept of equal justice under the law requires the state to govern impartially, and it may not draw distinctions between individuals solely on differences that are irrelevant to a legitimate governmental objective.[78] The equal protection clause is aimed at all official state actions, not just those of the legislature.[79] Its inhibitions cover all the departments of the government including the political and executive departments, and extend to all actions of a state denying equal protection of the laws, through whatever agency or whatever guise is taken. [80] It, however, does not require the universal application of the laws to all persons or things without distinction. What it simply requires is equality among equals as determined according to a valid classification. Indeed, the equal protection clause permits classification. Such classification, however, to be valid must pass the test of reasonableness. The test has four requisites: (1) The classification rests on substantial distinctions; (2) It is germane to the purpose of the law; (3) It is not limited to existing conditions only; and

(4) It applies equally to all members of the same class.[81] Superficial differences do not make for a valid classification.[82] For a classification to meet the requirements of constitutionality, it must include or embrace all persons who naturally belong to the class. [83] The classification will be regarded as invalid if all the members of the class are not similarly treated, both as to rights conferred and obligations imposed. It is not necessary that the classification be made with absolute symmetry, in the sense that the members of the class should possess the same characteristics in equal degree. Substantial similarity will suffice; and as long as this is achieved, all those covered by the classification are to be treated equally. The mere fact that an individual belonging to a class differs from the other members, as long as that class is substantially distinguishable from all others, does not justify the nonapplication of the law to him.[84] The classification must not be based on existing circumstances only, or so constituted as to preclude addition to the number included in the class. It must be of such a nature as to embrace all those who may thereafter be in similar circumstances and conditions. It must not leave out or underinclude those that should otherwise fall into a certain classification. As elucidated in Victoriano v. Elizalde Rope Workers' Union[85] and reiterated in a long line of cases,[86]
The guaranty of equal protection of the laws is not a guaranty of equality in the application of the laws upon all citizens of the state. It is not, therefore, a requirement, in order to avoid the constitutional prohibition against inequality, that every man, woman and child should be affected alike by a statute. Equality of operation of statutes does not mean indiscriminate operation on persons merely as such, but on persons according to the circumstances surrounding them. It guarantees equality, not identity of rights. The Constitution does not require that things which are different in fact be treated in law as though they were the same. The equal protection clause does not forbid discrimination as to things that are different. It does not prohibit legislation which is limited either in the object to which it is directed or by the territory within which it is to operate. The equal protection of the laws clause of the Constitution allows classification. Classification in law, as in the other departments of knowledge or practice, is the grouping of things in speculation or practice because they agree with one another in certain particulars. A law is not invalid because of simple inequality. The very idea of classification is that of inequality, so that it goes without saying that the mere fact of inequality in no manner determines the

matter of constitutionality. All that is required of a valid classification is that it be reasonable, which means that the classification should be based on substantial distinctions which make for real differences, that it must be germane to the purpose of the law; that it must not be limited to existing conditions only; and that it must apply equally to each member of the class. This Court has held that the standard is satisfied if the classification or distinction is based on a reasonable foundation or rational basis and is not palpably arbitrary. [Citations omitted]

Applying these precepts to this case, Executive Order No. 1 should be struck down as violative of the equal protection clause. The clear mandate of the envisioned truth commission is to investigate and find out the truth concerning the reported cases of graft and corruption during the previous administration[87] only. The intent to single out the previous administration is plain, patent and manifest. Mention of it has been made in at least three portions of the questioned executive order. Specifically, these are:
WHEREAS, there is a need for a separate body dedicated solely to investigating and finding out the truth concerning the reported cases of graft and corruption during theprevious administration, and which will recommend the prosecution of the offenders and secure justice for all; SECTION 1. Creation of a Commission. There is hereby created the PHILIPPINE TRUTH COMMISSION, hereinafter referred to as the COMMISSION, which shall primarily seek and find the truth on, and toward this end, investigate reports of graft and corruption of such scale and magnitude that shock and offend the moral and ethical sensibilities of the people, committed by public officers and employees, their co-principals, accomplices and accessories from the private sector, if any, during the previous administration; and thereafter recommend the appropriate action or measure to be taken thereon to ensure that the full measure of justice shall be served without fear or favor. SECTION 2. Powers and Functions. The Commission, which shall have all the powers of an investigative body under Section 37, Chapter 9, Book I of the Administrative Code of 1987, is primarily tasked to conduct a thorough factfinding investigation of reported cases of graft and corruption referred to in Section 1, involving third level public officers and higher, their co-principals, accomplices and accessories from the private sector, if any, during the previous administration and thereafter submit its finding and recommendations to the President, Congress and the Ombudsman. [Emphases supplied]

In this regard, it must be borne in mind that the Arroyo administration is but just a member of a class, that is, a class of past administrations. It is not a class of its own. Not to include past administrations similarly situated constitutes arbitrariness which the equal protection clause cannot sanction. Such discriminating differentiation clearly reverberates to label the commission as a vehicle for vindictiveness and selective retribution. Though the OSG enumerates several differences between the Arroyo administration and other past administrations, these distinctions are not substantial enough to merit the restriction of the investigation to the previous administration only. The reports of widespread corruption in the Arroyo administration cannot be taken as basis for distinguishing said administration from earlier administrations which were also blemished by similar widespread reports of impropriety. They are not inherent in, and do not inure solely to, the Arroyo administration. As Justice Isagani Cruz put it, Superficial differences do not make for a valid classification.[88]

The public needs to be enlightened why Executive Order No. 1 chooses to limit the scope of the intended investigation to the previous administration only. The OSG ventures to opine that to include other past administrations, at this point, may unnecessarily overburden the commission and lead it to lose its effectiveness.[89] The reason given is specious. It is without doubt irrelevant to the legitimate and noble objective of the PTC to stamp out or end corruption and the evil it breeds.[90] The probability that there would be difficulty in unearthing evidence or that the earlier reports involving the earlier administrations were already inquired into is beside the point. Obviously, deceased presidents and cases which have already prescribed can no longer be the subjects of inquiry by the PTC. Neither is the PTC expected to conduct simultaneous investigations of previous administrations, given the bodys limited time and resources. The law does not require the impossible (Lex non cogit ad impossibilia).[91]

Given the foregoing physical and legal impossibility, the Court logically recognizes the unfeasibility of investigating almost a centurys worth of graft cases. However, the fact remains that Executive Order No. 1 suffers from arbitrary classification. The PTC, to be true to its mandate of searching for the truth, must not exclude the other past administrations. The PTC must, at least, have the authority to investigate all past administrations. While reasonable prioritization is permitted, it should not be arbitrary lest it be struck down for being unconstitutional. In the often quoted language of Yick Wo v. Hopkins,[92]

Though the law itself be fair on its face and impartial in appearance, yet, if applied and administered by public authority with an evil eye and an unequal hand, so as practically to make unjust and illegal discriminations between persons in similar circumstances, material to their rights, the denial of equal justice is still within the prohibition of the constitution. [Emphasis supplied] It could be argued that considering that the PTC is an ad hoc body, its scope is limited. The Court, however, is of the considered view that although its focus is restricted, the constitutional guarantee of equal protection under the laws should not in any way be circumvented. The Constitution is the fundamental and paramount law of the nation to which all other laws must conform and in accordance with which all private rights determined and all public authority administered.[93] Laws that do not conform to the Constitution should be stricken down for being unconstitutional.[94] While the thrust of the PTC is specific, that is, for investigation of acts of graft and corruption, Executive Order No. 1, to survive, must be read together with the provisions of the Constitution. To exclude the earlier administrations in the guise of substantial distinctions would only confirm the petitioners lament that the subject executive order is only an adventure in partisan hostility. In the case of US v. Cyprian,[95] it was written: A rather limited number of such classifications have routinely been held or assumed to be arbitrary; those include: race, national origin, gender, political activity or membership in a political party, union activity or membership in a labor union, or more generally the exercise of first amendment rights.

To reiterate, in order for a classification to meet the requirements of constitutionality, it must include or embrace all persons who naturally belong to the class.[96] Such a classification must not be based on existing c ircumstances only, or so constituted as to preclude additions to the number included within a class, but must be of such a nature as to embrace all those who may thereafter be in similar circumstances and conditions. Furthermore, all who are in situations and circumstances which are relative to the discriminatory legislation and which are indistinguishable from those of the members of the class must be brought under the influence of the law and treated by it in the same way as are the members of the class.[97] The Court is not unaware that mere underinclusiveness is not fatal to the validity of a law under the equal protection clause.[98] Legislation is not unconstitutional merely because it is not all-embracing and does not include all the evils within its reach.[99] It has been written that a regulation challenged under the equal protection clause is not devoid of a rational predicate simply because it happens to be incomplete.[100] In several instances, the underinclusiveness was not considered a valid reason to strike down a law or regulation where the purpose can be attained in future legislations or regulations. These cases refer to the step by step process.[101] With regard to equal protection claims, a legislature does not run the risk of losing the entire remedial scheme simply because it fails, through inadvertence or otherwise, to cover every evil that might conceivably have been attacked.[102] In Executive Order No. 1, however, there is no inadvertence. That the previous administration was picked out was deliberate and intentional as can be gleaned from the fact that it was underscored at least three times in the assailed executive order. It must be noted that Executive Order No. 1 does not even mention any particular act, event or report to be focused on unlike the investigative commissions created in the past. The equal protection clause is violated by purposeful and intentional discrimination.[103] To disprove petitioners contention that there is deliberate discrimination, the OSG clarifies that the commission does not only confine itself to cases of large scale graft and corruption committed during the previous administration. [104] The OSG points to Section 17 of Executive Order No. 1, which provides:

SECTION 17. Special Provision Concerning Mandate. If and when in the judgment of the President there is a need to expand the mandate of the Commission as defined in Section 1 hereof to include the investigation of cases and instances of graft and corruption during the prior administrations, such mandate may be so extended accordingly by way of a supplemental Executive Order.

The Court is not convinced. Although Section 17 allows the President the discretion to expand the scope of investigations of the PTC so as to include the acts of graft and corruption committed in other past administrations, it does not guarantee that they would be covered in the future. Such expanded mandate of the commission will still depend on the whim and caprice of the President. If he would decide not to include them, the section would then be meaningless. This will only fortify the fears of the petitioners that the Executive Order No. 1 was crafted to tailor-fit the prosecution of officials and personalities of the Arroyo administration.[105]

The Court tried to seek guidance from the pronouncement in the case of Virata v. Sandiganbayan,[106] that the PCGG Charter (composed of Executive Orders Nos. 1, 2 and 14) does not violate the equal protection clause. The decision, however, was devoid of any discussion on how such conclusory statement was arrived at, the principal issue in said case being only the sufficiency of a cause of action. A final word The issue that seems to take center stage at present is - whether or not the Supreme Court, in the exercise of its constitutionally mandated power of Judicial Review with respect to recent initiatives of the legislature and the executive department, is exercising undue interference. Is the Highest Tribunal, which is expected to be the protector of the Constitution, itself guilty of violating fundamental tenets like the doctrine of separation of powers? Time and again, this issue has been addressed by the Court, but it seems that the present political

situation calls for it to once again explain the legal basis of its action lest it continually be accused of being a hindrance to the nations thrust to progress. The Philippine Supreme Court, according to Article VIII, Section 1 of the 1987 Constitution, is vested with Judicial Power that 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 of abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the government. Furthermore, in Section 4(2) thereof, it is vested with the power of judicial review which is the power to declare a treaty, international or executive agreement, law, presidential decree, proclamation, order, instruction, ordinance, or regulation unconstitutional. This power also includes the duty to rule on the constitutionality of the application, or operation of presidential decrees, proclamations, orders, instructions, ordinances, and other regulations. These provisions, however, have been fertile grounds of conflict between the Supreme Court, on one hand, and the two co-equal bodies of government, on the other. Many times the Court has been accused of asserting superiority over the other departments. To answer this accusation, the words of Justice Laurel would be a good source of enlightenment, to wit: And when the judiciary mediates to allocate constitutional boundaries, it does not assert any superiority over the other departments; it does not in reality nullify or invalidate an act of the legislature, but only asserts the solemn and sacred obligation assigned to it by the Constitution to determine conflicting claims of authority under the Constitution and to establish for the parties in an actual controversy the rights which that instrument secures and guarantees to them.[107] Thus, the Court, in exercising its power of judicial review, is not imposing its own will upon a co-equal body but rather simply making sure that any act of government is done in consonance with the authorities and rights allocated to it by the Constitution. And, if after said review, the Court finds no constitutional violations of any sort, then, it has no more authority of proscribing the actions

under review. Otherwise, the Court will not be deterred to pronounce said act as void and unconstitutional. It cannot be denied that most government actions are inspired with noble intentions, all geared towards the betterment of the nation and its people. But then again, it is important to remember this ethical principle: The end does not justify the means. No matter how noble and worthy of admiration the purpose of an act, but if the means to be employed in accomplishing it is simply irreconcilable with constitutional parameters, then it cannot still be allowed.[108] The Court cannot just turn a blind eye and simply let it pass. It will continue to uphold the Constitution and its enshrined principles. The Constitution must ever remain supreme. All must bow to the mandate of this law. Expediency must not be allowed to sap its strength nor greed for power debase its rectitude.[109]

Lest it be misunderstood, this is not the death knell for a truth commission as nobly envisioned by the present administration. Perhaps a revision of the executive issuance so as to include the earlier past administrations would allow it to pass the test of reasonableness and not be an affront to the Constitution. Of all the branches of the government, it is the judiciary which is the most interested in knowing the truth and so it will not allow itself to be a hindrance or obstacle to its attainment. It must, however, be emphasized that the search for the truth must be within constitutional bounds for ours is still a government of laws and not of men.[110] WHEREFORE, the petitions are GRANTED. Executive Order No. 1 is hereby declared UNCONSTITUTIONAL insofar as it is violative of the equal protection clause of the Constitution. As also prayed for, the respondents are hereby ordered to cease and desist from carrying out the provisions of Executive Order No. 1. SO ORDERED.

JOSE CATRAL MENDOZA Associate Justice

WE CONCUR:

See separate opinion (concurring) RENATO C. CORONA Chief Justice

Se e dissenting opinion Please see dissenting opinion

ANTONIO T. CARPIO ociate Justice

CONCHITA CARPIO MORALES Ass Associate Justice

I certify that Justice Velasco left his concurring vote See concurring & dissenting opinion PRESBITERO J. VELASCO, JR. ANTONIO EDUARDO B. NACHURA Associat e Justice Associate Justice

See separate concurring opinion See separate opinion (concurring) TERESITA J. LEONARDO-DE CASTRO ARTURO D. BRION

Associate Justice

Associate Justice

See separate concurring opinion see my separate concurring opinion DIOSDADO M. PERALTA LUCAS P. BERSAMIN Associate Justice Associate Justice

See separate dissenting opinion MARIANO C. DEL CASTILLO ROBERTO A. ABAD Ass ociate Justice Associate Justice

See separate opinion (concurring) MARTIN S. VILLARAMA, JR. JOSE PORTUGAL PEREZ Ass ociate Justice Associate Justice

See dissenting opinion MARIA LOURDES P.A. SERENO Associate Justice

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court.

RENATO C. CORONA Chief Justice

[1] [2]

Angara v. The Electoral Commission, 63 Phil. 139, 158 (1936). Bernas, The 1987 Constitution of the Republic of the Philippines; A Commentary, 1996 ed., p. xxxiv, citing Miller, Lectures on the Constitution of the United States 64 (1893); 1 Schwartz, The Powers of Government 1 (1963). [3] Cruz, Philippine Political law, 2002 ed. p. 12. [4] Id. [5] Resolution dated August 24, 2010 consolidating G.R. No. 192935 with G.R. No. 193036, rollo, pp. 87-88. [6] Section 1. The legislative power shall be vested in the Congress of the Philippines which shall consist of a Senate and a House of Representatives, except to the extent reserved to the people by the provision on initiative and referendum. [7] Biraogo Petition, p. 5, rollo, p. 7. [8] Salvador Laurel v. Hon. Desierto, G.R. No. 145368, April 12, 2002, citing F.R. Mechem, A Treatise On The Law of Public Offices and Officers. [9] International Center for Transitional Justice, <http://www.ictj.org/en/tj/138.html> visited November 20, 2010.

[10]

Freeman, The Truth Commission and Procedural Fairness, 2006 Ed., p. 12, citing Hayner, UnspeakableTruths: Facing the Challenge of Truth Commissions. [11] International Center for Transitional Justice, supra note 9. [12] Armando Doronila, Philippine Daily Inquirer, August 2, 2010. <http://newsinfo.inquirer.net/inquirerheadlines/nation/view/20100802-284444/Truth-body-told-Take-no prisoners> visited November 9, 2010. [13] Lagman Petition, pp. 50-52, rollo, pp. 58-60. [14] Rollo, pp. 111-216. [15] Otherwise known as the Administrative Code of 1987. [16] Granting Continuing Authority To The President Of The Philippines To Reorganize The National Government. [17] Otherwise known as the General Appropriations Act of 2010. [18] OSG Consolidated Comment, p. 33, rollo, p. 153, citing Uy v. Sandiganbayan, G.R. Nos. 105965-70, March 20, 2001, 354 SCRA 651, 660-661. [19] Senate of the Philippines v. Ermita, G.R. No. 169777, April 20, 2006, 488 SCRA 1, 35; and Francisco v. House of Representatives, 460 Phil. 830, 842 (2003). [20] OSG Memorandum, p. 29, rollo, p. 348. [21] G.R. No. 113105, August 19, 1994, 235 SCRA 506, 520. [22] Supra note 19, citing Pimentel Jr., v. Executive Secretary, G.R. No. 158088, July 6, 2005, 462 SCRA 623, 631-632. [23] OSG Memorandum, p. 30, rollo, p. 349. [24] G.R. No. 171396, May 3, 2006, 489 SCRA 160, 216-218. [25] Social Justice Society (SJS) v. Dangerous Drugs Board and Philippine Drug Enforcement Agency, G.R. No. 157870, November 3, 2008, 570 SCRA 410, 421; Tatad v. Secretary of the Department of Energy, 346 Phil 321 (1997); De Guia v. COMELEC, G.R. No. 104712, May 6, 1992, 208 SCRA 420, 422. [26] G.R. 132527, July 29, 2005, 465 SCRA 47, 62. [27] 84 Phil. 368, 373 (1949). [28] (1) the character of the funds or other assets involved in the case; (2) the presence of a clear case of disregard of a constitutional or statutory prohibition by the public respondent agency or instrumentality of the government; and, (3) the lack of any other party with a more direct and specific interest in the questions being raised. [29] G.R. No. 174697, July 8, 2010. [30] Kilosbayan,Inc. v. Guingona, Jr., G.R. No. 113375, May 5, 1994, 232 SCRA 110, 139. [31] Biraogo Memorandum, p. 7, rollo, p. 69. [32] Id. at 6, rollo, p. 68. [33] Id. at 9, rollo, p. 71. [34] Id. at 10, rollo, p. 72. [35] Id. at 10-11, rollo pp. 72-73. [36] Lagman Memorandum, G.R. No 193036, pp. 10-11, rollo, pp. 270-271. [37] OSG Memorandum, p. 32, rollo, p. 351. [38] Id. at 33, rollo, p. 352. [39] OSG Consolidated Comment, p. 24, rollo, p. 144. [40] OSG Memorandum, pp. 38-39, rollo, pp. 357-358. [41] Citing Department of Health v. Camposano, G.R. No. 157684, April 27, 2005, 457 SCRA 438, 450. [42] Citing Evangelista v. Jarencio, No. L-27274, November 27, 1975, 68 SCRA 99, 104. [43] Citing Rodriguez v. Santos Diaz, No. L-19553, February 29, 1964, 10 SCRA 441, 445. [44] G.R. No. 166620, April 20, 2010. [45] Consolidated Comment, p. 45, rollo, p. 165. [46] G.R. Nos. 142801-802, July 10, 2001, 360 SCRA 718, also cited in Banda, supra. [47] The Veterans Federation of the Philippines v. Reyes, G. R. No. 155027, February 28, 2006, 483 SCRA 526, 564; DOTC v. Mabalot, 428 Phil. 154, 164-165 (2002); Mondano v. Silvosa, 97 Phil. 143 (1955). [48] OSG Memorandum, p. 56, rollo, p. 375. [49] G.R. No. 112745, October 16, 1997, 280 SCRA 713, 730. [50] TSN, September 28, 2010, pp. 205-207. [51] OSG Memorandum, p. 37, rollo, p.356.

[52] [53]

G.R. 88211, September 15, 1989, 177 SCRA 688. Id. at 691. [54] 496 Phil. 886, 896-897 (2005). [55] Consolidated Comment, p. 48; rollo, p. 168. [56] Section 17. The President shall have control of all the executive departments, bureaus, and offices. He shall ensure that the laws be faithfully executed. [57] Ople v. Torres, 354 Phil. 948, 967 (1998). [58] Smart Communications, Inc. et al. v. National Telecommunications Commission , 456 Phil. 145, 156 (2003). [59] G.R. No. 96681, December 2, 1991, 204 SCRA 483. [60] Id. at 492. [61] TSN, September 28, 2010, pp. 39-44; and OSG Memorandum, p. 67, rollo, p. 339. [62] OSG Consolidated Comment, p. 55, rollo, p. 175. [63] Id. at 56, rollo, p. 176. [64] Id. [65] G.R. No. 167711, October 10, 2008, 568 SCRA 327, 339. [66] Lagman Petition, pp. 43, 50-52, rollo, pp. 51, 50-60. [67] Lagman Memorandum, G.R. 193036, pp. 28-29, rollo, pp. 347-348. [68] Lagman Petition, p. 31, rollo, p. 39. [69] Id. at 28-29, rollo, pp. 36-37. [70] Id. at 29, rollo, p. 37. [71] OSG Memorandum, p. 88; rollo, p. 407. [72] OSG Consolidated Comment. p. 68, rollo, p. 188. [73] OSG Memorandum, pp. 90-93, rollo, pp. 409-412. [74] The Philippine Judges Association v. Hon. Pardo, G.R. No. 105371, November 11, 1993, 227 SCRA 703, 711. [75] Id. at 712, citing Ichong v. Hernandez, 101 Phil. 1155 (1957); Sison, Jr. v. Ancheta, No. L-59431, July 25, 1984, 130 SCRA 654; Association of Small Landowners in the Philippines v. Secretary of Agrarian Reform , G.R. No. 7842, July 14, 1989, 175 SCRA 343, 375. [76] Guino v. Senkowski, 54 F 3d 1050 (2d. Cir. 1995) cited in Am. Jur, 2d, Vol. 16 (b), p. 302. [77] Edward Valves, Inc. v. Wake Country, 343 N.C. 426 cited in Am. Jur. 2d, Vol. 16 (b), p. 303. [78] Lehr v. Robertson, 463 US 248, 103 cited in Am. Jur. 2d, Vol. 16 (b), p. 303. [79] See Columbus Bd. of Ed. v. Penick, 443 US 449 cited Am. Jur. 2d, Vol. 16 (b), pp. 316-317. [80] See Lombard v. State of La., 373 US 267 cited in Am. Jur. 2d, Vol. 16 (b), p. 316. [81] Beltran v. Secretary of Health, 512 Phil 560, 583 (2005). [82] Cruz, Constitutional Law, 2003 ed., p. 128. [83] McErlain v. Taylor, 207 Ind. 240 cited in Am. Jur. 2d, Vol. 16 (b), p. 367. [84] Cruz, Constitutional Law, 2003 ed., pp. 135-136. [85] No. L-25246, 59 SCRA 54, 77-78 (September 12, 1974). [86] Basa v. Federacion Obrera de la Industria Tabaquera y Otros Trabajadores de Filipinas (FOITAF), No. L-27113, November 19, 1974, 61 SCRA 93, 110-111; Anuncension v. National Labor Union , No. L-26097, November 29, 1977, 80 SCRA 350, 372-373; Villegas v. Hiu Chiong Tsai Pao Ho, No. L-29646, November 10, 1978, 86 SCRA 270, 275; Dumlao v. Comelec, No. L-52245, January 22, 1980, 95 SCRA 392, 404; Ceniza v. Comelec, No. L-52304, January 28, 1980, 95 SCRA 763, 772-773;Himagan v. People, G.R. No. 113811, October 7, 1994, 237 SCRA 538; The Conference of Maritime Manning Agencies, Inc. v. POEA, G.R. No. 114714, April 21, 1995, 243 SCRA 666, 677; JMM Promotion and Management, Inc. v. Court of Appeals, G.R. No. 120095, August 5, 1996, 260 SCRA 319, 331332; and Tiu v. Court of Appeals, G.R. No. 127410, January 20, 1999, 301 SCRA 278, 288-289. See also Ichong v. Hernandez, No. L-7995, 101 Phil. 1155 (1957); Vera v. Cuevas, Nos. L-33693-94, May 31, 1979, 90 SCRA 379, 388; and Tolentino v. Secretary of Finance, G.R. Nos. 115455, 115525, 115543, 115544, 115754, 115781, 115852, 115873, and 115931, August 25, 1994, 235 SCRA 630, 684. [87] th 7 Whereas clause, Executive Order No. 1. [88] Cruz, Constitutional Law, 2003 ed., p. 128. [89] OSG, Memorandum, p. 89, rollo, p. 408. [90] th 6 Whereas clause, Executive Order No. 1

[91] [92]

Lee, Handbook of Legal Maxims, 2002 Ed., p. 118 US 357, http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=us&vol=118&invol=35 <accessed on December 4, 2010>. [93] Macalintal v. COMELEC, G.R. No. 157013, July 10, 2003, 405 SCRA 614, pp. 631-632; Manila Prince Hotel vs. GSIS, 335 Phil. 82, 101 (1997). [94] Id. at 632. [95] 756 F. Supp. 388, N.. D. Ind., 1991, Jan 30, 1991, Crim No. HCR 90-42; also http://in.findacase.com/research/wfrmDocViewer.aspx/xq/fac.19910130_0000002.NIN.htm/qx <accessed December 5, 2010> [96] McErlain v. Taylor, 207 Ind. 240 cited in Am. Jur. 2d, Vol. 16 (b), p. 367. [97] Martin v. Tollefson, 24 Wash. 2d 211 cited in Am. Jur. 2d, Vol. 16 (b), pp. 367-368 . [98] Nixon v. Administrator of General Services, 433 US 425 cited in Am. Jur. 2d, Vol. 16 (b), p. 371. [99] Hunter v. Flowers, 43 So 2d 435 cited in Am. Jur. 2d, Vol. 16 (b), p. 370. [100] Clements v. Fashing, 457 US 957. [101] See Am. Jur. 2d, Vol. 16 (b), pp. 370-371, as footnote (A state legislature may, consistently with the Equal Protection Clause, address a problem one step at a time, or even select one phase of one field and apply a remedy there, neglecting the others. [Jeffeson v. Hackney, 406 US 535]. [102] McDonald v. Board of Election Comrs of Chicago , 394 US 802 cited in Am Jur 2d, Footnote No. 9. [103] Ricketts v. City of Hardford, 74 F. 3d 1397 cited in Am. Jur. 2d, Vol. 16 (b), p. 303. [104] OSG Consolidated Comment, p. 66, rollo, p.186. [105] Lagman Memorandum, p. 30; rollo, p. 118. [106] G.R. No. 86926, October 15, 1991; 202 SCRA 680. [107] Angara v. Electoral Commission, 63 Phil. 139, 158 (1936). [108] Cruz, Philippine Political Law, 2002 ed., pp. 12-13. [109] Id. [110] Republic v. Southside Homeowners Association , G.R. No. 156951, September 22, 2006.

EN BANC
MANILA INTERNATIONAL AIRPORT AUTHORITY, Petitioner, G.R. No. 155650 Present:

PANGANIBAN, C.J., PUNO, QUISUMBING, YNARES-SANTIAGO, SANDOVAL-GUTIERREZ, - versus CARPIO, AUSTRIA-MARTINEZ, CORONA, CARPIO MORALES, CALLEJO, SR., AZCUNA, COURT OF APPEALS, CITY OF PARAAQUE, CITY MAYOR OF PARAAQUE, SANGGUNIANG TINGA, CHICO-NAZARIO, GARCIA, and

PANGLUNGSOD NG PARAAQUE, CITY ASSESSOR OF PARAAQUE, and CITY TREASURER OF PARAAQUE, Respondents.

VELASCO, JR., JJ.

Promulgated:

July 20, 2006

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

D E C I S I ON
CARPIO, J.:

The Antecedents Petitioner Manila International Airport Authority (MIAA) operates the Ninoy Aquino International Airport (NAIA) Complex in Paraaque City under Executive Order No. 903, otherwise known as the Revised Charter of the Manila International Airport Authority (MIAA Charter). Executive Order No. 903 was issued on 21 July 1983 by then President Ferdinand E. Marcos. Subsequently, Executive Order Nos. 909[1] and 298[2] amended the MIAA Charter.

As operator of the international airport, MIAA administers the land, improvements and equipment within the NAIA Complex. The MIAA Charter transferred to MIAA approximately 600 hectares of land,[3] including the runways and buildings (Airport Lands and Buildings) then under the Bureau of Air Transportation.[4] The MIAA Charter further provides that no portion of the land

transferred to MIAA shall be disposed of through sale or any other mode unless specifically approved by the President of thePhilippines.[5]

On 21 March 1997, the Office of the Government Corporate Counsel (OGCC) issued Opinion No. 061. The OGCC opined that the Local Government Code of 1991 withdrew the exemption from real estate tax granted to MIAA under Section 21 of the MIAA Charter. Thus, MIAA negotiated with respondent City of Paraaque to pay the real estate tax imposed by the City. MIAA then paid some of the real estate tax already due.

On 28 June 2001, MIAA received Final Notices of Real Estate Tax Delinquency from the City of Paraaque for the taxable years 1992 to 2001. MIAAs real estate tax delinquency is broken down as follows:

TAX DECLARATION E-016-01370 E-016-01374 E-016-01375 E-016-01376 E-016-01377 E-016-01378 E-016-01379 E-016-01380 *E-016-013-85 *E-016-01387

TAXABLE 1992-2001 1992-2001 1992-2001 1992-2001 1992-2001 1992-2001 1992-2001 1992-2001 1998-2001 1998-2001

YEAR

TAX DUE 19,558,160.00 111,689,424.90 20,276,058.00 58,144,028.00 18,134,614.65 111,107,950.40 4,322,340.00 7,776,436.00 6,444,810.00 34,876,800.00

PENALTY 11,201,083.20 68,149,479.59 12,371,832.00 35,477,712.00 11,065,188.59 67,794,681.59 2,637,360.00 4,744,944.00 2,900,164.50 5,694,560.00

TOTAL 30,789,243.20 179,838,904.49 32,647,890.00 93,621,740.00 29,199,803.24 178,902,631.99 6,959,700.00 12,521,380.00 9,344,974.50 50,571,360.00

*E-016-01396 GRAND TOTAL

1998-2001

75,240.00 P392,435,861.95

33,858.00 P232,070,863.47

109,098.00 P 624,506,725.42

1992-1997 RPT was paid on Dec. 24, 1997 as per O.R.#9476102 for P4,207,028.75 #9476101 for P28,676,480.00 #9476103 for P49,115.00[6]

On 17 July 2001, the City of Paraaque, through its City Treasurer, issued notices of levy and warrants of levy on the Airport Lands and Buildings. The Mayor of the City of Paraaque threatened to sell at public auction the Airport Lands and Buildings should MIAA fail to pay the real estate tax delinquency. MIAA thus sought a clarification of OGCC Opinion No. 061.

On 9 August 2001, the OGCC issued Opinion No. 147 clarifying OGCC Opinion No. 061. The OGCC pointed out that Section 206 of the Local Government Code requires persons exempt from real estate tax to show proof of exemption. The OGCC opined that Section 21 of the MIAA Charter is the proof that MIAA is exempt from real estate tax.

On 1 October 2001, MIAA filed with the Court of Appeals an original petition for prohibition and injunction, with prayer for preliminary injunction or temporary restraining order. The petition sought to restrain the City of Paraaque from imposing real estate tax on, levying against, and auctioning for public sale the Airport Lands and Buildings. The petition was docketed as CA-G.R. SP No. 66878. On 5 October 2001, the Court of Appeals dismissed the petition because MIAA filed it beyond the 60-day reglementary period. The Court of Appeals also

denied on 27 September 2002 MIAAs motion for reconsideration and supplemental motion for reconsideration. Hence, MIAA filed on 5 December 2002 the present petition for review.[7]

Meanwhile, in January 2003, the City of Paraaque posted notices of auction sale at the Barangay Halls of Barangays Vitalez, Sto. Nio, and Tambo, Paraaque City; in the public market of Barangay La Huerta; and in the main lobby of the Paraaque City Hall. The City of Paraaque published the notices in the 3 and 10 January 2003 issues of thePhilippine Daily Inquirer, a newspaper of general circulation in the Philippines. The notices announced the public auction sale of the Airport Lands and Buildings to the highest bidder on 7 February 2003, 10:00 a.m., at the Legislative Session Hall Building of Paraaque City.

A day before the public auction, or on 6 February 2003, at 5:10 p.m., MIAA filed before this Court an Urgent Ex-Parte and Reiteratory Motion for the Issuance of a Temporary Restraining Order. The motion sought to restrain respondents the City of Paraaque, City Mayor of Paraaque, Sangguniang Panglungsod ng Paraaque, City Treasurer of Paraaque, and the City Assessor of Paraaque (respondents) from auctioning the Airport Lands and Buildings.

On 7 February 2003, this Court issued a temporary restraining order (TRO) effective immediately. The Court ordered respondents to cease and desist from selling at public auction the Airport Lands and Buildings. Respondents received the TRO on the same day that the Court issued it. However, respondents received the TRO only at 1:25 p.m. or three hours after the conclusion of the public auction. On 10 February 2003, this Court issued a Resolution confirming nunc pro tunc the TRO.

On 29 March 2005, the Court heard the parties in oral arguments. In compliance with the directive issued during the hearing, MIAA, respondent City of Paraaque, and the Solicitor General subsequently submitted their respective Memoranda.

MIAA admits that the MIAA Charter has placed the title to the Airport Lands and Buildings in the name of MIAA. However, MIAA points out that it cannot claim ownership over these properties since the real owner of the Airport Lands and Buildings is the Republic of the Philippines. The MIAA Charter mandates MIAA to devote theAirport Lands and Buildings for the benefit of the general public. Since the Airport Lands and Buildings are devoted to public use and public service, the ownership of these properties remains with the State. The Airport Lands and Buildings are thus inalienable and are not subject to real estate tax by local governments.

MIAA also points out that Section 21 of the MIAA Charter specifically exempts MIAA from the payment of real estate tax. MIAA insists that it is also exempt from real estate tax under Section 234 of the Local Government Code because the Airport Lands and Buildings are owned by the Republic. To justify the exemption, MIAA invokes the principle that the government cannot tax itself. MIAA points out that the reason for tax exemption of public property is that its taxation would not inure to any public advantage, since in such a case the tax debtor is also the tax creditor. Respondents invoke Section 193 of the Local Government Code, which expressly withdrew the tax exemption privileges of government-owned and-controlled corporations upon the effectivity of the Local Government Code. Respondents also argue that a basic rule of statutory construction is that the express mention of one person, thing, or act excludes all others. An

international airport is not among the exceptions mentioned in Section 193 of the Local Government Code. Thus, respondents assert that MIAA cannot claim that the Airport Lands and Buildings are exempt from real estate tax.

Respondents also cite the ruling of this Court in Mactan International Airport v. Marcos[8] where we held that the Local Government Code has withdrawn the exemption from real estate tax granted to international airports. Respondents further argue that since MIAA has already paid some of the real estate tax assessments, it is now estopped from claiming that the Airport Lands and Buildings are exempt from real estate tax.

The Issue This petition raises the threshold issue of whether the Airport Lands and Buildings of MIAA are exempt from real estate tax under existing laws. If so exempt, then the real estate tax assessments issued by the City of Paraaque, and all proceedings taken pursuant to such assessments, are void. In such event, the other issues raised in this petition become moot.

The Courts Ruling We rule that MIAAs Airport Lands and Buildings are exempt from real estate tax imposed by local governments.

First, MIAA is not a government-owned or controlled corporation but an instrumentality of the National Government and thus exempt from local taxation. Second, the real properties of MIAA are owned by the Republic of the Philippines and thus exempt from real estate tax.

1. MIAA is Not a Government-Owned or Controlled Corporation

Respondents argue that MIAA, being a government-owned or controlled corporation, is not exempt from real estate tax. Respondents claim that the deletion of the phrase any government-owned or controlled so exempt by its charter in Section 234(e) of the Local Government Code withdrew the real estate tax exemption of government-owned or controlled corporations. The deleted phrase appeared in Section 40(a) of the 1974 Real Property Tax Code enumerating the entities exempt from real estate tax. There is no dispute that a government-owned or controlled corporation is not exempt from real estate tax. However, MIAA is not a government-owned or controlled corporation. Section 2(13) of the Introductory Provisions of the Administrative Code of 1987 defines a government-owned or controlled corporation as follows:

SEC. 2. General Terms Defined. x x x x

(13) Government-owned or controlled corporation refers to any agency organized as a stock or non-stock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital stock: x x x. (Emphasis supplied)

A government-owned or controlled corporation must be organized as a stock or non-stock corporation. MIAA is not organized as a stock or non-stock corporation. MIAA is not a stock corporation because it has no capital stock divided into shares. MIAA has no stockholders or voting shares. Section 10 of the MIAA Charter[9]provides:

SECTION 10. Capital. The capital of the Authority to be contributed by the National Government shall be increased from Two and One-half Billion (P2,500,000,000.00) Pesos to Ten Billion (P10,000,000,000.00) Pesos to consist of:

(a) The value of fixed assets including airport facilities, runways and equipment and such other properties, movable and immovable[,] which may be contributed by the National Government or transferred by it from any of its agencies, the valuation of which shall be determined jointly with the Department of Budget and Management and the Commission on Audit on the date of such contribution or transfer after making due allowances for depreciation and other deductions taking into account the loans and other liabilities of the Authority at the time of the takeover of the assets and other properties;
(b) That the amount of P605 million as of December 31, 1986 representing about seventy percentum (70%) of the unremitted share of the National Government from 1983 to 1986 to be remitted to the National Treasury as provided for in Section 11

of E. O. No. 903 as amended, shall be converted into the equity of the National Government in the Authority. Thereafter, the Government contribution to the capital of the Authority shall be provided in the General Appropriations Act.

Clearly, under its Charter, MIAA does not have capital stock that is divided into shares. Section 3 of the Corporation Code[10] defines a stock corporation as one whose capital stock is divided into shares and x x x authorized to distribute to the holders of such shares dividends x x x. MIAA has capital but it is not divided into shares of stock. MIAA has no stockholders or voting shares. Hence, MIAA is not a stock corporation.

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

Section 88 of the Corporation Code provides that non-stock corporations are organized for charitable, religious, educational, professional, cultural, recreational, fraternal, literary, scientific, social, civil service, or similar purposes, like trade, industry, agriculture and like chambers. MIAA is not organized for any of these purposes. MIAA, a public utility, is organized to operate an international and domestic airport for public use.

Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a government-owned or controlled corporation. What then is the legal status of MIAA within the National Government? MIAA is a government instrumentality vested with corporate powers to perform efficiently its governmental functions. MIAA is like any other governmentinstrumentality, the only difference is that MIAA is vested with corporate powers. Section 2(10) of the Introductory Provisions of the Administrative Code defines a government instrumentality as follows:

SEC. 2. General Terms Defined. x x x x

(10) Instrumentality refers to any agency of the National Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. x x x (Emphasis supplied)

When the law vests in a government instrumentality corporate powers, the instrumentality does not become a corporation. Unless the government instrumentality is organized as a stock or non-stock corporation, it remains a government instrumentality exercising not only governmental but also corporate powers. Thus, MIAA exercises the governmental powers of eminent domain,[12] police authority[13] and the levying of fees and charges.[14] At the same time, MIAA exercises all the powers of a corporation under the Corporation Law, insofar as these powers are not inconsistent with the provisions of this Executive Order.[15]

Likewise, when the law makes a government instrumentality operationally autonomous, the instrumentality remains part of the National Government machinery although not integrated with the department framework. The MIAA Charter expressly states that transforming MIAA into a separate and autonomous body[16] will make its operation more financially viable.[17]

Many government instrumentalities are vested with corporate powers but they do not become stock or non-stock corporations, which is a necessary condition before an agency or instrumentality is deemed a government-owned or controlled corporation. Examples are the Mactan International Airport Authority, the Philippine Ports Authority, the University of the Philippines and Bangko Sentral ng Pilipinas. All these government instrumentalities exercise corporate powers but they are not organized as stock or non-stock corporations as required by Section 2(13) of the Introductory Provisions of the Administrative Code. These government instrumentalities are sometimes loosely called government corporate entities. However, they are not government-owned or controlled corporations in the strict sense as understood under the Administrative Code, which is the governinglaw defining the legal relationship and status of government entities.

A government instrumentality like MIAA falls under Section 133(o) of the Local Government Code, which states:

SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. Unless otherwise provided herein , the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following:

xxxx

(o) Taxes, fees or charges of any kind on the National agencies and instrumentalities and local government and underscoring supplied)

Government, its units. (Emphasis

Section 133(o) recognizes the basic principle that local governments cannot tax the national government, which historically merely delegated to local governments the power to tax. While the 1987 Constitution now includes taxation as one of the powers of local governments, local governments may only exercise such power subject to such guidelines and limitations as the Congress may provide.[18] When local governments invoke the power to tax on national government instrumentalities, such power is construed strictly against local governments. The rule is that a tax is never presumed and there must be clear language in the law imposing the tax. Any doubt whether a person, article or activity is taxable is resolved against taxation. This rule applies with greater force when local governments seek to tax national government instrumentalities. Another rule is that a tax exemption is strictly construed against the taxpayer claiming the exemption. However, when Congress grants an exemption to a national government instrumentality from local taxation, such exemption is construed liberally in favor of the national government instrumentality. As this Court declared in Maceda v.Macaraig, Jr.:

The reason for the rule does not apply in the case of exemptions running to the benefit of the government itself or its agencies. In such case the practical effect of an exemption is merely to reduce the amount of money that has to be handled by government in the course of its operations. For these reasons, provisions granting exemptions to government agencies may be construed liberally, in favor of non taxliability of such agencies.[19]

There is, moreover, no point in national and local governments taxing each other, unless a sound and compelling policy requires such transfer of public funds from one government pocket to another. There is also no reason for local governments to tax national government instrumentalities for rendering essential public services to inhabitants of local governments. The only exception is when the legislature clearly intended to tax government instrumentalities for the delivery of essential public services for sound and compelling policy considerations. There must be express language in the law empowering local governments to tax national government instrumentalities. Any doubt whether such power exists is resolved against local governments.

Thus, Section 133 of the Local Government Code states that unless otherwise provided in the Code, local governments cannot tax national government instrumentalities. As this Court held in Basco v. Philippine Amusements and Gaming Corporation:

The states have no power by taxation or otherwise, to retard, impede, burden or in any manner control the operation of constitutional laws enacted by Congress to carry into execution the powers vested in the federal government. (MC Culloch v. Maryland, 4 Wheat 316, 4 L Ed. 579)
This doctrine emanates from the supremacy of the National Government over local governments.

Justice Holmes, speaking for the Supreme Court, made reference to the entire absence of power on the part of the States to touch, in that way (taxation) at least, the instrumentalities of the United States (Johnson v. Maryland, 254 US 51) and it can be agreed that no

state or political subdivision can regulate a federal instrumentality in such a way as to prevent it from consummating its federal responsibilities, or even to seriously burden it in the accomplishment of them. (Antieau, Modern Constitutional Law, Vol. 2, p. 140, emphasis supplied)

Otherwise, mere creatures of the State can defeat National policies thru extermination of what local authorities may perceive to be undesirable activities or enterprise using the power to tax as a tool for regulation (U.S. v. Sanchez, 340 US 42).

The power to tax which was called by Justice Marshall as the power to destroy (Mc Culloch v. Maryland, supra) cannot be allowed to defeat an instrumentality or creation of the very entity which has the inherent power to wield it.
[20]

2. Airport Lands and Buildings of MIAA are Owned by the Republic

a. Airport Lands and Buildings are of Public Dominion

The Airport Lands and Buildings of MIAA are property of public dominion and therefore owned by the State or the Republic of the Philippines. The Civil Code provides:

ARTICLE 419. Property is either of public dominion or of private ownership.

ARTICLE 420. The following things are property of public dominion :

(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character;

(2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth. (Emphasis supplied)

ARTICLE 421. All other property of the State, which is not of the character stated in the preceding article, is patrimonial property.

ARTICLE 422. Property of public dominion, when no longer intended for public use or for public service, shall form part of the patrimonial property of the State.

No one can dispute that properties of public dominion mentioned in Article 420 of the Civil Code, like roads, canals, rivers, torrents, ports and bridges constructed by the State, are owned by the State. The term ports includes seaports and airports. The MIAA Airport Lands and Buildings constitute a port constructed by the State. Under Article 420 of the Civil Code, the MIAA Airport Lands and Buildings are properties of public dominion and thus owned by the State or the Republic of thePhilippines.

The Airport Lands and Buildings are devoted to public use because they are used by the public for international and domestic travel and

transportation. The fact that the MIAA collects terminal fees and other charges from the public does not remove the character of the Airport Lands and Buildings as properties for public use. The operation by the government of a tollway does not change the character of the road as one for public use. Someone must pay for the maintenance of the road, either the public indirectly through the taxes they pay the government, or only those among the public who actually use the road through the toll fees they pay upon using the road. The tollwaysystem is even a more efficient and equitable manner of taxing the public for the maintenance of public roads.

The charging of fees to the public does not determine the character of the property whether it is of public dominion or not. Article 420 of the Civil Code defines property of public dominion as one intended for public use. Even if the government collects toll fees, the road is still intended for public use if anyone can use the road under the same terms and conditions as the rest of the public. The charging of fees, the limitation on the kind of vehicles that can use the road, the speed restrictions and other conditions for the use of the road do not affect the public character of the road. The terminal fees MIAA charges to passengers, as well as the landing fees MIAA charges to airlines, constitute the bulk of the income that maintains the operations of MIAA. The collection of such fees does not change the character of MIAA as an airport for public use. Such fees are often termed users tax. This means taxing those among the public who actually use a public facility instead of taxing all the public including those who never use the particular public facility. A users tax is more equitable a principle of taxation mandated in the 1987 Constitution.[21] The Airport Lands and Buildings of MIAA, which its Charter calls the principal airport of the Philippines for both international and domestic air traffic,[22] are properties of public dominion because they are intended for public use. As properties of public dominion, they indisputably belong to the State or the Republic of the Philippines.

b. Airport Lands and Buildings are Outside the Commerce of Man

The Airport Lands and Buildings of MIAA are devoted to public use and thus are properties of public dominion. As properties of public dominion, the Airport Landsand Buildings are outside the commerce of man. The Court has ruled repeatedly that properties of public dominion are outside the commerce of man. As early as 1915, this Court already ruled in Municipality of Cavite v. Rojas that properties devoted to public use are outside the commerce of man, thus:

According to article 344 of the Civil Code: Property for public use in provinces and in towns comprises the provincial and town roads, the squares, streets, fountains, and public waters, the promenades, and public works of general service supported by said towns or provinces.

The said Plaza Soledad being a promenade for public use, the municipal council of Cavite could not in 1907 withdraw or exclude from public use a portion thereof in order to lease it for the sole benefit of the defendant Hilaria Rojas. In leasing a portion of said plaza or public place to the defendant for private use the plaintiff municipality exceeded its authority in the exercise of its powers by executing a contract over a thing of which it could not dispose, nor is it empowered so to do.
The Civil Code, article 1271, prescribes that everything which is not outside the commerce of man may be the object of a contract, and plazas and streets are outside of this commerce, as was decided by the supreme court of Spain in its decision of February 12, 1895, which says: Communal things that cannot be sold because they are by their very nature outside of commerce are those for public use, such as the plazas, streets, common lands, rivers, fountains, etc. (Emphasis supplied)
[23]

Again in Espiritu v. Municipal Council, the Court declared that properties of public dominion are outside the commerce of man:

xxx Town plazas are properties of public dominion , to be devoted to public use and to be made available to the public in general. They are outside the commerce of man and cannot be disposed of or even leased by the municipality to private parties. While in case of war or during an emergency, town plazas may be occupied temporarily by private individuals, as was done and as was tolerated by the Municipality of Pozorrubio, when the emergency has ceased, said temporary occupation or use must also cease, and the town officials should see to it that the town plazas should ever be kept open to the public and free from encumbrances or illegal private constructions.
[24]

(Emphasis supplied)

The Court has also ruled that property of public dominion, being outside the commerce of man, cannot be the subject of an auction sale.[25]

Properties of public dominion, being for public use, are not subject to levy, encumbrance or disposition through public or private sale. Any encumbrance, levy on execution or auction sale of any property of public dominion is void for being contrary to public policy. Essential public services will stop if properties of public dominion are subject to encumbrances, foreclosures and auction sale. This will happen if the City of Paraaque can foreclose and compel the auction sale of the 600-hectare runway of the MIAA for non-payment of real estate tax. Before MIAA can encumber[26] the Airport Lands and Buildings, the President must first withdraw from public use the Airport Lands and Buildings. Sections 83 and 88 of the Public Land Law or Commonwealth Act No.

141, which remains to this day the existing general law governing the classification and disposition of lands of the public domain other than timber and mineral lands,[27] provide:

SECTION 83. Upon the recommendation of the Secretary of Agriculture and Natural Resources, the President may designate by proclamation any tract or tracts of land of the public domain as reservations for the use of the Republic of the Philippines or of any of its branches, or of the inhabitants thereof, in accordance with regulations prescribed for this purposes, or for quasi-public uses or purposes when the public interest requires it, including reservations for highways, rights of way for railroads, hydraulic power sites, irrigation systems, communal pastures or lequas communales, public parks, public quarries, public fishponds, working mens village and other improvements for the public benefit.

SECTION 88. The tract or tracts of land reserved under the provisions of Section eighty-three shall be non-alienable and shall not be subject to occupation, entry, sale, lease, or other disposition until again declared alienable under the provisions of this Act or by proclamation of the President . (Emphasis and underscoring supplied)

Thus, unless the President issues a proclamation withdrawing the Airport Lands and Buildings from public use, these properties remain properties of public dominion and are inalienable. Since the Airport Lands and Buildings are inalienable in their present status as properties of public dominion, they are not subject to levy on execution or foreclosure sale. As long as the Airport Lands and Buildings are reserved for public use, their ownership remains with the State or the Republic of the Philippines.

The authority of the President to reserve lands of the public domain for public use, and to withdraw such public use, is reiterated in Section 14, Chapter 4, Title I, Book III of the Administrative Code of 1987, which states:

SEC. 14. Power to Reserve Lands of the Public and Private Domain of the Government. (1) The President shall have the power to reserve for settlement or public use, and for specific public purposes, any of the lands of the public domain, the use of which is not otherwise directed by law. The reserved land shall thereafter remain subject to the specific public purpose indicated until otherwise provided by law or proclamation;

x x x x. (Emphasis supplied)

There is no question, therefore, that unless the Airport Lands and Buildings are withdrawn by law or presidential proclamation from public use, they are properties of public dominion, owned by the Republic and outside the commerce of man.

c. MIAA is a Mere Trustee of the Republic

MIAA is merely holding title to the Airport Lands and Buildings in trust for the Republic. Section 48, Chapter 12, Book I of the Administrative Code allows instrumentalities like MIAA to hold title to real properties owned by the Republic, thus:

SEC. 48. Official Authorized to Convey Real Property . Whenever real property of the Government is authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of the government by the following:

(1) For property belonging to and titled in the name of the Republic of the Philippines, by the President, unless the authority therefor is expressly vested by law in another officer.
(2) For property belonging to the Republic of the Philippines but titled in the name of any political subdivision or of any corporate agency or instrumentality, by the executive head of the agency or instrumentality. (Emphasis supplied)

In MIAAs case, its status as a mere trustee of the Airport Lands and Buildings is clearer because even its executive head cannot sign the deed of conveyance on behalf of the Republic. Only the President of the Republic can sign such deed of conveyance.[28]

d. Transfer to MIAA was Meant to Implement a Reorganization

The MIAA Charter, which is a law, transferred to MIAA the title to the Airport Lands and Buildings from the Bureau of Air Transportation of the Department of Transportation and Communications. The MIAA Charter provides:
SECTION 3. Creation of the Manila International Airport Authority. x x x x

The land where the Airport is presently located as well as the surrounding land area of approximately six hundred hectares, are hereby transferred, conveyed and assigned to the ownership and administration of the Authority, subject to existing rights, if any. The Bureau of Lands and other appropriate government agencies shall undertake an actual survey of the area transferred within one year from the promulgation of this Executive Order and the corresponding title to be issued in the

name of the Authority. Any portion thereof shall not be disposed through sale or through any other mode unless specifically approved by the President of the Philippines. (Emphasis supplied)

SECTION 22. Transfer of Existing Facilities and Intangible Assets. All existing public airport facilities, runways, lands, buildings and other property , movable or immovable, belonging to the Airport, and all assets, powers, rights, interests and privileges belonging to the Bureau of Air Transportation relating to airport works or air operations, including all equipment which are necessary for the operation of crash fire and rescue facilities, are hereby transferred to the Authority. (Emphasis supplied)

SECTION 25. Abolition of the Manila International Airport as a Division in the Bureau of Air Transportation and Transitory Provisions. The Manila International Airport including theManila Domestic Airport as a division under the Bureau of Air Transportation is hereby abolished.

x x x x.

The MIAA Charter transferred the Airport Lands and Buildings to MIAA without the Republic receiving cash, promissory notes or even stock since MIAA is not a stock corporation. The whereas clauses of the MIAA Charter explain the rationale for the transfer of the Airport Lands and Buildings to MIAA, thus:
WHEREAS, the Manila International Airport as the principal airport of the Philippines for both international and domestic air traffic, is required to provide standards of airport accommodation and service comparable with the best airports in the world;

WHEREAS, domestic and other terminals, general aviation and other facilities, have to be upgraded to meet the current and future air traffic and other demands of aviation in Metro Manila;

WHEREAS, a management and organization study has indicated that the objectives of providing high standards of accommodation and service within the context of a financially viable operation, will best be achieved by a separate and autonomous body; and

WHEREAS, under Presidential Decree No. 1416, as amended by Presidential Decree No. 1772, the President of the Philippines is given continuing authority to reorganize the National Government, which authority includes the creation of new entities, agencies and instrumentalities of the Government[ .] (Emphasis supplied)

The transfer of the Airport Lands and Buildings from the Bureau of Air Transportation to MIAA was not meant to transfer beneficial ownership of these assets from the Republic to MIAA. The purpose was merely to reorganize a division in the Bureau of Air Transportation into a separate and autonomous body. The Republic remains the beneficial owner of the Airport Lands and Buildings. MIAA itself is owned solely by the Republic. No party claims any ownership rights over MIAAs assets adverse to the Republic. The MIAA Charter expressly provides that the Airport Lands and Buildings shall not be disposed through sale or through any other mode unless specifically approved by the President of the Philippines. This only means that the Republic retained the beneficial ownership of the Airport Lands and Buildings because under Article 428 of the Civil Code, only the owner has the right to x x x dispose of a thing. Since MIAA cannot dispose of the Airport Lands and Buildings, MIAA does not own theAirport Lands and Buildings.

At any time, the President can transfer back to the Republic title to the Airport Lands and Buildings without the Republic paying MIAA any

consideration. Under Section 3 of the MIAA Charter, the President is the only one who can authorize the sale or disposition of the Airport Lands and Buildings. This only confirms that the Airport Lands and Buildings belong to the Republic.

e. Real Property Owned by the Republic is Not Taxable

Section 234(a) of the Local Government Code exempts from real estate tax any [r]eal property owned by the Republic of the Philippines. Section 234(a) provides:
SEC. 234. Exemptions from Real Property Tax. The following are exempted from payment of the real property tax:

(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person;

x x x. (Emphasis supplied)

This exemption should be read in relation with Section 133(o) of the same Code, which prohibits local governments from imposing [t]axes, fees or charges of any kind on the National Government, its agencies and instrumentalities x x x. The real properties owned by the Republic are titled either in the name of the Republic itself or in the name of agencies or instrumentalities of the National Government. The Administrative Code allows real property owned by the Republic to be titled in the name of agencies or

instrumentalities of the national government. Such real properties remain owned by the Republic and continue to be exempt from real estate tax. The Republic may grant the beneficial use of its real property to an agency or instrumentality of the national government. This happens when title of the real property is transferred to an agency or instrumentality even as the Republic remains the owner of the real property. Such arrangement does not result in the loss of the tax exemption. Section 234(a) of the Local Government Code states that real property owned by the Republic loses its tax exemption only if the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person. MIAA, as a government instrumentality, is not a taxable person under Section 133(o) of the Local Government Code. Thus, even if we assume that the Republic has granted to MIAA the beneficial use of the Airport Lands and Buildings, such fact does not make these real properties subject to real estate tax.

However, portions of the Airport Lands and Buildings that MIAA leases to private entities are not exempt from real estate tax. For example, the land area occupied by hangars that MIAA leases to private corporations is subject to real estate tax. In such a case, MIAA has granted the beneficial use of such land area for a consideration to ataxable person and therefore such land area is subject to real estate tax. In Lung Center of the Philippines v. Quezon City, the Court ruled:

Accordingly, we hold that the portions of the land leased to private entities as well as those parts of the hospital leased to private individuals are not exempt from such taxes. On the other hand, the portions of the land occupied by the hospital and portions of the hospital used for its patients, whether paying or non-paying, are exempt from real property taxes.
[29]

3. Refutation of Arguments of Minority

The minority asserts that the MIAA is not exempt from real estate tax because Section 193 of the Local Government Code of 1991 withdrew the tax exemption of all persons, whether natural or juridical upon the effectivity of the Code. Section 193 provides:

SEC. 193. Withdrawal of Tax Exemption Privileges Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or controlled corporations, except local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions are hereby withdrawn upon effectivity of this Code. (Emphasis supplied)

The minority states that MIAA is indisputably a juridical person. The minority argues that since the Local Government Code withdrew the tax exemption of all juridical persons, then MIAA is not exempt from real estate tax. Thus, the minority declares:

It is evident from the quoted provisions of the Local Government Code that the withdrawn exemptions from realty tax cover not just GOCCs, but all persons. To repeat, the provisions lay down the explicit proposition that the withdrawal of realty tax exemption applies to all persons. The reference to or the inclusion of GOCCs is only clarificatory or illustrative of the explicit provision.

The term All persons encompasses the two classes of persons recognized under our laws, natural and juridical persons. Obviously, MIAA is not a natural person. Thus, the determinative test is not just whether MIAA is a GOCC, but whether MIAA is a juridical person at all. (Emphasis and underscoring in the original)

The minority posits that the determinative test whether MIAA is exempt from local taxation is its status whether MIAA is a juridical person or not. The minority also insists that Sections 193 and 234 may be examined in isolation from Section 133(o) to ascertain MIAAs claim of exemption. The argument of the minority is fatally flawed. Section 193 of the Local Government Code expressly withdrew the tax exemption of all juridical persons [u]nlessotherwise provided in this Code. Now, Section 133(o) of the Local Government Code expressly provides otherwise, specifically prohibiting local governments from imposing any kind of tax on national government instrumentalities. Section 133(o) states:

SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following:

xxxx

(o) Taxes, fees or charges of any kinds on the National Government, its agencies and instrumentalities, underscoring supplied) and local government units. (Emphasis and

By express mandate of the Local Government Code, local governments cannot impose any kind of tax on national government instrumentalities like the MIAA. Local governments are devoid of power to tax the national government, its agencies and instrumentalities. The taxing powers of local governments do not extend to the national government, its agencies and instrumentalities, [u]nless otherwise provided in this Code as stated in the saving clause of Section 133. The saving clause refers to Section

234(a) on the exception to the exemption from real estate tax of real property owned by the Republic.

The minority, however, theorizes that unless exempted in Section 193 itself, all juridical persons are subject to tax by local governments. The minority insists that the juridical persons exempt from local taxation are limited to the three classes of entities specifically enumerated as exempt in Section 193. Thus, the minority states:

x x x Under Section 193, the exemption is limited to (a) local water districts; (b) cooperatives duly registered under Republic Act No. 6938; and (c) non-stock and nonprofit hospitals and educational institutions. It would be belaboring the obvious why the MIAA does not fall within any of the exempt entities under Section 193. (Emphasis supplied)

The minoritys theory directly contradicts and completely negates Section 133(o) of the Local Government Code. This theory will result in gross absurdities. It will make the national government, which itself is a juridical person, subject to tax by local governments since the national government is not included in the enumeration of exempt entities in Section 193. Under this theory, local governments can impose any kind of local tax, and not only real estate tax, on the national government.

Under the minoritys theory, many national government instrumentalities with juridical personalities will also be subject to any kind of local tax, and not only real estate tax. Some of the national government instrumentalities vested by law with juridical [30] personalities are: Bangko Sentral ng Pilipinas, Philippine Rice Research [31] Institute, Laguna Lake

Development Authority,[32] Fisheries Development Authority,[33] Bases Conversion Development Authority,[34] Philippine Ports Authority,[35] Cagayan de Oro Port Authority,[36] San Fernando Port Authority,[37] Cebu Port Authority,[38] and Philippine National Railways.[39]

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

Section 133 of the Local Government Code starts with the saving clause [u]nless otherwise provided in this Code. This means that unless the Local Government Code grants an express authorization, local governments have no power to tax the national government, its agencies and instrumentalities. Clearly, the rule is local governments have no power to tax the national government, its agencies and instrumentalities. As an exception to this rule, local governments may tax the national government, its agencies and instrumentalities only if the Local Government Code expressly so provides.

The saving clause in Section 133 refers to the exception to the exemption in Section 234(a) of the Code, which makes the national government subject to real estate taxwhen it gives the beneficial use of its real properties to a taxable entity. Section 234(a) of the Local Government Code provides:

SEC. 234. Exemptions from Real Property Tax The following are exempted from payment of the real property tax:

(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person .

x x x. (Emphasis supplied)

Under Section 234(a), real property owned by the Republic is exempt from real estate tax. The exception to this exemption is when the government gives the beneficial use of the real property to a taxable entity. The exception to the exemption in Section 234(a) is the only instance when the national government, its agencies and instrumentalities are subject to any kind of tax by local governments. The exception to the exemption applies only to real estate tax and not to any other tax. The justification for the exception to the exemption is that the real property, although owned by the Republic, is not devoted to public use or public service but devoted to the private gain of a taxable person.

The minority also argues that since Section 133 precedes Section 193 and 234 of the Local Government Code, the later provisions prevail over Section 133. Thus, the minority asserts:

x x x Moreover, sequentially Section 133 antecedes Section 193 and 234. Following an accepted rule of construction, in case of conflict the subsequent provisions should prevail. Therefore, MIAA, as a juridical person, is subject to real property taxes, the general exemptions attaching to instrumentalities under Section 133(o) of the Local Government Code being qualified by Sections 193 and 234 of the same law. (Emphasis supplied)

The minority assumes that there is an irreconcilable conflict between Section 133 on one hand, and Sections 193 and 234 on the other. No one has urged that there is such a conflict, much less has any one presented a persuasive argument that there is such a conflict. The minoritys assumption of an irreconcilable conflict in the statutory provisions is an egregious error for two reasons.

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

Second, Section 133 is entitled Common Limitations on the Taxing Powers of Local Government Units. Section 133 limits the grant to local governments of the power to tax, and not merely the exercise of a delegated power to tax. Section 133 states that the taxing powers of local governments shall not extend to the levy of any kind of tax on the national government, its agencies and instrumentalities. There is no clearer limitation on the taxing power than this. Since Section 133 prescribes the common limitations on the taxing powers of local governments, Section 133 logically prevails over Section 193 which grants local governments such taxing powers. By their very meaning and purpose, the common limitations on the taxing power prevail over the grant or exercise of the taxing power. If the taxing power of local governments in Section 193 prevails over the limitations on such taxing power in Section 133,

then local governments can impose any kind of tax on the national government, its agencies and instrumentalities a gross absurdity.

Local governments have no power to tax the national government, its agencies and instrumentalities, except as otherwise provided in the Local Government Code pursuant to the saving clause in Section 133 stating [u]nless otherwise provided in this Code. This exception which is an exception to the exemption of the Republic from real estate tax imposed by local governments refers to Section 234(a) of the Code. The exception to the exemption in Section 234(a) subjects real property owned by the Republic, whether titled in the name of the national government, its agencies or instrumentalities, to real estate tax if the beneficial use of such property is given to a taxable entity. The minority also claims that the definition in the Administrative Code of the phrase government-owned or controlled corporation is not controlling. The minority points out that Section 2 of the Introductory Provisions of the Administrative Code admits that its definitions are not controlling when it provides:
SEC. 2. General Terms Defined. Unless the specific words of the text, or the context as a whole, or a particular statute, shall require a different meaning:

xxxx

The minority then concludes that reliance on the Administrative Code definition is flawed.

The minoritys argument is a non sequitur. True, Section 2 of the Administrative Code recognizes that a statute may require a different meaning than that defined in the Administrative Code. However, this does not automatically mean that the definition in the Administrative Code does not apply to the Local Government Code. Section 2 of the Administrative Code clearly states that unless the specific words x x x of a particular statute shall require a different meaning, the definition in Section 2 of the Administrative Code shall apply. Thus, unless there is specific language in the Local Government Code defining the phrase government-owned or controlled corporation differently from the definition in the Administrative Code, the definition in the Administrative Code prevails.

The minority does not point to any provision in the Local Government Code defining the phrase government-owned or controlled corporation differently from the definition in the Administrative Code. Indeed, there is none. The Local Government Code is silent on the definition of the phrase government -owned or controlled corporation. The Administrative Code, however, expressly defines the phrase government-owned or controlled corporation. The inescapable conclusion is that the Administrative Code definition of the phrase governmentowned or controlled corporation applies to the Local Government Code. The third whereas clause of the Administrative Code states that the Code incorporates in a unified document the major structural, functional and procedural principles and rules of governance. Thus, the Administrative Code is the governing law defining the status and relationship of government departments, bureaus, offices, agencies and instrumentalities. Unless a statute expressly provides for a different status and relationship for a specific government unit or entity, the provisions of the Administrative Code prevail.

The minority also contends that the phrase government-owned or controlled corporation should apply only to corporations organized under the Corporation Code, the general incorporation law, and not to corporations created

by special charters. The minority sees no reason why government corporations with special charters should have a capital stock. Thus, the minority declares:
I submit that the definition of government-owned or controlled corporations under the Administrative Code refer to those corporations owned by the government or its instrumentalities which are created not by legislative enactment, but formed and organized under the Corporation Code through registration with the Securities and Exchange Commission. In short, these are GOCCs without original charters.

xxxx

It might as well be worth pointing out that there is no point in requiring a capital structure for GOCCs whose full ownership is limited by its charter to the State or Republic. Such GOCCs are not empowered to declare dividends or alienate their capital shares.

The contention of the minority is seriously flawed. It is not in accord with the Constitution and existing legislations. It will also result in gross absurdities. First, the Administrative Code definition of the phrase government-owned or controlled corporation does not distinguish between one incorporated under the Corporation Code or under a special charter. Where the law does not distinguish, courts should not distinguish. Second, Congress has created through special charters several governmentowned corporations organized as stock corporations. Prime examples are the Land Bank of the Philippines and the Development Bank of the Philippines. The special charter[40] of the Land Bank of the Philippines provides:

SECTION 81. Capital. The authorized capital stock of the Bank shall be nine billion pesos, divided into seven hundred and eighty million common shares with a par value of ten pesos each, which shall be fully subscribed by the Government, and one hundred and twenty million preferred shares with a par value of ten pesos each, which shall be issued in accordance with the provisions of Sections seventy-seven and eightythree of this Code. (Emphasis supplied)

Likewise, the special the Philippines provides:

charter[41] of

the

Development

Bank

of

SECTION 7. Authorized Capital Stock Par value. The capital stock of the Bank shall be Five Billion Pesos to be divided into Fifty Million common shares with par value ofP100 per share. These shares are available for subscription by the National Government. Upon the effectivity of this Charter, the National Government shall subscribe to Twenty-Five Million common shares of stock worth Two Billion Five Hundred Million which shall be deemed paid for by the Government with the net asset values of the Bank remaining after the transfer of assets and liabilities as provided in Section 30 hereof. (Emphasis supplied)

Other government-owned corporations organized as stock corporations under their special charters are the Philippine Crop Insurance Corporation,[42] Philippine International Trading Corporation,[43] and the Philippine National Bank[44] before it was reorganized as a stock corporation under the Corporation Code. All these government-owned corporations organized under special charters as stock corporations are subject to real estate tax on real properties owned by them. To rule that they are not government-owned or controlled corporations because they are not registered with the Securities and Exchange Commission would remove them from the reach of Section 234 of the Local Government Code, thus exempting them from real estate tax.

Third, the government-owned or controlled corporations created through special charters are those that meet the two conditions prescribed in Section 16, Article XII of the Constitution. The first condition is that the government-owned or

controlled corporation must be established for the common good. The second condition is that the government-owned or controlled corporation must meet the test of economic viability. Section 16, Article XII of the 1987 Constitution provides:

SEC. 16. The Congress shall not, except by general law, provide for the formation, organization, or regulation of private corporations. Government-owned or controlled corporations may be created or established by special charters in the interest of the common good and subject to the test of economic viability . (Emphasis and underscoring supplied)

The Constitution expressly authorizes the legislature to create government-owned or controlled corporations through special charters only if these entities are required to meet the twin conditions of common good and economic viability. In other words, Congress has no power to create government-owned or controlled corporations with special charters unless they are made to comply with the two conditions of common good and economic viability. The test of economic viability applies only to government-owned or controlled corporations that perform economic or commercial activities and need to compete in the market place. Being essentially economic vehicles of the State for the common good meaning for economic development purposes these government-owned or controlled corporations with special charters are usually organized as stock corporations just like ordinary private corporations.

In contrast, government instrumentalities vested with corporate powers and performing governmental or public functions need not meet the test of economic viability. These instrumentalities perform essential public services for the common good, services that every modern State must provide its citizens. These instrumentalities need not be economically viable since the government may even subsidize their entire operations. These

instrumentalities are not the government-owned or controlled corporations referred to in Section 16, Article XII of the 1987 Constitution. Thus, the Constitution imposes no limitation when the legislature creates government instrumentalities vested with corporate powers but performing essential governmental or public functions. Congress has plenary authority to create government instrumentalities vested with corporate powers provided these instrumentalities perform essential government functions or public services. However, when the legislature creates through special charters corporations that perform economic or commercial activities, such entities known as government-owned or controlled corporations must meet the test of economic viability because they compete in the market place.

This is the situation of the Land Bank of the Philippines and the Development Bank of the Philippines and similar government-owned or controlled corporations, which derive their income to meet operating expenses solely from commercial transactions in competition with the private sector. The intent of the Constitution is to prevent the creation of government-owned or controlled corporations that cannot survive on their own in the market place and thus merely drain the public coffers.

Commissioner Blas F. Ople, proponent of the test of economic viability, explained to the Constitutional Commission the purpose of this test, as follows:
MR. OPLE: Madam President, the reason for this concern is really that when the government creates a corporation, there is a sense in which this corporation becomes exempt from the test of economic performance. We know what happened in

the past. If a government corporation loses, then it makes its claim upon the taxpayers money through new equity infusions from the government and what is always invoked is the common good. That is the reason why this year, out of a budget of P115 billion for the entire government, about P28 billion of this will go into equity infusions to support a few government financial institutions. And this is all taxpayers money which could have been relocated to agrarian reform, to social services like health and education, to augment the salaries of grossly underpaid public employees. And yet this is all going down the drain.

Therefore, when we insert the phrase ECONOMIC VIABILITY together with the common good, this becomes a restraint on future enthusiasts for state capita lism to excuse themselves from the responsibility of meeting the market test so that they become viable. And so, Madam President, I reiterate, for the committees consideration and I am glad that I am joined in this proposal by CommissionerFoz, the insertion of the standard of ECONOMIC VIABILITY OR THE ECONOMIC TEST, together with the common good.[45]

Father Joaquin G. Bernas, a leading member of the Constitutional Commission, explains in his textbook The 1987 Constitution of the Republic of the Philippines: ACommentary:
The second sentence was added by the 1986 Constitutional Commission. The significant addition, however, is the phrase in the interest of the common good and subject to the test of economic viability. The addition includes the ideas that they must show capacity to function efficiently in business and that they should not go into activities which the private sector can do better. Moreover, economic viability is more than financial viability but also includes capability to make profit and generate benefits not quantifiable in financial terms.
[46]

(Emphasis supplied)

Clearly, the test of economic viability does not apply to government entities vested with corporate powers and performing essential public services. The State is obligated to render essential public services regardless of the economic viability of providing such service. The non-economic viability

of rendering such essential public service does not excuse the State from withholding such essential services from the public. However, government-owned or controlled corporations with special charters, organized essentially for economic or commercial objectives, must meet the test of economic viability. These are the government-owned or controlled corporations that are usually organized under their special charters as stock corporations, like the Land Bank of thePhilippines and the Development Bank of the Philippines. These are the government-owned or controlled corporations, along with government-owned or controlled corporations organized under the Corporation Code, that fall under the definition of government-owned or controlled corporations in Section 2(10) of the Administrative Code. The MIAA need not meet the test of economic viability because the legislature did not create MIAA to compete in the market place. MIAA does not compete in the market place because there is no competing international airport operated by the private sector. MIAA performs an essential public service as the primary domestic and international airport of the Philippines. The operation of an international airport requires the presence of personnel from the following government agencies: 1. The Bureau of Immigration and Deportation, to document the arrival and departure of passengers, screening out those without visas or travel documents, or those with hold departure orders; 2. The Bureau of Customs, to collect import duties or enforce the ban on prohibited importations; 3. The quarantine office of the Department of Health, to enforce health measures against the spread of infectious diseases into the country;

4. The Department of Agriculture, to enforce measures against the spread of plant and animal diseases into the country; 5. The Aviation Security Command of the Philippine National Police, to prevent the entry of terrorists and the escape of criminals, as well as to secure the airport premises from terrorist attack or seizure; 6. The Air Traffic Office of the Department of Transportation and Communications, to authorize aircraft to enter or leave Philippine airspace, as well as to land on, or take off from, the airport; and 7. The MIAA, to provide the proper premises such as runway and buildings for the government personnel, passengers, and airlines, and to manage the airport operations. All these agencies of government perform government functions essential to the operation of an international airport. MIAA performs an essential public service that every modern State must provide its citizens. MIAA derives its revenues principally from the mandatory fees and charges MIAA imposes on passengers and airlines. The terminal fees that MIAA charges every passenger are regulatory or administrative fees[47] and not income from commercial transactions. MIAA falls under the definition of a government instrumentality under Section 2(10) of the Introductory Provisions of the Administrative Code, which provides:

SEC. 2. General Terms Defined. x x x x

(10) Instrumentality refers to any agency of the National Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers , administering special funds, and enjoying operational autonomy, usually through a charter. x x x (Emphasis supplied)

The fact alone that MIAA is endowed with corporate powers does not make MIAA a government-owned or controlled corporation. Without a change in its capital structure, MIAA remains a government instrumentality under Section 2(10) of the Introductory Provisions of the Administrative Code. More importantly, as long as MIAA renders essential public services, it need not comply with the test of economic viability. Thus, MIAA is outside the scope of the phrase governmentowned or controlled corporations under Section 16, Article XII of the 1987 Constitution. The minority belittles the use in the Local Government Code of the phrase government-owned or controlled corporation as merely clarificatory or illustrative. This is fatal. The 1987 Constitution prescribes explicit conditions for the creation of government-owned or controlled corporations. The Administrative Code defines what constitutes a government-owned or controlled corporation. To belittle this phrase as clarificatory or illustrative is grave error.

To summarize, MIAA is not a government-owned or controlled corporation under Section 2(13) of the Introductory Provisions of the Administrative Code because it is not organized as a stock or non-stock corporation. Neither is MIAA a government-owned or controlled corporation under Section 16, Article XII of the 1987 Constitution because MIAA is not required to meet the test of economic viability. MIAA is a government instrumentality vested with corporate powers and performing essential public services pursuant to Section 2(10) of the Introductory Provisions of the

Administrative Code. As a government instrumentality, MIAA is not subject to any kind of tax by local governments under Section 133(o) of the Local Government Code. The exception to the exemption in Section 234(a) does not apply to MIAA because MIAA is not a taxable entity under the Local Government Code. Such exception applies only if the beneficial use of real property owned by the Republic is given to a taxable entity. Finally, the Airport Lands and Buildings of MIAA are properties devoted to public use and thus are properties of public dominion. Properties of public dominion are owned by the State or the Republic. Article 420 of the Civil Code provides:

Art. 420. The following things are property of public dominion:

(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character;

(2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth. (Emphasis supplied)

The term ports x x x constructed by the State includes airports and seaports. The Airport Lands and Buildings of MIAA are intended for public use, and at the very least intended for public service. Whether intended for public use or public service, the Airport Lands and Buildings are properties of public dominion. As properties of public dominion, the Airport Lands and Buildings are owned by the Republic and thus exempt from real estate tax under Section 234(a) of the Local Government Code.

4. Conclusion

Under Section 2(10) and (13) of the Introductory Provisions of the Administrative Code, which governs the legal relation and status of government units, agencies and offices within the entire government machinery, MIAA is a government instrumentality and not a government-owned or controlled corporation. Under Section 133(o) of the Local Government Code, MIAA as a government instrumentality is not a taxable person because it is not subject to [t]axes, fees or charges of any kind by local governments. The only exception is when MIAA leases its real property to a taxable person as provided in Section 234(a) of the Local Government Code, in which case the specific real property leased becomes subject to real estate tax. Thus, only portions of the Airport Lands and Buildings leased to taxable persons like private parties are subject to real estate tax by the City of Paraaque. Under Article 420 of the Civil Code, the Airport Lands and Buildings of MIAA, being devoted to public use, are properties of public dominion and thus owned by the State or the Republic of the Philippines. Article 420 specifically mentions ports x x x constructed by the State, which includes public airports and seaports, as properties of public dominion and owned by the Republic. As properties of public dominion owned by the Republic, there is no doubt whatsoever that the Airport Lands and Buildings are expressly exempt from real estate tax under Section 234(a) of the Local Government Code. This Court has also repeatedly ruled that properties of public dominion are not subject to execution or foreclosure sale.

WHEREFORE, we GRANT the petition. We SET ASIDE the assailed Resolutions of the Court of Appeals of 5 October 2001 and 27 September 2002 in CA-G.R. SP No. 66878. We DECLARE the Airport Lands and Buildings of

the Manila International Airport Authority EXEMPT from the real estate tax imposed by the City ofParaaque. We declare VOID all the real estate tax assessments, including the final notices of real estate tax delinquencies, issued by the City of Paraaque on the Airport Landsand Buildings of the Manila International Airport Authority, except for the portions that the Manila International Airport Authority has leased to private parties. We also declareVOID the assailed auction sale, and all its effects, of the Airport Lands and Buildings of the Manila International Airport Authority. No costs. SO ORDERED. ANTONIO T. CARPIO Associate Justice WE CONCUR: ARTEMIO V. PANGANIBAN Chief Justice

REYNATO S. PUNO Associate Justice

LEONARDO A. QUISUMBING Associate Justice

CONSUELO YNARES-SANTIAGO Associate Justice

ANGELINA SANDOVAL-GUTIERREZ Associate Justice

MA. ALICIA AUSTRIA-MARTINEZ Associate Justice

RENATO C. CORONA Associate Justice

CONCHITA CARPIO MORALES Associate Justice ADOLFO S. AZCUNA Associate Justice

ROMEO J. CALLEJO, SR. Associate Justice

DANTE O. TINGA Associate Justice

MINITA V. CHICO-NAZARIO Associate Justice

CANCIO C. GARCIA Associate Justice

PRESBITERO J. VELASCO, JR. Associate Justice

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court. ARTEMIO V. PANGANIBAN Chief Justice

[1] [2] [3] [4] [5]

Dated 16 September 1983. Dated 26 July 1987. Section 3, MIAA Charter. Section 22, MIAA Charter. Section 3, MIAA Charter.

[6] [7] [8] [9] [10] [11]

Rollo, pp. 22-23. Under Rule 45 of the 1997 Rules of Civil Procedure. 330 Phil. 392 (1996). MIAA Charter as amended by Executive Order No. 298. See note 2. Batas Pambansa Blg. 68. Section 11 of the MIAA Charter provides: Contribution to the General Fund for the Maintenance and Operation of other Airports. Within thirty (30) days after the close of each quarter, twenty percentum (20%) of the gross operating income, excluding payments for utilities of tenants and concessionaires and terminal fee collections, shall be remitted to the General Fund in the National Treasury to be used for the maintenance and operation of other international and domestic airports in the country. Adjustments in the amount paid by the Authority to the National Treasury under this Section shall be made at the end of each year based on the audited financial statements of the Authority. Section 5(j), MIAA Charter. Section 6, MIAA Charter. Section 5(k), MIAA Charter. Section 5(o), MIAA Charter. Third Whereas Clause, MIAA Charter. Id. CONSTITUTION, Art. X, Sec. 5. 274 Phil. 1060, 1100 (1991) quoting C. Dallas Sands, 3 STATUTES and STATUTORY CONSTRUCTION 207. 274 Phil. 323, 339-340 (1991). CONSTITUTION, Art. VI, Sec. 28(1). First Whereas Clause, MIAA Charter. 30 Phil. 602, 606-607 (1915). 102 Phil. 866, 869-870 (1958). PNB v. Puruganan, 130 Phil. 498 (1968). See also Martinez v. CA, 155 Phil. 591 (1974). MIAA Charter, Sec.16. Chavez v. Public Estates Authority, 433 Phil. 506 (2002). Section 3, MIAA Charter. G.R. No. 144104, 29 June 2004, 433 SCRA 119, 138. Republic Act No. 7653, 14 June 1993, Sec. 5. Executive Order No. 1061, 5 November 1985, Sec. 3(p). Republic Act No. 4850, 18 July 1966, Sec. 5. Presidential Decree No. 977, 11 August 1976, Section 4(j). Republic Act No. 7227, 13 March 1992, Sec. 3. Presidential Decree No. 857, 23 December 1975, Sec. 6(b)(xvi). Republic Act No. 4663, 18 June 1966, Sec. 7(m). Republic Act No. 4567, 19 June 1965, Sec. 7(m). Republic Act No. 7621, 26 June 1992, Sec. 7(m). Republic Act No. 4156, 20 June 1964. Section 4(b). Republic Act No. 3844, 8 August 1963, as amended by Republic Act No. 7907, 23 February 1995. Executive Order No. 81, 3 December 1986. Republic Act No. 8175, 29 December 1995. Presidential Decree No. 252, 21 July 1973, as amended by Presidential Decree No. 1071, 25 January 1977 and Executive Order No. 1067, 25 November 1985. Executive Order No. 80, 3 December 1986. III RECORDS, CONSTITUTIONAL COMMISSION 63 (22 August 1986). 2003 ed., 1181. Manila International Airport Authority v. Airspan Corporation, G.R. No. 157581, 1 December 2004, 445 SCRA 471.

[12] [13] [14] [15] [16] [17] [18] [19] [20] [21] [22] [23] [24] [25] [26] [27] [28] [29] [30] [31] [32] [33] [34] [35] [36] [37] [38] [39] [40] [41] [42] [43]

[44] [45] [46] [47]

Republic of the Philippines SUPREME COURT Manila

THIRD DIVISION GOVERNMENT SERVICE INSURANCE SYSTEM, Petitioner, G.R. No. 186242

Present:

- versus -

CORONA, J., Chairperson, VELASCO, JR., NACHURA, PERALTA, and

CITY TREASURER and CITY ASSESSOR of the CITY OFMANILA, Respondents.

DEL CASTILLO,* JJ.

Promulgated:

December 23, 2009 x-----------------------------------------------------------------------------------------x DECISION

VELASCO, JR., J.: The Case

For review under Rule 45 of the Rules of Court on pure question of law are the November 15, 2007 Decision[1] and January 7, 2009 Order[2] of the Regional Trial Court (RTC), Branch 49 in Manila, in Civil Case No. 02-104827, a suit to nullify the assessment of real property taxes on certain properties belonging to petitioner Government Service Insurance System (GSIS). The Facts Petitioner GSIS owns or used to own two (2) parcels of land, one located at Katigbak 25th St., Bonifacio Drive, Manila (Katigbak property), and the other, at Concepcion cor. Arroceros Sts., also in Manila (Concepcion-Arroceros property). Title to the Concepcion-Arroceros property was transferred to this Court in 2005 pursuant to Proclamation No. 835[3] dated April 27, 2005. Both the GSIS and the Metropolitan Trial Court (MeTC) of Manila occupy the Concepcion-Arroceros property, while the Katigbak property was under lease. The controversy started when the City Treasurer of Manila addressed a letter dated September 13, 2002 to GSIS President and General Manager Winston F. Garcia informing him of the unpaid real property taxes due on the aforementioned properties for years 1992 to 2002, broken down as follows: (a) PhP 54,826,599.37 for the Katigbak property; and (b) PhP 48,498,917.01 for the Concepcion-Arroceros property. The letter warned of the inclusion of the subject properties in the scheduled October 30, 2002 public auction of all delinquent properties in Manila should the unpaid taxes remain unsettled before that date.
[4]

On September 16, 2002, the City Treasurer of Manila issued separate Notices of Realty Tax Delinquency[5] for the subject properties, with the usual warning of seizure and/or sale. On October 8, 2002, GSIS, through its legal

counsel, wrote back emphasizing the GSIS exemption from all kinds of taxes, including realty taxes, under Republic Act No. (RA) 8291.[6]

Two days after, GSIS filed a petition for certiorari and prohibition[7] with prayer for a restraining and injunctive relief before the Manila RTC. In it, GSIS prayed for the nullification of the assessments thus made and that respondents City of Manila officials be permanently enjoined from proceedings against GSIS property. GSIS would later amend its petition[8] to include the fact that: (a) the Katigbak property, covered by TCT Nos. 117685 and 119465 in the name of GSIS, has, since November 1991, been leased to and occupied by the Manila Hotel Corporation (MHC), which has contractually bound itself to pay any realty taxes that may be imposed on the subject property; and (b) the Concepcion-Arroceros property is partly occupied by GSIS and partly occupied by the MeTC of Manila. The Ruling of the RTC By Decision of November 15, 2007, the RTC dismissed GSIS petition, as follows:
WHEREFORE, in view of the foregoing, judgment is hereby rendered, DISMISSING the petition for lack of merit, and declaring the assessment conducted by the respondents City of Manila on the subject real properties of GSIS as valid pursuant to law. SO ORDERED.[9]

GSIS sought but was denied reconsideration per the assailed Order dated January 7, 2009. Thus, the instant petition for review on pure question of law.

The Issues
1. Whether petitioner is exempt from the payment of real property taxes from 1992 to 2002; 2. Whether petitioner is exempt from the payment of real property taxes on the property it leased to a taxable entity; and 3. Whether petitioners real properties are exempt from warrants of levy and from tax sale for non-payment of real property taxes.[10]

The Courts Ruling The issues raised may be formulated in the following wise: first, whether GSIS under its charter is exempt from real property taxation; second, assuming that it is so exempt, whether GSIS is liable for real property taxes for its properties leased to a taxable entity; and third, whether the properties of GSIS are exempt from levy.

In the main, it is petitioners posture that both its old charter, Presidential Decree No. (PD) 1146, and present charter, RA 8291 or the GSIS Act of 1997, exempt the agency and its properties from all forms of taxes and assessments, inclusive of realty tax. Excepting, respondents counter that GSIS may not successfully resist the citys notices and warrants of levy on the basis of its exemption under RA 8291, real property taxation being governed by RA 7160 or the Local Government Code of 1991 (LGC, hereinafter).

The petition is meritorious.

First Core Issue: GSIS Exempt from Real Property Tax

Full tax exemption granted through PD 1146

In 1936, Commonwealth Act No. (CA) 186[11] was enacted abolishing the then pension systems under Act No. 1638, as amended, and establishing the GSIS to manage the pension system, life and retirement insurance, and other benefits of all government employees. Under what may be considered as its first charter, the GSIS was set up as a non-stock corporation managed by a board of trustees. Notably, Section 26 of CA 186 provided exemption from any legal process and liens but only for insurance policies and their proceeds, thus:

Section 26. Exemption from legal process and liens. No policy of life insurance issued under this Act, or the proceeds thereof, when paid to any member thereunder, nor any other benefit granted under this Act, shall be liable to attachment, garnishment, or other process, or to be seized, taken, appropriated, or applied by any legal or equitable process or operation of law to pay any debt or liability of such member, or his beneficiary, or any other person who may have a right thereunder, either before or after payment; nor shall the proceeds thereof, when not made payable to a named beneficiary, constitute a part of the estate of the member for payment of his debt. x x x

In 1977, PD 1146,[12] otherwise known as the Revised Government Service Insurance Act of 1977, was issued, providing for an expanded insurance system for government employees. Sec. 33 of PD 1146 provided for a new tax treatment for GSIS, thus:
Section 33. Exemption from Tax, Legal Process and Lien. It is hereby declared to be the policy of the State that the actuarial solvency of the funds of the System shall be preserved and maintained at all times and that the contribution rates necessary to sustain the benefits under this Act shall be kept as low as possible in order not to burden the members of the System and/or their employees. Taxes imposed on the System tend to impair the actuarial

solvency of its funds and increase the contribution rate necessary to sustain the benefits under this Act. Accordingly, notwithstanding any laws to the contrary, the System, its assets, revenues including all accruals thereto, and benefits paid, shall be exempt from all taxes, assessments, fees, charges or duties of all kinds. These exemptions shall continue unless expressly and specifically revoked and any assessment against the System as of the approval of this Act are hereby considered paid.
The benefits granted under this Act shall not be subject, among others, to attachment, garnishment, levy or other processes. This, however, shall not apply to obligations of the member to the System, or to the employer, or when the benefits granted herein are assigned by the member with the authority of the System. (Emphasis ours.)

A scrutiny of PD 1146 reveals that the non-stock corporate structure of [13] GSIS, as established under CA 186, remained unchanged. Sec. 34 of PD 1146 pertinently provides that the GSIS, as created by CA 186, shall implement the provisions of PD 1146.

RA 7160 lifted GSIS tax exemption

Then came the enactment in 1991 of the LGC or RA 7160, providing the exercise of local government units (LGUs) of their power to tax, the scope and limitations thereof,[14] and the exemptions from taxations. Of particular pertinence is the general provision on withdrawal of tax exemption privileges in Sec. 193 of the LGC, and the special provision on withdrawal of exemption from payment of real property taxes in the last paragraph of the succeeding Sec. 234, thus:
SEC. 193. Withdrawal of Tax Exemption Privileges. Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or -controlled corporations, except local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code.

SEC. 234. Exemption from Real Property Tax. x x x Except as provided herein, any exemption from payment of real property tax previously granted to, or presently enjoyed by, all persons, whether natural or juridical, including all government-owned or controlled corporation are hereby withdrawn upon the effectivity of this Code.

From the foregoing provisos, there can be no serious doubt about the Congress intention to withdraw, subject to certain defined exceptions, tax exemptions granted prior to the passage of RA 7160. The question that easily comes to mind then is whether or not the full tax exemption heretofore granted to GSIS under PD 1146, particular insofar as realty tax is concerned, was deemed withdrawn. We answer in the affirmative.

In Mactan Cebu International Airport Authority v. Marcos,[15] the Court held that the express withdrawal by the LGC of previously granted exemptions from realty taxes applied to instrumentalities and government-owned and controlled corporations (GOCCs), such as the Mactan-Cebu International Airport Authority. In City of Davao v. RTC, Branch XII, Davao City,[16] the Court, citing Mactan Cebu International Airport Authority, declared the GSIS liable for real property taxes for the years 1992 to 1994 (contested real estate tax assessment therein), its previous exemption under PD 1146 being considered withdrawn with the enactment of the LGC in 1991.

Significantly, the Court, in City of Davao, stated the observation that the GSIS tax-exempt status withdrawn in 1992 by the LGC was restored in 1997 by RA 8291.[17]

Full tax exemption reenacted through RA 8291

Indeed, almost 20 years to the day after the issuance of the GSIS charter, i.e., PD 1146, it was further amended and expanded by RA 8291 which took effect on June 24, 1997.[18] Under it, the full tax exemption privilege of GSIS was restored, the operative provision being Sec. 39 thereof, a virtual replication of the earlier quoted Sec. 33 of PD 1146. Sec. 39 of RA 8291 reads:

SEC. 39. Exemption from Tax, Legal Process and Lien. It is hereby declared to be the policy of the State that the actuarial solvency of the funds of the GSIS shall be preserved and maintained at all times and that contribution rates necessary to sustain the benefits under this Act shall be kept as low as possible in order not to burden the members of the GSIS and their employers. Taxes imposed on the GSIS tend to impair the actuarial solvency of its funds and increase the contribution rate necessary to sustain the benefits of this Act. Accordingly, notwithstanding, any laws to the contrary, the GSIS, its assets, revenues including all accruals thereto, and benefits paid, shall be exempt from all taxes, assessments, fees, charges or duties of all kinds. These exemptions shall continue unless expressly and specifically revoked and any assessment against the GSIS as of the approval of this Act are hereby considered paid. Consequently, all laws, ordinances, regulations, issuances, opinions or jurisprudence contrary to or in derogation of this provision are hereby deemed repealed, superseded and rendered ineffective and without legal force and effect. Moreover, these exemptions shall not be affected by subsequent laws to the contrary unless this section is expressly, specifically and categorically revoked or repealed by law and a provision is enacted to substitute or replace the exemption referred to herein as an essential factor to maintain or protect the solvency of the fund, notwithstanding and independently of the guaranty of the national government to secure such solvency or liability. The funds and/or the properties referred to herein as well as the benefits, sums or monies corresponding to the benefits under this Act shall be exempt from attachment, garnishment, execution, levy or other processes issued by the courts, quasi-judicial agencies or administrative bodies including Commission on Audit (COA) disallowances and from all financial obligations of the members, including his pecuniary accountability arising from or caused or occasioned by his exercise or performance of his official functions or duties, or incurred relative to or in connection with his position or work except when his monetary liability, contractual or otherwise, is in favor of the GSIS. (Emphasis ours.)

The foregoing exempting proviso, couched as it were in an encompassing manner, brooks no other construction but that GSIS is exempt from all forms of taxes. While not determinative of this case, it is to be noted that prominently added in GSIS present charter is a paragraph precluding any implied repeal of the tax-exempt clause so as to protect the solvency of GSIS funds. Moreover, an express repeal by a subsequent law would not suffice to affect the full exemption benefits granted the GSIS, unless the following conditionalities are met: (1) The repealing clause must expressly, specifically, and categorically revoke or repeal

Sec. 39; and (2) a provision is enacted to substitute or replace the exemption referred to herein as an essential factor to maintain or protect the solvency of the fund. These restrictions for a future express repeal, notwithstanding, do not make the proviso an irrepealable law, for such restrictions do not impinge or limit the carte blanche legislative authority of the legislature to so amend it. The restrictions merely enhance other provisos in the law ensuring the solvency of the GSIS fund.

Given the foregoing perspectives, the following may be assumed: (1) Pursuant to Sec. 33 of PD 1146, GSIS enjoyed tax exemption from real estate taxes, among other tax burdens, until January 1, 1992 when the LGC took effect and withdrew exemptions from payment of real estate taxes privileges granted under PD 1146; (2) RA 8291 restored in 1997 the tax exempt status of GSIS by reenacting under its Sec. 39 what was once Sec. 33 of P.D. 1146; [19] and (3) If any real estate tax is due to the City of Manila, it is, following City of Davao, only for the interim period, or from 1992 to 1996, to be precise.

Real property taxes assessed and due from GSIS considered paid

While recognizing the exempt status of GSIS owing to the reenactment of the full tax exemption clause under Sec. 39 of RA 8291 in 1997, the ponencia in City of Davaoappeared to have failed to take stock of and fully appreciate the all-embracing condoning proviso in the very same Sec. 39 which, for all intents and purposes, considered as paid any assessment against the GSIS as of the approval of this Act. If only to stress the point, we hereby reproduce the pertinent portion of said Sec. 39:
SEC. 39. Exemption from Tax, Legal Process and Lien. x x x Taxes imposed on the GSIS tend to impair the actuarial solvency of its funds and increase the contribution rate necessary to sustain the benefits of this Act. Accordingly, notwithstanding, any laws to the contrary, the GSIS, its assets, revenues including all accruals thereto, and benefits paid, shall be exempt from all taxes, assessments, fees, charges or duties of all kinds. These exemptions shall continue unless expressly and specifically revoked and any assessment against the GSIS as of the approval of this Act are hereby considered paid. Consequently, all laws, ordinances, regulations, issuances, opinions or

jurisprudence contrary to or in derogation of this provision are hereby deemed repealed, superseded and rendered ineffective and without legal force and effect. (Emphasis added.)

GSIS an instrumentality of the National Government

Apart from the foregoing consideration, the Courts fairly recent ruling in Manila International Airport Authority v. Court of Appeals ,[20] a case likewise involving real estate tax assessments by a Metro Manila city on the real properties administered by MIAA, argues for the non-tax liability of GSIS for real estate taxes. There, the Court held that MIAA does not qualify as a GOCC, not having been organized either as a stock corporation, its capital not being divided into shares, or as a non-stock corporation because it has no members. MIAA is rather an instrumentality of the National Government and, hence, outside the purview of local taxation by force of Sec. 133 of the LGC providing in context that unless otherwise provided, local governments cannot tax national government instrumentalities. And as the Court pronounced in Manila International Airport Authority, the airport lands and buildings MIAA administers belong to the Republic of the Philippines, which makes MIAA a mere trustee of such assets. No less than the Administrative Code of 1987 recognizes a scenario where a piece of land owned by the Republic is titled in the name of a department, agency, or instrumentality. The following provision of the said Code suggests as much:

Sec. 48. Official Authorized to Convey Real Property .Whenever real property of the Government is authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of the government by the following: x x x x

(2) For property belonging to the Republic of the Philippines, but titled in the name of x x x any corporate agency or instrumentality, by the executive head of the agency or instrumentality.[21]

While perhaps not of governing sway in all fours inasmuch as what were involved in Manila International Airport Authority, e.g., airfields and runways, are properties of the public dominion and, hence, outside the commerce of man, the rationale underpinning the disposition in that case is squarely applicable to GSIS, both MIAA and GSIS being similarly situated. First, while created under CA 186 as a non-stock corporation, a status that has remained unchanged even when it operated under PD 1146 and RA 8291, GSIS is not, in the context of the afore quoted Sec. 193 of the LGC, a GOCC following the teaching of Manila International Airport Authority, for, like MIAA, GSIS capital is not divided into unit shares. Also, GSIS has no members to speak of. And by members, the reference is to those who, under Sec. 87 of the Corporation Code, make up the non-stock corporation, and not to the compulsory members of the system who are government employees. Its management is entrusted to a Board of Trustees whose members are appointed by the President.

Second, the subject properties under GSISs name are likewise owned by the Republic. The GSIS is but a mere trustee of the subject properties which have either been ceded to it by the Government or acquired for the enhancement of the system. This particular property arrangement is clearly shown by the fact that the disposal or conveyance of said subject properties are either done by or through the authority of the President of the Philippines. Specifically, in the case of the Concepcion-Arroceros property, it was transferred, conveyed, and ceded to this Court on April 27, 2005 through a presidential proclamation, Proclamation No. 835. Pertinently, the text of the proclamation announces that the Concepcion-Arroceros property was earlier ceded to the GSIS on October 13, 1954 pursuant to Proclamation No. 78 for office purposes and had since been titled to GSIS which constructed an office building thereon. Thus, the transfer on April 27, 2005 of the Concepcion-Arroceros property to this Court by the President through Proclamation No. 835. This illustrates the nature of the government ownership of the subject GSIS properties, as indubitably shown in the last clause of Presidential Proclamation No. 835:

WHEREAS, by virtue of the Public Land Act (Commonwealth Act No. 141, as amended), Presidential Decree No. 1455, and the Administrative Code of 1987, the President is authorized to transfer any government property that is no longer

needed by the agency to which it belongs to other branches or agencies of the government. (Emphasis ours.)

Third, GSIS manages the funds for the life insurance, retirement, survivorship, and disability benefits of all government employees and their beneficiaries. This undertaking, to be sure, constitutes an essential and vital function which the government, through one of its agencies or instrumentalities, ought to perform if social security services to civil service employees are to be delivered with reasonable dispatch. It is no wonder, therefore, that the Republic guarantees the fulfillment of the obligations of the GSIS to its members (government employees and their beneficiaries) when and as they become due. This guarantee was first formalized under Sec. 24[22] of CA 186, then Sec. 8[23] of PD 1146, and finally in Sec. 8[24] of RA 8291.

Second Core Issue: Beneficial Use Doctrine Applicable The foregoing notwithstanding, the leased Katigbak property shall be taxable pursuant to the beneficial use principle under Sec. 234(a) of the LGC. It is true that said Sec. 234(a), quoted below, exempts from real estate taxes real property owned by the Republic, unless the beneficial use of the property is, for consideration, transferred to a taxable person.
SEC. 234. Exemptions from Real Property Tax. The following are exempted from payment of the real property tax:

(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person.

This exemption, however, must be read in relation with Sec. 133(o) of the LGC, which prohibits LGUs from imposing taxes or fees of any kind on the national government, its agencies, and instrumentalities:

SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following:

xxxx

(o) Taxes, fees or charges of any kinds on the National Government, its agencies and instrumentalities, and local government units. (Emphasis supplied.)

Thus read together, the provisions allow the Republic to grant the beneficial use of its property to an agency or instrumentality of the national government. Such grant does not necessarily result in the loss of the tax exemption. The tax exemption the property of the Republic or its instrumentality carries ceases only if, as stated in Sec. 234(a) of the LGC of 1991, beneficial use thereof has been granted, for a consideration or otherwise, to a taxable person. GSIS, as a government instrumentality, is not a taxable juridical person under Sec. 133(o) of the LGC. GSIS, however, lost in a sense that status with respect to the Katigbak property when it contracted its beneficial use to MHC, doubtless a taxable person. Thus, the real estate tax assessment of PhP 54,826,599.37 covering 1992 to 2002 over the subject Katigbak property is valid insofar as said tax delinquency is concerned as assessed over said property.

Taxable entity having beneficial use of leased property liable for real property taxes thereon

The next query as to which between GSIS, as the owner of the Katigbak property, or MHC, as the lessee thereof, is liable to pay the accrued real estate tax, need not detain us long. MHC ought to pay.

As we declared in Testate Estate of Concordia T. Lim, the unpaid tax attaches to the property and is chargeable against the taxable person who had actual or beneficial use and possession of it regardless of whether or not he is the owner. Of the same tenor is the Courts holding in the subsequent Manila Electric Company v. Barlis[25] and later inRepublic v. City of Kidapawan.[26] Actual use refers to the purpose for which the property is principally or predominantly utilized by the person in possession thereof.[27] Being in possession and having actual use of the Katigbak property since November 1991, MHC is liable for the realty taxes assessed over the Katigbak property from 1992 to 2002. The foregoing is not all. As it were, MHC has obligated itself under the GSISMHC Contract of Lease to shoulder such assessment. Stipulation l8 of the contract pertinently reads:
18. By law, the Lessor, [GSIS], is exempt from taxes, assessments and levies. Should there be any change in the law or the interpretation thereof or any other circumstances which would subject the Leased Property to any kind of tax, assessment or levy which would constitute a charge against the Lessor or create a lien against the Leased Property, the Lessee agrees and obligates itself to shoulder and pay such tax, assessment or levy as it becomes due.[28] (Emphasis ours.)

As a matter of law and contract, therefore, MHC stands liable to pay the realty taxes due on the Katigbak property. Considering, however, that MHC has not been impleaded in the instant case, the remedy of the City of Manila is to serve the realty tax assessment covering the subject Katigbak property to MHC and to pursue other available remedies in case of nonpayment, for said property cannot be levied upon as shall be explained below. Third Core Issue: GSIS Properties Exempt from Levy In light of the foregoing disquisition, the issue of the propriety of the threatened levy of subject properties by the City of Manila to answer for the demanded realty tax deficiency is now moot and academic. A valid tax levy

presupposes a corresponding tax liability. Nonetheless, it will not be remiss to note that it is without doubt that the subject GSIS properties are exempt from any attachment, garnishment, execution, levy, or other legal processes. This is the clear import of the third paragraph of Sec. 39, RA 8291, which we quote anew for clarity:

SEC. 39. Exemption from Tax, Legal Process and Lien. x x x. xxxx The funds and/or the properties referred to herein as well as the benefits, sums or monies corresponding to the benefits under this Act shall be exempt from attachment, garnishment, execution, levy or other processes issued by the courts, quasi-judicial agencies or administrative bodies including Commission on Audit (COA) disallowances and from all financial obligations of the members, including his pecuniary accountability arising from or caused or occasioned by his exercise or performance of his official functions or duties, or incurred relative to or in connection with his position or work except when his monetary liability, contractual or otherwise, is in favor of the GSIS. (Emphasis ours.)

The Court would not be indulging in pure speculative exercise to say that the underlying legislative intent behind the above exempting proviso cannot be other than to isolate GSIS funds and properties from legal processes that will either impair the solvency of its fund or hamper its operation that would ultimately require an increase in the contribution rate necessary to sustain the benefits of the system. Throughout GSIS life under three different charters, the need to ensure the solvency of GSIS fund has always been a legislative concern, a concern expressed in the tax-exempting provisions.

Thus, even granting arguendo that GSIS liability for realty taxes attached from 1992, when RA 7160 effectively lifted its tax exemption under PD 1146, to 1996, when RA 8291 restored the tax incentive, the levy on the subject properties to answer for the assessed realty tax delinquencies cannot still be sustained. The simple reason: The governing law, RA 8291, in force at the time of the levy

prohibits it. And in the final analysis, the proscription against the levy extends to the leased Katigbak property, the beneficial use doctrine, notwithstanding.

Summary

In sum, the Court finds that GSIS enjoys under its charter full tax exemption. Moreover, as an instrumentality of the national government, it is itself not liable to pay real estate taxes assessed by the City of Manila against its Katigbak and Concepcion-Arroceros properties. Following the beneficial use rule, however, accrued real property taxes are due from the Katigbak property, leased as it is to a taxable entity. But the corresponding liability for the payment thereof devolves on the taxable beneficial user. The Katigbak property cannot in any event be subject of a public auction sale, notwithstanding its realty tax delinquency. This means that the City of Manila has to satisfy its tax claim by serving the accrued realty tax assessment on MHC, as the taxable beneficial user of the Katigbak property and, in case of nonpayment, through means other than the sale at public auction of the leased property.

WHEREFORE, the instant petition is hereby GRANTED. The November 15, 2007 Decision and January 7, 2009 Order of the Regional Trial Court, Branch 49, Manila areREVERSED and SET ASIDE. Accordingly, the real property tax assessments issued by the City of Manila to the Government Service Insurance System on the subject properties are declared VOID, except that the real property tax assessment pertaining to the leased Katigbak property shall be valid if served on the Manila Hotel Corporation, as lessee which has actual and beneficial use thereof. The City of Manila is permanently restrained from levying on or selling at public auction the subject properties to satisfy the payment of the real property tax delinquency.

No pronouncement as to costs.

SO ORDERED.

PRESBITERO J. VELASCO, JR. Associate Justice WE CONCUR:

RENATO C. CORONA Associate Justice Chairperson

ANTONIO EDUARDO B. NACHURA Associate Justice

DIOSDADO M. PERALTA Associate Justice

MARIANO C. DEL CASTILLO Associate Justice

ATTESTATION I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

RENATO C. CORONA Associate Justice Chairperson

CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. REYNATO S. PUNO Chief Justice

Additional member per Special Order No. 805 dated December 4, 2009. Rollo, pp. 29-38. Penned by Judge Concepcion S. Alarcon-Vergara. [2] Id. at 39. [3] Id. at 51-52, entitled Amending Proclamation No. 78 dated October 13, 1954 by Transferring the Property Housing the Former Offices of the [GSIS] to the Supreme Court of the Philippines, Reserving the Same for the City of Manila Hall of Justice. [4] Id. at 40-41. [5] Id. at 53, 54-55. [6] Id. at 56-62. [7] Id. at 63-76, dated October 7, 2002. [8] Id. at 77-90. [9] Id. at 38. [10] Id. at 11. [11] Entitled An Act to Create and Establish a Government Service Insurance System, to Provide for its Administration, and to Appropriate the Necessary Funds Therefor. [12] Entitled Amending, Expanding, Increasing and Integrating the Social Security and Insurance Benefits of Government Employees and Facilitating the Payment Thereof Under Commonwealth Act No. 186, as Amended, and for Other Purposes, approved on May 31, 1977. [13] Section 34. Implementing Body.The Government Service Insurance System as created and established under Commonwealth Act No. 186 shall implement the provisions of this Act. [14] Sec. 133(o) of the LGC provides that the taxing power of LGUs shall not extend to the levy of taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities and LGUs. [15] G.R. No. 120082, September 11, 1996, 261 SCRA 667. [16] G.R. No. 127383, 18 August 2005, 467 SCRA 280. [17] Id. at 299. [18] After its publication in the June 9, 1997 issue of the Philippine Star. [19] City of Davao, supra note 16. [20] G.R. No. 155650, July 20, 2006, 495 SCRA 591. [21] Chapter 12, Book I. [22] Section 24. Accounts to be maintained . The System shall keep separate and distinct from one another the following funds: (a) x x x x The Government of the Republic of the Philippines hereby guarantees the fulfillment of the obligations of the [GSIS] to the members thereof when and as they shall become due.
[1]

Section 8. Government Guarantee.The Government of the Republic of the Philippines hereby guarantees the fulfillment of the obligations of the System to its members as and when they fall due. [24] SEC. 8. Government Guarantee. The government of the Republic of the Philippines hereby guarantees the fulfillment of the obligations of the GSIS to its members as and when they fall due. [25] G.R. No. 114231, May 18, 2001, 357 SCRA 832 and June 29, 2004, 433 SCRA 11. [26] G.R. No. 166651, December 9, 2005, 477 SCRA 324. [27] Id at 333-334; citing LOCAL GOVERNMENT CODE, Sec. 199(b). [28] Rollo, p. 48.

[23]

EN BANC G.R. No. 196425 July 24, 2012

PROSPERO A. PICHAY, JR., Petitioner, vs. OFFICE OF THE DEPUTY EXECUTIVE SECRETARY FOR LEGAL AFFAIRS INVESTIGATIVE AND ADJUDICATORY DIVISION, HON. PAQUITO N. OCHOA, JR., in his capacity as Executive Secretary, and HON. CESAR V. PURISIMA, in his capacity as Secretary of Finance, and as an ex-officio member of the Monetary Board, Respondents. DECISION PERLAS-BERNABE, J.: The Case This is a Petition for Certiorari and Prohibition with a prayer for the issuance of a temporary restraining order, seeking to declare as unconstitutional Executive Order No. 13, entitled, "Abolishing the Presidential Anti-Graft Commission and Transferring Its Investigative, Adjudicatory and Recommendatory Functions to the Office Of The Deputy Executive Secretary For Legal Affairs, Office of the President",1 and to permanently prohibit respondents from administratively proceeding against petitioner on the strength of the assailed executive order. The Facts On April 16, 2001, then President Gloria Macapagal-Arroyo issued Executive Order No. 12 (E.O. 12) creating the Presidential Anti-Graft Commission (PAGC) and vesting it with the power to investigate or hear administrative cases or complaints for possible graft and corruption, among others, against presidential appointees and to submit its report and recommendations to the President. Pertinent portions of E.O. 12 provide: Section 4. Jurisdiction, Powers and Functions. (a) x x x xxx xxx

(b) The Commission, acting as a collegial body, shall have the authority to investigate or hear administrative cases or complaints against all presidential appointees in the government and any of its agencies or instrumentalities xxx xxx xxx xxx xxx xxx xxx

Section 8. Submission of Report and Recommendations. After completing its investigation or hearing, the Commission en banc shall submit its report and recommendations to the President. The report and recommendations shall state, among others, the factual findings and legal conclusions, as well as the penalty recommend (sic) to be imposed or such other action that may be taken." On November 15, 2010, President Benigno Simeon Aquino III issued Executive Order No. 13 (E.O. 13), abolishing the PAGC and transferring its functions to the Office of the Deputy Executive Secretary for Legal Affairs (ODESLA), more particularly to its newly-established Investigative and Adjudicatory Division (IAD). The full text of the assailed executive order reads: EXECUTIVE ORDER NO. 13 ABOLISHING THE PRESIDENTIAL ANTI-GRAFT COMMISSION AND TRANSFERRING ITS INVESTIGATIVE, ADJUDICATORY AND RECOMMENDATORY FUNCTIONS TO THE OFFICE OF THE DEPUTY EXECUTIVE SECRETARY FOR LEGAL AFFAIRS, OFFICE OF THE PRESIDENT WHEREAS, this administration has a continuing mandate and advocacy to fight and eradicate corruption in the different departments, bureaus, offices and other government agencies and instrumentalities; WHEREAS, the government adopted a policy of streamlining the government bureaucracy to promote economy and efficiency in government; WHEREAS, Section VII of the 1987 Philippine Constitution provides that the President shall have control of all the executive departments, bureaus and offices;

WHEREAS, Section 31 Chapter 10, Title III, Book III of Executive Order 292 (Administrative Code of 1987) provides for the continuing authority of the President to reorganize the administrative structure of the Office of the President; WHEREAS, Presidential Decree (PD) No. 1416 (Granting Continuing Authority to the President of the Philippines to Reorganize the National Government), as amended by PD 1722, provides that the President of the Philippines shall have continuing authority to reorganize the administrative structure of the National Government and may, at his discretion, create, abolish, group, consolidate, merge or integrate entities, agencies, instrumentalities and units of the National Government, as well as, expand, amend, change or otherwise modify their powers, functions and authorities; WHEREAS, Section 78 of the General Provisions of Republic Act No. 9970 (General Appropriations Act of 2010) authorizes the President of the Philippines to direct changes in the organizational units or key positions in any department or agency; NOW, THEREFORE, I, BENIGNO S. AQUINO III, President of the Philippines, by virtue of the powers vested in me by law, do hereby order the following: SECTION 1. Declaration of Policy. It is the policy of the government to fight and eradicate graft and corruption in the different departments, bureaus, offices and other government agencies and instrumentalities. The government adopted a policy of streamlining the government bureaucracy to promote economy and efficiency in the government. SECTION 2. Abolition of Presidential Anti-Graft Commission (PAGC). To enable the Office of the President (OP) to directly investigate graft and corrupt cases of Presidential appointees in the Executive Department including heads of government-owned and controlled corporations, the Presidential Anti-Graft Commission (PAGC) is hereby abolished and their vital functions and other powers and functions inherent or incidental thereto, transferred to the Office of the Deputy Executive Secretary for Legal Affairs (ODESLA), OP in accordance with the provisions of this Executive Order.

SECTION 3. Restructuring of the Office of the Deputy Executive Secretary for Legal Affairs, OP. In addition to the Legal and Legislative Divisions of the ODESLA, the Investigative and Adjudicatory Division shall be created. The newly created Investigative and Adjudicatory Division shall perform powers, functions and duties mentioned in Section 2 hereof, of PAGC. The Deputy Executive Secretary for Legal Affairs (DESLA) will be the recommending authority to the President, thru the Executive Secretary, for approval, adoption or modification of the report and recommendations of the Investigative and Adjudicatory Division of ODESLA. SECTION 4. Personnel Who May Be Affected By the Abolition of PAGC. The personnel who may be affected by the abolition of the PAGC shall be allowed to avail of the benefits provided under existing laws if applicable. The Department of Budget and Management (DBM) is hereby ordered to release the necessary funds for the benefits of the employees. SECTION 5. Winding Up of the Operation and Disposition of the Functions, Positions, Personnel, Assets and Liabilities of PAGC. The winding up of the operations of PAGC including the final disposition or transfer of their functions, positions, personnel, assets and liabilities as may be necessary, shall be in accordance with the applicable provision(s) of the Rules and Regulations Implementing EO 72 (Rationalizing the Agencies Under or Attached to the Office of the President) dated March 15, 2002. The winding up shall be implemented not later than 31 December 2010. The Office of the Executive Secretary, with the assistance of the Department of Budget and Management, shall ensure the smooth and efficient implementation of the dispositive actions and winding-up of the activities of PAGC. SECTION 6. Repealing Clause. All executive orders, rules, regulations and other issuances or parts thereof, which are inconsistent with the provisions of this Executive Order, are hereby revoked or modified accordingly. SECTION 7. Effectivity. This Executive Order shall take effect immediately after its publication in a newspaper of general circulation.

On April 6, 2011, respondent Finance Secretary Cesar V. Purisima filed before the IAD-ODESLA a complaint affidavit2 for grave misconduct against petitioner Prospero A. Pichay, Jr., Chairman of the Board of Trustees of the Local Water Utilities Administration (LWUA), as well as the incumbent members of the LWUA Board of Trustees, namely, Renato Velasco, Susana Dumlao Vargas, Bonifacio Mario M. Pena, Sr. and Daniel Landingin, which arose from the purchase by the LWUA of Four Hundred Forty-Five Thousand Three Hundred Seventy Seven (445,377) shares of stock of Express Savings Bank, Inc. On April 14, 2011, petitioner received an Order3 signed by Executive Secretary Paquito N. Ochoa, Jr. requiring him and his co-respondents to submit their respective written explanations under oath. In compliance therewith, petitioner filed a Motion to Dismiss Ex Abundante Ad Cautelam manifesting that a case involving the same transaction and charge of grave misconduct entitled, "Rustico B. Tutol, et al. v. Prospero Pichay, et al.", and docketed as OMB-C-A-10-0426-I, is already pending before the Office of the Ombudsman. Now alleging that no other plain, speedy and adequate remedy is available to him in the ordinary course of law, petitioner has resorted to the instant petition for certiorari and prohibition upon the following grounds: I. E.O. 13 IS UNCONSTITUTIONAL FOR USURPING THE POWER OF THE LEGISLATURE TO CREATE A PUBLIC OFFICE. II. E.O. 13 IS UNCONSTITUTIONAL FOR USURPING THE POWER OF THE LEGISLATURE TO APPROPRIATE FUNDS. III. E.O. 13 IS UNCONSTITUTIONAL FOR USURPING THE POWER OF CONGRESS TO DELEGATE QUASI-JUDICIAL POWERS TO ADMINISTRATIVE AGENCIES. IV. E.O. 13 IS UNCONSTITUTIONAL FOR ENCROACHING UPON THE POWERS OF THE OMBUDSMAN. V. E.O. 13 IS UNCONSTITUTIONAL FOR VIOLATING THE GUARANTEE OF DUE PROCESS. VI. E.O. 13 IS UNCONSTITUTIONAL FOR VIOLATING THE EQUAL PROTECTION CLAUSE.

Our Ruling In assailing the constitutionality of E.O. 13, petitioner asseverates that the President is not authorized under any existing law to create the Investigative and Adjudicatory Division, Office of the Deputy Executive Secretary for Legal Affairs (IAD-ODESLA) and that by creating a new, additional and distinct office tasked with quasi-judicial functions, the President has not only usurped the powers of congress to create a public office, appropriate funds and delegate quasi-judicial functions to administrative agencies but has also encroached upon the powers of the Ombudsman. Petitioner avers that the unconstitutionality of E.O. 13 is also evident when weighed against the due process requirement and equal protection clause under the 1987 Constitution. The contentions are unavailing. The President has Continuing Authority to Reorganize the Executive Department under E.O. 292. Section 31 of Executive Order No. 292 (E.O. 292), otherwise known as the Administrative Code of 1987, vests in the President the continuing authority to reorganize the offices under him in order to achieve simplicity, economy and efficiency. E.O. 292 sanctions the following actions undertaken for such purpose: (1)Restructure the internal organization of the Office of the President Proper, including the immediate Offices, the Presidential Special Assistants/Advisers System and the Common Staff Support System, by abolishing, consolidating, or merging units thereof or transferring functions from one unit to another; (2)Transfer any function under the Office of the President to any other Department or Agency as well as transfer functions to the Office of the President from other Departments and Agencies; and (3)Transfer any agency under the Office of the President to any other Department or Agency as well as transfer agencies to the Office of the President from other departments or agencies.4 In the case of Buklod ng Kawaning EIIB v. Zamora5 the Court affirmed that the President's authority to carry out a reorganization in any branch or agency of the

executive department is an express grant by the legislature by virtue of E.O. 292, thus: But of course, the list of legal basis authorizing the President to reorganize any department or agency in the executive branch does not have to end here. We must not lose sight of the very source of the power that which constitutes an express grant of power. Under Section 31, Book III of Executive Order No. 292 (otherwise known as the Administrative Code of 1987), "the President, subject to the policy of the Executive Office and in order to achieve simplicity, economy and efficiency, shall have the continuing authority to reorganize the administrative structure of the Office of the President." For this purpose, he may transfer the functions of other Departments or Agencies to the Office of the President. (Emphasis supplied) And in Domingo v. Zamora,6 the Court gave the rationale behind the President's continuing authority in this wise: The law grants the President this power in recognition of the recurring need of every President to reorganize his office "to achieve simplicity, economy and efficiency." The Office of the President is the nerve center of the Executive Branch. To remain effective and efficient, the Office of the President must be capable of being shaped and reshaped by the President in the manner he deems fit to carry out his directives and policies. After all, the Office of the President is the command post of the President. (Emphasis supplied) Clearly, the abolition of the PAGC and the transfer of its functions to a division specially created within the ODESLA is properly within the prerogative of the President under his continuing "delegated legislative authority to reorganize" his own office pursuant to E.O. 292. Generally, this authority to implement organizational changes is limited to transferring either an office or a function from the Office of the President to another Department or Agency, and the other way around.7 Only Section 31(1) gives the President a virtual freehand in dealing with the internal structure of the Office of the President Proper by allowing him to take actions as extreme as abolition, consolidation or merger of units, apart from the less drastic move of transferring functions and offices from one unit to another. Again, in Domingo v. Zamora8 the Court noted:

However, the President's power to reorganize the Office of the President under Section 31 (2) and (3) of EO 292 should be distinguished from his power to reorganize the Office of the President Proper. Under Section 31 (1) of EO 292, the President can reorganize the Office of the President Proper by abolishing, consolidating or merging units, or by transferring functions from one unit to another. In contrast, under Section 31 (2) and (3) of EO 292, the President's power to reorganize offices outside the Office of the President Proper but still within the Office of the President is limited to merely transferring functions or agencies from the Office of the President to Departments or Agencies, and vice versa. The distinction between the allowable organizational actions under Section 31(1) on the one hand and Section 31 (2) and (3) on the other is crucial not only as it affects employees' tenurial security but also insofar as it touches upon the validity of the reorganization, that is, whether the executive actions undertaken fall within the limitations prescribed under E.O. 292. When the PAGC was created under E.O. 12, it was composed of a Chairman and two (2) Commissioners who held the ranks of Presidential Assistant II and I, respectively,9 and was placed directly "under the Office of the President."10 On the other hand, the ODESLA, to which the functions of the PAGC have now been transferred, is an office within the Office of the President Proper.11 Since both of these offices belong to the Office of the President Proper, the reorganization by way of abolishing the PAGC and transferring its functions to the ODESLA is allowable under Section 31 (1) of E.O. 292. Petitioner, however, goes on to assert that the President went beyond the authority granted by E.O. 292 for him to reorganize the executive department since his issuance of E.O. 13 did not merely involve the abolition of an office but the creation of one as well. He argues that nowhere in the legal definition laid down by the Court in several cases does a reorganization include the act of creating an office. The contention is misplaced. The Reorganization Did not Entail the Creation of a New, Separate and Distinct Office.

The abolition of the PAGC did not require the creation of a new, additional and distinct office as the duties and functions that pertained to the defunct anti-graft body were simply transferred to the ODESLA, which is an existing office within the Office of the President Proper. The reorganization required no more than a mere alteration of the administrative structure of the ODESLA through the establishment of a third division the Investigative and Adjudicatory Division through which ODESLA could take on the additional functions it has been tasked to discharge under E.O. 13. In Canonizado v. Aguirre,12We ruled that Reorganization takes place when there is an alteration of the existing structure of government offices or units therein, including the lines of control, authority and responsibility between them. It involves a reduction of personnel, consolidation of offices, or abolition thereof by reason of economy or redundancy of functions. The Reorganization was Pursued in Good Faith. A valid reorganization must not only be exercised through legitimate authority but must also be pursued in good faith. A reorganization is said to be carried out in good faith if it is done for purposes of economy and efficiency. 13 It appears in this case that the streamlining of functions within the Office of the President Proper was pursued with such purposes in mind. In its Whereas clauses, E.O. 13 cites as bases for the reorganization the policy dictates of eradicating corruption in the government and promoting economy and efficiency in the bureaucracy. Indeed, the economical effects of the reorganization is shown by the fact that while Congress had initially appropriated P22 Million for the PAGC's operation in the 2010 annual budget,14 no separate or added funding of such a considerable amount was ever required after the transfer of the PAGC functions to the IAD-ODESLA. Apparently, the budgetary requirements that the IAD-ODESLA needed to discharge its functions and maintain its personnel would be sourced from the following year's appropriation for the President's Offices under the General Appropriations Act of 2011.15 Petitioner asseverates, however, that since Congress did not indicate the manner by which the appropriation for the Office of the President was to be distributed, taking therefrom the operational funds of the IAD-ODESLA would amount to an illegal appropriation by the President. The contention is without legal basis.

There is no usurpation of the legislative power to appropriate public funds. In the chief executive dwell the powers to run government. Placed upon him is the power to recommend the budget necessary for the operation of the Government,16 which implies that he has the necessary authority to evaluate and determine the structure that each government agency in the executive department would need to operate in the most economical and efficient manner.17 Hence, the express recognition under Section 78 of R.A. 9970 or the General Appropriations Act of 2010 of the Presidents authority to "direct changes in the organizational units or key positions in any department or agency." The aforecited provision, often and consistently included in the general appropriations laws, recognizes the extent of the Presidents power to reorganize the executive offices and agencies under him, which is, "even to the extent of modifying and realigning appropriations for that purpose."18 And to further enable the President to run the affairs of the executive department, he is likewise given constitutional authority to augment any item in the General Appropriations Law using the savings in other items of the appropriation for his office.19In fact, he is explicitly allowed by law to transfer any fund appropriated for the different departments, bureaus, offices and agencies of the Executive Department which is included in the General Appropriations Act, to any program, project or activity of any department, bureau or office included in the General Appropriations Act or approved after its enactment.20 Thus, while there may be no specific amount earmarked for the IAD-ODESLA from the total amount appropriated by Congress in the annual budget for the Office of the President, the necessary funds for the IAD-ODESLA may be properly sourced from the President's own office budget without committing any illegal appropriation. After all, there is no usurpation of the legislature's power to appropriate funds when the President simply allocates the existing funds previously appropriated by Congress for his office. The IAD-ODESLA is a fact-finding and recommendatory body not vested with quasi-judicial powers. Petitioner next avers that the IAD-ODESLA was illegally vested with judicial power which is reserved to the Judicial Department and, by way of exception through an express grant by the legislature, to administrative agencies. He points out that the

name Investigative and Adjudicatory Division is proof itself that the IAD-ODESLA wields quasi-judicial power. The argument is tenuous. As the OSG aptly explained in its Comment,21 while the term "adjudicatory" appears part of its appellation, the IAD-ODESLA cannot try and resolve cases, its authority being limited to the conduct of investigations, preparation of reports and submission of recommendations. E.O. 13 explicitly states that the IAD-ODESLA shall "perform powers, functions and duties xxx, of PAGC."22 Under E.O. 12, the PAGC was given the authority to "investigate or hear administrative cases or complaints against all presidential appointees in the government"23 and to "submit its report and recommendations to the President."24 The IAD-ODESLA is a fact-finding and recommendatory body to the President, not having the power to settle controversies and adjudicate cases. As the Court ruled in Cario v. Commission on Human Rights,25 and later reiterated in Biraogo v. The Philippine Truth Commission:26 Fact-finding is not adjudication and it cannot be likened to the judicial function of a court of justice, or even a quasi-judicial agency or office. The function of receiving evidence and ascertaining therefrom the facts of a controversy is not a judicial function. To be considered as such, the act of receiving evidence and arriving at factual conclusions in a controversy must be accompanied by the authority of applying the law to the factual conclusions to the end that the controversy may be decided or determined authoritatively, finally and definitively, subject to such appeals or modes of review as may be provided by law. The President's authority to issue E.O. 13 and constitute the IAD-ODESLA as his fact-finding investigator cannot be doubted. After all, as Chief Executive, he is granted full control over the Executive Department to ensure the enforcement of the laws. Section 17, Article VII of the Constitution provides: Section 17. The President shall have control of all the executive departments, bureaus and offices. He shall ensure that the laws be faithfully executed. The obligation to see to it that laws are faithfully executed necessitates the corresponding power in the President to conduct investigations into the conduct of officials and employees in the executive department.27

The IAD-ODESLA does not encroach upon the powers and duties of the Ombudsman. Contrary to petitioner's contention, the IAD-ODESLA did not encroach upon the Ombudsman's primary jurisdiction when it took cognizance of the complaint affidavit filed against him notwithstanding the earlier filing of criminal and administrative cases involving the same charges and allegations before the Office of the Ombudsman. The primary jurisdiction of the Ombudsman to investigate and prosecute cases refers to criminal cases cognizable by the Sandiganbayan and not to administrative cases. It is only in the exercise of its primary jurisdiction that the Ombudsman may, at any time, take over the investigation being conducted by another investigatory agency. Section 15 (1) of R.A. No. 6770 or the Ombudsman Act of 1989, empowers the Ombudsman to (1)Investigate and prosecute on its own or on complaint by any person, any act or omission of any public officer or employee, office or agency, when such act or omission appears to be illegal, unjust, improper or inefficient. It has primary jurisdiction over cases cognizable by the Sandiganbayan and, in the exercise of its primary jurisdiction, it may take over, at any stage, from any investigatory agency of government, the investigation of such cases. (Emphasis supplied) Since the case filed before the IAD-ODESLA is an administrative disciplinary case for grave misconduct, petitioner may not invoke the primary jurisdiction of the Ombudsman to prevent the IAD-ODESLA from proceeding with its investigation. In any event, the Ombudsman's authority to investigate both elective and appointive officials in the government, extensive as it may be, is by no means exclusive. It is shared with other similarly authorized government agencies.28 While the Ombudsman's function goes into the determination of the existence of probable cause and the adjudication of the merits of a criminal accusation, the investigative authority of the IAD- ODESLA is limited to that of a fact-finding investigator whose determinations and recommendations remain so until acted upon by the President. As such, it commits no usurpation of the Ombudsman's constitutional duties. Executive Order No. 13 Does Not Violate Petitioner's Right to Due Process and the Equal Protection of the Laws.

Petitioner goes on to assail E.O. 13 as violative of the equal protection clause pointing to the arbitrariness of limiting the IAD-ODESLA's investigation only to presidential appointees occupying upper-level positions in the government. The equal protection of the laws is a guaranty against any form of undue favoritism or hostility from the government.29 It is embraced under the due process concept and simply requires that, in the application of the law, "all persons or things similarly situated should be treated alike, both as to rights conferred and responsibilities imposed."30 The equal protection clause, however, is not absolute but subject to reasonable classification so that aggrupations bearing substantial distinctions may be treated differently from each other. This we ruled in Farinas v. Executive Secretary,31 wherein we further stated that 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. (Emphasis supplied) Presidential appointees come under the direct disciplining authority of the President. This proceeds from the well settled principle that, in the absence of a contrary law, the power to remove or to discipline is lodged in the same authority on which the power to appoint is vested.32 Having the power to remove and/or discipline presidential appointees, the President has the corollary authority to investigate such public officials and look into their conduct in office. 33 Petitioner is a presidential appointee occupying the high-level position of Chairman of the LWUA. Necessarily, he comes under the disciplinary jurisdiction of the President, who is well within his right to order an investigation into matters that require his informed decision. There are substantial distinctions that set apart presidential appointees occupying upper-level positions in government from non-presidential appointees and those that occupy the lower positions in government. In Salumbides v. Office of the

Ombudsman,34 we had ruled extensively on the substantial distinctions that exist between elective and appointive public officials, thus: 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. 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 tenure while others serve at the pleasure of the appointing authority. xxxx An election is the embodiment of the popular will, perhaps the purest expression of the sovereign power of the people.1wphi1 It involves the choice or selection of candidates to public office by popular vote. Considering that elected officials are put in office by their constituents for a definite term, x x x complete deference is accorded to the will of the electorate that they be served by such officials until the end of the term for which they were elected. In contrast, there is no such expectation insofar as appointed officials are concerned. (Emphasis supplied) Also, contrary to petitioner's assertions, his right to due process was not violated when the IAD-ODESLA took cognizance of the administrative complaint against him since he was given sufficient opportunity to oppose the formal complaint filed by Secretary Purisima. In administrative proceedings, the filing of charges and giving reasonable opportunity for the person so charged to answer the accusations against him constitute the minimum requirements of due process,35 which simply means having the opportunity to explain ones side.36 Hence, as long as petitioner was given the opportunity to explain his side and present evidence, the requirements of due process are satisfactorily complied with because what the law abhors is an absolute lack of opportunity to be heard.37 The records show that petitioner was issued an Order requiring him to submit his written explanation under oath with respect to the charge of grave misconduct filed against him. His own failure to submit his explanation despite notice defeats his subsequent claim of denial of due process.

Finally, petitioner doubts that the IAD-ODESLA can lawfully perform its duties as an impartial tribunal, contending that both the IAD-ODESLA and respondent Secretary Purisima are connected to the President. The mere suspicion of partiality will not suffice to invalidate the actions of the IAD-ODESLA. Mere allegation is not equivalent to proof. Bias and partiality cannot be presumed.38 Petitioner must present substantial proof to show that the lAD-ODES LA had unjustifiably sided against him in the conduct of the investigation. No such evidence has been presented as to defeat the presumption of regularity m the performance of the fact-finding investigator's duties. The assertion, therefore, deserves scant consideration. Every law has in its favor the presumption of constitutionality, and to justify its nullification, there must be a clear and unequivocal breach of the Constitution, not a doubtful and argumentative one.39 Petitioner has failed to discharge the burden of proving the illegality of E.O. 13, which IS indubitably a valid exercise of the President's continuing authority to reorganize the Office of the President. WHEREFORE, premises considered, the petition IS hereby DISMISSED. SO ORDERED. ESTELA M. PERLAS-BERNABE Associate justice WE CONCUR: ANTONIO T. CARPIO Senior Associate Justice (On official leave) TERESITA J. LEONARDO-DE CASTRO* Associate Justice (On official business) DIOSDADO M. PERALTA*** Associate Justice

PRESBITERO J. VELASCO, JR. Associate Justice

(On leave) ARTURO D. BRION** Associate Justice

LUCAS P. BERSAMIN Associate Justice ROBERTO A. ABAD Associate Justice JOSE PORTUGAL PEREZ Associate Justice MARIA LOURDES P.A. SERENO Associate Justice

MARIANO C. DEL CASTILLO Associate Justice MARTIN S. VILLARAMA, JR. Associate Justice (On leave) JOSE CATRAL MENDOZA**** Associate Justice BIENVENIDO L. REYES Associate Justice

CERTIFICATION I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court. ANTONIO T. CARPIO Senior Associate Justice (Per Section 12, R.A. 296, The Judiciary Act of 1948, as amended)

EN BANC G.R. No. 196231 September 4, 2012

EMILIO A. GONZALES III, Petitioner, vs. OFFICE OF THE PRESIDENT OF THE PHILIPPINES, acting through and represented by EXECUTIVE SECRETARY PAQUITO N. OCHOA, JR., SENIOR DEPUTY EXECUTIVE SECRETARY JOSE AMOR M. AMORANDO, Officer in Charge, Office of the Deputy Executive Secretary for Legal Affairs, ATTY. RONALDO A. GERON, DIR. ROWENA TURINGAN-SANCHEZ, and ATTY. CARLITOD. CATAYONG, Respondents. x-----------------------x G.R. No. 196232 WENDELL BARRERAS-SULIT, Petitioner, vs. ATTY. PAQUITO N. OCHOA, JR., in his capacity as EXECUTIVE SECRETARY, OFFICE OF THE PRESIDENT, ATTY. DENNIS F. ORTIZ, ATTY. CARLO D.SULAY and ATTY. FROILAN MONTALBAN, .JR., in their capacities as CHAIRMAN and MEMBERS of the OFFICE OF MALACAANG LEGAL AFFAIRS, Respondents. DECISION PERLAS-BERNABE, J.: The Case These two petitions have been consolidated not because they stem from the same factual milieu but because they raise a common thread of issues relating to the President's exercise of the power to remove from office herein petitioners who claim the protective cloak of independence of the constitutionally-created office to which they belong - the Office of the Ombudsman. The first case, docketed as G.R. No. 196231, is a Petition for Certiorari (with application for issuance of temporary restraining order or status quo order) which assails on jurisdictional grounds the Decision1 dated March 31, 2011 rendered by the Office of the President in OP Case No. 10-J-460 dismissing petitioner Emilio A.

Gonzales III, Deputy Ombudsman for the Military and Other Law Enforcement Offices (MOLEO), upon a finding of guilt on the administrative charges of Gross Neglect of Duty and Grave Misconduct constituting a Betrayal of Public Trust. The petition primarily seeks to declare as unconstitutional Section 8(2) of Republic Act (R.A.) No. 6770, otherwise known as the Ombudsman Act of 1989, which gives the President the power to dismiss a Deputy Ombudsman of the Office of the Ombudsman. The second case, docketed as G.R. No. 196232, is a Petition for Certiorari and Prohibition (with application for issuance of a temporary restraining order or status quo order) seeking to annul, reverse and set aside (1) the undated Order2 requiring petitioner Wendell Barreras-Sulit to submit a written explanation with respect to alleged acts or omissions constituting serious/grave offenses in relation to the Plea Bargaining Agreement (PLEBARA) entered into with Major General Carlos F. Garcia; and (2) the April 7, 2011 Notice of Preliminary Investigation,3 both issued by the Office of the President in OP-DC-Case No. 11-B003, the administrative case initiated against petitioner as a Special Prosecutor of the Office of the Ombudsman. The petition likewise seeks to declare as unconstitutional Section 8(2) of R.A. No. 6770 giving the President the power to dismiss a Special Prosecutor of the Office of the Ombudsman. The facts from which these two cases separately took root are neither complicated nor unfamiliar. In the morning of August 23, 2010, news media scampered for a minute-byminute coverage of a hostage drama that had slowly unfolded right at the very heart of the City of Manila. While initial news accounts were fragmented it was not difficult to piece together the story on the hostage-taker, Police Senior Inspector Rolando Mendoza. He was a disgruntled former police officer attempting to secure his reinstatement in the police force and to restore the benefits of a life-long, and erstwhile bemedaled, service. The following day, broadsheets and tabloids were replete with stories not just of the deceased hostage-taker but also of the hostage victims, eight of whom died during the bungled police operation to rescue the hapless innocents. Their tragic deaths triggered word wars of foreign relation proportions. One newspaper headline ran the story in detail, as follows:

MANILA, Philippines - A dismissed policeman armed with an assault rifle hijacked a bus packed with tourists, and killed most of its passengers in a 10 hour-hostage drama shown live on national television until last night. Former police senior inspector Rolando Mendoza was shot dead by a sniper at past 9 p.m. Mendoza hijacked the bus and took 21 Chinese tourists hostage, demanding his reinstatement to the police force. The hostage drama dragged on even after the driver of the bus managed to escape and told police that all the remaining passengers had been killed. Late into the night assault forces surrounded the bus and tried to gain entry, but a pair of dead hostages hand-cuffed to the door made it difficult for them. Police said they fired at the wheels of the bus to immobilize it. Police used hammers to smash windows, door and wind-shield but were met with intermittent fire from the hos-tage taker. Police also used tear gas in an effort to confirm if the remaining hostages were all dead or alive. When the standoff ended at nearly 9 p.m., some four hostages were rescued alive while Mendoza was killed by a sniper. Initial reports said some 30 policemen stormed the bus. Shots also rang out, sending bystanders scampering for safety. It took the policemen almost two hours to assault the bus because gunfire reportedly rang out from inside the bus. Mendoza hijacked the tourist bus in the morning and took the tourists hostage. Mendoza, who claimed he was illegally dismissed from the police service, initially released nine of the hostages during the drama that began at 10 a.m. and played out live on national television. Live television footage showed Mendoza asking for food for those remaining in the bus, which was delivered, and fuel to keep the air-conditioning going. The disgruntled former police officer was reportedly armed with an M-16 rifle, a 9 mm pistol and two hand grenades.

Mendoza posted a handwritten note on the windows of the bus, saying "big deal will start after 3 p.m. today." Another sign stuck to another window said "3 p.m. today deadlock." Stressing his demand, Mendoza stuck a piece of paper with a handwritten message: "Big mistake to correct a big wrong decision." A larger piece of paper on the front windshield was headed, "Release final decision," apparently referring to the case that led to his dismissal from the police force. Negotiations dragged on even after Mendoza's self-imposed deadline. Senior Police Officer 2 Gregorio Mendoza said his brother was upset over his dismissal from the police force. "His problem was he was unjustly removed from service. There was no due process, no hearing, no com-plaint," Gregorio said. Last night, Gregorio was arrested by his colleagues on suspicions of being an accessory to his brother's action. Tensions rose as relatives tried to prevent lawmen from arresting Gregorio in front of national television. This triggered the crisis that eventually forced Mendoza to carry out his threat and kill the remaining hostages. Negotiators led by Superintendent Orlando Yebra and Chief Inspector Romeo Salvador tried to talk Mendoza into surrendering and releasing the 21 hostages, mostly children and three Filipinos, including the driver, the tourist guide and a photographer. Yebra reportedly lent a cellphone to allow communications with Mendoza in-side the bus, which was parked in front ofthe Quirino Grandstand. Children could be seen peeking from the drawn curtains of the bus while police negotiators hovered near the scene. Manila Police District (MPD) director Chief Superinten-dent Rodolfo Magtibay ordered the deployment of crack police teams and snipers near the scene. A crisis man-agement committee had been activated with Manila Vice Mayor Isko Moreno coordinating the actions with the MPD. Earlier last night, Ombudsman Merceditas Gutierrez had a meeting with Moreno to discuss Mendoza's case that led to his dismissal from the service. Ombudsman spokesman Jose de Jesus said Gutierrez gave a "sealed letter" to Moreno to be

delivered to Mendoza. De Jesus did not elaborate on the contents of the letter but said Moreno was tasked to personally deliver the letter to Mendoza. MPD spokesman Chief Inspector Edwin Margarejo said Mendoza was apparently distraught by the slow process of the Ombudsman in deciding his motion for reconside-ration. He said the PNP-Internal Affairs Service and the Manila Regional Trial Court had already dismissed crim-inal cases against him. The hostage drama began when Mendoza flagged down the Hong Thai Travel Tourist bus (TVU-799), pretend-ing to hitch a ride. Margarejo said the bus had just left Fort Santiago in Intramuros when Mendoza asked the driver to let him get on and ride to Quirino Grandstand. Upon reaching the Quirino Grandstand, Mendoza an-nounced to the passengers that they would be taken hostage. "Having worn his (police) uniform, of course there is no doubt that he already planned the hostage taking," Margarejo said. - Sandy Araneta, Nestor Etolle, Delon Porcalla, Amanda Fisher, Cecille Suerte Felipe, Christi-na Mendez, AP Grandstand Carnage, The Philippine Star, Updated August 24, 2010 12:00 AM, Val Rodri-guez.4 In a completely separate incident much earlier in time, more particularly in December of 2003, 28-year-old Juan Paolo Garcia and 23-year-old Ian Carl Garcia were caught in the United States smuggling $100,000 from Manila by concealing the cash in their luggage and making false statements to US Customs Officers. The Garcia brothers pleaded guilty to bulk cash smuggling and agreed to forfeit the amount in favor of the US Government in exchange for the dismissal of the rest of the charges against them and for being sentenced to time served. Inevitably, however, an investigation into the source of the smuggled currency conducted by US Federal Agents and the Philippine Government unraveled a scandal of military corruption and amassed wealth -- the boys' father, Retired Major General Carlos F. Garcia, former Chief Procurement Officer of the Armed Forces, had accumulated more than P 300 Million during his active military service. Plunder and Anti-Money Laundering cases were eventually filed against Major General Garcia, his wife and their two sons before the Sandiganbayan. G.R. No. 196231 Sometime in 2008, a formal charge5 for Grave Misconduct (robbery, grave threats, robbery extortion and physical injuries) was filed before the Philippine National Police-National Capital Region (PNP-NCR) against Manila Police District

Senior Inspector (P/S Insp.) Rolando Mendoza, and four others, namely, Police Inspector Nelson Lagasca, Senior Police Inspector I Nestor David, Police Officer III Wilson Gavino, and Police Officer II Roderick Lopena. A similar charge was filed by the private complainant, Christian M. Kalaw, before the Office of the City Prosecutor, Manila, docketed as I.S. No. 08E-09512. On July 24, 2008, while said cases were still pending, the Office of the Regional Director of the National Police Commission (NPC) turned over, upon the request of petitioner Emilio A. Gonzales III, all relevant documents and evidence in relation to said case to the Office of the Deputy Ombudsman for appropriate administrative adjudication.6 Subsequently, Case No. OMB-P-A-08-0670-H for Grave Misconduct was lodged against P/S Insp. Rolando Mendoza and his fellow police officers, who filed their respective verified position papers as directed. Meanwhile, on August 26, 2008, I.S. No. 08E-09512 was dismissed7 upon a finding that the material allegations made by the complainant had not been substantiated "by any evidence at all to warrant the indictment of respondents of the offenses charged." Similarly, the Internal Affairs Service of the PNP issued a Resolution8 dated October 17, 2008 recommending the dismissal without prejudice of the administrative case against the same police officers, for failure of the complainant to appear in three (3) consecutive hearings despite due notice. However, on February 16, 2009, upon the recommendation of petitioner Emilio Gonzales III, a Decision9 in Case No. OMB-P-A-08-0670-H finding P/S Insp. Rolando Mendoza and his fellow police officers guilty of Grave Misconduct was approved by the Ombudsman. The dispositive portion of said Decision reads: WHEREFORE, it is respectfully recommended that respondents P/S Insp. ROLANDO DEL ROSARIO MENDOZA and PO3 WILSON MATIC GAVINO of PROARMM, Camp Brig. Gen. Salipada K. Pendatun, Parang, Shariff Kabunsuan; P/INSP. NELSON URBANO LAGASCA, SPO1 NESTOR REYES DAVID and PO2 RODERICK SALVA LOPEA of Manila Police District, Headquarters, United Nations Avenue, Manila, be meted the penalty of DISMISSAL from the Service, pursuant to Section 52 (A), Rule IV, Uniform Rules on Administrative Cases in the Civil Service, with the accessory penalties of forfeiture of retirement benefits and perpetual disqualification from reemployment in the government service pursuant to Section 58, Rule IV of the same Uniform Rules of

Administrative Cases in the Civil Service, for having committed GRAVE MISCONDUCT. On November 5, 2009, they filed a Motion for Reconsideration10 of the foregoing Decision, followed by a Supplement to the Motion for Reconsideration11 on November 19, 2009. On December 14, 2009, the pleadings mentioned and the records of the case were assigned for review and recommendation to Graft Investigation and Prosecutor Officer Dennis L. Garcia, who released a draft Order12 on April 5, 2010 for appropriate action by his immediate superior, Director Eulogio S. Cecilio, who, in turn, signed and forwarded said Order to petitioner Gonzalez's office on April 27, 2010. Not more than ten (10) days after, more particularly on May 6, 2010, petitioner endorsed the Order, together with the case records, for final approval by Ombudsman Merceditas N. Gutierrez, in whose office it remained pending for final review and action when P/S Insp. Mendoza hijacked a bus-load of foreign tourists on that fateful day of August 23, 2010 in a desperate attempt to have himself reinstated in the police service. In the aftermath of the hostage-taking incident, which ended in the tragic murder of eight HongKong Chinese nationals, the injury of seven others and the death of P/S Insp. Rolando Mendoza, a public outcry against the blundering of government officials prompted the creation of the Incident Investigation and Review Committee (IIRC),13 chaired by Justice Secretary Leila de Lima and vice-chaired by Interior and Local Government Secretary Jesus Robredo. It was tasked to determine accountability for the incident through the conduct of public hearings and executive sessions. However, petitioner, as well as the Ombudsman herself, refused to participate in the IIRC proceedings on the assertion that the Office of the Ombudsman is an independent constitutional body. Sifting through testimonial and documentary evidence, the IIRC eventually identified petitioner Gonzales to be among those in whom culpability must lie. In its Report,14 the IIRC made the following findings: Deputy Ombudsman Gonzales committed serious and inexcusable negligence and gross violation of their own rules of procedure by allowing Mendoza's motion for reconsideration to languish for more than nine (9) months without any justification, in violation of the Ombudsman prescribed rules to resolve motions for reconsideration in administrative disciplinary cases within five (5) days from

submission. The inaction is gross, considering there is no opposition thereto. The prolonged inaction precipitated the desperate resort to hostage-taking. More so, Mendoza's demand for immediate resolution of his motion for reconsideration is not without legal and compelling bases considering the following: (a) PSI Mendoza and four policemen were investigated by the Ombudsman involving a case for alleged robbery (extortion), grave threats and physical injuries amounting to grave misconduct allegedly committed against a certain Christian Kalaw. The same case, however, was previously dismissed by the Manila City Prosecutors Office for lack of probable cause and by the PNP-NCR Internal Affairs Service for failure of the complainant (Christian Kalaw) to submit evidence and prosecute the case. On the other hand, the case which was filed much ahead by Mendoza et al. against Christian Kalaw involving the same incident, was given due course by the City Prosecutors Office. (b) The Ombudsman exercised jurisdiction over the case based on a letter issued motu proprio for Deputy Ombudsman Emilio A. Gonzalez III, directing the PNP-NCR - without citing any reason - to endorse the case against Mendoza and the arresting policemen to his office for administrative adjudication, thereby showing undue interest on the case. He also caused the docketing of the case and named Atty. Clarence V. Guinto of the PNP-CIDG-NCR, who indorsed the case records, as the nominal complainant, in lieu of Christian Kalaw. During the proceedings, Christian Kalaw did not also affirm his complaint-affidavit with the Ombudsman or submit any position paper as required. (c) Subsequently, Mendoza, after serving preventive suspension, was adjudged liable for grave misconduct by Deputy Ombudsman Gonzales (duly approved on May 21, 2009) based on the sole and uncorroborated complaint-affidavit of Christian Kalaw, which was not previously sustained by the City Prosecutor's Office and the PNP Internal Affairs Service. From the said Resolution, Mendoza interposed a timely motion for reconsideration (dated and filed November 5, 2009) as well as a supplement thereto. No opposition or comment was filed thereto.

(d) Despite the pending and unresolved motion for reconsideration, the judgment of dismissal was enforced, thereby abruptly ending Mendoza's 30 years of service in the PNP with forfeiture of all his benefits. As a result, Mendoza sought urgent relief by sending several hand-written letterrequests to the Ombudsman for immediate resolution of his motion for reconsideration. But his requests fell on deaf ears. xxxx By allowing Mendoza's motion for reconsideration to languish for nine long (9) months without any justification, Ombudsman Gutierrez and Deputy Ombudsman Gonzales committed complete and wanton violation of the Ombudsman prescribed rule to resolve motions for reconsideration in administrative disciplinary cases within five (5) days from submission (Sec. 8, Ombudsman Rules of Procedure). The inaction is gross, there being no opposition to the motion for reconsideration. Besides, the Ombudsman, without first resolving the motion for reconsideration, arbitrarily enforced the judgment of dismissal and ignored the intervening requests for immediate resolution, thereby rendering the inaction even more inexcusable and unjust as to amount to gross negligence and grave misconduct. SECOND, Ombudsman Gutierrez and Deputy Ombudsman Gonzales committed serious disregard of due process, manifest injustice and oppression in failing to provisionally suspend the further implementation of the judgment of dismissal against Mendoza pending disposition of his unresolved motion for reconsideration. By enforcing the judgment of dismissal without resolving the motion for reconsideration for over nine months, the two Ombudsman officials acted with arbitrariness and without regard to due process and the constitutional right of an accused to the speedy disposition of his case. As long as his motion for reconsideration remained pending and unresolved, Mendoza was also effectively deprived of the right to avail of the ordinary course of appeal or review to challenge the judgment of dismissal before the higher courts and seek a temporary restraining order to prevent the further execution thereof. As such, if the Ombudsman cannot resolve with dispatch the motion for reconsideration, it should have provisionally suspended the further enforcement

of the judgment of dismissal without prejudice to its re-implementation if the reconsideration is eventually denied. Otherwise, the Ombudsman will benefit from its own inaction. Besides, the litigant is entitled to a stay of the execution pending resolution of his motion for reconsideration. Until the motion for reconsideration is denied, the adjudication process before the Ombudsman cannot be considered as completely finished and, hence, the judgment is not yet ripe for execution. xxxx When the two Ombudsman officials received Mendoza's demand for the release of the final order resolving his motion for reconsideration, they should have performed their duty by resolving the reconsideration that same day since it was already pending for nine months and the prescribed period for its resolution is only five days. Or if they cannot resolve it that same day, then they should have acted decisively by issuing an order provisionally suspending the further enforcement of the judgment of dismissal subject to revocation once the reconsideration is denied and without prejudice to the arrest and prosecution of Mendoza for the hostage-taking. Had they done so, the crisis may have ended peacefully, without necessarily compromising the integrity of the institution. After all, as relayed to the negotiators, Mendoza did express willingness to take full responsibility for the hostage-taking if his demand for release of the final decision or reinstatement was met. But instead of acting decisively, the two Ombudsman officials merely offered to review a pending motion for review of the case, thereby prolonging their inaction and aggravating the situation. As expected, Mendoza - who previously berated Deputy Gonzales for allegedly demanding Php150,000 in exchange for favorably resolving the motion for reconsideration - rejected and branded as trash ("basura") the Ombudsman [sic] letter promising review, triggering the collapse of the negotiations. To prevent the situation from getting out of hand, the negotiators sought the alternative option of securing before the PNP-NCRPO an order for Mendoza's provisional reinstatement pending resolution of the motion for reconsideration. Unfortunately, it was already too late. But had the Ombudsman officials performed their duty under the law and acted decisively, the entire crisis may have ended differently.

The IIRC recommended that its findings with respect to petitioner Gonzales be referred to the Office of the President (OP) for further determination of possible administrative offenses and for the initiation of the proper administrative proceedings. On October 15, 2010, the OP instituted a Formal Charge15 against petitioner Gonzales for Gross Neglect of Duty and/or Inefficiency in the Performance of Official Duty under Rule XIV, Section 22 of the Omnibus Rules Implementing Book V of E.O. No. 292 and other pertinent Civil Service Laws, rules and regulations, and for Misconduct in Office under Section 3 of the Anti-Graft and Corrupt Practices Act.16 Petitioner filed his Answer17 thereto in due time. Shortly after the filing by the OP of the administrative case against petitioner, a complaint dated October 29, 2010 was filed by Acting Assistant Ombudsman Joselito P. Fangon before the Internal Affairs Board of the Office of the Ombudsman charging petitioner with "directly or indirectly requesting or receiving any gift, present, share, percentage, or benefit, for himself or for any other person, in connection with any contract or transaction between the Government and any other party, wherein the public officer in his official capacity has to intervene under the law" under Section 3(b) of the Anti-Graft and Corrupt Practices Act, and also, with solicitation or acceptance of gifts under Section 7(d) of the Code of Conduct and Ethical Standards.18 In a Joint Resolution19 dated February 17, 2011, which was approved by Ombudsman Ma. Merceditas N. Gutierrez, the complaint was dismissed, as follows: WHEREFORE, premises considered, finding no probable cause to indict respondent Emilio A. Gonzales III for violations of Section 3(b) of R.A. No. 3019 and Section 7(d) of R.A. No. 6713, the complaint is hereby be [sic] DISMISSED. Further, finding no sufficient evidence to hold respondent administratively liable for Misconduct, the same is likewise DISMISSED. Meanwhile, the OP notified20 petitioner that a Preliminary Clarificatory Conference relative to the administrative charge against him was to be conducted at the Office of the Deputy Executive Secretary for Legal Affairs (ODESLA) on February 8, 2011. Petitioner Gonzales alleged,21 however, that on February 4, 2011, he heard the news that the OP had announced his suspension for one year

due to his delay in the disposition of P/S Insp. Mendoza's motion for reconsideration. Hence, believing that the OP had already prejudged his case and that any proceeding before it would simply be a charade, petitioner no longer attended the scheduled clarificatory conference. Instead, he filed an Objection to Proceedings22 on February 7, 2011. Despite petitioner's absence, however, the OP pushed through with the proceedings and, on March 31, 2011, rendered the assailed Decision,23 the dispositive portion of which reads: WHEREFORE, in view of the foregoing, this Office finds Deputy Ombudsman Emilio A. Gonzales III guilty of Gross Neglect of Duty and Grave Misconduct constituting betrayal of public trust, and hereby meted out the penalty of DISMISSAL from service. SO ORDERED. Hence, the petition. G.R. No. 196232 In April of 2005, the Acting Deputy Special Prosecutor of the Office of the Ombudsman charged Major General Carlos F. Garcia, his wife Clarita D. Garcia, their sons Ian Carl Garcia, Juan Paulo Garcia and Timothy Mark Garcia and several unknown persons with Plunder (Criminal Case No. 28107) and Money Laundering (Criminal Case No. SB09CRM0194) before the Sandiganbayan. On January 7, 2010, the Sandiganbayan denied Major General Garcia's urgent petition for bail holding that strong prosecution evidence militated against the grant of bail. On March 16, 2010, however, the government, represented by petitioner, Special Prosecutor Wendell Barreras-Sulit ("Barreras-Sulit") and her prosecutorial staff sought the Sandiganbayan's approval of a Plea Bargaining Agreement (hereinafter referred to as "PLEBARA") entered into with the accused. On May 4, 2010, the Sandiganbayan issued a Resolution finding the change of plea warranted and the PLEBARA compliant with jurisprudential guidelines. Outraged by the backroom deal that could allow Major General Garcia to get off the hook with nothing but a slap on the hand notwithstanding the prosecution's apparently strong evidence of his culpability for serious public offenses, the House of Representatives' Committee on Justice conducted public hearings on the PLEBARA. At the conclusion of these public hearings, the Committee on Justice

passed and adopted Committee Resolution No. 3,24 recommending to the President the dismissal of petitioner Barreras-Sulit from the service and the filing of appropriate charges against her Deputies and Assistants before the appropriate government office for having committed acts and/or omissions tantamount to culpable violations of the Constitution and betrayal of public trust, which are violations under the Anti-Graft and Corrupt Practices Act and grounds for removal from office under the Ombudsman Act. The Office of the President initiated OP-DC-Case No. 11-B-003 against petitioner Barreras-Sulit. In her written explanation, petitioner raised the defenses of prematurity and the lack of jurisdiction of the OP with respect to the administrative disciplinary proceeding against her. The OP, however, still proceeded with the case, setting it for preliminary investigation on April 15, 2011. Hence, the petition. The Issues In G.R. No. 196231, petitioner Gonzales raises the following grounds, to wit: (A) RESPONDENT OFFICE OF THE PRESIDENT, ACTING THROUGH THE OTHER INDIVIDUAL RESPONDENTS, HAS NO CONSTITUTIONAL OR VALID STATUTORY AUTHORITY TO SUBJECT PETITIONER TO AN ADMINISTRATIVE INVESTIGATION AND TO THEREAFTER ORDER HIS REMOVAL AS DEPUTY OMBUDSMAN. (B) RESPONDENT OFFICE OF THE PRESIDENT, ACTING THROUGH THE OTHER INDIVIDUAL RESPONDENTS, GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT CONDUCTED ITS INVESTIGATION AND RENDERED ITS DECISION IN VIOLATION OF PETITIONER'S RIGHT TO DUE PROCESS. (C) RESPONDENT OFFICE OF THE PRESIDENT, ACTING THROUGH THE INDIVIDUAL RESPONDENTS, GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR

EXCESS OF JURISDICTION IN FINDING THAT PETITIONER COMMITTED DELAY IN THE DISPOSITION OF MENDOZA'S MOTION FOR RECONSIDERATION. (D) RESPONDENT OFFICE OF THE PRESIDENT, ACTING THROUGH THE INDIVIDUAL RESPONDENTS, GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN FINDING THAT PETITIONER TOOK UNDUE INTEREST IN MENDOZA'S CASE. (E) RESPONDENT OFFICE OF THE PRESIDENT, ACTING THROUGH THE INDIVIDUAL RESPONDENTS, GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN FAULTING PETITIONER FOR NOT RELEASING THE RESOLUTION ON MENDOZA'S MOTION FOR RECONSIDERATION OR FOR NOT SUSPENDING MENDOZA'S DISMISSAL FROM SERVICE DURING THE HOSTAGE CRISIS. (F) RESPONDENT OFFICE OF THE PRESIDENT, ACTING THROUGH THE INDIVIDUAL RESPONDENTS, GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN FINDING THAT THERE WAS SUBSTANTIAL EVIDENCE TO SHOW THAT PETITIONER DEMANDED A BRIBE FROM MENDOZA.25 On the other hand, in G.R. No. 196232, petitioner Barreras-Sulit poses for the Court the question AS OF THIS POINT IN TIME, WOULD TAKING AND CONTINUING TO TAKE ADMINISTRATIVE DISCIPLINARY PROCEEDING AGAINST PETITIONER BE LAWFUL AND JUSTIFIABLE?26 Re-stated, the primordial question in these two petitions is whether the Office of the President has jurisdiction to exercise administrative disciplinary power over a Deputy Ombudsman and a Special Prosecutor who belong to the constitutionallycreated Office of the Ombudsman. The Court's Ruling

Short of claiming themselves immune from the ordinary means of removal, petitioners asseverate that the President has no disciplinary jurisdiction over them considering that the Office of the Ombudsman to which they belong is clothed with constitutional independence and that they, as Deputy Ombudsman and Special Prosecutor therein, necessarily bear the constitutional attributes of said office. The Court is not convinced. The Ombudsman's administrative disciplinary power over a Deputy Ombudsman and Special Prose-cutor is not exclusive. It is true that the authority of the Office of the Ombudsman to conduct administrative investigations proceeds from its constitutional mandate to be an effective protector of the people against inept and corrupt government officers and employees,27 and is subsumed under the broad powers "explicitly conferred" upon it by the 1987 Constitution and R.A. No. 6770.28 The ombudsman traces its origins to the primitive legal order of Germanic tribes. The Swedish term, which literally means "agent" or "representative," communicates the concept that has been carried on into the creation of the modern-day ombudsman, that is, someone who acts as a neutral representative of ordinary citizens against government abuses.29 This idea of a people's protector was first institutionalized in the Philippines under the 1973 Constitution with the creation of the Tanodbayan, which wielded the twin powers of investigation and prosecution. Section 6, Article XIII of the 1973 Constitution provided thus: Sec. 6. The Batasang Pambansa shall create an office of the Ombudsman, to be known as Tanodbayan, which shall receive and investigate complaints relative to public office, including those in government-owned or controlled corporations, make appropriate recommendations, and in case of failure of justice as defined by law, file and prosecute the corresponding criminal, civil, or administrative case before the proper court or body. The framers of the 1987 Constitution later envisioned a more effective ombudsman vested with authority to "act in a quick, inexpensive and effective manner on complaints against administrative officials", and to function purely with the "prestige and persuasive powers of his office" in correcting

improprieties, inefficiencies and corruption in government freed from the hampering effects of prosecutorial duties.30 Accordingly, Section 13, Article XI of the 1987 Constitution enumerates the following powers, functions, and duties of the Office of the Ombudsman, viz: (1) Investigate on its own, or on complaint by any person, any act or omission of any public official, employee, office or agency, when such act or omission appears to be illegal, unjust, improper, or inefficient. (2) Direct, upon complaint or at its own instance, any public official or employee of the Government, or any subdivision, agency or instrumentality thereof, as well as of any government-owned or controlled corporation with original charter, to perform and expedite any act or duty required by law, or to stop, prevent, and correct any abuse or impropriety in the performance of duties. (3) Direct the officer concerned to take appropriate action against a public official or employee at fault, and recommend his removal, suspension, demotion, fine, censure, or prosecution, and ensure compliance therewith. (4) Direct the officer concerned, in any appropriate case, and subject to such limitations as may be provided by law, to furnish it with copies of documents relating to contracts or transactions entered into by his office involving the disbursement or use of public funds or properties, and report any irregularity to the Commission on Audit for appropriate action. (5) Request any government agency for assistance and information necessary in the discharge of its responsibilities, and to examine, if necessary, pertinent records and documents. (6) Publicize matters covered by its investigation when circumstances so warrant and with due prudence. (7) Determine the causes of inefficiency, red tape, mismanagement, fraud, and corruption in the Government and make recommendations for their elimination and the observance of high standards of ethics and efficiency. (8) Promulgate its rules of procedure and exercise such other powers or perform such functions or duties as may be provided by law.31

Congress thereafter passed, on November 17, 1989, Republic Act No. 6770, the Ombudsman Act of 1989, to shore up the Ombudsman's institutional strength by granting it "full administrative disciplinary power over public officials and employees,"32 as follows: Sec. 21. Officials Subject to Disciplinary Authority; Exceptions. - The Office of the Ombudsman shall have disciplinary authority over all elective and appointive officials of the Government and its subdivisions, instrumentalities and agencies, including Members of the Cabinet, local government, government-owned or controlled corporations and their subsidiaries, except over officials who may be removed only by impeachment or over Members of Congress, and the Judiciary.(Emphasis supplied) In the exercise of such full administrative disciplinary authority, the Office of the Ombudsman was explicitly conferred the statutory power to conduct administrative investigations under Section 19 of the same law, thus: Sec. 19. Administrative complaints. - The Ombudsman shall act on all complaints relating, but not limited, to acts or omissions which: 1. Are contrary to law or regulation; 2. Are unreasonable, unfair, oppressive or discriminatory; 3. Are inconsistent with the general course of an agency's functions, though in accordance with law; 4. Proceed from a mistake of law or an arbitrary ascertainment of facts; 5. Are in the exercise of discretionary powers but for an improper purpose; or 6. Are otherwise irregular, immoral or devoid of justification. While the Ombudsman's authority to discipline administratively is extensive and covers all government officials, whether appointive or elective, with the exception only of those officials removable by impeachment, the members of congress and the judiciary, such authority is by no means exclusive. Petitioners cannot insist that they should be solely and directly subject to the disciplinary authority of the Ombudsman. For, while Section 21 declares the Ombudsman's disciplinary

authority over all government officials, Section 8(2), on the other hand, grants the President express power of removal over a Deputy Ombudsman and a Special Prosecutor. Thus: Section 8. Removal; Filling of Vacancy.xxxx (2) A Deputy or the Special Prosecutor, may be removed from office by the President for any of the grounds provided for the removal of the Ombudsman, and after due process. It is a basic canon of statutory construction that in interpreting a statute, care should be taken that every part thereof be given effect, on the theory that it was enacted as an integrated measure and not as a hodge-podge of conflicting provisions. A construction that would render a provision inoperative should be avoided; instead, apparently inconsistent provisions should be reconciled whenever possible as parts of a coordinated and harmonious whole. 33 Otherwise stated, the law must not be read in truncated parts. Every part thereof must be considered together with the other parts, and kept subservient to the general intent of the whole enactment.34 A harmonious construction of these two apparently conflicting provisions in R.A. No. 6770 leads to the inevitable conclusion that Congress had intended the Ombudsman and the President to exercise concurrent disciplinary jurisdiction over petitioners as Deputy Ombudsman and Special Prosecutor, respectively. This sharing of authority goes into the wisdom of the legislature, which prerogative falls beyond the pale of judicial inquiry. The Congressional deliberations on this matter are quite insightful, viz: x x x Senator Angara explained that the phrase was added to highlight the fact that the Deputy Tanodbayan may only be removed for cause and after due process. He added that the President alone has the power to remove the Deputy Tanodbayan. Reacting thereto, Senator Guingona observed that this might impair the independence of the Tanodbayan and suggested that the procedural removal of

the Deputy Tanodbayan...; and that he can be removed not by the President but by the Ombudsman. However, the Chair expressed apprehension that the Ombudsman and the Deputy Ombudsman may try to protect one another. The Chair suggested the substitution of the phrase "after due process" with the words after due notice and hearing with the President as the ultimate authority. Senator Guingona contended, however, that the Constitution provides for an independent Office of the Tanodbayan, and to allow the Executive to have disciplinary powers over the Tanodbayan Deputies would be an encroachment on the independence of the Tanodbayan. Replying thereto, Senator Angara stated that originally, he was not averse to the proposal, however, considering the Chair's observation that vesting such authority upon the Tanodbayan itself could result in mutual protection, it is necessary that an outside official should be vested with such authority to effect a check and balance.35 Indubitably, the manifest intent of Congress in enacting both provisions - Section 8(2) and Section 21 - in the same Organic Act was to provide for an external authority, through the person of the President, that would exercise the power of administrative discipline over the Deputy Ombudsman and Special Prosecutor without in the least diminishing the constitutional and plenary authority of the Ombudsman over all government officials and employees. Such legislative design is simply a measure of "check and balance" intended to address the lawmakers' real and valid concern that the Ombudsman and his Deputy may try to protect one another from administrative liabilities. This would not be the first instance that the Office of the President has locked horns with the Ombudsman on the matter of disciplinary jurisdiction. An earlier conflict had been settled in favor of shared authority in Hagad v. Gozo Dadole.36 In said case, the Mayor and Vice-Mayor of Mandaue City, and a member of the Sangguniang Panlungsod, were charged before the Office of the Deputy Ombudsman for the Visayas with violations of R.A. No. 3019, R.A. No. 6713, and the Revised Penal Code. The pivotal issue raised therein was whether the Ombudsman had been divested of his authority to conduct administrative investigations over said local elective officials by virtue of the subsequent

enactment of the Local Government Code of 1991 (R.A. No. 7160), the pertinent provision of which states: Sec. 61. Form and Filing of Administrative Complaints.- A verified complaint against any erring local elective official shall be prepared as follows: (a) A complaint against any elective official of a province, a highly urbanized city, an independent component city or component city shall be filed before the Office of the President. The Court resolved said issue in the negative, upholding the ratiocination of the Solicitor General that R.A. No. 7160 should be viewed as having conferred on the Office of the President, but not on an exclusive basis, disciplinary authority over local elective officials. Despite the fact that R.A. No. 7160 was the more recent expression of legislative will, no repeal of pertinent provisions in the Ombudsman Act was inferred therefrom. Thus said the Court: Indeed, there is nothing in the Local Government Code to indicate that it has repealed, whether expressly or impliedly, the pertinent provisions of the Ombudsman Act. The two statutes on the specific matter in question are not so inconsistent, let alone irreconcilable, as to compel us to only uphold one and strike down the other. Well settled is the rule that repeals of laws by implication are not favored, and that courts must generally assume their congruent application. The two laws must be absolutely incompatible, and a clear finding thereof must surface, before the inference of implied repeal may be drawn. The rule is expressed in the maxim, interpretare et concordare legibus est optimus interpretendi, i.e., every statute must be so interpreted and brought into accord with other laws as to form a uniform system of jurisprudence. The fundament is that the legislature should be presumed to have known the existing laws on the subject and not to have enacted conflicting statutes. Hence, all doubts must be resolved against any implied repeal, and all efforts should be exerted in order to harmonize and give effect to all laws on the subject.37 While Hagad v. Gozo Dadole38 upheld the plenary power of the Office of the Ombudsman to discipline elective officials over the same disciplinary authority of the President under R.A. No. 7160, the more recent case of the Office of the Ombudsman v. Delijero39 tempered the exercise by the Ombudsman of such plenary power invoking Section 23(2)40 of R.A. No. 6770, which gives the

Ombudsman the option to "refer certain complaints to the proper disciplinary authority for the institution of appropriate administrative proceedings against erring public officers or employees." The Court underscored therein the clear legislative intent of imposing "a standard and a separate set of procedural requirements in connection with administrative proceedings involving public school teachers"41 with the enactment of R.A. No. 4670, otherwise known as "The Magna Carta for Public School Teachers." It thus declared that, while the Ombudsman's administrative disciplinary authority over a public school teacher is concurrent with the proper investigating committee of the Department of Education, it would have been more prudent under the circumstances for the Ombudsman to have referred to the DECS the complaint against the public school teacher. Unquestionably, the Ombudsman is possessed of jurisdiction to discipline his own people and mete out administrative sanctions upon them, including the extreme penalty of dismissal from the service. However, it is equally without question that the President has concurrent authority with respect to removal from office of the Deputy Ombudsman and Special Prosecutor, albeit under specified conditions. Considering the principles attending concurrence of jurisdiction where the Office of the President was the first to initiate a case against petitioner Gonzales, prudence should have prompted the Ombudsman to desist from proceeding separately against petitioner through its Internal Affairs Board, and to defer instead to the President's assumption of authority, especially when the administrative charge involved "demanding and soliciting a sum of money" which constitutes either graft and corruption or bribery, both of which are grounds reserved for the President's exercise of his authority to remove a Deputy Ombudsman. In any case, assuming that the Ombudsman's Internal Affairs Board properly conducted a subsequent and parallel administrative action against petitioner, its earlier dismissal of the charge of graft and corruption against petitioner could not have the effect of preventing the Office of the President from proceeding against petitioner upon the same ground of graft and corruption. After all, the doctrine of res judicata applies only to judicial or quasi-judicial proceedings, not to the exercise of administrative powers.42 In Montemayor v. Bundalian,43 the Court sustained the President's dismissal from service of a Regional Director of the Department of Public Works and Highways (DPWH) who was found liable for unexplained wealth upon investigation by the now defunct Philippine Commission

Against Graft and Corruption (PCAGC). The Court categorically ruled therein that the prior dismissal by the Ombudsman of similar charges against said official did not operate as res judicata in the PCAGC case. By granting express statutory power to the President to remove a Deputy Ombudsman and a Special Prosecutor, Congress merely filled an obvious gap in the law. Section 9, Article XI of the 1987 Constitution confers upon the President the power to appoint the Ombudsman and his Deputies, viz: Section 9. The Ombudsman and his Deputies shall be appointed by the President from a list of at least six nominees prepared by the Judicial and Bar Council, and from a list of three nominees for every vacancy thereafter. Such appointments shall require no confirmation. All vacancies shall be filled within three months after they occur. While the removal of the Ombudsman himself is also expressly provided for in the Constitution, which is by impeachment under Section 244 of the same Article, there is, however, no constitutional provision similarly dealing with the removal from office of a Deputy Ombudsman, or a Special Prosecutor, for that matter. By enacting Section 8(2) of R.A. 6770, Congress simply filled a gap in the law without running afoul of any provision in the Constitution or existing statutes. In fact, the Constitution itself, under Section 2, authorizes Congress to provide for the removal of all other public officers, including the Deputy Ombudsman and Special Prosecutor, who are not subject to impeachment. That the Deputies of the Ombudsman were intentionally excluded from the enumeration of impeachable officials is clear from the following deliberations45 of the Constitutional Commission, thus: MR. REGALADO. Yes, thank you. On Section 10, regarding the Ombudsman, there has been concern aired by Commissioner Rodrigo about who will see to it that the Ombudsman will perform his duties because he is something like a guardian of the government. This recalls the statement of Juvenal that while the Ombudsman is the guardian of the people, "Quis custodiet ipsos custodies", who will guard the

guardians? I understand here that the Ombudsman who has the rank of a chairman of a constitutional commission is also removable only by impeachment. MR. ROMULO. That is the intention, Madam President. MR. REGALADO. Only the Ombudsman? MR. MONSOD. Only the Ombudsman. MR. REGALADO. So not his deputies, because I am concerned with the phrase "have the rank of". We know, for instance, that the City Fiscal of Manila has the rank of a justice of the Intermediate Appellate Court, and yet he is not a part of the judiciary. So I think we should clarify that also and read our discussions into the Record for purposes of the Commission and the Committee.46 xxx THE PRESIDENT. The purpose of the amendment of Commissioner Davide is not just to include the Ombudsman among those officials who have to be removed from office only onimpeachment. Is that right? MR. DAVIDE. Yes, Madam President. MR. RODRIGO. Before we vote on the amendment, may I ask a question? THE PRESIDENT. Commissioner Rodrigo is recognized. MR. RODRIGO. The Ombudsman, is this only one man? MR. DAVIDE. Only one man. MR. RODRIGO. Not including his deputies. MR. MONSOD. No.47 (Emphasis supplied) The Power of the President to Remove a Deputy Ombudsman and a Special Prosecutor is Implied from his Power to Appoint.

Under the doctrine of implication, the power to appoint carries with it the power to remove.48 As a general rule, therefore, all officers appointed by the President are also removable by him.49 The exception to this is when the law expressly provides otherwise - that is, when the power to remove is expressly vested in an office or authority other than the appointing power. In some cases, the Constitution expressly separates the power to remove from the President's power to appoint. Under Section 9, Article VIII of the 1987 Constitution, the Members of the Supreme Court and judges of lower courts shall be appointed by the President. However, Members of the Supreme Court may be removed after impeachment proceedings initiated by Congress (Section 2, Article XI), while judges of lower courts may be removed only by the Supreme Court by virtue of its administrative supervision over all its personnel (Sections 6 and 11, Article VIII). The Chairpersons and Commissioners of the Civil Service Commission Section 1(2), Article IX(B), the Commission on Elections Section 1(2), Article IX(C), and the Commission on Audit Section 1(2), Article IX(D) shall likewise be appointed by the President, but they may be removed only by impeachment (Section 2, Article XI). As priorly stated, the Ombudsman himself shall be appointed by the President (Section 9, Article XI) but may also be removed only by impeachment (Section 2, Article XI). In giving the President the power to remove a Deputy Ombudsman and Special Prosecutor, Congress simply laid down in express terms an authority that is already implied from the President's constitutional authority to appoint the aforesaid officials in the Office of the Ombudsman. The Office of the Ombudsman is charged with monumental tasks that have been generally categorized into investigatory power, prosecutorial power, public assistance, authority to inquire and obtain information and the function to adopt, institute and implement preventive measures.50 In order to ensure the effectiveness of his constitutional role, the Ombudsman was provided with an over-all deputy as well as a deputy each for Luzon, Visayas and Mindanao. However, well into the deliberations of the Constitutional Commission, a provision for the appointment of a separate deputy for the military establishment was necessitated by Commissioner Ople's lament against the rise within the armed forces of "fraternal associations outside the chain of command" which have become the common soldiers' "informal grievance machinery" against injustice, corruption and neglect in the uniformed service,51 thus:

In our own Philippine Armed Forces, there has arisen in recent years a type of fraternal association outside the chain of command proposing reformist objectives. They constitute, in fact, an informal grievance machinery against injustices to the rank and file soldiery and perceive graft in higher rank and neglect of the needs of troops in combat zones. The Reform the Armed Forces Movement of RAM has kept precincts for pushing logistics to the field, the implied accusation being that most of the resources are used up in Manila instead of sent to soldiers in the field. The Guardians, the El Diablo and other organizations dominated by enlisted men function, more or less, as grievance collectors and as mutual aid societies. This proposed amendment merely seeks to extend the office of the Ombudsman to the military establishment, just as it champions the common people against bureaucratic indifference. The Ombudsman can designate a deputy to help the ordinary foot soldier get through with his grievance to higher authorities. This deputy will, of course work in close cooperation with the Minister of National Defense because of the necessity to maintain the integrity of the chain of command. Ordinary soldiers, when they know they can turn to a military Ombudsman for their complaints, may not have to fall back on their own informal devices to obtain redress for their grievances. The Ombudsman will help raise troop morale in accordance with a major professed goal of the President and the military authorities themselves. x x x The add-on now forms part of Section 5, Article XI which reads as follows: Section 5. There is hereby created the independent Office of the Ombudsman, composed of the Ombudsman to be known as Tanodbayan, one over-all Deputy and at least one Deputy each for Luzon, Visayas and Mindanao. A separate deputy for the military establishment shall likewise be appointed. (Emphasis supplied) The integrity and effectiveness of the Deputy Ombudsman for the MOLEO as a military watchdog looking into abuses and irregularities that affect the general morale and professionalism in the military is certainly of primordial importance in relation to the President's own role asCommander-in-Chief of the Armed Forces. It would not be incongruous for Congress, therefore, to grant the President concurrent disciplinary authority over the Deputy Ombudsman for the military and other law enforcement offices.

Granting the President the Power to Remove a Deputy Ombudsman does not Diminish the Independence of the Office of the Ombudsman. The claim that Section 8(2) of R.A. No. 6770 granting the President the power to remove a Deputy Ombudsman from office totally frustrates, if not resultantly negates the independence of the Office of the Ombudsman is tenuous. The independence which the Office of the Ombudsman is vested with was intended to free it from political considerations in pursuing its constitutional mandate to be a protector of the people. What the Constitution secures for the Office of the Ombudsman is, essentially, political independence. This means nothing more than that "the terms of office, the salary, the appointments and discipline of all persons under the office" are "reasonably insulated from the whims of politicians."52 And so it was that Section 5, Article XI of the 1987 Constitution had declared the creation of the independent Office of the Ombudsman, composed of the Ombudsman and his Deputies, who are described as "protectors of the people" and constitutionally mandated to act promptly on complaints filed in any form or manner against public officials or employees of the Government Section 12, Article XI. Pertinent provisions under Article XI prescribes a term of office of seven years without reappointment Section 11, prohibits a decrease in salaries during the term of office Section 10, provides strict qualifications for the office Section 8, grants fiscal autonomy Section 14 and ensures the exercise of constitutional functions Section 12 and 13. The cloak of independence is meant to build up the Office of the Ombudsman's institutional strength to effectively function as official critic, mobilizer of government, constitutional watchdog53 and protector of the people. It certainly cannot be made to extend to wrongdoings and permit the unbridled acts of its officials to escape administrative discipline. Being aware of the constitutional imperative of shielding the Office of the Ombudsman from political influences and the discretionary acts of the executive, Congress laid down two restrictions on the President's exercise of such power of removal over a Deputy Ombudsman, namely: (1) that the removal of the Deputy Ombudsman must be for any of the grounds provided for the removal of the Ombudsman and (2) that there must be observance of due process. Reiterating the grounds for impeachment laid down in Section 2, Article XI of the 1987 Constitution, paragraph 1 of Section 8 of R.A. No. 6770 states that the Deputy

Ombudsman may be removed from office for the same grounds that the Ombudsman may be removed through impeachment, namely, "culpable violation of the Constitution, treason, bribery, graft and corruption, other high crimes, or betrayal of public trust." Thus, it cannot be rightly said that giving the President the power to remove a Deputy Ombudsman, or a Special Prosecutor for that matter, would diminish or compromise the constitutional independence of the Office of the Ombudsman. It is, precisely, a measure of protection of the independence of the Ombudsman's Deputies and Special Prosecutor in the discharge of their duties that their removal can only be had on grounds provided by law. In Espinosa v. Office of the Ombudsman,54 the Court elucidated on the nature of the Ombudsman's independence in this wise The prosecution of offenses committed by public officers is vested in the Office of the Ombudsman. To insulate the Office from outside pressure and improper influence, the Constitution as well as RA 6770 has endowed it with a wide latitude of investigatory and prosecutory powers virtually free from legislative, executive or judicial intervention. This Court consistently refrains from interfering with the exercise of its powers, and respects the initiative and independence inherent in the Ombudsman who, 'beholden to no one, acts as the champion of the people and the preserver of the integrity of public service. Petitioner Gonzales may not be removed from office where the questioned acts, falling short of constitutional standards, do not constitute betrayal of public trust. Having now settled the question concerning the validity of the President's power to remove the Deputy Ombudsman and Special Prosecutor, we now go to the substance of the administrative findings in OP Case No. 10-J-460 which led to the dismissal of herein petitioner, Deputy Ombudsman Emilio A. Gonzales, III. At the outset, the Court finds no cause for petitioner Gonzales to complain simply because the OP proceeded with the administrative case against him despite his non-attendance thereat. Petitioner was admittedly able to file an Answer in which he had interposed his defenses to the formal charge against him. Due process is

satisfied when a person is notified of the charge against him and given an opportunity to explain or defend himself. In administrative proceedings, the filing of charges and giving reasonable opportunity for the person so charged to answer the accusations against him constitute the minimum requirements of due process.55 Due process is simply having the opportunity to explain one's side, or an opportunity to seek a reconsideration of the action or ruling complained of. 56 The essence of due process is that a party is afforded reasonable opportunity to be heard and to submit any evidence he may have in support of his defense.57 Mere opportunity to be heard is sufficient. As long as petitioner was given the opportunity to explain his side and present evidence, the requirements of due process are satisfactorily complied with because what the law abhors is an absolute lack of opportunity to be heard.58 Besides, petitioner only has himself to blame for limiting his defense through the filing of an Answer. He had squandered a subsequent opportunity to elucidate upon his pleaded defenses by adamantly refusing to attend the scheduled Clarificatory Conference despite notice. The OP recounted as follows It bears noting that respondent Deputy Ombudsman Gonzalez was given two separate opportunities to explain his side and answer the Formal Charge against him. In the first instance, respondent was given the opportunity to submit his answer together with his documentary evidence, which opportunity respondent actually availed of. In the second instance, this Office called a Clarificatory Conference on 8 February 2011 pursuant to respondent's express election of a formal investigation. Despite due notice, however, respondent Deputy Ombudsman refused to appear for said conference, interposing an objection based on the unfounded notion that this Office has prejudged the instant case. Respondent having been given actual and reasonable opportunity to explain or defend himself in due course, the requirement of due process has been satisfied.59 In administrative proceedings, the quantum of proof necessary for a finding of guilt is substantial evidence,60 which is more than a mere scintilla and means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.61 The fact, therefore, that petitioner later refused to participate in the hearings before the OP is not a hindrance to a finding of his culpability based on

substantial evidence, which only requires that a decision must "have something upon which it is based."62 Factual findings of administrative bodies are controlling when supported by substantial evidence.63 The OP's pronouncement of administrative accountability against petitioner and the imposition upon him of the corresponding penalty of removal from office was based on the finding of gross neglect of duty and grave misconduct in office amounting to a betrayal of public trust, which is a constitutional ground for the removal by impeachment of the Ombudsman (Section 2, Article XI, 1987 Constitution), and a statutory ground for the President to remove from office a Deputy Ombudsman and a Special Prosecutor Section 8(2) of the Ombudsman Act. The OP held that petitioner's want of care and wrongful conduct consisted of his unexplained action in directing the PNP-NCR to elevate P/S Insp. Mendoza's case records to his office; his failure to verify the basis for requesting the Ombudsman to take over the case; his pronouncement of administrative liability and imposition of the extreme penalty of dismissal on P/S Insp. Mendoza based upon an unverified complaint-affidavit; his inordinate haste in implementing P/S Insp. Mendoza's dismissal notwithstanding the latter's non-receipt of his copy of the Decision and the subsequent filing of a motion for reconsideration; and his apparent unconcern that the pendency of the motion for reconsideration for more than five months had deprived P/S Insp. Mendoza of available remedies against the immediate implementation of the Decision dismissing him from the service. Thus, taking into consideration the factual determinations of the IIRC, the allegations and evidence of petitioner in his Answer as well as other documentary evidence, the OP concluded that: (1) petitioner failed to supervise his subordinates to act with dispatch on the draft resolution of P/S Insp. Mendoza's motion for reconsideration and thereby caused undue prejudice to P/S Insp. Mendoza by effectively depriving the latter of the right to challenge the dismissal before the courts and prevent its immediate execution, and (2) petitioner showed undue interest by having P/S Insp. Mendoza's case endorsed to the Office of the Ombudsman and resolving the same against P/S Insp. Mendoza on the basis of the unverified complaint-affidavit of the alleged victim Christian Kalaw.

The invariable rule is that administrative decisions in matters within the executive jurisdiction can only be set aside on proof of gross abuse of discretion, fraud, or error of law.64 In the instant case, while the evidence may show some amount of wrongdoing on the part of petitioner, the Court seriously doubts the correctness of the OP's conclusion that the imputed acts amount to gross neglect of duty and grave misconduct constitutive of betrayal of public trust. To say that petitioner's offenses, as they factually appear, weigh heavily enough to constitute betrayal of public trust would be to ignore the significance of the legislature's intent in prescribing the removal of the Deputy Ombudsman or the Special Prosecutor for causes that, theretofore, had been reserved only for the most serious violations that justify the removal by impeachment of the highest officials of the land. Would every negligent act or misconduct in the performance of a Deputy Ombudsman's duties constitute betrayal of public trust warranting immediate removal from office? The question calls for a deeper, circumspective look at the nature of the grounds for the removal of a Deputy Ombudsman and a Special Prosecutor vis-a-vis common administrative offenses. Betrayal of public trust is a new ground for impeachment under the 1987 Constitution added to the existing grounds of culpable violation of the Constitution, treason, bribery, graft and corruption and other high crimes. While it was deemed broad enough to cover any violation of the oath of office,65 the impreciseness of its definition also created apprehension that "such an overarching standard may be too broad and may be subject to abuse and arbitrary exercise by the legislature."66 Indeed, the catch-all phrase betrayal of public trust that referred to "all acts not punishable by statutes as penal offenses but, nonetheless, render the officer unfit to continue in office"67 could be easily utilized for every conceivable misconduct or negligence in office. However, deliberating on some workable standard by which the ground could be reasonably interpreted, the Constitutional Commission recognized that human error and good faith precluded an adverse conclusion. MR. VILLACORTA: x x x One last matter with respect to the use of the words "betrayal of public trust" as embodying a ground for impeachment that has been raised by the Honorable Regalado. I am not a lawyer so I can anticipate the difficulties that a layman may encounter in understanding this provision and also the possible abuses that the legislature can commit in interpreting this phrase. It is to be noted that this ground was also suggested in the 1971 Constitutional

Convention. A review of the Journals of that Convention will show that it was not included; it was construed as encompassing acts which are just short of being criminal but constitute gross faithlessness against public trust, tyrannical abuse of power, inexcusable negligence of duty, favoritism, and gross exercise of discretionary powers. I understand from the earlier discussions that these constitute violations of the oath of office, and also I heard the Honorable Davide say that even the criminal acts that were enumerated in the earlier 1973 provision on this matter constitute betrayal of public trust as well. In order to avoid confusion, would it not be clearer to stick to the wording of Section 2 which reads: "may be removed from office on impeachment for and conviction of, culpable violation of the Constitution, treason, bribery, and other high crimes, graft and corruption or VIOLATION OF HIS OATH OF OFFICE", because if betrayal of public trust encompasses the earlier acts that were enumerated, then it would behoove us to be equally clear about this last provision or phrase. MR. NOLLEDO: x x x I think we will miss a golden opportunity if we fail to adopt the words "betrayal of public trust" in the 1986 Constitution. But I would like him to know that we are amenable to any possible amendment. Besides, I think plain error of judgment, where circumstances may indicate that there is good faith, to my mind, will not constitute betrayal of public trust if that statement will allay the fears of difficulty in interpreting the term."68 (Emphasis supplied) The Constitutional Commission eventually found it reasonably acceptable for the phrase betrayal of public trust to refer to "acts which are just short of being criminal but constitute gross faithlessness against public trust, tyrannical abuse of power, inexcusable negligence of duty, favoritism, and gross exercise of discretionary powers."69 In other words, acts that should constitute betrayal of public trust as to warrant removal from office may be less than criminal but must be attended by bad faith and of such gravity and seriousness as the other grounds for impeachment. A Deputy Ombudsman and a Special Prosecutor are not impeachable officers. However, by providing for their removal from office on the same grounds as removal by impeachment, the legislature could not have intended to redefine constitutional standards of culpable violation of the Constitution, treason, bribery, graft and corruption, other high crimes, as well as betrayal of public trust, and apply them less stringently. Hence, where betrayal of public trust, for purposes of impeachment, was not intended to cover all kinds of official

wrongdoing and plain errors of judgment, this should remain true even for purposes of removing a Deputy Ombudsman and Special Prosecutor from office. Hence, the fact that the grounds for impeachment have been made statutory grounds for the removal by the President of a Deputy Ombudsman and Special Prosecutor cannot diminish the seriousness of their nature nor the acuity of their scope. Betrayal of public trust could not suddenly "overreach" to cover acts that are not vicious or malevolent on the same level as the other grounds for impeachment. The tragic hostage-taking incident was the result of a confluence of several unfortunate events including system failure of government response. It cannot be solely attributed then to what petitioner Gonzales may have negligently failed to do for the quick, fair and complete resolution of the case, or to his error of judgment in the disposition thereof. Neither should petitioner's official acts in the resolution of P/S Insp. Mendoza's case be judged based upon the resulting deaths at the Quirino Grandstand. The failure to immediately act upon a party's requests for an early resolution of his case is not, by itself, gross neglect of duty amounting to betrayal of public trust. Records show that petitioner took considerably less time to act upon the draft resolution after the same was submitted for his appropriate action compared to the length of time that said draft remained pending and unacted upon in the Office of Ombudsman Merceditas N. Gutierrez. He reviewed and denied P/S Insp. Mendoza's motion for reconsideration within nine (9) calendar days reckoned from the time the draft resolution was submitted to him on April 27, 2010 until he forwarded his recommendation to the Office of Ombudsman Gutierrez on May 6, 2010 for the latter's final action. Clearly, the release of any final order on the case was no longer in his hands. Even if there was inordinate delay in the resolution of P/S Insp. Mendoza's motion and an unexplained failure on petitioner's part to supervise his subordinates in its prompt disposition, the same cannot be considered a vicious and malevolent act warranting his removal for betrayal of public trust. More so because the neglect imputed upon petitioner appears to be an isolated case. Similarly, petitioner's act of directing the PNP-IAS to endorse P/S Insp. Mendoza's case to the Ombudsman without citing any reason therefor cannot, by itself, be considered a manifestation of his undue interest in the case that would amount to wrongful or unlawful conduct. After all, taking cognizance of cases upon the request of concerned agencies or private parties is part and parcel of the

constitutional mandate of the Office of the Ombudsman to be the "champion of the people." The factual circumstances that the case was turned over to the Office of the Ombudsman upon petitioner's request; that administrative liability was pronounced against P/S Insp. Mendoza even without the private complainant verifying the truth of his statements; that the decision was immediately implemented; or that the motion for reconsideration thereof remained pending for more than nine months cannot be simply taken as evidence of petitioner's undue interest in the case considering the lack of evidence of any personal grudge, social ties or business affiliation with any of the parties to the case that could have impelled him to act as he did. There was likewise no evidence at all of any bribery that took place, or of any corrupt intention or questionable motivation. Accordingly, the OP's pronouncement of administrative accountability against petitioner and the imposition upon him of the corresponding penalty of dismissal must be reversed and set aside, as the findings of neglect of duty or misconduct in office do not amount to a betrayal of public trust. Hence, the President, while he may be vested with authority, cannot order the removal of petitioner as Deputy Ombudsman, there being no intentional wrongdoing of the grave and serious kind amounting to a betrayal of public trust. This is not to say, however, that petitioner is relieved of all liability for his acts showing less than diligent performance of official duties. Although the administrative acts imputed to petitioner fall short of the constitutional standard of betrayal of public trust, considering the OP's factual findings of negligence and misconduct against petitioner, the Court deems it appropriate to refer the case to the Office of the Ombudsman for further investigation of the charges in OP Case No. 10-J-460 and the imposition of the corresponding administrative sanctions, if any. Inasmuch as there is as yet no existing ground justifying his removal from office, petitioner is entitled to reinstatement to his former position as Deputy Ombudsman and to the payment of backwages and benefits corresponding to the period of his suspension. The Office of the President is vested with statutory authority to proceed administratively against petitioner

Barreras-Sulit to determine the existence of any of the grounds for her removal from office as provided for under the Constitution and the Ombudsman Act. Petitioner Barreras-Sulit, on the other hand, has been resisting the President's authority to remove her from office upon the averment that without the Sandiganbayan's final approval and judgment on the basis of the PLEBARA, it would be premature to charge her with acts and/or omissions "tantamount to culpable violations of the Constitution and betrayal of public trust," which are grounds for removal from office under Section 8, paragraph (2) of the Ombudsman Act of 1989; and which also constitute a violation of Section 3, paragraph (e) of Republic Act No. 3019 (Anti-Graft and Corrupt Practices Act) causing undue injury to the Government or giving any private party any unwarranted benefits, advantage or preference through manifest partiality, evident bad faith or gross inexcusable negligence. With reference to the doctrine of prejudicial procedural antecedent, petitioner Barreras-Sulit asserts that the propriety of taking and continuing to take administrative disciplinary proceeding against her must depend on the final disposition by the Sandiganbayan of the PLEBARA, explaining that if the Sandiganbayan would uphold the PLEBARA, there would no longer be any cause of complaint against her; if not, then the situation becomes ripe for the determination of her failings. The argument will not hold water. The incidents that have taken place subsequent to the submission in court of the PLEBARA shows that the PLEBARA has been practically approved, and that the only thing which remains to be done by the Sandiganbayan is to promulgate a judgment imposing the proper sentence on the accused Major General Garcia based on his new pleas to lesser offenses. On May 4, 2010, the Sandiganbayan issued a resolution declaring that the change of plea under the PLEBARA was warranted and that it complied with jurisprudential guidelines. The Sandiganbayan, thereafter, directed the accused Major General Garcia to immediately convey in favor of the State all the properties, both real and personal, enumerated therein. On August 11, 2010, the Sandiganbayan issued a resolution, which, in order to put into effect the reversion of Major General Garcia's ill-gotten properties, ordered the corresponding government agencies to cause the transfer of ownership of said properties to the Republic of the Philippines. In the meantime, the Office of the Special Prosecutor

(OSP) informed the Sandiganbayan that an Order70 had been issued by the Regional Trial Court of Manila, Branch 21 on November 5, 2010 allowing the transfer of the accused's frozen accounts to the Republic of the Philippines pursuant to the terms of the PLEBARA as approved by the Sandiganbayan. Immediately after the OSP informed the Sandiganbayan that its May 4, 2010 Resolution had been substantially complied with, Major General Garcia manifested71 to the Sandiganbayan on November 19, 2010 his readiness for sentencing and for the withdrawal of the criminal information against his wife and two sons. Major General Garcia's Motion to Dismiss,72 dated December 16, 2010 and filed with the Sandiganbayan, reads: 1.0 The Co-Accused were impleaded under the theory of conspiracy with the Principal Accused MGen. Carlos F. Garcia (AFP Ret.), (Principal Accused) with the allegation that the act of one is the act of the others. Therefore, with the approval by the Honorable Court of the Plea Bargaining Agreement executed by the Principal Accused, the charges against the Co-Accused should likewise be dismissed since the charges against them are anchored on the same charges against the Principal Accused. On December 16, 2010, the Sandiganbayan allowed accused Major General Garcia to plead guilty to the lesser offenses of direct bribery and violation of Section 4(b), R.A. No. 9160, as amended. Upon Major General Garcia's motion, and with the express conformity of the OSP, the Sandiganbayan allowed him to post bail in both cases, each at a measly amount of P30,000.00. The approval or disapproval of the PLEBARA by the Sandiganbayan is of no consequence to an administrative finding of liability against petitioner BarrerasSulit. While the court's determination of the propriety of a plea bargain is on the basis of the existing prosecution evidence on record, the disciplinary authority's determination of the prosecutor's administrative liability is based on whether the plea bargain is consistent with the conscientious consideration of the government's best interest and the diligent and efficient performance by the prosecution of its public duty to prosecute crimes against the State. Consequently, the disciplining authority's finding of ineptitude, neglect or willfulness on the part of the prosecution, more particularly petitioner Special Prosecutor Barreras-Sulit, in failing to pursue or build a strong case for the government or, in this case, entering into an agreement which the government

finds "grossly disadvantageous," could result in administrative liability, notwithstanding court approval of the plea bargaining agreement entered into. Plea bargaining is a process in criminal cases whereby the accused and the prosecution work out a mutually satisfactory disposition of the case subject to court approval.73 The essence of a plea bargaining agreement is the allowance of an accused to plead guilty to a lesser offense than that charged against him. Section 2, Rule 116 of the Revised Rules of Criminal Procedure provides the procedure therefor, to wit: SEC. 2. Plea of guilty to a lesser offense. -- At arraignment, the accused, with the consent of the offended party and the prosecutor, may be allowed by the trial court to plead guilty to a lesser offense which is necessarily included in the offense charged. After arraignment but before trial, the accused may still be allowed to plead guilty to said lesser offense after withdrawing his plea of not guilty. No amendment of the complaint or information is necessary. (Sec. 4, Cir. 38-98) Plea bargaining is allowable when the prosecution does not have sufficient evidence to establish the guilt of the accused of the crime charged. 74 However, if the basis for the allowance of a plea bargain in this case is the evidence on record, then it is significant to state that in its earlier Resolution75 promulgated on January 7, 2010, the Sandiganbayan had evaluated the testimonies of twenty (20) prosecution witnesses and declared that "the conglomeration of evidence presented by the prosecution is viewed by the Court to be of strong character that militates against the grant of bail." Notwithstanding this earlier ruling by the Sandiganbayan, the OSP, unexplainably, chose to plea bargain with the accused Major General Garcia as if its evidence were suddenly insufficient to secure a conviction. At this juncture, it is not amiss to emphasize that the "standard of strong evidence of guilt which is sufficient to deny bail to an accused is markedly higher than the standard of judicial probable cause which is sufficient to initiate a criminal case."76 Hence, in light of the apparently strong case against accused Major General Garcia, the disciplining authority would be hard-pressed not to look into the whys and wherefores of the prosecution's turnabout in the case.

The Court need not touch further upon the substantial matters that are the subject of the pending administrative proceeding against petitioner Barreras-Sulit and are, thus, better left to the complete and effective resolution of the administrative case before the Office of the President. The challenge to the constitutionality of Section 8(2) of the Ombudsman Act has, nonetheless, failed to obtain the necessary votes to invalidate the law, thus, keeping said provision part of the law of the land. To recall, these cases involve two distinct issues: (a) the constitutionality of Section 8(2) of the Ombudsman Act; and (b) the validity of the administrative action of removal taken against petitioner Gonzales. While the Court voted unanimously to reverse the decision of the OP removing petitioner Gonzales from office, it was equally divided in its opinion on the constitutionality of the assailed statutory provision in its two deliberations held on April 17, 2012 and September 4, 2012. There being no majority vote to invalidate the law, the Court, therefore, dismisses the challenge to the constitutionality of Section 8(2) of the Ombudsman Act in accordance with Section 2(d), Rule 12 of the Internal Rules of the Court. Indeed, Section 4(2), Article VIII of the 1987 Constitution requires the vote of the majority of the Members of the Court actually taking part in the deliberation to sustain any challenge to the constitutionality or validity of a statute or any of its provisions. WHEREFORE, in G.R. No. 196231, the decision of the Office of the President in OP Case No. 10-J-460 is REVERSED and SET ASIDE. Petitioner Emilio A. Gonzales III is ordered REINSTATED with payment of backwages corresponding to the period of suspension effective immediately, even as the Office of the Ombudsman is directed to proceed with the investigation in connection with the above case against petitioner. In G.R. No. 196232, We AFFIRM the continuation of OP-DC Case No. 11-B-003 against Special Prosecutor Wendell Barreras-Sulit for alleged acts and omissions tantamount to culpable violation of the Constitution and a betrayal of public trust, in accordance with Section 8(2) of the Ombudsman Act of 1989. The challenge to the constitutionality of Section 8(2) of the Ombudsman Act is hereby DENIED. SO ORDERED.

ESTELA M. PERLAS-BERNABE Associate Justice WE CONCUR: MARIA LOURDES P. A. SERENO Chief Justice