V.
Separation of POWERS SMC’s conversion or stock exchange offer is embodied in its Information
G.R. Nos. 177857-58 September 17, 2009
PHILIPPINE COCONUT PRODUCERS FEDERATION, INC. (COCOFED),
MANUEL V. DEL ROSARIO, DOMINGO P. ESPINA, SALVADOR P.
BALLARES, JOSELITO A. MORALEDA, PAZ M. YASON, VICENTE A.
CADIZ, CESARIA DE LUNA TITULAR, and RAYMUNDO C. DE
VILLA, Petitioners,
vs.
REPUBLIC OF THE PHILIPPINES, Respondent.
JOVITO R. SALONGA, WIGBERTO E. TAÑADA, OSCAR F. SANTOS, ANA
THERESIA HONTIVEROS, and TEOFISTO L. GUINGONA III, Oppositors-
Intervenors.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 178193***
DANILO B. URUSA, Petitioner,
vs.
REPUBLIC OF THE PHILIPPINES, Respondent.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 180705***
EDUARDO M. COJUANGCO, JR., Petitioner,
vs.
REPUBLIC OF THE PHILIPPINES, Respondent.
RESOLUTION
VELASCO, JR., J.:
For consideration is the Urgent Motion to Approve the Conversion of the SMC
Common Shares into SMC Series 1 Preferred Shares dated July 24, 2009
(Motion) interposed by petitioners Philippine Coconut Producers Federation,
Inc., et al. (collectively, COCOFED). COCOFED seeks the Court’s approval of
the conversion of 753,848,312 Class "A" and Class "B" common shares of San
Miguel Corporation (SMC) registered in the names of Coconut Industry
Investment Fund and the so-called "14 Holding Companies" (collectively known
as "CIIF companies") into 753,848,312 SMC Series 1 Preferred Shares
(hereinafter, the Conversion).
Statement1 and yields the following relevant features:
Instrument - Peso denominated, perpetual, cumulative, non-voting preferred
shares with a par value of Php 5.00 per share and Issue Price of Php 75
per share.
Dividend Rate - The SMC Board of Directors shall have the sole discretion to
declare dividends on the Series 1 Preferred Shares as redeemed by SMC,
the dividend rate shall be at a fixed rate of 8% per annum, payable quarterly
and calculated by reference to the issue price.
Dividend Rate Step Up - Unless the Series 1 Preferred Shares are redeemed
by SMC, the Dividend Rate shall be adjusted at the end of the fifth year to
the higher of (a) the Dividend Rate or (b) the prevailing 10-year PDSTF rate
plus a spread of 300 bps.
Optional Redemption and Purchase - SMC has the option, but not the
obligation, to redeem all or part of the Series 1 Preferred Shares on the third
anniversary from the Issue Date or on any Dividend Date thereafter at a
redemption price equal to the Issue price of the Preferred Shares plus all
cumulated and unpaid cash dividends.
Preference in the event of the liquidation of SMC - The Series 1 Preferred
Shares shall have preference over the common shares.
Selling costs - All selling costs pertaining to the Common Shares shall be borne
by the common shareholders. x x x (Emphasis added.)
COCOFED proposes to constitute a trust fund to be known as the "Coconut
Industry Trust Fund (CITF) for the Benefit of the Coconut Farmers," with
respondent Republic, acting through the Philippine Coconut Authority (PCA), as
trustee. As proposed, the constitution of the CITF shall be subject to terms and
conditions which, for the most part, reiterate the features of SMC’s conversion
offer, albeit specific reference is made to the shares of the 14 CIIF companies.
Among the terms and conditions are the following:
Standard 1. There must be a prior approval by this Honorable Court in this
instant case G.R. No. 177857-58 entitled "COCOFED, et. al. vs. Republic of the
Philippines", of the conversion of the sequestered SMC Common Shares, Both
Class "A" and Class "B", registered in the respective names of the 14 CIIF
Holding Companies, into SMC Series 1 Preferred Shares.
Standard 2. The SMC shares to be exchanged are all the shares of stock of
SMC that are presently sequestered and registered in the respective names of
the 14 CIIF Holding Companies in the total number of 753,848,312, both Class
"A" and Class "B" shares x x x (hereinafter, collectively referred to as the "SMC
Common Shares").
xxxx
Standard 4. The SMC Common Shares shall be converted at an exchange ratio
of one (1) SMC Series 1 Preferred Share (hereinafter, "SMC Series 1 Preferred
Share") for every one (1) SMC Common Share tendered. Each SMC Series 1
Preferred Share shall have a par value of (P5.00) per share and an Issue Price
of Seventy Five Pesos per share (P75.00). Dividends on the SMC Series 1
Preferred Share shall be cumulative and with dividend rate of 8% per annum
computed on the Issue Price of Seventy Five Pesos (P75.00) per share.
xxxx
Standard 6. If and when SMC exercises its right, but not an obligation, to
redeem after a period of three (3) years the SMC Series 1 Preferred Shares,
the redemption shall in no case be less than the Issue Price of Seventy Five
Pesos (P75.00) per share plus unpaid cumulative dividends.
xxxx
Standard 8. Upon written appointment to the Board of Governors of the [PCA]
of the three (3) nominees submitted to the President of the Philippines by the
[COCOFED], as required by PD 1468, a trust fund is thereby automatically
created to be identified and known as the "Coconut Industry Trust Fund (CITF)
For the Benefit of the Coconut Farmers" and the trustee of the Coconut Industry
Trust fund shall be: "The Republic of the Philippines Acting Through the
Philippine Coconut Authority for the Benefit of the Coconut Farmers."
Standard 9. The initial capital of the [CITF] shall be the SMC Series 1 Preferred
Shares that will be issued by SMC as herein described.
Standard 10. Within ten (10) days from and after the date of the final approval
by this Honorable Court of the Conversion, the Republic of the Philippines,
acting through the Presidential Commission on Good Government through its
duly authorized Chairman, shall deliver to SMC these documents.
xxxx
Standard 11. As the issuer, SMC shall within a reasonable period from a trade,
or exchange, of the SMC Common Shares into 753,848,312 SMC Series 1
Preferred Shares through the facilities of the Philippine Stock Exchange, deliver
duly-signed and issued SMC Series 1 Preferred Stock Certificate(s) in the
name of "The Republic of the Philippines acting though the Philippine Coconut
Authority as Trustee of the Coconut Industry Trust Fund (CITF) For the Benefit
of the Coconut Farmers."
Standard 12. Upon compliance by the SMC with its reciprocal obligations
according to the terms and intent of the approval by this Honorable Court, then
it shall acquire absolute ownership of the SMC Common Shares free from all
liens, writs, demands, or claims x x x.
Standard 13. The trustee of the [CITF] shall have no authority to sell, dispose,
assign, encumber or otherwise impair the value of the SMC Series 1 Preferred
Shares, unless the same are redeemed by SMC in accordance with its Articles
of Incorporation, as amended.
Standard 14. For purposes of ascertaining x x x the identities and addresses of
coconut farmers, the beneficiaries of the developmental projects herein
authorized to be financed, a ground survey of coconut farmers as presently
defined, or hereafter defined, by the [PCA], shall be conducted by the [PCA] x x
x.
Standard 15. Thirty (30) days after the receipt of any dividend paid on the SMC
Series 1 preferred Shares, the net proceeds x x x shall be disbursed by the
Trustee in favor of these entities in these proportions:
a. Forty percent (40%) – Coconut Industry Trust Fund constituted
under Paragraph 11, Standard 8 and Standard 9 hereof which the
Trustee should invest and re-invest only in the permissible investments
authorized under Paragraph 11, Standard 16.
b. Twenty percent (20%) – To the (PCA) "in trust and for the benefit of
the coconut farmers", being the governmental agency designated by
law to implement projects for the coconut industry.
c. Twenty percent (20%) – To the [COCOFED], in its capacity as the
duly recognized organization of the coconut farmers with the highest
membership.
d. Twenty percent (20%) – To the PCA Accredited Other Coconut
Farmers’ organizations – The trustee shall disburse this allocation to
each and all of those PCA Accredited Other Coconut Farmers
Organizations.
Standard 16. In the event of redemption of the SMC Series 1 Preferred Shares,
whether in full or in part, the proceeds of such redemption shall form part of the
capital of the [CITF] which the Trustee shall invest, within a period of forty eight
(48) hours from receipt of the proceeds of such redemption, and reinvest in
these permissible investments x x x.2
To the basic motion, respondent Republic filed its Comment questioning
COCOFED’s personality to seek the Court’s approval of the desired
conversion. Respondent Republic also disputes COCOFED’s right to impose
and prescribe terms and conditions on the proposed conversion, maintaining
that the CIIF SMC common shares are sequestered assets and are in custodia
legis under Presidential Commission on Good Government’s (PCGG’s)
administration. It postulates that, owing to the sequestrated status of the said
common shares, only PCGG has the authority to approve the proposed
conversion and seek the necessary Court approval. In this connection,
respondent Republic cites Republic v. Sandiganbayan3 where the coconut levy
funds were declared as prima facie public funds, thus reinforcing its position
that only PCGG, a government agency, can ask for approval of the conversion.
On September 4, 2009, Jovito R. Salonga and four others sought leave to
intervene. Attached to the motion was their Comment/Opposition-in-
Intervention, asserting that "the government bears the burden of showing that
the conversion is indubitably advantageous to the public interest or will result in
clear and material benefit. Failure of the government to carry the burden means
that the current status of the sequestered stocks should be maintained pending
final disposition of G.R. Nos. 177857-58." They further postulate that "even
assuming that the proposal to convert the SMC shares is beneficial to the
government, it cannot pursue the exchange offer because it is without power to
exercise acts of strict dominion over the sequestered shares." Lastly, they
argue that "the proposed conversion x x x is not only not advantageous to the
public interest but is in fact positively disadvantageous."
On September 4, 2009, respondent Republic filed a Supplemental Comment in
which it cited the Partial Summary Judgment rendered by the Sandiganbayan
on May 27, 2004 in Civil Case No. 33-F, declaring the Republic as owner, in
trust for the coconut farmers, of the subject CIIF SMC shares (27%). The same
comment also referred to Resolution No. 365-2009 passed on August 28, 2009
by the United Coconut Planters Bank (UCPB) Board of Directors expressing the
sense that "the proposed conversion of the CIIF SMC common shares to SMC
Series I preferred shares is financially beneficial."4 Reference was also made to
PCGG Resolution 2009-037-756 dated September 2, 2009, requesting the
Office of the Solicitor General (OSG) to seek approval of this Court for the
proposed conversion.5 By way of relief, respondent Republic prayed that the
PCGG be allowed to proceed and effect the conversion.
On the preliminary issue as to the proper party to seek the imprimatur on the
conversion, the Court rules that it is the PCGG, not COCOFED, that is
authorized to seek the approval of the Court of the Series 1 preferred shares
conversion.
As records show, PCGG sequestered the 753,848,312 SMC common shares
registered in the name of CIIF companies on April 7, 1986.6 From that time on,
these sequestered shares became subject to the management, supervision,
and control of PCGG, pursuant to Executive Order No. (EO) 1, Series of 1986,
creating that commission and vesting it with the following powers:
Sec. 3. The Commission shall have the power and authority:
xxxx
(b) To sequester or place or cause to be placed under its control or possession
any building or office wherein any ill-gotten wealth or properties may be found,
and any records pertaining thereto, in order to prevent their destruction,
concealment or disappearance which would frustrate or hamper the
investigation or otherwise prevent the Commission from accomplishing its task.
(c) To provisionally take over in the public interest or to prevent its disposal or
dissipation, business enterprises and properties taken over by the government
of the Marcos Administration or by entities or persons close to former President
Marcos, until the transactions leading to such acquisition by the latter can be
disposed of by the appropriate authorities.
Eventually, the coconut levy funds that were used to acquire the sequestered
CIIF SMC common shares in question were peremptorily determined to be
prima facie public funds. The Court, in Republic v. COCOFED,7 elucidated on
the nature of the coconut levy funds:
Coconut Levy Funds Are Prima Facie Public Funds
To avoid misunderstanding and confusion, this Court will even be more
categorical and positive than its earlier pronouncements: the coconut levy funds
are not only affected with public interest; they are, in fact, prima facie public
funds.
Public funds are those moneys belonging to the State or to any political
subdivision of the State; more specifically, taxes, customs duties and moneys
raised by operation of law for the support of the government or for the
discharge of its obligations. Undeniably, coconut levy funds satisfy this general
definition of public funds, because of the following reasons:
1. Coconut levy funds are raised with the use of the police and taxing
powers of the State.
2. They are levies imposed by the State for the benefit of the coconut
industry and its farmers.
3. Respondents have judicially admitted that the sequestered shares
were purchased with public funds.
 xxxx
6. The very laws governing coconut levies recognize their public
character.8
xxxx
2. Coconut Funds Are Levied for the Benefit of the Coconut Industry
and Its Farmers.
xxxx
And explaining the PCGG’s authority to vote the sequestered shares acquired
from the coconut levy, the Court further wrote:
Having Been Acquired With Public Funds, UCPB Shares Belong, Prima Facie,
to the Government
Having shown that the coconut levy funds are not only affected with public
interest, but are in fact prima facie public funds, this Court believes that the
government should be allowed to vote the questioned shares, because they
belong to it as the prima facie beneficial and true owner.
As stated at the beginning, voting is an act of dominion that should be
exercised by the share owner. One of the recognized rights of an owner is the
right to vote at meetings of the corporation. The right to vote is classified as the
right to control. Voting rights may be for the purpose of, among others, electing
or removing directors, amending a charter, or making or amending by laws.
Because the subject UCPB shares were acquired with government funds, the
government becomes their prima facie beneficial and true owner.
Ownership includes the right to enjoy, dispose of, exclude and recover a thing
without limitations other than those established by law or by the owner. x x x
And the right to vote shares is a mere incident of ownership. In the present
case, the government has been shown to be the prima facie owner of the funds
used to purchase the shares. Hence, it should be allowed the rights and
privileges flowing from such fact.9
Time and again, the Court has likened sequestration to preliminary attachment
and receivership under Rules 57 and 59 of the Rules of Court and has
accordingly applied the said rules to sequestration cases. So it was that in
Republic v. Sandiganbayan10 the Court noted that the powers and duties of the
PCGG as conservator and protector of sequestered assets are virtually the
same as those possessed by a receiver under Rule 59, Section 6:
SEC. 6. General powers of receiver.—Subject to the control of the court in
which the action or proceeding is pending, a receiver shall have the power to
bring and defend, in such capacity, actions in his own name; to take and keep
possession of the property in controversy; to receive rents; to collect debts due
to himself as receiver or to the fund, property, estate, person, or corporation of
which he is the receiver; to compound for and compromise the same; to make
transfers; to pay outstanding debts; to divide the money and other property that
shall remain among the persons legally entitled to receive the same; and
generally to do such acts respecting the property as the court may authorize.
However, funds in the hands of a receiver may be invested only by order of the
court upon the written consent of all the parties to the action.
No action may be filed by or against a receiver without leave of the court which
appointed him. (Emphasis supplied.)
And in Republic v. Sandiganbayan,11 the Court observed that "the PCGG’s
power to sequester alleged ill-gotten properties is likened to the provisional
remedies of preliminary attachment or receivership which are always subject to
the control of the court."
The PCGG, therefore, as the "receiver" of sequestered assets and in
consonance with its duty under EO 1, Series of 1986, to protect and preserve
them, has the power to exercise acts of dominion provided that those acts are
approved by the proper court.
From the foregoing discussion, it is clear that it is the PCGG—not COCOFED
or the CIIF companies—that has the right and/or authority during sequestration
to seek this Court’s approval for the proposed conversion. Consequently, the
terms and conditions sought by COCOFED for the conversion are not material
to the proposed conversion. At most, COCOFED’s prayer for approval of the
conversion reflects its conformity to said transfiguration.
After a circumspect evaluation of the incident at bar, we resolve to approve the
conversion, taking into account certain circumstances and hard economic
realities as discussed below:
Contrary to the assertion of intervenors Salonga, et al., respondent Republic
has satisfactorily demonstrated that the conversion will redound to the clear
advantage and material benefit of the eventual owner of the CIIF SMC shares
in question.
Positive action must be taken in order to preserve the value of the sequestered
CIIF SMC common shares. The worldwide economic crisis that started last year
affected the Philippines and adversely impacted on several banks and financial
institutions, resulting in billions of loses. The Philippine Stock Exchange Index
retreated by a record 12.3% on October 27, 2008, the biggest single day fall
since July 24, 1987. This year, 2009, the recorded index of 2,859 has not
regained the pre-October 27, 2008 level of 3,837.89.
Moreover, the CIIF SMC shares traded in the local bourse have substantially
dropped in value in the last two (2) years. The SMC Class "A" shares, which
commanded the unit price of PhP 48 per share as of November 6, 2008, were
trading at PhP 57.50 in 2007 and PhP 65 in 2006. SMC Class "B" shares, on
the other hand, which fetched a price of PhP 49 per share on November 6,
2008, were priced at PhP 61 in 2007 and PhP 74.50 in 2006. As of June 1,
2009, Class "A" and Class "B" common shares of CIIF SMC closed at PhP
53.50 and PhP 54 per unit, respectively. CIIF SMC share prices may decline
over the years.
No doubt shares of stock are not the safest of investments, moored as they are
on the ever changing worldwide and local financial conditions. The proposed
conversion would provide better protection either to the government or to the
eventually declared real stock owners, depending on the final ruling on the
ownership issue. In the event SMC suffers serious financial reverses in the
short or long term and seeks insolvency protection, the owners of the preferred
shares, being considered creditors, shall have, vis-à-vis common stock
shareholders, preference in the corporate assets of the insolvent or dissolved
corporation. In the case of the SMC Series 1 Preferred Shares, these
preferential features are made available to buyers of said shares and are amply
protected in the investment.12
More importantly, the conversion will ensure a higher cumulative and fixed
dividend rate of 8% per annum computed at an issue price of PhP 75 per
share, a yield not currently available to common shareholders. The OSG
succinctly explained the undeniable advantages to be gained from the
conversion, thus:
Assuming that the data contained in the SMC Information Sheet is accurate
and true, the closing prices of SMC Common Class "A" and "B" Shares, as of
June 1, 2009, are Fifty-three pesos and 50/100 (P53.50) and Fifty-four Pesos
(P54.00), respectively. The proposed conversion into Series 1 Preferred Shares
would give said share an issue price of seventy-five pesos (P75.00) per share.
Corollarily, while the current SMC Common shares have no fixed dividend rate,
the Series 1 Preferred Shares have a determined dividend rate of eight percent
(8%) per annum. On these points alone, the benefits to the shareholders are
clearly quantifiable.
Further still, the SMC Series 1 Preferred Shares are deemed cumulative. As a
cumulative share with preference in the payment of dividends, it is entitled to
cumulate the dividends in those years where no dividend is declared. Thus, if a
cumulative share is entitled to 10% of par value as cumulative dividend yearly,
where no dividends are declared in 1989, 1990 and 1991 because there are no
profits, and dividends are declared in 1992 because of surplus or unrestricted
earnings, the holder of the preferred cumulative shares is entitled to receive
40% of par value as his cumulative dividends for the years 1989 to 1991.
The declaration of dividends is still generally subject to the discretion of the
board but once dividends are declared, the cumulative preferred shareholders
are entitled to receive the dividends for the years when no declaration was
made. When dividends are declared, cumulative dividends must be paid
regardless of the year in which they are earned. Therefore, holders of the
converted preferred shares are assured of accumulated annual
dividends.13(Emphasis added.)
As it were, the issue price of PhP 75 per share represents a 40% premium,
more or less, over the prevailing market price, i.e., about PhP 54 per share, of
the CIIF SMC common shares as of June 1, 2009. The 40% premium amply
covers the "block" and "control" features of the CIIF SMC common shares.
These shares below 33.33% are, to many, not even considered vested with
"control" premium. It can be safely assumed that the issue price of PhP 75 per
share was based on an independent valuation of the CIIF SMC shares, a
requisite usually prescribed as a prelude to Board approval.
The redemption value of the preferred shares depends upon and is actually tied
up with the issue price plus all the cumulated and unpaid dividends. This
redemption feature is envisaged to effectively eliminate the market volatility
risks on the side of the share owners. Undoubtedly, these are clear advantages
and benefits that inure to the share owners who, on one hand, prefer a stable
dividend yield on their investments and, on the other hand, want security from
the uncertainty of market forces over which they do not have control.
Recent developments saw SMC venturing and diversifying into several huge
projects (i.e., oil, power, telecommunications), business moves which
understandably have caused some critics to raise the concern over a possible
prejudice to the CIIF SMC common shares presently under sequestration
should such investments turn sour. A number of people claim these new
acquisitions are likely to dissipate the assets of SMC. Some sectors ratiocinate
that the huge capital investments poured into these projects may substantially
erode SMC’s profitability in the next few years, resulting in diminished dividends
declaration. The proposed conversion will address the concerns and allay the
fears of well meaning sectors, and insulate and protect the sequestered CIIF
SMC shares from potential damage or loss.
Moreover, the conversion may be viewed as a sound business strategy to
preserve and conserve the value of the government’s interests in CIIF SMC
shares. Preservation is attained by fixing the value today at a significant
premium over the market price and ensuring that such value is not going to
decline despite negative market conditions. Conservation is realized thru an
improvement in the earnings value via the 8% per annum dividends versus the
uncertain and most likely lower dividends on common shares.
A fixed dividend rate of 8% per annum translates to PhP 6 per preferred share
or a guaranteed yearly dividend of PhP 4,523,308,987.20 for the entire
sequestered CIIF SMC shares. The figures jibe with the estimate made by
intervenors Salonga, et al.14 Compare this amount to the dividends declared for
common shares for the recent past years which are in the vicinity of PhP 1.40
per unit share or a total amount of PhP 1,055,387,636.80 per annum. The
whopping difference is around PhP 3.5 billion annually or PhP 10.5 billion in
three (3) years. On a year-to-year basis, the difference reflects an estimated
increase of 77% in dividend earnings. With the bold investments of SMC in
various lines of business, there is no assurance of substantial earnings in the
coming years. There may even be no earnings. The modest dividends that
accrue to the common shares in the recent years may be a thing of the past
and may even be obliterated by poor or unstable performance in the initial
years of operation of newly-acquired ventures.
In the light of the above findings, the Court holds that respondent Republic has
satisfactorily hurdled the onus of showing that the conversion is advantageous
to the public interest or will result in clear and material benefit to the eventually
declared stock owners, be they the coconut farmers or the government itself.
In their Comment/Opposition in Intervention, intervenors Salonga, et al.,
however, assert that the proposed conversion is positively disadvantageous to
respondent. They label the conversion as a "devious compromise favorable
only to COCOFED and Cojuangco, Jr." This allegation is simply conjectural. No
evidence of the alleged compromise was presented, as it was only COCOFED
that initiated the proposal for conversion.
The claim that the Cojuangco, Jr. group will be able to oust the government
nominees from the SMC Board, buy the sequestered shares without
encumbrances, and do so with SMC funds is inaccurate and even speculative.
Intervenors completely miss the point. The genuine issue is whether or not the
desired conversion will be beneficial and advantageous to the government or
the eventual owners of the shares. The perceived full control by Cojuangco, Jr.
over SMC after the common shares are released from sequestration is hardly
relevant to the propriety of the conversion. Intervenors have not been able to
demonstrate how the domination of SMC by Cojuangco, Jr., if that should come
to pass, will prejudice or impair the interests of respondent Republic in the
preferred shares. The more important consideration in the exercise at hand is
the preservation and conservation of the preferred shares and the innumerable
benefits and substantial financial gains that will redound to the owner of these
shares.
The conversion, so intervenors claim, will result in the loss of voting rights of
PCGG in SMC and enable Cojuangco, Jr. to acquire the sequestered shares,
without encumbrances, using SMC funds. This is incorrect. The common
shares after conversion and release from sequestration become treasury
stocks or shares. Treasury shares under Sec. 9 of the Corporation Code (Batas
Pambansa Blg. 68) are "shares of stock which have been issued and fully paid
for, but subsequently reacquired by the issuing corporation by purchase,
redemption, donation or through some other lawful means. Such shares may
again be disposed of for a reasonable price fixed by the board of directors."
A treasury share or stock, which may be common or preferred, may be used for
a variety of corporate purposes, such as for a stock bonus plan for
management and employees or for acquiring another company. It may be held
indefinitely, resold or retired. While held in the company’s treasury, the stock
earns no dividends and has no vote in company affairs.15 Thus, the CIIF
common shares that would become treasury shares are not entitled to voting
rights. And should conversion push through, SMC, not Cojuangco, Jr.,
becomes the owner of the reacquired sequestered CIIF SMC common shares.
Should SMC opt, however, to sell said shares in the future, prospective buyers,
including possibly Cojuangco, Jr., have to put up their own money to acquire
said common shares. Thus, it is erroneous for intervenors to say that
Cojuangco, Jr., with the use of SMC funds, will be acquiring the CIIF SMC
common shares.
It bears to stress that it was SMC which amended its articles of incorporation,
reclassifying the existing composition of the authorized capital stock from PhP
4.5 billion common shares to PhP 3.39 billion common shares and PhP 1.11
billion Series 1 Preferred Shares. The conversion in question is a legitimate
exercise of corporate powers under the Corporation Code. The shares in
question will not be acquired with SMC funds but by reason of the
reconfiguration of said shares to preferred shares.
The Court can perhaps take judicial notice of the government’s enunciated
policy to reduce, if not eliminate, its exposure to business. The PCGG has held
on to the sequestered shares for more than 20 years and this may be the
opportune time to do away with its participation in SMC, especially considering
the claim that the sequestration of the CIIF SMC common shares has
frightened away investors and stunted growth of the company.
The only interest of PCGG in SMC is to protect the CIIF SMC common shares
from dissipation. PCGG is neither tasked to bar Cojuangco, Jr., or any
individual for that matter, from securing domination of the SMC Board, nor avert
Cojuangco, Jr.’s acquisition of the CIIF SMC common shares once released
from sequestration. Even if the conversion is approved, nothing can prevent the
government from prosecuting the people whom intervenors tag as responsible
for "greasing the government and the coconut farmers of billions of pesos."
On the other hand, COCOFED does not stand to benefit from the conversion,
because portions of the dividends or proceeds from the redemption cannot be
allocated directly to proposed beneficiaries, as this will be contrary to Sec. 2 of
Presidential Decree No. (PD) 961,16 as amended by PD 1468. In addition, the
preferred shares which will be placed in the names of the CIIF companies, or
the dividends derived from said shares, shall remain as sequestered assets
until final resolution of the ownership issue.
Intervenors suggest a deferment of any action on the conversion until the CIIF
SMC shares ownership issue is settled. The General Offer of conversion,
originally expiring on August 24, 2009, was extended up to September 21,
2009. Availment of the conversion calls for immediate action. Almost all of the
parties-in-interest—COCOFED, UCPB as administrator of the CIIF, and
respondent Republic through PCGG—have in one way or another signified
their assent to the conversion.
It has not successfully been demonstrated, however, how the alleged eventual
ownership by Cojuangco, Jr. of the sequestered shares will prejudice the
interests of respondent Republic in the preferred shares. It cannot likewise be
figured out what distinct benefits the government will obtain if the common
shares are converted to preferred shares or used in another manner after final
resolution of the ownership issue.
The indicated advantages of conversion, if accomplished now, will surely make
up for the apprehensions arising from the possible domination by Cojuangco,
Jr. of the SMC in the future. The primordial consideration is that the shares be
shielded from dissipation and potential risks that may arise from uncertainty of
market and business conditions. The conversion will ensure stable share value
and enhanced earnings of the shares.
Lest it be overlooked, the decision on whether to proceed with the conversion
or defer action thereon until final adjudication of the issue of ownership over the
sequestered shares properly pertains to the executive branch, represented by
the PCGG. Just as it cannot look into the wisdom behind the enactment of a
law, the Court cannot question the wisdom and reasons behind the decision of
the executive branch to ask for the conversion of the common shares to
preferred shares. Else, the Court would be trenching on the well-settled
doctrine of separation of powers. The cardinal postulate explains that the three
branches must discharge their respective functions within the limits of authority
conferred by the Constitution. Under the principle of separation of powers,
neither Congress, the President, nor the Judiciary may encroach on fields
allocated to the other branches of government. The legislature is generally
limited to the enactment of laws, the executive to the enforcement of laws, and
the judiciary to their interpretation and application to cases and controversies. 17
Jurisprudence is well-established that the courts cannot intervene or interfere
with executive or legislative discretion exercised within constitutional limits. In
JG Summit Holdings, Inc. v. Court of Appeals,18 the Court explained:
The discretion to accept or reject a bid and award contracts is vested in the
Government agencies entrusted with that function. The discretion given to the
authorities on this matter is of such wide latitude that the Courts will not
interfere therewith, unless it is apparent that it is used as a shield to a
fraudulent award (Jalandoni v. NARRA, 108 Phil. 486 [1960]). x x x The
exercise of this discretion is a policy decision that necessitates prior inquiry,
investigation, comparison, evaluation, and deliberation. This task can best be
discharged by the Government agencies x x x. The role of the Courts is to
ascertain whether a branch or instrumentality of the Government has
transgressed its constitutional boundaries. But the Courts will not interfere with
executive or legislative discretion exercised within those boundaries.
Otherwise, it strays into the realm of policy decision-making.
It is only upon a clear showing of grave abuse of discretion that the Courts will
set aside the award of a contract made by a government entity. Grave abuse of
discretion implies a capricious, arbitrary and whimsical exercise of power
(Filinvest Credit Corp. v. Intermediate Appellate Court, No. 65935, 30
September 1988, 166 SCRA 155). The abuse of discretion must be so patent
and gross as to amount to an evasion of positive duty or to a virtual refusal to
perform a duty enjoined by law, as to act at all in contemplation of law, where
the power is exercised in an arbitrary and despotic manner by reason of
passion or hostility (Litton Mills, Inc. v. Galleon Trader, Inc., et al., L-40867, 26
July 1988, 163 SCRA 489). (Emphasis supplied.)
In Ledesma v. Court of Appeals,19 the Court added:
x x x [A] court is without power to directly decide matters over which full
discretionary authority has been delegated to the legislative or executive
branch of the government. It is not empowered to substitute its judgment for
that of Congress or of the President. It may, however, look into the question of
whether such exercise has been made in grave abuse of discretion.
In Francisco, Jr. v. UEM-MARA Philippines Corporation,20 the Court elucidated
the co-equal status of the three branches of government:
Considering the co-equal status of the three branches of government, courts
may not tread into matters requiring the exercise of discretion of a functionary
or office in the executive and legislative branches, unless it is clearly shown
that the government official or office concerned abused his or its discretion. x x
x
Furthermore,
"x x x courts, as a rule, refuse to interfere with proceedings undertaken by
administrative bodies or officials in the exercise of administrative functions. This
is so because such bodies are generally better equipped technically to decide
administrative questions and that non-legal factors, such as government policy
on the matter, are usually involved in the decisions." (Emphasis supplied.)
Corollary to the principle of separation of powers is the doctrine of primary
jurisdiction that the courts will DEFER to the decisions of the administrative
offices and agencies by reason of their expertise and experience in the matters
assigned to them. Administrative decisions on matters within the jurisdiction of
administrative bodies are to be respected and can only be set aside on proof of
grave abuse of discretion, fraud, or error of law.21
The only instance when the Courts ought to interfere is when a department or
an agency has acted with grave abuse of discretion or violated a law. A
circumspect review of the pleadings and evidence extant on record shows that
the PCGG approved the conversion only after it conducted an in-depth inquiry,
thorough study, and judicious evaluation of the pros and cons of the proposed
conversion. PCGG took into consideration the following:
(1) Resolution of the UCPB Board of Directors approved during its July
20, 2009 special meeting, where it categorically decided and concluded
that it is financially beneficial to convert the CIIF SMC shares as offered
by the SMC.
(2) Resolution No. 365-2009 of the UCPB Board of Directors issued on
August 28, 2009 reiterating its position that the proposed conversion is
financially beneficial, thus:
WHEREAS, in its regular meeting on June 26, 2009, the UCPB
Board of Directors instructed the UCPB-TBG to undertake a
study on the financial and economic viability of the proposed
SMC share conversion;
WHEREAS, the UCPB Board of Directors in a special meeting
on July 16, 2009 noted and referred to the PCGG and CIIF 14
Holding Companies for appropriate action UCPB-TBG’s study
on the financial and economic viability of the proposed SMC
share conversion, which states that, "x x x it would be more
advantageous to convert the CIIF’s SMC common shares to
the proposed SMC Series "1" Preferred Shares.";
WHEREAS, during a special meeting on July 20, 2009 among
the UCPB committee, PCGG and CIIF 14 Holding Companies,
UCPB-TBG’s study on the financial and economic viability of
the proposed SMC share conversion was affirmed and
endorsed to the PCGG and CIIF 14 Holding Companies for
appropriate action;
WHEREAS, apart from the legal issues surrounding the CIIF
SMC shares and considering the immediate concern to
preserve the value of the said shares, taking into account the
current global financial crisis and its effects on the Philippine
financial situation, and as recommended by the UCPB-TBG,
the proposed SMC share conversion is financially and
economically advantageous;
WHEREAS, in addition, given the dynamic market
environment, when the shares are converted, the shareholders
will no longer gain from any profits or suffer from any losses
resulting from the change in business strategy of SMC, or from
any change in the economic situation or market developments;
BE IT RESOLVED, That, based on the facts and
circumstances prevailing as of even date and the results of the
study conducted by the UCPB-TBG, UCPB, as the
administrator of the CIIF and in compliance with its mandate
under PD 1468, concluded that it is financially beneficial to
convert the CIIF SMC shares as offered by the San Miguel
Corporation. (Emphasis supplied.)
(3) The Department of Finance, through Secretary Margarito B. Teves,
upon the recommendation of the Development Bank of the Philippines,
confirmed that the CIIF SMC shares conversion is financially and
economically advantageous and that it shall work for the best interest
of the farmers who are the ultimate and beneficial owners of said
shares.
(4) The letter of the OSG dated July 30, 2009 opined that the proposed
conversion is legally allowable as long as PCGG approval is obtained,
thus:
Parenthetically, x x x our Office received a copy of COCOFED, et al.’s Urgent
Motion To Approve the Conversion of the SMC Common Share Into SMC
Series 1 Preferred Shares dated July 24, 2009. Attached therewith is the SMC
Notice of Regular Meeting and Information Statement dated July 23, 2009
which discusses and compares the common shares and Series 1 preferred
shares. As can be gleaned from the x x x Information Statement dated July 23,
2009, the advantages of conversion of the common shares to Series 1
preferred shares are as follows:
1. The Series 1 preferred shares shall be entitled to receive cash
dividends upon declaration made at the sole option of the Board of
Directors, fixed at 8% per annum as determined by Management. On
the other hand, there is no fixed dividend rate for common shares.
Further, no dividend shall be declared and paid to holders of common
shares unless cash dividends shall have been declared and paid to all
holders of the Series 1 preferred shares. Moreover, the Series 1
 preferred shares are cumulative, which means that should dividend
payments get delayed, it would eventually be paid in the future. This
feature is not available for common shareholders.
2. The Series 1 preferred shares are redeemable in whole or in part, at
the sole option of the Company (SMC), at the end of three (3) years
from the Issue Date or on any Dividend Payment Date thereafter, at the
price equal to the Issue Price plus any accumulated unpaid cash
dividends. Series 1 preferred shares are also perpetual or have no
stated maturity.
3. Should SMC decide not to redeem the Series 1 preferred shares at
the end of the fifth year from Issue Date, the Dividend Rate will be
adjusted to the higher of 8% per annum, and the prevailing 10-year
Philippine Dealing System Treasury Fixing (PDST-F) Rate plus a
spread of up to 300 basis points. This is an advantage because there is
the opportunity for the Series 1 Preferred Shareholders to enjoy a
higher dividend rate.
4. The Series 1 preferred shares have preference over common shares
upon liquidation.
5. The Series 1 preferred shares shall be listed with the Philippine
Stock Exchange within one year from issue date which should provide
liquidity to the issue.
On the other hand, the disadvantages to the conversion are as follows:
1. Holders of Series 1 preferred shares will have no voting rights except
as provided by law. Thus, the PCGG’s representatives in the SMC
Board will have been effectively removed from participating in the
management of the SMC.
2. Series 1 preferred shares have no maturing date as these are
perpetual shares. There is no definite assurance that the SMC will
exercise its option of redemption.
3. Holders of the Series 1 preferred shares shall not be entitled to any
participation or share in the retained earnings remaining after dividend
payment shall have been made on Series 1 preferred shares.
4. There is no expiry date on the SMC’s option to redeem the Series 1
Preferred Shares. Should market interest rates fall below the Dividend
Rate, on or after the 3rd anniversary from Issue Date, the SMC may
exercise the option to redeem the Series 1 Preferred Shares.
It is also our considered view that the conversion of the CIIF SMC common
shares to SMC Series 1 preferred shares does not take them away from the
jurisdiction of the courts. In conversion, the SMC common shares are merely
reclassified into SMC Series 1 preferred shares without changing the
proportional interest of the stockholder in San Miguel Corporation. Verily, the
conversion of the SMC common shares to SMC Series 1 preferred shares does
not involve a change in the condition of said shares.
The conversion of the SMC common shares to SMC Series 1 preferred shares
and its eventual redemption is legally allowable as long as the approval of the
PCGG is obtained for the amendment of the Articles of Incorporation of SMC,
to allow the creation of the proposed preferred share with its various features.
As long as the PCGG approval is obtained, the exercise of the redemption
feature of the SMC in accordance with the Amended Articles of Incorporation
would not constitute a "sale" of the sequestered asset that is prohibited.
Hence, on September 2, 2009, the PCGG issued Resolution No. 2009-037-756
approving the proposed conversion:
WHEREAS, guided by the foregoing, the Commission interposes no objection
to the conversion of the CIIF shares in SMC, as well as the PCGG ITF-CARP
shares, including the qualifying shares issued to PCGG/government nominee-
directors, to Series "1" Preferred shares.
NOW, THEREFORE, be it RESOLVED, as it is hereby RESOLVED, that the
Commission hereby APPROVES, as it is hereby APPROVED, the conversion
of the CIIF owned common shares, as well as the PCGG ITF-CARP common
shares, including the qualifying shares issued to PCGG/government nominee-
directors in San Miguel Corporation (SMC), to Series "1" Preferred Shares,
PURSUANT to the confirmation of the Department of Finance (DOF) and legal
opinion of the Office of the Solicitor General (OSG), and SUBJECT to the
conditions set forth in the said OSG opinion and requests of the OSG to seek
the approval of the Honorable Supreme Court for the said proposed
conversion. (Emphasis supplied.)
The approval by the PCGG, for respondent Republic, of the conversion is a
policy decision which cannot be interfered with in the absence of a showing or
proof, as here, that PCGG committed grave abuse of discretion.
In the similar Palm Avenue Realty Development Corporation v. PCGG,22 the
Court ruled that the approval by PCGG of the sale of the sequestered shares of
petitioner corporations allegedly owned and controlled by Kokoy Romualdez
was legal and could not be the subject of a writ of certiorari or prohibition,
absent proof that PCGG committed a grave abuse of discretion. The price of
PhP 29 per share approved by the PCGG was even below the prevailing price
of PhP 43 per share.
The Court ratiocinated in that case, thus:
It was no doubt in the light of these undeniable actualities, and in an attempt to
discharge its responsibility to preserve the sequestered stock and put an end to
its continuing and inexorable depreciation, that the PCGG performed the acts
now subject of attack in the case at bar. Upon these facts and considerations, it
cannot be said that the PCGG acted beyond the scope of the power conferred
upon it by law. Indeed, it would appear that its acts were motivated and guided
by the law creating it and prescribing its powers, functions, duties and
responsibilities. Neither can it be said that it acted with grave abuse of
discretion. It evidently considered and assessed the facts, the conflicting
positions of the parties concerned, and the options open to it, before taking the
course of action that it did. The possibility that it has erred cannot, to be sure,
be completely eliminated. As above stated, it is entirely possible that a better
bargain might have been struck with someone else. What cannot be denied is
that the arrangement actually adopted and implemented has resulted in the
satisfactory reconciliation of the conflicting facts in the case and the
preservation of the stock for the benefit of the party that may finally be
adjudged by competent court to be the owner thereof, and to a certain extent,
to the advantage of numerous employees.
The petitioners have failed to demonstrate that respondent PCGG has acted
without or in excess of the authority granted to it by law, or with grave abuse of
discretion, or that it had exercised judicial or quasi-judicial functions in this
case, correctible by certiorari. The Court thus finds itself bereft of any
justification to issue the prerogative writ of certiorari or prohibition that
petitioners seek. (Emphasis supplied.)
Salonga, et al. question the position of respondent Republic that the benefits
derived from the conversion are clearly quantifiable. As they claim, the price
differential of PhP 21 per share is only profit on paper and at the price of losing
membership in the SMC Board. Moreover, they point out that the dividends to
be distributed to the common shares may even be higher than the guaranteed
8% dividends.
These contentions are specious. While it is conceded that the price differential
of PhP 21 is an unrealized gain, the clear financial advantage derived from the
transaction is not the price differential but the guaranteed 8% dividend per
annum based on the issue price of PhP 75 per share as compared to a much
lower dividend rate that common shares may earn. Worse, there may even be
no dividends for the common shares after distribution of the dividends to the
holders of the preferred shares in the event of poor or weak business
performance. In addition, unless the Series 1 Preferred Shares are redeemed
at the end of the fifth year from issue date, the dividend rate of 8% shall be
increased based on the following formula:
[T]he dividend rate shall be adjusted to the higher of (i) the Dividend Rate, and
(ii) the prevailing 10-year PDST-F Rate (or such successor benchmark rate) as
displayed under the heading "Bid Yield" as published on the PDEx Page (or
such successor page) of Bloomberg (or such successor electronic service
provider) at approximately 11:30 a.m. Manila time on the date corresponding to
the end of the fifth year from the Issue Date (or if not available, the PDST-F
Rate on the banking day prior to such date, or if still not available, the nearest
preceding date on which the PDST-F Rate is available, but if such nearest
preceding date is more than five days prior to the date corresponding to the end
of the fifth year from the Issue Date, the Board of Directors at its reasonable
discretion shall determine the appropriate substitute rate), plus a spread of up
to 300 basis points, in either case calculated in respect of each share by
reference to the Issue Price.23
Undoubtedly, the holders of preferred shares will have distinct advantages over
common shareholders.
By relinquishing its voting rights in the SMC Board through the conversion, the
government, it is argued, would be surrendering its final arsenal in combating
the maneuverings to frustrate the recovery of ill-gotten wealth. It may, as
feared, be rendered helpless in preventing an impending peril of a "lurking
dissipation."
This contention has no merit.
The mere presence of four (4) PCGG nominated directors in the SMC Board
does not mean it can prevent board actions that are viewed to fritter away the
company assets. Even under the status quo, PCGG has no controlling sway in
the SMC Board, let alone a veto power at 24% of the stockholdings. In
relinquishing the voting rights, the government, through PCGG, is not in reality
ceding control.
Moreover, PCGG has ample powers to address alleged strategies to thwart
recovery of ill-gotten wealth. Thus, the loss of voting rights has no significant
effect on PCGG’s function to recover ill-gotten wealth or prevent dissipation of
sequestered assets.
It is also not correct to say that the holders of the preferred shares lose all their
voting rights. Sec. 6 of the Corporation Code provides for the situations where
non-voting shares like preferred shares are granted voting rights, viz:
Section 6. Classification of shares.—The shares of stock in corporations may
be divided into classes or series of shares, or both, any of which classes or
series of shares may have such rights, privileges or restrictions as may be
stated in the articles of incorporation: Provided, That no share may be deprived
of voting rights except those classified and issues as "preferred" or
"redeemable" shares, unless otherwise provided in this Code: Provided, further,
That there shall always be a class or series of shares which have complete
voting rights.
xxxx
Where the articles of incorporation provide for non-voting shares in the cases
allowed by this Code, the holders of such shares shall nevertheless be entitled
to vote on the following matters:
1. Amendment of the articles of incorporation;
2. Adoption and amendment of by-laws;
3. Sale, lease, exchange, mortgage, pledge or other disposition of all or
substantially all of the corporation property;
4. Incurring, creating or increasing bonded indebtedness;
5. Increase or decrease of capital stock;
6. Merger or consolidation of the corporation with another corporation
or other corporations;
7. Investment of corporate funds in another corporation or business in
accordance with this Code; and
8. Dissolution of the corporation.
Except as provided in the immediately preceding paragraph, the vote
necessary to approve a particular corporate act as provided in this Code shall
be deemed to refer only to stocks with voting rights.
In addition, the holders of the preferred shares retain the right to dissent and
demand payment of the fair value of their shares, to wit:
Sec. 81. Instances of appraisal right.—Any stockholder of a corporation shall
have the right to dissent and demand payment of the fair value of his shares in
the following instances:
1. In case any amendment to the articles of incorporation has the effect
of changing or restricting the rights of any stockholders or class of
shares, or of authorizing preferences in any respect superior to those of
outstanding shares of any class, or of extending or shortening the term
of corporate existence;
2. In case of sale, lease, exchange, transfer, mortgage, pledge or other
disposition of all or substantially all of the corporate property and
assets as provided in this Code, and
3. In case of merger or consolidation.
Lastly, the preferred shares will be placed under sequestration and
management of PCGG. It has powers to protect and preserve the sequestered
preferred shares even if there are no government-nominated directors in the
SMC Board.
Thus, the loss of four (4) board seats would not in reality prejudice the rights
and interests of the holders of the preferred shares. And such loss is
compensated by the tremendous financial gains and benefits and enormous
protection from loss or deterioration of the value of the CIIF SMC shares. The
advantages accorded to the preferred shares are undeniable, namely: the
significant premium in the price being offered; the preference enjoyed in the
dividends as well as in the liquidation of assets; and the voting rights still
retained by preferred shares in major corporate actions. All things considered,
conversion to preferred shares would best serve the interests and rights of the
government or the eventual owner of the CIIF SMC shares.
It is likewise postulated that the dividends distributed to the common shares
may end up higher than 8% guaranteed to preferred shares. This assumption is
speculative. With the huge investments SMC poured into several big ticket
projects, it is unlikely that there will be much earnings left to be distributed to
common shareholders. And to reiterate, the decision to convert is best left to
the sound business discretion of the government agencies concerned.
Salonga, et al. also argue that the proposed redemption is a right to buy the
preferred shares at less than the market value. That the market value of the
preferred shares may be higher than the issue price of PhP 75 per share at the
time of redemption is possible. But then the opposite scenario is also possible.
Again, the Court need not delve into policy decisions of government agencies
because of their expertise and special knowledge of these matters. Suffice it to
say that all indications show that SMC will redeem said preferred shares in the
third year and not later because the dividend rate of 8% it has to pay on said
shares is higher than the interest it will pay to the banks in case it simply
obtains a loan. When market prices of shares are low, it is possible that interest
rate on loans will likewise be low. On the other hand, if SMC has available
cash, it would be prudent for it to use such cash to redeem the shares than
place it in a regular bank deposit which will earn lower interests. It is plainly
expensive and costly for SMC to keep on paying the 8% dividend rate annually
in the hope that the market value of the shares will go up before it redeems the
shares. Likewise, the conclusion that respondent Republic will suffer a loss
corresponding to the difference between a high market value and the issue
price does not take into account the dividends to be earned by the preferred
shares for the three years prior to redemption. The guaranteed PhP 6 per share
dividend multiplied by three years will amount to PhP 18. If one adds PhP 18 to
the issue price of PhP 75, then the holders of the preferred shares will have
actually attained a price of PhP 93 which hews closely to the speculative PhP
100 per share price indicated by movants-intervenors. In effect, there will not be
much prejudice to respondent on the assumption that the speculative PhP 100
per share will be attained.
On the issue of the net dividends accruing to COCOFED, the Court rules that
the dividends shall be placed in escrow either at the Land Bank of the
Philippines or at the Development Bank of the Philippines in the name of
respondent Republic and not COCOFED.
Salonga, et al. also contend that PCGG cannot pursue the exchange offer of
SMC for want of power to exercise acts of strict dominion over the sequestered
shares.
This is incorrect.
The Court, to be sure, has not barred the conversion of any sequestered
common shares of a corporation into preferred shares. It may be argued that
the conversion scheme under consideration may later on be treated as an
indirect sale of the common shares from the registered owner to another
person if and when SMC decides to redeem the Series 1 preferred shares on
the third anniversary from the issue date of the preferred shares. Still, given the
circumstances of the pending incident, the Court can validly allow the proposed
conversion in accordance with Rule 57, Sec. 11, in relation to Rule 59, Sec. 6
of the Rules of Court. Sec. 11 reads:
SEC. 11. When attached property may be sold after levy on attachment and
before entry of judgment.—Whenever it shall be made to appear to the court in
which the action is pending, upon hearing with notice to both parties, that the
property attached is perishable, or that the interests of all the parties to the
action will be subserved by the sale thereof, the court may order such property
to be sold at public auction in such manner as it may direct, and the proceeds
of such sale to be deposited in court to abide the judgment in the action.
(Emphasis supplied.)
Republic v. Sandiganbayan24 teaches that sequestration is akin to preliminary
attachment or receivership, thus:
As thus described, sequestration, freezing and provisional takeover are akin to
the provisional remedy of preliminary attachment, or receivership. x x x By
attachment, a sheriff seizes property of a defendant in a civil suit so that it may
stand as security for the satisfaction of any judgment that may be obtained, and
not disposed of, or dissipated, or lost intentionally or otherwise, pending the
action. x x x By receivership, property, real or personal, which is subject of
litigation, is placed in the possession and control of a receiver appointed by the
Court, who shall conserve it pending final determination of the title or right of
possession over it. x x x All these remedies––sequestration, freezing,
provisional, takeover, attachment and receivership––are provisional, temporary,
designed for particular exigencies, attended by no character of permanency or
finality, and always subject to the control of the issuing court or agency.
(Emphasis supplied.)
Even if the conversion-cum-redemption partakes of an indirect sale, PCGG can
be allowed to approve the conversion in line with our ruling in Palm Avenue
Realty Development Corporation,25 subject to the approval of the Court.
Evidently, as long as the interests of all the parties will be subserved by the
sale of the sequestered properties, the Court may allow the properties to be
sold. More so, the Rules would allow the mere conversion of the shares of
stock given the evident benefit that all the parties would receive from such
conversion that far outweighs any perceived disadvantage. Thus, the Court is
clearly empowered to allow the conversion herein pressed by the PCGG.
While the PCGG, as sequestrator, does not exercise acts of ownership over
sequestered assets, the proper court, where the case involving the sequestered
asset is pending, may, nevertheless, issue a positive and definite order
authorizing the sale of said assets. As we held in Republic v. Sandiganbayan:
Our temporary restraining order lifting the Sandiganbayan restraining order did
not, by any stretch of the imagination, authorize PCGG to sell the Falcon
aircraft. A definite and positive order of a court is needed before the jet plane
may be sold. The proper procedure after the lifting of the restraining order was
for PCGG to go to Sandiganbayan and ask for formal authority to sell the
aircraft.26 x x x
The ruling in Republic v. Sandiganbayan voiding the sale by PCGG of a
sequestered jet does not apply squarely to the incident at bar, because PCGG
did not, in that case, seek court approval before the sale. Moreover, PCGG was
not able to provide any justification for the seizure of the jet from the lessee. In
the pending incident before the Court, it has long been settled that the CIIF
SMC common shares were bought by what have been declared as prima facie
public funds. Thus, the sequestration is justified. More importantly, respondent
Republic, as contained in the Supplemental Comment filed by the OSG dated
September 4, 2009, has adopted Resolution No. 2009-037-756 approving the
conversion of the shares, and has prayed for the approval by the Court of such
conversion.
In sum, the conversion of the CIIF SMC Common Shares to Series 1 Preferred
Shares should be approved in the best interests of everyone concerned
including the government and the Filipino people.1avvphi1

Once the subject conversion is accomplished, the preferred shares shall remain
in custodia legis and their ownership shall be subject to final ownership
determination by the Court. In addition, the preferred shares shall be registered
in the name of the CIIF companies until the final adjudication of the issue as to
the true and legal owners of said shares. Unless and until the ownership issue
shall have been resolved with finality, said preferred shares shall remain under
sequestration and PCGG management.27

WHEREFORE, the Court APPROVES the conversion of the 753,848,312 SMC

Common Shares registered in the name of CIIF companies to SMC SERIES 1
PREFERRED SHARES of 753,848,312, the converted shares to be registered
in the names of CIIF companies in accordance with the terms and conditions
specified in the conversion offer set forth in SMC’s Information Statement and
appended as Annex "A" of COCOFED’s Urgent Motion to Approve the
Conversion of the CIIF SMC Common Shares into SMC Series 1 Preferred
Shares. The preferred shares shall remain in custodia legis and their ownership
shall be subject to the final ownership determination of the Court. Until the
ownership issue has been resolved, the preferred shares in the name of the
CIIF companies shall be placed under sequestration and PCGG management.
The net dividend earnings and/or redemption proceeds from the Series 1
Preferred Shares shall be deposited in an escrow account with the Land Bank
of the Philippines or the Development Bank of the Philippines.
G.R. No. 181704 December 6, 2011
BUREAU OF CUSTOMS EMPLOYEES ASSOCIATION (BOCEA),
represented by its National President (BOCEA National Executive
Council) Mr. Romulo A. Pagulayan, Petitioner,
vs.
HON. MARGARITO B. TEVES, in his capacity as Secretary of the
Department of Finance, HON. NAPOLEON L. MORALES, in his capacity as
Commissioner of the Bureau of Customs, HON. LILIAN B. HEFTI, in her
capacity as Commissioner of the Bureau of Internal
Revenue, Respondents.
DECISION

Respondent Republic, thru the PCGG, is hereby directed to cause the CIIF
companies, including their respective directors, officers, employees, agents,
and all other persons acting in their behalf, to perform such acts and execute
such documents as required to effectuate the conversion of the common
shares into SMC Series 1 Preferred Shares, within ten (10) days from receipt of
this Resolution.
Once the conversion is accomplished, the SMC Common Shares previously
registered in the names of the CIIF companies shall be released from
sequestration.
SO ORDERED.
VILLARAMA, JR., J.:
Before this Court is a petition1 for certiorari and prohibition with prayer for
injunctive relief/s under Rule 65 of the 1997 Rules of Civil Procedure, as
amended, to declare Republic Act (R.A.) No. 9335,2 otherwise known as
the Attrition Act of 2005, and its Implementing Rules and Regulations3 (IRR)
unconstitutional, and the implementation thereof be enjoined permanently.
The Facts
On January 25, 2005, former President Gloria Macapagal-Arroyo signed into
law R.A. No. 9335 which took effect on February 11, 2005.

In Abakada Guro Party List v. Purisima4 (Abakada), we said of R.A. No. 9335:

RA [No.] 9335 was enacted to optimize the revenue-generation capability and

collection of the Bureau of Internal Revenue (BIR) and the Bureau of Customs
(BOC). The law intends to encourage BIR and BOC officials and employees to
exceed their revenue targets by providing a system of rewards and sanctions
through the creation of a Rewards and Incentives Fund (Fund) and a Revenue
Performance Evaluation Board (Board). It covers all officials and employees of
the BIR and the BOC with at least six months of service, regardless of
employment status.
The Fund is sourced from the collection of the BIR and the BOC in excess of
their revenue targets for the year, as determined by the Development Budget
and Coordinating Committee (DBCC). Any incentive or reward is taken from the
fund and allocated to the BIR and the BOC in proportion to their contribution in
the excess collection of the targeted amount of tax revenue.
The Boards in the BIR and the BOC are composed of the Secretary of the
Department of Finance (DOF) or his/her Undersecretary, the Secretary of the
Department of Budget and Management (DBM) or his/her Undersecretary, the
Director General of the National Economic Development Authority (NEDA) or
his/her Deputy Director General, the Commissioners of the BIR and the BOC or
their Deputy Commissioners, two representatives from the rank-and-file
employees and a representative from the officials nominated by their
recognized organization.
Each Board has the duty to (1) prescribe the rules and guidelines for the
allocation, distribution and release of the Fund; (2) set criteria and procedures
for removing from the service officials and employees whose revenue collection
falls short of the target; (3) terminate personnel in accordance with the criteria
adopted by the Board; (4) prescribe a system for performance evaluation; (5)
perform other functions, including the issuance of rules and regulations and (6)
submit an annual report to Congress.
The DOF, DBM, NEDA, BIR, BOC and the Civil Service Commission (CSC)
were tasked to promulgate and issue the implementing rules and regulations of
RA [No.] 9335, to be approved by a Joint Congressional Oversight Committee
created for such purpose.5
The Joint Congressional Oversight Committee approved the assailed IRR on
May 22, 2006. Subsequently, the IRR was published on May 30, 2006 in two
newspapers of general circulation, the Philippine Star and the Manila Standard,
and became effective fifteen (15) days later.6
Contending that the enactment and implementation of R.A. No. 9335 are
tainted with constitutional infirmities in violation of the fundamental rights of its
members, petitioner Bureau of Customs Employees Association (BOCEA), an
association of rank-and-file employees of the Bureau of Customs (BOC), duly
registered with the Department of Labor and Employment (DOLE) and the Civil
Service Commission (CSC), and represented by its National President, Mr.
Romulo A. Pagulayan (Pagulayan), directly filed the present petition before this
Court against respondents Margarito B. Teves, in his capacity as Secretary of
the Department of Finance (DOF), Commissioner Napoleon L. Morales
(Commissioner Morales), in his capacity as BOC Commissioner, and Lilian B.
Hefti, in her capacity as Commissioner of the Bureau of Internal Revenue (BIR).
In its petition, BOCEA made the following averments:
Sometime in 2008, high-ranking officials of the BOC pursuant to the mandate of
R.A. No. 9335 and its IRR, and in order to comply with the stringent deadlines
thereof, started to disseminate Collection District Performance
Contracts7 (Performance Contracts) for the lower ranking officials and rank-
and-file employees to sign. The Performance Contract pertinently provided:
xxxx
WHEREAS, pursuant to the provisions of Sec. 25 (b) of the Implementing Rules
and Regulations (IRR) of the Attrition Act of 2005, that provides for the setting
of criteria and procedures for removing from the service Officials and
Employees whose revenue collection fall short of the target in accordance with
Section 7 of Republic Act 9335.
xxxx
NOW, THEREFORE, for and in consideration of the foregoing premises, parties
unto this Agreement hereby agree and so agreed to perform the following:
xxxx
2. The "Section 2, PA/PE" hereby accepts the allocated Revenue Collection
Target and further accepts/commits to meet the said target under the following
conditions:
a.) That he/she will meet the allocated Revenue Collection Target and
thereby undertakes and binds himself/herself that in the event the
revenue collection falls short of the target with due consideration of all
relevant factors affecting the level of collection as provided in the rules
and regulations promulgated under the Act and its IRR, he/she will
voluntarily submit to the provisions of Sec. 25 (b) of the IRR and Sec. 7
of the Act; and
b.) That he/she will cascade and/or allocate to respective
Appraisers/Examiners or Employees under his/her section the said
Revenue Collection Target and require them to execute a Performance
Contract, and direct them to accept their individual target. The
Performance Contract executed by the respective
Examiners/Appraisers/Employees shall be submitted to the Office of
the Commissioner through the LAIC on or before March 31, 2008.
x x x x8
BOCEA opined that the revenue target was impossible to meet due to the
Government’s own policies on reduced tariff rates and tax breaks to big
businesses, the occurrence of natural calamities and because of other
economic factors. BOCEA claimed that some BOC employees were coerced
and forced to sign the Performance Contract. The majority of them, however,
did not sign. In particular, officers of BOCEA were summoned and required to
sign the Performance Contracts but they also refused. To ease the brewing
tension, BOCEA claimed that its officers sent letters, and sought several
dialogues with BOC officials but the latter refused to heed them.
In addition, BOCEA alleged that Commissioner Morales exerted heavy
pressure on the District Collectors, Chiefs of Formal Entry Divisions, Principal
Customs Appraisers and Principal Customs Examiners of the BOC during
command conferences to make them sign their Performance Contracts.
Likewise, BOC Deputy Commissioner Reynaldo Umali (Deputy Commissioner
Umali) individually spoke to said personnel to convince them to sign said
contracts. Said personnel were threatened that if they do not sign their
respective Performance Contracts, they would face possible reassignment,
reshuffling, or worse, be placed on floating status. Thus, all the District
Collectors, except a certain Atty. Carlos So of the Collection District III of the
Ninoy Aquino International Airport (NAIA), signed the Performance Contracts.
BOCEA further claimed that Pagulayan was constantly harassed and
threatened with lawsuits. Pagulayan approached Deputy Commissioner Umali
to ask the BOC officials to stop all forms of harassment, but the latter merely
said that he would look into the matter. On February 5, 2008, BOCEA through
counsel wrote the Revenue Performance Evaluation Board (Board) to desist
from implementing R.A. No. 9335 and its IRR and from requiring rank-and-file
employees of the BOC and BIR to sign Performance Contracts.9 In his letter-
reply10 dated February 12, 2008, Deputy Commissioner Umali denied having
coerced any BOC employee to sign a Performance Contract. He also defended
the BOC, invoking its mandate of merely implementing the law. Finally,
Pagulayan and BOCEA’s counsel, on separate occasions, requested for a
certified true copy of the Performance Contract from Deputy Commissioner
Umali but the latter failed to furnish them a copy.11
This petition was filed directly with this Court on March 3, 2008. BOCEA
asserted that in view of the unconstitutionality of R.A. No. 9335 and its IRR, and
their adverse effects on the constitutional rights of BOC officials and
employees, direct resort to this Court is justified. BOCEA argued, among
others, that its members and other BOC employees are in great danger of
losing their jobs should they fail to meet the required quota provided under the
law, in clear violation of their constitutional right to security of tenure, and at
their and their respective families’ prejudice.
In their Comment,12 respondents, through the Office of the Solicitor General
(OSG), countered that R.A. No. 9335 and its IRR do not violate the right to due
process and right to security of tenure of BIR and BOC employees. The OSG
stressed that the guarantee of security of tenure under the 1987 Constitution is
not a guarantee of perpetual employment. R.A. No. 9335 and its IRR provided
a reasonable and valid ground for the dismissal of an employee which is
germane to the purpose of the law. Likewise, R.A. No. 9335 and its IRR
provided that an employee may only be separated from the service upon
compliance with substantive and procedural due process. The OSG added that
R.A. No. 9335 and its IRR must enjoy the presumption of constitutionality.
In its Reply,13 BOCEA claimed that R.A. No. 9335 employs means that are
unreasonable to achieve its stated objectives; that the law is unduly oppressive
of BIR and BOC employees as it shifts the extreme burden upon their
shoulders when the Government itself has adopted measures that make
collection difficult such as reduced tariff rates to almost zero percent and tax
exemption of big businesses; and that the law is discriminatory of BIR and BOC
employees. BOCEA manifested that only the high-ranking officials of the BOC
benefited largely from the reward system under R.A. No. 9335 despite the fact
that they were not the ones directly toiling to collect revenue. Moreover, despite
the BOCEA’s numerous requests,14 BOC continually refused to provide BOCEA
the Expenditure Plan on how such reward was distributed.
Since BOCEA was seeking similar reliefs as that of the petitioners in Abakada
Guro Party List v. Purisima, BOCEA filed a Motion to Consolidate15 the present
case with Abakada on April 16, 2008. However, pending action on said motion,
the Court rendered its decision in Abakada on August 14, 2008. Thus, the
consolidation of this case with Abakada was rendered no longer possible. 16
In Abakada, this Court, through then Associate Justice, now Chief Justice
Renato C. Corona, declared Section 1217of R.A. No. 9335 creating a Joint
Congressional Oversight Committee to approve the IRR as unconstitutional and
violative of the principle of separation of powers. However, the constitutionality
of the remaining provisions of R.A. No. 9335 was upheld pursuant to Section
1318 of R.A. No. 9335. The Court also held that until the contrary is shown, the
IRR of R.A. No. 9335 is presumed valid and effective even without the approval
of the Joint Congressional Oversight Committee.19
Notwithstanding our ruling in Abakada, both parties complied with our
Resolution20 dated February 10, 2009, requiring them to submit their respective
Memoranda.
The Issues
BOCEA raises the following issues:
 I.
WHETHER OR NOT THE ATTRITION LAW, REPUBLIC ACT [NO.] 9335, AND
ITS IMPLEMENTING RULES AND REGULATIONS ARE
UNCONSTITUTIONAL AS THESE VIOLATE THE RIGHT TO DUE PROCESS
OF THE COVERED BIR AND BOC OFFICIALS AND EMPLOYEES[;]
II.
WHETHER OR NOT THE ATTRITION LAW, REPUBLIC ACT [NO.] 9335, AND
ITS IMPLEMENTING RULES AND REGULATIONS ARE
UNCONSTITUTIONAL AS THESE VIOLATE THE RIGHT OF BIR AND BOC
OFFICIALS AND EMPLOYEES TO THE EQUAL PROTECTION OF THE
LAWS[;]
III.
WHETHER OR NOT REPUBLIC ACT [NO.] 9335 AND ITS IMPLEMENTING
RULES AND REGULATIONS VIOLATE THE RIGHT TO SECURITY OF
TENURE OF BIR AND BOC OFFICIALS AND EMPLOYEES AS ENSHRINED
UNDER SECTION 2 (3), ARTICLE IX (B) OF THE CONSTITUTION[;]
IV.
WHETHER OR NOT REPUBLIC ACT [NO.] 9335 AND ITS IMPLEMENTING
RULES AND REGULATIONS ARE UNCONSTITUTIONAL AS THEY
CONSTITUTE UNDUE DELEGATION OF LEGISLATIVE POWERS TO THE
REVENUE PERFORMANCE EVALUATION BOARD IN VIOLATION OF THE
PRINCIPLE OF SEPARATION OF POWERS ENSHRINED IN THE
CONSTITUTION[; AND]
V.
WHETHER OR NOT REPUBLIC ACT [NO.] 9335 IS A BILL OF ATTAINDER
AND HENCE[,] UNCONSTITUTIONAL BECAUSE IT INFLICTS PUNISHMENT
THROUGH LEGISLATIVE FIAT UPON A PARTICULAR GROUP OR CLASS
OF OFFICIALS AND EMPLOYEES WITHOUT TRIAL.21
BOCEA manifested that while waiting for the Court to give due course to its
petition, events unfolded showing the patent unconstitutionality of R.A. No.
9335. It narrated that during the first year of the implementation of R.A. No.
9335, BOC employees exerted commendable efforts to attain their revenue
target of ₱196 billion which they surpassed by as much as ₱2 billion for that
year alone. However, this was attained only because oil companies made
advance tax payments to BOC. Moreover, BOC employees were given their
"reward" for surpassing said target only in 2008, the distribution of which they
described as unjust, unfair, dubious and fraudulent because only top officials of
BOC got the huge sum of reward while the employees, who did the hard task of
collecting, received a mere pittance of around ₱8,500.00. In the same manner,
the Bonds Division of BOC-NAIA collected 400+% of its designated target but
the higher management gave out to the employees a measly sum of ₱8,500.00
while the top level officials partook of millions of the excess collections. BOCEA
relies on a piece of information revealed by a newspaper showing the list of
BOC officials who apparently earned huge amounts of money by way of
reward.22 It claims that the recipients thereof included lawyers, support
personnel and other employees, including a dentist, who performed no
collection functions at all. These alleged anomalous selection, distribution and
allocation of rewards was due to the failure of R.A. No. 9335 to set out clear
guidelines.23
In addition, BOCEA avers that the Board initiated the first few cases of attrition
for the Fiscal Year 2007 by subjecting five BOC officials from the Port of Manila
to attrition despite the fact that the Port of Manila substantially complied with
the provisions of R.A. No. 9335. It is thus submitted that the selection of these
officials for attrition without proper investigation was nothing less than arbitrary.
Further, the legislative and executive departments’ promulgation of issuances
and the Government’s accession to regional trade agreements have caused a
significant diminution of the tariff rates, thus, decreasing over-all collection.
These unrealistic settings of revenue targets seriously affect BIR and BOC
employees tasked with the burden of collection, and worse, subjected them to
attrition.24
BOCEA assails the constitutionality of R.A. No. 9335 and its IRR on the
following grounds:
1. R.A. No. 9335 and its IRR violate the BIR and BOC employees’ right
to due process because the termination of employees who had not
attained their revenue targets for the year is peremptory and done
without any form of hearing to allow said employees to ventilate their
side. Moreover, R.A. No. 9335 and its IRR do not comply with the
requirements under CSC rules and regulations as the dismissal in this
case is immediately executory. Such immediately executory nature of
the Board’s decision negates the remedies available to an employee as
provided under the CSC rules.
2. R.A. No. 9335 and its IRR violate the BIR and BOC employees’ right
to equal protection of the law because R.A. No. 9335 and its IRR
unduly discriminates against BIR and BOC employees as compared to
employees of other revenue generating government agencies like the
Philippine Amusement and Gaming Corporation, Department of
Transportation and Communication, the Air Transportation Office, the
Land Transportation Office, and the Philippine Charity Sweepstakes
Office, among others, which are not subject to attrition.
 3. R.A. No. 9335 and its IRR violate the BIR and BOC employees’ right
to security of tenure because R.A. No. 9335 and its IRR effectively
removed remedies provided in the ordinary course of administrative
procedure afforded to government employees. The law likewise
created another ground for dismissal, i.e., non-attainment of revenue
collection target, which is not provided under CSC rules and which is,
by its nature, unpredictable and therefore arbitrary and unreasonable.
4. R.A. No. 9335 and its IRR violate the 1987 Constitution because
Congress granted to the Revenue Performance Evaluation Board
(Board) the unbridled discretion of formulating the criteria for
termination, the manner of allocating targets, the distribution of rewards
and the determination of relevant factors affecting the targets of
collection, which is tantamount to undue delegation of legislative
power.
5. R.A. No. 9335 is a bill of attainder because it inflicts punishment
upon a particular group or class of officials and employees without trial.
This is evident from the fact that the law confers upon the Board the
power to impose the penalty of removal upon employees who do not
meet their revenue targets; that the same is without the benefit of
hearing; and that the removal from service is immediately executory.
Lastly, it disregards the presumption of regularity in the performance of
the official functions of a public officer.25
On the other hand, respondents through the OSG stress that except for Section
12 of R.A. No. 9335, R.A. No. 9335 and its IRR are constitutional, as per our
ruling in Abakada. Nevertheless, the OSG argues that the classification of BIR
and BOC employees as public officers under R.A. No. 9335 is based on a valid
and substantial distinction since the revenue generated by the BIR and BOC is
essentially in the form of taxes, which is the lifeblood of the State, while the
revenue produced by other agencies is merely incidental or secondary to their
governmental functions; that in view of their mandate, and for purposes of tax
collection, the BIR and BOC are sui generis; that R.A. No. 9335 complies with
the "completeness" and "sufficient standard" tests for the permissive delegation
of legislative power to the Board; that the Board exercises its delegated power
consistent with the policy laid down in the law, that is, to optimize the revenue
generation capability and collection of the BIR and the BOC; that parameters
were set in order that the Board may identify the officials and employees
subject to attrition, and the proper procedure for their removal in case they fail
to meet the targets set in the Performance Contract were provided; and that the
rights of BIR and BOC employees to due process of law and security of tenure
are duly accorded by R.A. No. 9335. The OSG likewise maintains that there
was no encroachment of judicial power in the enactment of R.A. No. 9335
amounting to a bill of attainder since R.A. No. 9335 and its IRR merely defined
the offense and provided for the penalty that may be imposed. Finally, the OSG
reiterates that the separation from the service of any BIR or BOC employee
under R.A. No. 9335 and its IRR shall be done only upon due consideration of
all relevant factors affecting the level of collection, subject to Civil Service laws,
rules and regulations, and in compliance with substantive and procedural due
process. The OSG opines that the Performance Contract, far from violating the
BIR and BOC employees’ right to due process, actually serves as a notice of
the revenue target they have to meet and the possible consequences of failing
to meet the same. More, there is nothing in the law which prevents the
aggrieved party from appealing the unfavorable decision of dismissal.26
In essence, the issues for our resolution are:
1. Whether there is undue delegation of legislative power to the Board;
2. Whether R.A. No. 9335 and its IRR violate the rights of BOCEA’s
members to: (a) equal protection of laws, (b) security of tenure and (c)
due process; and
3. Whether R.A. No. 9335 is a bill of attainder.
Our Ruling
Prefatorily, we note that it is clear, and in fact uncontroverted, that BOCEA has
locus standi. BOCEA impugns the constitutionality of R.A. No. 9335 and its IRR
because its members, who are rank-and-file employees of the BOC, are
actually covered by the law and its IRR. BOCEA’s members have a personal
and substantial interest in the case, such that they have sustained or will
sustain, direct injury as a result of the enforcement of R.A. No. 9335 and its
IRR.27
However, we find no merit in the petition and perforce dismiss the same.
It must be noted that this is not the first time the constitutionality of R.A. No.
9335 and its IRR are being challenged. The Court already settled the majority
of the same issues raised by BOCEA in our decision in Abakada, which
attained finality on September 17, 2008. As such, our ruling therein is worthy of
reiteration in this case.
We resolve the first issue in the negative.
The principle of separation of powers ordains that each of the three great
branches of government has exclusive cognizance of and is supreme in
matters falling within its own constitutionally allocated sphere. 28 Necessarily
imbedded in this doctrine is the principle of non-delegation of powers, as
expressed in the Latin maxim potestas delegata non delegari potest, which
means "what has been delegated, cannot be delegated." This doctrine is based
on the ethical principle that such delegated power constitutes not only a right
but a duty to be performed by the delegate through the instrumentality of his
own judgment and not through the intervening mind of another.29However, this
principle of non-delegation of powers admits of numerous exceptions,30 one of
which is the delegation of legislative power to various specialized administrative
agencies like the Board in this case.
The rationale for the aforementioned exception was clearly explained in our
ruling in Gerochi v. Department of Energy,31 to wit:
In the face of the increasing complexity of modern life, delegation of legislative
power to various specialized administrative agencies is allowed as an exception
to this principle. Given the volume and variety of interactions in today’s society,
it is doubtful if the legislature can promulgate laws that will deal adequately with
and respond promptly to the minutiae of everyday life. Hence, the need to
delegate to administrative bodies — the principal agencies tasked to execute
laws in their specialized fields — the authority to promulgate rules and
regulations to implement a given statute and effectuate its policies. All that is
required for the valid exercise of this power of subordinate legislation is that the
regulation be germane to the objects and purposes of the law and that the
regulation be not in contradiction to, but in conformity with, the standards
prescribed by the law. These requirements are denominated as the
completeness test and the sufficient standard test.32
Thus, in Abakada, we held,
Two tests determine the validity of delegation of legislative power: (1) the
completeness test and (2) the sufficient standard test. A law is complete when it
sets forth therein the policy to be executed, carried out or implemented by the
delegate. It lays down a sufficient standard when it provides adequate
guidelines or limitations in the law to map out the boundaries of the delegate’s
authority and prevent the delegation from running riot. To be sufficient, the
standard must specify the limits of the delegate’s authority, announce the
legislative policy and identify the conditions under which it is to be
implemented.
RA [No.] 9335 adequately states the policy and standards to guide the
President in fixing revenue targets and the implementing agencies in carrying
out the provisions of the law. Section 2 spells out the policy of the law:
"SEC. 2. Declaration of Policy. — It is the policy of the State to optimize the
revenue-generation capability and collection of the Bureau of Internal Revenue
(BIR) and the Bureau of Customs (BOC) by providing for a system of rewards
and sanctions through the creation of a Rewards and Incentives Fund and a
Revenue Performance Evaluation Board in the above agencies for the purpose
of encouraging their officials and employees to exceed their revenue targets."
Section 4 "canalized within banks that keep it from overflowing" the delegated
power to the President to fix revenue targets:
"SEC. 4. Rewards and Incentives Fund. — A Rewards and Incentives Fund,
hereinafter referred to as the Fund, is hereby created, to be sourced from the
collection of the BIR and the BOC in excess of their respective revenue
targets of the year, as determined by the Development Budget and
Coordinating Committee (DBCC), in the following percentages:
Excess of Collection [Over] the Percent (%) of the Excess
Revenue Targets Collection to Accrue to the Fund
30% or below — 15%
More than 30% — 15% of the first 30% plus 20% of
the remaining excess
The Fund shall be deemed automatically appropriated the year immediately
following the year when the revenue collection target was exceeded and shall
be released on the same fiscal year.
Revenue targets shall refer to the original estimated revenue collection
expected of the BIR and the BOC for a given fiscal year as stated in the Budget
of Expenditures and Sources of Financing (BESF) submitted by the President
to Congress. The BIR and the BOC shall submit to the DBCC the distribution of
the agencies’ revenue targets as allocated among its revenue districts in the
case of the BIR, and the collection districts in the case of the BOC.
xxx xxx x x x"
Revenue targets are based on the original estimated revenue collection
expected respectively of the BIR and the BOC for a given fiscal year as
approved by the DBCC and stated in the BESF submitted by the President to
Congress. Thus, the determination of revenue targets does not rest solely on
the President as it also undergoes the scrutiny of the DBCC.
On the other hand, Section 7 specifies the limits of the Board’s authority and
identifies the conditions under which officials and employees whose revenue
collection falls short of the target by at least 7.5% may be removed from the
service:
"SEC. 7. Powers and Functions of the Board. — The Board in the agency shall
have the following powers and functions:
xxx xxx xxx
(b) To set the criteria and procedures for removing from service officials and
employees whose revenue collection falls short of the target by at least seven
and a half percent (7.5%), with due consideration of all relevant factors
affecting the level of collection as provided in the rules and regulations
promulgated under this Act, subject to civil service laws, rules and regulations
and compliance with substantive and procedural due process: Provided, That
the following exemptions shall apply:
1. Where the district or area of responsibility is newly-created, not
exceeding two years in operation, and has no historical record of
collection performance that can be used as basis for evaluation; and
2. Where the revenue or customs official or employee is a recent
transferee in the middle of the period under consideration unless the
transfer was due to nonperformance of revenue targets or potential
nonperformance of revenue targets: Provided, however, That when the
district or area of responsibility covered by revenue or customs officials
or employees has suffered from economic difficulties brought about by
natural calamities or force majeure or economic causes as may be
determined by the Board, termination shall be considered only after
careful and proper review by the Board.
(c) To terminate personnel in accordance with the criteria adopted in the
preceding paragraph: Provided, That such decision shall be immediately
executory: Provided, further, That the application of the criteria for the
separation of an official or employee from service under this Act shall be
without prejudice to the application of other relevant laws on accountability of
public officers and employees, such as the Code of Conduct and Ethical
Standards of Public Officers and Employees and the Anti-Graft and Corrupt
Practices Act;
xxx xxx x x x"
At any rate, this Court has recognized the following as sufficient standards:
"public interest", "justice and equity", "public convenience and welfare" and
"simplicity, economy and welfare". In this case, the declared policy of
optimization of the revenue-generation capability and collection of the BIR and
the BOC is infused with public interest.33
We could not but deduce that the completeness test and the sufficient standard
test were fully satisfied by R.A. No. 9335, as evident from the aforementioned
Sections 2, 4 and 7 thereof. Moreover, Section 534 of R.A. No. 9335 also
provides for the incentives due to District Collection Offices. While it is apparent
that the last paragraph of Section 5 provides that "[t]he allocation, distribution
and release of the district reward shall likewise be prescribed by the rules and
regulations of the Revenue Performance and Evaluation Board," Section 7
(a)35 of R.A. No. 9335 clearly mandates and sets the parameters for the Board
by providing that such rules and guidelines for the allocation, distribution and
release of the fund shall be in accordance with Sections 4 and 5 of R.A. No.
9335. In sum, the Court finds that R.A. No. 9335, read and appreciated in its
entirety, is complete in all its essential terms and conditions, and that it contains
sufficient standards as to negate BOCEA’s supposition of undue delegation of
legislative power to the Board.
Similarly, we resolve the second issue in the negative.
Equal protection simply provides that all persons or things similarly situated
should be treated in a similar manner, both as to rights conferred and
responsibilities imposed. The purpose of the equal protection clause is to
secure every person within a state’s jurisdiction against intentional and arbitrary
discrimination, whether occasioned by the express terms of a statute or by its
improper execution through the state’s duly constituted authorities. 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.361awphil
Thus, on the issue on equal protection of the laws, we held in Abakada:
The equal protection clause recognizes a valid classification, that is, a
classification that has a reasonable foundation or rational basis and not
arbitrary. With respect to RA [No.] 9335, its expressed public policy is the
optimization of the revenue-generation capability and collection of the BIR and
the BOC. Since the subject of the law is the revenue-generation capability and
collection of the BIR and the BOC, the incentives and/or sanctions provided in
the law should logically pertain to the said agencies. Moreover, the law
concerns only the BIR and the BOC because they have the common distinct
primary function of generating revenues for the national government through
the collection of taxes, customs duties, fees and charges.
The BIR performs the following functions:
"Sec. 18. The Bureau of Internal Revenue. — The Bureau of Internal Revenue,
which shall be headed by and subject to the supervision and control of the
Commissioner of Internal Revenue, who shall be appointed by the President
upon the recommendation of the Secretary [of the DOF], shall have the
following functions:
(1) Assess and collect all taxes, fees and charges and account for all
revenues collected;
(2) Exercise duly delegated police powers for the proper performance
of its functions and duties;
 (3) Prevent and prosecute tax evasions and all other illegal economic
activities;
(4) Exercise supervision and control over its constituent and
subordinate units; and
(5) Perform such other functions as may be provided by law.
xxx xxx x x x"
On the other hand, the BOC has the following functions:
"Sec. 23. The Bureau of Customs. — The Bureau of Customs which shall be
headed and subject to the management and control of the Commissioner of
Customs, who shall be appointed by the President upon the recommendation of
the Secretary [of the DOF] and hereinafter referred to as Commissioner, shall
have the following functions:
(1) Collect custom duties, taxes and the corresponding fees, charges
and penalties;
(2) Account for all customs revenues collected;
(3) Exercise police authority for the enforcement of tariff and customs
laws;
(4) Prevent and suppress smuggling, pilferage and all other economic
frauds within all ports of entry;
(5) Supervise and control exports, imports, foreign mails and the
clearance of vessels and aircrafts in all ports of entry;
(6) Administer all legal requirements that are appropriate;
(7) Prevent and prosecute smuggling and other illegal activities in all
ports under its jurisdiction;
(8) Exercise supervision and control over its constituent units;
(9) Perform such other functions as may be provided by law.
xxx xxx x x x"
Both the BIR and the BOC are bureaus under the DOF. They principally
perform the special function of being the instrumentalities through which the
State exercises one of its great inherent functions — taxation. Indubitably, such
substantial distinction is germane and intimately related to the purpose of the
law. Hence, the classification and treatment accorded to the BIR and the BOC
under RA [No.] 9335 fully satisfy the demands of equal protection.37
As it was imperatively correlated to the issue on equal protection, the issues on
the security of tenure of affected BIR and BOC officials and employees and
their entitlement to due process were also settled in Abakada:
Clearly, RA [No.] 9335 in no way violates the security of tenure of officials and
employees of the BIR and the BOC. The guarantee of security of tenure only
means that an employee cannot be dismissed from the service for causes other
than those provided by law and only after due process is accorded the
employee. In the case of RA [No.] 9335, it lays down a reasonable yardstick for
removal (when the revenue collection falls short of the target by at least 7.5%)
with due consideration of all relevant factors affecting the level of collection.
This standard is analogous to inefficiency and incompetence in the
performance of official duties, a ground for disciplinary action under civil service
laws. The action for removal is also subject to civil service laws, rules and
regulations and compliance with substantive and procedural due process.38
In addition, the essence of due process is simply an opportunity to be heard, or
as applied to administrative proceedings, a fair and reasonable opportunity to
explain one’s side.39 BOCEA’s apprehension of deprivation of due process
finds its answer in Section 7 (b) and (c) of R.A. No. 9335.40 The concerned BIR
or BOC official or employee is not simply given a target revenue collection and
capriciously left without any quarter. R.A. No. 9335 and its IRR clearly give due
consideration to all relevant factors41 that may affect the level of collection. In
the same manner, exemptions42 were set, contravening BOCEA’s claim that its
members may be removed for unattained target collection even due to causes
which are beyond their control. Moreover, an employee’s right to be heard is
not at all prevented and his right to appeal is not deprived of him. 43 In fine, a
BIR or BOC official or employee in this case cannot be arbitrarily removed from
the service without according him his constitutional right to due process. No
less than R.A. No. 9335 in accordance with the 1987 Constitution guarantees
this.
We have spoken, and these issues were finally laid to rest. Now, the Court
proceeds to resolve the last, but new issue raised by BOCEA, that is, whether
R.A. No. 9335 is a bill of attainder proscribed under Section 22, 44 Article III of
the 1987 Constitution.
On this score, we hold that R.A. No. 9335 is not a bill of attainder. A bill of
attainder is a legislative act which inflicts punishment on individuals or
members of a particular group without a judicial trial. Essential to a bill of
attainder are a specification of certain individuals or a group of individuals, the thereof.49 Just like any other law, R.A. No. 9335 has in its favor the presumption
imposition of a punishment, penal or otherwise, and the lack of judicial of constitutionality, and to justify its nullification, there must be a clear and
trial.451avvphi1 unequivocal breach of the Constitution and not one that is doubtful, speculative,
or argumentative.50 We have so declared in Abakada, and we now reiterate that
In his Concurring Opinion in Tuason v. Register of Deeds, Caloocan R.A. No. 9335 and its IRR are constitutional.
City,46 Justice Florentino P. Feliciano traces the roots of a Bill of Attainder, to
wit: WHEREFORE, the present petition for certiorari and prohibition with prayer for
injunctive relief/s is DISMISSED.
Bills of attainder are an ancient instrument of tyranny. In England a few
centuries back, Parliament would at times enact bills or statutes which declared No costs.
certain persons attainted and their blood corrupted so that it lost all heritable
quality (Ex Parte Garland, 4 Wall. 333, 18 L.Ed. 366 [1867]). In more modern SO ORDERED.
terms, a bill of attainder is essentially a usurpation of judicial power by a
legislative body. It envisages and effects the imposition of a penalty — the
deprivation of life or liberty or property — not by the ordinary processes of
judicial trial, but by legislative fiat. While cast in the form of special legislation, a
bill of attainder (or bill of pains and penalties, if it prescribed a penalty other
than death) is in intent and effect a penal judgment visited upon an identified
person or group of persons (and not upon the general community) without a
prior charge or demand, without notice and hearing, without an opportunity to
defend, without any of the civilized forms and safeguards of the judicial process
as we know it (People v. Ferrer, 48 SCRA 382 [1972]; Cummings and Missouri,
4 Wall. 277, 18 L. Ed. 356 [1867]; U.S. v. Lovett, 328, U.S. 303, 90 L.Ed. 1252
[1945]; U.S. v. Brown, 381 U.S. 437, 14 L.Ed. 2d. 484 [1965]. Such is the
archetypal bill of attainder wielded as a means of legislative oppression. x x x 47

R.A. No. 9335 does not possess the elements of a bill of attainder. It does not
seek to inflict punishment without a judicial trial. R.A. No. 9335 merely lays
down the grounds for the termination of a BIR or BOC official or employee and
provides for the consequences thereof. The democratic processes are still
followed and the constitutional rights of the concerned employee are amply
EN BANC
protected.
G.R. No. 173425 September 4, 2012
A final note.
FORT BONIFACIO DEVELOPMENT CORPORATION, Petitioner,
We find that BOCEA’s petition is replete with allegations of defects and
vs.
anomalies in allocation, distribution and receipt of rewards. While BOCEA COMMISSIONER OF INTERNAL REVENUE and REVENUE DISTRICT
intimates that it intends to curb graft and corruption in the BOC in particular and OFFICER, REVENUE DISTRICT NO. 44, TAGUIG and PATEROS, BUREAU
in the government in general which is nothing but noble, these intentions do not
OF INTERNAL REVENUE, Respondents.
actually pertain to the constitutionality of R.A. No. 9335 and its IRR, but rather
in the faithful implementation thereof. R.A. No. 9335 itself does not tolerate
these pernicious acts of graft and corruption.48 As the Court is not a trier of DECISION
facts, the investigation on the veracity of, and the proper action on these
anomalies are in the hands of the Executive branch. Correlatively, the wisdom DEL CASTILLO, J.:
for the enactment of this law remains within the domain of the Legislative
branch. We merely interpret the law as it is. The Court has no discretion to give Courts cannot limit the application or coverage of a law, nor can it impose
statutes a meaning detached from the manifest intendment and language conditions not provided therein. To do so constitutes judicial legislation.
This Petition for Review on Certiorari under Rule 45 of the Rules of Court
assails the July 7, 2006 Decision1 of the Court of Appeals (CA) in CA-G.R. SP
No. 61436, the dispositive portion of which reads.
WHEREFORE, the instant petition is hereby DISMISSED. ACCORDINGLY, the
Decision dated October 12, 2000 of the Court of Tax Appeals in CTA Case No.
5735, denying petitioner’s claim for refund in the amount of Three Hundred
Fifty-Nine Million Six Hundred Fifty-Two Thousand Nine Pesos and Forty-
Seven Centavos (₱ 359,652,009.47), is hereby AFFIRMED.
SO ORDERED.2
Factual Antecedents
Petitioner Fort Bonifacio Development Corporation (FBDC) is a duly registered
domestic corporation engaged in the development and sale of real
property.3 The Bases Conversion Development Authority (BCDA), a wholly
owned government corporation created under Republic Act (RA) No.
7227,4 owns 45% of petitioner’s issued and outstanding capital stock; while the
Bonifacio Land Corporation, a consortium of private domestic corporations,
owns the remaining 55%.5
On February 8, 1995, by virtue of RA 7227 and Executive Order No. 40, 6 dated
December 8, 1992, petitioner purchased from the national government a
portion of the Fort Bonifacio reservation, now known as the Fort Bonifacio
Global City (Global City).7
On January 1, 1996, RA 77168 restructured the Value-Added Tax (VAT) system
by amending certain provisions of the old National Internal Revenue Code
(NIRC). RA 7716 extended the coverage of VAT to real properties held
primarily for sale to customers or held for lease in the ordinary course of trade
or business.9
On September 19, 1996, petitioner submitted to the Bureau of Internal Revenue
(BIR) Revenue District No. 44, Taguig and Pateros, an inventory of all its real
properties, the book value of which aggregated ₱ 71,227,503,200.10Based on
this value, petitioner claimed that it is entitled to a transitional input tax credit of
₱ 5,698,200,256,11pursuant to Section 10512 of the old NIRC.
In October 1996, petitioner started selling Global City lots to interested
buyers.13
For the first quarter of 1997, petitioner generated a total amount of ₱
3,685,356,539.50 from its sales and lease of lots, on which the output VAT
payable was ₱ 368,535,653.95.14 Petitioner paid the output VAT by making
cash payments to the BIR totalling ₱ 359,652,009.47 and crediting its unutilized
input tax credit on purchases of goods and services of ₱ 8,883,644.48.15
Realizing that its transitional input tax credit was not applied in computing its
output VAT for the first quarter of 1997, petitioner on November 17, 1998 filed
with the BIR a claim for refund of the amount of ₱ 359,652,009.47 erroneously
paid as output VAT for the said period.16
Ruling of the Court of Tax Appeals
On February 24, 1999, due to the inaction of the respondent Commissioner of
Internal Revenue (CIR), petitioner elevated the matter to the Court of Tax
Appeals (CTA) via a Petition for Review.17
In opposing the claim for refund, respondents interposed the following special
and affirmative defenses:
xxxx
8. Under Revenue Regulations No. 7-95, implementing Section 105 of the Tax
Code as amended by E.O. 273, the basis of the presumptive input tax, in the
case of real estate dealers, is the improvements, such as buildings, roads,
drainage systems, and other similar structures, constructed on or after January
1, 1988.
9. Petitioner, by submitting its inventory listing of real properties only on
September 19, 1996, failed to comply with the aforesaid revenue regulations
mandating that for purposes of availing the presumptive input tax credits under
its Transitory Provisions, "an inventory as of December 31, 1995, of such goods
or properties and improvements showing the quantity, description, and amount
should be filed with the RDO no later than January 31, 1996. x x x"18
On October 12, 2000, the CTA denied petitioner’s claim for refund. According to
the CTA, "the benefit of transitional input tax credit comes with the condition
that business taxes should have been paid first."19 In this case, since petitioner
acquired the Global City property under a VAT-free sale transaction, it cannot
avail of the transitional input tax credit.20 The CTA likewise pointed out that
under Revenue Regulations No. (RR) 7-95, implementing Section 105 of the
old NIRC, the 8% transitional input tax credit should be based on the value of
the improvements on land such as buildings, roads, drainage system and other
similar structures, constructed on or after January 1, 1998, and not on the book
value of the real property.21 Thus, the CTA disposed of the case in this manner:
WHEREFORE, in view of all the foregoing, the claim for refund representing
alleged overpaid value-added tax covering the first quarter of 1997 is
hereby DENIED for lack of merit.
SO ORDERED.22
Ruling of the Court of Appeals
Aggrieved, petitioner filed a Petition for Review23 under Rule 43 of the Rules of
Court before the CA.
On July 7, 2006, the CA affirmed the decision of the CTA. The CA agreed that
petitioner is not entitled to the 8% transitional input tax credit since it did not pay
any VAT when it purchased the Global City property.24 The CA opined that
transitional input tax credit is allowed only when business taxes have been paid
and passed-on as part of the purchase price.25 In arriving at this conclusion, the
CA relied heavily on the historical background of transitional input tax
credit.26 As to the validity of RR 7-95, which limited the 8% transitional input tax
to the value of the improvements on the land, the CA said that it is entitled to
great weight as it was issued pursuant to Section 24527 of the old NIRC.28
Issues
Hence, the instant petition with the principal issue of whether petitioner is
entitled to a refund of ₱ 359,652,009.47 erroneously paid as output VAT for the
first quarter of 1997, the resolution of which depends on:
3.05.a. Whether Revenue Regulations No. 6-97 effectively repealed or
repudiated Revenue Regulations No. 7-95 insofar as the latter limited the
transitional/presumptive input tax credit which may be claimed under Section
105 of the National Internal Revenue Code to the "improvements" on real
properties.
3.05.b. Whether Revenue Regulations No. 7-95 is a valid implementation of
Section 105 of the National Internal Revenue Code.
3.05.c. Whether the issuance of Revenue Regulations No. 7-95 by the Bureau
of Internal Revenue, and declaration of validity of said Regulations by the Court
of Tax Appeals and Court of Appeals, were in violation of the fundamental
principle of separation of powers.
3.05.d. Whether there is basis and necessity to interpret and construe the
provisions of Section 105 of the National Internal Revenue Code.
3.05.e. Whether there must have been previous payment of business tax by
petitioner on its land before it may claim the input tax credit granted by Section
105 of the National Internal Revenue Code.
3.05.f. Whether the Court of Appeals and Court of Tax Appeals merely
speculated on the purpose of the transitional/presumptive input tax provided for
in Section 105 of the National Internal Revenue Code.
3.05.g. Whether the economic and social objectives in the acquisition of the
subject property by petitioner from the Government should be taken into
consideration.29
Petitioner’s Arguments
Petitioner claims that it is entitled to recover the amount of ₱ 359,652,009.47
erroneously paid as output VAT for the first quarter of 1997 since its transitional
input tax credit of ₱ 5,698,200,256 is more than sufficient to cover its output
VAT liability for the said period.30
Petitioner assails the pronouncement of the CA that prior payment of taxes is
required to avail of the 8% transitional input tax credit.31 Petitioner contends that
there is nothing in Section 105 of the old NIRC to support such conclusion.32
Petitioner further argues that RR 7-95, which limited the 8% transitional input
tax credit to the value of the improvements on the land, is invalid because it
goes against the express provision of Section 105 of the old NIRC, in relation to
Section 10033 of the same Code, as amended by RA 7716.34
Respondents’ Arguments
Respondents, on the other hand, maintain that petitioner is not entitled to a
transitional input tax credit because no taxes were paid in the acquisition of the
Global City property.35 Respondents assert that prior payment of taxes is
inherent in the nature of a transitional input tax.36 Regarding RR 7-95,
respondents insist that it is valid because it was issued by the Secretary of
Finance, who is mandated by law to promulgate all needful rules and
regulations for the implementation of Section 105 of the old NIRC.37
Our Ruling
The petition is meritorious.
The issues before us are no longer new or novel as these have been resolved
in the related case of Fort Bonifacio Development Corporation v. Commissioner
of Internal Revenue.38
Prior payment of taxes is not required
for a taxpayer to avail of the 8%
transitional input tax credit
Section 105 of the old NIRC reads:
SEC. 105. Transitional input tax credits. – A person who becomes liable to
value-added tax or any person who elects to be a VAT-registered person shall,
subject to the filing of an inventory as prescribed by regulations, be allowed
input tax on his beginning inventory of goods, materials and supplies equivalent
to 8% of the value of such inventory or the actual value-added tax paid on such
goods, materials and supplies, whichever is higher, which shall be creditable
against the output tax. (Emphasis supplied.)
Contrary to the view of the CTA and the CA, there is nothing in the above-
quoted provision to indicate that prior payment of taxes is necessary for the
availment of the 8% transitional input tax credit. Obviously, all that is required is
for the taxpayer to file a beginning inventory with the BIR.
To require prior payment of taxes, as proposed in the Dissent is not only
tantamount to judicial legislation but would also render nugatory the provision in
Section 105 of the old NIRC that the transitional input tax credit shall be "8% of
the value of [the beginning] inventory or the actual [VAT] paid on such goods,
materials and supplies, whichever is higher" because the actual VAT (now
12%) paid on the goods, materials, and supplies would always be higher than
the 8% (now 2%) of the beginning inventory which, following the view of Justice
Carpio, would have to exclude all goods, materials, and supplies where no
taxes were paid. Clearly, limiting the value of the beginning inventory only to
goods, materials, and supplies, where prior taxes were paid, was not the
intention of the law. Otherwise, it would have specifically stated that the
beginning inventory excludes goods, materials, and supplies where no taxes
were paid. As retired Justice Consuelo Ynares-Santiago has pointed out in her
Concurring Opinion in the earlier case of Fort Bonifacio:
If the intent of the law were to limit the input tax to cases where actual VAT was
paid, it could have simply said that the tax base shall be the actual value-added
tax paid. Instead, the law as framed contemplates a situation where a
transitional input tax credit is claimed even if there was no actual payment of
VAT in the underlying transaction. In such cases, the tax base used shall be the
value of the beginning inventory of goods, materials and supplies. 39
Moreover, prior payment of taxes is not required to avail of the transitional input
tax credit because it is not a tax refund per se but a tax credit. Tax credit is not
synonymous to tax refund. Tax refund is defined as the money that a taxpayer
overpaid and is thus returned by the taxing authority.40 Tax credit, on the other
hand, is an amount subtracted directly from one’s total tax liability. 41 It is any
amount given to a taxpayer as a subsidy, a refund, or an incentive to
encourage investment. Thus, unlike a tax refund, prior payment of taxes is not
a prerequisite to avail of a tax credit. In fact, in Commissioner of Internal
Revenue v. Central Luzon Drug Corp.,42 we declared that prior payment of
taxes is not required in order to avail of a tax credit.43 Pertinent portions of the
Decision read:
While a tax liability is essential to the availment or use of any tax credit, prior
tax payments are not. On the contrary, for the existence or grant solely of such
credit, neither a tax liability nor a prior tax payment is needed. The Tax Code is
in fact replete with provisions granting or allowing tax credits, even though no
taxes have been previously paid.
For example, in computing the estate tax due, Section 86(E) allows a tax credit
-- subject to certain limitations -- for estate taxes paid to a foreign country. Also
found in Section 101(C) is a similar provision for donor’s taxes -- again when
paid to a foreign country -- in computing for the donor’s tax due. The tax credits
in both instances allude to the prior payment of taxes, even if not made to our
government.
Under Section 110, a VAT (Value-Added Tax) - registered person engaging in
transactions -- whether or not subject to the VAT -- is also allowed a tax credit
that includes a ratable portion of any input tax not directly attributable to either
activity. This input tax may either be the VAT on the purchase or importation of
goods or services that is merely due from -- not necessarily paid by -- such
VAT-registered person in the course of trade or business; or the transitional
input tax determined in accordance with Section 111(A). The latter type may in
fact be an amount equivalent to only eight percent of the value of a VAT-
registered person’s beginning inventory of goods, materials and supplies, when
such amount -- as computed -- is higher than the actual VAT paid on the said
items. Clearly from this provision, the tax credit refers to an input tax that is
either due only or given a value by mere comparison with the VAT actually paid
-- then later prorated. No tax is actually paid prior to the availment of such
credit.
In Section 111(B), a one and a half percent input tax credit that is merely
presumptive is allowed. For the purchase of primary agricultural products used
as inputs -- either in the processing of sardines, mackerel and milk, or in the
manufacture of refined sugar and cooking oil -- and for the contract price of
public works contracts entered into with the government, again, no prior tax
payments are needed for the use of the tax credit.
More important, a VAT-registered person whose sales are zero-rated or
effectively zero-rated may, under Section 112(A), apply for the issuance of a
tax credit certificate for the amount of creditable input taxes merely due -- again
not necessarily paid to -- the government and attributable to such sales, to the
extent that the input taxes have not been applied against output taxes. Where a
taxpayer is engaged in zero-rated or effectively zero-rated sales and also in
taxable or exempt sales, the amount of creditable input taxes due that are not
directly and entirely attributable to any one of these transactions shall be
proportionately allocated on the basis of the volume of sales. Indeed, in availing
of such tax credit for VAT purposes, this provision -- as well as the one earlier
mentioned -- shows that the prior payment of taxes is not a requisite.
It may be argued that Section 28(B)(5)(b) of the Tax Code is another illustration
of a tax credit allowed, even though no prior tax payments are not required.
Specifically, in this provision, the imposition of a final withholding tax rate on
cash and/or property dividends received by a nonresident foreign corporation
from a domestic corporation is subjected to the condition that a foreign tax
credit will be given by the domiciliary country in an amount equivalent to taxes
that are merely deemed paid. Although true, this provision actually refers to the
tax credit as a condition only for the imposition of a lower tax rate, not as a
deduction from the corresponding tax liability. Besides, it is not our government
but the domiciliary country that credits against the income tax payable to the
latter by the foreign corporation, the tax to be foregone or spared.
In contrast, Section 34(C)(3), in relation to Section 34(C)(7)(b), categorically
allows as credits, against the income tax imposable under Title II, the amount of
income taxes merely incurred -- not necessarily paid -- by a domestic
corporation during a taxable year in any foreign country. Moreover, Section
34(C)(5) provides that for such taxes incurred but not paid, a tax credit may be
allowed, subject to the condition precedent that the taxpayer shall simply give a
bond with sureties satisfactory to and approved by petitioner, in such sum as
may be required; and further conditioned upon payment by the taxpayer of any
tax found due, upon petitioner’s redetermination of it.
In addition to the above-cited provisions in the Tax Code, there are also tax
treaties and special laws that grant or allow tax credits, even though no prior
tax payments have been made.
Under the treaties in which the tax credit method is used as a relief to avoid
double taxation, income that is taxed in the state of source is also taxable in the
state of residence, but the tax paid in the former is merely allowed as a credit
against the tax levied in the latter. Apparently, payment is made to the state of
source, not the state of residence. No tax, therefore, has been previously paid
to the latter.
Under special laws that particularly affect businesses, there can also be tax
credit incentives. To illustrate, the incentives provided for in Article 48 of
Presidential Decree No. (PD) 1789, as amended by Batas Pambansa Blg. (BP)
391, include tax credits equivalent to either five percent of the net value earned,
or five or ten percent of the net local content of export. In order to avail of such
credits under the said law and still achieve its objectives, no prior tax payments
are necessary.
From all the foregoing instances, it is evident that prior tax payments are not
indispensable to the availment of a tax credit. Thus, the CA correctly held that
the availment under RA 7432 did not require prior tax payments by private
establishments concerned. However, we do not agree with its finding that the
carry-over of tax credits under the said special law to succeeding taxable
periods, and even their application against internal revenue taxes, did not
necessitate the existence of a tax liability.
The examples above show that a tax liability is certainly important in the
availment or use, not the existence or grant, of a tax credit. Regarding this
matter, a private establishment reporting a net loss in its financial statements is
no different from another that presents a net income. Both are entitled to the tax
credit provided for under RA 7432, since the law itself accords that
unconditional benefit. However, for the losing establishment to immediately
apply such credit, where no tax is due, will be an improvident usance. 44
In this case, when petitioner realized that its transitional input tax credit was not
applied in computing its output VAT for the 1st quarter of 1997, it filed a claim
for refund to recover the output VAT it erroneously or excessively paid for the
1st quarter of 1997. In filing a claim for tax refund, petitioner is simply applying
its transitional input tax credit against the output VAT it has paid. Hence, it is
merely availing of the tax credit incentive given by law to first time VAT
taxpayers. As we have said in the earlier case of Fort Bonifacio, the provision
on transitional input tax credit was enacted to benefit first time VAT taxpayers
by mitigating the impact of VAT on the taxpayer.45 Thus, contrary to the view of
Justice Carpio, the granting of a transitional input tax credit in favor of
petitioner, which would be paid out of the general fund of the government,
would be an appropriation authorized by law, specifically Section 105 of the old
NIRC.
The history of the transitional input tax credit likewise does not support the
ruling of the CTA and CA. In our Decision dated April 2, 2009, in the related
case of Fort Bonifacio, we explained that:
If indeed the transitional input tax credit is integrally related to previously paid
sales taxes, the purported causal link between those two would have been
nonetheless extinguished long ago. Yet Congress has reenacted the
transitional input tax credit several times; that fact simply belies the absence of
any relationship between such tax credit and the long-abolished sales taxes.
Obviously then, the purpose behind the transitional input tax credit is not
confined to the transition from sales tax to VAT.
There is hardly any constricted definition of "transitional" that will limit its
possible meaning to the shift from the sales tax regime to the VAT regime.
Indeed, it could also allude to the transition one undergoes from not being a
VAT-registered person to becoming a VAT-registered person. Such transition
does not take place merely by operation of law, E.O. No. 273 or Rep. Act No.
7716 in particular. It could also occur when one decides to start a business.
Section 105 states that the transitional input tax credits become available either
to (1) a person who becomes liable to VAT; or (2) any person who elects to be
VAT-registered. The clear language of the law entitles new trades or
businesses to avail of the tax credit once they become VAT-registered. The
transitional input tax credit, whether under the Old NIRC or the New NIRC, may
be claimed by a newly-VAT registered person such as when a business as it
commences operations. If we view the matter from the perspective of a starting
entrepreneur, greater clarity emerges on the continued utility of the transitional
input tax credit.
Following the theory of the CTA, the new enterprise should be able to claim the
transitional input tax credit because it has presumably paid taxes, VAT in
particular, in the purchase of the goods, materials and supplies in its beginning
inventory. Consequently, as the CTA held below, if the new enterprise has not
paid VAT in its purchases of such goods, materials and supplies, then it should
not be able to claim the tax credit. However, it is not always true that the
acquisition of such goods, materials and supplies entail the payment of taxes
on the part of the new business. In fact, this could occur as a matter of course
by virtue of the operation of various provisions of the NIRC, and not only on
account of a specially legislated exemption.
Let us cite a few examples drawn from the New NIRC. If the goods or
properties are not acquired from a person in the course of trade or business,
the transaction would not be subject to VAT under Section 105. The sale would
be subject to capital gains taxes under Section 24 (D), but since capital gains is
a tax on passive income it is the seller, not the buyer, who generally would
shoulder the tax.
If the goods or properties are acquired through donation, the acquisition would
not be subject to VAT but to donor’s tax under Section 98 instead. It is the
donor who would be liable to pay the donor’s tax, and the donation would be
exempt if the donor’s total net gifts during the calendar year does not exceed ₱
100,000.00.
If the goods or properties are acquired through testate or intestate succession,
the transfer would not be subject to VAT but liable instead for estate tax under
Title III of the New NIRC. If the net estate does not exceed ₱ 200,000.00, no
estate tax would be assessed.
The interpretation proffered by the CTA would exclude goods and properties
which are acquired through sale not in the ordinary course of trade or business,
donation or through succession, from the beginning inventory on which the
transitional input tax credit is based. This prospect all but highlights the ultimate
absurdity of the respondents’ position. Again, nothing in the Old NIRC (or even
the New NIRC) speaks of such a possibility or qualifies the previous payment of
VAT or any other taxes on the goods, materials and supplies as a pre-requisite
for inclusion in the beginning inventory.
It is apparent that the transitional input tax credit operates to benefit newly VAT-
registered persons, whether or not they previously paid taxes in the acquisition
of their beginning inventory of goods, materials and supplies. During that period
of transition from non-VAT to VAT status, the transitional input tax credit serves
to alleviate the impact of the VAT on the taxpayer. At the very beginning, the
VAT-registered taxpayer is obliged to remit a significant portion of the income it
derived from its sales as output VAT. The transitional input tax credit mitigates
this initial diminution of the taxpayer's income by affording the opportunity to
offset the losses incurred through the remittance of the output VAT at a stage
when the person is yet unable to credit input VAT payments.
There is another point that weighs against the CTA’s interpretation. Under
Section 105 of the Old NIRC, the rate of the transitional input tax credit is "8%
of the value of such inventory or the actual value-added tax paid on such
goods, materials and supplies, whichever is higher." If indeed the transitional
input tax credit is premised on the previous payment of VAT, then it does not
make sense to afford the taxpayer the benefit of such credit based on "8% of
the value of such inventory" should the same prove higher than the actual VAT
paid. This intent that the CTA alluded to could have been implemented with
ease had the legislature shared such intent by providing the actual VAT paid as
the sole basis for the rate of the transitional input tax credit.46
In view of the foregoing, we find petitioner entitled to the 8% transitional input
tax credit provided in Section 105 of the old NIRC. The fact that it acquired the
Global City property under a tax-free transaction makes no difference as prior
payment of taxes is not a pre-requisite.
Section 4.105-1 of RR 7-95 is
inconsistent with Section 105 of the old
NIRC
As regards Section 4.105-147 of RR 7-95 which limited the 8% transitional input
tax credit to the value of the improvements on the land, the same contravenes
the provision of Section 105 of the old NIRC, in relation to Section 100 of the
same Code, as amended by RA 7716, which defines "goods or properties," to
wit:
SEC. 100. Value-added tax on sale of goods or properties. – (a) Rate and base
of tax. – There shall be levied, assessed and collected on every sale, barter or
exchange of goods or properties, a value-added tax equivalent to 10% of the
gross selling price or gross value in money of the goods or properties sold,
bartered or exchanged, such tax to be paid by the seller or transferor.
(1) The term "goods or properties" shall mean all tangible and intangible objects
which are capable of pecuniary estimation and shall include:
(A) Real properties held primarily for sale to customers or held for lease
in the ordinary course of trade or business; x x x
In fact, in our Resolution dated October 2, 2009, in the related case of Fort
Bonifacio, we ruled that Section 4.105-1 of RR 7-95, insofar as it limits the
transitional input tax credit to the value of the improvement of the real
properties, is a nullity.48 Pertinent portions of the Resolution read:
As mandated by Article 7 of the Civil Code, an administrative rule or regulation
cannot contravene the law on which it is based. RR 7-95 is inconsistent with
Section 105 insofar as the definition of the term "goods" is concerned. This is a
legislative act beyond the authority of the CIR and the Secretary of Finance.
The rules and regulations that administrative agencies promulgate, which are
the product of a delegated legislative power to create new and additional legal
provisions that have the effect of law, should be within the scope of the
statutory authority granted by the legislature to the objects and purposes of the
law, and should not be in contradiction to, but in conformity with, the standards
prescribed by law.
To be valid, an administrative rule or regulation must conform, not contradict,
the provisions of the enabling law.1âwphi1 An implementing rule or regulation
cannot modify, expand, or subtract from the law it is intended to implement. Any
rule that is not consistent with the statute itself is null and void.
While administrative agencies, such as the Bureau of Internal Revenue, may
issue regulations to implement statutes, they are without authority to limit the
scope of the statute to less than what it provides, or extend or expand the
statute beyond its terms, or in any way modify explicit provisions of the law.
Indeed, a quasi-judicial body or an administrative agency for that matter cannot
amend an act of Congress. Hence, in case of a discrepancy between the basic
law and an interpretative or administrative ruling, the basic law prevails.
To recapitulate, RR 7-95, insofar as it restricts the definition of "goods" as basis
of transitional input tax credit under Section 105 is a nullity. 49
As we see it then, the 8% transitional input tax credit should not be limited to
the value of the improvements on the real properties but should include the
value of the real properties as well.
In this case, since petitioner is entitled to a transitional input tax credit of ₱
5,698,200,256, which is more than sufficient to cover its output VAT liability for
the first quarter of 1997, a refund of the amount of ₱ 359,652,009.47
erroneously paid as output VAT for the said quarter is in order.
WHEREFORE, the petition is hereby GRANTED. The assailed Decision dated
July 7, 2006 of the Court of Appeals in CA-G.R. SP No. 61436
is REVERSED and SET ASIDE. Respondent Commissioner of Internal
Revenue is ordered to refund to petitioner Fort Bonifacio Development
Corporation the amount of ₱ 359,652,009.47 paid as output VAT for the first
quarter of 1997 in light of the transitional input tax credit available to petitioner
for the said quarter, or in the alternative, to issue a tax credit certificate
corresponding to such amount.
SO ORDERED.
MARIANO C. DEL CASTILLO
Associate Justice
WE CONCUR:
EN BANC
G.R. No. 186616 November 20, 2009
COMMISSION ON ELECTIONS, Petitioner,
vs.
CONRADO CRUZ, SANTIAGO P. GO, RENATO F. BORBON, LEVVINO
CHING, CARLOS C. FLORENTINO, RUBEN G. BALLEGA, LOIDA ALCEDO,
MARIO M. CAJUCOM, EMMANUEL M. CALMA, MANUEL A. RAYOS,
WILMA L. CHUA, EUFEMIO S. ALFONSO, JESUS M. LACANILAO,
BONIFACIO N. ALCAPA, JOSE H. SILVERIO, RODRIGO DEVELLES, NIDA
R. PAUNAN, MARIANO B. ESTUYE, JR., RAFAEL C. AREVALO, ARTURO
T. MANABAT, RICARDO O. LIZARONDO, LETICIA C. MATURAN,
RODRIGO A. ALAYAN, LEONILO N. MIRANDA, DESEDERIO O. MONREAL,
FRANCISCO M. BAHIA, NESTOR R. FORONDA, VICENTE B. QUE, JR.,
AURELIO A. BILUAN, DANILO R. GATCHALIAN, LOURDES R. DEL
MUNDO, EMMA O. CALZADO, FELIMON DE LEON, TANY V. CATACUTAN,
AND CONCEPCION P. JAO, Respondents.
DECISION
BRION, J.:
We resolve in this Decision the constitutional challenge, originally filed before
the Regional Trial Court of Caloocan City, Branch 128 (RTC), against the
following highlighted portion of Section 2 of Republic Act (RA) No. 9164
(entitled "An Act Providing for Synchronized Barangay and Sangguniang
Kabataan Elections, amending RA No. 7160, as amended, otherwise known as
the Local Government Code of 1991"):
Sec. 2. Term of Office. – The term of office of
all barangay and sangguniang kabataan officials after the effectivity of this Act
shall be three (3) years.
No barangay elective official shall serve for more than three (3) consecutive
terms in the same position: Provided, however, That the term of office shall be
reckoned from the 1994 barangay elections. Voluntary renunciation of office for
any length of time shall not be considered as an interruption in the continuity of
service for the full term for which the elective official was elected.
The RTC granted the petition and declared the challenged proviso
constitutionally infirm. The present petition, filed by the Commission on
Elections (COMELEC), seeks a review of the RTC decision.1
THE ANTECEDENTS
Before the October 29, 2007
Synchronized Barangay and Sangguniang Kabataan (SK) Elections, some of
the then incumbent officials of several barangays of Caloocan City2 filed with
the RTC a petition for declaratory relief to challenge the constitutionality of the
above-highlighted proviso, based on the following arguments:
I. The term limit of Barangay officials should be applied prospectively
and not retroactively.
II. Implementation of paragraph 2 Section 2 of RA No. 9164 would be a
violation of the equal protection of the law.
III. Barangay officials have always been apolitical.
The RTC agreed with the respondents’ contention that the challenged proviso
retroactively applied the three-term limit for barangay officials under the
following reasoning:
When the Local Government Code of 1991 took effect abrogating all other laws
inconsistent therewith, a different term was ordained. Here, this Court agrees
with the position of the petitioners that Section 43 of the Code specifically
exempted barangay elective officials from the coverage of the three (3)
consecutive term limit rule considering that the provision applicable to these
(sic) class of elective officials was significantly separated from the provisions of
paragraphs (a) and (b) thereof. Paragraph (b) is indeed intended to qualify
paragraph (a) of Section 43 as regards to (sic) all local elective officials
except barangay officials. Had the intention of the framers of the Code is (sic)
to include barangay elective officials, then no excepting proviso should have
been expressly made in paragraph (a) thereof or, by implication, the contents of
paragraph (c) should have been stated ahead of the contents of paragraph (b).
xxxx
Clearly, the intent of the framers of the constitution (sic) is to exempt
the barangay officials from the three (3) term limits (sic) which are otherwise
applicable to other elected public officials from the Members of the House of
Representatives down to the members of the sangguniang bayan/panlungsod.
It is up for the Congress whether the three (3) term limit should be applied by
enacting a law for the purpose.
The amendment introduced by R.A. No. 8524 merely increased the term of
office of barangay elective officials from three (3) years to five (5) years. Like
the Local Government Code, it can be noted that no consecutive term limit for
the election of barangay elective officials was fixed therein.
The advent of R.A. 9164 marked the revival of the consecutive term limit for the
election of barangay elective officials after the Local Government Code took
effect. Under the assailed provision of this Act, the term of office
of barangay elective officials reverted back to three (3) years from five (5)
years, and, this time, the legislators expressly declared that
no barangay elective official shall serve for more than three (3) consecutive
terms in the same position. The petitioners are very clear that they are not
assailing the validity of such provision fixing the three (3) consecutive term limit
rule for the election of barangay elective officials to the same position. The
particular provision the constitutionality of which is under attack is that portion
providing for the reckoning of the three (3) consecutive term limit
of barangay elective officials beginning from the 1994 barangay elections.
xxx
Section 2, paragraph 2 of R.A. 9164 is not a mere restatement of Section 43(c)
of the Local Government Code. As discussed above, Section 43(c) of the Local
Government Code does not provide for the consecutive term limit rule
of barangay elective officials. Such specific provision of the Code has in fact
amended the previous enactments (R.A. 6653 and R.A. 6679) providing for the
consecutive term limit rule of barangay elective officials. But, such specific
provision of the Local Government Code was amended by R.A. 9164, which
reverted back to the previous policy of fixing consecutive term limits
of barangay elective officials." 3
In declaring this retroactive application unconstitutional, the RTC explained
that:
By giving a retroactive reckoning of the three (3) consecutive term limit rule
for barangay officials to the 1994 barangay elections, Congress has violated
not only the principle of prospective application of statutes but also the equal
protection clause of the Constitution inasmuch as the barangay elective officials
were singled out that their consecutive term limit shall be counted retroactively.
There is no rhyme or reason why the consecutive limit for
these barangay officials shall be counted retroactively while the consecutive
limit for other local and national elective officials are counted prospectively. For
if the purpose of Congress is [sic] to classify elective barangay officials as
belonging to the same class of public officers whose term of office are limited to
three (3) consecutive terms, then to discriminate them by applying the proviso
retroactively violates the constitutionally enshrined principle of equal protection
of the laws.
Although the Constitution grants Congress the power to determine such
successive term limit of barangay elective officials, the exercise of the authority
granted shall not otherwise transgress other constitutional and statutory
privileges.
This Court cannot subscribe to the position of the respondent that the
legislature clearly intended that the provision of RA No. 9164 be made effective
in 1994 and that such provision is valid and constitutional. If we allow such
premise, then the term of office for those officials elected in the
1997 barangay elections should have ended in year 2000 and not year 2002
considering that RA No. 9164 provides for a three-year term
of barangay elective officials. The amendment introduced by R.A. No. 8524
would be rendered nugatory in view of such retroactive application. This is
absurd and illusory.
True, no person has a vested right to a public office, the same not being
property within the contemplation of constitutional guarantee. However, a
cursory reading of the petition would show that the petitioners are not claiming
vested right to their office but their right to be voted upon by the electorate
without being burdened by the assailed provision of the law that, in effect,
rendered them ineligible to run for their incumbent positions. Such right to run
for office and be voted for by the electorate is the right being sought to be
protected by assailing the otherwise unconstitutional provision.
Moreover, the Court likewise agrees with the petitioners that the law violated
the one-act-one subject rule embodied in the Constitution. x x x x The
challenged law’s title is "AN ACT PROVIDING FOR THE
SYNCHRONIZED BARANGAY AND SANGGUNIANG KABATAAN ELECTION
S, AMENDING REPUBLIC ACT 7160 OTHERWISE KNOWN AS THE LOCAL
GOVERNMENT CODE OF 1991 AND FOR OTHER PURPOSES." x x x x
xxxx
To this court, the non-inclusion in the title of the act on the retroactivity of the
reckoning of the term limits posed a serious constitutional breach, particularly
on the provision of the constitution [sic] that every bill must embrace only one
subject to be expressed in the title thereof.
x x x the Court is of the view that the affected barangay officials were not
sufficiently given notice that they were already disqualified by a new act, when
under the previous enactments no such restrictions were imposed.
Even if this Court would apply the usual test in determining the sufficiency of
the title of the bill, the challenged law would still be insufficient for how can a
retroactivity of the term limits be germane to the synchronization of an election
x x x x.4
The COMELEC moved to reconsider this decision but the RTC denied the
motion. Hence, the present petition on a pure question of law.
The Petition
The COMELEC takes the position that the assailed law is valid and
constitutional. RA No. 9164 is an amendatory law to RA No. 7160 (the Local
Government Code of 1991 or LGC) and is not a penal law; hence, it cannot be
considered an ex post facto law. The three-term limit, according to the
COMELEC, has been specifically provided in RA No. 7160, and RA No. 9164
merely restated the three-term limitation. It further asserts that laws which are
not penal in character may be applied retroactively when expressly so provided
and when it does not impair vested rights. As there is no vested right to public
office, much less to an elective post, there can be no valid objection to the
alleged retroactive application of RA No. 9164.
The COMELEC also argues that the RTC’s invalidation of RA No. 9164
essentially involves the wisdom of the law – the aspect of the law that the RTC
has no right to inquire into under the constitutional separation of powers
principle. The COMELEC lastly argues that there is no violation of the one
subject-one title rule, as the matters covered by RA No. 9164 are related; the
assailed provision is actually embraced within the title of the law.
THE COURT’S RULING
We find the petition meritorious. The RTC legally erred when it declared the
challenged proviso unconstitutional.
Preliminary Considerations
We find it appropriate, as a preliminary matter, to hark back to the pre-1987
Constitution history of the barangaypolitical system as outlined by this Court in
David v. COMELEC,5 and we quote:
As a unit of government, the barangay antedated the Spanish conquest of the
Philippines. The word "barangay" is derived from the Malay "balangay," a boat
which transported them (the Malays) to these shores. Quoting from Juan de
Plasencia, a Franciscan missionary in 1577, Historian Conrado Benitez wrote
that the barangay was ruled by a dato who exercised absolute powers of
government. While the Spaniards kept the barangay as the basic structure of
government, they stripped the dato or rajah of his powers. Instead, power was
centralized nationally in the governor general and locally in
the encomiendero and later, in the alcalde mayor and the gobernadorcillo.
The datoor rajah was much later renamed cabeza de barangay, who was
elected by the local citizens possessing property. The position degenerated
from a title of honor to that of a "mere government employee. Only the poor
who needed a salary, no matter how low, accepted the post."
After the Americans colonized the Philippines, the barangays became known
as "barrios." For some time, the laws governing barrio governments were found
in the Revised Administrative Code of 1916 and later in the Revised
Administrative Code of 1917. Barrios were granted autonomy by the original
Barrio Charter, RA 2370, and formally recognized as quasi-municipal
corporations by the Revised Barrio Charter, RA 3590. During the martial law
regime, barrios were "declared" or renamed "barangays" -- a reversion really to
their pre-Spanish names -- by PD. No. 86 and PD No. 557. Their basic
organization and functions under RA 3590, which was expressly "adopted as
the Barangay Charter," were retained. However, the titles of the officials were
changed to "barangay captain," "barangaycouncilman," "barangay secretary"
and "barangay treasurer."
Pursuant to Sec. 6 of Batas Pambansa Blg. 222,
"a Punong Barangay (Barangay Captain) and
six Kagawads ngSangguniang Barangay (Barangay Councilmen), who shall
constitute the presiding officer and members of the Sangguniang
Barangay (Barangay Council) respectively" were first elected on May 17, 1982.
They had a term of six years which began on June 7, 1982.
The Local Government Code of 1983 also fixed the term of office of local
elective officials at six years. Under this Code, the chief officials of
the barangay were the punong barangay, six
elective sangguniang barangay members, the kabataang barangay chairman,
a barangay secretary and a barangay treasurer.
B.P. Blg. 881, the Omnibus Election Code, reiterated that barangay officials
"shall hold office for six years," and stated that their election was to be held "on
the second Monday of May nineteen hundred and eighty eight and on the same
day every six years thereafter." [Emphasis supplied.]
The 1987 Philippine Constitution extended constitutional recognition
to barangays under Article X, Section 1 by specifying barangays as one of the
territorial and political subdivisions of the country, supplemented by Section 8 of
the same Article X, which provides:
SEC. 8. The term of office of elective local officials, except barangay officials,
which shall be determined by law, shall be three years and no such official shall
serve for more than three consecutive terms. Voluntary renunciation of the
office for any length of time shall not be considered as an interruption in the
continuity of his service for the full term for which he was elected. [Emphasis
supplied.]
The Constitutional Commission’s deliberations on Section 8 show that the
authority of Congress to legislate relates not only to the fixing of the term of
office of barangay officials, but also to the application of the three-term limit.
The following deliberations of the Constitutional Commission are particularly
instructive on this point:
MR. NOLLEDO: One clarificatory question, Madam President. What will
be the term of the office of barangayofficials as provided for?
MR. DAVIDE: As may be determined by law.
MR. NOLLEDO: As provided for in the Local Government Code?
MR. DAVIDE: Yes.
xxx xxx xxx
THE PRESIDENT: Is there any other comment? Is there any objection
to this proposed new section as submitted by Commissioner Davide
and accepted by the Committee?
MR. RODRIGO: Madam President, does this prohibition to serve for
more than three consecutive terms apply to barangay officials?
MR. DAVIDE: Madam President, the voting that we had on the terms of
office did not include the barangayofficials because it was then the
stand of the Chairman of the Committee on Local Governments that
the term of barangay officials must be determined by law. So it is now
for the law to determine whether the restriction on the number of
reelections will be included in the Local Government Code.
 MR. RODRIGO: So that is up to Congress to decide.
MR. DAVIDE: Yes.
MR. RODRIGO: I just wanted that clear in the record." 6 [Emphasis
supplied.]
After the effectivity of the 1987 Constitution, the barangay election originally
scheduled by Batas Pambansa Blg. 8817 on the second Monday of May 1988
was reset to "the second Monday of November 1988 and every five years
thereafter by RA No. 6653."8 Section 2 of RA No. 6653 changed the term of
office of barangay officials and introduced a term limitation as follows:
SEC. 2. The term of office of barangay officials shall be for five (5) years from
the first day of January following their election. Provided, however, That no
kagawad shall serve for more than two (2) consecutive terms. [Emphasis
supplied]
Under Section 5 of RA No. 6653, the punong barangay was to be chosen by
seven kagawads from among themselves, and they in turn, were to be elected
at large by the barangay electorate. The punong barangay, under Section 6 of
the law, may be recalled for loss of confidence by an absolute majority vote of
the Sangguniang Barangay, embodied in a resolution that shall necessarily
include the punong barangay’s successor.
The election date set by RA No. 6653 on the second Monday of November
1988 was postponed yet again to March 28, 1989 by RA No. 6679 whose
pertinent provision states:
SEC. 1. The elections of barangay officials set on the second Monday of
November 1988 by Republic Act No. 6653 are hereby postponed and reset to
March 28, 1989. They shall serve a term which shall begin on the first day of
May 1989 and ending on the thirty-first day of May 1994.
There shall be held a regular election of barangay officials on the second
Monday of May 1994 and on the same day every five (5) years thereafter. Their
term shall be for five (5) years which shall begin on the first day of June
following the election and until their successors shall have been elected and
qualified: Provided, That no barangayofficial shall serve for more than three (3)
consecutive terms.
The barangay elections shall be nonpartisan and shall be conducted in an
expeditious and inexpensive manner.
Significantly, the manner of election of the punong barangay was changed –
Section 5 of the law provided that while the seven kagawads were to be elected
by the registered voters of the barangay, "(t)he candidate who obtains the
highest number of votes shall be the punong barangay and in the event of a tie,
there shall be a drawing of lots under the supervision of the Commission on
Elections."
More than two (2) years after the 1989 barangay elections, RA No. 7160
(the LGC) introduced the following changes in the law:
SEC. 41. Manner of Election. -- (a) The x x x punong barangay shall be elected
at large x x x by the qualified voters" therein.
SEC. 43. Term of Office. - (a) The term of office of all local elective officials
elected after the effectivity of this Code shall be three (3) years, starting from
noon of June 30, 1992 or such date as may be provided for by law, except that
of elective barangay officials: Provided, That all local officials first elected
during the local elections immediately following the ratification of the 1987
Constitution shall serve until noon of June 30, 1992.
(b) No local elective official shall serve for more than three (3)
consecutive terms in the same position. Voluntary renunciation of the
office for any length of time shall not be considered as an interruption in
the continuity of service for the full term for which the elective official
concerned was elected.
(c) The term of office of barangay officials and members of
the sangguniang kabataan shall be for three (3) years, which shall
begin after the regular election of barangay officials on the second
Monday of May 1994.
SEC. 387. Chief Officials and Offices. -- (a) There shall be in
each barangay a punong barangay, seven (7) sangguniang
barangay members, the sangguniang kabataan chairman,
a barangay secretary and a barangaytreasurer.
xxxxxxxxx
SEC. 390. Composition. -- The Sangguniang barangay, the legislative body of
the barangay, shall be composed of the punong barangay as presiding officer,
and the seven (7) regular sanguniang barangay members elected at large and
the sanguniang kabataan chairman as members. [Emphasis supplied.]
This law started the direct and separate election of the punong barangay by the
"qualified voters" in the barangayand not by the seven (7) kagawads from
among themselves.9
Subsequently or on February 14, 1998, RA No. 8524 changed the three-year
term of office of barangay officials under Section 43 of the LGC to five (5)
years. On March 19, 2002, RA No. 9164 introduced the following significant
changes: (1) the term of office of barangay officials was again fixed at three
years on the reasoning that the barangay officials should not serve a longer
term than their supervisors;10 and (2) the challenged proviso, which states that
the 1994 election shall be the reckoning point for the application of the three-
term limit, was introduced. Yet another change was introduced three years after
or on July 25, 2005 when RA No. 9340 extended the term of the then
incumbent barangay officials – due to expire at noon of November 30, 2005
under RA No. 9164 – to noon of November 30, 2007. The three-year term
limitation provision survived all these changes.
Congress’ Plenary Power to Legislate Term Limits for Barangay Officials and
Judicial Power
In passing upon the issues posed to us, we clarify at the outset the parameters
of our powers.
As reflected in the above-quoted deliberations of the 1987 Constitution,
Congress has plenary authority under the Constitution to determine by
legislation not only the duration of the term of barangay officials, but also the
application to them of a consecutive term limit. Congress invariably exercised
this authority when it enacted no less than six (6) barangay-related laws since
1987.
Through all these statutory changes, Congress had determined at its discretion
both the length of the term of office of barangay officials and their term
limitation. Given the textually demonstrable commitment by the 1987
Constitution to Congress of the authority to determine the term duration and
limition of barangay officials under the Constitution, we consider it established
that whatever Congress, in its wisdom, decides on these matters are political
questions beyond the pale of judicial scrutiny,11 subject only to the certiorari
jurisdiction of the courts provided under Section 1, Article VIII of the
Constitution and to the judicial authority to invalidate any law contrary to the
Constitution.12
Political questions refer "to those questions which, under the Constitution, are
to be decided by the people in their sovereign capacity, or in regard to
which full discretionary authority has been delegated to the legislative or
executive branch of the government; it is concerned with issues dependent
upon the wisdom, not legality of a particular measure."13 These questions,
previously impervious to judicial scrutiny can now be inquired into under the
limited window provided by Section 1, Article VIII. Estrada v. Desierto14 best
describes this constitutional development, and we quote:
To a great degree, the 1987 Constitution has narrowed the reach of the political
doctrine when it expanded the power of judicial review of this court not only to
settle actual controversies involving rights which are legally demandable and
enforceable but also to determine whether or not there has been a grave abuse
of discretion amounting to lack or excess of jurisdiction on the part of any
branch or instrumentality of government. Heretofore, the judiciary has focused
on the "thou shalt not’s" of the Constitution directed against the exercise of its
jurisdiction. With the new provision, however, courts are given a greater
prerogative to determine what it can do to prevent grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of government. Clearly, the new provision did not just grant the
Court power of doing nothing. In sync and symmetry with this intent are other
provisions of the 1987 Constitution trimming the so called political thicket. xxxx
Thus, we can inquire into a congressional enactment despite the political
question doctrine, although the window provided us is narrow; the challenge
must show grave abuse of discretion to justify our intervention.
Other than the Section 1, Article VIII route, courts can declare a law invalid
when it is contrary to any provision of the Constitution. This requires the
appraisal of the challenged law against the legal standards provided by the
Constitution, not on the basis of the wisdom of the enactment. To justify its
nullification, the breach of the Constitution must be clear and unequivocal, not a
doubtful or equivocal one, as every law enjoys a strong presumption of
constitutionality.15 These are the hurdles that those challenging the
constitutional validity of a law must overcome.
The present case, as framed by the respondents, poses no challenge on the
issue of grave abuse of discretion. The legal issues posed relate strictly to
compliance with constitutional standards. It is from this prism that we shall
therefore resolve this case.
The Retroactive Application Issue
a. Interpretative / Historical Consideration
The respondents’ first objection to the challenged proviso’s constitutionality is
its purported retroactive application of the three-term limit when it set the
1994 barangay elections as a reckoning point in the application of the three-
term limit.
The respondents argued that the term limit, although present in the previous
laws, was not in RA No. 7160 when it amended all previous barangay election
laws. Hence, it was re-introduced for the first time by RA No. 9164 (signed into
law on March 19, 2002) and was applied retroactively when it made the term
limitation effective from the 1994 barangay elections. As the appealed ruling
quoted above shows, the RTC fully agreed with the respondents’ position.
Our first point of disagreement with the respondents and with the RTC is on
their position that a retroactive application of the term limitation was made
under RA No. 9164. Our own reading shows that no retroactive application was
made because the three-term limit has been there all along as early as the
second barangay law (RA No. 6679) after the 1987 Constitution took effect; it
was continued under the LGC and can still be found in the current law. We find
this obvious from a reading of the historical development of the law.
The first law that provided a term limitation for barangay officials was RA No.
6653 (1988); it imposed a two-consecutive term limit. After only six months,
Congress, under RA No. 6679 (1988), changed the two-term limit by providing
for a three-consecutive term limit. This consistent imposition of the term limit
gives no hint of any equivocation in the congressional intent to provide a term
limitation. Thereafter, RA No. 7160 – the LGC – followed, bringing with it the
issue of whether it provided, as originally worded, for a three-term limit
for barangay officials. We differ with the RTC analysis of this issue.
Section 43 is a provision under Title II of the LGC on Elective Officials. Title II is
divided into several chapters dealing with a wide range of subject matters, all
relating to local elective officials, as follows: a. Qualifications and Election
(Chapter I); b. Vacancies and Succession (Chapter II), c. Disciplinary Actions
(Chapter IV) and d. Recall (Chapter V). Title II likewise contains a chapter on
Local Legislation (Chapter III).
These Title II provisions are intended to apply to all local elective
officials, unless the contrary is clearly provided. A contrary application is
provided with respect to the length of the term of office under Section 43(a);
while it applies to all local elective officials, it does not apply
to barangay officials whose length of term is specifically provided by Section
43(c). In contrast to this clear case of an exception to a general rule, the three-
term limit under Section 43(b) does not contain any exception; it applies to all
local elective officials who must perforce include barangay officials.
An alternative perspective is to view Sec. 43(a), (b) and (c) separately from one
another as independently standing and self-contained provisions, except to the
extent that they expressly relate to one another. Thus, Sec. 43(a) relates to the
term of local elective officials, except barangay officials whose term of office is
separately provided under Sec. 43(c). Sec. 43(b), by its express terms, relates
to all local elective officials without any exception. Thus, the term limitation
applies to all local elective officials without any exclusion or qualification.
Either perspective, both of which speak of the same resulting interpretation, is
the correct legal import of Section 43 in the context in which it is found in Title II
of the LGC.1avvphi1
To be sure, it may be argued, as the respondents and the RTC did, that
paragraphs (a) and (b) of Section 43 are the general law for elective officials
(other than barangay officials); and paragraph (c) is the specific law
on barangayofficials, such that the silence of paragraph (c) on term limitation
for barangay officials indicates the legislative intent to
exclude barangay officials from the application of the three-term limit. This
reading, however, is flawed for two reasons.
First, reading Section 43(a) and (b) together to the exclusion of Section 43(c), is
not justified by the plain texts of these provisions. Section 43(a) plainly refers to
local elective officials, except elective barangay officials. In comparison,
Section 43(b) refers to all local elective officials without exclusions or
exceptions. Their respective coverages therefore vary so that one cannot be
said to be of the same kind as the other. Their separate topics additionally
strengthen their distinction; Section 43(a) refers to the term of office while
Section 43(b) refers to the three-term limit. These differences alone indicate
that Sections 43(a) and (b) cannot be read together as one organic whole in the
way the RTC suggested. Significantly, these same distinctions apply between
Sec. 43(b) and (c).
Second, the RTC interpretation is flawed because of its total disregard of the
historical background of Section 43(c) – a backdrop that we painstakingly
outlined above.
From a historical perspective of the law, the inclusion of Section 43(c) in the
LGC is an absolute necessity to clarify the length of term of barangay officials.
Recall that under RA No. 6679, the term of office of barangay officials was five
(5) years. The real concern was how Section 43 would interface with RA No.
6679. Without a categorical statement on the length of the term of office
of barangay officials, a general three-year term for all local elective officials
under Section 43(a), standing alone, may not readily and completely erase
doubts on the intended abrogation of the 5-year term for barangay officials
under RA No. 6679. Thus, Congress added Section 43(c) which provided a
categorical three-year term for these officials. History tells us, of course, that
the unequivocal provision of Section 43(c) notwithstanding, an issue on what is
the exact term of office of barangay officials was still brought to us via a petition
filed by no less than the President of the Liga ng Mga Barangay in 1997. We
fully resolved the issue in the cited David v. Comelec.
Section 43(c) should therefore be understood in this context and not in the
sense that it intended to provide the complete rule for the election
of barangay officials, so that in the absence of any term limitation proviso under
this subsection, no term limitation applies to barangay officials. That Congress
had the LGC’s three-term limit in mind when it enacted RA No. 9164 is clear
from the following deliberations in the House of Representatives (House) on
House Bill No. 4456 which later became RA No. 9164:
MARCH 5, 2002:
THE DEPUTY SPEAKER (Rep. Espinosa, E.R.). Majority Leader.
REP. ESCUDERO. Mr. Speaker, next to interpellate is the Gentleman from
Zamboanga City. I ask that the Honorable Lobregat be recognized.
THE DEPUTY SPEAKER (Rep. Espinosa, E.R.). The Honorable Lobregat is
recognized.
REP. LOBREGAT. Thank you very much, Mr. Speaker. Mr. Speaker, this is just
… supplied.]
REP. MACIAS. Willingly to the Gentleman from Zamboanga City.
REP. LOBREGAT. … points of clarification, Mr. Speaker, the term of office. It
says in Section 4, "The term of office of all Barangay and sangguniang
kabataan officials after the effectivity of this Act shall be three years." Then it
says, "No Barangay elective official shall serve for more than three (3)
consecutive terms in the same position."
Mr. Speaker, I think it is the position of the committee that the first term should
be reckoned from election of what year, Mr. Speaker?
REP. MACIAS. After the adoption of the Local Government Code, Your Honor.
So that the first election is to be reckoned on, would be May 8, 1994, as far as
the Barangay election is concerned.
REP. LOBREGAT. Yes, Mr. Speaker. So there was an election in 1994.
REP. MACIAS. Then an election in 1997.
REP. LOBREGAT. There was an election in 1997. And there will be an election
this year …
REP. LOBREGAT. … election this year.
REP. MACIAS. That is correct. This will be the third.
xxx xxx xxx
REP. SUMULONG. Mr. Speaker.
THE DEPUTY SPEAKER (Rep. Espinosa, E.R.) The Honorable Sumulong is
recognized.
REP. SUMULONG. Again, with the permission of my Chairman, I would like to
address the question of Congressman Lobregat.
THE DEPUTY SPEAKER (Rep. Espinosa, E.R.). Please proceed.
REP. SUMULONG. With respect to the three-year consecutive term limits of
Barangay Captains that is not provided for in the Constitution and that is why
the election prior to 1991 during the enactment of the Local Government Code
is not counted because it is not in the Constitution but in the Local Government
Code where the three consecutive term limits has been placed. [Emphasis
which led to the following exchanges in the House Committee on Amendments:
March 6, 2002
COMMITTEE ON AMENDMENTS
REP. GONZALES. May we now proceed to committee amendment, if any, Mr.
Speaker.
THE DEPUTY SPEAKER (Rep. Gonzalez). The Chair recognizes the
distinguished Chairman of the Committee on Suffrage and Electoral Reforms.
REP. SYJUCO. Mr. Speaker, on page 2, line 7, after the word "position",
substitute the period (.) and add the following: PROVIDED HOWEVER THAT
THE TERM OF OFFICE SHALL BE RECKONED FROM THE 1994
BARANGAY ELECTIONS. So that the amended Section 4 now reads as
follows:
"SEC. 4. Term of Office. – The term of office of all barangay and sangguniang
kabataan officials after the effectivity of this Act shall be three (3) years.
No barangay elective local official shall serve for more than three (3)
consecutive terms in the same position COLON (:) PROVIDED, HOWEVER,
THAT THE TERM OF OFFICE SHALL BE RECKONED FROM THE
1994 BARANGAY ELECTIONS. Voluntary renunciation of office for any length
of time shall not be considered as an interruption in the continuity of service for
the full term for which the elective official was elected.
The House therefore clearly operated on the premise that the LGC imposed a
three-term limit for barangay officials, and the challenged proviso is its way of
addressing any confusion that may arise from the numerous changes in the
law.
All these inevitably lead to the conclusion that the challenged proviso has been
there all along and does not simply retroact the application of the three-term
limit to the barangay elections of 1994. Congress merely integrated the past
statutory changes into a seamless whole by coming up with the challenged
proviso.
With this conclusion, the respondents’ constitutional challenge to the proviso –
based on retroactivity – must fail.
b. No Involvement of Any Constitutional Standard
Separately from the above reason, the constitutional challenge must fail for a
more fundamental reason – the respondents’ retroactivity objection does not
involve a violation of any constitutional standard.
Retroactivity of laws is a matter of civil law, not of a constitutional law, as its
governing law is the Civil Code,16 not the Constitution. Article 4 of the Civil
Code provides that laws shall have no retroactive effect unless the contrary is
provided. The application of the Civil Code is of course self-explanatory – laws
enacted by Congress may permissibly provide that they shall have retroactive
effect. The Civil Code established a statutory norm, not a constitutional
standard.
The closest the issue of retroactivity of laws can get to a genuine constitutional
issue is if a law’s retroactive application will impair vested rights. Otherwise
stated, if a right has already vested in an individual and a subsequent law
effectively takes it away, a genuine due process issue may arise. What should
be involved, however, is a vested right to life, liberty or property, as these are
the ones that may be considered protected by the due process clause of the
Constitution.1 a vv p h i 1
In the present case, the respondents never raised due process as an issue. But
even assuming that they did, the respondents themselves concede that there is
no vested right to public office.17 As the COMELEC correctly pointed out, too,
there is no vested right to an elective post in view of the uncertainty inherent in
electoral exercises.
Aware of this legal reality, the respondents theorized instead that they had a
right to be voted upon by the electorate without being burdened by a law that
effectively rendered them ineligible to run for their incumbent positions. Again,
the RTC agreed with this contention.
We do not agree with the RTC, as we find no such right under the Constitution;
if at all, this claimed right is merely a restatement of a claim of vested right to a
public office. What the Constitution clearly provides is the power of Congress to
prescribe the qualifications for elective local posts;18 thus, the question of
eligibility for an elective local post is a matter for Congress, not for the courts, to
decide. We dealt with a strikingly similar issue in Montesclaros v. Commission
on Elections19 where we ruled that SK membership – which was claimed as a
property right within the meaning of the Constitution – is a mere statutory right
conferred by law. Montesclaros instructively tells us:
Congress exercises the power to prescribe the qualifications for SK
membership. One who is no longer qualified because of an amendment in the
law cannot complain of being deprived of a proprietary right to SK membership.
Only those who qualify as SK members can contest, based on a statutory right,
any act disqualifying them from SK membership or from voting in the SK
elections. SK membership is not a property right protected by the Constitution
because it is a mere statutory right conferred by law. Congress may amend at
any time the law to change or even withdraw the statutory right.
A public office is not a property right. As the Constitution expressly states, a
"[P]ublic office is a public trust." No one has a vested right to any public office,
much less a vested right to an expectancy of holding a public office. In Cornejo
v. Gabriel, decided in 1920, the Court already ruled:
Again, for this petition to come under the due process of law prohibition, it
would be necessary to consider an office a "property." It is, however, well
settled x x x that a public office is not property within the sense of the
constitutional guaranties of due process of law, but is a public trust or
agency. x x x The basic idea of the government x x x is that of a popular
representative government, the officers being mere agents and not rulers of the
people, one where no one man or set of men has a proprietary or contractual
right to an office, but where every officer accepts office pursuant to the
provisions of the law and holds the office as a trust for the people he
represents.
Petitioners, who apparently desire to hold public office, should realize from the
very start that no one has a proprietary right to public office. While the law
makes an SK officer an ex-officio member of a local government legislative
council, the law does not confer on petitioners a proprietary right or even a
proprietary expectancy to sit in local legislative councils. The constitutional
principle of a public office as a public trust precludes any proprietary claim to
public office. Even the State policy directing "equal access to opportunities for
public service" cannot bestow on petitioners a proprietary right to SK
membership or a proprietary expectancy to ex-officio public offices.
Moreover, while the State policy is to encourage the youth’s involvement in
public affairs, this policy refers to those who belong to the class of people
defined as the youth. Congress has the power to define who are the youth
qualified to join the SK, which itself is a creation of Congress. Those who do not
qualify because they are past the age group defined as the youth cannot insist
on being part of the youth. In government service, once an employee reaches
mandatory retirement age, he cannot invoke any property right to cling to his
office. In the same manner, since petitioners are now past the maximum age
for membership in the SK, they cannot invoke any property right to cling to their
SK membership. [Emphasis supplied.]
To recapitulate, we find no merit in the respondents’ retroactivity arguments
because: (1) the challenged proviso did not provide for the retroactive
application to barangay officials of the three-term limit; Section 43(b) of RA No.
9164 simply continued what had been there before; and (2) the constitutional
challenge based on retroactivity was not anchored on a constitutional standard
but on a mere statutory norm.
The Equal Protection Clause Issue
The equal protection guarantee under the Constitution is found under its
Section 2, Article III, which provides: "Nor shall any person be denied the equal
protection of the laws." Essentially, the equality guaranteed under this clause is
equality under the same conditions and among persons similarly situated. It is
equality among equals, not similarity of treatment of persons who are different
from one another on the basis of substantial distinctions related to the objective
of the law; when things or persons are different in facts or circumstances, they
may be treated differently in law.20
Appreciation of how the constitutional equality provision applies inevitably leads
to the conclusion that no basis exists in the present case for an equal protection
challenge. The law can treat barangay officials differently from other local
elective officials because the Constitution itself provides a significant distinction
between these elective officials with respect to length of term and term
limitation. The clear distinction, expressed in the Constitution itself, is that while
the Constitution provides for a three-year term and three-term limit for local
elective officials, it left the length of term and the application of the three-term
limit or any form of term limitation for determination by Congress through
legislation. Not only does this disparate treatment recognize substantial
distinctions, it recognizes as well that the Constitution itself allows a non-
uniform treatment. No equal protection violation can exist under these
conditions.
From another perspective, we see no reason to apply the equal protection
clause as a standard because the challenged proviso did not result in any
differential treatment between barangay officials and all other elective officials.
This conclusion proceeds from our ruling on the retroactivity issue that the
challenged proviso does not involve any retroactive application.
Violation of the Constitutional
One Subject- One Title Rule
Every bill passed by the Congress shall embrace only one subject which shall
be expressed in the title thereof. Fariñas v. Executive Secretary21 provides the
reasons for this constitutional requirement and the test for its application, as
follows:
The proscription is aimed against the evils of the so-called omnibus bills and
log-rolling legislation as well as surreptitious and/or unconsidered encroaches.
The provision merely calls for all parts of an act relating to its subject finding
expression in its title.
To determine whether there has been compliance with the constitutional
requirement that the subject of an act shall be expressed in its title, the Court
laid down the rule that –
Constitutional provisions relating to the subject matter and titles of statutes
should not be so narrowly construed as to cripple or impede the power of
legislation. The requirement that the subject of an act shall be expressed in its
title should receive a reasonable and not a technical construction. It is sufficient
if the title be comprehensive enough reasonably to include the general object
which a statute seeks to effect, without expressing each and every end and
means necessary or convenient for the accomplishing of that object. Mere
details need not be set forth. The title need not be an abstract or index of the
Act.
xxxx
x x x This Court has held that an act having a single general subject, indicated
in the title, may contain any number of provisions, no matter how diverse they
may be, so long as they are not inconsistent with or foreign to the general
subject, and may be considered in furtherance of such subject by providing for
the method and means of carrying out the general subject.
xxxx
x x x Moreover, the avowed purpose of the constitutional directive that the
subject of a bill should be embraced in its title is to apprise the legislators of the
purposes, the nature and scope of its provisions, and prevent the enactment
into law of matters which have not received the notice, action and study of the
legislators and the public.
We find, under these settled parameters, that the challenged proviso does not
violate the one subject-one title rule.
First, the title of RA No. 9164, "An Act Providing for
Synchronized Barangay and Sangguniang Kabataang Elections, amending
Republic Act No. 7160, as amended, otherwise known as the Local
Government Code of 1991," states the law’s general subject matter – the
amendment of the LGC to synchronize the barangay and SK elections and for
other purposes. To achieve synchronization of the barangay and SK elections,
the reconciliation of the varying lengths of the terms of office
of barangay officials and SK officials is necessary. Closely related with length of
term is term limitation which defines the total number of terms for which
a barangay official may run for and hold office. This natural linkage
demonstrates that term limitation is not foreign to the general subject expressed
in the title of the law.
Second, the congressional debates we cited above show that the legislators
and the public they represent were fully informed of the purposes, nature and
scope of the law’s provisions. Term limitation therefore received the notice,
consideration, and action from both the legislators and the public.
Finally, to require the inclusion of term limitation in the title of RA No. 9164 is to
make the title an index of all the subject matters dealt with by law; this is not
what the constitutional requirement contemplates.
WHEREFORE, premises considered, we GRANT the petition and accordingly
AFFIRM the constitutionality of the challenged proviso under Section 2,
paragraph 2 of Republic Act No. 9164. Costs against the respondents.
SO ORDERED.
ARTURO D. BRION
FIRST DIVISION
G.R. No. 177780 January 25, 2012
METROPOLITAN BANK & TRUST CO. (METROBANK), represented by
ROSELLA A. SANTIAGO, Petitioner,
vs.
ANTONINO O. TOBIAS III, Respondent.
DECISION
BERSAMIN, J.:
This appeal assails the adverse decision of the Court of Appeals (CA) 1 that
dismissed the petition for certioraribrought by the petitioner to nullify and set
aside the resolutions issued by the Secretary of Justice on July 20, 2004 2and
November 18, 20053 directing the City Prosecutor of Malabon City to withdraw
the information in Criminal Case No. 27020 entitled People v. Antonino O.
Tobias III.
We affirm the CA in keeping with the principle of non-interference with the
prerogative of the Secretary of Justice to review the resolutions of the public
prosecutor in the latter’s determination of the existence of probable cause,
absent any showing that the Secretary of Justice thereby commits grave abuse
of his discretion.
Antecedents
In 1997, Rosella A. Santiago, then the OIC-Branch Head of Metropolitan Bank
& Trust Company (METROBANK) in Valero Street, Makati City, was introduced
to respondent Antonino O. Tobias III (Tobias) by one Jose Eduardo Gonzales,
a valued client of METROBANK. Subsequently, Tobias opened a
savings/current account for and in the name of Adam Merchandising, his frozen
meat business. Six months later, Tobias applied for a loan from METROBANK,
which in due course conducted trade and credit verification of Tobias that
resulted in negative findings. METROBANK next proceeded to appraise the
property Tobias offered as collateral by asking him for a photocopy of the title
and other related documents.4 The property consisted of four parcels of land
located in Malabon City, Metro Manila with a total area of 6,080 square meters
and covered by Transfer Certificate of Title (TCT) No. M-16751.5 Based on the
financial statements submitted by Tobias, METROBANK approved a credit line
for ₱40,000,000.00. On August 15, 1997, Joselito Bermeo Moreno, Lead
Internal Affairs Investigator of METROBANK, proceeded to the Registry of
Deeds of Malabon to cause the annotation of the deed of real estate mortgage
on TCT No. M-16751. The annotation was Entry No. 26897.6
Thereafter, Tobias initially availed himself of ₱20,000,000, but took out the
balance within six months.7 He paid the interest on the loan for about a year
before defaulting. His loan was restructured to 5-years upon his request. Yet,
after two months, he again defaulted. Thus, the mortgage was foreclosed, and
the property was sold to METROBANK as the lone bidder.8 On June 11, 1999,
the certificate of sale was issued in favor of METROBANK.9
When the certificate of sale was presented for registration to the Registry of
Deeds of Malabon, no corresponding original copy of TCT No. M-16751 was
found in the registry vault. Atty. Sarah Principe-Bido, Deputy Register of Deeds
of Malabon, went on to verify TCT No. M-16751 and learned that Serial No.
4348590 appearing therein had been issued for TCT No. M-15363 in the name
of one Alberto Cruz; while TCT No. 16751 (now TCT No. 390146) appeared to
have been issued in the name of Eugenio S. Cruz and Co. for a parcel of land
located in Navotas.10
Given such findings, METROBANK requested the Presidential Anti-Organized
Crime Task Force (PAOCTF) to investigate.11 In its report dated May 29,
2000,12 PAOCTF concluded that TCT No. M-16751 and the tax declarations
submitted by Tobias were fictitious. PAOCTF recommended the filing against
Tobias of a criminal complaint for estafa through falsification of public
documents under paragraph 2 (a) of Article 315, in relation to Articles 172(1)
and 171(7) of the Revised Penal Code.13
The Office of the City Prosecutor of Malabon ultimately charged Tobias
with estafa through falsification of public documents through the following
information,14 viz:
xxx
That on or about the 15th day of August, 1997 in the Municipality of Malabon,
Philippines and within the jurisdiction of this Honorable Court, the above-named
accused, by means of deceit, false pretense, fraudulent acts and
misrepresentation executed prior to or simultaneous with the commission of
fraud, represented to METROBANK, as represented by MS. ROSELLA S.
SANTIAGO, that he is the registered owner of a parcel of land covered by TCT
No. M-16751 which he represented to be true and genuine when he knew the
Certificate of Title No. M-16751 is fake and spurious and executed a Real
Estate Mortgage in favor of Metrobank and offered the same as collateral for a
loan and Rosella S. Santiago relying on said misrepresentation gave to
accused, the amount of ₱20,000,000.00 and once in possession of the amount,
with intent to defraud, willfully, unlawfully and feloniously failed to deliver the
land covered by spurious title and misappropriate, misapply and converted the
said amount of ₱20,000,000.00 to his own personal use and benefit and
despite repeated demands accused failed and refused and still fails and
refuses to return the amount to complainant METROBANK, and/or delivered
the land covered in the spurious title in the aforementioned amount of
₱20,000,000.00.
CONTRARY TO LAW.15
Tobias filed a motion for re-investigation,16 which was granted.
In his counter-affidavit submitted during the re-investigation,17 Tobias averred
that he had bought the property from one Leonardo Fajardo through real estate
brokers Augusto Munsuyac and Carmelito Pilapil; that Natalio Bartolome, his
financial consultant from Carwin International, had convinced him to purchase
the property due to its being an ideal site for his meat processing plant and cold
storage business; that the actual inspection of the property as well as the
verification made in the Registry of Deeds of Malabon City had ascertained the
veracity of TCT No. 106083 under the name of Leonardo Fajardo; that he had
applied for the loan from METROBANK to pay the purchase price by offering
the property as collateral; that in order for the final application to be processed
and the loan proceeds to be released, METROBANK had advised him to have
the title first transferred to his name; that he had executed a deed of absolute
sale with Fajardo covering the property, and that said instrument had been
properly registered in the Registry of Deeds; that the transfer of the title, being
under the account of the seller, had been processed by seller Fajardo and his
brokers Munsuyac and Pilapil; that his title and the property had been inspected
and verified by METROBANK’s personnel; and that he did not have any
intention to defraud METROBANK.
Nonetheless, on December 27, 2002, the City Prosecutor of Malabon still found
probable cause against Tobias, and recommended his being charged
with estafa through falsification of public document.18
Tobias appealed to the Department of Justice (DOJ).
On July 20, 2004, then Acting Secretary of Justice Ma. Merceditas N. Gutierrez
issued a resolution directing the withdrawal of the information filed against
Tobias,19 to wit:
WHEREFORE, the assailed resolution is hereby REVERSED and SET ASIDE.
The City Prosecutor of Malabon City is directed to cause the withdrawal of the
Information in Crim. Case No. 27020 against respondent Antonino O. Tobias III,
and report the action taken thereon within ten (10) days from receipt hereof.
SO ORDERED.
Acting Secretary of Justice Gutierrez opined that Tobias had sufficiently
established his good faith in purchasing the property; that he had even used
part of the proceeds of the loan to pay the seller; that it was METROBANK that
had caused the annotation of the mortgage on the TCT, thereby creating an
impression that the title had been existing in the Registry of Deeds at that time;
that, accordingly, the presumption that the possessor of a falsified document
was the author of the falsification did not apply because it was always subject
to the qualification or reference as to the approximate time of the commission of
the falsification.
METROBANK moved to reconsider,20 arguing that Tobias had employed deceit
or false pretense in offering the property as collateral by using a fake title; and
that the presumption that the possessor of the document was the author of the
falsification applied because no other person could have falsified the TCT and
would have benefitted therefrom except Tobias himself.
On November 18, 2005, Secretary of Justice Raul M. Gonzalez denied
METROBANK’s motion for reconsideration.21
Ruling of the CA
METROBANK challenged the adverse resolutions through certiorari.
On December 29, 2006, the CA promulgated its decision,22 dismissing
METROBANK’s petition for certiorari by holding that the presumption of
authorship might be disputed through a satisfactory explanation, viz:
We are not unaware of the established presumption and rule that when it is
proved that a person has in his possession a falsified document and makes use
of the same, the presumption or inference is that such person is the forger
(Serrano vs. Court of Appeals, 404 SCRA 639, 651 [2003]), citing Koh Tieck
Heng vs. People, 192 SCRA 533, 546-547 [1990]). Yet, the Supreme Court
declared that in the absence of satisfactory explanation, one who is found in
possession of a forged document and who used it is presumed to be the forger
(citing People vs. Sendaydiego, 81 SCRA 120, 141 [1978]). Very clearly then, a
satisfactory explanation could render ineffective the presumption which, after
all, is merely a disputable one.
It is in this score that We affirm the resolution of the Department of Justice
finding no probable cause against private respondent Tobias for estafa thru
falsification of public document. The record speaks well of Tobias’ good faith
and lack of criminal intention and liability. Consider:
(a) Tobias has in his favor a similar presumption that good faith is
always presumed. Therefore, he who claims bad faith must prove it
(Prinsipio vs. The Honorable Oscar Barrientos, G.R. 167025,
December 19, 2005). No such evidence of bad faith of Tobias appears
on record;
(b) Tobias’ actuation in securing the loan belies any criminal intent on
his part to deceive petitioner Bank. He was not in a hurry to obtain the
loan. He had to undergo the usual process of the investigative arm or
machine of the Bank not only on the location and the physical
appearance of the property but likewise the veracity of its title. Out of
the approved ₱40,000,000.00 loan he only availed of ₱20,000,000.00,
for his frozen meat business which upon investigation of the Bank
failed to give negative results;
(c) Tobias paid the necessary interests for one (1) year on the loan and
two (2) installments on the restructured loan; and
(d) More importantly, the loan was not released to him until after the
mortgage was duly registered with the Registry of Deeds of Malabon
City and even paid the amount of ₱90,000.00 for the registration fees
therefor.
These actuations, for sure, can only foretell that Tobias has the least intention
to deceive the Bank in obtaining the loan. It may not be surprising to find that
Tobias could even be a victim himself by another person in purchasing the
properties he offered as security for the loan.23
The CA stressed that the determination of probable cause was an executive
function within the discretion of the public prosecutor and, ultimately, of the
Secretary of Justice, and the courts of law could not interfere with such
determination;24 that the private complainant in a criminal action was only
concerned with its civil aspect; that should the State choose not to file the
criminal action, the private complainant might initiate a civil action based on
Article 35 of the Civil Code, to wit:
In the eventuality that the Secretary of Justice refuses to file the criminal
complaint, the complainant, whose only interest is the civil aspect of the case
and not the criminal aspect thereof, is not left without a remedy. In Vda. De
Jacob vs. Puno, 131 SCRA 144, 149 [1984], the Supreme Court has this for an
answer:
"The remedy of complainant in a case where the Minister of Justice would not
allow the filing of a criminal complaint against an accused because it is his
opinion that the evidence is not sufficient to sustain an information for the
complaint with which the respondents are charged of, is to file a civil action as
indicated in Article 35 of the Civil Code, which provides:
‘Art. 35. When a person, claiming to be injured by a criminal offense, charges
another with the same, for which no independent civil action is granted in this
Code or any special law, but the justice of the peace finds no reasonable
grounds to believe that a crime has been committed, or the prosecuting
attorney refuses or fails to institute criminal proceedings, the complainant may
bring a civil action for damages against the alleged offender. Such civil action
may be supported by a preponderance of evidence. Upon the defendant’s
motion, the court may require the plaintiff to file a bond to indemnify the
defendant in case the complainant should be found to be malicious.
‘If during the pendency of the civil action, an information should be presented
by the prosecuting attorney, the civil action shall be suspended until the
termination of the criminal proceedings.’"25
METROBANK sought reconsideration, but the CA denied its motion for that
purpose, emphasizing that the presumption that METROBANK firmly relied
upon was overcome by Tobias sufficiently establishing his good faith and lack
of criminal intent. The CA relevantly held:
Petitioner should be minded that the subject presumption that the possessor
and user of a forged or falsified document is presumed to be the falsifier or
forger is a mere disputable presumption and not a conclusive one. Under the
law on evidence, presumptions are divided into two (2) classes: conclusive and
rebuttable. Conclusive or absolute presumptions are rules determining the
quantity of evidence requisite for the support of any particular averment which
is not permitted to be overcome by any proof that the fact is otherwise, if the
basis facts are established (1 Greenleaf, Ev 44; 29 Am Jur 2d, Evidence 164; 1
Jones on Evidence 6 ed, page 132). Upon the other hand, a disputable
presumption has been defined as species of evidence that may be accepted
and acted on when there is no other evidence to uphold the contention for
which it stands, or one which may be overcome by other evidence (31A C.J.S.,
p. 197; People v. de Guzman, G.R. No. 106025, Feb. 9, 1994; Herrera,
Remedial Law, Vol. VI, 1999 Edition, pp. 40-41). In fact, Section 3 of Rule 131
provides that the disputable presumptions therein enumerated are satisfactory
if uncontradicted but may be contradicted and overcome by other evidence.
Thus, as declared in Our decision in this case, private respondent had shown
evidence of good faith and lack of criminal intention and liability that can
overthrow the controversial disputable presumption.26
Issue
In this appeal, METROBANK raises the lone issue of—
WHETHER OR NOT THE HONORABLE COURT OF APPEALS HAS
DECIDED A QUESTION OF SUBSTANCE PROBABLY NOT IN ACCORD
WITH LAW OR WITH THE APPLICABLE DECISIONS OF THIS HONORABLE
COURT AND THUS, COMMITTED PATENT ERROR IN RENDERING THE
ASSAILED DECISION DATED 29 DECEMBER 2006, DISMISSING
METROBANK’S PETITION FOR CERTIORARI AND AFFIRMING THE
RESOLUTIONS DATED 20 JULY 2004 AND 18 NOVEMBER 2005 OF THE
HON. SECRETARY OF JUDTICE AND IN DENYING METROBANK’S
MOTION FOR RECONSIDERATION.
METROBANK submits that the presumption of authorship was sufficient to
establish probable cause to hold Tobias for trial; that the presumption applies
when a person is found in possession of the forged instrument, makes use of it,
and benefits from it; that contrary to the ruling of the CA, there is no
requirement that the legal presumption shall only apply in the absence of a
valid explanation from the person found to have possessed, used and benefited
from the forged document; that the CA erred in declaring that Tobias was in
good faith, because good faith was merely evidentiary and best raised in the
trial on the merits; and that Tobias was heavily involved in a modus operandi of
using fake titles because he was also being tried for a similar crime in the RTC,
Branch 133, in Makati City.
METROBANK maintains that what the Secretary of Justice did was to
determine the innocence of the accused, which should not be done during the
preliminary investigation; and that the CA disregarded such lapse.
On the other hand, Tobias posits that the core function of the Department of
Justice is to prosecute the guilty in criminal cases, not to persecute; that
although the prosecutors are given latitude to determine the existence of
probable cause, the review power of the Secretary of Justice prevents
overzealous prosecutors from persecuting the innocent; that in reversing the
resolution of Malabon City Assistant Prosecutor Ojer Pacis, the Secretary of
Justice only acted within his authority; that, indeed, the Secretary of Justice
was correct in finding that there was lack of evidence to prove that the
purported fake title was the very cause that had induced the petitioner to grant
the loan; and that the Secretary likewise appropriately found that Tobias dealt
with the petitioner in good faith because of lack of proof that he had employed
fraud and deceit in securing the loan.
Lastly, Tobias argues that the presumption of forgery could not be applied in his
case because it was METROBANK, through a representative, who had
annotated the real estate mortgage with the Registry of Deeds; and that he had
no access to and contact with the Registry of Deeds, and whatever went wrong
after the annotation was beyond his control.
Ruling
The appeal has no merit.
Under the doctrine of separation of powers, the courts have no right to directly
decide matters over which full discretionary authority has been delegated to the
Executive Branch of the Government,27 or to substitute their own judgments for
that of the Executive Branch,28 represented in this case by the Department of
Justice. The settled policy is that the courts will not interfere with the executive
determination of probable cause for the purpose of filing an information, in the
absence of grave abuse of discretion.29 That abuse of discretion must be so
patent and gross as to amount to an evasion of a positive duty or a virtual
refusal to perform a duty enjoined by law or to act at all in contemplation of law,
such as where the power is exercised in an arbitrary and despotic manner by
reason of passion or hostility.30 For instance, in Balanganan v. Court of
Appeals, Special Nineteenth Division, Cebu City,31 the Court ruled that the
Secretary of Justice exceeded his jurisdiction when he required "hard facts and
solid evidence" in order to hold the defendant liable for criminal prosecution
when such requirement should have been left to the court after the conduct of a
trial.
In this regard, we stress that a preliminary investigation for the purpose of
determining the existence of probable cause is not part of a trial.32 At a
preliminary investigation, the investigating prosecutor or the Secretary of
Justice only determines whether the act or omission complained of constitutes
the offense charged.33 Probable cause refers to facts and circumstances that
engender a well-founded belief that a crime has been committed and that the
respondent is probably guilty thereof.34 There is no definitive standard by which
probable cause is determined except to consider the attendant conditions; the
existence of probable cause depends upon the finding of the public prosecutor
conducting the examination, who is called upon not to disregard the facts
presented, and to ensure that his finding should not run counter to the clear
dictates of reason.35
Tobias was charged with estafa through falsification of public document the
elements of which are: (a) the accused uses a fictitious name, or falsely
pretends to possess power, influence, qualifications, property, credit, agency,
business or imaginary transactions, or employs other similar deceits; (b) such
false pretense, fraudulent act or fraudulent means must be made or executed
prior to or simultaneously with the commission of the fraud; (c) the offended
party must have relied on the false pretense, fraudulent act or fraudulent
means, that is, he was induced to part with his money or property because of
the false pretense, fraudulent act or fraudulent means; and (d) as a result
thereof, the offended party suffered damage.36 It is required that the false
statement or fraudulent representation constitutes the very cause or the only
motive that induced the complainant to part with the thing.37
METROBANK urges the application of the presumption of authorship against
Tobias based on his having offered the duplicate copy of the spurious title to
secure the loan; and posits that there is no requirement that the presumption
shall apply only when there is absence of a valid explanation from the person
found to have possessed, used and benefited from the forged document.
We cannot sustain METROBANK’s urging.
Firstly, a presumption affects the burden of proof that is normally lodged in the
State.38 The effect is to create the need of presenting evidence to overcome
the prima facie case that shall prevail in the absence of proof to the
contrary.39 As such, a presumption of law is material during the actual trial of
the criminal case where in the establishment thereof the party against whom
the inference is made should adduce evidence to rebut the presumption and
demolish the prima facie case.40 This is not so in a preliminary investigation,
where the investigating prosecutor only determines the existence of a prima
facie case that warrants the prosecution of a criminal case in court. 41
Secondly, the presumption of authorship, being disputable, may be accepted
and acted upon where no evidence upholds the contention for which it
stands.42 It is not correct to say, consequently, that the investigating prosecutor
will try to determine the existence of the presumption during preliminary
investigation, and then to disregard the evidence offered by the respondent.
The fact that the finding of probable cause during a preliminary investigation is
an executive function does not excuse the investigating prosecutor or the
Secretary of Justice from discharging the duty to weigh the evidence submitted
by the parties. Towards that end, the investigating prosecutor, and, ultimately,
the Secretary of Justice have ample discretion to determine the existence of
probable cause,43 a discretion that must be used to file only a criminal charge
that the evidence and inferences can properly warrant.
The presumption that whoever possesses or uses a spurious document is its
forger applies only in the absence of a satisfactory explanation.44 Accordingly,
we cannot hold that the Secretary of Justice erred in dismissing the information
in the face of the controverting explanation by Tobias showing how he came to
possess the spurious document. Much less can we consider the dismissal as
done with abuse of discretion, least of all grave. We concur with the erudite
exposition of the CA on the matter, to wit:
It would seem that under the above proposition of the petitioner, the moment a
person has in his possession a falsified document and has made use of it,
probable cause or prima facie is already established and that no amount of
satisfactory explanation will prevent the filing of the case in court by the
investigating officer, for any such good explanation or defense can only be
threshed out in the trial on the merit. We are not to be persuaded. To give
meaning to such argumentation will surely defeat the very purpose for which
preliminary investigation is required in this jurisdiction.1avvphi1
A preliminary investigation is designed to secure the respondent involved
against hasty, malicious and oppressive prosecution. A preliminary
investigation is an inquiry to determine whether (a) a crime has been
committed, and (b) whether there is probable cause to believe that the accused
is guilty thereof (De Ocampo vs. Secretary of Justice, 480 SCRA 71 [2006]). It
is a means of discovering the person or persons who may be reasonably
charged with a crime (Preferred Home Specialties, Inc. vs. Court of Appeals,
478 SCRA 387, 410 [2005]). Prescindingly, under Section 3 of Rule 112 of the
Rules of Criminal Procedure, the respondent must be informed of the
accusation against him and shall have the right to examine the evidence
against him and submit his counter-affidavit to disprove criminal liability. By far,
respondent in a criminal preliminary investigation is legally entitled to explain
his side of the accusation.
We are not unaware of the established presumption and rule that when it is
proved that a person has in his possession a falsified document and makes use
of the same the presumption or inference is that such person is the forger
(Serrano vs. Court of Appeals, 404 SCRA 639, 651 [2003]), citing Koh Tieck
Heng vs. People, 192 SCRA 533, 546-547 [1990]). Yet, the Supreme Court
declared that in the absence of satisfactory explanation, one who is found in
possession of a forged document and who used it is presumed to be the forger
(citing People vs. Sendaydiego, 81 SCRA 120, 141 [1978]). Very clearly then, a
satisfactory explanation could render ineffective the presumption which, after
all, is merely a disputable one.45
We do not lose sight of the fact that METROBANK, a commercial bank dealing
in real property, had the duty to observe due diligence to ascertain the
existence and condition of the realty as well as the validity and integrity of the
documents bearing on the realty.46 Its duty included the responsibility of
dispatching its competent and experience representatives to the realty to
assess its actual location and condition, and of investigating who was its real
owner.47 Yet, it is evident that METROBANK did not diligently perform a
thorough check on Tobias and the circumstances surrounding the realty he had
offered as collateral. As such, it had no one to blame but itself. Verily, banks
are expected to exercise greater care and prudence than others in their
dealings because their business is impressed with public interest.48 Their failure
to do so constitutes negligence on its part.49
WHEREFORE, the Court DENIES the petition for review on certiorari,
and AFFIRMS the decision of the Court of Appeals promulgated on December
29, 2006. The petitioner shall pay the costs of suit.
SO ORDERED.
LUCAS P. BERSAMIN
Associate Justice
WE CONCUR:
EN BANC
G.R. No. 193978 February 28, 2012
JELBERT B. GALICTO, Petitioner,
vs.
H.E. PRESIDENT BENIGNO SIMEON C. AQUINO III, in his capacity as
President of the Republic of the Philippines; ATTY. PAQUITO N. OCHOA,
JR., in his capacity as Executive Secretary; and FLORENCIO B. ABAD, in
his capacity as Secretary of the Department of Budget and
Management, Respondents.
RESOLUTION
BRION, J.:
Before us is a Petition for Certiorari and Prohibition with Application for Writ of
Preliminary Injunction and/or Temporary Restraining Order, 1 seeking to nullify
and enjoin the implementation of Executive Order No. (EO) 7 issued by the
Office of the President on September 8, 2010. Petitioner Jelbert B. Galicto
asserts that EO 7 is unconstitutional for having been issued beyond the powers
of the President and for being in breach of existing laws.
The petitioner is a Filipino citizen and an employee of the Philippine Health
Insurance Corporation (PhilHealth).2 He is currently holding the position of
Court Attorney IV and is assigned at the PhilHealth Regional Office CARAGA. 3
Respondent Benigno Simeon C. Aquino III is the President of the Republic of
the Philippines (Pres. Aquino); he issued EO 7 and has the duty of
implementing it. Respondent Paquito N. Ochoa, Jr. is the incumbent Executive
Secretary and, as the alter ego of Pres. Aquino, is tasked with the
implementation of EO 7. Respondent Florencio B. Abad is the incumbent
Secretary of the Department of Budget and Management (DBM) charged with
the implementation of EO 7.4
The Antecedent Facts
On July 26, 2010, Pres. Aquino made public in his first State of the Nation
Address the alleged excessive allowances, bonuses and other benefits of
Officers and Members of the Board of Directors of the Manila Waterworks and
Sewerage System – a government owned and controlled corporation (GOCC)
which has been unable to meet its standing obligations.5 Subsequently, the
Senate of the Philippines (Senate), through the Senate Committee on
Government Corporations and Public Enterprises, conducted an inquiry in aid
of legislation on the reported excessive salaries, allowances, and other benefits
of GOCCs and government financial institutions (GFIs).6
Based on its findings that "officials and governing boards of various [GOCCs]
and [GFIs] x x x have been granting themselves unwarranted allowances,
bonuses, incentives, stock options, and other benefits [as well as other]
irregular and abusive practices,"7 the Senate issued Senate Resolution No. 17
"urging the President to order the immediate suspension of the unusually large
and apparently excessive allowances, bonuses, incentives and other perks of
members of the governing boards of [GOCCs] and [GFIs]."8
Heeding the call of Congress, Pres. Aquino, on September 8, 2010, issued EO
7, entitled "Directing the Rationalization of the Compensation and Position
Classification System in the [GOCCs] and [GFIs], and for Other Purposes." EO
7 provided for the guiding principles and framework to establish a fixed
compensation and position classification system for GOCCs and GFIs. A Task
Force was also created to review all remunerations of GOCC and GFI
employees and officers, while GOCCs and GFIs were ordered to submit to the
Task Force information regarding their compensation. Finally, EO 7 ordered (1)
a moratorium on the increases in the salaries and other forms of compensation,
except salary adjustments under EO 8011 and EO 900, of all GOCC and GFI
employees for an indefinite period to be set by the President,9 and (2) a
suspension of all allowances, bonuses and incentives of members of the Board
of Directors/Trustees until December 31, 2010.10
EO 7 was published on September 10, 2010.11 It took effect on September 25,
2010 and precluded the Board of Directors, Trustees and/or Officers of GOCCs
from granting and releasing bonuses and allowances to members of the board
of directors, and from increasing salary rates of and granting new or additional
benefits and allowances to their employees.
The Petition
The petitioner claims that as a PhilHealth employee, he is affected by the
implementation of EO 7, which was issued with grave abuse of discretion
amounting to lack or excess of jurisdiction, based on the following arguments:
I.
EXECUTIVE ORDER NO. 7 IS NULL AND VOID FOR LACK OF
LEGAL BASIS DUE TO THE FOLLOWING GROUNDS:
A. P.D. 985 IS NOT APPLICABLE AS BASIS FOR
EXECUTIVE ORDER NO. 7 BECAUSE THE GOVERNMENT-
OWNED AND CONTROLLED CORPORATIONS WERE
SUBSEQUENTLY GRANTED THE POWER TO FIX
COMPENSATION LONG AFTER SUCH POWER HAS BEEN
REVOKED BY P.D. 1597 AND R.A. 6758.
B. THE GOVERNMENT-OWNED AND CONTROLLED
CORPORATIONS DO NOT NEED TO HAVE ITS
COMPENSATION PLANS, RATES AND POLICIES
REVIEWED BY THE DBM AND APPROVED BY THE
PRESIDENT BECAUSE P.D. 1597 REQUIRES ONLY THE
GOCCs TO REPORT TO THE OFFICE TO THE PRESIDENT
THEIR COMPENSATION PLANS AND RATES BUT THE
SAME DOES NOT GIVE THE PRESIDENT THE POWER OF
CONTROL OVER THE FISCAL POWER OF THE GOCCs.
C. J.R. NO. 4, [SERIES] 2009 IS NOT APPLICABLE AS
LEGAL BASIS BECAUSE IT HAD NOT RIPENED INTO X X X
LAW, THE SAME NOT HAVING BEEN PUBLISHED.
D. ASSUMING ARGUENDO THAT J.R. NO. 1, S. 2004 (sic)
AND J.R. 4, S. 2009 ARE VALID, STILL THEY ARE NOT
APPLICABLE AS LEGAL BASIS BECAUSE THEY ARE NOT
LAWS WHICH MAY VALIDLY DELEGATE POWER TO THE
PRESIDENT TO SUSPEND THE POWER OF THE BOARD
TO FIX COMPENSATION.
II.
EXECUTIVE ORDER NO. 7 IS INVALID FOR DIVESTING THE
BOARD OF DIRECTORS OF [THE] GOCCS OF THEIR POWER TO
FIX THE COMPENSATION, A POWER WHICH IS A LEGISLATIVE
GRANT AND WHICH COULD NOT BE REVOKED OR MODIFIED BY
AN EXECUTIVE FIAT.
III.
EXECUTIVE ORDER NO. 7 IS BY SUBSTANCE A LAW, WHICH IS A
DEROGATION OF CONGRESSIONAL PREROGATIVE AND IS
THEREFORE UNCONSTITUTIONAL.
IV.
THE ACTS OF SUSPENDING AND IMPOSING MORATORIUM ARE
ULTRA VIRES ACTS BECAUSE J.R. NO. 4 DOES NOT EXPRESSLY
AUTHORIZE THE PRESIDENT TO EXERCISE SUCH POWERS.
V.
EXECUTIVE ORDER NO. 7 IS AN INVALID ISSUANCE BECAUSE IT
HAS NO SUFFICIENT STANDARDS AND IS THEREFORE
ARBITRARY, UNREASONABLE AND A VIOLATION OF
SUBSTANTIVE DUE PROCESS.
VI.
EXECUTIVE ORDER NO. 7 INVOLVES THE DETERMINATION AND
DISCRETION AS TO WHAT THE LAW SHALL BE AND IS
THEREFORE INVALID FOR ITS USURPATION OF LEGISLATIVE
POWER.
 VII.
CONSISTENT WITH THE DECISION OF THE SUPREME COURT IN
PIMENTEL V. AGUIRRE CASE, EXECUTIVE ORDER NO. 7 IS ONLY
DIRECTORY AND NOT MANDATORY.12
The Case for the Respondents
On December 13, 2010, the respondents filed their Comment. They pointed out
the following procedural defects as grounds for the petition’s dismissal: (1) the
petitioner lacks locus standi; (2) the petitioner failed to attach a board resolution
or secretary’s certificate authorizing him to question EO 7 in behalf of
PhilHealth; (3) the petitioner’s signature does not indicate his PTR Number,
Mandatory Continuing Legal Education (MCLE) Compliance Number and
Integrated Bar of the Philippines (IBP) Number; (4) the jurat of the Verification
and Certification of Non-Forum Shopping failed to indicate a valid identification
card as provided under A.M. No. 02-8-13-SC; (5) the President should be
dropped as a party respondent as he is immune from suit; and (6) certiorari is
not applicable to this case.13
The respondents also raised substantive defenses to support the validity of EO
7. They claim that the President exercises control over the governing boards of
the GOCCs and GFIs; thus, he can fix their compensation packages. In
addition, EO 7 was issued in accordance with law for the purpose of controlling
the grant of excessive salaries, allowances, incentives and other benefits to
GOCC and GFI employees. They also advocate the validity of Joint Resolution
(J.R.) No. 4, which they point to as the authority for issuing EO 7. 14
Meanwhile, on June 6, 2011, Congress enacted Republic Act (R.A.) No.
10149,15 otherwise known as the "GOCC Governance Act of 2011." Section 11
of RA 10149 expressly authorizes the President to fix the compensation
framework of GOCCs and GFIs.
The Court’s Ruling
We resolve to DISMISS the petition for its patent formal and procedural
infirmities, and for having been mooted by subsequent events.
A. Certiorari is not the proper remedy.
Under the Rules of Court, petitions for Certiorari and Prohibition are availed of
to question judicial, quasi-judicial and mandatory acts. Since the issuance of an
EO is not judicial, quasi-judicial or a mandatory act, a petition for certiorari and
prohibition is an incorrect remedy; instead a petition for declaratory relief under
Rule 63 of the Rules of Court, filed with the Regional Trial Court (RTC), is the
proper recourse to assail the validity of EO 7:
Section 1. Who may file petition. Any person interested under a deed, will,
contract or other written instrument, whose rights are affected by a statute,
executive order or regulation, ordinance, or any other governmental regulation
may, before breach or violation thereof, bring an action in the appropriate
Regional Trial Court to determine any question of construction or validity
arising, and for a declaration of his rights or duties, thereunder. (Emphases
ours.)
Liga ng mga Barangay National v. City Mayor of Manila16 is a case in point.17 In
Liga, we dismissed the petition for certiorari to set aside an EO issued by a City
Mayor and insisted that a petition for declaratory relief should have been filed
with the RTC. We painstakingly ruled:
After due deliberation on the pleadings filed, we resolve to dismiss this petition
for certiorari.
First, the respondents neither acted in any judicial or quasi-judicial capacity nor
arrogated unto themselves any judicial or quasi-judicial prerogatives. A petition
for certiorari under Rule 65 of the 1997 Rules of Civil Procedure is a special
civil action that may be invoked only against a tribunal, board, or officer
exercising judicial or quasi-judicial functions.
Section 1, Rule 65 of the 1997 Rules of Civil Procedure provides:
SECTION 1. Petition for certiorari. — When any tribunal, board or officer
exercising judicial or quasi-judicial functions has acted without or in excess of
its or his jurisdiction, or with grave abuse of discretion amounting to lack or
excess of jurisdiction, and there is no appeal, or any plain, speedy, and
adequate remedy in the ordinary course of law, a person aggrieved thereby
may file a verified petition in the proper court, alleging the facts with certainty
and praying that judgment be rendered annulling or modifying the proceedings
of such tribunal, board or officer, and granting such incidental reliefs as law and
justice may require.
Elsewise stated, for a writ of certiorari to issue, the following requisites must
concur: (1) it must be directed against a tribunal, board, or officer exercising
judicial or quasi-judicial functions; (2) the tribunal, board, or officer must have
acted without or in excess of jurisdiction or with grave abuse of discretion
amounting [to] lack or excess of jurisdiction; and (3) there is no appeal or any
plain, speedy, and adequate remedy in the ordinary course of law.
A respondent is said to be exercising judicial function where he has the power
to determine what the law is and what the legal rights of the parties are, and
then undertakes to determine these questions and adjudicate upon the rights of
the parties.
Quasi-judicial function, on the other hand, is "a term which applies to the
actions, discretion, etc., of public administrative officers or bodies … required to
investigate facts or ascertain the existence of facts, hold hearings, and draw
conclusions from them as a basis for their official action and to exercise
discretion of a judicial nature."
Before a tribunal, board, or officer may exercise judicial or quasi-judicial acts, it
is necessary that there be a law that gives rise to some specific rights of
persons or property under which adverse claims to such rights are made, and
the controversy ensuing therefrom is brought before a tribunal, board, or officer
clothed with power and authority to determine the law and adjudicate the
respective rights of the contending parties.
The respondents do not fall within the ambit of tribunal, board, or officer
exercising judicial or quasi-judicial functions. As correctly pointed out by the
respondents, the enactment by the City Council of Manila of the assailed
ordinance and the issuance by respondent Mayor of the questioned executive
order were done in the exercise of legislative and executive functions,
respectively, and not of judicial or quasi-judicial functions. On this score
alone, certiorari will not lie.
Second, although the instant petition is styled as a petition for certiorari, in
essence, it seeks the declaration by this Court of the unconstitutionality or
illegality of the questioned ordinance and executive order. It, thus, partakes of
the nature of a petition for declaratory relief over which this Court has only
appellate, not original, jurisdiction. Section 5, Article VIII of the Constitution
provides:
Sec. 5. The Supreme Court shall have the following powers:
(1) Exercise original jurisdiction over cases affecting ambassadors,
other public ministers and consuls, and over petitions for certiorari,
prohibition, mandamus, quo warranto, and habeas corpus.
(2) Review, revise, reverse, modify, or affirm on appeal or certiorari as
the law or the Rules of Court may provide, final judgments and orders
of lower courts in:
(a) All cases in which the constitutionality or validity of any
treaty, international or executive agreement, law, presidential
decree, proclamation, order, instruction, ordinance, or
regulation is in question. (Italics supplied).
As such, this petition must necessar[ily] fail, as this Court does not have original
jurisdiction over a petition for declaratory relief even if only questions of law are
involved.18
Likewise, in Southern Hemisphere Engagement Network, Inc. v. Anti Terrorism
Council,19 we similarly dismissed the petitions for certiorari and prohibition
challenging the constitutionality of R.A. No. 9372, otherwise known as the
"Human Security Act of 2007," since the respondents therein (members of the
Anti-Terrorism Council) did not exercise judicial or quasi-judicial functions.
While we have recognized in the past that we can exercise the discretion and
rulemaking authority we are granted under the Constitution,20 and set aside
procedural considerations to permit parties to bring a suit before us at the first
instance through certiorari and/or prohibition,21 this liberal policy remains to be
an exception to the general rule, and thus, has its limits. In Concepcion v.
Commission on Elections (COMELEC),22 we emphasized the importance of
availing of the proper remedies and cautioned against the wrongful use of
certiorari in order to assail the quasi-legislative acts of the COMELEC,
especially by the wrong party. In ruling that liberality and the transcendental
doctrine cannot trump blatant disregard of procedural rules, and considering
that the petitioner had other available remedies (such as a petition for
declaratory relief with the appropriate RTC under the terms of Rule 63 of the
Rules of Court), as in this case, we categorically ruled:
The petitioner’s unusual approaches and use of Rule 65 of the Rules of Court
do not appear to us to be the result of any error in reading Rule 65, given the
way the petition was crafted. Rather, it was a backdoor approach to achieve
what the petitioner could not directly do in his individual capacity under Rule 65.
It was, at the very least, an attempted bypass of other available, albeit
lengthier, modes of review that the Rules of Court provide. While we stop short
of concluding that the petitioner’s approaches constitute an abuse of process
through a manipulative reading and application of the Rules of Court, we
nevertheless resolve that the petition should be dismissed for its blatant
violation of the Rules. The transgressions alleged in a petition, however weighty
they may sound, cannot be justifications for blatantly disregarding the rules of
procedure, particularly when remedial measures were available under these
same rules to achieve the petitioner’s objectives. For our part, we cannot and
should not – in the name of liberality and the "transcendental importance"
doctrine – entertain these types of petitions. As we held in the very recent case
of Lozano, et al. vs. Nograles, albeit from a different perspective, our liberal
approach has its limits and should not be abused.23 [emphasis supplied]
B. Petitioner lacks locus standi.
"Locus standi or legal standing has been defined as a personal and substantial
interest in a case such that the party has sustained or will sustain direct injury
as a result of the governmental act that is being challenged. The gist of the
question on standing is whether a party alleges such personal stake in the
outcome of the controversy as to assure that concrete adverseness which
sharpens the presentation of issues upon which the court depends for
illumination of difficult constitutional questions."24 This requirement of standing
relates to the constitutional mandate that this Court settle only actual cases or
controversies.25
Thus, as a general rule, a party is allowed to "raise a constitutional question"
when (1) he can show that he will personally suffer some actual or threatened
injury because of the allegedly illegal conduct of the government; (2) the injury
is fairly traceable to the challenged action; and (3) the injury is likely to be
redressed by a favorable action.26
Jurisprudence defines interest as "material interest, an interest in issue and to
be affected by the decree, as distinguished from mere interest in the question
involved, or a mere incidental interest. By real interest is meant a present
substantial interest, as distinguished from a mere expectancy or a future,
contingent, subordinate, or consequential interest."27
To support his claim that he has locus standi to file the present petition, the
petitioner contends that as an employee of PhilHealth, he "stands to be
prejudiced by [EO] 7, which suspends or imposes a moratorium on the grants
of salary increases or new or increased benefits to officers and employees of
GOCC[s] and x x x curtail[s] the prerogative of those officers who are to fix and
determine his compensation."28 The petitioner also claims that he has standing
as a member of the bar in good standing who has an interest in ensuring that
laws and orders of the Philippine government are legally and validly issued and
implemented.
The respondents meanwhile argue that the petitioner is not a real party-in-
interest since future increases in salaries and other benefits are merely
contingent events or expectancies.29 The petitioner, too, is not asserting a
public right for which he is entitled to seek judicial protection. Section 9 of EO 7
reads:
Section 9. Moratorium on Increases in Salaries, Allowances, Incentives and
Other Benefits. –Moratorium on increases in the rates of salaries, and the grant
of new increases in the rates of allowances, incentives and other benefits,
except salary adjustments pursuant to Executive Order No. 8011 dated June
17, 2009 and Executive Order No. 900 dated June 23, 2010, are hereby
imposed until specifically authorized by the President. [emphasis ours]
In the present case, we are not convinced that the petitioner has demonstrated
that he has a personal stake or material interest in the outcome of the case
because his interest, if any, is speculative and based on a mere expectancy. In
this case, the curtailment of future increases in his salaries and other benefits
cannot but be characterized as contingent events or expectancies. To be sure,
he has no vested rights to salary increases and, therefore, the absence of such
right deprives the petitioner of legal standing to assail EO 7.
It has been held that as to the element of injury, such aspect is not something
that just anybody with some grievance or pain may assert. It has to be direct
and substantial to make it worth the court’s time, as well as the effort of inquiry
into the constitutionality of the acts of another department of government. If the
asserted injury is more imagined than real, or is merely superficial and
insubstantial, then the courts may end up being importuned to decide a matter
that does not really justify such an excursion into constitutional
adjudication.30 The rationale for this constitutional requirement of locus standi is
by no means trifle. Not only does it assure the vigorous adversary presentation
of the case; more importantly, it must suffice to warrant the Judiciary’s
overruling the determination of a coordinate, democratically elected organ of
government, such as the President, and the clear approval by Congress, in this
case. Indeed, the rationale goes to the very essence of representative
democracies.31
Neither can the lack of locus standi be cured by the petitioner’s claim that he is
instituting the present petition as a member of the bar in good standing who has
an interest in ensuring that laws and orders of the Philippine government are
legally and validly issued. This supposed interest has been branded by the
Court in Integrated Bar of the Phils. (IBP) v. Hon. Zamora,32 "as too general an
interest which is shared by other groups and [by] the whole citizenry."33 Thus,
the Court ruled in IBP that the mere invocation by the IBP of its duty to preserve
the rule of law and nothing more, while undoubtedly true, is not sufficient to
clothe it with standing in that case. The Court made a similar ruling in Prof.
David v. Pres. Macapagal-Arroyo34 and held that the petitioners therein, who
are national officers of the IBP, have no legal standing, having failed to allege
any direct or potential injury which the IBP, as an institution, or its members
may suffer as a consequence of the issuance of Presidential Proclamation No.
1017 and General Order No. 5.35
We note that while the petition raises vital constitutional and statutory questions
concerning the power of the President to fix the compensation packages of
GOCCs and GFIs with possible implications on their officials and employees,
the same cannot "infuse" or give the petitioner locus standi under the
transcendental importance or paramount public interest doctrine. In Velarde v.
Social Justice Society,36 we held that even if the Court could have exempted
the case from the stringent locus standi requirement, such heroic effort would
be futile because the transcendental issue could not be resolved any way, due
to procedural infirmities and shortcomings, as in the present case.37 In other
words, giving due course to the present petition which is saddled with formal
and procedural infirmities explained above in this Resolution, cannot but be an
exercise in futility that does not merit the Court’s liberality. As we emphasized in
Lozano v. Nograles,38 "while the Court has taken an increasingly liberal
approach to the rule of locus standi, evolving from the stringent
requirements of ‘personal injury’ to the broader ‘transcendental
importance’ doctrine, such liberality is not to be abused."39
Finally, since the petitioner has failed to demonstrate a material and personal
interest in the issue in dispute, he cannot also be considered to have filed the
present case as a representative of PhilHealth. In this regard, we cannot ignore
or excuse the blatant failure of the petitioner to provide a Board Resolution or a
Secretary’s Certificate from PhilHealth to act as its representative.
C. The petition has a defective jurat.
The respondents claim that the petition should be dismissed for failing to
comply with Section 3, Rule 7 of the Rules of Civil Procedure, which requires
the party or the counsel representing him to sign the pleading and indicate an
address that should not be a post office box. The petition also allegedly violated
the Supreme Court En Banc Resolution dated November 12, 2001, requiring
counsels to indicate in their pleadings their Roll of Attorneys Number, their PTR
Number and their IBP Official Receipt or Lifetime Member Number; otherwise,
the pleadings would be considered unsigned and dismissible. Bar Matter No.
1922 likewise states that a counsel should note down his MCLE Certificate of
Compliance or Certificate of Exemption in the pleading, but the petitioner had
failed to do so.40
We do not see any violation of Section 3, Rule 7 of the Rules of Civil Procedure
as the petition bears the petitioner’s signature and office address. The present
suit was brought before this Court by the petitioner himself as a party litigant
and not through counsel. Therefore, the requirements under the Supreme Court
En Banc Resolution dated November 12, 2001 and Bar Matter No. 1922 do not
apply. In Bar Matter No. 1132, April 1, 2003, we clarified that a party who is not
a lawyer is not precluded from signing his own pleadings as this is allowed by
the Rules of Court; the purpose of requiring a counsel to indicate his IBP
Number and PTR Number is merely to protect the public from bogus lawyers. A
similar construction should be given to Bar Matter No. 1922, which requires
lawyers to indicate their MCLE Certificate of Compliance or Certificate of
Exemption; otherwise, the provision that allows parties to sign their own
pleadings will be negated.
However, the point raised by the respondents regarding the petitioner’s
defective jurat is correct. Indeed, A.M. No. 02-8-13-SC, dated February 19,
2008, calls for a current identification document issued by an official agency
bearing the photograph and signature of the individual as competent evidence
of identity. Nevertheless, we hasten to clarify that the defective jurat in the
Verification/Certification of Non-Forum Shopping is not a fatal defect, as we
held in In-N-Out Burger, Inc. v. Sehwani, Incorporated.41 The verification is only
a formal, not a jurisdictional, requirement that the Court may waive.
D. The petition has been mooted by supervening events.
Because of the transitory nature of EO 7, it has been pointed out that the
present case has already been rendered moot by these supervening events: (1)
the lapse on December 31, 2010 of Section 10 of EO 7 that suspended the
allowances and bonuses of the directors and trustees of GOCCs and GFIs; and
(2) the enactment of R.A. No. 10149 amending the provisions in the charters of
GOCCs and GFIs empowering their board of directors/trustees to determine
their own compensation system, in favor of the grant of authority to the
President to perform this act.
With the enactment of the GOCC Governance Act of 2011, the President is
now authorized to fix the compensation framework of GOCCs and GFIs. The
pertinent provisions read:
Section 5. Creation of the Governance Commission for Government-Owned or
-Controlled Corporations. — There is hereby created an advisory, monitoring,
and oversight body with authority to formulate, implement and coordinate
policies to be known as the Governance Commission for Government-Owned
or-Controlled Corporations, hereinafter referred to as the GCG, which shall be
attached to the Office of the President. The GCG shall have the following
powers and functions:
xxxx
h) Conduct compensation studies, develop and recommend to the President a
competitive compensation and remuneration system which shall attract and
retain talent, at the same time allowing the GOCC to be financially sound and
sustainable;
xxxx
Section 8. Coverage of the Compensation and Position Classification System.
— The GCG, after conducting a compensation study, shall develop a
Compensation and Position Classification System which shall apply to all
officers and employees of the GOCCs whether under the Salary
Standardization Law or exempt therefrom and shall consist of classes of
positions grouped into such categories as the GCG may determine, subject to
approval of the President.
Section 9. Position Titles and Salary Grades. — All positions in the Positions
Classification System, as determined by the GCG and as approved by the
President, shall be allocated to their proper position titles and salary grades in
accordance with an Index of Occupational Services, Position Titles and Salary
Grades of the Compensation and Position Classification System, which shall be
prepared by the GCG and approved by the President.
xxxx
[N]o GOCC shall be exempt from the coverage of the Compensation and
Position Classification System developed by the GCG under this Act.
As may be gleaned from these provisions, the new law amended R.A. No. 7875
and other laws that enabled certain GOCCs and GFIs to fix their own
compensation frameworks; the law now authorizes the President to fix the
compensation and position classification system for all GOCCs and GFIs, as
well as other entities covered by the law. This means that, the President can
now reissue an EO containing these same provisions without any legal
constraints.1âwphi1
A moot case is "one that ceases to present a justiciable controversy by virtue of
supervening events, so that a declaration thereon would be of no practical use
or value."42 "[A]n action is considered ‘moot’ when it no longer presents a
justiciable controversy because the issues involved have become academic or
dead[,] or when the matter in dispute has already been resolved and hence,
one is not entitled to judicial intervention unless the issue is likely to be raised
again between the parties x x x. Simply stated, there is nothing for the x x x
court to resolve as [its] determination x x x has been overtaken by subsequent
events."43
This is the present situation here. Congress, thru R.A. No. 10149, has
expressly empowered the President to establish the compensation systems of
GOCCs and GFIs. For the Court to still rule upon the supposed
unconstitutionality of EO 7 will merely be an academic exercise. Any further
discussion of the constitutionality of EO 7 serves no useful purpose since such
issue is moot in its face in light of the enactment of R.A. No. 10149. In the
words of the eminent constitutional law expert, Fr. Joaquin Bernas, S.J., "the
Court normally [will not] entertain a petition touching on an issue that has
become moot because x x x there would [be] no longer x x x a ‘flesh and blood’
case for the Court to resolve."44
All told, in view of the supervening events rendering the petition moot, as well
as its patent formal and procedural infirmities, we no longer see any reason for
the Court to resolve the other issues raised in the certiorari petition.
WHEREFORE, premises considered, the petition is DISMISSED. No costs.
SO ORDERED
EN BANC
G.R. No. 170139 August 5, 2014
SAMEER OVERSEAS PLACEMENT AGENCY, INC., Petitioner,
vs.
JOY C. CABILES, Respondent.
DECISION
LEONEN, J.:
This case involves an overseas Filipino worker with shattered dreams. It is our
duty, given the facts and the law, to approximate justice for her.
We are asked to decide a petition for review1 on certiorari assailing the Court of
Appeals’ decision2 dated June 27, 2005. This decision partially affirmed the
National Labor RelationsCommission’s resolution dated March 31,
2004,3declaring respondent’s dismissal illegal, directing petitioner to pay
respondent’s three-month salary equivalent to New Taiwan Dollar (NT$)
46,080.00, and ordering it to reimburse the NT$3,000.00 withheld from
respondent, and pay her NT$300.00 attorney’s fees.4
Petitioner, Sameer Overseas Placement Agency, Inc., is a recruitment and
placement agency.5 Responding to an ad it published, respondent, Joy C.
Cabiles, submitted her application for a quality control job in Taiwan.6
Joy’s application was accepted.7 Joy was later asked to sign a oneyear
employment contract for a monthly salary of NT$15,360.00.8 She alleged that
Sameer Overseas Agency required her to pay a placement fee of ₱70,000.00
when she signed the employment contract.9
Joy was deployed to work for TaiwanWacoal, Co. Ltd. (Wacoal) on June 26,
1997.10 She alleged that in her employment contract, she agreed to work as
quality control for one year.11 In Taiwan, she was asked to work as a cutter.12
Sameer Overseas Placement Agencyclaims that on July 14, 1997, a certain Mr.
Huwang from Wacoal informedJoy, without prior notice, that she was
terminated and that "she should immediately report to their office to get her
salary and passport."13 She was asked to "prepare for immediate
repatriation."14
Joy claims that she was told that from June 26 to July 14, 1997, she only
earned a total of NT$9,000.15 According to her, Wacoal deducted NT$3,000 to
cover her plane ticket to Manila.16
On October 15, 1997, Joy filed a complaint17 with the National Labor Relations
Commission against petitioner and Wacoal. She claimed that she was illegally
dismissed.18 She asked for the return of her placement fee, the withheld
amount for repatriation costs, payment of her salary for 23 months as well as
moral and exemplary damages.19 She identified Wacoal as Sameer Overseas
Placement Agency’s foreign principal.20
Sameer Overseas Placement Agency alleged that respondent's termination
was due to her inefficiency, negligence in her duties, and her "failure to comply
with the work requirements [of] her foreign [employer]."21 The agency also
claimed that it did not ask for a placement fee of ₱70,000.00.22 As evidence, it
showedOfficial Receipt No. 14860 dated June 10, 1997, bearing the amount of
₱20,360.00.23 Petitioner added that Wacoal's accreditation with petitioner had
already been transferred to the Pacific Manpower & Management Services, Inc.
(Pacific) as of August 6, 1997.24 Thus, petitioner asserts that it was already
substituted by Pacific Manpower.25
Pacific Manpower moved for the dismissal of petitioner’s claims against it.26 It
alleged that there was no employer-employee relationship between
them.27 Therefore, the claims against it were outside the jurisdiction of the
Labor Arbiter.28 Pacific Manpower argued that the employment contract should
first be presented so that the employer’s contractual obligations might be
identified.29 It further denied that it assumed liability for petitioner’s illegal acts.30
On July 29, 1998, the Labor Arbiter dismissed Joy’s complaint.31 Acting
Executive Labor Arbiter Pedro C.Ramos ruled that her complaint was based on
mereallegations.32 The Labor Arbiter found that there was no excess payment
of placement fees, based on the official receipt presented by petitioner. 33 The
Labor Arbiter found unnecessary a discussion on petitioner’s transfer of
obligations to Pacific34 and considered the matter immaterial in view of the
dismissal of respondent’s complaint.35
Joy appealed36 to the National Labor Relations Commission.
In a resolution37 dated March 31, 2004, the National Labor Relations
Commission declared that Joy was illegally dismissed.38 It reiterated the
doctrine that the burden of proof to show that the dismissal was based on a just
or valid cause belongs to the employer. 39 It found that Sameer Overseas
Placement Agency failed to prove that there were just causes for
termination.40 There was no sufficient proofto show that respondent was
inefficient in her work and that she failed to comply with company
requirements.41 Furthermore, procedural dueprocess was not observed in
terminating respondent.42
The National Labor Relations Commission did not rule on the issue of
reimbursement of placement fees for lack of jurisdiction.43 It refused to entertain
the issue of the alleged transfer of obligations to Pacific.44 It did not acquire
jurisdiction over that issue because Sameer Overseas Placement Agency failed
to appeal the Labor Arbiter’s decision not to rule on the matter.45
The National Labor Relations Commission awarded respondent only three (3)
months worth of salaryin the amount of NT$46,080, the reimbursement of the
NT$3,000 withheld from her, and attorney’s fees of NT$300.46
The Commission denied the agency’s motion for reconsideration47 dated May
12, 2004 through a resolution48 dated July 2, 2004.
Aggrieved by the ruling, Sameer Overseas Placement Agency caused the filing
of a petition49 for certiorari with the Court of Appeals assailing the National
Labor Relations Commission’s resolutions dated March 31, 2004 and July 2,
2004.
The Court of Appeals50 affirmed the decision of the National Labor Relations
Commission with respect to the finding of illegal dismissal, Joy’s entitlement to
the equivalent of three months worth of salary, reimbursement of withheld
repatriation expense, and attorney’s fees.51 The Court of Appeals remanded the
case to the National Labor Relations Commission to address the validity of
petitioner's allegations against Pacific.52 The Court of Appeals held, thus:
Although the public respondent found the dismissal of the complainant-
respondent illegal, we should point out that the NLRC merely awarded her
three (3) months backwages or the amount of NT$46,080.00, which was based
upon its finding that she was dismissed without due process, a finding that we
uphold, given petitioner’s lack of worthwhile discussion upon the same in the
proceedings below or before us. Likewise we sustain NLRC’s finding in regard
to the reimbursement of her fare, which is squarely based on the law; as well as
the award of attorney’s fees.
But we do find it necessary to remand the instant case to the public respondent
for further proceedings, for the purpose of addressing the validity or propriety of
petitioner’s third-party complaint against the transferee agent or the Pacific
Manpower & Management Services, Inc. and Lea G. Manabat. We should
emphasize that as far as the decision of the NLRC on the claims of Joy
Cabiles, is concerned, the same is hereby affirmed with finality, and we hold
petitioner liable thereon, but without prejudice to further hearings on its third
party complaint against Pacific for reimbursement.
WHEREFORE, premises considered, the assailed Resolutions are hereby
partly AFFIRMED in accordance with the foregoing discussion, but subject to
the caveat embodied inthe last sentence. No costs.
SO ORDERED.53
Dissatisfied, Sameer Overseas Placement Agency filed this petition.54
We are asked to determine whether the Court of Appeals erred when it affirmed
the ruling of the National Labor Relations Commission finding respondent
illegally dismissed and awarding her three months’ worth of salary, the
reimbursement of the cost ofher repatriation, and attorney’s fees despite the
alleged existence of just causes of termination.
Petitioner reiterates that there was just cause for termination because there
was a finding of Wacoal that respondent was inefficient in her work.55
Therefore, it claims that respondent’s dismissal was valid.56
Petitioner also reiterates that since Wacoal’s accreditation was validly
transferred to Pacific at the time respondent filed her complaint, it should be
Pacific that should now assume responsibility for Wacoal’s contractual
obligations to the workers originally recruited by petitioner. 57
Sameer Overseas Placement Agency’spetition is without merit. We find for
respondent.
I guarantees the special protection of workers, to wit:
Sameer Overseas Placement Agency failed to show that there was just cause
for causing Joy’s dismissal. The employer, Wacoal, also failed to accord her
due process of law.
Indeed, employers have the prerogative to impose productivity and quality
standards at work.58 They may also impose reasonable rules to ensure that the
employees comply with these standards.59 Failure to comply may be a just
cause for their dismissal.60 Certainly, employers cannot be compelled to retain
the services of anemployee who is guilty of acts that are inimical to the interest
of the employer.61 While the law acknowledges the plight and vulnerability of
workers, it does not "authorize the oppression or self-destruction of the
employer."62 Management prerogative is recognized in law and in our
jurisprudence.
This prerogative, however, should not be abused. It is "tempered with the
employee’s right to security of tenure."63Workers are entitled to substantive and
procedural due process before termination. They may not be removed from
employment without a validor just cause as determined by law and without
going through the proper procedure.
Security of tenure for labor is guaranteed by our Constitution.64
Employees are not stripped of their security of tenure when they move to work
in a different jurisdiction. With respect to the rights of overseas Filipino workers,
we follow the principle of lex loci contractus.Thus, in Triple Eight Integrated
Services, Inc. v. NLRC,65 this court noted:
Petitioner likewise attempts to sidestep the medical certificate requirement by
contending that since Osdana was working in Saudi Arabia, her employment
was subject to the laws of the host country. Apparently, petitioner hopes
tomake it appear that the labor laws of Saudi Arabia do not require any
certification by a competent public health authority in the dismissal of
employees due to illness.
Again, petitioner’s argument is without merit.
First, established is the rule that lex loci contractus (the law of the place where
the contract is made) governs in this jurisdiction. There is no question that the
contract of employment in this case was perfected here in the Philippines.
Therefore, the Labor Code, its implementing rules and regulations, and other
laws affecting labor apply in this case.Furthermore, settled is the rule that the
courts of the forum will not enforce any foreign claim obnoxious to the forum’s
public policy. Herein the Philippines, employment agreements are more than
contractual in nature. The Constitution itself, in Article XIII, Section 3,
The State shall afford full protection to labor, local and overseas, organized and
unorganized, and promote full employment and equality of employment
opportunities for all.
It shall guarantee the rights of all workers to selforganization, collective
bargaining and negotiations, and peaceful concerted activities, including the
right to strike in accordance with law. They shall be entitled to security of
tenure, humane conditions of work, and a living wage. Theyshall also
participate in policy and decision-making processes affecting their rights and
benefits as may be provided by law.
....
This public policy should be borne in mind in this case because to allow foreign
employers to determine for and by themselves whether an overseas contract
worker may be dismissed on the ground of illness would encourage illegal or
arbitrary pretermination of employment contracts.66 (Emphasis supplied, citation
omitted)
Even with respect to fundamental procedural rights, this court emphasized in
PCL Shipping Philippines, Inc. v. NLRC,67 to wit:
Petitioners admit that they did notinform private respondent in writing of the
charges against him and that they failed to conduct a formal investigation to
give him opportunity to air his side. However, petitioners contend that the twin
requirements ofnotice and hearing applies strictly only when the employment is
within the Philippines and that these need not be strictly observed in cases of
international maritime or overseas employment.
The Court does not agree. The provisions of the Constitution as well as the
Labor Code which afford protection to labor apply to Filipino employees
whether working within the Philippines or abroad. Moreover, the principle of lex
loci contractus (the law of the place where the contract is made) governs in this
jurisdiction. In the present case, it is not disputed that the Contract of
Employment entered into by and between petitioners and private respondent
was executed here in the Philippines with the approval of the Philippine
Overseas Employment Administration (POEA). Hence, the Labor Code
together with its implementing rules and regulations and other laws affecting
labor apply in this case.68 (Emphasis supplied, citations omitted)
By our laws, overseas Filipino workers (OFWs) may only be terminated for a
just or authorized cause and after compliance with procedural due process
requirements.
Article 282 of the Labor Code enumerates the just causes of termination by the
employer. Thus:
Art. 282. Termination by employer. An employer may terminate an employment
for any of the following causes:
(a) Serious misconduct or willful disobedience by the employee of the
lawful orders of his employer or representative in connection with his
work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him
by his employer or duly authorized representative;
(d) Commission of a crime or offense by the employee against the
person of his employer or any immediate member of his family or his
duly authorized representatives; and
(e) Other causes analogous to the foregoing.
Petitioner’s allegation that respondentwas inefficient in her work and negligent
in her duties69 may, therefore, constitute a just cause for termination under
Article 282(b), but only if petitioner was able to prove it.
The burden of proving that there is just cause for termination is on the
employer. "The employer must affirmatively show rationally adequate evidence
that the dismissal was for a justifiable cause."70 Failure to show that there was
valid or just cause for termination would necessarily mean that the dismissal
was illegal.71
To show that dismissal resulting from inefficiency in work is valid, it must be
shown that: 1) the employer has set standards of conduct and workmanship
against which the employee will be judged; 2) the standards of conduct and
workmanship must have been communicated tothe employee; and 3) the
communication was made at a reasonable time prior to the employee’s
performance assessment.
This is similar to the law and jurisprudence on probationary employees, which
allow termination ofthe employee only when there is "just cause or when [the
probationary employee] fails to qualify as a regular employee in accordance
with reasonable standards made known by the employer to the employee at the
time of his [or her] engagement."72
However, we do not see why the application of that ruling should be limited to
probationary employment. That rule is basic to the idea of security of tenure
and due process, which are guaranteed to all employees, whether their
employment is probationary or regular.
The pre-determined standards that the employer sets are the bases for
determining the probationary employee’s fitness, propriety, efficiency, and
qualifications as a regular employee. Due process requires that the
probationary employee be informed of such standards at the time of his or her
engagement so he or she can adjusthis or her character or workmanship
accordingly. Proper adjustment to fit the standards upon which the employee’s
qualifications will be evaluated will increase one’s chances of being positively
assessed for regularization by his or her employer.
Assessing an employee’s work performance does not stop after regularization.
The employer, on a regular basis, determines if an employee is still qualified
and efficient, based on work standards. Based on that determination, and after
complying with the due process requirements of notice and hearing, the
employer may exercise its management prerogative of terminating the
employee found unqualified.
The regular employee must constantlyattempt to prove to his or her employer
that he or she meets all the standards for employment. This time, however, the
standards to be met are set for the purpose of retaining employment or
promotion. The employee cannot be expected to meet any standard of
character or workmanship if such standards were not communicated to him or
her. Courts should remain vigilant on allegations of the employer’s failure to
communicatework standards that would govern one’s employment "if [these
are] to discharge in good faith [their] duty to adjudicate."73
In this case, petitioner merely alleged that respondent failed to comply with her
foreign employer’s work requirements and was inefficient in her work.74 No
evidence was shown to support such allegations. Petitioner did not even bother
to specify what requirements were not met, what efficiency standards were
violated, or what particular acts of respondent constituted inefficiency.
There was also no showing that respondent was sufficiently informed of the
standards against which her work efficiency and performance were judged. The
parties’ conflict as to the position held by respondent showed that even the
matter as basic as the job title was not clear.
The bare allegations of petitioner are not sufficient to support a claim that there
is just cause for termination. There is no proof that respondent was legally
terminated.
Petitioner failed to comply with
the due process requirements
Respondent’s dismissal less than one year from hiring and her repatriation on
the same day show not onlyfailure on the partof petitioner to comply with the
requirement of the existence of just cause for termination. They patently show
that the employersdid not comply with the due process requirement.
A valid dismissal requires both a valid cause and adherence to the valid
procedure of dismissal.75 The employer is required to give the charged
employee at least two written notices before termination.76 One of the written
notices must inform the employee of the particular acts that may cause his or
her dismissal.77 The other notice must "[inform] the employee of the employer’s
decision."78 Aside from the notice requirement, the employee must also be
given "an opportunity to be heard."79
Petitioner failed to comply with the twin notices and hearing requirements.
Respondent started working on June 26, 1997. She was told that she was
terminated on July 14, 1997 effective on the same day and barely a month from
her first workday. She was also repatriated on the same day that she was
informed of her termination. The abruptness of the termination negated any
finding that she was properly notified and given the opportunity to be heard. Her
constitutional right to due process of law was violated.
II
Respondent Joy Cabiles, having been illegally dismissed, is entitled to her
salary for the unexpired portion ofthe employment contract that was violated
together with attorney’s fees and reimbursement of amounts withheld from her
salary.
Section 10 of Republic Act No. 8042,otherwise known as the Migrant Workers
and Overseas Filipinos Act of1995, states thatoverseas workers who were
terminated without just, valid, or authorized cause "shall be entitled to the full
reimbursement of his placement fee with interest of twelve (12%) per annum,
plus his salaries for the unexpired portion of his employment contract or for
three (3) months for every year of the unexpired term, whichever is less."
Sec. 10. MONEY CLAIMS. – Notwithstanding any provision of law to the
contrary, the Labor Arbiters of the National Labor Relations Commission
(NLRC) shall have the original and exclusive jurisdiction to hear and decide,
within ninety (90) calendar days after filing of the complaint, the claims arising
out of an employer-employee relationship or by virtue of any law or contract
involving Filipino workers for overseas deployment including claims for actual,
moral, exemplary and other forms of damages.
The liability of the principal/employer and the recruitment/placement agency for
any and all claims under this section shall be joint and several. This provisions
[sic] shall be incorporated in the contract for overseas employment and shall be
a condition precedent for its approval. The performance bond to be filed by the
recruitment/placementagency, as provided by law, shall be answerable for all
money claims or damages that may be awarded to the workers. If the
recruitment/placement agency is a juridical being, the corporate officers and
directors and partners as the case may be, shall themselves be jointly and
solidarily liable with the corporation orpartnership for the aforesaid claims and
damages.
Such liabilities shall continue during the entire period or duration of the
employment contract and shall not be affected by any substitution, amendment
or modification made locally or in a foreign country of the said contract.
Any compromise/amicable settlement or voluntary agreement on money claims
inclusive of damages under this section shall be paid within four (4) months
from the approval of the settlement by the appropriate authority.
In case of termination of overseas employment without just, valid or authorized
cause as defined by law or contract, the workers shall be entitled to the full
reimbursement of his placement fee with interest of twelve (12%) per annum,
plus his salaries for the unexpired portion of his employment contract or for
three (3) months for every year of the unexpired term, whichever is less.
....
(Emphasis supplied)
Section 15 of Republic Act No. 8042 states that "repatriation of the worker and
the transport of his [or her] personal belongings shall be the primary
responsibility of the agency which recruited or deployed the worker overseas."
The exception is when "termination of employment is due solely to the fault of
the worker,"80 which as we have established, is not the case. It reads: SEC. 15.
REPATRIATION OF WORKERS; EMERGENCY REPATRIATION FUND. –
The repatriation of the worker and the transport of his personal belongings shall
be the primary responsibility of the agency which recruited or deployed the
worker overseas. All costs attendant to repatriation shall be borne by or
charged to the agency concerned and/or its principal. Likewise, the repatriation
of remains and transport of the personal belongings of a deceased worker and
all costs attendant thereto shall be borne by the principal and/or local agency.
However, in cases where the termination of employment is due solely to the
fault of the worker, the principal/employer or agency shall not in any manner be
responsible for the repatriation of the former and/or his belongings.
....
The Labor Code81 also entitles the employee to 10% of the amount of withheld
wages as attorney’s feeswhen the withholding is unlawful.
The Court of Appeals affirmedthe National Labor Relations Commission’s
decision to award respondent NT$46,080.00 or the threemonth equivalent of
her salary, attorney’s fees of NT$300.00, and the reimbursement of the
withheld NT$3,000.00 salary, which answered for her repatriation.
We uphold the finding that respondent is entitled to all of these awards. The
award of the three-month equivalent of respondent’s salary should, however,
be increased to the amount equivalent to the unexpired term of the employment
contract.
In Serrano v. Gallant Maritime Services, Inc. and Marlow Navigation Co.,
Inc.,82 this court ruled that the clause "or for three (3) months for every year of
the unexpired term, whichever is less"83 is unconstitutional for violating the
equal protection clause and substantive due process.84
A statute or provision which was declared unconstitutional is not a law. It
"confers no rights; it imposes no duties; it affords no protection; it creates no
office; it is inoperative as if it has not been passed at all."85
We are aware that the clause "or for three (3) months for every year of the
unexpired term, whichever is less"was reinstated in Republic Act No. 8042
upon promulgation of Republic Act No. 10022 in 2010. Section 7 of Republic
Act No. 10022 provides:
Section 7.Section 10 of Republic Act No. 8042, as amended, is hereby
amended to read as follows:
SEC. 10. Money Claims.– Notwithstanding any provision of law to the contrary,
the Labor Arbiters of the National Labor Relations Commission (NLRC) shall
have the original and exclusive jurisdiction to hear and decide, within ninety
(90) calendar days after the filing of the complaint, the claims arising out of an
employer-employee relationship or by virtue of any law or contract involving
Filipino workers for overseas deployment including claims for actual, moral,
exemplary and other forms of damage. Consistent with this mandate, the NLRC
shall endeavor to update and keep abreast with the developments in the global
services industry.
The liability of the principal/employer and the recruitment/placement agency for
any and all claims under this section shall be joint and several. This provision
shall be incorporated in the contract for overseas employment and shall be a
condition precedent for its approval. The performance bond to de [sic] filed by
the recruitment/placement agency, as provided by law, shall be answerable for
all money claims or damages that may be awarded to the workers. If the
recruitment/placement agency is a juridical being, the corporate officers and
directors and partners as the case may be, shall themselves be jointly and
solidarily liable with the corporation or partnership for the aforesaid claims and
damages.
Such liabilities shall continue during the entire period or duration of the
employment contract and shall not be affected by any substitution, amendment
or modification made locally or in a foreign country of the said contract.
Any compromise/amicable settlement or voluntary agreement on money claims
inclusive of damages under this section shall be paid within thirty (30) days
from approval of the settlement by the appropriate authority.
In case of termination of overseas employment without just, valid or authorized
cause as defined by law or contract, or any unauthorized deductions from the
migrant worker’s salary, the worker shall be entitled to the full reimbursement if
[sic] his placement fee and the deductions made with interest at twelve percent
(12%) per annum, plus his salaries for the unexpired portion of his employment
contract or for three (3) months for every year of the unexpired term, whichever
is less.
In case of a final and executory judgement against a foreign employer/principal,
it shall be automatically disqualified, without further proceedings, from
participating in the Philippine Overseas Employment Program and from
recruiting and hiring Filipino workers until and unless it fully satisfies the
judgement award.
Noncompliance with the mandatory periods for resolutions of case
providedunder this section shall subject the responsible officials to any or all of
the following penalties:
(a) The salary of any such official who fails to render his decision or
resolution within the prescribed period shall be, or caused to be,
withheld until the said official complies therewith;
(b) Suspension for not more than ninety (90) days; or
(c) Dismissal from the service with disqualification to hold any
appointive public office for five (5) years.
Provided, however,That the penalties herein provided shall be without prejudice
to any liability which any such official may have incured [sic] under other
existing laws or rules and regulations as a consequence of violating the
provisions of this paragraph. (Emphasis supplied)
Republic Act No. 10022 was promulgated on March 8, 2010. This means that
the reinstatement of the clause in Republic Act No. 8042 was not yet in effect at
the time of respondent’s termination from work in 1997.86 Republic Act No.
8042 before it was amended byRepublic Act No. 10022 governs this case.
When a law is passed, this court awaits an actual case that clearly raises
adversarial positions in their proper context before considering a prayer to
declare it as unconstitutional.
However, we are confronted with a unique situation. The law passed
incorporates the exact clause already declared as unconstitutional, without any
perceived substantial change in the circumstances.
This may cause confusion on the part of the National Labor Relations
Commission and the Court of Appeals.At minimum, the existence of Republic
Act No. 10022 may delay the execution of the judgment in this case, further
frustrating remedies to assuage the wrong done to petitioner.
Hence, there is a necessity to decide this constitutional issue.
Moreover, this court is possessed with the constitutional duty to "[p]romulgate
rules concerning the protection and enforcement of constitutional
rights."87 When cases become mootand academic, we do not hesitate to
provide for guidance to bench and bar in situations where the same violations
are capable of repetition but will evade review. This is analogous to cases
where there are millions of Filipinos working abroad who are bound to suffer
from the lack of protection because of the restoration of an identical clause in a
provision previously declared as unconstitutional.
In the hierarchy of laws, the Constitution is supreme. No branch or office of the
government may exercise its powers in any manner inconsistent with the
Constitution, regardless of the existence of any law that supports such
exercise. The Constitution cannot be trumped by any other law. All laws must
be read in light of the Constitution. Any law that is inconsistent with it is a nullity.
Thus, when a law or a provision of law is null because it is inconsistent with the
Constitution,the nullity cannot be cured by reincorporation or reenactment of
the same or a similar law or provision. A law or provision of law that was
already declared unconstitutional remains as such unless circumstances have
sochanged as to warrant a reverse conclusion.
We are not convinced by the pleadings submitted by the parties that the
situation has so changed so as to cause us to reverse binding precedent.
Likewise, there are special reasons of judicial efficiency and economy that
attend to these cases. The new law puts our overseas workers in the same
vulnerable position as they were prior to Serrano. Failure to reiterate the very
ratio decidendi of that case will result in the same untold economic hardships
that our reading of the Constitution intended to avoid. Obviously, we cannot
countenance added expenses for further litigation thatwill reduce their
hardearned wages as well as add to the indignity of having been deprived of
the protection of our laws simply because our precedents have not been
followed. There is no constitutional doctrine that causes injustice in the face of
empty procedural niceties. Constitutional interpretation is complex, but it is
never unreasonable.
Thus, in a resolution88 dated October 22, 2013, we ordered the parties and the
Office of the Solicitor General to comment on the constitutionality of the
reinstated clause in Republic Act No. 10022.
In its comment,89 petitioner argued that the clause was constitutional.90 The
legislators intended a balance between the employers’ and the employees’
rights by not unduly burdening the local recruitment agency.91 Petitioner is also
of the view that the clause was already declared as constitutional in Serrano. 92
The Office of the Solicitor General also argued that the clause was valid and
constitutional.93 However, since the parties never raised the issue of the
constitutionality of the clause asreinstated in Republic Act No. 10022, its
contention is that it is beyond judicial review.94
On the other hand, respondentargued that the clause was unconstitutional
because it infringed on workers’ right to contract.95
We observe that the reinstated clause, this time as provided in Republic Act.
No. 10022, violates the constitutional rights to equal protection and due
process.96 Petitioner as well as the Solicitor General have failed to show any
compelling changein the circumstances that would warrant us to revisit the
precedent.
We reiterate our finding in Serrano v. Gallant Maritime that limiting wages that
should be recovered by anillegally dismissed overseas worker to three months
is both a violation of due process and the equal protection clauses of the
Constitution.
Equal protection of the law is a guarantee that persons under like
circumstances and falling within the same class are treated alike, in terms of
"privileges conferred and liabilities enforced."97 It is a guarantee against "undue
favor and individual or class privilege, as well as hostile discrimination or the
oppression of inequality."98
In creating laws, the legislature has the power "to make distinctions and
classifications."99
In exercising such power, it has a wide discretion.100
The equal protection clause does not infringe on this legislative power. 101 A law
is void on this basis, only if classifications are made arbitrarily. 102 There is no
violation of the equal protection clause if the law applies equally to persons
within the same class and if there are reasonable grounds for distinguishing
between those falling within the class and those who do not fall within the
class.103 A law that does not violate the equal protection clause prescribesa
reasonable classification.104
A reasonable classification "(1) must rest on substantial distinctions; (2) must
be germane to the purposes of the law; (3) must not be limited to existing
conditions only; and (4) must apply equally to all members of the same
class."105
The reinstated clause does not satisfy the requirement of reasonable
classification.
In Serrano, we identified the classifications made by the reinstated clause. It
distinguished between fixed-period overseas workers and fixedperiod local
workers.106 It also distinguished between overseas workers with employment
contracts of less than one year and overseas workers with employment
contracts of at least one year.107 Within the class of overseas workers with at
least one-year employment contracts, there was a distinction between those
with at least a year left in their contracts and those with less than a year left in
their contracts when they were illegally dismissed.108
The Congress’ classification may be subjected to judicial review. In Serrano,
there is a "legislative classification which impermissibly interferes with the
exercise of a fundamental right or operates to the peculiar disadvantage of a
suspect class."109
Under the Constitution, labor is afforded special protection.110 Thus, this court in
Serrano, "[i]mbued with the same sense of ‘obligation to afford protection to
labor,’ . . . employ[ed] the standard of strict judicial scrutiny, for it perceive[d] in
the subject clause a suspect classification prejudicial to OFWs."111
We also noted in Serranothat before the passage of Republic Act No. 8042, the
money claims of illegally terminated overseas and local workers with fixed-term
employment werecomputed in the same manner.112 Their money claims were
computed based onthe "unexpired portions of their contracts."113 The adoption
of the reinstated clause in Republic Act No. 8042 subjected the money claims
of illegally dismissed overseas workers with an unexpired term of at least a
year to a cap of three months worth of their salary.114 There was no such
limitation on the money claims of illegally terminated local workers with fixed-
term employment.115
We observed that illegally dismissed overseas workers whose employment
contracts had a term of less than one year were granted the amount equivalent
to the unexpired portion of their employment contracts.116 Meanwhile, illegally
dismissed overseas workers with employment terms of at least a year were
granted a cap equivalent to three months of their salary for the unexpired
portions of their contracts.117
Observing the terminologies used inthe clause, we also found that "the subject
clause creates a sub-layer of discrimination among OFWs whose contract
periods are for more than one year: those who are illegally dismissed with less
than one year left in their contracts shall be entitled to their salaries for the
entire unexpired portion thereof, while those who are illegally dismissed with
one year or more remaining in their contracts shall be covered by the reinstated
clause, and their monetary benefits limited to their salaries for three months
only."118
We do not need strict scrutiny to conclude that these classifications do not rest
on any real or substantial distinctions that would justify different treatments in
terms of the computation of money claims resulting from illegal termination.
Overseas workers regardless of their classifications are entitled to security of
tenure, at least for the period agreed upon in their contracts. This means that
they cannot be dismissed before the end of their contract terms without due
process. If they were illegally dismissed, the workers’ right to security of tenure
is violated.
The rights violated when, say, a fixed-period local worker is illegally terminated
are neither greater than norless than the rights violated when a fixed-period
overseas worker is illegally terminated. It is state policy to protect the rights of
workers withoutqualification as to the place of employment.119 In both cases,
the workers are deprived of their expected salary, which they could have
earned had they not been illegally dismissed. For both workers, this deprivation
translates to economic insecurity and disparity.120 The same is true for the
distinctions between overseas workers with an employment contract of less
than one year and overseas workers with at least one year of employment
contract, and between overseas workers with at least a year left in their
contracts and overseas workers with less than a year left in their contracts
when they were illegally dismissed.
For this reason, we cannot subscribe to the argument that "[overseas workers]
are contractual employeeswho can never acquire regular employment status,
unlike local workers"121 because it already justifies differentiated treatment in
terms ofthe computation of money claims.122
Likewise, the jurisdictional and enforcement issues on overseas workers’
money claims do not justify a differentiated treatment in the computation of their
money claims.123 If anything, these issues justify an equal, if not greater
protection and assistance to overseas workers who generally are more prone to
exploitation given their physical distance from our government.
We also find that the classificationsare not relevant to the purpose of the law,
which is to "establish a higher standard of protection and promotion of the
welfare of migrant workers, their families and overseas Filipinos in distress, and
for other purposes."124 Further, we find specious the argument that reducing the
liability of placement agencies "redounds to the benefit of the [overseas]
workers."125
Putting a cap on the money claims of certain overseas workers does not
increase the standard of protection afforded to them. On the other hand, foreign
employers are more incentivizedby the reinstated clause to enter into contracts
of at least a year because it gives them more flexibility to violate our overseas
workers’ rights. Their liability for arbitrarily terminating overseas workers is
decreased at the expense of the workers whose rights they violated.
Meanwhile, these overseas workers who are impressed with an expectation of
a stable job overseas for the longer contract period disregard other
opportunities only to be terminated earlier. They are left with claims that are
less than what others in the same situation would receive. The reinstated
clause, therefore, creates a situation where the law meant to protect them
makes violation of rights easier and simply benign to the violator.
As Justice Brion said in his concurring opinion in Serrano:
Section 10 of R.A. No. 8042 affects these well-laid rules and measures, and in
fact provides a hidden twist affecting the principal/employer’s liability. While
intended as an incentive accruing to recruitment/manning agencies, the law, as
worded, simply limits the OFWs’ recovery in wrongfuldismissal situations. Thus,
it redounds to the benefit of whoever may be liable, including the
principal/employer – the direct employer primarily liable for the wrongful
dismissal. In this sense, Section 10 – read as a grant of incentives to
recruitment/manning agencies – oversteps what it aims to do by effectively
limiting what is otherwise the full liability of the foreign principals/employers.
Section 10, in short, really operates to benefit the wrong party and allows that
party, without justifiable reason, to mitigate its liability for wrongful dismissals.
Because of this hidden twist, the limitation ofliability under Section 10 cannot be
an "appropriate" incentive, to borrow the term that R.A. No. 8042 itself uses to
describe the incentive it envisions under its purpose clause.
What worsens the situation is the chosen mode of granting the incentive:
instead of a grant that, to encourage greater efforts at recruitment, is directly
related to extra efforts undertaken, the law simply limits their liability for the
wrongful dismissals of already deployed OFWs. This is effectively a legally-
imposed partial condonation of their liability to OFWs, justified solely by the
law’s intent to encourage greater deployment efforts. Thus, the incentive,from a
more practical and realistic view, is really part of a scheme to sell Filipino
overseas labor at a bargain for purposes solely of attracting the market. . . .
The so-called incentive is rendered particularly odious by its effect on the
OFWs — the benefits accruing to the recruitment/manning agencies and their
principals are takenfrom the pockets of the OFWs to whom the full salaries for
the unexpired portion of the contract rightfully belong. Thus, the
principals/employers and the recruitment/manning agencies even profit from
their violation of the security of tenure that an employment contract embodies.
Conversely, lesser protection is afforded the OFW, not only because of the
lessened recovery afforded him or her by operation of law, but also because
this same lessened recovery renders a wrongful dismissal easier and less
onerous to undertake; the lesser cost of dismissing a Filipino will always bea
consideration a foreign employer will take into account in termination of
employment decisions. . . .126
Further, "[t]here can never be a justification for any form of government action
that alleviates the burden of one sector, but imposes the same burden on
another sector, especially when the favored sector is composed of private
businesses suchas placement agencies, while the disadvantaged sector is
composed ofOFWs whose protection no less than the Constitution commands.
The idea thatprivate business interest can be elevated to the level of a
compelling state interest is odious."127
Along the same line, we held that the reinstated clause violates due process
rights. It is arbitrary as it deprives overseas workers of their monetary claims
without any discernable valid purpose.128
Respondent Joy Cabiles is entitled to her salary for the unexpired portion of her
contract, in accordance with Section 10 of Republic Act No. 8042. The award of
the three-month equivalence of respondent’s salary must be modified
accordingly. Since she started working on June 26, 1997 and was terminated
on July 14, 1997, respondent is entitled to her salary from July 15, 1997 to June
25, 1998. "To rule otherwise would be iniquitous to petitioner and other OFWs,
and would,in effect, send a wrong signal that principals/employers and
recruitment/manning agencies may violate an OFW’s security of tenure which
an employment contract embodies and actually profit from such violation based
on an unconstitutional provision of law."129
III
On the interest rate, the Bangko Sentral ng Pilipinas Circular No. 799 of June
21, 2013, which revised the interest rate for loan or forbearance from 12% to
6% in the absence of stipulation,applies in this case. The pertinent portions of
Circular No. 799, Series of 2013, read: The Monetary Board, in its Resolution
No. 796 dated 16 May 2013, approved the following revisions governing the
rate of interest in the absence of stipulation in loan contracts, thereby amending
Section 2 of Circular No. 905, Series of 1982:
Section 1. The rate of interest for the loan or forbearance of any money, goods
or credits and the rate allowed in judgments, in the absence of an express
contract as to such rateof interest, shall be six percent (6%) per annum.
Section 2. In view of the above, Subsection X305.1 of the Manual of
Regulations for Banks and Sections 4305Q.1, 4305S.3 and 4303P.1 of the
Manual of Regulations for Non-Bank Financial Institutions are hereby amended
accordingly.
This Circular shall take effect on 1 July 2013.
Through the able ponencia of Justice Diosdado Peralta, we laid down the
guidelines in computing legal interest in Nacar v. Gallery Frames:130
II. With regard particularly to an award of interest in the concept of actual and
compensatory damages, the rate of interest, as well as the accrual thereof, is
imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a
sum of money, i.e., a loan or forbearance of money, the interest due
should be that which may have been stipulated in writing. Furthermore,
the interest due shall itself earn legal interest from the time it is
judicially demanded. In the absence of stipulation, the rate of interest
shall be 6% per annum to be computed from default, i.e., from judicial
or extrajudicial demand under and subject to the provisions of Article
1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money,
is breached, an interest on the amount of damages awarded may be
imposed at the discretion of the court at the rate of 6% per annum. No
interest, however, shall be adjudged on unliquidated claims or
damages, except when or until the demand can be established with
reasonable certainty. Accordingly, where the demand is established
with reasonable certainty, the interest shall begin to run from the time
the claim is made judicially or extrajudicially (Art. 1169, Civil Code), but
when such certainty cannot be so reasonably established at the time
the demand is made, the interest shall begin to run only from the date
the judgment of the court is made (at which time the quantification of
damages may be deemed to have been reasonably ascertained). The
actual base for the computation of legal interest shall, in any case, be
on the amount finally adjudged. 3. When the judgment of the court
awarding a sum of money becomes final and executory, the rate of
legal interest, whether the case falls under paragraph 1 or paragraph 2,
above, shall be 6% per annum from such finality until its satisfaction,
this interim period being deemed to be by then an equivalent to a
forbearance of credit.
And, in addition to the above, judgments that have become final and executory
prior to July 1, 2013, shall not be disturbed and shall continue to be
implemented applying the rate of interest fixed therein. 131
Circular No. 799 is applicable only in loans and forbearance of money, goods,
or credits, and in judgments when there is no stipulation on the applicable
interest rate. Further, it is only applicable if the judgment did not become final
and executory before July 1, 2013.132
We add that Circular No. 799 is not applicable when there is a law that states
otherwise. While the Bangko Sentral ng Pilipinas has the power to set or limit
interest rates,133 these interest rates do not apply when the law provides that a
different interest rate shall be applied. "[A] Central Bank Circular cannot repeal
a law. Only a law can repeal another law."134
For example, Section 10 of Republic Act No. 8042 provides that unlawfully
terminated overseas workers are entitled to the reimbursement of his or her
placement fee with an interest of 12% per annum. Since Bangko Sentral ng
Pilipinas circulars cannotrepeal Republic Act No. 8042, the issuance of Circular
No. 799 does not have the effect of changing the interest on awards for
reimbursement of placement fees from 12% to 6%. This is despite Section 1 of
Circular No. 799, which provides that the 6% interest rate applies even to
judgments.
Moreover, laws are deemed incorporated in contracts. "The contracting parties
need not repeat them. They do not even have to be referred to. Every contract,
thus, contains not only what has been explicitly stipulated, but the statutory
provisions that have any bearing on the matter."135 There is, therefore, an
implied stipulation in contracts between the placement agency and the
overseasworker that in case the overseas worker is adjudged as entitled to
reimbursement of his or her placement fees, the amount shall be subject to a
12% interest per annum. This implied stipulation has the effect of removing
awards for reimbursement of placement fees from Circular No. 799’s coverage.
The same cannot be said for awardsof salary for the unexpired portion of the
employment contract under Republic Act No. 8042. These awards are covered
by Circular No. 799 because the law does not provide for a specific interest rate
that should apply.
In sum, if judgment did not become final and executory before July 1, 2013 and
there was no stipulation in the contract providing for a different interest rate,
other money claims under Section 10 of Republic Act No. 8042 shall be subject
to the 6% interest per annum in accordance with Circular No. 799.
This means that respondent is also entitled to an interest of 6% per annum on
her money claims from the finality of this judgment.
IV
Finally, we clarify the liabilities ofWacoal as principal and petitioner as the
employment agency that facilitated respondent’s overseas employment.
Section 10 of the Migrant Workers and Overseas Filipinos Act of 1995 provides
that the foreign employer and the local employment agency are jointly and
severally liable for money claims including claims arising out of an employer-
employee relationship and/or damages. This section also provides that the
performance bond filed by the local agency shall be answerable for such
money claims or damages if they were awarded to the employee.
This provision is in line with the state’s policy of affording protection to labor
and alleviating workers’ plight.136
In overseas employment, the filing of money claims against the foreign
employer is attended by practical and legal complications.1âwphi1 The
distance of the foreign employer alonemakes it difficult for an overseas worker
to reach it and make it liable for violations of the Labor Code. There are also
possible conflict of laws, jurisdictional issues, and procedural rules that may be
raised to frustrate an overseas worker’sattempt to advance his or her claims.
It may be argued, for instance, that the foreign employer must be impleaded in
the complaint as an indispensable party without which no final determination
can be had of an action.137
The provision on joint and several liability in the Migrant Workers and Overseas
Filipinos Act of 1995 assures overseas workers that their rights will not be
frustrated with these complications. The fundamental effect of joint and several
liability is that "each of the debtors is liable for the entire obligation."138 A final
determination may, therefore, be achieved even if only oneof the joint and
several debtors are impleaded in an action. Hence, in the case of overseas
employment, either the local agency or the foreign employer may be sued for
all claims arising from the foreign employer’s labor law violations. This way, the
overseas workers are assured that someone — the foreign employer’s local
agent — may be made to answer for violationsthat the foreign employer may
have committed.
The Migrant Workers and Overseas Filipinos Act of 1995 ensures that overseas
workers have recourse in law despite the circumstances of their employment.
By providing that the liability of the foreign employer may be "enforced to the
full extent"139 against the local agent,the overseas worker is assured of
immediate and sufficientpayment of what is due them.140
Corollary to the assurance of immediate recourse in law, the provision on joint
and several liability in the Migrant Workers and Overseas Filipinos Act of 1995
shifts the burden of going after the foreign employer from the overseas worker
to the local employment agency. However, it must be emphasized that the local
agency that is held to answer for the overseas worker’s money claims is not
leftwithout remedy. The law does not preclude it from going after the foreign
employer for reimbursement of whatever payment it has made to the employee
to answer for the money claims against the foreign employer.
A further implication of making localagencies jointly and severally liable with the
foreign employer is thatan additional layer of protection is afforded to overseas
workers. Local agencies, which are businesses by nature, are inoculated with
interest in being always on the lookout against foreign employers that tend to
violate labor law. Lest they risk their reputation or finances, local agenciesmust
already have mechanisms for guarding against unscrupulous foreign employers
even at the level prior to overseas employment applications.
With the present state of the pleadings, it is not possible to determine whether
there was indeed a transfer of obligations from petitioner to Pacific. This should
not be an obstacle for the respondent overseas worker to proceed with the
enforcement of this judgment. Petitioner is possessed with the resources to
determine the proper legal remedies to enforce its rights against Pacific, if any.
V per annum from the finality of this judgment. Petitioner is also ORDERED to
Many times, this court has spoken on what Filipinos may encounter as they
travel into the farthest and mostdifficult reaches of our planet to provide for their
families. In Prieto v. NLRC:141
The Court is not unaware of the many abuses suffered by our overseas
workers in the foreign land where they have ventured, usually with heavy
hearts, in pursuit of a more fulfilling future. Breach of contract, maltreatment,
rape, insufficient nourishment, sub-human lodgings, insults and other forms of
debasement, are only a few of the inhumane acts towhich they are subjected
by their foreign employers, who probably feel they can do as they please in
their own country. Whilethese workers may indeed have relatively little defense
against exploitation while they are abroad, that disadvantage must not continue
to burden them when they return to their own territory to voice their muted
complaint. There is no reason why, in their very own land, the protection of our
own laws cannot be extended to them in full measure for the redress of their
grievances.142
But it seems that we have not said enough.
We face a diaspora of Filipinos. Their travails and their heroism can be told a
million times over; each of their stories as real as any other. Overseas Filipino
workers brave alien cultures and the heartbreak of families left behind daily.
They would count the minutes, hours, days, months, and years yearning to see
their sons and daughters. We all know of the joy and sadness when they come
home to see them all grown up and, being so, they remember what their work
has cost them. Twitter accounts, Facetime, and many other gadgets and online
applications will never substitute for their lost physical presence.
Unknown to them, they keep our economy afloat through the ebb and flow of
political and economic crises. They are our true diplomats, they who show the
world the resilience, patience, and creativity of our people. Indeed, we are a
people who contribute much to the provision of material creations of this world.
This government loses its soul if we fail to ensure decent treatment for all
Filipinos. We default by limiting the contractual wages that should be paid to
our workers when their contracts are breached by the foreign employers. While
we sit, this court will ensure that our laws will reward our overseas workers with
what they deserve: their dignity.
Inevitably, their dignity is ours as weil.
WHEREFORE, the petition is DENIED. The decision of the Court of Appeals is
AFFIRMED with modification. Petitioner Sameer Overseas Placement Agency
is ORDERED to pay respondent Joy C. Cabiles the amount equivalent to her
salary for the unexpired portion of her employment contract at an interest of 6%
reimburse respondent the withheld NT$3,000.00 salary and pay respondent
attorney's fees of NT$300.00 at an interest of 6% per annum from the finality of
this judgment.
The clause, "or for three (3) months for every year of the unexpired term,
whichever is less" in Section 7 of Republic Act No. 10022 amending Section 10
of Republic Act No. 8042 is declared unconstitutional and, therefore, null and
void.
SO ORDERED.
EN BANC
G.R. No. 206510 September 16, 2014
MOST REV. PEDRO D. ARIGO, Vicar Apostolic of Puerto Princesa D.D.;
MOST REV. DEOGRACIAS S. INIGUEZ, JR., Bishop-Emeritus of Caloocan,
FRANCES Q. QUIMPO, CLEMENTE G. BAUTISTA, JR., Kalikasan-PNE,
MARIA CAROLINA P. ARAULLO, RENATO M. REYES, JR., Bagong
Alyansang Makabayan, HON. NERI JAVIER COLMENARES, Bayan Muna
Partylist, ROLAND G. SIMBULAN, PH.D., Junk VF A Movement, TERESITA
R. PEREZ, PH.D., HON. RAYMOND V. PALATINO, Kabataan Party-list,
PETER SJ. GONZALES, Pamalakaya, GIOVANNI A. TAPANG, PH. D.,
Agham, ELMER C. LABOG, Kilusang Mayo Uno, JOAN MAY E.
SALVADOR, Gabriela, JOSE ENRIQUE A. AFRICA, THERESA A.
CONCEPCION, MARY JOAN A. GUAN, NESTOR T. BAGUINON, PH.D., A.
EDSEL F. TUPAZ, Petitioners,
vs.
SCOTT H. SWIFT in his capacity as Commander of the US. 7th Fleet,
MARK A. RICE in his capacity as Commanding Officer of the USS
Guardian, PRESIDENT BENIGNO S. AQUINO III in his capacity as
Commander-in-Chief of the Armed Forces of the Philippines, HON.
ALBERT F. DEL ROSARIO, Secretary, pepartment of Foreign Affair.s,
HON. PAQUITO OCHOA, JR., Executiv~.:Secretary, Office of the
President, . HON. VOLTAIRE T. GAZMIN, Secretary, Department of
National Defense, HON. RAMON JESUS P. P AJE, Secretary, Department
of Environment and Natural Resoz!rces, VICE ADMIRAL JOSE LUIS M.
ALANO, Philippine Navy Flag Officer in Command, Armed Forces of the
Philippines, ADMIRAL RODOLFO D. ISO RENA, Commandant, Philippine
Coast Guard, COMMODORE ENRICO EFREN EVANGELISTA, Philippine
Coast Guard Palawan, MAJOR GEN. VIRGILIO 0. DOMINGO, Commandant
of Armed Forces of the Philippines Command and LT. GEN. TERRY G.
ROBLING, US Marine Corps Forces. Pacific and Balikatan 2013 Exercise
Co-Director, Respondents.
DECISION
VILLARAMA, JR, J.:
Before us is a petition for the issuance of a Writ of Kalikasan with prayer for the
issuance of a Temporary Environmental Protection Order (TEPO) under Rule 7
of A.M. No. 09-6-8-SC, otherwise known as the Rules of Procedure for
Environmental Cases (Rules), involving violations of environmental laws and
regulations in relation to the grounding of the US military ship USS Guardian
over the Tubbataha Reefs.
Factual Background
The name "Tubbataha" came from the Samal (seafaring people of southern
Philippines) language which means "long reef exposed at low tide." Tubbataha
is composed of two huge coral atolls - the north atoll and the south atoll - and
the Jessie Beazley Reef, a smaller coral structure about 20 kilometers north of
the atolls. The reefs of Tubbataha and Jessie Beazley are considered part of
Cagayancillo, a remote island municipality of Palawan. 1
In 1988, Tubbataha was declared a National Marine Park by virtue of
Proclamation No. 306 issued by President Corazon C. Aquino on August 11,
1988. Located in the middle of Central Sulu Sea, 150 kilometers southeast of
Puerto Princesa City, Tubbataha lies at the heart of the Coral Triangle, the
global center of marine biodiversity.
In 1993, Tubbataha was inscribed by the United Nations Educational Scientific
and Cultural Organization (UNESCO) as a World Heritage Site. It was
recognized as one of the Philippines' oldest ecosystems, containing excellent
examples of pristine reefs and a high diversity of marine life. The 97,030-
hectare protected marine park is also an important habitat for internationally
threatened and endangered marine species. UNESCO cited Tubbataha's
outstanding universal value as an important and significant natural habitat for in
situ conservation of biological diversity; an example representing significant on-
going ecological and biological processes; and an area of exceptional natural
beauty and aesthetic importance.2
On April 6, 2010, Congress passed Republic Act (R.A.) No. 10067,3 otherwise
known as the "Tubbataha Reefs Natural Park (TRNP) Act of 2009" "to ensure
the protection and conservation of the globally significant economic, biological,
sociocultural, educational and scientific values of the Tubbataha Reefs into
perpetuity for the enjoyment of present and future generations." Under the "no-
take" policy, entry into the waters of TRNP is strictly regulated and many
human activities are prohibited and penalized or fined, including fishing,
gathering, destroying and disturbing the resources within the TRNP. The law
likewise created the Tubbataha Protected Area Management Board (TPAMB)
which shall be the sole policy-making and permit-granting body of the TRNP.
The USS Guardian is an Avenger-class mine countermeasures ship of the US
Navy. In December 2012, the US Embassy in the Philippines requested
diplomatic clearance for the said vessel "to enter and exit the territorial waters
of the Philippines and to arrive at the port of Subic Bay for the purpose of
routine ship replenishment, maintenance, and crew liberty."4 On January 6,
2013, the ship left Sasebo, Japan for Subic Bay, arriving on January 13, 2013
after a brief stop for fuel in Okinawa, Japan.1âwphi1
On January 15, 2013, the USS Guardian departed Subic Bay for its next port of
call in Makassar, Indonesia. On January 17, 2013 at 2:20 a.m. while transiting
the Sulu Sea, the ship ran aground on the northwest side of South Shoal of the
Tubbataha Reefs, about 80 miles east-southeast of Palawan. No cine was
injured in the incident, and there have been no reports of leaking fuel or oil.
On January 20, 2013, U.S. 7th Fleet Commander, Vice Admiral Scott Swift,
expressed regret for the incident in a press statement.5 Likewise, US
Ambassador to the Philippines Harry K. Thomas, Jr., in a meeting at the
Department of Foreign Affairs (DFA) on February 4, "reiterated his regrets over
the grounding incident and assured Foreign Affairs Secretazy Albert F. del
Rosario that the United States will provide appropriate compensation for
damage to the reef caused by the ship."6 By March 30, 2013, the US Navy-led
salvage team had finished removing the last piece of the grounded ship from
the coral reef.
On April 1 7, 2013, the above-named petitioners on their behalf and in
representation of their respective sector/organization and others, including
minors or generations yet unborn, filed the present petition agairtst Scott H.
Swift in his capacity as Commander of the US 7th Fleet, Mark A. Rice in his
capacity as Commanding Officer of the USS Guardian and Lt. Gen. Terry G.
Robling, US Marine Corps Forces, Pacific and Balikatan 2013 Exercises Co-
Director ("US respondents"); President Benigno S. Aquino III in his capacity as
Commander-in-Chief of the Armed Forces of the Philippines (AFP), DF A
Secretary Albert F. Del Rosario, Executive Secretary Paquito Ochoa, Jr.,
Secretary Voltaire T. Gazmin (Department of National Defense), Secretary
Jesus P. Paje (Department of Environment and Natural Resources), Vice-
Admiral Jose Luis M. Alano (Philippine Navy Flag Officer in Command, AFP),
Admiral Rodolfo D. Isorena (Philippine Coast Guard Commandant),
Commodore Enrico Efren Evangelista (Philippine Coast Guard-Palawan), and
Major General Virgilio 0. Domingo (AFP Commandant), collectively the
"Philippine respondents."
The Petition
Petitioners claim that the grounding, salvaging and post-salvaging operations of
the USS Guardian cause and continue to cause environmental damage of such
magnitude as to affect the provinces of Palawan, Antique, Aklan, Guimaras,
Iloilo, Negros Occidental, Negros Oriental, Zamboanga del Norte, Basilan,
Sulu, and Tawi-Tawi, which events violate their constitutional rights to a
balanced and healthful ecology. They also seek a directive from this Court for
the institution of civil, administrative and criminal suits for acts committed in
violation of environmental laws and regulations in connection with the
grounding incident.
Specifically, petitioners cite the following violations committed by US
respondents under R.A. No. 10067: unauthorized entry (Section 19); non-
payment of conservation fees (Section 21 ); obstruction of law enforcement
officer (Section 30); damages to the reef (Section 20); and destroying and
disturbing resources (Section 26[g]). Furthermore, petitioners assail certain
provisions of the Visiting Forces Agreement (VFA) which they want this Court to
nullify for being unconstitutional.
The numerous reliefs sought in this case are set forth in the final prayer of the
petition, to wit: WHEREFORE, in view of the foregoing, Petitioners respectfully
pray that the Honorable Court: 1. Immediately issue upon the filing of this
petition a Temporary Environmental Protection Order (TEPO) and/or a Writ of
Kalikasan, which shall, in particular,
a. Order Respondents and any person acting on their behalf, to cease
and desist all operations over the Guardian grounding incident;
b. Initially demarcating the metes and bounds of the damaged area as
well as an additional buffer zone;
c. Order Respondents to stop all port calls and war games under
'Balikatan' because of the absence of clear guidelines, duties, and
liability schemes for breaches of those duties, and require
Respondents to assume responsibility for prior and future
environmental damage in general, and environmental damage under
the Visiting Forces Agreement in particular.
d. Temporarily define and describe allowable activities of ecotourism,
diving, recreation, and limited commercial activities by fisherfolk and
indigenous communities near or around the TRNP but away from the
damaged site and an additional buffer zone;
2. After summary hearing, issue a Resolution extending the TEPO until
further orders of the Court;
3. After due proceedings, render a Decision which shall include, without
limitation:
a. Order Respondents Secretary of Foreign Affairs, following the
dispositive portion of Nicolas v. Romulo, "to forthwith negotiate with the
United States representatives for the appropriate agreement on
[environmental guidelines and environmental accountability] under
Philippine authorities as provided in Art. V[] of the VFA ... "
b. Direct Respondents and appropriate agencies to commence
administrative, civil, and criminal proceedings against erring officers
and individuals to the full extent of the law, and to make such
proceedings public;
c. Declare that Philippine authorities may exercise primary and
exclusive criminal jurisdiction over erring U.S. personnel under the
circumstances of this case;
d. Require Respondents to pay just and reasonable compensation in
the settlement of all meritorious claims for damages caused to the
Tubbataha Reef on terms and conditions no less severe than those
applicable to other States, and damages for personal injury or death, if
such had been the case;
e. Direct Respondents to cooperate in providing for the attendance of
witnesses and in the collection and production of evidence, including
seizure and delivery of objects connected with the offenses related to
the grounding of the Guardian;
f. Require the authorities of the Philippines and the United States to
notify each other of the disposition of all cases, wherever heard, related
to the grounding of the Guardian;
g. Restrain Respondents from proceeding with any purported
restoration, repair, salvage or post salvage plan or plans, including
cleanup plans covering the damaged area of the Tubbataha Reef
absent a just settlement approved by the Honorable Court;
h. Require Respondents to engage in stakeholder and LOU
consultations in accordance with the Local Government Code and R.A.
10067;
i. Require Respondent US officials and their representatives to place a
deposit to the TRNP Trust Fund defined under Section 17 of RA 10067
as a bona .fide gesture towards full reparations;
j. Direct Respondents to undertake measures to rehabilitate the areas
affected by the grounding of the Guardian in light of Respondents'
experience in the Port Royale grounding in 2009, among other similar
grounding incidents;
k. Require Respondents to regularly publish on a quarterly basis and in
the name of transparency and accountability such environmental
damage assessment, valuation, and valuation methods, in all stages of
negotiation;
l. Convene a multisectoral technical working group to provide scientific
and technical support to the TPAMB;
m. Order the Department of Foreign Affairs, Department of National
Defense, and the Department of Environment and Natural Resources
to review the Visiting Forces Agreement and the Mutual Defense
Treaty to consider whether their provisions allow for the exercise of
erga omnes rights to a balanced and healthful ecology and for
damages which follow from any violation of those rights;
n. Narrowly tailor the provisions of the Visiting Forces Agreement for
purposes of protecting the damaged areas of TRNP;
o. Declare the grant of immunity found in Article V ("Criminal
Jurisdiction") and Article VI of the Visiting Forces Agreement
unconstitutional for violating equal protection and/or for violating the
preemptory norm of nondiscrimination incorporated as part of the law of
the land under Section 2, Article II, of the Philippine Constitution;
p. Allow for continuing discovery measures;
q. Supervise marine wildlife rehabilitation in the Tubbataha Reefs in all
other respects; and
4. Provide just and equitable environmental rehabilitation measures
and such other reliefs as are just and equitable under the
premises.7 (Underscoring supplied.)
Since only the Philippine respondents filed their comment8 to the petition,
petitioners also filed a motion for early resolution and motion to proceed ex
parte against the US respondents.9
Respondents' Consolidated Comment
In their consolidated comment with opposition to the application for a TEPO
and ocular inspection and production orders, respondents assert that: ( 1) the
grounds relied upon for the issuance of a TEPO or writ of Kalikasan have
become fait accompli as the salvage operations on the USS Guardian were
already completed; (2) the petition is defective in form and substance; (3) the
petition improperly raises issues involving the VFA between the Republic of the
Philippines and the United States of America; and ( 4) the determination of the
extent of responsibility of the US Government as regards the damage to the
Tubbataha Reefs rests exdusively with the executive branch.
The Court's Ruling
As a preliminary matter, there is no dispute on the legal standing of petitioners
to file the present petition.
Locus standi is "a right of appearance in a court of justice on a given
question."10 Specifically, it is "a party's personal and substantial interest in a
case where he has sustained or will sustain direct injury as a result" of the act
being challenged, and "calls for more than just a generalized
grievance."11 However, the rule on standing is a procedural matter which this
Court has relaxed for non-traditional plaintiffs like ordinary citizens, taxpayers
and legislators when the public interest so requires, such as when the subject
matter of the controversy is of transcendental importance, of overreaching
significance to society, or of paramount public interest.12
In the landmark case of Oposa v. Factoran, Jr.,13 we recognized the "public
right" of citizens to "a balanced and healthful ecology which, for the first time in
our constitutional history, is solemnly incorporated in the fundamental law." We
declared that the right to a balanced and healthful ecology need not be written
in the Constitution for it is assumed, like other civil and polittcal rights
guaranteed in the Bill of Rights, to exist from the inception of mankind and it is
an issue of transcendental importance with intergenerational
implications.1âwphi1 Such right carries with it the correlative duty to refrain
from impairing the environment.14
On the novel element in the class suit filed by the petitioners minors in Oposa,
this Court ruled that not only do ordinary citizens have legal standing to sue for
the enforcement of environmental rights, they can do so in representation of
their own and future generations. Thus:
Petitioners minors assert that they represent their generation as well as
generations yet unborn. We find no difficulty in ruling that they can, for
themselves, for others of their generation and for the succeeding generations,
file a class suit. Their personality to sue in behalf of the succeeding generations
can only be based on the concept of intergenerational responsibility insofar as
the right to a balanced and healthful ecology is concerned. Such a right, as
hereinafter expounded, considers the "rhythm and harmony of nature." Nature
means the created world in its entirety. Such rhythm and harmony
indispensably include, inter alia, the judicious disposition, utilization,
management, renewal and conservation of the country's forest, mineral, land,
waters, fisheries, wildlife, off-shore areas and other natural resources to the
end that their exploration, development and utilization be equitably accessible
to the present a:: well as future generations. Needless to say, every generation
has a responsibility to the next to preserve that rhythm and harmony for the full
1:njoyment of a balanced and healthful ecology. Put a little differently, the
minors' assertion of their right to a sound environment constitutes, at the same
time, the performance of their obligation to ensure the protection of that right for
the generations to come.15 (Emphasis supplied.)
The liberalization of standing first enunciated in Oposa, insofar as it refers to
minors and generations yet unborn, is now enshrined in the Rules which allows
the filing of a citizen suit in environmental cases. The provision on citizen suits
in the Rules "collapses the traditional rule on personal and direct interest, on
the principle that humans are stewards of nature."16
Having settled the issue of locus standi, we shall address the more
fundamental question of whether this Court has jurisdiction over the US
respondents who did not submit any pleading or manifestation in this case.
The immunity of the State from suit, known also as the doctrine of sovereign
immunity or non-suability of the State,17is expressly provided in Article XVI of
the 1987 Constitution which states:
Section 3. The State may not be sued without its consent.
In United States of America v. Judge Guinto,18 we discussed the principle of
state immunity from suit, as follows:
The rule that a state may not be sued without its consent, now · expressed in
Article XVI, Section 3, of the 1987 Constitution, is one of the generally accepted
principles of international law that we have adopted as part of the law of our
land under Article II, Section 2. x x x.
Even without such affirmation, we would still be bound by the generally
accepted principles of international law under the doctrine of incorporation.
Under this doctrine, as accepted by the majority of states, such principles are
deemed incorporated in the law of every civilized state as a condition and
consequence of its membership in the society of nations. Upon its admission to
such society, the state is automatically obligated to comply with these principles
in its relations with other states.
As applied to the local state, the doctrine of state immunity is based on the
justification given by Justice Holmes that ''there can be no legal right against
the authority which makes the law on which the right depends." [Kawanakoa v.
Polybank, 205 U.S. 349] There are other practical reasons for the enforcement
of the doctrine. In the case of the foreign state sought to be impleaded in the
local jurisdiction, the added inhibition is expressed in the maxim par in parem,
non habet imperium. All states are sovereign equals and cannot assert
jurisdiction over one another. A contrary disposition would, in the language of a
celebrated case, "unduly vex the peace of nations." [De Haber v. Queen of
Portugal, 17 Q. B. 171]
While the doctrine appears to prohibit only suits against the state without its
consent, it is also applicable to complaints filed against officials of the state for
acts allegedly performed by them in the discharge of their duties. The rule is
that if the judgment against such officials will require the state itself to perform
an affirmative act to satisfy the same,. such as the appropriation of the amount
needed to pay the damages awarded against them, the suit must be regarded
as against the state itself although it has not been formally impleaded. [Garcia
v. Chief of Staff, 16 SCRA 120] In such a situation, the state may move to
dismiss the comp.taint on the ground that it has been filed without its
consent.19 (Emphasis supplied.)
Under the American Constitution, the doctrine is expressed in the Eleventh
Amendment which reads:
The Judicial power of the United States shall not be construed to extend to any
suit in law or equity, commenced or prosecuted against one of the United
States by Citizens of another State, or by Citizens or Subjects of any Foreign
State.
In the case of Minucher v. Court of Appeals,20 we further expounded on the
immunity of foreign states from the jurisdiction of local courts, as follows:
The precept that a State cannot be sued in the courts of a foreign state is a
long-standing rule of customary international law then closely identified with the
personal immunity of a foreign sovereign from suit and, with the emergence of
democratic states, made to attach not just to the person of the head of state, or
his representative, but also distinctly to the state itself in its sovereign capacity.
If the acts giving rise to a suit arc those of a foreign government done by its
foreign agent, although not necessarily a diplomatic personage, but acting in
his official capacity, the complaint could be barred by the immunity of the
foreign sovereign from suit without its consent. Suing a representative of a state
is believed to be, in effect, suing the state itself. The proscription is not
accorded for the benefit of an individual but for the State, in whose service he
is, under the maxim -par in parem, non habet imperium -that all states are
soverr~ign equals and cannot assert jurisdiction over one another. The
implication, in broad terms, is that if the judgment against an official would rec
1uire the state itself to perform an affirmative act to satisfy the award, such as
the appropriation of the amount needed to pay the damages decreed against
him, the suit must be regarded as being against the state itself, although it has
not been formally impleaded.21 (Emphasis supplied.)
In the same case we also mentioned that in the case of diplomatic immunity,
the privilege is not an immunity from the observance of the law of the territorial
sovereign or from ensuing legal liability; it is, rather, an immunity from the
exercise of territorial jurisdiction.22
In United States of America v. Judge Guinto,23 one of the consolidated cases
therein involved a Filipino employed at Clark Air Base who was arrested
following a buy-bust operation conducted by two officers of the US Air Force,
and was eventually dismissed from his employment when he was charged in
court for violation of R.A. No. 6425. In a complaint for damages filed by the said
employee against the military officers, the latter moved to dismiss the case on
the ground that the suit was against the US Government which had not given
its consent. The RTC denied the motion but on a petition for certiorari and
prohibition filed before this Court, we reversed the RTC and dismissed the
complaint. We held that petitioners US military officers were acting in the
exercise of their official functions when they conducted the buy-bust operation
against the complainant and thereafter testified against him at his trial. It follows
that for discharging their duties as agents of the United States, they cannot be
directly impleaded for acts imputable to their principal, which has not given its
consent to be sued.
This traditional rule of State immunity which exempts a State from being sued
in the courts of another State without the former's consent or waiver has
evolved into a restrictive doctrine which distinguishes sovereign and
governmental acts (Jure imperil") from private, commercial and proprietary acts
(Jure gestionis). Under the restrictive rule of State immunity, State immunity
extends only to acts Jure imperii. The restrictive application of State immunity is
proper only when the proceedings arise out of commercial transactions of the
foreign sovereign, its commercial activities or economic affairs.24
In Shauf v. Court of Appeals,25 we discussed the limitations of the State
immunity principle, thus:
It is a different matter where the public official is made to account in his
capacity as such for acts contrary to law and injurious to the rights of plaintiff.
As was clearly set forth by JustiGe Zaldivar in Director of the Bureau of
Telecommunications, et al. vs. Aligaen, etc., et al. : "Inasmuch as the State
authorizes only legal acts by its officers, unauthorized acts of government
officials or officers are not acts of the State, and an action against the officials
or officers by one whose rights have been invaded or violated by such acts, for
the protection of his rights, is not a suit against the State within the rule of
immunity of the State from suit. In the same tenor, it has been said that an
action at law or suit in equity against a State officer or the director of a State
department on the ground that, while claiming to act for the State, he violates or
invades the personal and property rights of the plaintiff, under an
unconstitutional act or under an assumption of authority which he does not
have, is not a suit against the State within the constitutional provision that the
State may not be sued without its consent." The rationale for this ruling is that
the doctrine of state immunity cannot be used as an instrument for perpetrating
an injustice.
xxxx
The aforecited authorities are clear on the matter. They state that the doctrine
of immunity from suit will not apply and may not be invoked where the public
official is being sued in his private and personal capacity as an ordinary citizen.
The cloak of protection afforded the officers and agents of the government is
removed the moment they are sued in their individual capacity. This situation
usually arises where the public official acts without authority or in excess of the
powers vested in him. It is a well-settled principle of law that a public official
may be liable in his personal private capacity for whatever damage he may
have caused by his act done with malice and in bad faith, or beyond the scope
of his authority or jurisdiction.26 (Emphasis supplied.) In this case, the US
respondents were sued in their official capacity as commanding officers of the
US Navy who had control and supervision over the USS Guardian and its crew.
The alleged act or omission resulting in the unfortunate grounding of the USS
Guardian on the TRNP was committed while they we:re performing official
military duties. Considering that the satisfaction of a judgment against said
officials will require remedial actions and appropriation of funds by the US
government, the suit is deemed to be one against the US itself. The principle of
State immunity therefore bars the exercise of jurisdiction by this Court over the
persons of respondents Swift, Rice and Robling.
During the deliberations, Senior Associate Justice Antonio T. Carpio took the
position that the conduct of the US in this case, when its warship entered a
restricted area in violation of R.A. No. 10067 and caused damage to the TRNP
reef system, brings the matter within the ambit of Article 31 of the United
Nations Convention on the Law of the Sea (UNCLOS). He explained that while
historically, warships enjoy sovereign immunity from suit as extensions of their
flag State, Art. 31 of the UNCLOS creates an exception to this rule in cases
where they fail to comply with the rules and regulations of the coastal State
regarding passage through the latter's internal waters and the territorial sea.
According to Justice Carpio, although the US to date has not ratified the
UNCLOS, as a matter of long-standing policy the US considers itself bound by
customary international rules on the "traditional uses of the oceans" as codified
in UNCLOS, as can be gleaned from previous declarations by former
Presidents Reagan and Clinton, and the US judiciary in the case of United
States v. Royal Caribbean Cruise Lines, Ltd.27
The international law of the sea is generally defined as "a body of treaty rules
arid customary norms governing the uses of the sea, the exploitation of its
resources, and the exercise of jurisdiction over maritime regimes. It is a branch
of public international law, regulating the relations of states with respect to the
uses of the oceans."28 The UNCLOS is a multilateral treaty which was opened
for signature on December 10, 1982 at Montego Bay, Jamaica. It was ratified
by the Philippines in 1984 but came into force on November 16, 1994 upon the
submission of the 60th ratification.
The UNCLOS is a product of international negotiation that seeks to balance
State sovereignty (mare clausum) and the principle of freedom of the high seas
(mare liberum).29 The freedom to use the world's marine waters is one of the
oldest customary principles of international law.30 The UNCLOS gives to the
coastal State sovereign rights in varying degrees over the different zones of the
sea which are: 1) internal waters, 2) territorial sea, 3) contiguous zone, 4)
exclusive economic zone, and 5) the high seas. It also gives coastal States
more or less jurisdiction over foreign vessels depending on where the vessel is
located.31
Insofar as the internal waters and territorial sea is concerned, the Coastal State
exercises sovereignty, subject to the UNCLOS and other rules of international
law. Such sovereignty extends to the air space over the territorial sea as well as
to its bed and subsoil.32
In the case of warships,33 as pointed out by Justice Carpio, they continue to
enjoy sovereign immunity subject to the following exceptions:
Article 30
Non-compliance by warships with the laws and regulations of the coastal State
If any warship does not comply with the laws and regulations of the coastal
State concerning passage through the territorial sea and disregards any
request for compliance therewith which is made to it, the coastal State may
require it to leave the territorial sea immediately.
Article 31
Responsibility of the flag State for damage caused by a warship
or other government ship operated for non-commercial purposes
The flag State shall bear international responsibility for any loss or damage to
the coastal State resulting from the non-compliance by a warship or other
government ship operated for non-commercial purposes with the laws and
regulations of the coastal State concerning passage through the territorial sea
or with the provisions of this Convention or other rules of international law.
Article 32
Immunities of warships and other government ships operated for non-
commercial purposes
With such exceptions as are contained in subsection A and in articles 30 and
31, nothing in this Convention affects the immunities of warships and other
government ships operated for non-commercial purposes. (Emphasis supplied.)
A foreign warship's unauthorized entry into our internal waters with resulting
damage to marine resources is one situation in which the above provisions may
apply. But what if the offending warship is a non-party to the UNCLOS, as in
this case, the US?
An overwhelming majority - over 80% -- of nation states are now members of
UNCLOS, but despite this the US, the world's leading maritime power, has not
ratified it.
While the Reagan administration was instrumental in UNCLOS' negotiation and
drafting, the U.S. delegation ultimately voted against and refrained from signing
it due to concerns over deep seabed mining technology transfer provisions
contained in Part XI. In a remarkable, multilateral effort to induce U.S.
membership, the bulk of UNCLOS member states cooperated over the
succeeding decade to revise the objection.able provisions. The revisions
satisfied the Clinton administration, which signed the revised Part XI
implementing agreement in 1994. In the fall of 1994, President Clinton
transmitted UNCLOS and the Part XI implementing agreement to the Senate
requesting its advice and consent. Despite consistent support from President
Clinton, each of his successors, and an ideologically diverse array of
stakeholders, the Senate has since withheld the consent required for the
President to internationally bind the United States to UNCLOS.
While UNCLOS cleared the Senate Foreign Relations Committee (SFRC)
during the 108th and 110th Congresses, its progress continues to be
hamstrung by significant pockets of political ambivalence over U.S. participation
in international institutions. Most recently, 111 th Congress SFRC Chairman
Senator John Kerry included "voting out" UNCLOS for full Senate consideration
among his highest priorities. This did not occur, and no Senate action has been
taken on UNCLOS by the 112th Congress.34
Justice Carpio invited our attention to the policy statement given by President
Reagan on March 10, 1983 that the US will "recognize the rights of the other ,
states in the waters off their coasts, as reflected in the convention [UNCLOS],
so long as the rights and freedom of the United States and others under
international law are recognized by such coastal states", and President
Clinton's reiteration of the US policy "to act in a manner consistent with its
[UNCLOS] provisions relating to traditional uses of the oceans and to
encourage other countries to do likewise." Since Article 31 relates to the
"traditional uses of the oceans," and "if under its policy, the US 'recognize[s] the
rights of the other states in the waters off their coasts,"' Justice Carpio
postulates that "there is more reason to expect it to recognize the rights of other
states in their internal waters, such as the Sulu Sea in this case."
As to the non-ratification by the US, Justice Carpio emphasizes that "the US'
refusal to join the UN CLOS was centered on its disagreement with UN CLOS'
regime of deep seabed mining (Part XI) which considers the oceans and deep
seabed commonly owned by mankind," pointing out that such "has nothing to
do with its [the US'] acceptance of customary international rules on navigation."
It may be mentioned that even the US Navy Judge Advocate General's Corps
publicly endorses the ratification of the UNCLOS, as shown by the following
statement posted on its official website:
The Convention is in the national interest of the United States because it
establishes stable maritime zones, including a maximum outer limit for territorial
seas; codifies innocent passage, transit passage, and archipelagic sea lanes
passage rights; works against "jurisdictiomtl creep" by preventing coastal
nations from expanding their own maritime zones; and reaffirms sovereign
immunity of warships, auxiliaries anJ government aircraft.
xxxx
Economically, accession to the Convention would support our national interests
by enhancing the ability of the US to assert its sovereign rights over the
resources of one of the largest continental shelves in the world. Further, it is the
Law of the Sea Convention that first established the concept of a maritime
Exclusive Economic Zone out to 200 nautical miles, and recognized the rights
of coastal states to conserve and manage the natural resources in this Zone. 35
We fully concur with Justice Carpio's view that non-membership in the
UNCLOS does not mean that the US will disregard the rights of the Philippines
as a Coastal State over its internal waters and territorial sea. We thus expect
the US to bear "international responsibility" under Art. 31 in connection with the
USS Guardian grounding which adversely affected the Tubbataha reefs.
Indeed, it is difficult to imagine that our long-time ally and trading partner, which
has been actively supporting the country's efforts to preserve our vital marine
resources, would shirk from its obligation to compensate the damage caused
by its warship while transiting our internal waters. Much less can we
comprehend a Government exercising leadership in international affairs,
unwilling to comply with the UNCLOS directive for all nations to cooperate in
the global task to protect and preserve the marine environment as provided in
Article 197, viz:
Article 197
Cooperation on a global or regional basis
States shall cooperate on a global basis and, as appropriate, on a regional
basis, directly or through competent international organizations, in formulating
and elaborating international rules, standards and recommended practices and
procedures consistent with this Convention, for the protection and preservation
of the marine environment, taking into account characteristic regional features.
In fine, the relevance of UNCLOS provisions to the present controversy is
beyond dispute. Although the said treaty upholds the immunity of warships from
the jurisdiction of Coastal States while navigating the.latter's territorial sea, the
flag States shall be required to leave the territorial '::;ea immediately if they flout
the laws and regulations of the Coastal State, and they will be liable for
damages caused by their warships or any other government vessel operated
for non-commercial purposes under Article 31.
Petitioners argue that there is a waiver of immunity from suit found in the VFA.
Likewise, they invoke federal statutes in the US under which agencies of the
US have statutorily waived their immunity to any action. Even under the
common law tort claims, petitioners asseverate that the US respondents are
liable for negligence, trespass and nuisance.
We are not persuaded.
The VFA is an agreement which defines the treatment of United States troops
and personnel visiting the Philippines to promote "common security interests"
between the US and the Philippines in the region. It provides for the guidelines
to govern such visits of military personnel, and further defines the rights of the
United States and the Philippine government in the matter of criminal
jurisdiction, movement of vessel and aircraft, importation and exportation of
equipment, materials and supplies.36 The invocation of US federal tort laws and
even common law is thus improper considering that it is the VF A which
governs disputes involving US military ships and crew navigating Philippine
waters in pursuance of the objectives of the agreement.
As it is, the waiver of State immunity under the VF A pertains only to criminal
jurisdiction and not to special civil actions such as the present petition for
issuance of a writ of Kalikasan. In fact, it can be inferred from Section 17, Rule
7 of the Rules that a criminal case against a person charged with a violation of
an environmental law is to be filed separately:
SEC. 17. Institution of separate actions.-The filing of a petition for the issuance
of the writ of kalikasan shall not preclude the filing of separate civil, criminal or
administrative actions.
In any case, it is our considered view that a ruling on the application or non-
application of criminal jurisdiction provisions of the VF A to US personnel who
may be found responsible for the grounding of the USS Guardian, would be
premature and beyond the province of a petition for a writ of Kalikasan. We also
find it unnecessary at this point to determine whether such waiver of State
immunity is indeed absolute. In the same vein, we cannot grant damages which
have resulted from the violation of environmental laws. The Rules allows the
recovery of damages, including the collection of administrative fines under R.A.
No. 10067, in a separate civil suit or that deemed instituted with the criminal
action charging the same violation of an environmental law.37
Section 15, Rule 7 enumerates the reliefs which may be granted in a petition for
issuance of a writ of Kalikasan, to wit:
SEC. 15. Judgment.-Within sixty (60) days from the time the petition is
submitted for decision, the court shall render judgment granting or denying the
privilege of the writ of kalikasan.
The reliefs that may be granted under the writ are the following:
(a) Directing respondent to permanently cease and desist from
committing acts or neglecting the performance of a duty in violation of
environmental laws resulting in environmental destruction or damage;
(b) Directing the respondent public official, govemment agency, private
person or entity to protect, preserve, rehabilitate or restore the
environment;
(c) Directing the respondent public official, government agency, private
person or entity to monitor strict compliance with the decision and
orders of the court;
(d) Directing the respondent public official, government agency, or
private person or entity to make periodic reports on the execution of the
final judgment; and
(e) Such other reliefs which relate to the right of the people to a
balanced and healthful ecology or to the protection, preservation,
rehabilitation or restoration of the environment, except the award of
damages to individual petitioners. (Emphasis supplied.)
We agree with respondents (Philippine officials) in asserting that this petition
has become moot in the sense that the salvage operation sought to be enjoined
or restrained had already been accomplished when petitioners sought recourse
from this Court. But insofar as the directives to Philippine respondents to
protect and rehabilitate the coral reef stn icture and marine habitat adversely
affected by the grounding incident are concerned, petitioners are entitled to
these reliefs notwithstanding the completion of the removal of the USS
Guardian from the coral reef. However, we are mindful of the fact that the US
and Philippine governments both expressed readiness to negotiate and discuss
the matter of compensation for the damage caused by the USS Guardian. The
US Embassy has also declared it is closely coordinating with local scientists
and experts in assessing the extent of the damage and appropriate methods of
rehabilitation.
Exploring avenues for settlement of environmental cases is not proscribed by
the Rules. As can be gleaned from the following provisions, mediation and
settlement are available for the consideration of the parties, and which dispute
resolution methods are encouraged by the court, to wit:
RULE3
xxxx
SEC. 3. Referral to mediation.-At the start of the pre-trial conference, the court
shall inquire from the parties if they have settled the dispute; otherwise, the
court shall immediately refer the parties or their counsel, if authorized by their
clients, to the Philippine Mediation Center (PMC) unit for purposes of
mediation. If not available, the court shall refer the case to the clerk of court or
legal researcher for mediation.
Mediation must be conducted within a non-extendible period of thirty (30) days
from receipt of notice of referral to mediation.
The mediation report must be submitted within ten (10) days from the expiration
of the 30-day period.
SEC. 4. Preliminary conference.-If mediation fails, the court will schedule the
continuance of the pre-trial. Before the scheduled date of continuance, the
court may refer the case to the branch clerk of court for a preliminary
conference for the following purposes:
(a) To assist the parties in reaching a settlement;
xxxx
SEC. 5. Pre-trial conference; consent decree.-The judge shall put the parties
and their counsels under oath, and they shall remain under oath in all pre-trial
conferences.
The judge shall exert best efforts to persuade the parties to arrive at a
settlement of the dispute. The judge may issue a consent decree approving the
agreement between the parties in accordance with law, morals, public order
and public policy to protect the right of the people to a balanced and healthful
ecology.
xxxx
SEC. 10. Efforts to settle.- The court shall endeavor to make the parties to
agree to compromise or settle in accordance with law at any stage of the
proceedings before rendition of judgment. (Underscoring supplied.)
The Court takes judicial notice of a similar incident in 2009 when a guided-
missile cruiser, the USS Port Royal, ran aground about half a mile off the
Honolulu Airport Reef Runway and remained stuck for four days. After
spending $6.5 million restoring the coral reef, the US government was reported
to have paid the State of Hawaii $8.5 million in settlement over coral reef
damage caused by the grounding.38
To underscore that the US government is prepared to pay appropriate
compensation for the damage caused by the USS Guardian grounding, the US
Embassy in the Philippines has announced the formation of a US
interdisciplinary scientific team which will "initiate discussions with the
Government of the Philippines to review coral reef rehabilitation options in
Tubbataha, based on assessments by Philippine-based marine scientists." The
US team intends to "help assess damage and remediation options, in
coordination with the Tubbataha Management Office, appropriate Philippine
government entities, non-governmental organizations, and scientific experts
from Philippine universities."39
A rehabilitation or restoration program to be implemented at the cost of the
violator is also a major relief that may be obtained under a judgment rendered
in a citizens' suit under the Rules, viz:
RULES
SECTION 1. Reliefs in a citizen suit.-If warranted, the court may grant to the
plaintiff proper reliefs which shall include the protection, preservation or
rehabilitation of the environment and the payment of attorney's fees, costs of
suit and other litigation expenses. It may also require the violator to submit a
program of rehabilitation or restoration of the environment, the costs of which
shall be borne by the violator, or to contribute to a special trust fund for that
purpose subject to the control of the court.1âwphi1
In the light of the foregoing, the Court defers to the Executive Branch on the
matter of compensation and rehabilitation measures through diplomatic
channels. Resolution of these issues impinges on our relations with another
State in the context of common security interests under the VFA. It is settled
that "[t]he conduct of the foreign relations of our government is committed by
the Constitution to the executive and legislative-"the political" --departments of
the government, and the propriety of what may be done in the exercise of this
political power is not subject to judicial inquiry or decision." 40
On the other hand, we cannot grant the additional reliefs prayed for in the
petition to order a review of the VFA and to nullify certain immunity provisions
thereof.
As held in BAYAN (Bagong Alyansang Makabayan) v. Exec. Sec.
Zamora,41 the VFA was duly concurred in by the Philippine Senate and has
been recognized as a treaty by the United States as attested and certified by
the duly authorized representative of the United States government. The VF A
being a valid and binding agreement, the parties are required as a matter of
international law to abide by its terms and provisions.42 The present petition
under the Rules is not the proper remedy to assail the constitutionality of its
provisions. WHEREFORE, the petition for the issuance of the privilege of the
Writ of Kalikasan is hereby DENIED.
No pronouncement as to costs.
SO ORDERED.
MARTIN S. VILLARAMA, JR.
Associate Justice
EN BANC
G.R. No. 206666 January 21, 2015
ATTY. ALICIA RISOS-VIDAL, Petitioner,
ALFREDO S. LIM Petitioner-Intervenor,
vs.
COMMISSION ON ELECTIONS and JOSEPH EJERCITO
ESTRADA, Respondents.
DECISION
LEONARDO-DE CASTRO, J.:
Before the Court are (1) a Petition for Certiorari filed under Rule 64, in relation
to Rule 65, both of the Revised Rules of Court, by Atty. Alicia Risos-Vidal
(Risos-Vidal), which essentially prays for the issuance of the writ of certiorari
annulling and setting aside the April 1, 20131 and April 23, 20132 Resolutions of
the Commission on Elections (COMELEC), Second Division and En bane,
respectively, in SPA No. 13-211 (DC), entitled "Atty. Alicia Risos-Vidal v.
Joseph Ejercito Estrada" for having been rendered with grave abuse of
discretion amounting to lack or excess of jurisdiction; and (2) a Petition-in-
Intervention3 filed by Alfredo S. Lim (Lim), wherein he prays to be declared the
2013 winning candidate for Mayor of the City of Manila in view of private
respondent former President Joseph Ejercito Estrada’s (former President
Estrada) disqualification to run for and hold public office.
The Facts
The salient facts of the case are as follows:
On September 12, 2007, the Sandiganbayan convicted former President
Estrada, a former President of the Republic of the Philippines, for the crime of
plunder in Criminal Case No. 26558, entitled "People of the Philippines v.
Joseph Ejercito Estrada, et al." The dispositive part of the graft court’s decision
reads:
WHEREFORE, in view of all the foregoing, judgment is hereby rendered in
Criminal Case No. 26558 finding the accused, Former President Joseph
Ejercito Estrada, GUILTY beyond reasonable doubt of the crime of PLUNDER,
defined in and penalized by Republic Act No. 7080, as amended. On the other
hand, for failure of the prosecution to prove and establish their guilt beyond
reasonable doubt, the Court finds the accused Jose "Jinggoy" Estrada and Atty.
Edward S. Serapio NOT GUILTY of the crime of plunder, and accordingly, the
Court hereby orders their ACQUITTAL.
The penalty imposable for the crime of plunder under Republic Act No. 7080,
as amended by Republic Act No. 7659, is Reclusion Perpetua to Death. There
being no aggravating or mitigating circumstances, however, the lesser penalty
shall be applied in accordance with Article 63 of the Revised Penal Code.
Accordingly, the accused Former President Joseph Ejercito Estrada is hereby
sentenced to suffer the penalty of Reclusion Perpetua and the accessory
penalties of civil interdiction during the period of sentence and perpetual
absolute disqualification.
The period within which accused Former President Joseph Ejercito Estrada has
been under detention shall be credited to him in full as long as he agrees
voluntarily in writing to abide by the same disciplinary rules imposed upon
convicted prisoners.
Moreover, in accordance with Section 2 of Republic Act No. 7080, as amended
by Republic Act No. 7659, the Court hereby declares the forfeiture in favor of
the government of the following:
(1) The total amount of Five Hundred Forty[-]Two Million Seven
Hundred Ninety[-]One Thousand Pesos (₱545,291,000.00), with
interest and income earned, inclusive of the amount of Two Hundred
Million Pesos (₱200,000,000.00), deposited in the name and account
of the Erap Muslim Youth Foundation.
(2) The amount of One Hundred Eighty[-]Nine Million Pesos
(₱189,000,000.00), inclusive of interests and income earned, deposited
in the Jose Velarde account.
(3) The real property consisting of a house and lot dubbed as "Boracay
Mansion" located at #100 11th Street, New Manila, Quezon City.
The cash bonds posted by accused Jose "Jinggoy" Estrada and Atty. Edward
S. Serapio are hereby ordered cancelled and released to the said accused or
their duly authorized representatives upon presentation of the original receipt
evidencing payment thereof and subject to the usual accounting and auditing
procedures. Likewise, the hold-departure orders issued against the said
accused are hereby recalled and declared functus oficio.4
On October 25, 2007, however, former President Gloria Macapagal Arroyo
(former President Arroyo) extended executive clemency, by way of pardon, to
former President Estrada. The full text of said pardon states:
MALACAÑAN PALACE
MANILA
By the President of the Philippines
PARDON
WHEREAS, this Administration has a policy of releasing inmates who have
reached the age of seventy (70),
WHEREAS, Joseph Ejercito Estrada has been under detention for six and a
half years,
WHEREAS, Joseph Ejercito Estrada has publicly committed to no longer seek
any elective position or office,
IN VIEW HEREOF and pursuant to the authority conferred upon me by the
Constitution, I hereby grant executive clemency to JOSEPH EJERCITO
ESTRADA, convicted by the Sandiganbayan of Plunder and imposed a penalty
of Reclusion Perpetua. He is hereby restored to his civil and political rights.
The forfeitures imposed by the Sandiganbayan remain in force and in full,
including all writs and processes issued by the Sandiganbayan in pursuance
hereof, except for the bank account(s) he owned before his tenure as
President.
Upon acceptance of this pardon by JOSEPH EJERCITO ESTRADA, this
pardon shall take effect.
Given under my hand at the City of Manila, this 25th Day of October, in the year
of Our Lord, two thousand and seven.
Gloria M. Arroyo (sgd.)
By the President:
IGNACIO R. BUNYE (sgd.)
Acting Executive Secretary5
On October 26, 2007, at 3:35 p.m., former President Estrada "received and
accepted"6 the pardon by affixing his signature beside his handwritten notation
thereon.
On November 30, 2009, former President Estrada filed a Certificate of
Candidacy7 for the position of President. During that time, his candidacy earned
three oppositions in the COMELEC: (1) SPA No. 09-024 (DC), a "Petition to
Deny Due Course and Cancel Certificate of Candidacy" filed by Rev. Elly Velez
B. Lao Pamatong, ESQ; (2) SPA No. 09-028 (DC), a petition for
"Disqualification as Presidential Candidate" filed by Evilio C. Pormento
(Pormento); and (3) SPA No. 09-104 (DC), a "Petition to Disqualify Estrada
Ejercito, Joseph M.from Running as President due to Constitutional
Disqualification and Creating Confusion to the Prejudice of Estrada, Mary Lou
B" filed by Mary Lou Estrada. In separate Resolutions 8 dated January 20, 2010
by the COMELEC, Second Division, however, all three petitions were
effectively dismissed on the uniform grounds that (i) the Constitutional
proscription on reelection applies to a sitting president; and (ii) the pardon
granted to former President Estrada by former President Arroyo restored the
former’s right to vote and be voted for a public office. The subsequent motions
for reconsideration thereto were denied by the COMELEC En banc.
After the conduct of the May 10, 2010 synchronized elections, however, former
President Estrada only managed to garner the second highest number of votes.
Of the three petitioners above-mentioned, only Pormento sought recourse to
this Court and filed a petition for certiorari, which was docketed as G.R. No.
191988, entitled "Atty. Evilio C. Pormento v. Joseph ‘ERAP’ Ejercito Estrada
and Commission on Elections." But in a Resolution 9 dated August 31, 2010, the
Court dismissed the aforementioned petition on the ground of mootness
considering that former President Estrada lost his presidential bid.
On October 2, 2012, former President Estrada once more ventured into the
political arena, and filed a Certificate of Candidacy,10 this time vying for a local
elective post, that ofthe Mayor of the City of Manila.
On January 24, 2013, Risos-Vidal, the petitioner in this case, filed a Petition for
Disqualification against former President Estrada before the COMELEC. The
petition was docketed as SPA No. 13-211 (DC). Risos Vidal anchored her
petition on the theory that "[Former President Estrada] is Disqualified to Run for
Public Office because of his Conviction for Plunder by the Sandiganbayan in
Criminal Case No. 26558 entitled ‘People of the Philippines vs. Joseph Ejercito
Estrada’ Sentencing Him to Suffer the Penalty of Reclusion Perpetuawith
Perpetual Absolute Disqualification."11 She relied on Section 40 of the Local
Government Code (LGC), in relation to Section 12 of the Omnibus Election
Code (OEC), which state respectively, that:
Sec. 40, Local Government Code:
SECTION 40. Disqualifications.- The following persons are disqualified from
running for any elective local position:
(a) Those sentenced by final judgment for an offense involving moral
turpitude or for an offense punishable by one (1) year or more of
imprisonment, within two (2) years after serving sentence; (b) Those
removed from office as a result of an administrative case;
(c) Those convicted by final judgment for violating the oath of
allegiance to the Republic;
(d) Those with dual citizenship;
(e) Fugitives from justice in criminal or nonpolitical cases here or
abroad;
 (f) Permanent residents in a foreign country or those who have
acquired the right to reside abroad and continue to avail of the same
right after the effectivity of this Code; and
(g) The insane or feeble minded. (Emphasis supplied.)
Sec. 12, Omnibus Election Code:
Section 12. Disqualifications. - Any person who has been declared by
competent authority insane or incompetent, or has been sentenced by final
judgmentfor subversion, insurrection, rebellion, or for any offense for which he
has been sentenced to a penalty of more than eighteen months or for a crime
involving moral turpitude, shall be disqualified to be a candidate and to hold any
public office, unless he has been given plenary pardon or granted amnesty.
(Emphases supplied.)
In a Resolution dated April 1, 2013,the COMELEC, Second Division, dismissed
the petition for disqualification, the fallo of which reads:
WHEREFORE, premises considered, the instant petition is hereby DISMISSED
for utter lack of merit.12
The COMELEC, Second Division, opined that "[h]aving taken judicial
cognizance of the consolidated resolution for SPA No. 09-028 (DC) and SPA
No. 09-104 (DC) and the 10 May 2010 En Banc resolution affirming it, this
Commission will not be labor the controversy further. Moreso, [Risos-Vidal]
failed to present cogent proof sufficient to reverse the standing pronouncement
of this Commission declaring categorically that [former President Estrada’s]
right to seek public office has been effectively restored by the pardon vested
upon him by former President Gloria M. Arroyo. Since this Commission has
already spoken, it will no longer engage in disquisitions of a settled matter lest
indulged in wastage of government resources."13
The subsequent motion for reconsideration filed by Risos-Vidal was denied in a
Resolution dated April 23, 2013.
On April 30, 2013, Risos-Vidal invoked the Court’s jurisdiction by filing the
present petition. She presented five issues for the Court’s resolution, to wit:
I. RESPONDENT COMELEC COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION IN HOLDING THAT RESPONDENT ESTRADA’S
PARDON WAS NOT CONDITIONAL;
II. RESPONDENT COMELEC COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION IN NOT FINDING THAT RESPONDENT ESTRADA IS
DISQUALIFIED TO RUN AS MAYOR OF MANILA UNDER SEC. 40
OF THE LOCAL GOVERNMENTCODE OF 1991 FOR HAVING BEEN
CONVICTED OF PLUNDER, AN OFFENSE INVOLVING MORAL
TURPITUDE;
III. RESPONDENT COMELEC COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION IN DISMISSING THE PETITION FOR
DISQUALIFICATION ON THE GROUND THAT THE CASE INVOLVES
THE SAME OR SIMILAR ISSUES IT ALREADY RESOLVED IN THE
CASES OF "PORMENTO VS. ESTRADA", SPA NO. 09-028 (DC) AND
IN "RE: PETITION TO DISQUALIFY ESTRADA EJERCITO, JOSEPH
M. FROM RUNNING AS PRESIDENT, ETC.," SPA NO. 09-104 (DC);
IV. RESPONDENT COMELEC COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION IN NOT RULING THAT RESPONDENT ESTRADA’S
PARDON NEITHER RESTORED HIS RIGHT OF SUFFRAGE NOR
REMITTED HIS PERPETUAL ABSOLUTE DISQUALIFICATION
FROM SEEKING PUBLIC OFFICE; and
V. RESPONDENT COMELEC COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION IN NOT HAVING EXERCISED ITS POWER TO MOTU
PROPRIO DISQUALIFY RESPONDENT ESTRADA IN THE FACE OF
HIS PATENT DISQUALIFICATION TO RUN FOR PUBLIC OFFICE
BECAUSE OF HIS PERPETUAL AND ABSOLUTE
DISQUALIFICATION TO SEEK PUBLIC OFFICE AND TO VOTE
RESULTING FROM HIS CRIMINAL CONVICTION FOR PLUNDER.14
While this case was pending beforethe Court, or on May 13, 2013, the elections
were conducted as scheduled and former President Estrada was voted into
office with 349,770 votes cast in his favor. The next day, the local board of
canvassers proclaimed him as the duly elected Mayor of the City of Manila.
On June 7, 2013, Lim, one of former President Estrada’s opponents for the
position of Mayor, moved for leave to intervene in this case. His motion was
granted by the Court in a Resolution15 dated June 25, 2013. Lim subscribed to
Risos-Vidal’s theory that former President Estrada is disqualified to run for and
hold public office as the pardon granted to the latter failed to expressly remit his
perpetual disqualification. Further, given that former President Estrada is
disqualified to run for and hold public office, all the votes obtained by the latter
should be declared stray, and, being the second placer with 313,764 votes to
his name, he (Lim) should be declared the rightful winning candidate for the
position of Mayor of the City of Manila.
 The Issue
Though raising five seemingly separate issues for resolution, the petition filed
by Risos-Vidal actually presents only one essential question for resolution by
the Court, that is, whether or not the COMELEC committed grave abuse of
discretion amounting to lack or excess of jurisdiction in ruling that former
President Estrada is qualified to vote and be voted for in public office as a result
of the pardon granted to him by former President Arroyo.
In her petition, Risos-Vidal starts her discussion by pointing out that the pardon
granted to former President Estrada was conditional as evidenced by the
latter’s express acceptance thereof. The "acceptance," she claims, is an
indication of the conditional natureof the pardon, with the condition being
embodied in the third Whereas Clause of the pardon, i.e., "WHEREAS, Joseph
Ejercito Estrada has publicly committed to no longer seek any elective position
or office." She explains that the aforementioned commitment was what impelled
former President Arroyo to pardon former President Estrada, without it, the
clemency would not have been extended. And any breach thereof, that is,
whenformer President Estrada filed his Certificate of Candidacy for President
and Mayor of the City of Manila, he breached the condition of the pardon;
hence, "he ought to be recommitted to prison to serve the unexpired portion of
his sentence x x x and disqualifies him as a candidate for the mayoralty
[position] of Manila."16
Nonetheless, Risos-Vidal clarifies that the fundamental basis upon which
former President Estrada mustbe disqualified from running for and holding
public elective office is actually the proscription found in Section 40 of the LGC,
in relation to Section 12 ofthe OEC. She argues that the crime of plunder is
both an offense punishable by imprisonment of one year or more and involving
moral turpitude; such that former President Estrada must be disqualified to run
for and hold public elective office.
Even with the pardon granted to former President Estrada, however, Risos-
Vidal insists that the same did not operate to make available to former
President Estrada the exception provided under Section 12 of the OEC, the
pardon being merely conditional and not absolute or plenary. Moreover, Risos-
Vidal puts a premium on the ostensible requirements provided under Articles 36
and 41 of the Revised Penal Code, to wit:
ART. 36. Pardon; its effects.– A pardon shall not work the restoration of the
right to hold publicoffice, or the right of suffrage, unless such rights be
expressly restored by the terms of the pardon.
A pardon shall in no case exempt the culprit from the payment of the civil
indemnity imposed upon him by the sentence.
xxxx
ART. 41. Reclusion perpetua and reclusion temporal – Their accessory
penalties.– The penalties of reclusion perpetua and reclusion temporal shall
carry with them that of civil interdiction for life or during the period of the
sentence as the case may be, and that of perpetual absolute disqualification
which the offender shall suffer even though pardoned as to the principal
penalty, unless the same shall have been expressly remitted in the pardon.
(Emphases supplied.)
She avers that in view of the foregoing provisions of law, it is not enough that a
pardon makes a general statement that such pardon carries with it the
restoration of civil and political rights. By virtue of Articles 36 and 41, a pardon
restoring civil and political rights without categorically making mention what
specific civil and political rights are restored "shall not work to restore the right
to hold public office, or the right of suffrage; nor shall it remit the accessory
penalties of civil interdiction and perpetual absolute disqualification for the
principal penalties of reclusion perpetua and reclusion temporal."17 In other
words, she considers the above constraints as mandatory requirements that
shun a general or implied restoration of civil and political rights in pardons.
Risos-Vidal cites the concurring opinions of Associate Justices Teodoro R.
Padilla and Florentino P. Feliciano in Monsanto v. Factoran, Jr.18 to endorse
her position that "[t]he restoration of the right to hold public office to one who
has lost such right by reason of conviction in a criminal case, but subsequently
pardoned, cannot be left to inference, no matter how intensely arguable, but
must be statedin express, explicit, positive and specific language."
Applying Monsantoto former President Estrada’s case, Risos-Vidal reckons that
"such express restoration is further demanded by the existence of the condition
in the [third] [W]hereas [C]lause of the pardon x x x indubitably indicating that
the privilege to hold public office was not restored to him."19
On the other hand, the Office ofthe Solicitor General (OSG) for public
respondent COMELEC, maintains that "the issue of whether or not the pardon
extended to [former President Estrada] restored his right to run for public office
had already been passed upon by public respondent COMELEC way back in
2010 via its rulings in SPA Nos. 09-024, 09-028 and 09-104, there is no cogent
reason for it to reverse its standing pronouncement and declare [former
President Estrada] disqualified to run and be voted as mayor of the City of
Manila in the absence of any new argument that would warrant its reversal. To
be sure, public respondent COMELEC correctly exercised its discretion in
taking judicial cognizance of the aforesaid rulings which are known toit and
which can be verified from its own records, in accordance with Section 2, Rule
129 of the Rules of Court on the courts’ discretionary power to take judicial
notice of matters which are of public knowledge, orare capable of
unquestionable demonstration, or ought to be known to them because of their
judicial functions."20
Further, the OSG contends that "[w]hile at first glance, it is apparent that
[former President Estrada’s] conviction for plunder disqualifies him from running
as mayor of Manila under Section 40 of the [LGC], the subsequent grant of
pardon to him, however, effectively restored his right to run for any public
office."21 The restoration of his right to run for any public office is the exception
to the prohibition under Section 40 of the LGC, as provided under Section 12 of
the OEC. As to the seeming requirement of Articles 36 and 41 of the Revised
Penal Code, i.e., the express restoration/remission of a particular right to be
stated in the pardon, the OSG asserts that "an airtight and rigid interpretation of
Article 36 and Article 41 of the [RPC] x x x would be stretching too much the
clear and plain meaning of the aforesaid provisions."22 Lastly, taking into
consideration the third Whereas Clause of the pardon granted to former
President Estrada, the OSG supports the position that it "is not an integral part
of the decree of the pardon and cannot therefore serve to restrict its
effectivity."23
Thus, the OSG concludes that the "COMELEC did not commit grave abuse of
discretion amounting to lack or excess of jurisdiction in issuing the assailed
Resolutions."24
For his part, former President Estrada presents the following significant
arguments to defend his stay in office: that "the factual findings of public
respondent COMELEC, the Constitutional body mandated to administer and
enforce all laws relative to the conduct of the elections, [relative to the
absoluteness of the pardon, the effects thereof, and the eligibility of former
President Estrada to seek public elective office] are binding [and conclusive] on
this Honorable Supreme Court;" that he "was granted an absolute pardon and
thereby restored to his full civil and political rights, including the right to seek
public elective office such as the mayoral (sic) position in the City of Manila;"
that "the majority decision in the case of Salvacion A. Monsanto v. Fulgencio S.
Factoran, Jr.,which was erroneously cited by both Vidal and Lim as authority for
their respective claims, x x x reveal that there was no discussion whatsoever in
the ratio decidendi of the Monsanto case as to the alleged necessity for an
expressed restoration of the ‘right to hold public office in the pardon’ as a legal
prerequisite to remove the subject perpetual special disqualification;" that
moreover, the "principal question raised in this Monsanto case is whether or not
a public officer, who has been granted an absolute pardon by the Chief
Executive, is entitled to reinstatement toher former position without need of a
new appointment;" that his "expressed acceptance [of the pardon] is not proof
that the pardon extended to [him] is conditional and not absolute;" that this case
is a mere rehash of the casesfiled against him during his candidacy for
President back in 2009-2010; that Articles 36 and 41 of the Revised Penal
Code "cannot abridge or diminish the pardoning power of the President
expressly granted by the Constitution;" that the text of the pardon granted to
him substantially, if not fully, complied with the requirement posed by Article 36
of the Revised Penal Code as it was categorically stated in the said document
that he was "restored to his civil and political rights;" that since pardon is an act
of grace, it must be construed favorably in favor of the grantee;25 and that his
disqualification will result in massive disenfranchisement of the hundreds of
thousands of Manileños who voted for him.26
The Court's Ruling
The petition for certiorari lacks merit.
Former President Estrada was granted an absolute pardon that fully restored
allhis civil and political rights, which naturally includes the right to seek public
elective office, the focal point of this controversy. The wording of the pardon
extended to former President Estrada is complete, unambiguous, and
unqualified. It is likewise unfettered by Articles 36 and 41 of the Revised Penal
Code. The only reasonable, objective, and constitutional interpretation of the
language of the pardon is that the same in fact conforms to Articles 36 and 41
of the Revised Penal Code. Recall that the petition for disqualification filed by
Risos-Vidal against former President Estrada, docketed as SPA No. 13-211
(DC), was anchored on Section 40 of the LGC, in relation to Section 12 of the
OEC, that is, having been convicted of a crime punishable by imprisonment of
one year or more, and involving moral turpitude, former President Estrada must
be disqualified to run for and hold public elective office notwithstanding the fact
that he is a grantee of a pardon that includes a statement expressing "[h]e is
hereby restored to his civil and political rights." Risos-Vidal theorizes that
former President Estrada is disqualified from running for Mayor of Manila inthe
May 13, 2013 Elections, and remains disqualified to hold any local elective post
despite the presidential pardon extended to him in 2007 by former President
Arroyo for the reason that it (pardon) did not expressly provide for the remission
of the penalty of perpetual absolute disqualification, particularly the restoration
of his (former President Estrada) right to vote and bevoted upon for public
office. She invokes Articles 36 and 41 of the Revised Penal Code as the
foundations of her theory.
It is insisted that, since a textual examination of the pardon given to and
accepted by former President Estrada does not actually specify which political
right is restored, it could be inferred that former President Arroyo did not
deliberately intend to restore former President Estrada’s rights of suffrage and
to hold public office, orto otherwise remit the penalty of perpetual absolute
disqualification. Even if her intention was the contrary, the same cannot be
upheld based on the pardon’s text.
The pardoning power of the President cannot be limited by legislative action.
The 1987 Constitution, specifically Section 19 of Article VII and Section 5 of
Article IX-C, provides that the President of the Philippines possesses the power
to grant pardons, along with other acts of executive clemency, to wit:
Section 19. Except in cases of impeachment, or as otherwise provided in this
Constitution, the President may grant reprieves, commutations, and pardons,
and remit fines and forfeitures, after conviction by final judgment.
He shall also have the power to grant amnesty with the concurrence of a
majority of all the Members of the Congress.
xxxx
Section 5. No pardon, amnesty, parole, or suspension of sentence for violation
of election laws, rules, and regulations shall be granted by the President
without the favorable recommendation of the Commission.
It is apparent from the foregoing constitutional provisions that the only
instances in which the President may not extend pardon remain to be in: (1)
impeachment cases; (2) cases that have not yet resulted in a final conviction;
and (3) cases involving violations of election laws, rules and regulations in
which there was no favorable recommendation coming from the COMELEC.
Therefore, it can be argued that any act of Congress by way of statute cannot
operate to delimit the pardoning power of the President.
In Cristobal v. Labrador27 and Pelobello v. Palatino,28 which were decided
under the 1935 Constitution,wherein the provision granting pardoning power to
the President shared similar phraseology with what is found in the present 1987
Constitution, the Court then unequivocally declared that "subject to the
limitations imposed by the Constitution, the pardoning power cannot be
restricted or controlled by legislative action." The Court reiterated this
pronouncement in Monsanto v. Factoran, Jr.29 thereby establishing that, under
the present Constitution, "a pardon, being a presidential prerogative, should not
be circumscribed by legislative action." Thus, it is unmistakably the long-
standing position of this Court that the exercise of the pardoning power is
discretionary in the President and may not be interfered with by Congress or
the Court, except only when it exceeds the limits provided for by the
Constitution.
This doctrine of non-diminution or non-impairment of the President’s power of
pardon by acts of Congress, specifically through legislation, was strongly
adhered to by an overwhelming majority of the framers of the 1987 Constitution
when they flatly rejected a proposal to carve out an exception from the
pardoning power of the President in the form of "offenses involving graft and
corruption" that would be enumerated and defined by Congress through the
enactment of a law. The following is the pertinent portion lifted from the Record
of the Commission (Vol. II):
MR. ROMULO. I ask that Commissioner Tan be recognized to introduce an
amendment on the same section.
THE PRESIDENT. Commissioner Tan is recognized.
SR. TAN. Madam President, lines 7 to 9 state:
However, the power to grant executive clemency for violations of corrupt
practices laws may be limited by legislation.
I suggest that this be deletedon the grounds that, first, violations of corrupt
practices may include a very little offense like stealing ₱10; second, which I
think is more important, I get the impression, rightly or wrongly, that
subconsciously we are drafting a constitution on the premise that all our future
Presidents will bebad and dishonest and, consequently, their acts will be
lacking in wisdom. Therefore, this Article seems to contribute towards the
creation of an anti-President Constitution or a President with vast
responsibilities but no corresponding power except to declare martial law.
Therefore, I request that these lines be deleted.
MR. REGALADO. Madam President,may the Committee react to that?
THE PRESIDENT. Yes, please.
MR. REGALADO. This was inserted here on the resolution of Commissioner
Davide because of the fact that similar to the provisions on the Commission on
Elections, the recommendation of that Commission is required before executive
clemency isgranted because violations of the election laws go into the very
political life of the country.
With respect to violations of our Corrupt Practices Law, we felt that it is also
necessary to have that subjected to the same condition because violation of our
Corrupt Practices Law may be of such magnitude as to affect the very
economic systemof the country. Nevertheless, as a compromise, we provided
here that it will be the Congress that will provide for the classification as to
which convictions will still require prior recommendation; after all, the Congress
could take into account whether or not the violation of the Corrupt Practices
Law is of such magnitude as to affect the economic life of the country, if it is in
the millions or billions of dollars. But I assume the Congress in its collective
wisdom will exclude those petty crimes of corruption as not to require any
further stricture on the exercise of executive clemency because, of course,
there is a whale of a difference if we consider a lowly clerk committing
malversation of government property or funds involving one hundred pesos. But
then, we also anticipate the possibility that the corrupt practice of a public
officer is of such magnitude as to have virtually drained a substantial portion of
the treasury, and then he goes through all the judicial processes and later on, a
President who may have close connections with him or out of improvident
compassion may grant clemency under such conditions. That is why we left it to
Congress to provide and make a classification based on substantial distinctions
between a minor act of corruption or an act of substantial proportions. SR. TAN.
So, why do we not just insert the word GROSS or GRAVE before the word
"violations"?
MR. REGALADO. We feel that Congress can make a better distinction because
"GRAVE" or "GROSS" can be misconstrued by putting it purely as a policy.
MR. RODRIGO. Madam President.
THE PRESIDENT. Commissioner Rodrigo is recognized.
MR. RODRIGO. May I speak in favor of the proposed amendment?
THE PRESIDENT. Please proceed.
MR. RODRIGO. The power to grant executive clemency is essentially an
executive power, and that is precisely why it is called executive clemency. In
this sentence, which the amendment seeks to delete, an exception is being
made. Congress, which is the legislative arm, is allowed to intrude into this
prerogative of the executive. Then it limits the power of Congress to subtract
from this prerogative of the President to grant executive clemency by limiting
the power of Congress to only corrupt practices laws. There are many other
crimes more serious than these. Under this amendment, Congress cannot limit
the power of executive clemency in cases of drug addiction and drug pushing
which are very, very serious crimes that can endanger the State; also, rape with
murder, kidnapping and treason. Aside from the fact that it is a derogation of
the power of the President to grant executive clemency, it is also defective in
that it singles out just one kind of crime. There are far more serious crimes
which are not included.
MR. REGALADO. I will just make one observation on that. We admit that the
pardoning power is anexecutive power. But even in the provisions on the
COMELEC, one will notice that constitutionally, it is required that there be a
favorable recommendation by the Commission on Elections for any violation of
election laws.
At any rate, Commissioner Davide, as the principal proponent of that and as a
member of the Committee, has explained in the committee meetings we had
why he sought the inclusion of this particular provision. May we call on
Commissioner Davide to state his position.
MR. DAVIDE. Madam President.
THE PRESIDENT. Commissioner Davide is recognized.
MR. DAVIDE. I am constrained to rise to object to the proposal. We have just
approved the Article on Accountability of Public Officers. Under it, it is
mandated that a public office is a public trust, and all government officers are
under obligation to observe the utmost of responsibility, integrity, loyalty and
efficiency, to lead modest lives and to act with patriotism and justice.
In all cases, therefore, which would go into the verycore of the concept that a
public office is a public trust, the violation is itself a violation not only of the
economy but the moral fabric of public officials. And that is the reason we now
want that if there is any conviction for the violation of the Anti-Graft and Corrupt
Practices Act, which, in effect, is a violation of the public trust character of the
public office, no pardon shall be extended to the offender, unless some
limitations are imposed.
Originally, my limitation was, it should be with the concurrence of the convicting
court, but the Committee left it entirely to the legislature to formulate the
mechanics at trying, probably, to distinguish between grave and less grave or
serious cases of violation of the Anti-Graft and Corrupt Practices Act. Perhaps
this is now the best time, since we have strengthened the Article on
Accountability of Public Officers, to accompany it with a mandate that the
President’s right to grant executive clemency for offenders or violators of laws
relating to the concept of a public office may be limited by Congress itself.
MR. SARMIENTO. Madam President.
THE PRESIDENT. Commissioner Sarmiento is recognized.
MR. SARMIENTO. May I briefly speak in favor of the amendment by deletion.
Madam President, over and over again, we have been saying and arguing
before this Constitutional Commission that we are emasculating the powers of
the presidency, and this provision to me is another clear example of that. So, I
speak against this provision. Even the 1935 and the 1973 Constitutions do not
provide for this kind of provision.
I am supporting the amendment by deletion of Commissioner Tan.
MR. ROMULO. Commissioner Tingson would like to be recognized.
THE PRESIDENT. Commissioner Tingson is recognized.
MR. TINGSON. Madam President, I am also in favor of the amendment by
deletion because I am in sympathy with the stand of Commissioner Francisco
"Soc" Rodrigo. I do believe and we should remember that above all the elected
or appointed officers of our Republic, the leader is the President. I believe that
the country will be as the President is, and if we systematically emasculate the
power of this presidency, the time may come whenhe will be also handcuffed
that he will no longer be able to act like he should be acting.
So, Madam President, I am in favor of the deletion of this particular line.
MR. ROMULO. Commissioner Colayco would like to be recognized.
THE PRESIDENT. Commissioner Colayco is recognized.
MR. COLAYCO. Thank you very much, Madam President.
I seldom rise here to object to or to commend or to recommend the approval of
proposals, but now I find that the proposal of Commissioner Tan is worthy of
approval of this body.
Why are we singling out this particular offense? There are other crimes which
cast a bigger blot on the moral character of the public officials.
Finally, this body should not be the first one to limit the almost absolute power
of our Chief Executive in deciding whether to pardon, to reprieve or to commute
the sentence rendered by the court.
I thank you.
THE PRESIDENT. Are we ready to vote now?
MR. ROMULO. Commissioner Padilla would like to be recognized, and after
him will be Commissioner Natividad.
THE PRESIDENT. Commissioner Padilla is recognized.
MR. PADILLA. Only one sentence, Madam President. The Sandiganbayan has
been called the Anti-Graft Court, so if this is allowed to stay, it would mean that
the President’s power togrant pardon or reprieve will be limited to the cases
decided by the Anti-Graft Court, when as already stated, there are many
provisions inthe Revised Penal Code that penalize more serious offenses.
Moreover, when there is a judgment of conviction and the case merits the
consideration of the exercise of executive clemency, usually under Article V of
the Revised Penal Code the judge will recommend such exercise of clemency.
And so, I am in favor of the amendment proposed by Commissioner Tan for the
deletion of this last sentence in Section 17.
THE PRESIDENT. Are we ready to vote now, Mr. Floor Leader?
MR. NATIVIDAD. Just one more.
THE PRESIDENT. Commissioner Natividad is recognized.
MR. NATIVIDAD. I am also against this provision which will again chip more
powers from the President. In case of other criminals convicted in our society,
we extend probation to them while in this case, they have already been
convicted and we offer mercy. The only way we can offer mercy to them is
through this executive clemency extended to them by the President. If we still
close this avenue to them, they would be prejudiced even worse than the
murderers and the more vicious killers in our society. I do not think they
deserve this opprobrium and punishment under the new Constitution.
I am in favor of the proposed amendment of Commissioner Tan.
MR. ROMULO. We are ready tovote, Madam President.
THE PRESIDENT. Is this accepted by the Committee?
MR. REGALADO. The Committee, Madam President, prefers to submit this to
the floor and also because of the objection of the main proponent,
Commissioner Davide. So we feel that the Commissioners should vote on this
question.
VOTING
THE PRESIDENT. As many as are in favor of the proposed amendment of
Commissioner Tan to delete the last sentence of Section 17 appearing on lines
7, 8 and 9, please raise their hand. (Several Members raised their hand.)
As many as are against, please raise their hand. (Few Members raised their
hand.)
The results show 34 votes in favor and 4 votes against; the amendment is
approved.30 (Emphases supplied.)
The proper interpretation of Articles
36 and 41 of the Revised Penal Code.
The foregoing pronouncements solidify the thesis that Articles 36 and 41 of the
Revised Penal Code cannot, in any way, serve to abridge or diminish the
exclusive power and prerogative of the President to pardon persons convicted
of violating penal statutes.
The Court cannot subscribe to Risos-Vidal’s interpretation that the said Articles
contain specific textual commands which must be strictly followed in order to
free the beneficiary of presidential grace from the disqualifications specifically
prescribed by them.
Again, Articles 36 and 41 of the Revised Penal Code provides:
ART. 36. Pardon; its effects.– A pardon shall not work the restoration of the
right to hold publicoffice, or the right of suffrage, unless such rights be
expressly restored by the terms of the pardon.
A pardon shall in no case exempt the culprit from the payment of the civil
indemnity imposed upon him by the sentence.
xxxx
ART. 41. Reclusion perpetua and reclusion temporal – Their accessory
penalties.– The penalties of reclusion perpetua and reclusion temporal shall
carry with them that of civil interdiction for life or during the period of the
sentence as the case may be, and that of perpetual absolute disqualification
which the offender shall suffer even though pardoned as to the principal
penalty, unless the same shall have been expressly remitted in the pardon.
(Emphases supplied.)
A rigid and inflexible reading of the above provisions of law, as proposed by
Risos-Vidal, is unwarranted, especially so if it will defeat or unduly restrict the
power of the President to grant executive clemency.
It is well-entrenched in this jurisdiction that where the words of a statute are
clear, plain, and free from ambiguity, it must be given its literal meaning and
applied without attempted interpretation. Verba legis non est recedendum.
From the words of a statute there should be no departure.31 It is this Court’s
firm view that the phrase in the presidential pardon at issue which declares that
former President Estrada "is hereby restored to his civil and political rights"
substantially complies with the requirement of express restoration.
The Dissent of Justice Marvic M.V.F. Leonen agreed with Risos Vidal that there
was no express remission and/or restoration of the rights of suffrage and/or to
hold public office in the pardon granted to former President Estrada, as
required by Articles 36 and 41 of the Revised Penal Code.
Justice Leonen posits in his Dissent that the aforementioned codal provisions
must be followed by the President, as they do not abridge or diminish the
President’s power to extend clemency. He opines that they do not reduce the
coverage of the President’s pardoning power. Particularly, he states:
Articles 36 and 41 refer only to requirements of convention or form. They only
provide a procedural prescription. They are not concerned with areas where or
the instances when the President may grant pardon; they are only concerned
with how he or she is to exercise such power so that no other governmental
instrumentality needs to intervene to give it full effect.
All that Articles 36 and 41 do is prescribe that, if the President wishes to include
in the pardon the restoration of the rights of suffrage and to hold public office, or
the remission of the accessory penalty of perpetual absolute disqualification,he
or she should do so expressly. Articles 36 and 41 only ask that the President
state his or her intentions clearly, directly, firmly, precisely, and unmistakably.
To belabor the point, the President retains the power to make such restoration
or remission, subject to a prescription on the manner by which he or she is to
state it.32
With due respect, I disagree with the overbroad statement that Congress may
dictate as to how the President may exercise his/her power of executive
clemency. The form or manner by which the President, or Congress for that
matter, should exercise their respective Constitutional powers or prerogatives
cannot be interfered with unless it is so provided in the Constitution. This is the
essence of the principle of separation of powers deeply ingrained in our system
of government which "ordains that each of the three great branches of
government has exclusive cognizance of and is supreme in matters falling
within its own constitutionally allocated sphere."33 Moreso, this fundamental
principle must be observed if noncompliance with the form imposed by one
branch on a co-equal and coordinate branch will result into the diminution of an
exclusive Constitutional prerogative.
For this reason, Articles 36 and 41 of the Revised Penal Code should be
construed in a way that will give full effect to the executive clemency granted by
the President, instead of indulging in an overly strict interpretation that may
serve to impair or diminish the import of the pardon which emanated from the
Office of the President and duly signed by the Chief Executive himself/herself.
The said codal provisions must be construed to harmonize the power of
Congress to define crimes and prescribe the penalties for such crimes and the
power of the President to grant executive clemency. All that the said provisions
impart is that the pardon of the principal penalty does notcarry with it the
remission of the accessory penalties unless the President expressly includes
said accessory penalties in the pardon. It still recognizes the Presidential
prerogative to grant executive clemency and, specifically, to decide to pardon
the principal penalty while excluding its accessory penalties or to pardon both.
Thus, Articles 36 and 41 only clarify the effect of the pardon so decided upon
by the President on the penalties imposedin accordance with law.
A close scrutiny of the text of the pardon extended to former President Estrada
shows that both the principal penalty of reclusion perpetua and its accessory
penalties are included in the pardon. The first sentence refers to the executive
clemency extended to former President Estrada who was convicted by the
Sandiganbayan of plunder and imposed a penalty of reclusion perpetua. The
latter is the principal penalty pardoned which relieved him of imprisonment. The
sentence that followed, which states that "(h)e is hereby restored to his civil and
political rights," expressly remitted the accessory penalties that attached to the
principal penalty of reclusion perpetua. Hence, even if we apply Articles 36 and
41 of the Revised Penal Code, it is indubitable from the textof the pardon that
the accessory penalties of civil interdiction and perpetual absolute
disqualification were expressly remitted together with the principal penalty of
reclusion perpetua.
In this jurisdiction, the right toseek public elective office is recognized by law as
falling under the whole gamut of civil and political rights.
Section 5 of Republic Act No. 9225,34 otherwise known as the "Citizenship
Retention and Reacquisition Act of 2003," reads as follows:
Section 5. Civil and Political Rights and Liabilities.– Those who retain or
reacquire Philippine citizenship under this Act shall enjoy full civil and political
rights and be subject to all attendant liabilities and responsibilities under
existing laws of the Philippines and the following conditions: (1) Those
intending to exercise their right of suffrage must meet the requirements under
Section 1, Article V of the Constitution, Republic Act No. 9189, otherwise
known as "The Overseas Absentee Voting Act of 2003" and other existing laws;
(2) Those seeking elective public office in the Philippines shall meet the
qualifications for holding such public office as required by the
Constitution and existing laws and, at the time of the filing of the
certificate of candidacy, make a personal and sworn renunciation of
any and all foreign citizenship before any public officer authorized to
administer an oath;
(3) Those appointed to any public office shall subscribe and swear an
oath of allegiance to the Republic of the Philippines and its duly
constituted authorities prior to their assumption of office: Provided, That
they renounce their oath of allegiance to the country where they took
that oath; (4) Those intending to practice their profession in the
Philippines shall apply with the proper authority for a license or permit
to engage in such practice; and
(5) That right to vote or be elected or appointed to any public office in
the Philippines cannot be exercised by, or extended to, those who:
(a) are candidates for or are occupying any public office in the
country of which theyare naturalized citizens; and/or
(b) are in active service as commissioned or non
commissioned officers in the armed forces of the country which
they are naturalized citizens. (Emphases supplied.)
No less than the International Covenant on Civil and Political Rights, to which
the Philippines is a signatory, acknowledges the existence of said right. Article
25(b) of the Convention states: Article 25
Every citizen shall have the right and the opportunity, without any of the
distinctions mentioned in Article 2 and without unreasonable restrictions:
xxxx
(b) To vote and to be electedat genuine periodic elections which shall be by
universal and equal suffrage and shall be held by secret ballot, guaranteeing
the free expression of the will of the electors[.] (Emphasis supplied.)
Recently, in Sobejana-Condon v. Commission on Elections,35 the Court
unequivocally referred to the right to seek public elective office as a political
right, to wit:
Stated differently, it is an additional qualification for elective office specific only
to Filipino citizens who re-acquire their citizenship under Section 3 of R.A. No.
9225. It is the operative act that restores their right to run for public office. The
petitioner’s failure to comply there with in accordance with the exact tenor of the
law, rendered ineffectual the Declaration of Renunciation of Australian
Citizenship she executed on September 18, 2006. As such, she is yet to regain
her political right to seek elective office. Unless she executes a sworn
renunciation of her Australian citizenship, she is ineligible to run for and hold
any elective office in the Philippines. (Emphasis supplied.)
Thus, from both law and jurisprudence, the right to seek public elective office is
unequivocally considered as a political right. Hence, the Court reiterates its
earlier statement that the pardon granted to former President Estrada admits no
other interpretation other than to mean that, upon acceptance of the pardon
granted tohim, he regained his FULL civil and political rights – including the
right to seek elective office.
On the other hand, the theory of Risos-Vidal goes beyond the plain meaning of
said penal provisions; and prescribes a formal requirement that is not only
unnecessary but, if insisted upon, could be in derogation of the constitutional
prohibition relative to the principle that the exercise of presidential pardon
cannot be affected by legislative action.
Risos-Vidal relied heavily on the separate concurring opinions in Monsanto v.
Factoran, Jr.36 to justify her argument that an absolute pardon must expressly
state that the right to hold public office has been restored, and that the penalty
of perpetual absolute disqualification has been remitted.
This is incorrect.
Her reliance on said opinions is utterly misplaced. Although the learned views
of Justices Teodoro R. Padilla and Florentino P. Feliciano are to be respected,
they do not form partof the controlling doctrine nor to be considered part of the
law of the land. On the contrary, a careful reading of the majority opinion in
Monsanto, penned by no less than Chief Justice Marcelo B. Fernan, reveals no
statement that denotes adherence to a stringent and overly nuanced
application of Articles 36 and 41 of the Revised Penal Code that will in effect
require the President to use a statutorily prescribed language in extending
executive clemency, even if the intent of the President can otherwise be
deduced from the text or words used in the pardon. Furthermore, as explained
above, the pardon here is consistent with, and not contrary to, the provisions of
Articles 36 and 41.
The disqualification of former President Estrada under Section 40 of the LGC in
relation to Section 12 of the OEC was removed by his acceptance of the
absolute pardon granted to him.
Section 40 of the LGC identifies who are disqualified from running for any
elective local position. Risos-Vidal argues that former President Estrada is
disqualified under item (a), to wit:
(a) Those sentenced by final judgment for an offense involving moral turpitude
or for an offense punishable by one (1) year or more of imprisonment, within
two (2) years after serving sentence[.] (Emphasis supplied.)
Likewise, Section 12 of the OEC provides for similar prohibitions, but it provides
for an exception, to wit:
Section 12. Disqualifications. – x x x unless he has been given plenary pardon
or granted amnesty. (Emphasis supplied.)
As earlier stated, Risos-Vidal maintains that former President Estrada’s
conviction for plunder disqualifies him from running for the elective local
position of Mayor of the City of Manila under Section 40(a) of the LGC.
However, the subsequent absolute pardon granted to former President Estrada
effectively restored his right to seek public elective office. This is made possible
by reading Section 40(a) of the LGC in relation to Section 12 of the OEC.
While it may be apparent that the proscription in Section 40(a) of the LGC is
worded in absolute terms, Section 12 of the OEC provides a legal escape from
the prohibition – a plenary pardon or amnesty. In other words, the latter
provision allows any person who has been granted plenary pardon or amnesty
after conviction by final judgment of an offense involving moral turpitude, inter
alia, to run for and hold any public office, whether local or national position.
Take notice that the applicability of Section 12 of the OEC to candidates
running for local elective positions is not unprecedented. In Jalosjos, Jr. v.
Commission on Elections,37 the Court acknowledged the aforementioned
provision as one of the legal remedies that may be availed of to disqualify a
candidate in a local election filed any day after the last day for filing of
certificates of candidacy, but not later than the date of proclamation.38 The
pertinent ruling in the Jalosjos case is quoted as follows:
What is indisputably clear is that false material representation of Jalosjos is a
ground for a petition under Section 78. However, since the false material
representation arises from a crime penalized by prision mayor, a petition under
Section 12 ofthe Omnibus Election Code or Section 40 of the Local
Government Code can also be properly filed. The petitioner has a choice
whether to anchor his petition on Section 12 or Section 78 of the Omnibus
Election Code, or on Section 40 of the Local Government Code. The law
expressly provides multiple remedies and the choice of which remedy to adopt
belongs to petitioner.39 (Emphasis supplied.)
The third preambular clause of the pardon did not operate to make the pardon
conditional.
Contrary to Risos-Vidal’s declaration, the third preambular clause of the
pardon, i.e., "[w]hereas, Joseph Ejercito Estrada has publicly committed to no
longer seek any elective position or office," neither makes the pardon
conditional, nor militate against the conclusion that former President Estrada’s
rights to suffrage and to seek public elective office have been restored.
This is especially true as the pardon itself does not explicitly impose a condition
or limitation, considering the unqualified use of the term "civil and political
rights"as being restored. Jurisprudence educates that a preamble is not an
essential part of an act as it is an introductory or preparatory clause that
explains the reasons for the enactment, usually introduced by the word
"whereas."40 Whereas clauses do not form part of a statute because, strictly
speaking, they are not part of the operative language of the statute.41 In this
case, the whereas clause at issue is not an integral part of the decree of the
pardon, and therefore, does not by itself alone operate to make the pardon
conditional or to make its effectivity contingent upon the fulfilment of the
aforementioned commitment nor to limit the scope of the pardon.
On this matter, the Court quotes with approval a relevant excerpt of COMELEC
Commissioner Maria Gracia Padaca’s separate concurring opinion in the
assailed April 1, 2013 Resolution of the COMELEC in SPA No. 13-211 (DC),
which captured the essence of the legal effect of preambular
paragraphs/whereas clauses, viz:
The present dispute does not raise anything which the 20 January 2010
Resolution did not conclude upon. Here, Petitioner Risos-Vidal raised the same
argument with respect to the 3rd "whereas clause" or preambular paragraph of
the decree of pardon. It states that "Joseph Ejercito Estrada has publicly
committed to no longer seek any elective position or office." On this contention,
the undersigned reiterates the ruling of the Commission that the 3rd preambular
paragraph does not have any legal or binding effect on the absolute nature of
the pardon extended by former President Arroyo to herein Respondent. This
ruling is consistent with the traditional and customary usage of preambular
paragraphs. In the case of Echegaray v. Secretary of Justice, the Supreme
Court ruled on the legal effect of preambular paragraphs or whereas clauses on
statutes. The Court stated, viz.:
Besides, a preamble is really not an integral part of a law. It is merely an
introduction to show its intent or purposes. It cannot be the origin of rights and
obligations. Where the meaning of a statute is clear and unambiguous, the
preamble can neither expand nor restrict its operation much less prevail over its
text.
If former President Arroyo intended for the pardon to be conditional on
Respondent’s promise never to seek a public office again, the former ought to
have explicitly stated the same in the text of the pardon itself. Since former
President Arroyo did not make this an integral part of the decree of pardon, the
Commission is constrained to rule that the 3rd preambular clause cannot be
interpreted as a condition to the pardon extended to former President
Estrada.42 (Emphasis supplied.)
Absent any contrary evidence, former President Arroyo’s silence on former
President Estrada’s decision torun for President in the May 2010 elections
against, among others, the candidate of the political party of former President
Arroyo, after the latter’s receipt and acceptance of the pardon speaks volume of
her intention to restore him to his rights to suffrage and to hold public office.
Where the scope and import of the executive clemency extended by the
President is in issue, the Court must turn to the only evidence available to it,
and that is the pardon itself. From a detailed review ofthe four corners of said
document, nothing therein gives an iota of intimation that the third Whereas
Clause is actually a limitation, proviso, stipulation or condition on the grant of
the pardon, such that the breach of the mentioned commitment not to seek
public office will result ina revocation or cancellation of said pardon. To the
Court, what it is simply is a statement of fact or the prevailing situation at the
time the executive clemency was granted. It was not used as a condition to the
efficacy orto delimit the scope of the pardon.
Even if the Court were to subscribe to the view that the third Whereas
Clausewas one of the reasons to grant the pardon, the pardon itself does not
provide for the attendant consequence of the breach thereof. This Court will be
hard put to discern the resultant effect of an eventual infringement. Just like it
will be hard put to determine which civil or political rights were restored if the
Court were to take the road suggested by Risos-Vidal that the statement "[h]e is
hereby restored to his civil and political rights" excludes the restoration of
former President Estrada’s rights to suffrage and to hold public office. The
aforequoted text ofthe executive clemency granted does not provide the Court
with any guide asto how and where to draw the line between the included and
excluded political rights.
Justice Leonen emphasizes the point that the ultimate issue for resolution is not
whether the pardon is contingent on the condition that former President Estrada
will not seek janother elective public office, but it actually concerns the
coverage of the pardon – whether the pardon granted to former President
Estrada was so expansive as to have restored all his political rights, inclusive of
the rights of suffrage and to hold public office. Justice Leonen is of the view that
the pardon in question is not absolute nor plenary in scope despite the
statement that former President Estrada is "hereby restored to his civil and
political rights," that is, the foregoing statement restored to former President
Estrada all his civil and political rights except the rights denied to him by the
unremitted penalty of perpetual absolute disqualification made up of, among
others, the rights of suffrage and to hold public office. He adds that had the
President chosen to be so expansive as to include the rights of suffrage and to
hold public office, she should have been more clear on her intentions.
However, the statement "[h]e is hereby restored to his civil and political rights,"
to the mind of the Court, iscrystal clear – the pardon granted to former
President Estrada was absolute, meaning, it was not only unconditional, it was
unrestricted in scope, complete and plenary in character, as the term "political
rights"adverted to has a settled meaning in law and jurisprudence.
With due respect, I disagree too with Justice Leonen that the omission of the
qualifying word "full" can be construed as excluding the restoration of the rights
of suffrage and to hold public office. There appears to be no distinction as to
the coverage of the term "full political rights" and the term "political rights" used
alone without any qualification. How to ascribe to the latter term the meaning
that it is "partial" and not "full" defies one’s understanding. More so, it will be
extremely difficult to identify which of the political rights are restored by the
pardon, when the text of the latter is silent on this matter. Exceptions to the
grant of pardon cannot be presumed from the absence of the qualifying word
"full" when the pardon restored the "political rights" of former President Estrada
without any exclusion or reservation.
Therefore, there can be no other conclusion but to say that the pardon granted
to former President Estrada was absolute in the absence of a clear,
unequivocal and concrete factual basis upon which to anchor or support the
Presidential intent to grant a limited pardon.
To reiterate, insofar as its coverageis concerned, the text of the pardon can
withstand close scrutiny even under the provisions of Articles 36 and 41 of the
Revised Penal Code.
The COMELEC did not commit grave abuse of discretion amounting to lack or
excess of jurisdiction in issuing the assailed Resolutions.
In light of the foregoing, contrary to the assertions of Risos-Vidal, the
COMELEC did not commit grave abuse of discretion amounting to lack or
excess of jurisdiction in issuing the assailed Resolutions.
The Court has consistently held that a petition for certiorariagainst actions of
the COMELEC is confined only to instances of grave abuse of discretion
amounting to patentand substantial denial of due process, because the
COMELEC is presumed to be most competent in matters falling within its
domain.43
As settled in jurisprudence, grave abuse of discretion is the arbitrary exercise of
power due to passion, prejudice or personal hostility; or the whimsical, arbitrary,
or capricious exercise of power that amounts to an evasion or refusal to
perform a positive duty enjoined by law or to act at all in contemplation of law.
For an act to be condemned as having been done with grave abuse of
discretion, such an abuse must be patent and gross.44
The arguments forwarded by Risos-Vidal fail to adequately demonstrate any
factual or legal bases to prove that the assailed COMELEC Resolutions were
issued in a "whimsical, arbitrary or capricious exercise of power that amounts to
an evasion orrefusal to perform a positive duty enjoined by law" or were so
"patent and gross" as to constitute grave abuse of discretion.
On the foregoing premises and conclusions, this Court finds it unnecessary to
separately discuss Lim's petition-in-intervention, which substantially presented
the same arguments as Risos-Vidal's petition.
WHEREFORE, the petition for certiorari and petition-inintervention are
DISMISSED. The Resolution dated April 1, 2013 of the Commission on
Elections, Second Division, and the Resolution dated April 23, 2013 of the
Commission on Elections, En bane, both in SPA No. 13-211 (DC), are
AFFIRMED.
SO ORDERED.
EN BANC
VI. DELEGATION OF POWERS
G.R. No. 170516 July 16, 2008
AKBAYAN CITIZENS ACTION PARTY ("AKBAYAN"), PAMBANSANG
KATIPUNAN NG MGA SAMAHAN SA KANAYUNAN ("PKSK"), ALLIANCE
OF PROGRESSIVE LABOR ("APL"), VICENTE A. FABE, ANGELITO R.
MENDOZA, MANUEL P. QUIAMBAO, ROSE BEATRIX CRUZ-ANGELES,
CONG. LORENZO R. TANADA III, CONG. MARIO JOYO AGUJA, CONG.
LORETA ANN P. ROSALES, CONG. ANA THERESIA HONTIVEROS-
BARAQUEL, AND CONG. EMMANUEL JOEL J. VILLANUEVA, Petitioners,
vs.
THOMAS G. AQUINO, in his capacity as Undersecretary of the Department
of Trade and Industry (DTI) and Chairman and Chief Delegate of the
Philippine Coordinating Committee (PCC) for the Japan-Philippines
Economic Partnership Agreement, EDSEL T. CUSTODIO, in his capacity
as Undersecretary of the Department of Foreign Affairs (DFA) and Co-
Chair of the PCC for the JPEPA, EDGARDO ABON, in his capacity as
Chairman of the Tariff Commission and lead negotiator for Competition
Policy and Emergency Measures of the JPEPA, MARGARITA SONGCO, in
her capacity as Assistant Director-General of the National Economic
Development Authority (NEDA) and lead negotiator for Trade in Services
and Cooperation of the JPEPA, MALOU MONTERO, in her capacity as
Foreign Service Officer I, Office of the Undersecretary for International
Economic Relations of the DFA and lead negotiator for the General and
Final Provisions of the JPEPA, ERLINDA ARCELLANA, in her capacity as
Director of the Board of Investments and lead negotiator for Trade in
Goods (General Rules) of the JPEPA, RAQUEL ECHAGUE, in her capacity
as lead negotiator for Rules of Origin of the JPEPA, GALLANT SORIANO,
in his official capacity as Deputy Commissioner of the Bureau of Customs
and lead negotiator for Customs Procedures and Paperless Trading of the
JPEPA, MA. LUISA GIGETTE IMPERIAL, in her capacity as Director of the
Bureau of Local Employment of the Department of Labor and
Employment (DOLE) and lead negotiator for Movement of Natural Persons
of the JPEPA, PASCUAL DE GUZMAN, in his capacity as Director of the
Board of Investments and lead negotiator for Investment of the JPEPA,
JESUS MOTOOMULL, in his capacity as Director for the Bureau of
Product Standards of the DTI and lead negotiator for Mutual Recognition
of the JPEPA, LOUIE CALVARIO, in his capacity as lead negotiator for
Intellectual Property of the JPEPA, ELMER H. DORADO, in his capacity as
Officer-in-Charge of the Government Procurement Policy Board Technical
Support Office, the government agency that is leading the negotiations on
Government Procurement of the JPEPA, RICARDO V. PARAS, in his
capacity as Chief State Counsel of the Department of Justice (DOJ) and
lead negotiator for Dispute Avoidance and Settlement of the JPEPA,
ADONIS SULIT, in his capacity as lead negotiator for the General and
Final Provisions of the JPEPA, EDUARDO R. ERMITA, in his capacity as
Executive Secretary, and ALBERTO ROMULO, in his capacity as
Secretary of the DFA,* Respondents.
DECISION
CARPIO MORALES, J.:
Petitioners – non-government organizations, Congresspersons, citizens and
taxpayers – seek via the present petition for mandamus and prohibition to
obtain from respondents the full text of the Japan-Philippines Economic
Partnership Agreement (JPEPA) including the Philippine and Japanese offers
submitted during the negotiation process and all pertinent attachments and
annexes thereto.
Petitioners Congressmen Lorenzo R. Tañada III and Mario Joyo Aguja filed on
January 25, 2005 House Resolution No. 551 calling for an inquiry into the
bilateral trade agreements then being negotiated by the Philippine government,
particularly the JPEPA. The Resolution became the basis of an inquiry
subsequently conducted by the House Special Committee on Globalization (the
House Committee) into the negotiations of the JPEPA.
In the course of its inquiry, the House Committee requested herein respondent
Undersecretary Tomas Aquino (Usec. Aquino), Chairman of the Philippine
Coordinating Committee created under Executive Order No. 213 ("Creation of A
Philippine Coordinating Committee to Study the Feasibility of the Japan-
Philippines Economic Partnership Agreement")1 to study and negotiate the
proposed JPEPA, and to furnish the Committee with a copy of the latest draft of
the JPEPA. Usec. Aquino did not heed the request, however.
Congressman Aguja later requested for the same document, but Usec. Aquino,
by letter of November 2, 2005, replied that the Congressman shall be provided
with a copy thereof "once the negotiations are completed and as soon as a
thorough legal review of the proposed agreement has been conducted."
In a separate move, the House Committee, through Congressman Herminio G.
Teves, requested Executive Secretary Eduardo Ermita to furnish it with "all
documents on the subject including the latest draft of the proposed agreement,
the requests and offers etc."2 Acting on the request, Secretary Ermita, by letter
of June 23, 2005, wrote Congressman Teves as follows:
In its letter dated 15 June 2005 (copy enclosed), [the] D[epartment of] F[oreign]
A[ffairs] explains that the Committee’s request to be furnished all
documents on the JPEPA may be difficult to accomplish at this time,
since the proposed Agreement has been a work in progress for about
three years. A copy of the draft JPEPA will however be forwarded to the
Committee as soon as the text thereof is settled and complete. (Emphasis
supplied)
Congressman Aguja also requested NEDA Director-General Romulo Neri and
Tariff Commission Chairman Edgardo Abon, by letter of July 1, 2005, for copies
of the latest text of the JPEPA.
Chairman Abon replied, however, by letter of July 12, 2005 that the Tariff
Commission does not have a copy of the documents being requested, albeit he
was certain that Usec. Aquino would provide the Congressman with a copy
"once the negotiation is completed." And by letter of July 18, 2005, NEDA
Assistant Director-General Margarita R. Songco informed the Congressman
that his request addressed to Director-General Neri had been forwarded to
Usec. Aquino who would be "in the best position to respond" to the request.
In its third hearing conducted on August 31, 2005, the House Committee
resolved to issue a subpoena for the most recent draft of the JPEPA, but the
same was not pursued because by Committee Chairman Congressman Teves’
information, then House Speaker Jose de Venecia had requested him to hold in
abeyance the issuance of the subpoena until the President gives her consent to
the disclosure of the documents.3
Amid speculations that the JPEPA might be signed by the Philippine
government within December 2005, the present petition was filed on December
9, 2005.4 The agreement was to be later signed on September 9, 2006 by
President Gloria Macapagal-Arroyo and Japanese Prime Minister Junichiro
Koizumi in Helsinki, Finland, following which the President endorsed it to the
Senate for its concurrence pursuant to Article VII, Section 21 of the
Constitution. To date, the JPEPA is still being deliberated upon by the Senate.
The JPEPA, which will be the first bilateral free trade agreement to be entered
into by the Philippines with another country in the event the Senate grants its
consent to it, covers a broad range of topics which respondents enumerate as
follows: trade in goods, rules of origin, customs procedures, paperless trading,
trade in services, investment, intellectual property rights, government
procurement, movement of natural persons, cooperation, competition policy,
mutual recognition, dispute avoidance and settlement, improvement of the
business environment, and general and final provisions.5
While the final text of the JPEPA has now been made accessible to the public
since September 11, 2006,6respondents do not dispute that, at the time the
petition was filed up to the filing of petitioners’ Reply – when the JPEPA was
still being negotiated – the initial drafts thereof were kept from public view.
Before delving on the substantive grounds relied upon by petitioners in support
of the petition, the Court finds it necessary to first resolve some material
procedural issues.
Standing
For a petition for mandamus such as the one at bar to be given due course, it
must be instituted by a party aggrieved by the alleged inaction of any tribunal,
corporation, board or person which unlawfully excludes said party from the
enjoyment of a legal right.7 Respondents deny that petitioners have such
standing to sue. "[I]n the interest of a speedy and definitive resolution of the
substantive issues raised," however, respondents consider it sufficient to cite a
portion of the ruling in Pimentel v. Office of Executive Secretary8 which
emphasizes the need for a "personal stake in the outcome of the controversy"
on questions of standing.
In a petition anchored upon the right of the people to information on matters of
public concern, which is a public right by its very nature, petitioners need not
show that they have any legal or special interest in the result, it being sufficient
to show that they are citizens and, therefore, part of the general public which
possesses the right.9 As the present petition is anchored on the right to
information and petitioners are all suing in their capacity as citizens and groups
of citizens including petitioners-members of the House of Representatives who
additionally are suing in their capacity as such, the standing of petitioners to file
the present suit is grounded in jurisprudence.
Mootness
Considering, however, that "[t]he principal relief petitioners are praying for is the
disclosure of the contents of the JPEPA prior to its finalization between the two
States parties,"10 public disclosure of the text of the JPEPA after its signing by
the President, during the pendency of the present petition, has been largely
rendered moot and academic.
With the Senate deliberations on the JPEPA still pending, the agreement as it
now stands cannot yet be considered as final and binding between the two
States. Article 164 of the JPEPA itself provides that the agreement does not
take effect immediately upon the signing thereof. For it must still go through the
procedures required by the laws of each country for its entry into force, viz:
Article 164
Entry into Force
This Agreement shall enter into force on the thirtieth day after the date on which
the Governments of the Parties exchange diplomatic notes informing each
other that their respective legal procedures necessary for entry into force
of this Agreement have been completed. It shall remain in force unless
terminated as provided for in Article 165.11 (Emphasis supplied)
President Arroyo’s endorsement of the JPEPA to the Senate for concurrence is
part of the legal procedures which must be met prior to the agreement’s entry
into force.
The text of the JPEPA having then been made accessible to the public, the
petition has become moot and academic to the extent that it seeks the
disclosure of the "full text" thereof.
The petition is not entirely moot, however, because petitioners seek to obtain,
not merely the text of the JPEPA, but also the Philippine and Japanese offers in
the course of the negotiations.12
A discussion of the substantive issues, insofar as they impinge on petitioners’
demand for access to the Philippine and Japanese offers, is thus in order.
Grounds relied upon by petitioners
Petitioners assert, first, that the refusal of the government to disclose the
documents bearing on the JPEPA negotiations violates their right to information
on matters of public concern13 and contravenes other constitutional provisions
on transparency, such as that on the policy of full public disclosure of all
transactions involving public interest.14 Second, they contend that non-
disclosure of the same documents undermines their right to effective and
reasonable participation in all levels of social, political, and economic decision-
making.15 Lastly, they proffer that divulging the contents of the JPEPA only after
the agreement has been concluded will effectively make the Senate into a mere
rubber stamp of the Executive, in violation of the principle of separation of
powers.
Significantly, the grounds relied upon by petitioners for the disclosure of
the latest text of the JPEPA are, except for the last, the same as those cited
for the disclosure of the Philippine and Japanese offers.
The first two grounds relied upon by petitioners which bear on the merits of
respondents’ claim of privilege shall be discussed. The last, being purely
speculatory given that the Senate is still deliberating on the JPEPA, shall not.
The JPEPA is a matter of public concern
To be covered by the right to information, the information sought must meet the
threshold requirement that it be a matter of public concern. Apropos is the
teaching of Legaspi v. Civil Service Commission:
In determining whether or not a particular information is of public concern there
is no rigid test which can be applied. ‘Public concern’ like ‘public interest’ is a
term that eludes exact definition. Both terms embrace a broad spectrum of
subjects which the public may want to know, either because these directly
affect their lives, or simply because such matters naturally arouse the interest
of an ordinary citizen. In the final analysis, it is for the courts to determine on a
case by case basis whether the matter at issue is of interest or importance, as it
relates to or affects the public.16(Underscoring supplied)
From the nature of the JPEPA as an international trade agreement, it is evident
that the Philippine and Japanese offers submitted during the negotiations
towards its execution are matters of public concern. This, respondents do not
dispute. They only claim that diplomatic negotiations are covered by the
doctrine of executive privilege, thus constituting an exception to the right to
information and the policy of full public disclosure.
Respondents’ claim of privilege
It is well-established in jurisprudence that neither the right to information nor the
policy of full public disclosure is absolute, there being matters which, albeit of
public concern or public interest, are recognized as privileged in nature. The
types of information which may be considered privileged have been elucidated
in Almonte v. Vasquez,17Chavez v. PCGG,18 Chavez v. Public Estate’s
Authority,19 and most recently in Senate v. Ermita20 where the Court reaffirmed
the validity of the doctrine of executive privilege in this jurisdiction and dwelt on
its scope.
Whether a claim of executive privilege is valid depends on the ground invoked
to justify it and the context in which it is made.21 In the present case, the ground
for respondents’ claim of privilege is set forth in their Comment, viz:
x x x The categories of information that may be considered privileged includes
matters of diplomatic character and under negotiation and review. In this
case, the privileged character of the diplomatic negotiations has been
categorically invoked and clearly explained by respondents particularly
respondent DTI Senior Undersecretary.
The documents on the proposed JPEPA as well as the text which is subject to
negotiations and legal review by the parties fall under the exceptions to the
right of access to information on matters of public concern and policy of public
disclosure. They come within the coverage of executive privilege. At the
time when the Committee was requesting for copies of such documents, the
negotiations were ongoing as they are still now and the text of the proposed
JPEPA is still uncertain and subject to change. Considering the status and
nature of such documents then and now, these are evidently covered by
executive privilege consistent with existing legal provisions and settled
jurisprudence.
Practical and strategic considerations likewise counsel against the disclosure of
the "rolling texts" which may undergo radical change or portions of which may
be totally abandoned. Furthermore, the negotiations of the representatives
of the Philippines as well as of Japan must be allowed to explore
alternatives in the course of the negotiations in the same manner as
judicial deliberations and working drafts of opinions are accorded strict
confidentiality.22 (Emphasis and underscoring supplied)
The ground relied upon by respondents is thus not simply that the information
sought involves a diplomatic matter, but that it pertains to diplomatic
negotiations then in progress.
Privileged character of diplomatic negotiations
The privileged character of diplomatic negotiations has been recognized in this
jurisdiction. In discussing valid limitations on the right to information, the Court
in Chavez v. PCGG held that "information on inter-government exchanges prior
to the conclusion of treaties and executive agreements may be subject to
reasonable safeguards for the sake of national interest."23 Even earlier, the
same privilege was upheld in People’s Movement for Press Freedom (PMPF) v.
Manglapus24 wherein the Court discussed the reasons for the privilege in more
precise terms.
In PMPF v. Manglapus, the therein petitioners were seeking information from
the President’s representatives on the state of the then on-going negotiations of
the RP-US Military Bases Agreement.25 The Court denied the petition, stressing
that "secrecy of negotiations with foreign countries is not violative of the
constitutional provisions of freedom of speech or of the press nor of the
freedom of access to information." The Resolution went on to state, thus:
The nature of diplomacy requires centralization of authority and
expedition of decision which are inherent in executive action. Another
essential characteristic of diplomacy is its confidential nature. Although
much has been said about "open" and "secret" diplomacy, with disparagement
of the latter, Secretaries of State Hughes and Stimson have clearly analyzed
and justified the practice. In the words of Mr. Stimson:
"A complicated negotiation . . . cannot be carried through without many,
many private talks and discussion, man to man; many tentative
suggestions and proposals. Delegates from other countries come and tell
you in confidence of their troubles at home and of their differences with
other countries and with other delegates; they tell you of what they would
do under certain circumstances and would not do under other
circumstances. . . If these reports . . . should become public . . . who
would ever trust American Delegations in another conference? (United
States Department of State, Press Releases, June 7, 1930, pp. 282-284.)."
xxxx
There is frequent criticism of the secrecy in which negotiation with
foreign powers on nearly all subjects is concerned. This, it is claimed, is
incompatible with the substance of democracy. As expressed by one writer,
"It can be said that there is no more rigid system of silence anywhere in the
world." (E.J. Young, Looking Behind the Censorship, J. B. Lippincott Co., 1938)
President Wilson in starting his efforts for the conclusion of the World War
declared that we must have "open covenants, openly arrived at." He quickly
abandoned his thought.
No one who has studied the question believes that such a method of publicity is
possible. In the moment that negotiations are started, pressure groups
attempt to "muscle in." An ill-timed speech by one of the parties or a
frank declaration of the concession which are exacted or offered on both
sides would quickly lead to widespread propaganda to block the
negotiations. After a treaty has been drafted and its terms are fully
published, there is ample opportunity for discussion before it is
approved. (The New American Government and Its Works, James T. Young,
4th Edition, p. 194) (Emphasis and underscoring supplied)
Still in PMPF v. Manglapus, the Court adopted the doctrine in U.S. v. Curtiss-
Wright Export Corp.26 that the President is the sole organ of the nation in its
negotiations with foreign countries, viz:
"x x x In this vast external realm, with its important, complicated, delicate and
manifold problems, the President alone has the power to speak or listen as a
representative of the nation. He makes treaties with the advice and consent of
the Senate; but he alone negotiates. Into the field of negotiation the Senate
cannot intrude; and Congress itself is powerless to invade it. As Marshall said
in his great argument of March 7, 1800, in the House of Representatives, "The
President is the sole organ of the nation in its external relations, and its
sole representative with foreign nations." Annals, 6th Cong., col. 613. . .
(Emphasis supplied; underscoring in the original)
Applying the principles adopted in PMPF v. Manglapus, it is clear that while the
final text of the JPEPA may not be kept perpetually confidential – since there
should be "ample opportunity for discussion before [a treaty] is approved" –
the offers exchanged by the parties during the negotiations continue to be
privileged even after the JPEPA is published. It is reasonable to conclude that
the Japanese representatives submitted their offers with the understanding that
"historic confidentiality"27 would govern the same. Disclosing these offers
could impair the ability of the Philippines to deal not only with Japan but with
other foreign governments in future negotiations.
A ruling that Philippine offers in treaty negotiations should now be open to
public scrutiny would discourage future Philippine representatives from frankly
expressing their views during negotiations. While, on first impression, it appears
wise to deter Philippine representatives from entering into compromises, it
bears noting that treaty negotiations, or any negotiation for that
matter, normally involve a process of quid pro quo, and oftentimes
negotiators have to be willing to grant concessions in an area of lesser
importance in order to obtain more favorable terms in an area of greater
national interest. Apropos are the following observations of Benjamin S.
Duval, Jr.:
x x x [T]hose involved in the practice of negotiations appear to be in agreement
that publicity leads to "grandstanding," tends to freeze negotiating positions,
and inhibits the give-and-take essential to successful negotiation. As Sissela
Bok points out, if "negotiators have more to gain from being approved by their
own sides than by making a reasoned agreement with competitors or
adversaries, then they are inclined to 'play to the gallery . . .'' In fact, the public
reaction may leave them little option. It would be a brave, or foolish, Arab
leader who expressed publicly a willingness for peace with Israel that did not
involve the return of the entire West Bank, or Israeli leader who stated publicly
a willingness to remove Israel's existing settlements from Judea and Samaria in
return for peace.28 (Emphasis supplied)
Indeed, by hampering the ability of our representatives to compromise, we may
be jeopardizing higher national goals for the sake of securing less critical ones.
Diplomatic negotiations, therefore, are recognized as privileged in this
jurisdiction, the JPEPA negotiations constituting no exception. It bears
emphasis, however, that such privilege is only presumptive. For as Senate v.
Ermita holds, recognizing a type of information as privileged does not mean
that it will be considered privileged in all instances. Only after a consideration of
the context in which the claim is made may it be determined if there is a public
interest that calls for the disclosure of the desired information, strong enough to
overcome its traditionally privileged status.
Whether petitioners have established the presence of such a public interest
shall be discussed later. For now, the Court shall first pass upon the arguments
raised by petitioners against the application of PMPF v. Manglapus to the
present case.
Arguments proffered by petitioners against the application of PMPF v.
Manglapus
Petitioners argue that PMPF v. Manglapus cannot be applied in toto to the
present case, there being substantial factual distinctions between the two.
To petitioners, the first and most fundamental distinction lies in the nature of the
treaty involved. They stress that PMPF v. Manglapus involved the Military
Bases Agreement which necessarily pertained to matters affecting national
security; whereas the present case involves an economic treaty that seeks to
regulate trade and commerce between the Philippines and Japan, matters
which, unlike those covered by the Military Bases Agreement, are not so vital to
national security to disallow their disclosure.
Petitioners’ argument betrays a faulty assumption that information, to be
considered privileged, must involve national security. The recognition in Senate
v. Ermita29 that executive privilege has encompassed claims of varying kinds,
such that it may even be more accurate to speak of "executive privileges,"
cautions against such generalization.
While there certainly are privileges grounded on the necessity of safeguarding
national security such as those involving military secrets, not all are founded
thereon. One example is the "informer’s privilege," or the privilege of the
Government not to disclose the identity of a person or persons who furnish
information of violations of law to officers charged with the enforcement of that
law.30 The suspect involved need not be so notorious as to be a threat to
national security for this privilege to apply in any given instance. Otherwise, the
privilege would be inapplicable in all but the most high-profile cases, in which
case not only would this be contrary to long-standing practice. It would also be
highly prejudicial to law enforcement efforts in general.
Also illustrative is the privilege accorded to presidential communications, which
are presumed privileged without distinguishing between those which involve
matters of national security and those which do not, the rationale for the
privilege being that
x x x [a] frank exchange of exploratory ideas and assessments, free from the
glare of publicity and pressure by interested parties, is essential to protect the
independence of decision-making of those tasked to exercise Presidential,
Legislative and Judicial power. x x x31 (Emphasis supplied)
In the same way that the privilege for judicial deliberations does not depend on
the nature of the case deliberated upon, so presidential communications are
privileged whether they involve matters of national security.
It bears emphasis, however, that the privilege accorded to presidential
communications is not absolute, one significant qualification being that "the
Executive cannot, any more than the other branches of government, invoke a
general confidentiality privilege to shield its officials and employees from
investigations by the proper governmental institutions into possible criminal
wrongdoing." 32 This qualification applies whether the privilege is being invoked
in the context of a judicial trial or a congressional investigation conducted in aid
of legislation.33
Closely related to the "presidential communications" privilege is the deliberative
process privilege recognized in the United States. As discussed by the U.S.
Supreme Court in NLRB v. Sears, Roebuck & Co,34 deliberative process covers
documents reflecting advisory opinions, recommendations and deliberations
comprising part of a process by which governmental decisions and policies are
formulated. Notably, the privileged status of such documents rests, not on the
need to protect national security but, on the "obvious realization that officials
will not communicate candidly among themselves if each remark is a potential
item of discovery and front page news," the objective of the privilege being to
enhance the quality of agency
decisionshttp://web2.westlaw.com/find/default.wl?rs=WLW7.07&serialnum=197
5129772&fn=_top&sv=Split&tc=-1&findtype=Y&tf=-
1&db=708&utid=%7b532A6DBF-9B4C-4A5A-8F16-
C20D9BAA36C4%7d&vr=2.0&rp=%2ffind%2fdefault.wl&mt=WLIGeneralSubscr
iption. 35
The diplomatic negotiations privilege bears a close resemblance to the
deliberative process and presidential communications privilege. It may be
readily perceived that the rationale for the confidential character of diplomatic
negotiations, deliberative process, and presidential communications is similar, if
not identical.
The earlier discussion on PMPF v. Manglapus36 shows that the privilege for
diplomatic negotiations is meant to encourage a frank exchange of exploratory
ideas between the negotiating parties by shielding such negotiations from
public view. Similar to the privilege for presidential communications, the
diplomatic negotiations privilege seeks, through the same means, to protect the
independence in decision-making of the President, particularly in its capacity as
"the sole organ of the nation in its external relations, and its sole representative
with foreign nations." And, as with the deliberative process privilege, the
privilege accorded to diplomatic negotiations arises, not on account of the
content of the information per se, but because the information is part of a
process of deliberation which, in pursuit of the public interest, must be
presumed confidential.
The decision of the U.S. District Court, District of Columbia in Fulbright &
Jaworski v. Department of the Treasury37enlightens on the close relation
between diplomatic negotiations and deliberative process privileges. The
plaintiffs in that case sought access to notes taken by a member of the U.S.
negotiating team during the U.S.-French tax treatynegotiations. Among the
points noted therein were the issues to be discussed, positions which the
French and U.S. teams took on some points, the draft language agreed on, and
articles which needed to be amended. Upholding the confidentiality of those
notes, Judge Green ruled, thus:
Negotiations between two countries to draft a treaty represent a true
example of a deliberative process. Much give-and-take must occur for the
countries to reach an accord. A description of the negotiations at any one
point would not provide an onlooker a summary of the discussions which could
later be relied on as law. It would not be "working law" as the points discussed
and positions agreed on would be subject to change at any date until the treaty
was signed by the President and ratified by the Senate.
The policies behind the deliberative process privilege support non-
disclosure. Much harm could accrue to the negotiations process if these
notes were revealed. Exposure of the pre-agreement positions of the
French negotiators might well offend foreign governments and would
lead to less candor by the U. S. in recording the events of the
negotiations process. As several months pass in between negotiations, this
lack of record could hinder readily the U. S. negotiating team. Further
disclosure would reveal prematurely adopted policies. If these policies should
be changed, public confusion would result easily.
Finally, releasing these snapshot views of the negotiations would be
comparable to releasing drafts of the treaty, particularly when the notes
state the tentative provisions and language agreed on. As drafts of
regulations typically are protected by the deliberative process
privilege, Arthur Andersen & Co. v. Internal Revenue Service, C.A. No. 80-705
(D.C.Cir., May 21, 1982), drafts of treaties should be accorded the same
protection. (Emphasis and underscoring supplied)
Clearly, the privilege accorded to diplomatic negotiations follows as a logical
consequence from the privileged character of the deliberative process.
The Court is not unaware that in Center for International Environmental Law
(CIEL), et al. v. Office of U.S. Trade Representative38 – where the plaintiffs
sought information relating to the just-completed negotiation of a United States-
Chile Free Trade Agreement – the same district court, this time under Judge
Friedman, consciously refrained from applying the doctrine in Fulbright and
ordered the disclosure of the information being sought.
Since the factual milieu in CIEL seemed to call for the straight application of the
doctrine in Fulbright, a discussion of why the district court did not apply the
same would help illumine this Court’s own reasons for deciding the present
case along the lines of Fulbright.
In both Fulbright and CIEL, the U.S. government cited a statutory basis for
withholding information, namely, Exemption 5 of the Freedom of Information
Act (FOIA).39 In order to qualify for protection under Exemption 5, a document
must satisfy two conditions: (1) it must be either inter-agency or intra-
agency in nature, and (2) it must be both pre-decisional and part of the
agency's deliberative or decision-making process.40
Judge Friedman, in CIEL, himself cognizant of a "superficial similarity of
context" between the two cases, based his decision on what he perceived to be
a significant distinction: he found the negotiator’s notes that were sought
in Fulbright to be "clearly internal," whereas the documents being sought
in CIEL were those produced by or exchanged with an outside party, i.e. Chile.
The documents subject of Fulbright being clearly internal in character, the
question of disclosure therein turned not on the threshold requirement of
Exemption 5 that the document be inter-agency, but on whether the documents
were part of the agency's pre-decisional deliberative process. On this basis,
Judge Friedman found that "Judge Green's discussion [in Fulbright] of the harm
that could result from disclosure therefore is irrelevant, since the documents
at issue [in CIEL] are not inter-agency, and the Court does not reach the
question of deliberative process." (Emphasis supplied)
In fine, Fulbright was not overturned. The court in CIEL merely found the same
to be irrelevant in light of its distinct factual setting. Whether this conclusion was
valid – a question on which this Court would not pass – the ruling
in Fulbright that "[n]egotiations between two countries to draft a treaty represent
a true example of a deliberative process" was left standing, since
the CIEL court explicitly stated that it did not reach the question of deliberative
process.
Going back to the present case, the Court recognizes that the information
sought by petitioners includes documents produced and communicated by a
party external to the Philippine government, namely, the Japanese
representatives in the JPEPA negotiations, and to that extent this case is closer
to the factual circumstances of CIELthan those of Fulbright.
Nonetheless, for reasons which shall be discussed shortly, this Court echoes
the principle articulated in Fulbrightthat the public policy underlying the
deliberative process privilege requires that diplomatic negotiations should also
be accorded privileged status, even if the documents subject of the present
case cannot be described as purely internal in character.
It need not be stressed that in CIEL, the court ordered the disclosure of
information based on its finding that the first requirement of FOIA Exemption 5
– that the documents be inter-agency – was not met. In determining whether
the government may validly refuse disclosure of the exchanges between the
U.S. and Chile, it necessarily had to deal with this requirement, it being laid
down by a statute binding on them.
In this jurisdiction, however, there is no counterpart of the FOIA, nor is there
any statutory requirement similar to FOIA Exemption 5 in particular. Hence,
Philippine courts, when assessing a claim of privilege for diplomatic
negotiations, are more free to focus directly on the issue of whether the
privilege being claimed is indeed supported by public policy, without having to
consider – as the CIEL court did – if these negotiations fulfill a formal
requirement of being "inter-agency." Important though that requirement may be
in the context of domestic negotiations, it need not be accorded the same
significance when dealing with international negotiations.
There being a public policy supporting a privilege for diplomatic negotiations for
the reasons explained above, the Court sees no reason to modify, much less
abandon, the doctrine in PMPF v. Manglapus.
A second point petitioners proffer in their attempt to differentiate PMPF v.
Manglapus from the present case is the fact that the petitioners therein
consisted entirely of members of the mass media, while petitioners in the
present case include members of the House of Representatives who invoke
their right to information not just as citizens but as members of Congress.
Petitioners thus conclude that the present case involves the right of members of
Congress to demand information on negotiations of international trade
agreements from the Executive branch, a matter which was not raised in PMPF
v. Manglapus.
While indeed the petitioners in PMPF v. Manglapus consisted only of members
of the mass media, it would be incorrect to claim that the doctrine laid down
therein has no bearing on a controversy such as the present, where the
demand for information has come from members of Congress, not only from
private citizens.
The privileged character accorded to diplomatic negotiations does not
ipso facto lose all force and effect simply because the same privilege is
now being claimed under different circumstances. The probability of the
claim succeeding in the new context might differ, but to say that the privilege,
as such, has no validity at all in that context is another matter altogether.
The Court’s statement in Senate v. Ermita that "presidential refusals to furnish
information may be actuated by any of at least three distinct kinds of
considerations [state secrets privilege, informer’s privilege, and a generic
privilege for internal deliberations], and may be asserted, with differing
degrees of success, in the context of either judicial or legislative
investigations,"41 implies that a privilege, once recognized, may be invoked
under different procedural settings. That this principle holds true particularly
with respect to diplomatic negotiations may be inferred from PMPF v.
Manglapus itself, where the Court held that it is the President alone who
negotiates treaties, and not even the Senate or the House of
Representatives, unless asked, may intrude upon that process.
Clearly, the privilege for diplomatic negotiations may be invoked not only
against citizens’ demands for information, but also in the context of legislative
investigations.
Hence, the recognition granted in PMPF v. Manglapus to the privileged
character of diplomatic negotiations cannot be considered irrelevant in
resolving the present case, the contextual differences between the two cases
notwithstanding.
As third and last point raised against the application of PMPF v. Manglapus in
this case, petitioners proffer that "the socio-political and historical contexts of
the two cases are worlds apart." They claim that the constitutional traditions
and concepts prevailing at the time PMPF v. Manglapus came about,
particularly the school of thought that the requirements of foreign policy and the
ideals of transparency were incompatible with each other or the "incompatibility
hypothesis," while valid when international relations were still governed by
power, politics and wars, are no longer so in this age of international
cooperation.42
Without delving into petitioners’ assertions respecting the "incompatibility
hypothesis," the Court notes that the ruling in PMPF v. Manglapus is grounded
more on the nature of treaty negotiations as such than on a particular socio-
political school of thought. If petitioners are suggesting that the nature of treaty
negotiations have so changed that "[a]n ill-timed speech by one of the parties or
a frank declaration of the concession which are exacted or offered on both
sides" no longer "lead[s] to widespread propaganda to block the negotiations,"
or that parties in treaty negotiations no longer expect their communications to
be governed by historic confidentiality, the burden is on them to substantiate
the same. This petitioners failed to discharge.
Whether the privilege applies only at certain stages of the negotiation
process
Petitioners admit that "diplomatic negotiations on the JPEPA are entitled to a
reasonable amount of confidentiality so as not to jeopardize the diplomatic
process." They argue, however, that the same is privileged "only at certain
stages of the negotiating process, after which such information must
necessarily be revealed to the public."43 They add that the duty to disclose this
information was vested in the government when the negotiations moved from
the formulation and exploratory stage to the firming up of definite propositions
or official recommendations, citing Chavez v. PCGG44 and Chavez v. PEA.45
The following statement in Chavez v. PEA, however, suffices to show that the
doctrine in both that case and Chavez v. PCGG with regard to the duty to
disclose "definite propositions of the government" does not apply to diplomatic
negotiations:
We rule, therefore, that the constitutional right to information includes official
information on on-going negotiationsbefore a final contract. The information,
however, must constitute definite propositions by the government and
should not cover recognized exceptions like privileged information,
military and diplomatic secrets and similar matters affecting national
security and public order. x x x46 (Emphasis and underscoring supplied)
It follows from this ruling that even definite propositions of the government may
not be disclosed if they fall under "recognized exceptions." The privilege for
diplomatic negotiations is clearly among the recognized exceptions, for the
footnote to the immediately quoted ruling cites PMPF v. Manglapus itself as an
authority.
Whether there is sufficient public interest to overcome the claim of
privilege
It being established that diplomatic negotiations enjoy a presumptive privilege
against disclosure, even against the demands of members of Congress for
information, the Court shall now determine whether petitioners have shown the
existence of a public interest sufficient to overcome the privilege in this
instance.
To clarify, there are at least two kinds of public interest that must be taken into
account. One is the presumed public interest in favor of keeping the subject
information confidential, which is the reason for the privilege in the first place,
and the other is the public interest in favor of disclosure, the existence of
which must be shown by the party asking for information. 47
The criteria to be employed in determining whether there is a sufficient public
interest in favor of disclosure may be gathered from cases such as U.S. v.
Nixon,48 Senate Select Committee on Presidential Campaign Activities v.
Nixon,49 and In re Sealed Case.50
U.S. v. Nixon, which involved a claim of the presidential communications
privilege against the subpoena duces tecum of a district court in a criminal
case, emphasized the need to balance such claim of privilege against the
constitutional duty of courts to ensure a fair administration of criminal justice.
x x x the allowance of the privilege to withhold evidence that is demonstrably
relevant in a criminal trial would cut deeply into the guarantee of due
process of law and gravely impair the basic function of the courts. A
President’s acknowledged need for confidentiality in the communications
of his office is general in nature, whereas the constitutional need for
production of relevant evidence in a criminal proceeding is specific
and central to the fair adjudication of a particular criminal case in the
administration of justice. Without access to specific facts a criminal
prosecution may be totally frustrated. The President’s broad interest in
confidentiality of communications will not be vitiated by disclosure of a limited
number of conversations preliminarily shown to have some bearing on the
pending criminal cases. (Emphasis, italics and underscoring supplied)
Similarly, Senate Select Committee v. Nixon,51 which involved a claim of the
presidential communications privilege against the subpoena duces tecum of a
Senate committee, spoke of the need to balance such claim with the duty of
Congress to perform its legislative functions.
The staged decisional structure established in Nixon v. Sirica was designed to
ensure that the President and those upon whom he directly relies in the
performance of his duties could continue to work under a general assurance
that their deliberations would remain confidential. So long as the presumption
that the public interest favors confidentiality can be defeated only by
a strong showing of need by another institution of government- a
showing that the responsibilities of that institution cannot responsibly be
fulfilled without access to records of the President's deliberations- we
believed in Nixon v. Sirica, and continue to believe, that the effective
functioning of the presidential office will not be impaired. x x x
xxxx
The sufficiency of the Committee's showing of need has come to depend,
therefore, entirely on whether the subpoenaed materials are critical to the
performance of its legislative functions. x x x (Emphasis and underscoring
supplied)
In re Sealed Case52 involved a claim of the deliberative process and
presidential communications privileges against a subpoena duces tecum of a
grand jury. On the claim of deliberative process privilege, the court stated:
The deliberative process privilege is a qualified privilege and can be overcome
by a sufficient showing of need. This need determination is to be made
flexibly on a case-by-case, ad hoc basis. "[E]ach time [the deliberative
process privilege] is asserted the district court must undertake a fresh
balancing of the competing interests," taking into account factors such as
"the relevance of the evidence," "the availability of other evidence," "the
seriousness of the litigation," "the role of the government," and the
"possibility of future timidity by government employees. x x x (Emphasis,
italics and underscoring supplied)
Petitioners have failed to present the strong and "sufficient showing of need"
referred to in the immediately cited cases. The arguments they proffer to
establish their entitlement to the subject documents fall short of this standard.
Petitioners go on to assert that the non-involvement of the Filipino people in the
JPEPA negotiation process effectively results in the bargaining away of their
economic and property rights without their knowledge and participation, in
violation of the due process clause of the Constitution. They claim, moreover,
that it is essential for the people to have access to the initial offers exchanged
during the negotiations since only through such disclosure can their
constitutional right to effectively participate in decision-making be brought to life
in the context of international trade agreements.
Whether it can accurately be said that the Filipino people were not involved in
the JPEPA negotiations is a question of fact which this Court need not resolve.
Suffice it to state that respondents had presented documents purporting to
show that public consultations were conducted on the JPEPA. Parenthetically,
petitioners consider these "alleged consultations" as "woefully selective and
inadequate."53
AT ALL EVENTS, since it is not disputed that the offers exchanged by the
Philippine and Japanese representatives have not been disclosed to the public,
the Court shall pass upon the issue of whether access to the documents
bearing on them is, as petitioners claim, essential to their right to participate in
decision-making.
The case for petitioners has, of course, been immensely weakened by the
disclosure of the full text of the JPEPA to the public since September 11, 2006,
even as it is still being deliberated upon by the Senate and, therefore, not yet
binding on the Philippines. Were the Senate to concur with the validity of the
JPEPA at this moment, there has already been, in the words of PMPF v.
Manglapus, "ample opportunity for discussion before [the treaty] is approved."
The text of the JPEPA having been published, petitioners have failed to
convince this Court that they will not be able to meaningfully exercise their right
to participate in decision-making unless the initial offers are also published.
It is of public knowledge that various non-government sectors and private
citizens have already publicly expressed their views on the JPEPA, their
comments not being limited to general observations thereon but on its specific
provisions. Numerous articles and statements critical of the JPEPA have been
posted on the Internet.54 Given these developments, there is no basis for
petitioners’ claim that access to the Philippine and Japanese offers is essential
to the exercise of their right to participate in decision-making.
Petitioner-members of the House of Representatives additionally anchor their
claim to have a right to the subject documents on the basis of Congress’
inherent power to regulate commerce, be it domestic or international. They
allege that Congress cannot meaningfully exercise the power to regulate
international trade agreements such as the JPEPA without being given copies
of the initial offers exchanged during the negotiations thereof. In the same vein,
they argue that the President cannot exclude Congress from the JPEPA
negotiations since whatever power and authority the President has to negotiate
international trade agreements is derived only by delegation of Congress,
pursuant to Article VI, Section 28(2) of the Constitution and Sections 401 and
402 of Presidential Decree No. 1464.55
The subject of Article VI Section 28(2) of the Constitution is not the power to
negotiate treaties and international agreements, but the power to fix tariff rates,
import and export quotas, and other taxes. Thus 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.
As to the power to negotiate treaties, the constitutional basis thereof is Section
21 of Article VII – the article on the Executive Department – which states:
No treaty or international agreement shall be valid and effective unless
concurred in by at least two-thirds of all the Members of the Senate.
The doctrine in PMPF v. Manglapus that the treaty-making power is exclusive
to the President, being the sole organ of the nation in its external relations, was
echoed in BAYAN v. Executive Secretary56 where the Court held:
By constitutional fiat and by the intrinsic nature of his office, the President, as
head of State, is the sole organ and authority in the external affairs of the
country. In many ways, the President is the chief architect of the nation's
foreign policy; his "dominance in the field of foreign relations is (then)
conceded." Wielding vast powers and influence, his conduct in the external
affairs of the nation, as Jefferson describes, is "executive altogether."
As regards the power to enter into treaties or international agreements,
the Constitution vests the same in the President, subject only to the
concurrence of at least two thirds vote of all the members of the
Senate. In this light, the negotiation of the VFA and the subsequent ratification
of the agreement are exclusive acts which pertain solely to the President, in the
lawful exercise of his vast executive and diplomatic powers granted him no
less than by the fundamental law itself. Into the field of negotiation the
Senate cannot intrude, and Congress itself is powerless to invade it. x x
x (Italics in the original; emphasis and underscoring supplied)
The same doctrine was reiterated even more recently in Pimentel v. Executive
Secretary57 where the Court ruled:
In our system of government, the President, being the head of state, is
regarded as the sole organ and authority in external relations and is the
country's sole representative with foreign nations. As the chief architect of
foreign policy, the President acts as the country's mouthpiece with respect to
international affairs. Hence, the President is vested with the authority
to deal with foreign states and governments, extend or withhold recognition,
maintain diplomatic relations, enter into treaties, and otherwise transact the
business of foreign relations. In the realm of treaty-making, the President
has the sole authority to negotiate with other states.
Nonetheless, while the President has the sole authority to negotiate and
enter into treaties, the Constitution provides a limitation to his power by
requiring the concurrence of 2/3 of all the members of the Senate for
the validity of the treaty entered into by him. x x x (Emphasis and
underscoring supplied)
While the power then to fix tariff rates and other taxes clearly belongs to
Congress, and is exercised by the President only by delegation of that body, it
has long been recognized that the power to enter into treaties is vested directly
and exclusively in the President, subject only to the concurrence of at least two-
thirds of all the Members of the Senate for the validity of the treaty. In this light,
the authority of the President to enter into trade agreements with foreign
nations provided under P.D. 146458 may be interpreted as an acknowledgment
of a power already inherent in its office. It may not be used as basis to hold the
President or its representatives accountable to Congress for the conduct of
treaty negotiations.
This is not to say, of course, that the President’s power to enter into treaties is
unlimited but for the requirement of Senate concurrence, since the President
must still ensure that all treaties will substantively conform to all the relevant
provisions of the Constitution.
It follows from the above discussion that Congress, while possessing vast
legislative powers, may not interfere in the field of treaty negotiations. While
Article VII, Section 21 provides for Senate concurrence, such pertains only to
the validity of the treaty under consideration, not to the conduct of negotiations
attendant to its conclusion. Moreover, it is not even Congress as a whole that
has been given the authority to concur as a means of checking the treaty-
making power of the President, but only the Senate.
Thus, as in the case of petitioners suing in their capacity as private citizens,
petitioners-members of the House of Representatives fail to present a
"sufficient showing of need" that the information sought is critical to the
performance of the functions of Congress, functions that do not include treaty-
negotiation.
Respondents’ alleged failure to timely claim executive privilege
On respondents’ invocation of executive privilege, petitioners find the same
defective, not having been done seasonably as it was raised only in their
Comment to the present petition and not during the House Committee hearings.
That respondents invoked the privilege for the first time only in their Comment
to the present petition does not mean that the claim of privilege should not be
credited. Petitioners’ position presupposes that an assertion of the privilege
should have been made during the House Committee investigations, failing
which respondents are deemed to have waived it.
When the House Committee and petitioner-Congressman
Aguja requested respondents for copies of the documents subject of this case,
respondents replied that the negotiations were still on-going and that the draft
of the JPEPA would be released once the text thereof is settled and complete.
There was no intimation that the requested copies are confidential in nature by
reason of public policy. The response may not thus be deemed a claim of
privilege by the standards of Senate v. Ermita, which recognizes as claims of
privilege only those which are accompanied by precise and certain
reasons for preserving the confidentiality of the information being sought.
Respondents’ failure to claim the privilege during the House Committee
hearings may not, however, be construed as a waiver thereof by the Executive
branch. As the immediately preceding paragraph indicates, what respondents
received from the House Committee and petitioner-Congressman Aguja were
mere requests for information. And as priorly stated, the House Committee
itself refrained from pursuing its earlier resolution to issue a subpoena duces
tecum on account of then Speaker Jose de Venecia’s alleged request to
Committee Chairperson Congressman Teves to hold the same in abeyance.
While it is a salutary and noble practice for Congress to refrain from issuing
subpoenas to executive officials – out of respect for their office – until resort to
it becomes necessary, the fact remains that such requests are not a
compulsory process. Being mere requests, they do not strictly call for an
assertion of executive privilege.
The privilege is an exemption to Congress’ power of inquiry.59 So long as
Congress itself finds no cause to enforce such power, there is no strict
necessity to assert the privilege. In this light, respondents’ failure to invoke the
privilege during the House Committee investigations did not amount to a waiver
thereof.
The Court observes, however, that the claim of privilege appearing in
respondents’ Comment to this petition fails to satisfy in full the requirement laid
down in Senate v. Ermita that the claim should be invoked by the President or
through the Executive Secretary "by order of the President."60 Respondents’
claim of privilege is being sustained, however, its flaw notwithstanding, because
of circumstances peculiar to the case.
The assertion of executive privilege by the Executive Secretary, who is one of
the respondents herein, without him adding the phrase "by order of the
President," shall be considered as partially complying with the requirement laid
down in Senate v. Ermita. The requirement that the phrase "by order of the
President" should accompany the Executive Secretary’s claim of privilege is a
new rule laid down for the first time in Senate v. Ermita, which was not yet final
and executory at the time respondents filed their Comment to the petition.61 A
strict application of this requirement would thus be unwarranted in this case.
Response to the Dissenting Opinion of the Chief Justice
We are aware that behind the dissent of the Chief Justice lies a genuine zeal to
protect our people’s right to information against any abuse of executive
privilege. It is a zeal that We fully share.
The Court, however, in its endeavor to guard against the abuse of executive
privilege, should be careful not to veer towards the opposite extreme, to the
point that it would strike down as invalid even a legitimate exercise thereof.
We respond only to the salient arguments of the Dissenting Opinion which have
not yet been sufficiently addressed above.
1. After its historical discussion on the allocation of power over international
trade agreements in the United States, the dissent concludes that "it will be
turning somersaults with history to contend that the President is the sole organ
for external relations" in that jurisdiction. With regard to this opinion, We make
only the following observations:
There is, at least, a core meaning of the phrase "sole organ of the nation in its
external relations" which is not being disputed, namely, that the power
to directly negotiate treaties and international agreements is vested by our
Constitution only in the Executive. Thus, the dissent states that "Congress has
the power to regulate commerce with foreign nations but does not have the
power to negotiate international agreements directly."62
What is disputed is how this principle applies to the case at bar.
The dissent opines that petitioner-members of the House of Representatives,
by asking for the subject JPEPA documents, are not seeking
to directly participate in the negotiations of the JPEPA, hence, they cannot be
prevented from gaining access to these documents.
On the other hand, We hold that this is one occasion where the following ruling
in Agan v. PIATCO63 – and in other cases both before and since – should be
applied:
This Court has long and consistently adhered to the legal maxim that
those that cannot be done directly cannot be done indirectly. To declare
the PIATCO contracts valid despite the clear statutory prohibition against a
direct government guarantee would not only make a mockery of what the BOT
Law seeks to prevent -- which is to expose the government to the risk of
incurring a monetary obligation resulting from a contract of loan between the
project proponent and its lenders and to which the Government is not a party to
-- but would also render the BOT Law useless for what it seeks to achieve –- to
make use of the resources of the private sector in the "financing, operation and
maintenance of infrastructure and development projects" which are necessary
for national growth and development but which the government, unfortunately,
could ill-afford to finance at this point in time.64
Similarly, while herein petitioners-members of the House of Representatives
may not have been aiming to participate in the negotiations directly, opening
the JPEPA negotiations to their scrutiny – even to the point of giving them
access to the offers exchanged between the Japanese and Philippine
delegations – would have made a mockery of what the Constitution sought to
prevent and rendered it useless for what it sought to achieve when it vested the
power of direct negotiation solely with the President.
What the U.S. Constitution sought to prevent and aimed to achieve in defining
the treaty-making power of the President, which our Constitution similarly
defines, may be gathered from Hamilton’s explanation of why the U.S.
Constitution excludes the House of Representatives from the treaty-making
process:
x x x The fluctuating, and taking its future increase into account, the
multitudinous composition of that body, forbid us to expect in it those qualities
which are essential to the proper execution of such a trust. Accurate and
comprehensive knowledge of foreign politics; a steady and systematic
adherence to the same views; a nice and uniform sensibility to national
character, decision, secrecy and dispatch; are incompatible with a body so
variable and so numerous. The very complication of the business by
introducing a necessity of the concurrence of so many different bodies, would
of itself afford a solid objection. The greater frequency of the calls upon the
house of representatives, and the greater length of time which it would often be
necessary to keep them together when convened, to obtain their sanction in the
progressive stages of a treaty, would be source of so great inconvenience and
expense, as alone ought to condemn the project.65
These considerations a fortiori apply in this jurisdiction, since the Philippine
Constitution, unlike that of the U.S., does not even grant the Senate the
power to advise the Executive in the making of treaties, but only vests in that
body the power to concur in the validity of the treaty after negotiations have
been concluded.66 Much less, therefore, should it be inferred that the House of
Representatives has this power.
Since allowing petitioner-members of the House of Representatives access to
the subject JPEPA documents would set a precedent for future negotiations,
leading to the contravention of the public interests articulated above which the
Constitution sought to protect, the subject documents should not be disclosed.
2. The dissent also asserts that respondents can no longer claim the diplomatic
secrets privilege over the subject JPEPA documents now that negotiations
have been concluded, since their reasons for nondisclosure cited in the June
23, 2005 letter of Sec. Ermita, and later in their Comment, necessarily apply
only for as long as the negotiations were still pending;
In their Comment, respondents contend that "the negotiations of the
representatives of the Philippines as well as of Japan must be allowed to
explore alternatives in the course of the negotiations in the same manner as
judicial deliberations and working drafts of opinions are accorded strict
confidentiality." That respondents liken the documents involved in the
JPEPA negotiations to judicial deliberations and working drafts of
opinions evinces, by itself, that they were claiming confidentiality not
only until, but even after, the conclusion of the negotiations.
Judicial deliberations do not lose their confidential character once a decision
has been promulgated by the courts. The same holds true with respect to
working drafts of opinions, which are comparable to intra-
agencyrecommendations. Such intra-agency recommendations are privileged
even after the position under consideration by the agency has developed into a
definite proposition, hence, the rule in this jurisdiction that agencies have the
duty to disclose only definite propositions, and not the inter-agency and intra-
agency communications during the stage when common assertions are still
being formulated.67
3. The dissent claims that petitioner-members of the House of Representatives
have sufficiently shown their need for the same documents to overcome the
privilege. Again, We disagree.
The House Committee that initiated the investigations on the JPEPA did not
pursue its earlier intention to subpoena the documents. This strongly
undermines the assertion that access to the same documents by the House
Committee is critical to the performance of its legislative functions. If the
documents were indeed critical, the House Committee should have, at the very
least, issued a subpoena duces tecum or, like what the Senate did in Senate v.
Ermita, filed the present petition as a legislative body, rather than leaving it to
the discretion of individual Congressmen whether to pursue an action or not.
Such acts would have served as strong indicia that Congress itself finds the
subject information to be critical to its legislative functions.
Further, given that respondents have claimed executive privilege, petitioner-
members of the House of Representatives should have, at least, shown how its
lack of access to the Philippine and Japanese offers would hinder the intelligent
crafting of legislation. Mere assertion that the JPEPA covers a subject matter
over which Congress has the power to legislate would not suffice. As Senate
Select Committee v. Nixon68 held, the showing required to overcome the
presumption favoring confidentiality turns, not only on the nature and
appropriateness of the function in the performance of which the material was
sought, but also the degree to which the material was necessary to its
fulfillment. This petitioners failed to do.
Furthermore, from the time the final text of the JPEPA including its annexes
and attachments was published, petitioner-members of the House of
Representatives have been free to use it for any legislative purpose they may
see fit. Since such publication, petitioners’ need, if any, specifically for the
Philippine and Japanese offers leading to the final version of the JPEPA, has
become even less apparent.
In asserting that the balance in this instance tilts in favor of disclosing the
JPEPA documents, the dissent contends that the Executive has failed to show
how disclosing them after the conclusion of negotiations would impair the
performance of its functions. The contention, with due respect, misplaces the
onus probandi. While, in keeping with the general presumption of transparency,
the burden is initially on the Executive to provide precise and certain reasons
for upholding its claim of privilege, once the Executive is able to show that the
documents being sought are covered by a recognized privilege, the burden
shifts to the party seeking information to overcome the privilege by a strong
showing of need.
When it was thus established that the JPEPA documents are covered by the
privilege for diplomatic negotiations pursuant to PMPF v. Manglapus, the
presumption arose that their disclosure would impair the performance of
executive functions. It was then incumbent on petitioner- requesting parties to
show that they have a strong need for the information sufficient to overcome
the privilege. They have not, however.
4. Respecting the failure of the Executive Secretary to explicitly state that he is
claiming the privilege "by order of the President," the same may not be strictly
applied to the privilege claim subject of this case.
When the Court in Senate v. Ermita limited the power of invoking the privilege
to the President alone, it was laying down a new rule for which there is no
counterpart even in the United States from which the concept of executive
privilege was adopted. As held in the 2004 case of Judicial Watch, Inc. v.
Department of Justice,69 citing In re Sealed Case,70 "the issue of whether a
President must personally invoke the [presidential communications] privilege
remains an open question." U.S. v. Reynolds,71 on the other hand, held that
"[t]here must be a formal claim of privilege, lodged by the head of the
department which has control over the matter, after actual personal
consideration by that officer."
The rule was thus laid down by this Court, not in adherence to any established
precedent, but with the aim of preventing the abuse of the privilege in light of its
highly exceptional nature. The Court’s recognition that the Executive Secretary
also bears the power to invoke the privilege, provided he does so "by order of
the President," is meant to avoid laying down too rigid a rule, the Court being
aware that it was laying down a new restriction on executive privilege. It is with
the same spirit that the Court should not be overly strict with applying the same
rule in this peculiar instance, where the claim of executive privilege occurred
before the judgment in Senate v. Ermitabecame final.
5. To show that PMPF v. Manglapus may not be applied in the present case,
the dissent implies that the Court therein erred in citing US v. Curtiss
Wright72 and the book entitled The New American Government and Its
Work73since these authorities, so the dissent claims, may not be used to
calibrate the importance of the right to information in the Philippine setting.
The dissent argues that since Curtiss-Wright referred to a conflict between the
executive and legislative branches of government, the factual setting thereof
was different from that of PMPF v. Manglapus which involved a collision
between governmental power over the conduct of foreign affairs and the
citizen’s right to information.
That the Court could freely cite Curtiss-Wright – a case that upholds the
secrecy of diplomatic negotiations against congressional demands for
information – in the course of laying down a ruling on the public right to
information only serves to underscore the principle mentioned earlier that the
privileged character accorded to diplomatic negotiations does not ipso
facto lose all force and effect simply because the same privilege is now being
claimed under different circumstances.
PMPF v. Manglapus indeed involved a demand for information from private
citizens and not an executive-legislative conflict, but so did Chavez v.
PEA74 which held that "the [public’s] right to information . . . does not extend to
matters recognized as privileged information under the separation of powers."
What counts as privileged information in an executive-legislative conflict is thus
also recognized as such in cases involving the public’s right to information.
Chavez v. PCGG75 also involved the public’s right to information, yet the Court
recognized as a valid limitation to that right the same privileged information
based on separation of powers – closed-door Cabinet meetings, executive
sessions of either house of Congress, and the internal deliberations of the
Supreme Court.
These cases show that the Court has always regarded claims of privilege,
whether in the context of an executive-legislative conflict or a citizen’s demand
for information, as closely intertwined, such that the principles applicable to one
are also applicable to the other.
The reason is obvious. If the validity of claims of privilege were to be assessed
by entirely different criteria in each context, this may give rise to the absurd
result where Congress would be denied access to a particular information
because of a claim of executive privilege, but the general public would have
access to the same information, the claim of privilege notwithstanding.
Absurdity would be the ultimate result if, for instance, the Court adopts the
"clear and present danger" test for the assessment of claims of privilege
against citizens’ demands for information. If executive information, when
demanded by a citizen, is privileged only when there is a clear and present
danger of a substantive evil that the State has a right to prevent, it would be
very difficult for the Executive to establish the validity of its claim in each
instance. In contrast, if the demand comes from Congress, the Executive
merely has to show that the information is covered by a recognized privilege in
order to shift the burden on Congress to present a strong showing of need. This
would lead to a situation where it would be more difficult for Congress to access
executive information than it would be for private citizens.
We maintain then that when the Executive has already shown that an
information is covered by executive privilege, the party demanding the
information must present a "strong showing of need," whether that party is
Congress or a private citizen.
The rule that the same "showing of need" test applies in both these contexts,
however, should not be construed as a denial of the importance of analyzing
the context in which an executive privilege controversy may happen to be
placed. Rather, it affirms it, for it means that the specific need being shown by
the party seeking information in every particular instance is highly significant in
determining whether to uphold a claim of privilege. This "need" is, precisely,
part of the context in light of which every claim of privilege should be
assessed.
Since, as demonstrated above, there are common principles that should be
applied to executive privilege controversies across different contexts, the Court
in PMPF v. Manglapus did not err when it cited the Curtiss-Wrightcase.
The claim that the book cited in PMPF v. Manglapus entitled The New
American Government and Its Work could not have taken into account the
expanded statutory right to information in the FOIA assumes that the
observations in that book in support of the confidentiality of treaty
negotiations would be different had it been written after the FOIA. Such
assumption is, with due respect, at best, speculative.
As to the claim in the dissent that "[i]t is more doubtful if the same book be used
to calibrate the importance of the right of access to information in the Philippine
setting considering its elevation as a constitutional right," we submit that the
elevation of such right as a constitutional right did not set it free from the
legitimate restrictions of executive privilege which is itself constitutionally-
based.76 Hence, the comments in that book which were cited in PMPF v.
Manglapus remain valid doctrine.
6. The dissent further asserts that the Court has never used "need" as a test to
uphold or allow inroads into rights guaranteed under the Constitution. With due
respect, we assert otherwise. The Court has done so before, albeit without
using the term "need."
In executive privilege controversies, the requirement that parties present a
"sufficient showing of need" only means, in substance, that they should show a
public interest in favor of disclosure sufficient in degree to overcome the claim
of privilege.77 Verily, the Court in such cases engages in a balancing of
interests. Such a balancing of interests is certainly not new in constitutional
adjudication involving fundamental rights. Secretary of Justice v.
Lantion,78 which was cited in the dissent, applied just such a test.
Given that the dissent has clarified that it does not seek to apply the "clear and
present danger" test to the present controversy, but the balancing test, there
seems to be no substantial dispute between the position laid down in
this ponencia and that reflected in the dissent as to what test to apply. It would
appear that the only disagreement is on the results of applying that test in this
instance.
The dissent, nonetheless, maintains that "it suffices that information is of public
concern for it to be covered by the right, regardless of the public’s need for the
information," and that the same would hold true even "if they simply want to
know it because it interests them." As has been stated earlier, however, there is
no dispute that the information subject of this case is a matter of public
concern. The Court has earlier concluded that it is a matter of public
concern, not on the basis of any specific need shown by petitioners, but from
the very nature of the JPEPA as an international trade agreement.
However, when the Executive has – as in this case – invoked the privilege, and
it has been established that the subject information is indeed covered by the
privilege being claimed, can a party overcome the same by merely asserting
that the information being demanded is a matter of public concern, without any
further showing required? Certainly not, for that would render the doctrine of
executive privilege of no force and effect whatsoever as a limitation on the right
to information, because then the sole test in such controversies would be
whether an information is a matter of public concern.
Moreover, in view of the earlier discussions, we must bear in mind that, by
disclosing the documents of the JPEPA negotiations, the Philippine government
runs the grave risk of betraying the trust reposed in it by the Japanese
representatives, indeed, by the Japanese government itself. How would the
Philippine government then explain itself when that happens? Surely, it cannot
bear to say that it just had to release the information because certain persons
simply wanted to know it "because it interests them."
Thus, the Court holds that, in determining whether an information is covered by
the right to information, a specific "showing of need" for such information is not
a relevant consideration, but only whether the same is a matter of public
concern. When, however, the government has claimed executive privilege, and
it has established that the information is indeed covered by the same, then the
party demanding it, if it is to overcome the privilege, must show that that the
information is vital, not simply for the satisfaction of its curiosity, but for its
ability to effectively and reasonably participate in social, political, and economic
decision-making.79
7. The dissent maintains that "[t]he treaty has thus entered the ultimate stage
where the people can exercise their right to participate in the discussion
whether the Senate should concur in its ratification or not." (Emphasis supplied)
It adds that this right "will be diluted unless the people can have access to the
subject JPEPA documents". What, to the dissent, is a dilution of the right to
participate in decision-making is, to Us, simply a recognition of the qualified
nature of the public’s right to information. It is beyond dispute that the right to
information is not absolute and that the doctrine of executive privilege is a
recognized limitation on that right.
Moreover, contrary to the submission that the right to participate in decision-
making would be diluted, We reiterate that our people have been
exercising their right to participate in the discussion on the issue of the JPEPA,
and they have been able to articulate their different opinions without need of
access to the JPEPA negotiation documents.
Thus, we hold that the balance in this case tilts in favor of executive privilege.
8. Against our ruling that the principles applied in U.S. v. Nixon, the Senate
Select Committee case, and In re Sealed Case, are similarly applicable to the
present controversy, the dissent cites the caveat in the Nixon case that the U.S.
Court was there addressing only the President’s assertion of privilege in the
context of a criminal trial, not a civil litigation nor a congressional demand for
information. What this caveat means, however, is only that courts must be
careful not to hastily apply the ruling therein to other contexts. It does not,
however, absolutely mean that the principles applied in that case may never be
applied in such contexts.
Hence, U.S. courts have cited U.S. v. Nixon in support of their rulings on claims
of executive privilege in contexts other than a criminal trial, as in the case
of Nixon v. Administrator of General Services80 – which involved former
President Nixon’s invocation of executive privilege to challenge the
constitutionality of the "Presidential Recordings and Materials Preservation
Act"81 – and the above-mentioned In re Sealed Case which involved a claim of
privilege against a subpoena duces tecum issued in a grand jury investigation.
Indeed, in applying to the present case the principles found in U.S. v. Nixon and
in the other cases already mentioned, We are merely affirming what the Chief
Justice stated in his Dissenting Opinion in Neri v. Senate Committee on
Accountability82 – a case involving an executive-legislative conflict over
executive privilege. That dissenting opinion stated that, while Nixon was not
concerned with the balance between the President’s generalized interest in
confidentiality and congressional demands for information, "[n]onetheless the
[U.S.] Court laid down principles and procedures that can serve as torch
lights to illumine us on the scope and use of Presidential communication
privilege in the case at bar."83 While the Court was divided in Neri, this
opinion of the Chief Justice was not among the points of disagreement, and We
similarly hold now that the Nixon case is a useful guide in the proper resolution
of the present controversy, notwithstanding the difference in context.
Verily, while the Court should guard against the abuse of executive
privilege, it should also give full recognition to the validity of the privilege
whenever it is claimed within the proper bounds of executive power, as in
this case. Otherwise, the Court would undermine its own credibility, for it would
be perceived as no longer aiming to strike a balance, but seeking merely to
water down executive privilege to the point of irrelevance.
Conclusion
To recapitulate, petitioners’ demand to be furnished with a copy of the full text
of the JPEPA has become moot and academic, it having been made accessible
to the public since September 11, 2006. As for their demand for copies of the
Philippine and Japanese offers submitted during the JPEPA negotiations, the
same must be denied, respondents’ claim of executive privilege being valid.
Diplomatic negotiations have, since the Court promulgated its Resolution in
PMPF v. Manglapus on September 13, 1988, been recognized as privileged in
this jurisdiction and the reasons proffered by petitioners against the application
of the ruling therein to the present case have not persuaded the Court.
Moreover, petitioners – both private citizens and members of the House of
Representatives – have failed to present a "sufficient showing of need" to
overcome the claim of privilege in this case.
That the privilege was asserted for the first time in respondents’ Comment to
the present petition, and not during the hearings of the House Special
Committee on Globalization, is of no moment, since it cannot be interpreted as
a waiver of the privilege on the part of the Executive branch.
For reasons already explained, this Decision shall not be interpreted as
departing from the ruling in Senate v. Ermitathat executive privilege should be
invoked by the President or through the Executive Secretary "by order of the
President."
WHEREFORE, the petition is DISMISSED.
SO ORDERED.
SECOND DIVISION
G.R. No. 162272 April 7, 2009
SANTIAGO C. DIVINAGRACIA, Petitioner,
vs.
CONSOLIDATED BROADCASTING SYSTEM, INC. and PEOPLE'S
BROADCASTING SERVICE, INC.,Respondents.
 DECISION
TINGA, J.:
Does the National Telecommunications Commission (NTC) have jurisdiction
over complaints seeking the cancellation of certificates of public convenience
(CPCs) and other licenses it had issued to the holders of duly-issued legislative
franchises on the ground that the franchisees had violated the terms of their
franchises? The Court, in resolving that question, takes the opportunity to
elaborate on the dynamic behind the regulation of broadcast media in the
Philippines, particularly the interrelationship between the twin franchise and
licensing requirements.
I.
Respondents Consolidated Broadcasting System, Inc. (CBS) and People’s
Broadcasting Service, Inc. (PBS) were incorporated in 1961 and 1965,
respectively. Both are involved in the operation of radio broadcasting services
in the Philippines, they being the grantees of legislative franchises by virtue of
two laws, Republic Act (R.A.) No. 7477 and R.A. No. 7582. R.A. No. 7477,
enacted on 5 May 1992, granted PBS a legislative franchise to construct,
install, maintain and operate radio and television stations within the Philippines
for a period of 25 years. R.A. No. 7582, enacted on 27 May 1992, extended
CBS’s previous legislative franchise1 to operate radio stations for another 25
years. The CBS and PBS radio networks are two of the three networks that
comprise the well-known "Bombo Radyo Philippines."2
Section 9 of R.A. No. 7477 and Section 3 of R.A. No. 7582 contain a common
provision predicated on the "constitutional mandate to democratize ownership
of public utilities."3 The common provision states:
SEC. 9. Democratization of ownership.― In compliance with the constitutional
mandate to democratize ownership of public utilities, the herein grantee shall
make public offering through the stock exchanges of at least thirty percent
(30%) of its common stocks within a period of three (3) years from the date of
effectivity of this Act: Provided, That no single person or entity shall be allowed
to own more than five percent (5%) of the stock offerings.4
It further appears that following the enactment of these franchise laws, the NTC
issued four (4) Provisional Authorities to PBS and six (6) Provisional Authorities
to CBS, allowing them to install, operate and maintain various AM and FM
broadcast stations in various locations throughout the nation. 5 These
Provisional Authorities were issued between 1993 to 1998, or after the
enactment of R.A. No. 7477 and R.A. No. 7582.
Petitioner Santiago C. Divinagracia6 filed two complaints both dated 1 March
1999 with the NTC, respectively lodged against PBS7 and CBS.8 He alleged
that he was "the actual and beneficial owner of Twelve percent (12%) of the
shares of stock" of PBS and CBS separately,9 and that despite the provisions in
R.A. No. 7477 and R.A. No. 7582 mandating the public offering of at least 30%
of the common stocks of PBS and CBS, both entities had failed to make such
offering. Thus, Divinagracia commonly argued in his complaints that the failure
on the part of PBS and CBS "to comply with the mandate of their legislative
franchise is a misuse of the franchise conferred upon it by law and it continues
to exercise its franchise in contravention of the law to the detriment of the
general public and of complainant who are unable to enjoy the benefits being
offered by a publicly listed company."10 He thus prayed for the cancellation of
all the Provisional Authorities or CPCs of PBS and CBS on account of the
alleged violation of the conditions set therein, as well as in its legislative
franchises.11
On 1 August 2000, the NTC issued a consolidated decision dismissing both
complaints.12 While the NTC posited that it had full jurisdiction to revoke or
cancel a Provisional Authority or CPC for violations or infractions of the terms
and conditions embodied therein,13 it held that the complaints actually
constituted collateral attacks on the legislative franchises of PBS and CBS
since the sole issue for determination was whether the franchisees had violated
the mandate to democratize ownership in their respective legislative franchises.
The NTC ruled that it was not competent to render a ruling on that issue, the
same being more properly the subject of an action for quo warranto to be
commenced by the Solicitor General in the name of the Republic of the
Philippines, pursuant to Rule 66 of the Rules of Court.14
After the NTC had denied Divinagracia’s motion for reconsideration,15 he filed a
petition for review under Rule 43 of the Rules of Court with the Court of
Appeals.16 On 18 February 2004, the Court of Appeals rendered a
decision17upholding the NTC. The appellate court agreed with the earlier
conclusion that the complaints were indeed a collateral attack on the legislative
franchises of CBS and PBS and that a quo warranto action was the proper
mode to thresh out the issues raised in the complaints.
Hence this petition, which submits as the principal issue, whether the NTC, with
its retinue of regulatory powers, is powerless to cancel Provisional Authorities
and Certificates of Public Convenience it issued to legislative franchise-holders.
That central issue devolves into several narrower arguments, some of which
hinge on the authority of the NTC to cancel the very Provisional Authorities and
CPCs which it is empowered to issue, as distinguished from the legislative
franchise itself, the cancellation of which Divinagracia points out was not the
relief he had sought from the NTC. Questions are raised as to whether the
complaints did actually constitute a collateral attack on the legislative
franchises.
Yet this case ultimately rests to a large degree on fundamentals. Divinagracia’s
case rotates on the singular thesis that the NTC has the power to cancel
Provisional Authorities and CPCs, or in effect, the power to cancel the licenses
that allow broadcast stations to operate. The NTC, in its assailed Decision,
expressly admits that it has such power even as it refrained from exercising the
same.18 The Court has yet to engage in a deep inquiry into the question of
whether the NTC has the power to cancel the operating licenses of entities to
whom Congress has issued franchises to operate broadcast stations, especially
on account of an alleged violation of the terms of their franchises. This is the
opportune time to examine the issue.
II.
To fully understand the scope and dimensions of the regulatory realm of the
NTC, it is essential to review the legal background of the regulation process. As
operative fact, any person or enterprise which wishes to operate a broadcast
radio or television station in the Philippines has to secure a legislative franchise
in the form of a law passed by Congress, and thereafter a license to operate
from the NTC.
The franchise requirement traces its genesis to Act No. 3846, otherwise known
as the Radio Control Act, enacted in 1931.19 Section 1 thereof provided that
"[n]o person, firm, company, association or corporation shall construct, install,
establish, or operate x x x a radio broadcasting station, without having first
obtained a franchise therefor from the National Assembly x x x"20 Section 2 of
the law prohibited the construction or installation of any station without a permit
granted by the Secretary of Public Works and Communication, and the
operation of such station without a license issued by the same Department
Secretary.21 The law likewise empowered the Secretary of Public Works and
Communication "to regulate the establishment, use, and operation of all radio
stations and of all forms of radio communications and transmissions within the
Philippine Islands and to issue such rules and regulations as may be
necessary."22
Noticeably, our Radio Control Act was enacted a few years after the United
States Congress had passed the Radio Act of 1927. American broadcasters
themselves had asked their Congress to step in and regulate the radio industry,
which was then in its infancy. The absence of government regulation in that
market had led to the emergence of hundreds of radio broadcasting stations,
each using frequencies of their choice and changing frequencies at will, leading
to literal chaos on the airwaves. It was the Radio Act of 1927 which introduced
a licensing requirement for American broadcast stations, to be overseen
eventually by the Federal Communications Commission (FCC).23
This pre-regulation history of radio broadcast stations illustrates the continuing
necessity of a government role in overseeing the broadcast media industry, as
opposed to other industries such as print media and the Internet.24Without
regulation, the result would be a free-for-all market with rival broadcasters able
with impunity to sabotage the use by others of the airwaves.25 Moreover, the
airwaves themselves the very medium utilized by broadcast―are by their very
nature not susceptible to appropriation, much less be the object of any claim of
private or exclusive ownership. No private individual or enterprise has the
physical means, acting alone to actualize exclusive ownership and use of a
particular frequency. That end, desirable as it is among broadcasters, can only
be accomplished if the industry itself is subjected to a regime of government
regulation whereby broadcasters receive entitlement to exclusive use of their
respective or particular frequencies, with the State correspondingly able by
force of law to confine all broadcasters to the use of the frequencies assigned
to them.
Still, the dominant jurisprudential rationale for state regulation of broadcast
media is more sophisticated than a mere recognition of a need for the orderly
administration of the airwaves. After all, a united broadcast industry can
theoretically achieve that goal through determined self-regulation. The key
basis for regulation is rooted in empiricism – "that broadcast frequencies are a
scarce resource whose use could be regulated and rationalized only by the
Government." This concept was first introduced in jurisprudence in the U.S.
case of Red Lion v. Federal Communications Commission.26
Red Lion enunciated the most comprehensive statement of the necessity of
government oversight over broadcast media. The U.S. Supreme Court
observed that within years from the introduction of radio broadcasting in the
United States, "it became apparent that broadcast frequencies constituted a
scarce resource whose use could be regulated and rationalized only by the
Government… without government control, the medium would be of little use
because of the cacophony of competing voices, none of which could be clearly
and predictably heard." The difficulties posed by spectrum scarcity was
concretized by the U.S. High Court in this manner:
Scarcity is not entirely a thing of the past. Advances in technology, such as
microwave transmission, have led to more efficient utilization of the frequency
spectrum, but uses for that spectrum have also grown apace. Portions of the
spectrum must be reserved for vital uses unconnected with human
communication, such as radio-navigational aids used by aircraft and vessels.
Conflicts have even emerged between such vital functions as defense
preparedness and experimentation in methods of averting midair collisions
through radio warning devices. "Land mobile services" such as police,
ambulance, fire department, public utility, and other communications systems
have been occupying an increasingly crowded portion of the frequency
spectrum and there are, apart from licensed amateur radio operators'
equipment, 5,000,000 transmitters operated on the "citizens' band" which is
also increasingly congested. Among the various uses for radio frequency
space, including marine, aviation, amateur, military, and common carrier users,
there are easily enough claimants to permit use of the whole with an even
smaller allocation to broadcast radio and television uses than now
exists.(citations omitted)27
After interrelating the premise of scarcity of resources with the First
Amendment rights of broadcasters, Red Lion concluded that government
regulation of broadcast media was a necessity:
Where there are substantially more individuals who want to broadcast than
there are frequencies to allocate, it is idle to posit an unabridgeable First
Amendment right to broadcast comparable to the right of every individual to
speak, write, or publish. If 100 persons want broadcast [395 U.S. 367, 389]
licenses but there are only 10 frequencies to allocate, all of them may have the
same "right" to a license; but if there is to be any effective communication by
radio, only a few can be licensed and the rest must be barred from the
airwaves. It would be strange if the First Amendment, aimed at protecting and
furthering communications, prevented the Government from making radio
communication possible by requiring licenses to broadcast and by limiting the
number of licenses so as not to overcrowd the spectrum.
This has been the consistent view of the Court. Congress unquestionably has
the power to grant and deny licenses and to eliminate existing stations. No one
has a First Amendment right to a license or to monopolize a radio frequency; to
deny a station license because "the public interest" requires it "is not a denial of
free speech."
By the same token, as far as the First Amendment is concerned those who are
licensed stand no better than those to whom licenses are refused. A license
permits broadcasting, but the licensee has no constitutional right to be the one
who holds the license or to monopolize a radio frequency to the exclusion of his
fellow citizens. There is nothing in the First Amendment which prevents the
Government from requiring a licensee to share his frequency with others and to
conduct himself as a proxy or fiduciary with obligations to present those views
and voices which are representative of his community and which would
otherwise, by necessity, be barred from the airwaves.28
xxxx
Rather than confer frequency monopolies on a relatively small number of
licensees, in a Nation of 200,000,000, the Government could surely have
decreed that each frequency should be shared among all or some of those who
wish to use it, each being assigned a portion of the broadcast day or the
broadcast week. The ruling and regulations at issue here do not go quite so far.
They assert that under specified circumstances, a licensee must offer to make
available a reasonable amount of broadcast time to those who have a view
different from that which has already been expressed on his station. The
expression of a political endorsement, or of a personal attack while dealing with
a controversial public issue, simply triggers this time sharing. As we have said,
the First Amendment confers no right on licensees to prevent others from
broadcasting on "their" frequencies and no right to an unconditional monopoly
of a scarce resource which the Government has denied others the right to use.
In terms of constitutional principle, and as enforced sharing of a scarce
resource, the personal attack and political editorial rules are indistinguishable
from the equal-time provision of §315, a specific enactment of Congress
requiring stations to set aside reply time under specified circumstances and to
which the fairness doctrine and these constituent regulations are important
complements. That provision, which has been part of the law since 1927, Radio
Act of 1927, §18, 44 Stat. 1170, has been held valid by this Court as an
obligation of the licensee relieving him of any power in any way to prevent or
censor the broadcast, and thus insulating him from liability for defamation. The
constitutionality of the statute under the First Amendment was
unquestioned.(citations omitted)29
As made clear in Red Lion, the scarcity of radio frequencies made it necessary
for the government to step in and allocate frequencies to competing
broadcasters. In undertaking that function, the government is impelled to
adjudge which of the competing applicants are worthy of frequency allocation. It
is through that role that it becomes legally viable for the government to impose
its own values and goals through a regulatory regime that extends beyond the
assignation of frequencies, notwithstanding the free expression guarantees
enjoyed by broadcasters. As the government is put in a position to determine
who should be worthy to be accorded the privilege to broadcast from a finite
and limited spectrum, it may impose regulations to see to it that broadcasters
promote the public good deemed important by the State, and to withdraw that
privilege from those who fall short of the standards set in favor of other worthy
applicants.
Such conditions are peculiar to broadcast media because of the scarcity of the
airwaves. Indeed, any attempt to impose such a regulatory regime on a
medium that is not belabored under similar physical conditions, such as print
media, will be clearly antithetical to democratic values and the free expression
clause. This Court, which has adopted the "scarcity of resources" doctrine in
cases such as Telecom. & Broadcast Attys. of the Phils., Inc. v.
COMELEC,30 emphasized the distinction citing Red Lion:
Petitioners complain that B.P. Blg. 881, §92 singles out radio and television
stations to provide free air time. They contend that newspapers and magazines
are not similarly required as, in fact, in Philippine Press Institute v. COMELEC
we upheld their right to the payment of just compensation for the print space
they may provide under §90.
The argument will not bear analysis. It rests on the fallacy that broadcast media
are entitled to the same treatment under the free speech guarantee of the
Constitution as the print media. There are important differences in the
characteristics of the two media, however, which justify their differential
treatment for free speech purposes. Because of the physical limitations of the
broadcast spectrum, the government must, of necessity, allocate broadcast
frequencies to those wishing to use them. There is no similar justification for
government allocation and regulation of the print media.
In the allocation of limited resources, relevant conditions may validly be
imposed on the grantees or licensees. The reason for this is that, as already
noted, the government spends public funds for the allocation and regulation of
the broadcast industry, which it does not do in the case of the print media. To
require the radio and television broadcast industry to provide free air time for
the COMELEC Time is a fair exchange for what the industry gets.31
Other rationales may have emerged as well validating state regulation of
broadcast media,32 but the reality of scarce airwaves remains the primary,
indisputable and indispensable justification for the government regulatory role.
The integration of the scarcity doctrine into the jurisprudence on broadcast
media illustrates how the libertarian ideal of the free expression clause may be
tempered and balanced by actualities in the real world while preserving the
core essence of the constitutional guarantee. Indeed, without government
regulation of the broadcast spectrum, the ability of broadcasters to clearly
express their views would be inhibited by the anarchy of competition. Since the
airwaves themselves are not susceptible to physical appropriation and private
ownership, it is but indispensable that the government step in as the guardian
of the spectrum.
Reference to the scarcity doctrine is necessary to gain a full understanding of
the paradigm that governs the state regulation of broadcast media. That
paradigm, as it exists in the United States, is contextually similar to our own,
except in one very crucial regard – the dual franchise/license requirements we
impose.
III.
Recall that the Radio Control Act specifically required the obtention of a
legislative franchise for the operation of a radio station in the Philippines. When
the Public Service Act was enacted in 1936, the Public Service Commission
(PSC) was vested with jurisdiction over "public services," including over "wire or
wireless broadcasting stations."33However, among those specifically exempted
from the regulatory reach of the PSC were "radio companies, except with
respect to the fixing of rates."34 Thus, following the Radio Control Act, the
administrative regulation of "radio companies" remained with the Secretary of
Public Works and Communications. It appears that despite the advent of
commercial television in the 1950s, no corresponding amendment to either the
Radio Control Act or the Public Service Act was passed to reflect that new
technology then.
Shortly after the 1972 declaration of martial law, President Marcos issued
Presidential Decree (P.D.) No. 1, which allocated to the Board of
Communications the authority to issue CPCs for the operation of radio and
television broadcasting systems and to grant permits for the use of radio
frequencies for such broadcasting systems. In 1974, President Marcos
promulgated Presidential Decree No. 576-A, entitled "Regulating the Ownership
and Operation of Radio and Television Stations and for other Purposes."
Section 6 of that law reads:
Section 6. All franchises, grants, licenses, permits, certificates or other forms of
authority to operate radio or television broadcasting systems shall terminate on
December 31, 1981. Thereafter, irrespective of any franchise, grants, license,
permit, certificate or other forms of authority to operate granted by any office,
agency or person, no radio or television station shall be authorized to operated
without the authority of the Board of Communications and the Secretary of
Public Works and Communications or their successors who have the right and
authority to assign to qualified parties frequencies, channels or other means of
identifying broadcasting systems; Provided, however, that any conflict over, or
disagreement with a decision of the aforementioned authorities may be
appealed finally to the Office of the President within fifteen days from the date
the decision is received by the party in interest.
A few years later, President Marcos promulgated Executive Order (E.O.) No.
546, establishing among others the National Telecommunications Commission.
Section 15 thereof enumerates the various functions of the NTC.
Section 15. Functions of the Commission.― The Commission shall exercise the
following functions:
a. Issue Certificate of Public Convenience for the operation of
communications utilities and services, radio communications systems,
wire or wireless telephone or telegraph systems, radio and television
broadcasting system and other similar public utilities;
b. Establish, prescribe and regulate areas of operation of particular
operators of public service communications; and determine and
prescribe charges or rates pertinent to the operation of such public
utility facilities and services except in cases where charges or rates are
established by international bodies or associations of which the
Philippines is a participating member or by bodies recognized by the
Philippine Government as the proper arbiter of such charges or rates;
c. Grant permits for the use of radio frequencies for wireless telephone
and telegraph systems and radio communication systems including
amateur radio stations and radio and television broadcasting systems;
 d. Sub-allocate series of frequencies of bands allocated by the
International Telecommunications Union to the specific services;
e. Establish and prescribe rules, regulations, standards, specifications
in all cases related to the issued Certificate of Public Convenience and
administer and enforce the same;
f. Coordinate and cooperate with government agencies and other
entities concerned with any aspect involving communications with a
view to continuously improve the communications service in the
country;
g. Promulgate such rules and regulations, as public safety and interest
may require, to encourage a larger and more effective use of
communications, radio and television broadcasting facilities, and to
maintain effective competition among private entities in these activities
whenever the Commission finds it reasonably feasible;
h. Supervise and inspect the operation of radio stations and
telecommunications facilities;
i. Undertake the examination and licensing of radio operators;
j. Undertake, whenever necessary, the registration of radio transmitters
and transceivers; and
k. Perform such other functions as may be prescribed by law.
These enactments were considered when in 2003 the Court definitively
resolved that the operation of a radio or television station does require a
congressional franchise. In Associated Communications & Wireless Services v.
NTC,35 the Court took note of the confusion then within the broadcast industry
as to whether the franchise requirement first ordained in the 1931 Radio
Control Act remained extant given the enactment of P.D. No. 576-A in 1974
and E.O. No. 546 in 1979. Notably, neither law had specifically required
legislative franchises for the operation of broadcast stations. Nonetheless, the
Court noted that Section 1 of P.D. No. 576-A had expressly referred to the
franchise requirement in stating that "[n]o radio station or television channel
may obtain a franchise unless it has sufficient capital on the basis of equity for
its operation for at least one year… ."36 Section 6 of that law made a similar
reference to the franchise requirement.37 From those references, the Court
concluded that the franchise requirement under the Radio Control Act was not
repealed by P.D. No. 576-A.38
Turning to E.O. No. 546, the Court arrived at a similar conclusion, despite a
Department of Justice Opinion stating that the 1979 enactment had dispensed
with the congressional franchise requirement. The Court clarified that the 1989
ruling in Albano v. Reyes, to the effect that "franchises issued by Congress are
not required before each and every public utility may operate" did not dispense
with the franchise requirement insofar as broadcast stations are concerned.
Our ruling in Albano that a congressional franchise is not required before "each
and every public utility may operate" should be viewed in its proper light. Where
there is a law such as P.D. No. 576-A which requires a franchise for the
operation of radio and television stations, that law must be followed until
subsequently repealed. As we have earlier shown, however, there is nothing in
the subsequent E.O. No. 546 which evinces an intent to dispense with the
franchise requirement. In contradistinction with the case at bar, the law
applicable in Albano, i.e., E.O. No. 30, did not require a franchise for the
Philippine Ports Authority to take over, manage and operate the Manila
International Port Complex and undertake the providing of cargo handling and
port related services thereat. Similarly, in Philippine Airlines, Inc. v. Civil
Aeronautics Board, et al., we ruled that a legislative franchise is not necessary
for the operation of domestic air transport because "there is nothing in the law
nor in the Constitution which indicates that a legislative franchise is an
indispensable requirement for an entity to operate as a domestic air transport
operator." Thus, while it is correct to say that specified agencies in the
Executive Branch have the power to issue authorization for certain classes of
public utilities, this does not mean that the authorization or CPC issued by the
NTC dispenses with the requirement of a franchise as this is clearly required
under P.D. No. 576-A.39
The Court further observed that Congress itself had accepted it as a given that
a legislative franchise is still required to operate a broadcasting station in the
Philippines.
That the legislative intent is to continue requiring a franchise for the operation of
radio and television broadcasting stations is clear from the franchises granted
by Congress after the effectivity of E.O. No. 546 in 1979 for the operation of
radio and television stations. Among these are: (1) R.A. No. 9131 dated April
24, 2001, entitled "An Act Granting the Iddes Broadcast Group, Inc., a
Franchise to Construct, Install, Establish, Operate and Maintain Radio and
Television Broadcasting Stations in the Philippines"; (2) R.A. No. 9148 dated
July 31, 2001, entitled "An Act Granting the Hypersonic Broadcasting Center,
Inc., a Franchise to Construct, Install, Establish, Operate and Maintain Radio
Broadcasting Stations in the Philippines;" and (3) R.A. No. 7678 dated February
17, 1994, entitled "An Act Granting the Digital Telecommunication Philippines,
Incorporated, a Franchise to Install, Operate and Maintain Telecommunications
Systems Throughout the Philippines." All three franchises require the grantees
to secure a CPCN/license/permit to construct and operate their
stations/systems. Likewise, the Tax Reform Act of 1997 provides in Section 119
for tax on franchise of radio and/or television broadcasting companies x x x 40
Associated Communications makes clear that presently broadcast stations are
still required to obtain a legislative franchise, as they have been so since the
passage of the Radio Control Act in 1931. By virtue of this requirement, the
broadcast industry falls within the ambit of Section 11, Article XII of the 1987
Constitution, the one constitutional provision
concerned with the grant of franchises in the Philippines. 41 The requirement of
a legislative franchise likewise differentiates the Philippine broadcast industry
from that in America, where there is no need to secure a franchise from the
U.S. Congress.
It is thus clear that the operators of broadcast stations in the Philippines must
secure a legislative franchise, a requirement imposed by the Radio Control Act
of 1931 and accommodated under the 1987 Constitution. At the same time, the
Court in Associated Communications referred to another form of "permission"
required of broadcast stations, that is the CPC issued by the NTC. What is the
source of such requirement?
The Radio Control Act had also obliged radio broadcast stations to secure a
permit from the Secretary of Commerce and Industry42 prior to the construction
or installation of any station.43 Said Department Secretary was also empowered
to regulate "the establishment, use and operation of all radio stations and of all
forms of radio communications and
transmission within the Philippines."44 Among the specific powers granted to the
Secretary over radio stations are the approval or disapproval of any application
for the construction, installation, establishment or operation of a radio
station45 and the approval or disapproval of any application for renewal of
station or operation license.46
As earlier noted, radio broadcasting companies were exempted from the
jurisdiction of the defunct Public Service Commission except with respect to
their rates; thus, they did not fall within the same regulatory regime as other
public services, the regime which was characterized by the need for CPC or
CPCN. However, following the Radio Control Act, it became clear that radio
broadcast companies need to obtain a similar license from the government in
order to operate, at that time from the Department of Public Works and
Communications.
Then, as earlier noted, in 1972, President Marcos through P.D. No. 1,
transferred to the Board of Communications the function of issuing CPCs for
the operation of radio and television broadcasting systems, as well as the
granting of permits for the use of radio frequencies for such broadcasting
systems. With the creation of the NTC, through E.O. No. 546 in 1979, that
agency was vested with the power to "[i]ssue certificate[s] of public
convenience for the operation of… radio and television broadcasting
system[s]."47 That power remains extant and undisputed to date.
This much thus is clear. Broadcast and television stations are required to obtain
a legislative franchise, a requirement imposed by the Radio Control Act and
affirmed by our ruling in Associated Broadcasting. After securing their
legislative franchises, stations are required to obtain CPCs from the NTC
before they can operate their radio or television broadcasting systems. Such
requirement while traceable also to the Radio Control Act, currently finds its
basis in E.O. No. 546, the law establishing the NTC.
From these same legal premises, the next and most critical question is whether
the NTC has the power to cancel the CPCs it has issued to legislative
franchisees.
IV.
The complexities of our dual franchise/license regime for broadcast media
should be understood within the context of separation of powers. The right of a
particular entity to broadcast over the airwaves is established by law —i.e., the
legislative franchise — and determined by Congress, the branch of government
tasked with the creation of rights and obligations. As with all other laws passed
by Congress, the function of the executive branch of government, to which the
NTC belongs, is the implementation of the law. In broad theory, the legal
obligation of the NTC once Congress has established a legislative franchise for
a broadcast media station is to facilitate the operation by the franchisee of its
broadcast stations. However, since the public administration of the airwaves is
a requisite for the operation of a franchise and is moreover a highly technical
function, Congress has delegated to the NTC the task of administration over
the broadcast spectrum, including the determination of available bandwidths
and the allocation of such available bandwidths among the various legislative
franchisees. The licensing power of the NTC thus arises from the necessary
delegation by Congress of legislative power geared towards the orderly
exercise by franchisees of the rights granted them by Congress.
Congress may very well in its wisdom impose additional obligations on the
various franchisees and accordingly delegate to the NTC the power to ensure
that the broadcast stations comply with their obligations under the law. Because
broadcast media enjoys a lesser degree of free expression protection as
compared to their counterparts in print, these legislative restrictions are
generally permissible under the Constitution. Yet no enactment of Congress
may contravene the Constitution and its Bill of Rights; hence, whatever
restrictions are imposed by Congress on broadcast media franchisees remain
susceptible to judicial review and analysis under the jurisprudential framework
for scrutiny of free expression cases involving the broadcast media.
The restrictions enacted by Congress on broadcast media franchisees have to
pass the mettle of constitutionality. On the other hand, the restrictions imposed
by an administrative agency such as the NTC on broadcast media franchisees
will have to pass not only the test of constitutionality, but also the test of
authority and legitimacy, i.e., whether such restrictions have been imposed in
the exercise of duly delegated legislative powers from Congress. If the
restriction or sanction imposed by the administrative agency cannot trace its
origin from legislative delegation, whether it is by virtue of a specific grant or
from valid delegation of rule-making power to the administrative agency, then
the action of such administrative agency cannot be sustained. The life and
authority of an administrative agency emanates solely from an Act of Congress,
and its faculties confined within the parameters set by the legislative branch of
government.
We earlier replicated the various functions of the NTC, as established by E.O.
No. 546. One can readily notice that even as the NTC is vested with the power
to issue CPCs to broadcast stations, it is not expressly vested with the power to
cancel such CPCs, or otherwise empowered to prevent broadcast stations with
duly issued franchises and CPCs from operating radio or television
stations.1avvphi1
In contrast, when the Radio Control Act of 1931 maintained a similar
requirement for radio stations to obtain a license from a government official (the
Secretary of Commerce and Industry), it similarly empowered the government,
through the Secretary of Public Works and Communications, to suspend or
revoke such license, as indicated in Section 3(m):
Section 3. The Secretary of Public Works and Communications is hereby
empowered, to regulate the construction or manufacture, possession, control,
sale and transfer of radio transmitters or transceivers (combination transmitter-
receiver) and the establishment, use, the operation of all radio stations and of
all form of radio communications and transmissions within the Philippines. In
addition to the above he shall have the following specific powers and duties:
(m) He may, at his direction bring criminal action against violators of the radio
laws or the regulations and confiscate the radio apparatus in case of illegal
operation; or simply suspend or revoke the offender’s station or operator
licenses or refuse to renew such licenses; or just reprimand and warn the
offenders;48
Section 3(m) begets the question – did the NTC retain the power granted in
1931 to the Secretary of Public Works and Communications to "x x x suspend
or revoke the offender’s station or operator licenses or refuse to renew such
licenses"? We earlier adverted to the statutory history. The enactment of the
Public Service Act in 1936 did not deprive the Secretary of regulatory
jurisdiction over radio stations, which included the power to impose fines. In
fact, the Public Service Commission was precluded from exercising such
jurisdiction, except with respect to the fixing of rates.
Then, in 1972, the regulatory authority over broadcast media was transferred to
the Board of Communications by virtue of P. D. No. 1, which adopted,
approved, and made as part of the law of the land the Integrated
Reorganization Plan which was prepared by the Commission on
Reorganization.49 Among the cabinet departments affected by the plan was the
Department of Public Works and Communications, which was now renamed
the Department of Public Works, Transportation and Communication.50 New
regulatory boards under the administrative supervision of the Department were
created, including the Board of Communications.51
The functions of the Board of Communications were enumerated in Part X,
Chapter I, Article III, Sec. 5 of the Integrated Reorganization Plan.52 What is
noticeably missing from these enumerated functions of the Board of
Communications is the power to revoke or cancel CPCs, even as the Board
was vested the power to issue the same. That same pattern held true in 1976,
when the Board of Communications was abolished by E.O. No. 546.53Said
executive order, promulgated by then President Marcos in the exercise of his
legislative powers, created the NTC but likewise withheld from it the authority to
cancel licenses and CPCs, even as it was empowered to issue CPCs. Given
the very specific functions allocated by law to the NTC, it would be very difficult
to recognize any intent to allocate to the Commission such regulatory functions
previously granted to the Secretary of Public Works and Communications, but
not included in the exhaustive list of functions enumerated in Section 15.
Certainly, petitioner fails to point to any provision of E.O. No. 546 authorizing
the NTC to cancel licenses. Neither does he cite any provision under P.D. No. 1
or the Radio Control Act, even if Section 3(m) of the latter law provides at least,
the starting point of a fair argument. Instead, petitioner relies on the power
granted to the Public Service Commission to revoke CPCs or CPCNs under
Section 16(m) of the Public Service Act.54 That argument has been irrefragably
refuted by Section 14 of the Public Service Act, and by jurisprudence, most
especially RCPI v. NTC.55As earlier noted, at no time did radio companies fall
under the jurisdiction of the Public Service Commission as they were expressly
excluded from its mandate under Section 14. In addition, the Court ruled in
RCPI that since radio companies, including broadcast stations and telegraphic
agencies, were never under the jurisdiction of the Public Service Commission
except as to rate-fixing, that Commission’s authority to impose fines did not
carry over to the NTC even while the other regulatory agencies that emanated
from the Commission did retain the previous authority their predecessor had
exercised.56 No provision in the Public Service Act thus can be relied upon by
the petitioner to claim that the NTC has the authority to cancel CPCs or
licenses.
It is still evident that E.O. No. 546 provides no explicit basis to assert that the
NTC has the power to cancel the licenses or CPCs it has duly issued, even as
the government office previously tasked with the regulation of radio stations,
the Secretary of Public Works and Communications, previously possessed
such power by express mandate of law. In order to sustain petitioner’s premise,
the Court will be unable to rely on an unequivocally current and extant provision
of law that justifies the NTC’s power to cancel CPCs. Petitioner suggests that
since the NTC has the power to issue CPCs, it necessarily has the power to
revoke the same. One might also argue that through the general rule-making
power of the NTC, we can discern a right of the NTC to cancel CPCs.
We must be mindful that the issue for resolution is not a run-of-the-mill matter
which would be settled with ease with the application of the principles of
statutory construction. It is at this juncture that the constitutional implications of
this case must ascend to preeminence.
A.
It is beyond question that respondents, as with all other radio and television
broadcast stations, find shelter in the Bill of Rights, particularly Section 3,
Article III of the Constitution. At the same time, as we have labored earlier to
point out, broadcast media stands, by reason of the conditions of scarcity,
within a different tier of protection from print media, which unlike broadcast,
does not have any regulatory interaction with the government during its
operation.
Still, the fact that state regulation of broadcast media is constitutionally justified
does not mean that its practitioners are precluded from invoking Section 3,
Article III of the Constitution in their behalf. Far from it. Our democratic way of
life is actualized by the existence of a free press, whether print media or
broadcast media. As with print media, free expression through broadcast media
is protected from prior restraint or subsequent punishment. The franchise and
licensing requirements are mainly impositions of the laws of physics which
would stand to periodic reassessment as technology advances. The science of
today renders state regulation as a necessity, yet this should not encumber the
courts from accommodating greater freedoms to broadcast media when doing
so would not interfere with the existing legitimate state interests in regulating
the industry.
In FCC v. League of Women Voters of California,57 the U.S. Supreme Court
reviewed a law prohibiting noncommercial broadcast stations that received
funding from a public corporation from "engaging in editorializing." The U.S.
Supreme Court acknowledged the differentiated First Amendment standard of
review that applied to broadcast media. Still, it struck down the restriction,
holding that "[the] regulation impermissibly sweeps within its prohibition a wide
range of speech by wholly private stations on topics that do not take a directly
partisan stand or that have nothing whatever to do with federal, state, or local
government."58 We are similarly able to maintain fidelity to the fundamental
rights of broadcasters even while upholding the rationale behind the regulatory
regime governing them.
Should petitioner’s position that the NTC has the power to cancel CPCs or
licenses it has issued to broadcast stations although they are in the first place
empowered by their respective franchise to exercise their rights to free
expression and as members of a free press, be adopted broadcast media
would be encumbered by another layer of state restrictions. As things stand,
they are already required to secure a franchise from Congress and a CPC from
the NTC in order to operate. Upon operation, they are obliged to comply with
the various regulatory issuances of the NTC, which has the power to impose
fees and fines and other mandates it may deem fit to prescribe in the exercise
of its rule-making power.
The fact that broadcast media already labors under this concededly valid
regulatory framework necessarily creates inhibitions on its practitioners as they
operate on a daily basis. Newspapers are able to print out their daily editions
without fear that a government agency such as the NTC will be able to suspend
their publication or fine them based on their content. Broadcast stations do
already operate with that possibility in mind, and that circumstance ineluctably
restrains its content, notwithstanding the constitutional right to free expression.
However, the cancellation of a CPC or license to operate of a broadcast station,
if we recognize that possibility, is essentially a death sentence, the most drastic
means to inhibit a broadcast media practitioner from exercising the
constitutional right to free speech, expression and of the press.
This judicial philosophy aligns well with the preferred mode of scrutiny in the
analysis of cases with dimensions of the right to free expression. When
confronted with laws dealing with freedom of the mind or restricting the political
process, of laws dealing with the regulation of speech, gender, or race as well
as other fundamental rights as expansion from its earlier applications to equal
protection, the Court has deemed it appropriate to apply "strict scrutiny" when
assessing the laws involved or the legal arguments pursued that would diminish
the efficacy of such constitutional right. The assumed authority of the NTC to
cancel CPCs or licenses, if sustained, will create a permanent atmosphere of a
less free right to express on the part of broadcast media. So that argument
could be sustained, it will have to withstand the strict scrutiny from this Court.
Strict scrutiny entails that the presumed law or policy must be justified by a
compelling state or government interest, that such law or policy must be
narrowly tailored to achieve that goal or interest, and that the law or policy must
be the least restrictive means for achieving that interest. It is through that lens
that we examine petitioner’s premise that the NTC has the authority to cancel
licenses of broadcast franchisees.
B.
In analyzing the compelling government interest that may justify the investiture
of authority on the NTC advocated by petitioner, we cannot ignore the interest
of the State as expressed in the respective legislative franchises of the
petitioner, R.A. No. 7477 and R. A. Act No. 7582. Since legislative franchises
are extended through statutes, they should receive recognition as the ultimate
expression of State policy. What the legislative franchises of respondents
express is that the Congress, after due debate and deliberation, declares it as
State policy that respondents should have the right to operate broadcast
stations. The President of the Philippines, by affixing his signature to the law,
concurs in such State policy.
Allowing the NTC to countermand State policy by revoking respondent’s vested
legal right to operate broadcast stations unduly gives to a mere administrative
agency veto power over the implementation of the law and the enforcement of
especially vested legal rights. That concern would not arise if Congress had
similarly empowered the NTC with the power to revoke a franchisee’s right to
operate broadcast stations. But as earlier stated, there is no such expression in
the law, and by presuming such right the Court will be acting contrary to the
stated State interest as expressed in respondents’ legislative franchises.
If we examine the particular franchises of respondents, it is readily apparent
that Congress has especially invested the NTC with certain powers with respect
to their broadcast operations. Both R.A. No. 747759 and R.A. No. 758260require
the grantee "to secure from the [NTC] the appropriate permits and licenses for
its stations," barring the private respondents from "using any frequency in the
radio spectrum without having been authorized by the [NTC]." At the same
time, both laws provided that "[the NTC], however, shall not unreasonably
withhold or delay the grant of any such authority."
An important proviso is stipulated in the legislative franchises, particularly under
Section 5 of R.A. No. 7477 and Section 3 of R.A. No. 7582, in relation to
Section 11 of R.A. No. 3902.
Section 5. Right of Government. ― A special right is hereby reserved to the
President of the Philippines, in times of rebellion, public peril, calamity,
emergency, disaster or disturbance of peace and order, to temporarily take
over and operate the stations of the grantee, temporarily suspend the operation
of any stations in the interest of public safety, security and public welfare, or
authorize the temporary use and operation thereof by any agency of the
Government, upon due compensation to the grantee, for the use of said
stations during the period when they shall be so operated.
The provision authorizes the President of the Philippines to exercise
considerable infringements on the right of the franchisees to operate their
enterprises and the right to free expression. Such authority finds corollary
constitutional justification as well under Section 17, Article XII, which allows the
State "in times of national emergency, when the public interest so requires x x x
during the emergency and under reasonable terms prescribed by it, temporarily
take over or direct the operation of any privately-owned public utility or business
affected with public interest." We do not doubt that the President or the State
can exercise such authority through the NTC, which remains an agency within
the executive branch of government, but such can be exercised only under
limited and rather drastic circumstances. They still do not vest in the NTC the
broad authority to cancel licenses and permits.
These provisions granting special rights to the President in times of emergency
are incorporated in our understanding of the legislated state policy with respect
to the operation by private respondents of their legislative franchises. There are
restrictions to the operation of such franchises, and when these restrictions are
indeed exercised there still may be cause for the courts to review whether said
limitations are justified despite Section 3, Article I of the Constitution. At the
same time, the state policy as embodied in these franchises is to restrict the
government’s ability to impair the freedom to broadcast of the stations only
upon the occurrence of national emergencies or events that compromise the
national security.
It should be further noted that even the aforequoted provision does not
authorize the President or the government to cancel the licenses of the
respondents. The temporary nature of the takeover or closure of the station is
emphasized in the provision. That fact further disengages the provision from
any sense that such delegated authority can be the source of a broad ruling
affirming the right of the NTC to cancel the licenses of franchisees.
With the legislated state policy strongly favoring the unimpeded operation of the
franchisee’s stations, it becomes even more difficult to discern what compelling
State interest may be fulfilled in ceding to the NTC the general power to cancel
the franchisee’s CPC’s or licenses absent explicit statutory authorization. This
absence of a compelling state interest strongly disfavors petitioner’s cause.
C.
Now, we shall tackle jointly whether a law or policy allowing the NTC to cancel
CPCs or licenses is to be narrowly tailored to achieve that requisite compelling
State goal or interest, and whether such a law or policy is the least restrictive
means for achieving that interest. We addressed earlier the difficulty of
envisioning the compelling State interest in granting the NTC such authority.
But let us assume for argument’s sake, that relieving the injury complained off
by petitioner – the failure of private respondents to open up ownership through
the initial public offering mandated by law – is a compelling enough State
interest to allow the NTC to extend consequences by canceling the licenses or
CPCs of the erring franchisee.
There is in fact a more appropriate, more narrowly-tailored and least restrictive
remedy that is afforded by the law. Such remedy is that adverted to by the NTC
and the Court of Appeals – the resort to quo warranto proceedings under Rule
66 of the Rules of Court.
Under Section 1 of Rule 66, "an action for the usurpation of a public office,
position or franchise may be brought in the name of the Republic of the
Philippines against a person who usurps, intrudes into, or unlawfully holds or
exercises public office, position or franchise."61 Even while the action is
maintained in the name of the Republic62 , the Solicitor General or a public
prosecutor is obliged to commence such action upon complaint, and upon good
reason to believe that any case specified under Section 1 of Rule 66 can be
established by proof.63
The special civil action of quo warranto is a prerogative writ by which the
Government can call upon any person to show by what warrant he holds a
public office or exercises a public franchise.64 It is settled that "[t]he
determination of the right to the exercise of a franchise, or whether the right to
enjoy such privilege has been forfeited by non-user, is more properly the
subject of the prerogative writ of quo warranto, the right to assert which, as a
rule, belongs to the State ‘upon complaint or otherwise,’ the reason being that
the abuse of a franchise is a public wrong and not a private injury."65 A
forfeiture of a franchise will have to be declared in a direct proceeding for the
purpose brought by the State because a franchise is granted by law and its
unlawful exercise is primarily a concern of Government.66Quo warranto is
specifically available as a remedy if it is thought that a government corporation
has offended against its corporate charter or misused its franchise.67
The Court of Appeals correctly noted that in PLDT v. NTC,68 the Court had
cited quo warranto as the appropriate recourse with respect to an allegation by
petitioner therein that a rival telecommunications competitor had failed to
construct its radio system within the ten (10) years from approval of its
franchise, as mandated by its legislative franchise. 69 It is beyond dispute
that quo warranto exists as an available and appropriate remedy against the
wrong imputed on private respondents.
Petitioners argue that since their prayer involves the cancellation of the
provisional authority and CPCs, and not the legislative franchise, then quo
warranto fails as a remedy. The argument is artificial. The authority of the
franchisee to engage in broadcast operations is derived in the legislative
mandate. To cancel the provisional authority or the CPC is, in effect, to cancel
the franchise or otherwise prevent its exercise. By law, the NTC is
incapacitated to frustrate such mandate by unduly withholding or canceling the
provisional authority or the CPC for reasons other than the orderly
administration of the frequencies in the radio spectrum.
What should occur instead is the converse. If the courts conclude that private
respondents have violated the terms of their franchise and thus issue the writs
of quo warranto against them, then the NTC is obliged to cancel any existing
licenses and CPCs since these permits draw strength from the possession of a
valid franchise. If the point has not already been made clear, then licenses
issued by the NTC such as CPCs and provisional authorities are junior to the
legislative franchise enacted by Congress. The licensing authority of the NTC is
not on equal footing with the franchising authority of the State through
Congress. The issuance of licenses by the NTC implements the legislative
franchises established by Congress, in the same manner that the executive
branch implements the laws of Congress rather than creates its own laws. And
similar to the inability of the executive branch to prevent the implementation of
laws by Congress, the NTC cannot, without clear and proper delegation by
Congress, prevent the exercise of a legislative franchise by withholding or
canceling the licenses of the franchisee.
And the role of the courts, through quo warranto proceedings, neatly
complements the traditional separation of powers that come to bear in our
analysis. The courts are entrusted with the adjudication of the legal status of
persons, the final arbiter of their rights and obligations under law. The question
of whether a franchisee is in breach of the franchise specially enacted for it by
Congress is one inherently suited to a court of law, and not for an
administrative agency, much less one to which no such function has been
delegated by Congress. In the same way that availability of judicial review over
laws does not preclude Congress from undertaking its own remedial measures
by appropriately amending laws, the viability of quo warranto in the instant
cases does not preclude Congress from enforcing its own prerogative by
abrogating the legislative franchises of respondents should it be distressed
enough by the franchisees’ violation of the franchises extended to them.
Evidently, the suggested theory of petitioner to address his plaints simply
overpowers the delicate balance of separation of powers, and unduly grants
superlative prerogatives to the NTC to frustrate the exercise of the
constitutional freedom speech, expression, and of the press. A more narrowly-
tailored relief that is responsive to the cause of petitioner not only exists, but is
in fact tailor-fitted to the constitutional framework of our government and the
adjudication of legal and constitutional rights. Given the current status of the
law, there is utterly no reason for this Court to subscribe to the theory that the
NTC has the presumed authority to cancel licenses and CPCs issued to due
holders of legislative franchise to engage in broadcast operations.
V.
An entire subset of questions may arise following this decision, involving issues
or situations not presently before us. We wish to make clear that the only
aspect of the regulatory jurisdiction of the NTC that we are ruling upon is its
presumed power to cancel provisional authorities, CPCs or CPCNs and other
such licenses required of franchisees before they can engage in broadcast
operations. Moreover, our conclusion that the NTC has no such power is borne
not simply from the statutory language of E.O. No. 546 or the respective
stipulations in private respondents’ franchises, but moreso, from the application
of the strict scrutiny standard which, despite its weight towards free speech, still
involves the analysis of the competing interests of the regulator and the
regulated.
In resolving the present questions, it was of marked impact to the Court that the
presumed power to cancel would lead to utterly fatal consequences to the
constitutional right to expression, as well as the legislated right of these
franchisees to broadcast. Other regulatory measures of less drastic impact will
have to be assessed on their own terms in the proper cases, and our decision
today should not be accepted or cited as a blanket shearing of the NTC’s
regulatory jurisdiction. In addition, considering our own present recognition of
legislative authority to regulate broadcast media on terms more cumbersome
than print media, it should not be discounted that Congress may enact
amendments to the organic law of the NTC that would alter the legal milieu
from which we adjudicated today.1avvphi1.zw+
Still, the Court sees all benefit and no detriment in striking this blow in favor of
free expression and of the press. While the ability of the State to broadly
regulate broadcast media is ultimately dictated by physics, regulation with a
light touch evokes a democracy mature enough to withstand competing
viewpoints and tastes. Perhaps unwittingly, the position advocated by petitioner
curdles a most vital sector of the press – broadcast media – within the heavy
hand of the State. The argument is not warranted by law, and it betrays the
constitutional expectations on this Court to assert lines not drawn and connect
the dots around throats that are free to speak.
WHEREFORE, the instant petition is DENIED. No pronouncement as to costs.
SO ORDERED.
FIRST DIVISION
G.R. No. 170432 March 24, 2008
AMOS P. FRANCIA, JR., CECILIA P. FRANCIA, and HEIRS OF BENJAMIN
P. FRANCIA, Petitioners,
vs.
MUNICIPALITY OF MEYCAUAYAN, Respondent.
RESOLUTION
CORONA, J.:
On February 6, 2003, respondent Municipality of Meycauayan, Bulacan filed a
complaint for expropriation1 against petitioners Amos P. Francia, Jr., Cecilia P.
Francia and Benjamin P. Francia2 in the Regional Trial Court (RTC) of Malolos,
Bulacan, Branch 16. Respondent needed petitioners' 16,256 sq. m. idle
property at the junction of the North Expressway, Malhacan-Iba-Camalig main
road artery and the MacArthur Highway.3 It planned to use it to establish a
common public terminal for all types of public utility vehicles with a weighing
scale for heavy trucks.
In their answer,4 petitioners denied that the property sought to be expropriated
was raw land. It was in fact developed5 and there were plans for further
development. For this reason, respondent’s offer price of ₱2,333,500 (or
₱111.99 per square meter) was too low.
After trial, the RTC ruled that the expropriation was for a public purpose. The
construction of a common terminal for all public utility conveyances (serving as
a two-way loading and unloading point for commuters and goods) would
improve the flow of vehicular traffic during rush hours. Moreover, the property
was the best site for the proposed terminal because of its accessibility. Thus,
on November 8, 2004, the RTC issued the following order:6
WHEREFORE, premises considered, after [respondent] has deposited with this
Court the fifteen percent (15%) of the fair market value of the property based on
the current tax declaration of the property to be expropriated, it may take
immediate possession of the property upon issuance of writ of possession that
this court will issue for that purpose.
Further, the purposes of assessment and determination of the area needed that
will suit the purpose of expropriation and just compensation of the lot sought to
be expropriated, the court hereby appoints commissioners to be composed of
the officer-in-charge of this court, Lerida Socorro E. Joson and one each from
[respondent] and [petitioners].
Notify all parties concerned.
SO ORDERED.7
Petitioners moved for the reconsideration of the November 8, 2004 order but
the motion was denied in an order dated January 31, 2005.
Aggrieved, petitioners filed a petition for certiorari in the Court of Appeals (CA)
contending that the RTC committed grave abuse of discretion in issuing its
November 8, 2004 and January 31, 2005 orders. They claimed that the trial
court issued the orders without conducting a hearing to determine the existence
of a public purpose.
On July 28, 2005, the CA rendered a decision8 partially granting the petition.
Finding that petitioners were deprived of an opportunity to controvert
respondent's allegations, the appellate court nullified the order of expropriation
except with regard to the writ of possession. According to the CA, a hearing
was not necessary because once the expropriator deposited the required
amount (with the Court), the issuance of a writ of possession became
ministerial.
Petitioners moved for partial reconsideration but their motion was denied.
Hence, this recourse.
Petitioners essentially aver that the CA erred in upholding the RTC's orders
that, in expropriation cases, prior determination of the existence of a public
purpose was not necessary for the issuance of a writ of possession.
We deny the petition.
Section 19 of Republic Act 71609 provides:
Section 19. Eminent Domain. ― A local government unit may, through its chief
executive and acting pursuant to an ordinance, exercise the power of eminent
domain for public use, or purpose, or welfare for the benefit of the poor and the
landless, upon payment of just compensation, pursuant to the provisions of the
Constitution and pertinent laws; Provided, however, That the power of eminent
domain may not be exercised unless a valid and definite offer has been
previously made to the owner, and that such offer was not accepted; Provided,
further, That the local government unit may immediately take possession
of the property upon the filing of the expropriation proceedings and upon
making a deposit with the proper court of at least fifteen percent (15%) of
the fair market value of the property based on the current tax declaration
of the property to be expropriated; Provided, finally, That, the amount to be
paid for the expropriated property shall be determined by the proper court,
based on the fair market value at the time of the taking of the property.
(emphasis supplied)10
Before a local government unit may enter into the possession of the property
sought to be expropriated, it must (1) file a complaint for expropriation sufficient
in form and substance in the proper court and (2) deposit with the said court at
least 15% of the property's fair market value based on its current tax
declaration.11 The law does not make the determination of a public purpose a
condition precedent to the issuance of a writ of possession. 12
WHEREFORE, the petition is hereby DENIED.
Costs against petitioners.
SO ORDERED.
EN BANC
G.R. No. 159796 July 17, 2007
ROMEO P. GEROCHI, KATULONG NG BAYAN (KB) and
ENVIRONMENTALIST CONSUMERS NETWORK, INC. (ECN), Petitioners,
vs.
DEPARTMENT OF ENERGY (DOE), ENERGY REGULATORY COMMISSION
(ERC), NATIONAL POWER CORPORATION (NPC), POWER SECTOR
ASSETS AND LIABILITIES MANAGEMENT GROUP (PSALM Corp.),
STRATEGIC POWER UTILITIES GROUP (SPUG), and PANAY ELECTRIC
COMPANY INC. (PECO),Respondents.
DECISION
NACHURA, J.:
Petitioners Romeo P. Gerochi, Katulong Ng Bayan (KB), and Environmentalist
Consumers Network, Inc. (ECN) (petitioners), come before this Court in this
original action praying that Section 34 of Republic Act (RA) 9136, otherwise
known as the "Electric Power Industry Reform Act of 2001" (EPIRA), imposing
the Universal Charge,1and Rule 18 of the Rules and Regulations (IRR)2 which
seeks to implement the said imposition, be declared unconstitutional.
Petitioners also pray that the Universal Charge imposed upon the consumers
be refunded and that a preliminary injunction and/or temporary restraining order
(TRO) be issued directing the respondents to refrain from implementing,
charging, and collecting the said charge.3 The assailed provision of law reads:
SECTION 34. Universal Charge. — Within one (1) year from the effectivity of
this Act, a universal charge to be determined, fixed and approved by the ERC,
shall be imposed on all electricity end-users for the following purposes:
(a) Payment for the stranded debts4 in excess of the amount assumed
by the National Government and stranded contract costs of NPC 5 and
as well as qualified stranded contract costs of distribution utilities
resulting from the restructuring of the industry;
(b) Missionary electrification;6
 (c) The equalization of the taxes and royalties applied to indigenous or
renewable sources of energy vis-à-vis imported energy fuels;
(d) An environmental charge equivalent to one-fourth of one centavo
per kilowatt-hour (₱0.0025/kWh), which shall accrue to an
environmental fund to be used solely for watershed rehabilitation and
management. Said fund shall be managed by NPC under existing
arrangements; and
(e) A charge to account for all forms of cross-subsidies for a period not
exceeding three (3) years.
The universal charge shall be a non-bypassable charge which shall be passed
on and collected from all end-users on a monthly basis by the distribution
utilities. Collections by the distribution utilities and the TRANSCO in any given
month shall be remitted to the PSALM Corp. on or before the fifteenth (15th) of
the succeeding month, net of any amount due to the distribution utility. Any
end-user or self-generating entity not connected to a distribution utility shall
remit its corresponding universal charge directly to the TRANSCO. The PSALM
Corp., as administrator of the fund, shall create a Special Trust Fund which
shall be disbursed only for the purposes specified herein in an open and
transparent manner. All amount collected for the universal charge shall be
distributed to the respective beneficiaries within a reasonable period to be
provided by the ERC.
The Facts
Congress enacted the EPIRA on June 8, 2001; on June 26, 2001, it took
effect.7
On April 5, 2002, respondent National Power Corporation-Strategic Power
Utilities Group8 (NPC-SPUG) filed with respondent Energy Regulatory
Commission (ERC) a petition for the availment from the Universal Charge of its
share for Missionary Electrification, docketed as ERC Case No. 2002-165.9
On May 7, 2002, NPC filed another petition with ERC, docketed as ERC Case
No. 2002-194, praying that the proposed share from the Universal Charge for
the Environmental charge of ₱0.0025 per kilowatt-hour (/kWh), or a total of
₱119,488,847.59, be approved for withdrawal from the Special Trust Fund
(STF) managed by respondent Power Sector Assets and
Liabilities Management Group (PSALM)10 for the rehabilitation and
management of watershed areas.11
On December 20, 2002, the ERC issued an Order12 in ERC Case No. 2002-165
provisionally approving the computed amount of ₱0.0168/kWh as the share of
the NPC-SPUG from the Universal Charge for Missionary Electrification and
authorizing the National Transmission Corporation (TRANSCO) and
Distribution Utilities to collect the same from its end-users on a monthly basis.
On June 26, 2003, the ERC rendered its Decision13 (for ERC Case No. 2002-
165) modifying its Order of December 20, 2002, thus:
WHEREFORE, the foregoing premises considered, the provisional authority
granted to petitioner National Power Corporation-Strategic Power Utilities
Group (NPC-SPUG) in the Order dated December 20, 2002 is hereby modified
to the effect that an additional amount of ₱0.0205 per kilowatt-hour should be
added to the ₱0.0168 per kilowatt-hour provisionally authorized by the
Commission in the said Order. Accordingly, a total amount of ₱0.0373 per
kilowatt-hour is hereby APPROVED for withdrawal from the Special Trust Fund
managed by PSALM as its share from the Universal Charge for Missionary
Electrification (UC-ME) effective on the following billing cycles:
(a) June 26-July 25, 2003 for National Transmission Corporation
(TRANSCO); and
(b) July 2003 for Distribution Utilities (Dus).
Relative thereto, TRANSCO and Dus are directed to collect the UC-ME in the
amount of ₱0.0373 per kilowatt-hour and remit the same to PSALM on or
before the 15th day of the succeeding month.
In the meantime, NPC-SPUG is directed to submit, not later than April 30,
2004, a detailed report to include Audited Financial Statements and physical
status (percentage of completion) of the projects using the prescribed
format.1avvphi1
Let copies of this Order be furnished petitioner NPC-SPUG and all distribution
utilities (Dus).
SO ORDERED.
On August 13, 2003, NPC-SPUG filed a Motion for Reconsideration asking the
ERC, among others,14 to set aside the above-mentioned Decision, which the
ERC granted in its Order dated October 7, 2003, disposing:
WHEREFORE, the foregoing premises considered, the "Motion for
Reconsideration" filed by petitioner National Power Corporation-Small Power
Utilities Group (NPC-SPUG) is hereby GRANTED. Accordingly, the Decision
dated June 26, 2003 is hereby modified accordingly.
Relative thereto, NPC-SPUG is directed to submit a quarterly report on the
following:
1. Projects for CY 2002 undertaken;
2. Location
3. Actual amount utilized to complete the project;
4. Period of completion;
5. Start of Operation; and
6. Explanation of the reallocation of UC-ME funds, if any.
SO ORDERED.15
Meanwhile, on April 2, 2003, ERC decided ERC Case No. 2002-194,
authorizing the NPC to draw up to ₱70,000,000.00 from PSALM for its 2003
Watershed Rehabilitation Budget subject to the availability of funds for the
Environmental Fund component of the Universal Charge.16
On the basis of the said ERC decisions, respondent Panay Electric Company,
Inc. (PECO) charged petitioner Romeo P. Gerochi and all other end-users with
the Universal Charge as reflected in their respective electric bills starting from
the month of July 2003.17
Hence, this original action.
Petitioners submit that the assailed provision of law and its IRR which sought to
implement the same are unconstitutional on the following grounds:
1) The universal charge provided for under Sec. 34 of the EPIRA and
sought to be implemented under Sec. 2, Rule 18 of the IRR of the said
law is a tax which is to be collected from all electric end-users and self-
generating entities. The power to tax is strictly a legislative function and
as such, the delegation of said power to any executive or administrative
agency like the ERC is unconstitutional, giving the same unlimited
authority. The assailed provision clearly provides that the Universal
Charge is to be determined, fixed and approved by the ERC, hence
leaving to the latter complete discretionary legislative authority.
2) The ERC is also empowered to approve and determine where the
funds collected should be used.
3) The imposition of the Universal Charge on all end-users is
oppressive and confiscatory and amounts to taxation without
representation as the consumers were not given a chance to be heard
and represented.18
Petitioners contend that the Universal Charge has the characteristics of a tax
and is collected to fund the operations of the NPC. They argue that the
cases19 invoked by the respondents clearly show the regulatory purpose of the
charges imposed therein, which is not so in the case at bench. In said cases,
the respective funds20 were created in order to balance and stabilize the prices
of oil and sugar, and to act as buffer to counteract the changes and
adjustments in prices, peso devaluation, and other variables which cannot be
adequately and timely monitored by the legislature. Thus, there was a need to
delegate powers to administrative bodies.21 Petitioners posit that the Universal
Charge is imposed not for a similar purpose.
On the other hand, respondent PSALM through the Office of the Government
Corporate Counsel (OGCC) contends that unlike a tax which is imposed to
provide income for public purposes, such as support of the government,
administration of the law, or payment of public expenses, the assailed Universal
Charge is levied for a specific regulatory purpose, which is to ensure the
viability of the country's electric power industry. Thus, it is exacted by the State
in the exercise of its inherent police power. On this premise, PSALM submits
that there is no undue delegation of legislative power to the ERC since the
latter merely exercises a limited authority or discretion as to the execution and
implementation of the provisions of the EPIRA.22
Respondents Department of Energy (DOE), ERC, and NPC, through the Office
of the Solicitor General (OSG), share the same view that the Universal Charge
is not a tax because it is levied for a specific regulatory purpose, which is to
ensure the viability of the country's electric power industry, and is, therefore, an
exaction in the exercise of the State's police power. Respondents further
contend that said Universal Charge does not possess the essential
characteristics of a tax, that its imposition would redound to the benefit of the
electric power industry and not to the public, and that its rate is uniformly levied
on electricity end-users, unlike a tax which is imposed based on the individual
taxpayer's ability to pay. Moreover, respondents deny that there is undue
delegation of legislative power to the ERC since the EPIRA sets forth sufficient
determinable standards which would guide the ERC in the exercise of the
powers granted to it. Lastly, respondents argue that the imposition of the
Universal Charge is not oppressive and confiscatory since it is an exercise of
the police power of the State and it complies with the requirements of due
process.23
On its part, respondent PECO argues that it is duty-bound to collect and remit
the amount pertaining to the Missionary Electrification and Environmental Fund
components of the Universal Charge, pursuant to Sec. 34 of the EPIRA and the
Decisions in ERC Case Nos. 2002-194 and 2002-165. Otherwise, PECO could
be held liable under Sec. 4624 of the EPIRA, which imposes fines and penalties
for any violation of its provisions or its IRR.25
The Issues
The ultimate issues in the case at bar are:
1) Whether or not, the Universal Charge imposed under Sec. 34 of the
EPIRA is a tax; and
2) Whether or not there is undue delegation of legislative power to tax
on the part of the ERC.26
Before we discuss the issues, the Court shall first deal with an obvious
procedural lapse.
Petitioners filed before us an original action particularly denominated as a
Complaint assailing the constitutionality of Sec. 34 of the EPIRA imposing the
Universal Charge and Rule 18 of the EPIRA's IRR. No doubt, petitioners
havelocus standi. They impugn the constitutionality of Sec. 34 of the EPIRA
because they sustained a direct injury as a result of the imposition of the
Universal Charge as reflected in their electric bills.
However, petitioners violated the doctrine of hierarchy of courts when they filed
this "Complaint" directly with us. Furthermore, the Complaint is bereft of any
allegation of grave abuse of discretion on the part of the ERC or any of the
public respondents, in order for the Court to consider it as a petition for
certiorari or prohibition.
Article VIII, Section 5(1) and (2) of the 1987 Constitution27 categorically
provides that:
SECTION 5. The Supreme Court shall have the following powers:
1. Exercise original jurisdiction over cases affecting ambassadors,
other public ministers and consuls, and over petitions for certiorari,
prohibition, mandamus, quo warranto, and habeas corpus.
2. Review, revise, reverse, modify, or affirm on appeal or certiorari, as
the law or the rules of court may provide, final judgments and orders of
lower courts in:
(a) All cases in which the constitutionality or validity of any treaty, international
or executive agreement, law, presidential decree, proclamation, order,
instruction, ordinance, or regulation is in question.
But this Court's jurisdiction to issue writs of certiorari,
prohibition, mandamus, quo warranto, and habeas corpus, while concurrent
with that of the regional trial courts and the Court of Appeals, does not give
litigants unrestrained freedom of choice of forum from which to seek such
relief.28 It has long been established that this Court will not entertain direct
resort to it unless the redress desired cannot be obtained in the appropriate
courts, or where exceptional and compelling circumstances justify availment of
a remedy within and call for the exercise of our primary jurisdiction.29 This
circumstance alone warrants the outright dismissal of the present action.
This procedural infirmity notwithstanding, we opt to resolve the constitutional
issue raised herein. We are aware that if the constitutionality of Sec. 34 of the
EPIRA is not resolved now, the issue will certainly resurface in the near future,
resulting in a repeat of this litigation, and probably involving the same parties. In
the public interest and to avoid unnecessary delay, this Court renders its ruling
now.
The instant complaint is bereft of merit.
The First Issue
To resolve the first issue, it is necessary to distinguish the State’s power of
taxation from the police power.
The power to tax is an incident of sovereignty and is unlimited in its range,
acknowledging in its very nature no limits, so that security against its abuse is
to be found only in the responsibility of the legislature which imposes the tax on
the constituency that is to pay it.30 It is based on the principle that taxes are the
lifeblood of the government, and their prompt and certain availability is an
imperious need.31 Thus, the theory behind the exercise of the power to tax
emanates from necessity; without taxes, government cannot fulfill its mandate
of promoting the general welfare and well-being of the people.32
On the other hand, police power is the power of the state to promote public
welfare by restraining and regulating the use of liberty and property. 33 It is the
most pervasive, the least limitable, and the most demanding of the three
fundamental powers of the State. The justification is found in the Latin
maxims salus populi est suprema lex (the welfare of the people is the supreme
law) and sic utere tuo ut alienum non laedas (so use your property as not to
injure the property of others). As an inherent attribute of sovereignty which
virtually extends to all public needs, police power grants a wide panoply of
instruments through which the State, as parens patriae, gives effect to a host of
its regulatory powers.34 We have held that the power to "regulate" means the
power to protect, foster, promote, preserve, and control, with due regard for the
interests, first and foremost, of the public, then of the utility and of its patrons. 35
The conservative and pivotal distinction between these two powers rests in the
purpose for which the charge is made. If generation of revenue is the primary
purpose and regulation is merely incidental, the imposition is a tax; but if
regulation is the primary purpose, the fact that revenue is incidentally raised
does not make the imposition a tax.36
In exacting the assailed Universal Charge through Sec. 34 of the EPIRA, the
State's police power, particularly its regulatory dimension, is invoked. Such can
be deduced from Sec. 34 which enumerates the purposes for which the
Universal Charge is imposed37 and which can be amply discerned as regulatory
in character. The EPIRA resonates such regulatory purposes, thus:
SECTION 2. Declaration of Policy. — It is hereby declared the policy of the
State:
(a) To ensure and accelerate the total electrification of the country;
(b) To ensure the quality, reliability, security and affordability of the
supply of electric power;
(c) To ensure transparent and reasonable prices of electricity in a
regime of free and fair competition and full public accountability to
achieve greater operational and economic efficiency and enhance the
competitiveness of Philippine products in the global market;
(d) To enhance the inflow of private capital and broaden the ownership
base of the power generation, transmission and distribution sectors;
(e) To ensure fair and non-discriminatory treatment of public and
private sector entities in the process of restructuring the electric power
industry;
(f) To protect the public interest as it is affected by the rates and
services of electric utilities and other providers of electric power;
(g) To assure socially and environmentally compatible energy sources
and infrastructure;
(h) To promote the utilization of indigenous and new and renewable
energy resources in power generation in order to reduce dependence
on imported energy;
(i) To provide for an orderly and transparent privatization of the assets
and liabilities of the National Power Corporation (NPC);
(j) To establish a strong and purely independent regulatory body and
system to ensure consumer protection and enhance the competitive
operation of the electricity market; and
(k) To encourage the efficient use of energy and other modalities of
demand side management.
From the aforementioned purposes, it can be gleaned that the assailed
Universal Charge is not a tax, but an exaction in the exercise of the State's
police power. Public welfare is surely promoted.
Moreover, it is a well-established doctrine that the taxing power may be used as
an implement of police power.38 In Valmonte v. Energy Regulatory Board, et
al.39 and in Gaston v. Republic Planters Bank,40 this Court held that the Oil
Price Stabilization Fund (OPSF) and the Sugar Stabilization Fund (SSF) were
exactions made in the exercise of the police power. The doctrine was reiterated
in Osmeña v. Orbos41 with respect to the OPSF. Thus, we disagree with
petitioners that the instant case is different from the aforementioned cases.
With the Universal Charge, a Special Trust Fund (STF) is also created under
the administration of PSALM.42 The STF has some notable characteristics
similar to the OPSF and the SSF, viz.:
1) In the implementation of stranded cost recovery, the ERC shall
conduct a review to determine whether there is under-recovery or over
recovery and adjust (true-up) the level of the stranded cost recovery
charge. In case of an over-recovery, the ERC shall ensure that any
excess amount shall be remitted to the STF. A separate account shall
be created for these amounts which shall be held in trust for any future
claims of distribution utilities for stranded cost recovery. At the end of
the stranded cost recovery period, any remaining amount in this
account shall be used to reduce the electricity rates to the end-users.43
2) With respect to the assailed Universal Charge, if the total amount
collected for the same is greater than the actual availments against it,
the PSALM shall retain the balance within the STF to pay for periods
where a shortfall occurs.44
3) Upon expiration of the term of PSALM, the administration of the STF
shall be transferred to the DOF or any of the DOF attached agencies
as designated by the DOF Secretary.45
The OSG is in point when it asseverates:
Evidently, the establishment and maintenance of the Special Trust Fund, under
the last paragraph of Section 34, R.A. No. 9136, is well within the pervasive
and non-waivable power and responsibility of the government to secure the
physical and economic survival and well-being of the community, that
comprehensive sovereign authority we designate as the police power of the
State.46
This feature of the Universal Charge further boosts the position that the same is
an exaction imposed primarily in pursuit of the State's police objectives. The
STF reasonably serves and assures the attainment and perpetuity of the
purposes for which the Universal Charge is imposed, i.e., to ensure the viability
of the country's electric power industry.
The Second Issue
The principle of separation of powers ordains that each of the three branches of
government has exclusive cognizance of and is supreme in matters falling
within its own constitutionally allocated sphere. A logical corollary to the
doctrine of separation of powers is the principle of non-delegation of powers, as
expressed in the Latin maxim potestas delegata non delegari potest (what has
been delegated cannot be delegated). This is based on the ethical principle that
such delegated power constitutes not only a right but a duty to be performed by
the delegate through the instrumentality of his own judgment and not through
the intervening mind of another. 47
In the face of the increasing complexity of modern life, delegation of legislative
power to various specialized administrative agencies is allowed as an exception
to this principle.48 Given the volume and variety of interactions in today's
society, it is doubtful if the legislature can promulgate laws that will deal
adequately with and respond promptly to the minutiae of everyday life. Hence,
the need to delegate to administrative bodies - the principal agencies tasked to
execute laws in their specialized fields - the authority to promulgate rules and
regulations to implement a given statute and effectuate its policies. All that is
required for the valid exercise of this power of subordinate legislation is that the
regulation be germane to the objects and purposes of the law and that the
regulation be not in contradiction to, but in conformity with, the standards
prescribed by the law. These requirements are denominated as the
completeness test and the sufficient standard test.
Under the first test, the law must be complete in all its terms and conditions
when it leaves the legislature such that when it reaches the delegate, the only
thing he will have to do is to enforce it. The second test mandates adequate
guidelines or limitations in the law to determine the boundaries of the delegate's
authority and prevent the delegation from running riot.49
The Court finds that the EPIRA, read and appreciated in its entirety, in relation
to Sec. 34 thereof, is complete in all its essential terms and conditions, and that
it contains sufficient standards.
Although Sec. 34 of the EPIRA merely provides that "within one (1) year from
the effectivity thereof, a Universal Charge to be determined, fixed and approved
by the ERC, shall be imposed on all electricity end-users," and therefore, does
not state the specific amount to be paid as Universal Charge, the amount
nevertheless is made certain by the legislative parameters provided in the law
itself. For one, Sec. 43(b)(ii) of the EPIRA provides:
SECTION 43. Functions of the ERC. — The ERC shall promote competition,
encourage market development, ensure customer choice and penalize abuse
of market power in the restructured electricity industry. In appropriate cases,
the ERC is authorized to issue cease and desist order after due notice and
hearing. Towards this end, it shall be responsible for the following key functions
in the restructured industry:
xxxx
(b) Within six (6) months from the effectivity of this Act, promulgate and
enforce, in accordance with law, a National Grid Code and a Distribution Code
which shall include, but not limited to the following:
xxxx
(ii) Financial capability standards for the generating companies, the TRANSCO,
distribution utilities and suppliers: Provided, That in the formulation of the
financial capability standards, the nature and function of the entity shall be
considered: Provided, further, That such standards are set to ensure that the
electric power industry participants meet the minimum financial standards to
protect the public interest. Determine, fix, and approve, after due notice and
public hearings the universal charge, to be imposed on all electricity end-users
pursuant to Section 34 hereof;
Moreover, contrary to the petitioners’ contention, the ERC does not enjoy a
wide latitude of discretion in the determination of the Universal Charge. Sec.
51(d) and (e) of the EPIRA50 clearly provides:
SECTION 51. Powers. — The PSALM Corp. shall, in the performance of its
functions and for the attainment of its objective, have the following powers:
xxxx
 (d) To calculate the amount of the stranded debts and stranded
contract costs of NPC which shall form the basis for ERC in the
determination of the universal charge;
(e) To liquidate the NPC stranded contract costs, utilizing the proceeds
from sales and other property contributed to it, including the proceeds
from the universal charge.
Thus, the law is complete and passes the first test for valid delegation of
legislative power.
As to the second test, this Court had, in the past, accepted as sufficient
standards the following: "interest of law and order;"51 "adequate and efficient
instruction;"52 "public interest;"53 "justice and equity;"54 "public convenience and
welfare;"55 "simplicity, economy and efficiency;"56 "standardization and
regulation of medical education;"57 and "fair and equitable employment
practices."58 Provisions of the EPIRA such as, among others, "to ensure the
total electrification of the country and the quality, reliability, security and
affordability of the supply of electric power"59 and "watershed rehabilitation and
management"60 meet the requirements for valid delegation, as they provide the
limitations on the ERC’s power to formulate the IRR. These are sufficient
standards.
It may be noted that this is not the first time that the ERC's conferred powers
were challenged. In Freedom from Debt Coalition v. Energy Regulatory
Commission,61 the Court had occasion to say:
In determining the extent of powers possessed by the ERC, the provisions of
the EPIRA must not be read in separate parts. Rather, the law must be read in
its entirety, because a statute is passed as a whole, and is animated by one
general purpose and intent. Its meaning cannot to be extracted from any single
part thereof but from a general consideration of the statute as a whole.
Considering the intent of Congress in enacting the EPIRA and reading the
statute in its entirety, it is plain to see that the law has expanded the jurisdiction
of the regulatory body, the ERC in this case, to enable the latter to implement
the reforms sought to be accomplished by the EPIRA. When the legislators
decided to broaden the jurisdiction of the ERC, they did not intend to abolish or
reduce the powers already conferred upon ERC's predecessors. To sustain the
view that the ERC possesses only the powers and functions listed under
Section 43 of the EPIRA is to frustrate the objectives of the law.
In his Concurring and Dissenting Opinion62 in the same case, then Associate
Justice, now Chief Justice, Reynato S. Puno described the immensity of police
power in relation to the delegation of powers to the ERC and its regulatory
functions over electric power as a vital public utility, to wit:
Over the years, however, the range of police power was no longer limited to the
preservation of public health, safety and morals, which used to be the primary
social interests in earlier times. Police power now requires the State to "assume
an affirmative duty to eliminate the excesses and injustices that are the
concomitants of an unrestrained industrial economy." Police power is now
exerted "to further the public welfare — a concept as vast as the good of
society itself." Hence, "police power is but another name for the governmental
authority to further the welfare of society that is the basic end of all
government." When police power is delegated to administrative bodies with
regulatory functions, its exercise should be given a wide latitude. Police power
takes on an even broader dimension in developing countries such as ours,
where the State must take a more active role in balancing the many conflicting
interests in society. The Questioned Order was issued by the ERC, acting as
an agent of the State in the exercise of police power. We should have
exceptionally good grounds to curtail its exercise. This approach is more
compelling in the field of rate-regulation of electric power rates. Electric power
generation and distribution is a traditional instrument of economic growth that
affects not only a few but the entire nation. It is an important factor in
encouraging investment and promoting business. The engines of progress may
come to a screeching halt if the delivery of electric power is impaired. Billions of
pesos would be lost as a result of power outages or unreliable electric power
services. The State thru the ERC should be able to exercise its police power
with great flexibility, when the need arises.
This was reiterated in National Association of Electricity Consumers for
Reforms v. Energy Regulatory Commission63 where the Court held that the
ERC, as regulator, should have sufficient power to respond in real time to
changes wrought by multifarious factors affecting public utilities.
From the foregoing disquisitions, we therefore hold that there is no undue
delegation of legislative power to the ERC.
Petitioners failed to pursue in their Memorandum the contention in the
Complaint that the imposition of the Universal Charge on all end-users is
oppressive and confiscatory, and amounts to taxation without representation.
Hence, such contention is deemed waived or abandoned per Resolution 64 of
August 3, 2004.65 Moreover, the determination of whether or not a tax is
excessive, oppressive or confiscatory is an issue which essentially involves
questions of fact, and thus, this Court is precluded from reviewing the same. 66
As a penultimate statement, it may be well to recall what this Court said of
EPIRA:
One of the landmark pieces of legislation enacted by Congress in recent years
is the EPIRA. It established a new policy, legal structure and regulatory
framework for the electric power industry. The new thrust is to tap private
capital for the expansion and improvement of the industry as the large
government debt and the highly capital-intensive character of the industry itself
have long been acknowledged as the critical constraints to the program. To
attract private investment, largely foreign, the jaded structure of the industry
had to be addressed. While the generation and transmission sectors were
centralized and monopolistic, the distribution side was fragmented with over
130 utilities, mostly small and uneconomic. The pervasive flaws have caused a
low utilization of existing generation capacity; extremely high and uncompetitive
power rates; poor quality of service to consumers; dismal to forgettable
performance of the government power sector; high system losses; and an
inability to develop a clear strategy for overcoming these shortcomings.
Thus, the EPIRA provides a framework for the restructuring of the industry,
including the privatization of the assets of the National Power Corporation
(NPC), the transition to a competitive structure, and the delineation of the roles
of various government agencies and the private entities. The law ordains the
division of the industry into four (4) distinct sectors, namely: generation,
transmission, distribution and supply.
Corollarily, the NPC generating plants have to privatized and its transmission
business spun off and privatized thereafter.67
Finally, 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 and not one that is doubtful, speculative, or
argumentative.68Indubitably, petitioners failed to overcome this presumption in
favor of the EPIRA. We find no clear violation of the Constitution which would
warrant a pronouncement that Sec. 34 of the EPIRA and Rule 18 of its IRR are
unconstitutional and void.
WHEREFORE, the instant case is hereby DISMISSED for lack of merit.
SO ORDERED.
EN BANC
G.R. No. 168056 September 1, 2005
ABAKADA GURO PARTY LIST (Formerly AASJAS) OFFICERS SAMSON S.
ALCANTARA and ED VINCENT S. ALBANO, Petitioners,
vs.
THE HONORABLE EXECUTIVE SECRETARY EDUARDO ERMITA;
HONORABLE SECRETARY OF THE DEPARTMENT OF FINANCE CESAR
PURISIMA; and HONORABLE COMMISSIONER OF INTERNAL REVENUE
GUILLERMO PARAYNO, JR., Respondent.
x-------------------------x
G.R. No. 168207
AQUILINO Q. PIMENTEL, JR., LUISA P. EJERCITO-ESTRADA, JINGGOY E.
ESTRADA, PANFILO M. LACSON, ALFREDO S. LIM, JAMBY A.S.
MADRIGAL, AND SERGIO R. OSMEÑA III, Petitioners,
vs.
EXECUTIVE SECRETARY EDUARDO R. ERMITA, CESAR V. PURISIMA,
SECRETARY OF FINANCE, GUILLERMO L. PARAYNO, JR.,
COMMISSIONER OF THE BUREAU OF INTERNAL REVENUE, Respondent.
x-------------------------x
G.R. No. 168461
ASSOCIATION OF PILIPINAS SHELL DEALERS, INC. represented by its
President, ROSARIO ANTONIO; PETRON DEALERS’ ASSOCIATION
represented by its President, RUTH E. BARBIBI; ASSOCIATION OF CALTEX
DEALERS’ OF THE PHILIPPINES represented by its President, MERCEDITAS
A. GARCIA; ROSARIO ANTONIO doing business under the name and style of
"ANB NORTH SHELL SERVICE STATION"; LOURDES MARTINEZ doing
business under the name and style of "SHELL GATE – N. DOMINGO";
BETHZAIDA TAN doing business under the name and style of "ADVANCE
SHELL STATION"; REYNALDO P. MONTOYA doing business under the name
and style of "NEW LAMUAN SHELL SERVICE STATION"; EFREN SOTTO
doing business under the name and style of "RED FIELD SHELL SERVICE
STATION"; DONICA CORPORATION represented by its President, DESI
TOMACRUZ; RUTH E. MARBIBI doing business under the name and style of
"R&R PETRON STATION"; PETER M. UNGSON doing business under the
name and style of "CLASSIC STAR GASOLINE SERVICE STATION"; MARIAN
SHEILA A. LEE doing business under the name and style of "NTE GASOLINE
& SERVICE STATION"; JULIAN CESAR P. POSADAS doing business under
the name and style of "STARCARGA ENTERPRISES"; ADORACION
MAÑEBO doing business under the name and style of "CMA MOTORISTS
CENTER"; SUSAN M. ENTRATA doing business under the name and style of
"LEONA’S GASOLINE STATION and SERVICE CENTER"; CARMELITA
BALDONADO doing business under the name and style of "FIRST CHOICE
SERVICE CENTER"; MERCEDITAS A. GARCIA doing business under the
name and style of "LORPED SERVICE CENTER"; RHEAMAR A. RAMOS
doing business under the name and style of "RJRAM PTT GAS STATION"; MA.
ISABEL VIOLAGO doing business under the name and style of "VIOLAGO-PTT
SERVICE CENTER"; MOTORISTS’ HEART CORPORATION represented by
its Vice-President for Operations, JOSELITO F. FLORDELIZA; MOTORISTS’
HARVARD CORPORATION represented by its Vice-President for Operations,
JOSELITO F. FLORDELIZA; MOTORISTS’ HERITAGE CORPORATION
represented by its Vice-President for Operations, JOSELITO F. FLORDELIZA;
PHILIPPINE STANDARD OIL CORPORATION represented by its Vice-
President for Operations, JOSELITO F. FLORDELIZA; ROMEO MANUEL
doing business under the name and style of "ROMMAN GASOLINE STATION";
ANTHONY ALBERT CRUZ III doing business under the name and style of
"TRUE SERVICE STATION", Petitioners,
vs.
CESAR V. PURISIMA, in his capacity as Secretary of the Department of
Finance and GUILLERMO L. PARAYNO, JR., in his capacity as
Commissioner of Internal Revenue, Respondent.
x-------------------------x
G.R. No. 168463
FRANCIS JOSEPH G. ESCUDERO, VINCENT CRISOLOGO, EMMANUEL
JOEL J. VILLANUEVA, RODOLFO G. PLAZA, DARLENE ANTONINO-
CUSTODIO, OSCAR G. MALAPITAN, BENJAMIN C. AGARAO, JR. JUAN
EDGARDO M. ANGARA, JUSTIN MARC SB. CHIPECO, FLORENCIO G.
NOEL, MUJIV S. HATAMAN, RENATO B. MAGTUBO, JOSEPH A.
SANTIAGO, TEOFISTO DL. GUINGONA III, RUY ELIAS C. LOPEZ,
RODOLFO Q. AGBAYANI and TEODORO A. CASIÑO, Petitioners,
vs.
CESAR V. PURISIMA, in his capacity as Secretary of Finance,
GUILLERMO L. PARAYNO, JR., in his capacity as Commissioner of
Internal Revenue, and EDUARDO R. ERMITA, in his capacity as Executive
Secretary,Respondent.
x-------------------------x
G.R. No. 168730
BATAAN GOVERNOR ENRIQUE T. GARCIA, JR. Petitioner,
vs.
HON. EDUARDO R. ERMITA, in his capacity as the Executive Secretary; HON.
MARGARITO TEVES, in his capacity as Secretary of Finance; HON. JOSE
MARIO BUNAG, in his capacity as the OIC Commissioner of the Bureau of
Internal Revenue; and HON. ALEXANDER AREVALO, in his capacity as the
OIC Commissioner of the Bureau of Customs, Respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
The expenses of government, having for their object the interest of all, should
be borne by everyone, and the more man enjoys the advantages of society, the
more he ought to hold himself honored in contributing to those expenses.
-Anne Robert Jacques Turgot (1727-1781)
French statesman and economist
Mounting budget deficit, revenue generation, inadequate fiscal allocation for
education, increased emoluments for health workers, and wider coverage for
full value-added tax benefits … these are the reasons why Republic Act No.
9337 (R.A. No. 9337)1 was enacted. Reasons, the wisdom of which, the Court
even with its extensive constitutional power of review, cannot probe. The
petitioners in these cases, however, question not only the wisdom of the law,
but also perceived constitutional infirmities in its passage.
Every law enjoys in its favor the presumption of constitutionality. Their
arguments notwithstanding, petitioners failed to justify their call for the invalidity
of the law. Hence, R.A. No. 9337 is not unconstitutional.
LEGISLATIVE HISTORY
R.A. No. 9337 is a consolidation of three legislative bills namely, House Bill
Nos. 3555 and 3705, and Senate Bill No. 1950.
House Bill No. 35552 was introduced on first reading on January 7, 2005. The
House Committee on Ways and Means approved the bill, in substitution of
House Bill No. 1468, which Representative (Rep.) Eric D. Singson introduced
on August 8, 2004. The President certified the bill on January 7, 2005 for
immediate enactment. On January 27, 2005, the House of Representatives
approved the bill on second and third reading.
House Bill No. 37053 on the other hand, substituted House Bill No. 3105
introduced by Rep. Salacnib F. Baterina, and House Bill No. 3381 introduced
by Rep. Jacinto V. Paras. Its "mother bill" is House Bill No. 3555. The House
Committee on Ways and Means approved the bill on February 2, 2005. The
President also certified it as urgent on February 8, 2005. The House of
Representatives approved the bill on second and third reading on February 28,
2005.
Meanwhile, the Senate Committee on Ways and Means approved Senate Bill
No. 19504 on March 7, 2005, "in substitution of Senate Bill Nos. 1337, 1838
and 1873, taking into consideration House Bill Nos. 3555 and 3705." Senator
Ralph G. Recto sponsored Senate Bill No. 1337, while Senate Bill Nos. 1838
and 1873 were both sponsored by Sens. Franklin M. Drilon, Juan M. Flavier
and Francis N. Pangilinan. The President certified the bill on March 11, 2005,
and was approved by the Senate on second and third reading on April 13,
2005.
On the same date, April 13, 2005, the Senate agreed to the request of the
House of Representatives for a committee conference on the disagreeing
provisions of the proposed bills.
Before long, the Conference Committee on the Disagreeing Provisions of
House Bill No. 3555, House Bill No. 3705, and Senate Bill No. 1950, "after
having met and discussed in full free and conference," recommended the
approval of its report, which the Senate did on May 10, 2005, and with the
House of Representatives agreeing thereto the next day, May 11, 2005.
On May 23, 2005, the enrolled copy of the consolidated House and Senate
version was transmitted to the President, who signed the same into law on May
24, 2005. Thus, came R.A. No. 9337.
July 1, 2005 is the effectivity date of R.A. No. 9337. 5 When said date came, the
Court issued a temporary restraining order, effective immediately and
continuing until further orders, enjoining respondents from enforcing and
implementing the law.
Oral arguments were held on July 14, 2005. Significantly, during the hearing,
the Court speaking through Mr. Justice Artemio V. Panganiban, voiced the
rationale for its issuance of the temporary restraining order on July 1, 2005, to
wit:
J. PANGANIBAN : . . . But before I go into the details of your presentation, let
me just tell you a little background. You know when the law took effect on July
1, 2005, the Court issued a TRO at about 5 o’clock in the afternoon. But before
that, there was a lot of complaints aired on television and on radio. Some
people in a gas station were complaining that the gas prices went up by 10%.
Some people were complaining that their electric bill will go up by 10%. Other
times people riding in domestic air carrier were complaining that the prices that
they’ll have to pay would have to go up by 10%. While all that was being aired,
per your presentation and per our own understanding of the law, that’s not true.
It’s not true that the e-vat law necessarily increased prices by 10% uniformly
isn’t it?
ATTY. BANIQUED : No, Your Honor.
J. PANGANIBAN : It is not?
ATTY. BANIQUED : It’s not, because, Your Honor, there is an Executive Order
that granted the Petroleum companies some subsidy . . . interrupted
J. PANGANIBAN : That’s correct . . .
ATTY. BANIQUED : . . . and therefore that was meant to temper the impact . . .
interrupted
J. PANGANIBAN : . . . mitigating measures . . .
ATTY. BANIQUED : Yes, Your Honor.
J. PANGANIBAN : As a matter of fact a part of the mitigating measures would
be the elimination of the Excise Tax and the import duties. That is why, it is not
correct to say that the VAT as to petroleum dealers increased prices by 10%.
ATTY. BANIQUED : Yes, Your Honor.
J. PANGANIBAN : And therefore, there is no justification for increasing the
retail price by 10% to cover the E-Vat tax. If you consider the excise tax and the
import duties, the Net Tax would probably be in the neighborhood of 7%? We
are not going into exact figures I am just trying to deliver a point that different
industries, different products, different services are hit differently. So it’s not
correct to say that all prices must go up by 10%.
ATTY. BANIQUED : You’re right, Your Honor.
J. PANGANIBAN : Now. For instance, Domestic Airline companies, Mr.
Counsel, are at present imposed a Sales Tax of 3%. When this E-Vat law took
effect the Sales Tax was also removed as a mitigating measure. So, therefore,
there is no justification to increase the fares by 10% at best 7%, correct?
ATTY. BANIQUED : I guess so, Your Honor, yes.
J. PANGANIBAN : There are other products that the people were complaining
on that first day, were being increased arbitrarily by 10%. And that’s one reason
among many others this Court had to issue TRO because of the confusion in
the implementation. That’s why we added as an issue in this case, even if it’s
tangentially taken up by the pleadings of the parties, the confusion in the
implementation of the E-vat. Our people were subjected to the mercy of that
confusion of an across the board increase of 10%, which you yourself now
admit and I think even the Government will admit is incorrect. In some cases, it
should be 3% only, in some cases it should be 6% depending on these
mitigating measures and the location and situation of each product, of each
service, of each company, isn’t it?
ATTY. BANIQUED : Yes, Your Honor.
J. PANGANIBAN : Alright. So that’s one reason why we had to issue a TRO
pending the clarification of all these and we wish the government will take time
to clarify all these by means of a more detailed implementing rules, in case the
law is upheld by this Court. . . .6
The Court also directed the parties to file their respective Memoranda.
G.R. No. 168056
Before R.A. No. 9337 took effect, petitioners ABAKADA GURO Party List, et
al., filed a petition for prohibition on May 27, 2005. They question the
constitutionality of Sections 4, 5 and 6 of R.A. No. 9337, amending Sections
106, 107 and 108, respectively, of the National Internal Revenue Code (NIRC).
Section 4 imposes a 10% VAT on sale of goods and properties, Section 5
imposes a 10% VAT on importation of goods, and Section 6 imposes a 10%
VAT on sale of services and use or lease of properties. These questioned
provisions contain a uniform proviso authorizing the President, upon
recommendation of the Secretary of Finance, to raise the VAT rate to 12%,
effective January 1, 2006, after any of the following conditions have been
satisfied, to wit:
. . . That the President, upon the recommendation of the Secretary of Finance,
shall, effective January 1, 2006, raise the rate of value-added tax to twelve
percent (12%), after any of the following conditions has been satisfied:
(i) Value-added tax collection as a percentage of Gross Domestic Product
(GDP) of the previous year exceeds two and four-fifth percent (2 4/5%); or
(ii) National government deficit as a percentage of GDP of the previous year
exceeds one and one-half percent (1 ½%).
Petitioners argue that the law is unconstitutional, as it constitutes abandonment
by Congress of its exclusive authority to fix the rate of taxes under Article VI,
Section 28(2) of the 1987 Philippine Constitution.
G.R. No. 168207
On June 9, 2005, Sen. Aquilino Q. Pimentel, Jr., et al., filed a petition
for certiorari likewise assailing the constitutionality of Sections 4, 5 and 6 of
R.A. No. 9337.
Aside from questioning the so-called stand-by authority of the President to
increase the VAT rate to 12%, on the ground that it amounts to an undue
delegation of legislative power, petitioners also contend that the increase in the
VAT rate to 12% contingent on any of the two conditions being satisfied violates
the due process clause embodied in Article III, Section 1 of the Constitution, as
it imposes an unfair and additional tax burden on the people, in that: (1) the
12% increase is ambiguous because it does not state if the rate would be
returned to the original 10% if the conditions are no longer satisfied; (2) the rate
is unfair and unreasonable, as the people are unsure of the applicable VAT rate
from year to year; and (3) the increase in the VAT rate, which is supposed to be
an incentive to the President to raise the VAT collection to at least 2 4/5 of the
GDP of the previous year, should only be based on fiscal adequacy.
Petitioners further claim that the inclusion of a stand-by authority granted to the
President by the Bicameral Conference Committee is a violation of the "no-
amendment rule" upon last reading of a bill laid down in Article VI, Section
26(2) of the Constitution.
G.R. No. 168461
Thereafter, a petition for prohibition was filed on June 29, 2005, by the
Association of Pilipinas Shell Dealers, Inc., et al., assailing the following
provisions of R.A. No. 9337:
1) Section 8, amending Section 110 (A)(2) of the NIRC, requiring that the input
tax on depreciable goods shall be amortized over a 60-month period, if the
acquisition, excluding the VAT components, exceeds One Million Pesos (₱1,
000,000.00);
2) Section 8, amending Section 110 (B) of the NIRC, imposing a 70% limit on
the amount of input tax to be credited against the output tax; and
3) Section 12, amending Section 114 (c) of the NIRC, authorizing the
Government or any of its political subdivisions, instrumentalities or agencies,
including GOCCs, to deduct a 5% final withholding tax on gross payments of
goods and services, which are subject to 10% VAT under Sections 106 (sale of
goods and properties) and 108 (sale of services and use or lease of properties)
of the NIRC.
Petitioners contend that these provisions are unconstitutional for being
arbitrary, oppressive, excessive, and confiscatory.
Petitioners’ argument is premised on the constitutional right of non-deprivation
of life, liberty or property without due process of law under Article III, Section 1
of the Constitution. According to petitioners, the contested sections impose
limitations on the amount of input tax that may be claimed. Petitioners also
argue that the input tax partakes the nature of a property that may not be
confiscated, appropriated, or limited without due process of law. Petitioners
further contend that like any other property or property right, the input tax credit
may be transferred or disposed of, and that by limiting the same, the
government gets to tax a profit or value-added even if there is no profit or
value-added.
Petitioners also believe that these provisions violate the constitutional
guarantee of equal protection of the law under Article III, Section 1 of the
Constitution, as the limitation on the creditable input tax if: (1) the entity has a
high ratio of input tax; or (2) invests in capital equipment; or (3) has several
transactions with the government, is not based on real and substantial
differences to meet a valid classification.
Lastly, petitioners contend that the 70% limit is anything but progressive,
violative of Article VI, Section 28(1) of the Constitution, and that it is the smaller
businesses with higher input tax to output tax ratio that will suffer the
consequences thereof for it wipes out whatever meager margins the petitioners
make.
G.R. No. 168463
Several members of the House of Representatives led by Rep. Francis Joseph
G. Escudero filed this petition for certiorari on June 30, 2005. They question the
constitutionality of R.A. No. 9337 on the following grounds:
1) Sections 4, 5, and 6 of R.A. No. 9337 constitute an undue delegation of
legislative power, in violation of Article VI, Section 28(2) of the Constitution;
2) The Bicameral Conference Committee acted without jurisdiction in deleting
the no pass on provisions present in Senate Bill No. 1950 and House Bill No.
3705; and
3) Insertion by the Bicameral Conference Committee of Sections 27, 28, 34,
116, 117, 119, 121, 125,7 148, 151, 236, 237 and 288, which were present in
Senate Bill No. 1950, violates Article VI, Section 24(1) of the Constitution,
which provides that all appropriation, revenue or tariff bills shall originate
exclusively in the House of Representatives
G.R. No. 168730
On the eleventh hour, Governor Enrique T. Garcia filed a petition
for certiorari and prohibition on July 20, 2005, alleging unconstitutionality of the
law on the ground that the limitation on the creditable input tax in effect allows
VAT-registered establishments to retain a portion of the taxes they collect, thus
violating the principle that tax collection and revenue should be solely allocated
for public purposes and expenditures. Petitioner Garcia further claims that
allowing these establishments to pass on the tax to the consumers is
inequitable, in violation of Article VI, Section 28(1) of the Constitution.
RESPONDENTS’ COMMENT
The Office of the Solicitor General (OSG) filed a Comment in behalf of
respondents. Preliminarily, respondents contend that R.A. No. 9337 enjoys the
presumption of constitutionality and petitioners failed to cast doubt on its
validity.
Relying on the case of Tolentino vs. Secretary of Finance, 235 SCRA
630 (1994), respondents argue that the procedural issues raised by
petitioners, i.e., legality of the bicameral proceedings, exclusive origination of
revenue measures and the power of the Senate concomitant thereto, have
already been settled. With regard to the issue of undue delegation of legislative
power to the President, respondents contend that the law is complete and
leaves no discretion to the President but to increase the rate to 12% once any
of the two conditions provided therein arise.
Respondents also refute petitioners’ argument that the increase to 12%, as well
as the 70% limitation on the creditable input tax, the 60-month amortization on
the purchase or importation of capital goods exceeding ₱1,000,000.00, and the
5% final withholding tax by government agencies, is arbitrary, oppressive, and
confiscatory, and that it violates the constitutional principle on progressive
taxation, among others.
Finally, respondents manifest that R.A. No. 9337 is the anchor of the
government’s fiscal reform agenda. A reform in the value-added system of
taxation is the core revenue measure that will tilt the balance towards a
sustainable macroeconomic environment necessary for economic growth.
ISSUES
The Court defined the issues, as follows:
PROCEDURAL ISSUE
Whether R.A. No. 9337 violates the following provisions of the Constitution:
a. Article VI, Section 24, and
b. Article VI, Section 26(2)
SUBSTANTIVE ISSUES
1. Whether Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107
and 108 of the NIRC, violate the following provisions of the Constitution:
a. Article VI, Section 28(1), and
b. Article VI, Section 28(2)
2. Whether Section 8 of R.A. No. 9337, amending Sections 110(A)(2) and
110(B) of the NIRC; and Section 12 of R.A. No. 9337, amending Section
114(C) of the NIRC, violate the following provisions of the Constitution:
a. Article VI, Section 28(1), and
b. Article III, Section 1
RULING OF THE COURT
As a prelude, the Court deems it apt to restate the general principles and
concepts of value-added tax (VAT), as the confusion and inevitably, litigation,
breeds from a fallacious notion of its nature.
The VAT is a tax on spending or consumption. It is levied on the sale, barter,
exchange or lease of goods or properties and services.8 Being an indirect tax
on expenditure, the seller of goods or services may pass on the amount of tax
paid to the buyer,9 with the seller acting merely as a tax collector.10 The burden
of VAT is intended to fall on the immediate buyers and ultimately, the end-
consumers.
In contrast, a direct tax is a tax for which a taxpayer is directly liable on the
transaction or business it engages in, without transferring the burden to
someone else.11 Examples are individual and corporate income taxes, transfer
taxes, and residence taxes.12
In the Philippines, the value-added system of sales taxation has long been in
existence, albeit in a different mode. Prior to 1978, the system was a single-
stage tax computed under the "cost deduction method" and was payable only
by the original sellers. The single-stage system was subsequently modified,
and a mixture of the "cost deduction method" and "tax credit method" was used
to determine the value-added tax payable.13 Under the "tax credit method," an
entity can credit against or subtract from the VAT charged on its sales or
outputs the VAT paid on its purchases, inputs and imports.14
It was only in 1987, when President Corazon C. Aquino issued Executive Order
No. 273, that the VAT system was rationalized by imposing a multi-stage tax
rate of 0% or 10% on all sales using the "tax credit method."15
E.O. No. 273 was followed by R.A. No. 7716 or the Expanded VAT Law,16 R.A.
No. 8241 or the Improved VAT Law,17 R.A. No. 8424 or the Tax Reform Act of
1997,18 and finally, the presently beleaguered R.A. No. 9337, also referred to
by respondents as the VAT Reform Act.
The Court will now discuss the issues in logical sequence.
PROCEDURAL ISSUE
I.
Whether R.A. No. 9337 violates the following provisions of the Constitution:
a. Article VI, Section 24, and
b. Article VI, Section 26(2)
A. The Bicameral Conference Committee
Petitioners Escudero, et al., and Pimentel, et al., allege that the Bicameral
Conference Committee exceeded its authority by:
1) Inserting the stand-by authority in favor of the President in Sections 4, 5, and
6 of R.A. No. 9337;
2) Deleting entirely the no pass-on provisions found in both the House and
Senate bills;
3) Inserting the provision imposing a 70% limit on the amount of input tax to be
credited against the output tax; and
4) Including the amendments introduced only by Senate Bill No. 1950 regarding
other kinds of taxes in addition to the value-added tax.
Petitioners now beseech the Court to define the powers of the Bicameral
Conference Committee.
It should be borne in mind that the power of internal regulation and discipline
are intrinsic in any legislative body for, as unerringly elucidated by Justice
Story, "[i]f the power did not exist, it would be utterly impracticable to
transact the business of the nation, either at all, or at least with decency,
deliberation, and order."19 Thus, Article VI, Section 16 (3) of the Constitution
provides that "each House may determine the rules of its proceedings."
Pursuant to this inherent constitutional power to promulgate and implement its
own rules of procedure, the respective rules of each house of Congress
provided for the creation of a Bicameral Conference Committee.
Thus, Rule XIV, Sections 88 and 89 of the Rules of House of Representatives
provides as follows:
Sec. 88. Conference Committee. – In the event that the House does not agree
with the Senate on the amendment to any bill or joint resolution, the differences
may be settled by the conference committees of both chambers.
In resolving the differences with the Senate, the House panel shall, as much as
possible, adhere to and support the House Bill. If the differences with the
Senate are so substantial that they materially impair the House Bill, the panel
shall report such fact to the House for the latter’s appropriate action.
Sec. 89. Conference Committee Reports. – . . . Each report shall contain a
detailed, sufficiently explicit statement of the changes in or amendments to the
subject measure.
...
The Chairman of the House panel may be interpellated on the Conference
Committee Report prior to the voting thereon. The House shall vote on the
Conference Committee Report in the same manner and procedure as it votes
on a bill on third and final reading.
Rule XII, Section 35 of the Rules of the Senate states:
Sec. 35. In the event that the Senate does not agree with the House of
Representatives on the provision of any bill or joint resolution, the differences
shall be settled by a conference committee of both Houses which shall meet
within ten (10) days after their composition. The President shall designate the
members of the Senate Panel in the conference committee with the approval of
the Senate.
Each Conference Committee Report shall contain a detailed and sufficiently
explicit statement of the changes in, or amendments to the subject measure,
and shall be signed by a majority of the members of each House panel, voting
separately.
A comparative presentation of the conflicting House and Senate provisions and
a reconciled version thereof with the explanatory statement of the conference
committee shall be attached to the report.
...
The creation of such conference committee was apparently in response to a
problem, not addressed by any constitutional provision, where the two houses
of Congress find themselves in disagreement over changes or amendments
introduced by the other house in a legislative bill. Given that one of the most
basic powers of the legislative branch is to formulate and implement its own
rules of proceedings and to discipline its members, may the Court then delve
into the details of how Congress complies with its internal rules or how it
conducts its business of passing legislation? Note that in the present petitions,
the issue is not whether provisions of the rules of both houses creating the
bicameral conference committee are unconstitutional, but whether the
bicameral conference committee has strictly complied with the rules of
both houses, thereby remaining within the jurisdiction conferred upon it
by Congress.
In the recent case of Fariñas vs. The Executive Secretary,20 the Court En
Banc, unanimously reiterated and emphasized its adherence to the "enrolled
bill doctrine," thus, declining therein petitioners’ plea for the Court to go behind
the enrolled copy of the bill. Assailed in said case was Congress’s creation of
two sets of bicameral conference committees, the lack of records of said
committees’ proceedings, the alleged violation of said committees of the rules
of both houses, and the disappearance or deletion of one of the provisions in
the compromise bill submitted by the bicameral conference committee. It was
argued that such irregularities in the passage of the law nullified R.A. No. 9006,
or the Fair Election Act.
Striking down such argument, the Court held thus:
Under the "enrolled bill doctrine," the signing of a bill by the Speaker of the
House and the Senate President and the certification of the Secretaries of both
Houses of Congress that it was passed are conclusive of its due enactment. A
review of cases reveals the Court’s consistent adherence to the rule. The
Court finds no reason to deviate from the salutary rule in this case where
the irregularities alleged by the petitioners mostly involved the internal
rules of Congress, e.g., creation of the 2nd or 3rd Bicameral Conference
Committee by the House. This Court is not the proper forum for the
enforcement of these internal rules of Congress, whether House or
Senate. Parliamentary rules are merely procedural and with their
observance the courts have no concern. Whatever doubts there may be
as to the formal validity of Rep. Act No. 9006 must be resolved in its
favor.The Court reiterates its ruling in Arroyo vs. De Venecia, viz.:
But the cases, both here and abroad, in varying forms of expression, all
deny to the courts the power to inquire into allegations that, in enacting a
law, a House of Congress failed to comply with its own rules, in the
absence of showing that there was a violation of a constitutional
provision or the rights of private individuals. In Osmeña v. Pendatun, it was
held: "At any rate, courts have declared that ‘the rules adopted by deliberative
bodies are subject to revocation, modification or waiver at the pleasure of the
body adopting them.’ And it has been said that "Parliamentary rules are
merely procedural, and with their observance, the courts have no
concern. They may be waived or disregarded by the legislative body."
Consequently, "mere failure to conform to parliamentary usage will not
invalidate the action (taken by a deliberative body) when the requisite
number of members have agreed to a particular measure."21 (Emphasis importation of goods goods and petroleum 10% VAT on sale of
supplied) (amending Sec. 107 of products and raw services including sale
NIRC); and 12% VAT materials to be used in of electricity by
The foregoing declaration is exactly in point with the present cases, where on sale of services the manufacture thereof generation companies,
petitioners allege irregularities committed by the conference committee in and use or lease of (amending Sec. 106 of transmission and
introducing changes or deleting provisions in the House and Senate bills. Akin properties (amending NIRC); 12% VAT on distribution companies,
to the Fariñas case,22 the present petitions also raise an issue regarding the Sec. 108 of NIRC) importation of goods and and use or lease of
actions taken by the conference committee on matters regarding Congress’ reduced rates for certain properties (amending
compliance with its own internal rules. As stated earlier, one of the most basic imported products Sec. 108 of NIRC)
and inherent power of the legislature is the power to formulate rules for its including petroleum
proceedings and the discipline of its members. Congress is the best judge of products (amending Sec.
how it should conduct its own business expeditiously and in the most orderly 107 of NIRC); and 12%
manner. It is also the sole VAT on sale of services
and use or lease of
concern of Congress to instill discipline among the members of its conference properties and a reduced
committee if it believes that said members violated any of its rules of rate for certain services
proceedings. Even the expanded jurisdiction of this Court cannot apply to including power
questions regarding only the internal operation of Congress, thus, the Court is generation (amending
wont to deny a review of the internal proceedings of a co-equal branch of Sec. 108 of NIRC)
government. With regard to the "no pass-on" provision
No similar provision Provides that the VAT Provides that the VAT
Moreover, as far back as 1994 or more than ten years ago, in the case imposed on power imposed on sales of
of Tolentino vs. Secretary of Finance,23 the Court already made the generation and on the electricity by
pronouncement that "[i]f a change is desired in the practice [of the sale of petroleum generation companies
Bicameral Conference Committee] it must be sought in Congress since products shall be and services of
this question is not covered by any constitutional provision but is only an absorbed by generation transmission
internal rule of each house." 24 To date, Congress has not seen it fit to make companies or sellers, companies and
such changes adverted to by the Court. It seems, therefore, that Congress finds respectively, and shall not distribution companies,
the practices of the bicameral conference committee to be very useful for be passed on to as well as those of
purposes of prompt and efficient legislative action. consumers franchise grantees of
electric utilities shall
not apply to residential
Nevertheless, just to put minds at ease that no blatant irregularities tainted the
proceedings of the bicameral conference committees, the Court deems it
necessary to dwell on the issue. The Court observes that there was a necessity end-users. VAT shall
for a conference committee because a comparison of the provisions of House be absorbed by
Bill Nos. 3555 and 3705 on one hand, and Senate Bill No. 1950 on the other, generation,
reveals that there were indeed disagreements. As pointed out in the petitions, transmission, and
said disagreements were as follows: distribution companies.
With regard to 70% limit on input tax credit
House Bill No. 3555 House Bill No.3705 Senate Bill No. 1950 Provides that the input No similar provision Provides that the input
tax credit for capital tax credit for capital
With regard to "Stand-By Authority" in favor of President
goods on which a VAT goods on which a VAT
Provides for 12% VAT Provides for 12% VAT in Provides for a single has been paid shall be has been paid shall be
on every sale of goods general on sales of goods rate of 10% VAT on equally distributed equally distributed over
or properties or properties and reduced sale of goods or over 5 years or the 5 years or the
(amending Sec. 106 of rates for sale of certain properties (amending depreciable life of depreciable life of such
NIRC); 12% VAT on locally manufactured Sec. 106 of NIRC), such capital goods; capital goods; the input
the input tax credit for
goods and services
other than capital
goods shall not
exceed 5% of the total
amount of such goods
and services; and for
persons engaged in
retail trading of goods,
the allowable input tax
credit shall not exceed
11% of the total
amount of goods
purchased.
With regard to amendments to be made to NIRC provisions regarding income and
No similar provision
tax credit for goods and of GDP of the previous year exceeds 1½%, when the President, upon
services other than recommendation of the Secretary of Finance shall raise the rate of VAT to 12%
capital goods shall not effective January 1, 2006.
exceed 90% of the
output VAT. 2. With regard to the disagreement on whether only the VAT imposed on
electricity generation, transmission and distribution companies should not be
passed on to consumers or whether both the VAT imposed on electricity
generation, transmission and distribution companies and the VAT imposed on
sale of petroleum products may be passed on to consumers, the Bicameral
Conference Committee chose to settle such disagreement by altogether
deleting from its Report any no pass-on provision.
3. With regard to the disagreement on whether input tax credits should be
limited or not, the Bicameral Conference Committee decided to adopt the
exciseoftaxes
position the House by putting a limitation on the amount of input tax that may
No similar provision Provided for amendments to
be credited against the output tax, although it crafted its own language as to the
several NIRC amount
provisionsof the limitation on input tax credits and the manner of computing the
regarding corporate
same byincome,
providing thus:
percentage, franchise and
excise taxes (A) Creditable Input Tax. – . . .

The disagreements between the provisions in the House bills and the Senate ...
bill were with regard to (1) what rate of VAT is to be imposed; (2) whether only
the VAT imposed on electricity generation, transmission and distribution
Provided, The input tax on goods purchased or imported in a calendar month
companies should not be passed on to consumers, as proposed in the Senate
for use in trade or business for which deduction for depreciation is allowed
bill, or both the VAT imposed on electricity generation, transmission and
under this Code, shall be spread evenly over the month of acquisition and the
distribution companies and the VAT imposed on sale of petroleum products
fifty-nine (59) succeeding months if the aggregate acquisition cost for such
should not be passed on to consumers, as proposed in the House bill; (3) in
goods, excluding the VAT component thereof, exceeds one million Pesos
what manner input tax credits should be limited; (4) and whether the NIRC
(₱1,000,000.00): PROVIDED, however, that if the estimated useful life of the
provisions on corporate income taxes, percentage, franchise and excise taxes
capital good is less than five (5) years, as used for depreciation purposes, then
should be amended.
the input VAT shall be spread over such shorter period: . . .
There being differences and/or disagreements on the foregoing provisions of
(B) Excess Output or Input Tax. – If at the end of any taxable quarter the output
the House and Senate bills, the Bicameral Conference Committee was
tax exceeds the input tax, the excess shall be paid by the VAT-registered
mandated by the rules of both houses of Congress to act on the same by
person. If the input tax exceeds the output tax, the excess shall be carried over
settling said differences and/or disagreements. The Bicameral Conference
to the succeeding quarter or quarters: PROVIDED that the input tax inclusive of
Committee acted on the disagreeing provisions by making the following
input VAT carried over from the previous quarter that may be credited in every
changes:
quarter shall not exceed seventy percent (70%) of the output VAT: PROVIDED,
HOWEVER, THAT any input tax attributable to zero-rated sales by a VAT-
1. With regard to the disagreement on the rate of VAT to be imposed, it would registered person may at his option be refunded or credited against other
appear from the Conference Committee Report that the Bicameral Conference internal revenue taxes, . . .
Committee tried to bridge the gap in the difference between the 10% VAT rate
proposed by the Senate, and the various rates with 12% as the highest VAT
4. With regard to the amendments to other provisions of the NIRC on corporate
rate proposed by the House, by striking a compromise whereby the present
income tax, franchise, percentage and excise taxes, the conference committee
10% VAT rate would be retained until certain conditions arise, i.e., the value-
decided to include such amendments and basically adopted the provisions
added tax collection as a percentage of gross domestic product (GDP) of the
previous year exceeds 2 4/5%, or National Government deficit as a percentage
found in Senate Bill No. 1950, with some changes as to the rate of the tax to be
imposed.
Under the provisions of both the Rules of the House of Representatives and
Senate Rules, the Bicameral Conference Committee is mandated to settle the
differences between the disagreeing provisions in the House bill and the
Senate bill. The term "settle" is synonymous to "reconcile" and
"harmonize."25 To reconcile or harmonize disagreeing provisions, the Bicameral
Conference Committee may then (a) adopt the specific provisions of either the
House bill or Senate bill, (b) decide that neither provisions in the House bill or
the provisions in the Senate bill would
be carried into the final form of the bill, and/or (c) try to arrive at a compromise
between the disagreeing provisions.
In the present case, the changes introduced by the Bicameral Conference
Committee on disagreeing provisions were meant only to reconcile and
harmonize the disagreeing provisions for it did not inject any idea or intent that
is wholly foreign to the subject embraced by the original provisions.
The so-called stand-by authority in favor of the President, whereby the rate of
10% VAT wanted by the Senate is retained until such time that certain
conditions arise when the 12% VAT wanted by the House shall be imposed,
appears to be a compromise to try to bridge the difference in the rate of VAT
proposed by the two houses of Congress. Nevertheless, such compromise is
still totally within the subject of what rate of VAT should be imposed on
taxpayers.
The no pass-on provision was deleted altogether. In the transcripts of the
proceedings of the Bicameral Conference Committee held on May 10, 2005,
Sen. Ralph Recto, Chairman of the Senate Panel, explained the reason for
deleting the no pass-on provision in this wise:
. . . the thinking was just to keep the VAT law or the VAT bill simple. And we
were thinking that no sector should be a beneficiary of legislative grace, neither
should any sector be discriminated on. The VAT is an indirect tax. It is a pass
on-tax. And let’s keep it plain and simple. Let’s not confuse the bill and put a no
pass-on provision. Two-thirds of the world have a VAT system and in this two-
thirds of the globe, I have yet to see a VAT with a no pass-though provision.
So, the thinking of the Senate is basically simple, let’s keep the VAT
simple.26 (Emphasis supplied)
Rep. Teodoro Locsin further made the manifestation that the no pass-
on provision "never really enjoyed the support of either House."27
With regard to the amount of input tax to be credited against output tax, the
Bicameral Conference Committee came to a compromise on the percentage
rate of the limitation or cap on such input tax credit, but again, the change
introduced by the Bicameral Conference Committee was totally within the intent
of both houses to put a cap on input tax that may be
credited against the output tax. From the inception of the subject revenue bill in
the House of Representatives, one of the major objectives was to "plug a
glaring loophole in the tax policy and administration by creating vital restrictions
on the claiming of input VAT tax credits . . ." and "[b]y introducing limitations on
the claiming of tax credit, we are capping a major leakage that has placed our
collection efforts at an apparent disadvantage."28
As to the amendments to NIRC provisions on taxes other than the value-added
tax proposed in Senate Bill No. 1950, since said provisions were among those
referred to it, the conference committee had to act on the same and it basically
adopted the version of the Senate.
Thus, all the changes or modifications made by the Bicameral Conference
Committee were germane to subjects of the provisions referred
to it for reconciliation. Such being the case, the Court does not see any grave
abuse of discretion amounting to lack or excess of jurisdiction committed by the
Bicameral Conference Committee. In the earlier cases of Philippine Judges
Association vs. Prado29 and Tolentino vs. Secretary of Finance,30 the Court
recognized the long-standing legislative practice of giving said conference
committee ample latitude for compromising differences between the Senate
and the House. Thus, in the Tolentino case, it was held that:
. . . it is within the power of a conference committee to include in its report an
entirely new provision that is not found either in the House bill or in the Senate
bill. If the committee can propose an amendment consisting of one or two
provisions, there is no reason why it cannot propose several provisions,
collectively considered as an "amendment in the nature of a substitute," so long
as such amendment is germane to the subject of the bills before the committee.
After all, its report was not final but needed the approval of both houses of
Congress to become valid as an act of the legislative department. The charge
that in this case the Conference Committee acted as a third legislative
chamber is thus without any basis.31 (Emphasis supplied)
B. R.A. No. 9337 Does Not Violate Article VI, Section 26(2) of the Constitution
on the "No-Amendment Rule"
Article VI, Sec. 26 (2) of the Constitution, states:
No bill passed by either House shall become a law unless it has passed three
readings on separate days, and printed copies thereof in its final form have
been distributed to its Members three days before its passage, except when the
President certifies to the necessity of its immediate enactment to meet a public
calamity or emergency. Upon the last reading of a bill, no amendment thereto
shall be allowed, and the vote thereon shall be taken immediately thereafter,
and the yeas and nays entered in the Journal.
Petitioners’ argument that the practice where a bicameral conference
committee is allowed to add or delete provisions in the House bill and the
Senate bill after these had passed three readings is in effect a circumvention of
the "no amendment rule" (Sec. 26 (2), Art. VI of the 1987 Constitution), fails to
convince the Court to deviate from its ruling in the Tolentino case that:
Nor is there any reason for requiring that the Committee’s Report in these
cases must have undergone three readings in each of the two houses. If that
be the case, there would be no end to negotiation since each house may seek
modification of the compromise bill. . . .
Art. VI. § 26 (2) must, therefore, be construed as referring only to bills
introduced for the first time in either house of Congress, not to the
conference committee report.32 (Emphasis supplied)
The Court reiterates here that the "no-amendment rule" refers only to the
procedure to be followed by each house of Congress with regard to bills
initiated in each of said respective houses, before said bill is transmitted
to the other house for its concurrence or amendment. Verily, to construe
said provision in a way as to proscribe any further changes to a bill after one
house has voted on it would lead to absurdity as this would mean that the other
house of Congress would be deprived of its constitutional power to amend or
introduce changes to said bill. Thus, Art. VI, Sec. 26 (2) of the Constitution
cannot be taken to mean that the introduction by the Bicameral Conference
Committee of amendments and modifications to disagreeing provisions in bills
that have been acted upon by both houses of Congress is prohibited.
C. R.A. No. 9337 Does Not Violate Article VI, Section 24 of the Constitution on
Exclusive Origination of Revenue Bills
Coming to the issue of the validity of the amendments made regarding the
NIRC provisions on corporate income taxes and percentage, excise taxes.
Petitioners refer to the following provisions, to wit:
Section 27 Rates of Income Tax on Domestic Corporation
28(A)(1) Tax on Resident Foreign Corporation
28(B)(1) Inter-corporate Dividends
34(B)(1) Inter-corporate Dividends
116 Tax on Persons Exempt from VAT
117 Percentage Tax on domestic carriers and keepers of Garage
119 Tax on franchises
121 Tax on banks and Non-Bank Financial Intermediaries
148 Excise Tax on manufactured oils and other fuels
151 Excise Tax on mineral products
236 Registration requirements
237 Issuance of receipts or sales or commercial invoices
288 Disposition of Incremental Revenue
Petitioners claim that the amendments to these provisions of the NIRC did not
at all originate from the House. They aver that House Bill No. 3555 proposed
amendments only regarding Sections 106, 107, 108, 110 and 114 of the NIRC,
while House Bill No. 3705 proposed amendments only to Sections 106,
107,108, 109, 110 and 111 of the NIRC; thus, the other sections of the NIRC
which the Senate amended but which amendments were not found in the
House bills are not intended to be amended by the House of Representatives.
Hence, they argue that since the proposed amendments did not originate from
the House, such amendments are a violation of Article VI, Section 24 of the
Constitution.
The argument does not hold water.
Article VI, Section 24 of the Constitution reads:
Sec. 24. All appropriation, revenue or tariff bills, bills authorizing increase of the
public debt, bills of local application, and private bills shall originate exclusively
in the House of Representatives but the Senate may propose or concur with
amendments.
In the present cases, petitioners admit that it was indeed House Bill Nos. 3555
and 3705 that initiated the move for amending provisions of the NIRC dealing
mainly with the value-added tax. Upon transmittal of said House bills to the
Senate, the Senate came out with Senate Bill No. 1950 proposing amendments
not only to NIRC provisions on the value-added tax but also amendments to
NIRC provisions on other kinds of taxes. Is the introduction by the Senate of
provisions not dealing directly with the value- added tax, which is the only kind
of tax being amended in the House bills, still within the purview of the
constitutional provision authorizing the Senate to propose or concur with
amendments to a revenue bill that originated from the House?
The foregoing question had been squarely answered in the Tolentino case,
wherein the Court held, thus:
. . . To begin with, it is not the law – but the revenue bill – which is required by
the Constitution to "originate exclusively" in the House of Representatives. It is
important to emphasize this, because a bill originating in the House may
undergo such extensive changes in the Senate that the result may be a
rewriting of the whole. . . . At this point, what is important to note is that, as a
result of the Senate action, a distinct bill may be produced. To insist that a
revenue statute – and not only the bill which initiated the legislative
process culminating in the enactment of the law – must substantially be
the same as the House bill would be to deny the Senate’s power not only
to "concur with amendments" but also to "propose amendments." It would
be to violate the coequality of legislative power of the two houses of Congress
and in fact make the House superior to the Senate.
… declared that:
…Given, then, the power of the Senate to propose amendments, the
Senate can propose its own version even with respect to bills which are
required by the Constitution to originate in the House.
...
Indeed, what the Constitution simply means is that the initiative for filing
revenue, tariff or tax bills, bills authorizing an increase of the public debt, private
bills and bills of local application must come from the House of Representatives
on the theory that, elected as they are from the districts, the members of the
House can be expected to be more sensitive to the local needs and
problems. On the other hand, the senators, who are elected at large, are
expected to approach the same problems from the national perspective.
Both views are thereby made to bear on the enactment of such
laws.33 (Emphasis supplied)
Since there is no question that the revenue bill exclusively originated in the
House of Representatives, the Senate was acting within its
constitutional power to introduce amendments to the House bill when it
included provisions in Senate Bill No. 1950 amending corporate income taxes,
percentage, excise and franchise taxes. Verily, Article VI, Section 24 of the
Constitution does not contain any prohibition or limitation on the extent of the
amendments that may be introduced by the Senate to the House revenue bill.
Furthermore, the amendments introduced by the Senate to the NIRC provisions
that had not been touched in the House bills are still in furtherance of the intent
of the House in initiating the subject revenue bills. The Explanatory Note of
House Bill No. 1468, the very first House bill introduced on the floor, which was
later substituted by House Bill No. 3555, stated:
One of the challenges faced by the present administration is the urgent and
daunting task of solving the country’s serious financial problems. To do this,
government expenditures must be strictly monitored and controlled and
revenues must be significantly increased. This may be easier said than done,
but our fiscal authorities are still optimistic the government will be operating on
a balanced budget by the year 2009. In fact, several measures that will result to
significant expenditure savings have been identified by the administration. It is
supported with a credible package of revenue measures that include
measures to improve tax administration and control the leakages in
revenues from income taxes and the value-added tax (VAT). (Emphasis
supplied)
Rep. Eric D. Singson, in his sponsorship speech for House Bill No. 3555,
In the budget message of our President in the year 2005, she reiterated that we
all acknowledged that on top of our agenda must be the restoration of the
health of our fiscal system.
In order to considerably lower the consolidated public sector deficit and
eventually achieve a balanced budget by the year 2009, we need to seize
windows of opportunities which might seem poignant in the beginning,
but in the long run prove effective and beneficial to the overall status of
our economy. One such opportunity is a review of existing tax rates,
evaluating the relevance given our present conditions.34 (Emphasis
supplied)
Notably therefore, the main purpose of the bills emanating from the House of
Representatives is to bring in sizeable revenues for the government
to supplement our country’s serious financial problems, and improve tax
administration and control of the leakages in revenues from income taxes and
value-added taxes. As these house bills were transmitted to the Senate, the
latter, approaching the measures from the point of national perspective, can
introduce amendments within the purposes of those bills. It can provide for
ways that would soften the impact of the VAT measure on the consumer, i.e.,
by distributing the burden across all sectors instead of putting it entirely on the
shoulders of the consumers. The sponsorship speech of Sen. Ralph Recto on
why the provisions on income tax on corporation were included is worth
quoting:
All in all, the proposal of the Senate Committee on Ways and Means will raise
₱64.3 billion in additional revenues annually even while by mitigating prices of
power, services and petroleum products.
However, not all of this will be wrung out of VAT. In fact, only ₱48.7 billion
amount is from the VAT on twelve goods and services. The rest of the tab –
₱10.5 billion- will be picked by corporations.
What we therefore prescribe is a burden sharing between corporate Philippines
and the consumer. Why should the latter bear all the pain? Why should the
fiscal salvation be only on the burden of the consumer?
The corporate world’s equity is in form of the increase in the corporate income
tax from 32 to 35 percent, but up to 2008 only. This will raise ₱10.5 billion a
year. After that, the rate will slide back, not to its old rate of 32 percent, but two
notches lower, to 30 percent.
Clearly, we are telling those with the capacity to pay, corporations, to bear with
this emergency provision that will be in effect for 1,200 days, while we put our
fiscal house in order. This fiscal medicine will have an expiry date.
For their assistance, a reward of tax reduction awaits them. We intend to keep
the length of their sacrifice brief. We would like to assure them that not because
there is a light at the end of the tunnel, this government will keep on making the
tunnel long.
The responsibility will not rest solely on the weary shoulders of the small man.
Big business will be there to share the burden.35
As the Court has said, the Senate can propose amendments and in fact, the
amendments made on provisions in the tax on income of corporations are
germane to the purpose of the house bills which is to raise revenues for the
government.
Likewise, the Court finds the sections referring to other percentage and excise
taxes germane to the reforms to the VAT system, as these sections would
cushion the effects of VAT on consumers. Considering that certain goods and
services which were subject to percentage tax and excise tax would no longer
be VAT-exempt, the consumer would be burdened more as they would be
paying the VAT in addition to these taxes. Thus, there is a need to amend
these sections to soften the impact of VAT. Again, in his sponsorship speech,
Sen. Recto said:
However, for power plants that run on oil, we will reduce to zero the present
excise tax on bunker fuel, to lessen the effect of a VAT on this product.
For electric utilities like Meralco, we will wipe out the franchise tax in exchange
for a VAT.
And in the case of petroleum, while we will levy the VAT on oil products, so as
not to destroy the VAT chain, we will however bring down the excise tax on
socially sensitive products such as diesel, bunker, fuel and kerosene.
...
What do all these exercises point to? These are not contortions of giving to the
left hand what was taken from the right. Rather, these sprang from our concern
of softening the impact of VAT, so that the people can cushion the blow of
higher prices they will have to pay as a result of VAT.36
The other sections amended by the Senate pertained to matters of tax
administration which are necessary for the implementation of the changes in
the VAT system.
To reiterate, the sections introduced by the Senate are germane to the subject
matter and purposes of the house bills, which is to supplement our country’s
fiscal deficit, among others. Thus, the Senate acted within its power to propose
those amendments.
SUBSTANTIVE ISSUES
I.
Whether Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107
and 108 of the NIRC, violate the following provisions of the Constitution:
a. Article VI, Section 28(1), and
b. Article VI, Section 28(2)
A. No Undue Delegation of Legislative Power
Petitioners ABAKADA GURO Party List, et al., Pimentel, Jr., et al., and
Escudero, et al. contend in common that Sections 4, 5 and 6 of R.A. No. 9337,
amending Sections 106, 107 and 108, respectively, of the NIRC giving the
President the stand-by authority to raise the VAT rate from 10% to 12% when a
certain condition is met, constitutes undue delegation of the legislative power to
tax.
The assailed provisions read as follows:
SEC. 4. Sec. 106 of the same Code, as amended, is hereby further amended to
read as follows:
SEC. 106. Value-Added Tax on Sale of Goods or Properties. –
(A) Rate and Base of Tax. – There shall be levied, assessed and collected on
every sale, barter or exchange of goods or properties, a value-added tax
equivalent to ten percent (10%) of the gross selling price or gross value in
money of the goods or properties sold, bartered or exchanged, such tax to be
paid by the seller or transferor: provided, that the President, upon the
recommendation of the Secretary of Finance, shall, effective January 1,
2006, raise the rate of value-added tax to twelve percent (12%), after any
of the following conditions has been satisfied.
(i) value-added tax collection as a percentage of Gross Domestic Product
(GDP) of the previous year exceeds two and four-fifth percent (2 4/5%) or
(ii) national government deficit as a percentage of GDP of the previous
year exceeds one and one-half percent (1 ½%).
SEC. 5. Section 107 of the same Code, as amended, is hereby further
amended to read as follows:
SEC. 107. Value-Added Tax on Importation of Goods. –
(A) In General. – There shall be levied, assessed and collected on every
importation of goods a value-added tax equivalent to ten percent (10%) based
on the total value used by the Bureau of Customs in determining tariff and
customs duties, plus customs duties, excise taxes, if any, and other charges,
such tax to be paid by the importer prior to the release of such goods from
customs custody: Provided, That where the customs duties are determined on
the basis of the quantity or volume of the goods, the value-added tax shall be
based on the landed cost plus excise taxes, if any: provided, further, that the
President, upon the recommendation of the Secretary of Finance, shall,
effective January 1, 2006, raise the rate of value-added tax to twelve
percent (12%) after any of the following conditions has been satisfied.
(i) value-added tax collection as a percentage of Gross Domestic Product
(GDP) of the previous year exceeds two and four-fifth percent (2 4/5%) or
(ii) national government deficit as a percentage of GDP of the previous
year exceeds one and one-half percent (1 ½%).
SEC. 6. Section 108 of the same Code, as amended, is hereby further
amended to read as follows:
SEC. 108. Value-added Tax on Sale of Services and Use or Lease of
Properties –
(A) Rate and Base of Tax. – There shall be levied, assessed and collected, a
value-added tax equivalent to ten percent (10%) of gross receipts derived from
the sale or exchange of services: provided, that the President, upon the
recommendation of the Secretary of Finance, shall, effective January 1,
2006, raise the rate of value-added tax to twelve percent (12%), after any
of the following conditions has been satisfied.
(i) value-added tax collection as a percentage of Gross Domestic Product
(GDP) of the previous year exceeds two and four-fifth percent (2 4/5%) or
(ii) national government deficit as a percentage of GDP of the previous
year exceeds one and one-half percent (1 ½%). (Emphasis supplied)
Petitioners allege that the grant of the stand-by authority to the President to
increase the VAT rate is a virtual abdication by Congress of its exclusive power
to tax because such delegation is not within the purview of Section 28 (2),
Article VI of the Constitution, which provides:
The Congress may, by law, authorize the President to fix within specified limits,
and 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.
They argue that the VAT is a tax levied on the sale, barter or exchange of
goods and properties as well as on the sale or exchange of services, which
cannot be included within the purview of tariffs under the exempted delegation
as the latter refers to customs duties, tolls or tribute payable upon merchandise
to the government and usually imposed on goods or merchandise imported or
exported.
Petitioners ABAKADA GURO Party List, et al., further contend that delegating
to the President the legislative power to tax is contrary to republicanism. They
insist that accountability, responsibility and transparency should dictate the
actions of Congress and they should not pass to the President the decision to
impose taxes. They also argue that the law also effectively nullified the
President’s power of control, which includes the authority to set aside and
nullify the acts of her subordinates like the Secretary of Finance, by mandating
the fixing of the tax rate by the President upon the recommendation of the
Secretary of Finance.
Petitioners Pimentel, et al. aver that the President has ample powers to cause,
influence or create the conditions provided by the law to bring about either or
both the conditions precedent.
On the other hand, petitioners Escudero, et al. find bizarre and revolting the
situation that the imposition of the 12% rate would be subject to the whim of the
Secretary of Finance, an unelected bureaucrat, contrary to the principle of no
taxation without representation. They submit that the Secretary of Finance is
not mandated to give a favorable recommendation and he may not even give
his recommendation. Moreover, they allege that no guiding standards are
provided in the law on what basis and as to how he will make his
recommendation. They claim, nonetheless, that any recommendation of the
Secretary of Finance can easily be brushed aside by the President since the
former is a mere alter ego of the latter, such that, ultimately, it is the President
who decides whether to impose the increased tax rate or not.
A brief discourse on the principle of non-delegation of powers is instructive.
The principle of separation of powers ordains that each of the three great
branches of government has exclusive cognizance of and is supreme in
matters falling within its own constitutionally allocated sphere. 37 A logical
corollary to the doctrine of separation of powers is the principle of non-
delegation of powers, as expressed in the Latin maxim: potestas delegata non
delegari potest which means "what has been delegated, cannot be
delegated."38 This doctrine is based on the ethical principle that such as
delegated power constitutes not only a right but a duty to be performed by the
delegate through the instrumentality of his own judgment and not through the
intervening mind of another.39
With respect to the Legislature, Section 1 of Article VI of the Constitution
provides that "the Legislative power shall be vested in the Congress of the
Philippines which shall consist of a Senate and a House of Representatives."
The powers which Congress is prohibited from delegating are those which are
strictly, or inherently and exclusively, legislative. Purely legislative power, which
can never be delegated, has been described as the authority to make a
complete law – complete as to the time when it shall take effect and as to
whom it shall be applicable – and to determine the expediency of its
enactment.40 Thus, the rule is that in order that a court may be justified in
holding a statute unconstitutional as a delegation of legislative power, it must
appear that the power involved is purely legislative in nature – that is, one
appertaining exclusively to the legislative department. It is the nature of the
power, and not the liability of its use or the manner of its exercise, which
determines the validity of its delegation.
Nonetheless, the general rule barring delegation of legislative powers is subject
to the following recognized limitations or exceptions:
(1) Delegation of tariff powers to the President under Section 28 (2) of Article VI
of the Constitution;
(2) Delegation of emergency powers to the President under Section 23 (2) of
Article VI of the Constitution;
(3) Delegation to the people at large;
(4) Delegation to local governments; and
(5) Delegation to administrative bodies.
In every case of permissible delegation, there must be a showing that the
delegation itself is valid. It is valid only if the law (a) is complete in itself, setting
forth therein the policy to be executed, carried out, or implemented by the
delegate;41 and (b) fixes a standard — the limits of which are sufficiently
determinate and determinable — to which the delegate must conform in the
performance of his functions.42 A sufficient standard is one which defines
legislative policy, marks its limits, maps out its boundaries and specifies the
public agency to apply it. It indicates the circumstances under which the
legislative command is to be effected.43 Both tests are intended to prevent a
total transference of legislative authority to the delegate, who is not allowed to
step into the shoes of the legislature and exercise a power essentially
legislative.44
In People vs. Vera,45 the Court, through eminent Justice Jose P. Laurel,
expounded on the concept and extent of delegation of power in this wise:
In testing whether a statute constitutes an undue delegation of legislative power
or not, it is usual to inquire whether the statute was complete in all its terms and
provisions when it left the hands of the legislature so that nothing was left to the
judgment of any other appointee or delegate of the legislature.
...
‘The true distinction’, says Judge Ranney, ‘is between the delegation of
power to make the law, which necessarily involves a discretion as to what
it shall be, and conferring an authority or discretion as to its execution, to
be exercised under and in pursuance of the law. The first cannot be done;
to the latter no valid objection can be made.’
...
It is contended, however, that a legislative act may be made to the effect as law
after it leaves the hands of the legislature. It is true that laws may be made
effective on certain contingencies, as by proclamation of the executive or the
adoption by the people of a particular community. In Wayman vs. Southard, the
Supreme Court of the United States ruled that the legislature may delegate a
power not legislative which it may itself rightfully exercise. The power to
ascertain facts is such a power which may be delegated. There is nothing
essentially legislative in ascertaining the existence of facts or conditions
as the basis of the taking into effect of a law. That is a mental process
common to all branches of the government. Notwithstanding the apparent
tendency, however, to relax the rule prohibiting delegation of legislative
authority on account of the complexity arising from social and economic forces
at work in this modern industrial age, the orthodox pronouncement of Judge
Cooley in his work on Constitutional Limitations finds restatement in Prof.
Willoughby's treatise on the Constitution of the United States in the following
language — speaking of declaration of legislative power to administrative
agencies: The principle which permits the legislature to provide that the
administrative agent may determine when the circumstances are such as
require the application of a law is defended upon the ground that at the
time this authority is granted, the rule of public policy, which is the
essence of the legislative act, is determined by the legislature. In other
words, the legislature, as it is its duty to do, determines that, under given
circumstances, certain executive or administrative action is to be taken,
and that, under other circumstances, different or no action at all is to be
taken. What is thus left to the administrative official is not the legislative
determination of what public policy demands, but simply the
ascertainment of what the facts of the case require to be done according
to the terms of the law by which he is governed. The efficiency of an Act
as a declaration of legislative will must, of course, come from Congress,
but the ascertainment of the contingency upon which the Act shall take
effect may be left to such agencies as it may designate. The legislature,
then, may provide that a law shall take effect upon the happening of
future specified contingencies leaving to some other person or body the
power to determine when the specified contingency has arisen. (Emphasis
supplied).46
In Edu vs. Ericta,47 the Court reiterated:
What cannot be delegated is the authority under the Constitution to make laws
and to alter and repeal them; the test is the completeness of the statute in all its
terms and provisions when it leaves the hands of the legislature. To determine
whether or not there is an undue delegation of legislative power, the inquiry
must be directed to the scope and definiteness of the measure enacted. The
legislative does not abdicate its functions when it describes what job
must be done, who is to do it, and what is the scope of his authority. For a
complex economy, that may be the only way in which the legislative process
can go forward. A distinction has rightfully been made between delegation
of power to make the laws which necessarily involves a discretion as to
what it shall be, which constitutionally may not be done, and delegation
of authority or discretion as to its execution to be exercised under and in
pursuance of the law, to which no valid objection can be made. The
Constitution is thus not to be regarded as denying the legislature the necessary
resources of flexibility and practicability. (Emphasis supplied). 48
Clearly, the legislature may delegate to executive officers or bodies the power
to determine certain facts or conditions, or the happening of contingencies, on
which the operation of a statute is, by its terms, made to depend, but the
legislature must prescribe sufficient standards, policies or limitations on their
authority.49 While the power to tax cannot be delegated to executive agencies,
details as to the enforcement and administration of an exercise of such power
may be left to them, including the power to determine the existence of facts on
which its operation depends.50
The rationale for this is that the preliminary ascertainment of facts as basis for
the enactment of legislation is not of itself a legislative function, but is simply
ancillary to legislation. Thus, the duty of correlating information and making
recommendations is the kind of subsidiary activity which the legislature may
perform through its members, or which it may delegate to others to perform.
Intelligent legislation on the complicated problems of modern society is
impossible in the absence of accurate information on the part of the legislators,
and any reasonable method of securing such information is proper.51 The
Constitution as a continuously operative charter of government does not require
that Congress find for itself
every fact upon which it desires to base legislative action or that it make for
itself detailed determinations which it has declared to be prerequisite to
application of legislative policy to particular facts and circumstances impossible
for Congress itself properly to investigate.52
In the present case, the challenged section of R.A. No. 9337 is the
common proviso in Sections 4, 5 and 6 which reads as follows:
That the President, upon the recommendation of the Secretary of Finance,
shall, effective January 1, 2006, raise the rate of value-added tax to twelve
percent (12%), after any of the following conditions has been satisfied:
(i) Value-added tax collection as a percentage of Gross Domestic Product
(GDP) of the previous year exceeds two and four-fifth percent (2 4/5%); or
(ii) National government deficit as a percentage of GDP of the previous year
exceeds one and one-half percent (1 ½%).
The case before the Court is not a delegation of legislative power. It is simply a
delegation of ascertainment of facts upon which enforcement and
administration of the increase rate under the law is contingent. The legislature
has made the operation of the 12% rate effective January 1, 2006, contingent
upon a specified fact or condition. It leaves the entire operation or non-
operation of the 12% rate upon factual matters outside of the control of the
executive.
No discretion would be exercised by the President. Highlighting the absence of
discretion is the fact that the word shall is used in the common proviso. The use
of the word shall connotes a mandatory order. Its use in a statute denotes an
imperative obligation and is inconsistent with the idea of discretion. 53 Where the
law is clear and unambiguous, it must be taken to mean exactly what it says,
and courts have no choice but to see to it that the mandate is obeyed.54
Thus, it is the ministerial duty of the President to immediately impose the 12%
rate upon the existence of any of the conditions specified by Congress. This is
a duty which cannot be evaded by the President. Inasmuch as the law
specifically uses the word shall, the exercise of discretion by the President does
not come into play. It is a clear directive to impose the 12% VAT rate when the
specified conditions are present. The time of taking into effect of the 12% VAT
rate is based on the happening of a certain specified contingency, or upon the
ascertainment of certain facts or conditions by a person or body other than the
legislature itself.
The Court finds no merit to the contention of petitioners ABAKADA
GURO Party List, et al. that the law effectively nullified the President’s power of
control over the Secretary of Finance by mandating the fixing of the tax rate by
the President upon the recommendation of the Secretary of Finance. The Court
cannot also subscribe to the position of petitioners
Pimentel, et al. that the word shall should be interpreted to mean may in view of
the phrase "upon the recommendation of the Secretary of Finance." Neither
does the Court find persuasive the submission of petitioners Escudero, et
al. that any recommendation by the Secretary of Finance can easily be brushed
aside by the President since the former is a mere alter ego of the latter.
When one speaks of the Secretary of Finance as the alter ego of the President,
it simply means that as head of the Department of Finance he is the assistant
and agent of the Chief Executive. The multifarious executive and administrative
functions of the Chief Executive are performed by and through the executive
departments, and the acts of the secretaries of such departments, such as the
Department of Finance, performed and promulgated in the regular course of
business, are, unless disapproved or reprobated by the Chief Executive,
presumptively the acts of the Chief Executive. The Secretary of Finance, as
such, occupies a political position and holds office in an advisory capacity, and,
in the language of Thomas Jefferson, "should be of the President's bosom
confidence" and, in the language of Attorney-General Cushing, is "subject to
the direction of the President."55
In the present case, in making his recommendation to the President on the
existence of either of the two conditions, the Secretary of Finance is not acting
as the alter ego of the President or even her subordinate. In such instance, he
is not subject to the power of control and direction of the President. He is acting
as the agent of the legislative department, to determine and declare the event
upon which its expressed will is to take effect.56 The Secretary of Finance
becomes the means or tool by which legislative policy is determined and
implemented, considering that he possesses all the facilities to gather data and
information and has a much broader perspective to properly evaluate them. His
function is to gather and collate statistical data and other pertinent information
and verify if any of the two conditions laid out by Congress is present. His
personality in such instance is in reality but a projection of that of Congress.
Thus, being the agent of Congress and not of the President, the President
cannot alter or modify or nullify, or set aside the findings of the Secretary of
Finance and to substitute the judgment of the former for that of the latter.
Congress simply granted the Secretary of Finance the authority to ascertain the
existence of a fact, namely, whether by December 31, 2005, the value-added
tax collection as a percentage of Gross Domestic Product (GDP) of the
previous year exceeds two and four-fifth percent (24/5%) or the national
government deficit as a percentage of GDP of the previous year exceeds one
and one-half percent (1½%). If either of these two instances has occurred, the
Secretary of Finance, by legislative mandate, must submit such information to
the President. Then the 12% VAT rate must be imposed by the President
effective January 1, 2006. There is no undue delegation of legislative power
but only of the discretion as to the execution of a law. This is
constitutionally permissible.57 Congress does not abdicate its functions or
unduly delegate power when it describes what job must be done, who must do
it, and what is the scope of his authority; in our complex economy that is
frequently the only way in which the legislative process can go forward.58
As to the argument of petitioners ABAKADA GURO Party List, et al. that
delegating to the President the legislative power to tax is contrary to the
principle of republicanism, the same deserves scant consideration. Congress
did not delegate the power to tax but the mere implementation of the law. The
intent and will to increase the VAT rate to 12% came from Congress and the
task of the President is to simply execute the legislative policy. That Congress
chose to do so in such a manner is not within the province of the Court to
inquire into, its task being to interpret the law.59
The insinuation by petitioners Pimentel, et al. that the President has ample
powers to cause, influence or create the conditions to bring about either or both
the conditions precedent does not deserve any merit as this argument is highly
speculative. The Court does not rule on allegations which are manifestly
conjectural, as these may not exist at all. The Court deals with facts, not
fancies; on realities, not appearances. When the Court acts on appearances
instead of realities, justice and law will be short-lived.
B. The 12% Increase VAT Rate Does Not Impose an Unfair and Unnecessary
Additional Tax Burden
Petitioners Pimentel, et al. argue that the 12% increase in the VAT rate
imposes an unfair and additional tax burden on the people. Petitioners also
argue that the 12% increase, dependent on any of the 2 conditions set forth in
the contested provisions, is ambiguous because it does not state if the VAT
rate would be returned to the original 10% if the rates are no longer satisfied.
Petitioners also argue that such rate is unfair and unreasonable, as the people
are unsure of the applicable VAT rate from year to year.
Under the common provisos of Sections 4, 5 and 6 of R.A. No. 9337, if any of
the two conditions set forth therein are satisfied, the President shall increase
the VAT rate to 12%. The provisions of the law are clear. It does not provide for
a return to the 10% rate nor does it empower the President to so revert if, after
the rate is increased to 12%, the VAT collection goes below the 24/5 of the GDP
of the previous year or that the national government deficit as a percentage of
GDP of the previous year does not exceed 1½%.
Therefore, no statutory construction or interpretation is needed. Neither can
conditions or limitations be introduced where none is provided for. Rewriting the
law is a forbidden ground that only Congress may tread upon.60
Thus, in the absence of any provision providing for a return to the 10% rate,
which in this case the Court finds none, petitioners’ argument is, at best, purely
speculative. There is no basis for petitioners’ fear of a fluctuating VAT rate
because the law itself does not provide that the rate should go back to 10% if
the conditions provided in Sections 4, 5 and 6 are no longer present. The rule is
that where the provision of the law is clear and unambiguous, so that there is
no occasion for the court's seeking the legislative intent, the law must be taken
as it is, devoid of judicial addition or subtraction. 61
Petitioners also contend that the increase in the VAT rate, which was allegedly
an incentive to the President to raise the VAT collection to at least 2 4/5 of the
GDP of the previous year, should be based on fiscal adequacy.
Petitioners obviously overlooked that increase in VAT collection is not
the only condition. There is another condition, i.e., the national government
deficit as a percentage of GDP of the previous year exceeds one and one-half
percent (1 ½%).
Respondents explained the philosophy behind these alternative conditions:
1. VAT/GDP Ratio > 2.8%
The condition set for increasing VAT rate to 12% have economic or fiscal
meaning. If VAT/GDP is less than 2.8%, it means that government has weak or
no capability of implementing the VAT or that VAT is not effective in the
function of the tax collection. Therefore, there is no value to increase it to 12%
because such action will also be ineffectual.
2. Nat’l Gov’t Deficit/GDP >1.5%
The condition set for increasing VAT when deficit/GDP is 1.5% or less means
the fiscal condition of government has reached a relatively sound position or is
towards the direction of a balanced budget position. Therefore, there is no need
to increase the VAT rate since the fiscal house is in a relatively healthy position.
Otherwise stated, if the ratio is more than 1.5%, there is indeed a need to
increase the VAT rate.62
That the first condition amounts to an incentive to the President to increase the
VAT collection does not render it unconstitutional so long as there is a public
purpose for which the law was passed, which in this case, is mainly to raise
revenue. In fact, fiscal adequacy dictated the need for a raise in revenue.
The principle of fiscal adequacy as a characteristic of a sound tax system was
originally stated by Adam Smith in his Canons of Taxation (1776), as:
IV. Every tax ought to be so contrived as both to take out and to keep out of the
pockets of the people as little as possible over and above what it brings into the
public treasury of the state.63
It simply means that sources of revenues must be adequate to meet
government expenditures and their variations.64
The dire need for revenue cannot be ignored. Our country is in a quagmire of
financial woe. During the Bicameral Conference Committee hearing, then
Finance Secretary Purisima bluntly depicted the country’s gloomy state of
economic affairs, thus:
First, let me explain the position that the Philippines finds itself in right now. We
are in a position where 90 percent of our revenue is used for debt service. So,
for every peso of revenue that we currently raise, 90 goes to debt service.
That’s interest plus amortization of our debt. So clearly, this is not a sustainable
situation. That’s the first fact.
The second fact is that our debt to GDP level is way out of line compared to
other peer countries that borrow money from that international financial
markets. Our debt to GDP is approximately equal to our GDP. Again, that
shows you that this is not a sustainable situation.
The third thing that I’d like to point out is the environment that we are presently
operating in is not as benign as what it used to be the past five years.
What do I mean by that?
In the past five years, we’ve been lucky because we were operating in a period
of basically global growth and low interest rates. The past few months, we have
seen an inching up, in fact, a rapid increase in the interest rates in the leading
economies of the world. And, therefore, our ability to borrow at reasonable
prices is going to be challenged. In fact, ultimately, the question is our ability to
access the financial markets.
When the President made her speech in July last year, the environment was
not as bad as it is now, at least based on the forecast of most financial
institutions. So, we were assuming that raising 80 billion would put us in a
position where we can then convince them to improve our ability to borrow at
lower rates. But conditions have changed on us because the interest rates have
gone up. In fact, just within this room, we tried to access the market for a billion
dollars because for this year alone, the Philippines will have to borrow 4 billion
dollars. Of that amount, we have borrowed 1.5 billion. We issued last January a
25-year bond at 9.7 percent cost. We were trying to access last week and the
market was not as favorable and up to now we have not accessed and we
might pull back because the conditions are not very good.
So given this situation, we at the Department of Finance believe that we really
need to front-end our deficit reduction. Because it is deficit that is causing the
increase of the debt and we are in what we call a debt spiral. The more debt
you have, the more deficit you have because interest and debt service eats and
eats more of your revenue. We need to get out of this debt spiral. And the only
way, I think, we can get out of this debt spiral is really have a front-end
adjustment in our revenue base.65
The image portrayed is chilling. Congress passed the law hoping for rescue
from an inevitable catastrophe. Whether the law is indeed sufficient to answer
the state’s economic dilemma is not for the Court to judge. In the Fariñas case,
the Court refused to consider the various arguments raised therein that dwelt
on the wisdom of Section 14 of R.A. No. 9006 (The Fair Election Act),
pronouncing that:
. . . policy matters are not the concern of the Court. Government policy is within
the exclusive dominion of the political branches of the government. It is not for
this Court to look into the wisdom or propriety of legislative determination.
Indeed, whether an enactment is wise or unwise, whether it is based on sound
economic theory, whether it is the best means to achieve the desired results,
whether, in short, the legislative discretion within its prescribed limits should be
exercised in a particular manner are matters for the judgment of the legislature,
and the serious conflict of opinions does not suffice to bring them within the
range of judicial cognizance.66
In the same vein, the Court in this case will not dawdle on the purpose of
Congress or the executive policy, given that it is not for the judiciary to "pass
upon questions of wisdom, justice or expediency of legislation."67
II.
Whether Section 8 of R.A. No. 9337, amending Sections 110(A)(2) and 110(B)
of the NIRC; and Section 12 of R.A. No. 9337, amending Section 114(C) of the
NIRC, violate the following provisions of the Constitution:
a. Article VI, Section 28(1), and
b. Article III, Section 1
A. Due Process and Equal Protection Clauses
Petitioners Association of Pilipinas Shell Dealers, Inc., et al. argue that Section
8 of R.A. No. 9337, amending Sections 110 (A)(2), 110 (B), and Section 12 of
R.A. No. 9337, amending Section 114 (C) of the NIRC are arbitrary,
oppressive, excessive and confiscatory. Their argument is premised on the
constitutional right against deprivation of life, liberty of property without due
process of law, as embodied in Article III, Section 1 of the Constitution.
Petitioners also contend that these provisions violate the constitutional
guarantee of equal protection of the law.
The doctrine is that where the due process and equal protection clauses are
invoked, considering that they are not fixed rules but rather broad standards,
there is a need for proof of such persuasive character as would lead to such a
conclusion. Absent such a showing, the presumption of validity must prevail.68
Section 8 of R.A. No. 9337, amending Section 110(B) of the NIRC imposes a
limitation on the amount of input tax that may be credited against the output tax.
It states, in part: "[P]rovided, that the input tax inclusive of the input VAT carried
over from the previous quarter that may be credited in every quarter shall not
exceed seventy percent (70%) of the output VAT: …"
Input Tax is defined under Section 110(A) of the NIRC, as amended, as the
value-added tax due from or paid by a VAT-registered person on the
importation of goods or local purchase of good and services, including lease or
use of property, in the course of trade or business, from a VAT-registered
person, and Output Tax is the value-added tax due on the sale or lease of
taxable goods or properties or services by any person registered or required to
register under the law.
Petitioners claim that the contested sections impose limitations on the amount
of input tax that may be claimed. In effect, a portion of the input tax that has
already been paid cannot now be credited against the output tax.
Petitioners’ argument is not absolute. It assumes that the input tax exceeds
70% of the output tax, and therefore, the input tax in excess of 70% remains
uncredited. However, to the extent that the input tax is less than 70% of the
output tax, then 100% of such input tax is still creditable.
More importantly, the excess input tax, if any, is retained in a business’s books
of accounts and remains creditable in the succeeding quarter/s. This is
explicitly allowed by Section 110(B), which provides that "if the input tax
exceeds the output tax, the excess shall be carried over to the succeeding
quarter or quarters." In addition, Section 112(B) allows a VAT-registered person
to apply for the issuance of a tax credit certificate or refund for any unused
input taxes, to the extent that such input taxes have not been applied against
the output taxes. Such unused input tax may be used in payment of his other
internal revenue taxes.
The non-application of the unutilized input tax in a given quarter is not ad
infinitum, as petitioners exaggeratedly contend. Their analysis of the effect of
the 70% limitation is incomplete and one-sided. It ends at the net effect that
there will be unapplied/unutilized inputs VAT for a given quarter. It does not
proceed further to the fact that such unapplied/unutilized input tax may be
credited in the subsequent periods as allowed by the carry-over provision of
Section 110(B) or that it may later on be refunded through a tax credit
certificate under Section 112(B).
Therefore, petitioners’ argument must be rejected.
On the other hand, it appears that petitioner Garcia failed to comprehend the
operation of the 70% limitation on the input tax. According to petitioner, the
limitation on the creditable input tax in effect allows VAT-registered
establishments to retain a portion of the taxes they collect, which violates the
principle that tax collection and revenue should be for public purposes and
expenditures
As earlier stated, the input tax is the tax paid by a person, passed on to him by
the seller, when he buys goods. Output tax meanwhile is the tax due to the
person when he sells goods. In computing the VAT payable, three possible
scenarios may arise:
First, if at the end of a taxable quarter the output taxes charged by the seller
are equal to the input taxes that he paid and passed on by the suppliers, then
no payment is required;
Second, when the output taxes exceed the input taxes, the person shall be
liable for the excess, which has to be paid to the Bureau of Internal Revenue
(BIR);69 and
Third, if the input taxes exceed the output taxes, the excess shall be carried
over to the succeeding quarter or quarters. Should the input taxes result from
zero-rated or effectively zero-rated transactions, any excess over the output
taxes shall instead be refunded to the taxpayer or credited against other
internal revenue taxes, at the taxpayer’s option.70
Section 8 of R.A. No. 9337 however, imposed a 70% limitation on the input tax.
Thus, a person can credit his input tax only up to the extent of 70% of the
output tax. In layman’s term, the value-added taxes that a person/taxpayer paid
and passed on to him by a seller can only be credited up to 70% of the value-
added taxes that is due to him on a taxable transaction. There is no retention of
any tax collection because the person/taxpayer has already previously paid the
input tax to a seller, and the seller will subsequently remit such input tax to the
BIR. The party directly liable for the payment of the tax is the seller. 71 What only
needs to be done is for the person/taxpayer to apply or credit these input taxes,
as evidenced by receipts, against his output taxes.
Petitioners Association of Pilipinas Shell Dealers, Inc., et al. also argue that the
input tax partakes the nature of a property that may not be confiscated,
appropriated, or limited without due process of law.
The input tax is not a property or a property right within the constitutional
purview of the due process clause. A VAT-registered person’s entitlement to
the creditable input tax is a mere statutory privilege.
The distinction between statutory privileges and vested rights must be borne in
mind for persons have no vested rights in statutory privileges. The state may
change or take away rights, which were created by the law of the state,
although it may not take away property, which was vested by virtue of such
rights.72
Under the previous system of single-stage taxation, taxes paid at every level of
distribution are not recoverable from the taxes payable, although it becomes
part of the cost, which is deductible from the gross revenue. When Pres.
Aquino issued E.O. No. 273 imposing a 10% multi-stage tax on all sales, it was
then that the crediting of the input tax paid on purchase or importation of goods
and services by VAT-registered persons against the output tax was
introduced.73 This was adopted by the Expanded VAT Law (R.A. No.
7716),74 and The Tax Reform Act of 1997 (R.A. No. 8424).75 The right to credit
input tax as against the output tax is clearly a privilege created by law, a
privilege that also the law can remove, or in this case, limit.
Petitioners also contest as arbitrary, oppressive, excessive and confiscatory,
Section 8 of R.A. No. 9337, amending Section 110(A) of the NIRC, which
provides:
SEC. 110. Tax Credits. –
(A) Creditable Input Tax. – …
Provided, That the input tax on goods purchased or imported in a calendar
month for use in trade or business for which deduction for depreciation is
allowed under this Code, shall be spread evenly over the month of acquisition
and the fifty-nine (59) succeeding months if the aggregate acquisition cost for
such goods, excluding the VAT component thereof, exceeds One million pesos
(₱1,000,000.00): Provided, however, That if the estimated useful life of the
capital goods is less than five (5) years, as used for depreciation purposes,
then the input VAT shall be spread over such a shorter period: Provided, finally,
That in the case of purchase of services, lease or use of properties, the input
tax shall be creditable to the purchaser, lessee or license upon payment of the
compensation, rental, royalty or fee.
The foregoing section imposes a 60-month period within which to amortize the
creditable input tax on purchase or importation of capital goods with acquisition
cost of ₱1 Million pesos, exclusive of the VAT component. Such spread out
only poses a delay in the crediting of the input tax. Petitioners’ argument is
without basis because the taxpayer is not permanently deprived of his privilege
to credit the input tax.
It is worth mentioning that Congress admitted that the spread-out of the
creditable input tax in this case amounts to a 4-year interest-free loan to the
government.76 In the same breath, Congress also justified its move by saying
that the provision was designed to raise an annual revenue of 22.6
billion.77 The legislature also dispelled the fear that the provision will fend off
foreign investments, saying that foreign investors have other tax incentives
provided by law, and citing the case of China, where despite a 17.5% non-
creditable VAT, foreign investments were not deterred.78 Again, for whatever is
the purpose of the 60-month amortization, this involves executive economic
policy and legislative wisdom in which the Court cannot intervene.
With regard to the 5% creditable withholding tax imposed on payments made
by the government for taxable transactions, Section 12 of R.A. No. 9337, which
amended Section 114 of the NIRC, reads:
SEC. 114. Return and Payment of Value-added Tax. –
(C) Withholding of Value-added Tax. – The Government or any of its political
subdivisions, instrumentalities or agencies, including government-owned or
controlled corporations (GOCCs) shall, before making payment on account of
each purchase of goods and services which are subject to the value-added tax
imposed in Sections 106 and 108 of this Code, deduct and withhold a final
value-added tax at the rate of five percent (5%) of the gross payment thereof:
Provided, That the payment for lease or use of properties or property rights to
nonresident owners shall be subject to ten percent (10%) withholding tax at the
time of payment. For purposes of this Section, the payor or person in control of
the payment shall be considered as the withholding agent.
The value-added tax withheld under this Section shall be remitted within ten
(10) days following the end of the month the withholding was made.
Section 114(C) merely provides a method of collection, or as stated by
respondents, a more simplified VAT withholding system. The government in
this case is constituted as a withholding agent with respect to their payments
for goods and services.
Prior to its amendment, Section 114(C) provided for different rates of value-
added taxes to be withheld -- 3% on gross payments for purchases of goods;
6% on gross payments for services supplied by contractors other than by public
works contractors; 8.5% on gross payments for services supplied by public
work contractors; or 10% on payment for the lease or use of properties or
property rights to nonresident owners. Under the present Section 114(C), these
different rates, except for the 10% on lease or property rights payment to
nonresidents, were deleted, and a uniform rate of 5% is applied.
The Court observes, however, that the law the used the word final. In tax
usage, final, as opposed to creditable, means full. Thus, it is provided in
Section 114(C): "final value-added tax at the rate of five percent (5%)."
In Revenue Regulations No. 02-98, implementing R.A. No. 8424 (The Tax
Reform Act of 1997), the concept of final withholding tax on income was
explained, to wit:
SECTION 2.57. Withholding of Tax at Source
(A) Final Withholding Tax. – Under the final withholding tax system the amount
of income tax withheld by the withholding agent is constituted as full and final
payment of the income tax due from the payee on the said income. The liability
for payment of the tax rests primarily on the payor as a withholding agent.
Thus, in case of his failure to withhold the tax or in case of underwithholding,
the deficiency tax shall be collected from the payor/withholding agent. …
(B) Creditable Withholding Tax. – Under the creditable withholding tax system,
taxes withheld on certain income payments are intended to equal or at least
approximate the tax due of the payee on said income. … Taxes withheld on
income payments covered by the expanded withholding tax (referred to in Sec.
2.57.2 of these regulations) and compensation income (referred to in Sec. 2.78
also of these regulations) are creditable in nature.
As applied to value-added tax, this means that taxable transactions with the
government are subject to a 5% rate, which constitutes as full payment of the
tax payable on the transaction. This represents the net VAT payable of the
seller. The other 5% effectively accounts for the standard input VAT (deemed
input VAT), in lieu of the actual input VAT directly or attributable to the taxable
transaction.79
The Court need not explore the rationale behind the provision. It is clear that
Congress intended to treat differently taxable transactions with the
government.80 This is supported by the fact that under the old provision, the 5%
tax withheld by the government remains creditable against the tax liability of the
seller or contractor, to wit:
SEC. 114. Return and Payment of Value-added Tax. –
(C) Withholding of Creditable Value-added Tax. – The Government or any of
its political subdivisions, instrumentalities or agencies, including government-
owned or controlled corporations (GOCCs) shall, before making payment on
account of each purchase of goods from sellers and services rendered by
contractors which are subject to the value-added tax imposed in Sections 106
and 108 of this Code, deduct and withhold the value-added tax due at the rate
of three percent (3%) of the gross payment for the purchase of goods and six
percent (6%) on gross receipts for services rendered by contractors on every
sale or installment payment which shall be creditable against the value-
added tax liability of the seller or contractor: Provided, however, That in the
case of government public works contractors, the withholding rate shall be eight
and one-half percent (8.5%): Provided, further, That the payment for lease or
use of properties or property rights to nonresident owners shall be subject to
ten percent (10%) withholding tax at the time of payment. For this purpose, the
payor or person in control of the payment shall be considered as the
withholding agent.
The valued-added tax withheld under this Section shall be remitted within ten
(10) days following the end of the month the withholding was made. (Emphasis
supplied)
As amended, the use of the word final and the deletion of the
word creditable exhibits Congress’s intention to treat transactions with the
government differently. Since it has not been shown that the class subject to
the 5% final withholding tax has been unreasonably narrowed, there is no
reason to invalidate the provision. Petitioners, as petroleum dealers, are not the
only ones subjected to the 5% final withholding tax. It applies to all those who
deal with the government.
Moreover, the actual input tax is not totally lost or uncreditable, as petitioners
believe. Revenue Regulations No. 14-2005 or the Consolidated Value-Added
Tax Regulations 2005 issued by the BIR, provides that should the actual input
tax exceed 5% of gross payments, the excess may form part of the cost.
Equally, should the actual input tax be less than 5%, the difference is treated as
income.81
Petitioners also argue that by imposing a limitation on the creditable input tax,
the government gets to tax a profit or value-added even if there is no profit or
value-added.
Petitioners’ stance is purely hypothetical, argumentative, and again, one-sided.
The Court will not engage in a legal joust where premises are what ifs,
arguments, theoretical and facts, uncertain. Any disquisition by the Court on
this point will only be, as Shakespeare describes life in Macbeth,82 "full of sound
and fury, signifying nothing."
What’s more, petitioners’ contention assumes the proposition that there is no
profit or value-added. It need not take an astute businessman to know that it is
a matter of exception that a business will sell goods or services without profit or
value-added. It cannot be overstressed that a business is created precisely for
profit.
The equal protection clause under the Constitution means that "no person or
class of persons shall be deprived of the same protection of laws which is
enjoyed by other persons or other classes in the same place and in like
circumstances."83
The power of the State to make reasonable and natural classifications for the
purposes of taxation has long been established. Whether it relates to the
subject of taxation, the kind of property, the rates to be levied, or the amounts
to be raised, the methods of assessment, valuation and collection, the State’s
power is entitled to presumption of validity. As a rule, the judiciary will not
interfere with such power absent a clear showing of unreasonableness,
discrimination, or arbitrariness.84
Petitioners point out that the limitation on the creditable input tax if the entity
has a high ratio of input tax, or invests in capital equipment, or has several
transactions with the government, is not based on real and substantial
differences to meet a valid classification.
The argument is pedantic, if not outright baseless. The law does not make any
classification in the subject of taxation, the kind of property, the rates to be
levied or the amounts to be raised, the methods of assessment, valuation and
collection. Petitioners’ alleged distinctions are based on variables that bear
different consequences. While the implementation of the law may yield varying
end results depending on one’s profit margin and value-added, the Court
cannot go beyond what the legislature has laid down and interfere with the
affairs of business.
The equal protection clause does not require the universal application of the
laws on all persons or things without distinction. This might in fact sometimes
result in unequal protection. What the clause requires is equality among equals
as determined according to a valid classification. By classification is meant the
grouping of persons or things similar to each other in certain particulars and
different from all others in these same particulars.85
Petitioners brought to the Court’s attention the introduction of Senate Bill No.
2038 by Sens. S.R. Osmeña III and Ma. Ana Consuelo A.S. – Madrigal on June
6, 2005, and House Bill No. 4493 by Rep. Eric D. Singson. The proposed
legislation seeks to amend the 70% limitation by increasing the same to 90%.
This, according to petitioners, supports their stance that the 70% limitation is
arbitrary and confiscatory. On this score, suffice it to say that these are still
proposed legislations. Until Congress amends the law, and absent any
unequivocal basis for its unconstitutionality, the 70% limitation stays.
B. Uniformity and Equitability of Taxation
Article VI, Section 28(1) of the Constitution reads:
The rule of taxation shall be uniform and equitable. The Congress shall evolve
a progressive system of taxation.
Uniformity in taxation means that all taxable articles or kinds of property of the
same class shall be taxed at the same rate. Different articles may be taxed at
different amounts provided that the rate is uniform on the same class
everywhere with all people at all times.86
In this case, the tax law is uniform as it provides a standard rate of 0% or 10%
(or 12%) on all goods and services. Sections 4, 5 and 6 of R.A. No. 9337,
amending Sections 106, 107 and 108, respectively, of the NIRC, provide for a
rate of 10% (or 12%) on sale of goods and properties, importation of goods,
and sale of services and use or lease of properties. These same sections also
provide for a 0% rate on certain sales and transaction.
Neither does the law make any distinction as to the type of industry or trade
that will bear the 70% limitation on the creditable input tax, 5-year amortization
of input tax paid on purchase of capital goods or the 5% final withholding tax by
the government. It must be stressed that the rule of uniform taxation does not
deprive Congress of the power to classify subjects of taxation, and only
demands uniformity within the particular class.87
R.A. No. 9337 is also equitable. The law is equipped with a threshold margin.
The VAT rate of 0% or 10% (or 12%) does not apply to sales of goods or
services with gross annual sales or receipts not exceeding
₱1,500,000.00.88Also, basic marine and agricultural food products in their
original state are still not subject to the tax,89 thus ensuring that prices at the
grassroots level will remain accessible. As was stated in Kapatiran ng mga
Naglilingkod sa Pamahalaan ng Pilipinas, Inc. vs. Tan:90
The disputed sales tax is also equitable. It is imposed only on sales of goods or
services by persons engaged in business with an aggregate gross annual sales
exceeding ₱200,000.00. Small corner sari-sari stores are consequently exempt
from its application. Likewise exempt from the tax are sales of farm and marine
products, so that the costs of basic food and other necessities, spared as they
are from the incidence of the VAT, are expected to be relatively lower and
within the reach of the general public.
It is admitted that R.A. No. 9337 puts a premium on businesses with low profit
margins, and unduly favors those with high profit margins. Congress was not
oblivious to this. Thus, to equalize the weighty burden the law entails, the law,
under Section 116, imposed a 3% percentage tax on VAT-exempt persons
under Section 109(v), i.e., transactions with gross annual sales and/or receipts
not exceeding ₱1.5 Million. This acts as a equalizer because in effect, bigger
businesses that qualify for VAT coverage and VAT-exempt taxpayers stand on
equal-footing.
Moreover, Congress provided mitigating measures to cushion the impact of the
imposition of the tax on those previously exempt. Excise taxes on petroleum
products91 and natural gas92 were reduced. Percentage tax on domestic
carriers was removed.93 Power producers are now exempt from paying
franchise tax.94
Aside from these, Congress also increased the income tax rates of
corporations, in order to distribute the burden of taxation. Domestic, foreign,
and non-resident corporations are now subject to a 35% income tax rate, from
a previous 32%.95 Intercorporate dividends of non-resident foreign corporations
are still subject to 15% final withholding tax but the tax credit allowed on the
corporation’s domicile was increased to 20%.96 The Philippine Amusement and
Gaming Corporation (PAGCOR) is not exempt from income taxes
anymore.97 Even the sale by an artist of his works or services performed for the
production of such works was not spared.
All these were designed to ease, as well as spread out, the burden of taxation,
which would otherwise rest largely on the consumers. It cannot therefore be
gainsaid that R.A. No. 9337 is equitable.
C. Progressivity of Taxation
Lastly, petitioners contend that the limitation on the creditable input tax is
anything but regressive. It is the smaller business with higher input tax-output
tax ratio that will suffer the consequences.
Progressive taxation is built on the principle of the taxpayer’s ability to pay. This
principle was also lifted from Adam Smith’s Canons of Taxation, and it states:
I. The subjects of every state ought to contribute towards the support of the
government, as nearly as possible, in proportion to their respective abilities;
that is, in proportion to the revenue which they respectively enjoy under the
protection of the state.
Taxation is progressive when its rate goes up depending on the resources of
the person affected.98
The VAT is an antithesis of progressive taxation. By its very nature, it is
regressive. The principle of progressive taxation has no relation with the VAT
system inasmuch as the VAT paid by the consumer or business for every
goods bought or services enjoyed is the same regardless of income. In
other words, the VAT paid eats the same portion of an income, whether big or
small. The disparity lies in the income earned by a person or profit margin
marked by a business, such that the higher the income or profit margin, the
smaller the portion of the income or profit that is eaten by VAT. A converso, the
lower the income or profit margin, the bigger the part that the VAT eats away.
At the end of the day, it is really the lower income group or businesses with low-
profit margins that is always hardest hit.
Nevertheless, the Constitution does not really prohibit the imposition of indirect
taxes, like the VAT. What it simply provides is that Congress shall "evolve a
progressive system of taxation." The Court stated in the Tolentino case, thus:
The Constitution does not really prohibit the imposition of indirect taxes which,
like the VAT, are regressive. What it simply provides is that Congress shall
‘evolve a progressive system of taxation.’ The constitutional provision has been
interpreted to mean simply that ‘direct taxes are . . . to be preferred [and] as
much as possible, indirect taxes should be minimized.’ (E. FERNANDO, THE
CONSTITUTION OF THE PHILIPPINES 221 (Second ed. 1977)) Indeed, the
mandate to Congress is not to prescribe, but to evolve, a progressive tax
system. Otherwise, sales taxes, which perhaps are the oldest form of indirect
taxes, would have been prohibited with the proclamation of Art. VIII, §17 (1) of
the 1973 Constitution from which the present Art. VI, §28 (1) was taken. Sales
taxes are also regressive.
Resort to indirect taxes should be minimized but not avoided entirely because it
is difficult, if not impossible, to avoid them by imposing such taxes according to
the taxpayers' ability to pay. In the case of the VAT, the law minimizes the
regressive effects of this imposition by providing for zero rating of certain
transactions (R.A. No. 7716, §3, amending §102 (b) of the NIRC), while
granting exemptions to other transactions. (R.A. No. 7716, §4 amending §103
of the NIRC)99
CONCLUSION
It has been said that taxes are the lifeblood of the government. In this case, it is
just an enema, a first-aid measure to resuscitate an economy in distress. The
Court is neither blind nor is it turning a deaf ear on the plight of the masses. But
it does not have the panacea for the malady that the law seeks to remedy. As in
other cases, the Court cannot strike down a law as unconstitutional simply
because of its yokes.
Let us not be overly influenced by the plea that for every wrong there is a
remedy, and that the judiciary should stand ready to afford relief. There are
undoubtedly many wrongs the judicature may not correct, for instance, those
involving political questions. . . .
Let us likewise disabuse our minds from the notion that the judiciary is the
repository of remedies for all political or social ills; We should not forget that the
Constitution has judiciously allocated the powers of government to three distinct
and separate compartments; and that judicial interpretation has tended to the
preservation of the independence of the three, and a zealous regard of the
prerogatives of each, knowing full well that one is not the guardian of the others
and that, for official wrong-doing, each may be brought to account, either by
impeachment, trial or by the ballot box.100
The words of the Court in Vera vs. Avelino101 holds true then, as it still holds
true now. All things considered, there is no raison d'être for the
unconstitutionality of R.A. No. 9337.
WHEREFORE, Republic Act No. 9337 not being unconstitutional, the petitions
in G.R. Nos. 168056, 168207, 168461, 168463, and 168730, are
hereby DISMISSED.
There being no constitutional impediment to the full enforcement and
implementation of R.A. No. 9337, the temporary restraining order issued by the
Court on July 1, 2005 is LIFTED upon finality of herein decision.
SO ORDERED.
EN BANC
G.R. No. 166620 April 20, 2010
ATTY. SYLVIA BANDA, CONSORICIA O. PENSON, RADITO V.
PADRIGANO, JEAN R. DE MESA, LEAH P. DELA CRUZ, ANDY V.
MACASAQUIT, SENEN B. CORDOBA, ALBERT BRILLANTES, GLORIA
BISDA, JOVITA V. CONCEPCION, TERESITA G. CARVAJAL, ROSANNA T.
MALIWANAG, RICHARD ODERON, CECILIA ESTERNON, BENEDICTO
CABRAL, MA. VICTORIA E. LAROCO, CESAR ANDRA, FELICISIMO
GALACIO, ELSA R. CALMA, FILOMENA A. GALANG, JEAN PAUL
MELEGRITO, CLARO G. SANTIAGO, JR., EDUARDO FRIAS, REYNALDO
O. ANDAL, NEPHTALIE IMPERIO, RUEL BALAGTAS, VICTOR R. ORTIZ,
FRANCISCO P. REYES, JR., ELISEO M. BALAGOT, JR., JOSE C.
MONSALVE, JR., ARTURO ADSUARA, F.C. LADRERO, JR., NELSON
PADUA, MARCELA C. SAYAO, ANGELITO MALAKAS, GLORIA RAMENTO,
JULIANA SUPLEO, MANUEL MENDRIQUE, E. TAYLAN, CARMELA BOBIS,
DANILO VARGAS, ROY-LEO C. PABLO, ALLAN VILLANUEVA, VICENTE
R. VELASCO, JR., IMELDA ERENO, FLORIZA M. CATIIS, RANIEL R.
BASCO, E. JALIJALI, MARIO C. CARAAN, DOLORES M. AVIADO,
MICHAEL P. LAPLANA, GUILLERMO G. SORIANO, ALICE E. SOJO,
ARTHUR G. NARNE, LETICIA SORIANO, FEDERICO RAMOS, JR.,
PETERSON CAAMPUED, RODELIO L. GOMEZ, ANTONIO D. GARCIA, JR.,
ANTONIO GALO, A. SANCHEZ, SOL E. TAMAYO, JOSEPHINE A.M.
COCJIN, DAMIAN QUINTO, JR., EDLYN MARIANO, M.A. MALANUM,
ALFREDO S. ESTRELLA, and JESUS MEL SAYO, Petitioners,
vs.
EDUARDO R. ERMITA, in his capacity as Executive Secretary, The
Director General of the Philippine Information Agency and The National
Treasurer, Respondents.
DECISION
LEONARDO-DE CASTRO, J.:
The present controversy arose from a Petition for Certiorari and prohibition
challenging the constitutionality of Executive Order No. 378 dated October 25,
2004, issued by President Gloria Macapagal Arroyo (President Arroyo).
Petitioners characterize their action as a class suit filed on their own behalf and
on behalf of all their co-employees at the National Printing Office (NPO).
The NPO was formed on July 25, 1987, during the term of former President
Corazon C. Aquino (President Aquino), by virtue of Executive Order No.
2851 which provided, among others, the creation of the NPO from the merger of
the Government Printing Office and the relevant printing units of the Philippine
Information Agency (PIA). Section 6 of Executive Order No. 285 reads:
SECTION 6. Creation of the National Printing Office. – There is hereby created
a National Printing Office out of the merger of the Government Printing Office
and the relevant printing units of the Philippine Information Agency. The Office
shall have exclusive printing jurisdiction over the following:
a. Printing, binding and distribution of all standard and accountable
forms of national, provincial, city and municipal governments, including
government corporations;
b. Printing of officials ballots;
c. Printing of public documents such as the Official Gazette, General
Appropriations Act, Philippine Reports, and development information
materials of the Philippine Information Agency.
The Office may also accept other government printing jobs, including
government publications, aside from those enumerated above, but not in an
exclusive basis.
The details of the organization, powers, functions, authorities, and related
management aspects of the Office shall be provided in the implementing details
which shall be prepared and promulgated in accordance with Section II of this
Executive Order.
The Office shall be attached to the Philippine Information Agency.
On October 25, 2004, President Arroyo issued the herein assailed Executive
Order No. 378, amending Section 6 of Executive Order No. 285 by, inter alia,
removing the exclusive jurisdiction of the NPO over the printing services
requirements of government agencies and instrumentalities. The pertinent
portions of Executive Order No. 378, in turn, provide:
SECTION 1. The NPO shall continue to provide printing services to government
agencies and instrumentalities as mandated by law. However, it shall no longer
enjoy exclusive jurisdiction over the printing services requirements of the
government over standard and accountable forms. It shall have to compete with
the private sector, except in the printing of election paraphernalia which could
be shared with the Bangko Sentral ng Pilipinas, upon the discretion of the
Commission on Elections consistent with the provisions of the Election Code of
1987.
SECTION 2. Government agencies/instrumentalities may source printing
services outside NPO provided that:
2.1 The printing services to be provided by the private sector is
superior in quality and at a lower cost than what is offered by the NPO;
and
2.2 The private printing provider is flexible in terms of meeting the
target completion time of the government agency.
SECTION 3. In the exercise of its functions, the amount to be appropriated for
the programs, projects and activities of the NPO in the General Appropriations
Act (GAA) shall be limited to its income without additional financial support from
the government. (Emphases and underscoring supplied.)
Pursuant to Executive Order No. 378, government agencies and
instrumentalities are allowed to source their printing services from the private
sector through competitive bidding, subject to the condition that the services
offered by the private supplier be of superior quality and lower in cost compared
to what was offered by the NPO. Executive Order No. 378 also limited NPO’s
appropriation in the General Appropriations Act to its income.
Perceiving Executive Order No. 378 as a threat to their security of tenure as
employees of the NPO, petitioners now challenge its constitutionality,
contending that: (1) it is beyond the executive powers of President Arroyo to
amend or repeal Executive Order No. 285 issued by former President Aquino
when the latter still exercised legislative powers; and (2) Executive Order No.
378 violates petitioners’ security of tenure, because it paves the way for the
gradual abolition of the NPO.
We dismiss the petition.
Before proceeding to resolve the substantive issues, the Court must first delve
into a procedural matter. Since petitioners instituted this case as a class suit,
the Court, thus, must first determine if the petition indeed qualifies as one. In
Board of Optometry v. Colet,2 we held that "[c]ourts must exercise utmost
caution before allowing a class suit, which is the exception to the requirement
of joinder of all indispensable parties. For while no difficulty may arise if the
decision secured is favorable to the plaintiffs, a quandary would result if the
decision were otherwise as those who were deemed impleaded by their self-
appointed representatives would certainly claim denial of due process."
Section 12, Rule 3 of the Rules of Court defines a class suit, as follows:
Sec. 12. Class suit. – When the subject matter of the controversy is one of
common or general interest to many persons so numerous that it is
impracticable to join all as parties, a number of them which the court finds to be
sufficiently numerous and representative as to fully protect the interests of all
concerned may sue or defend for the benefit of all. Any party in interest shall
have the right to intervene to protect his individual interest.
From the foregoing definition, the requisites of a class suit are: 1) the subject
matter of controversy is one of common or general interest to many persons; 2)
the parties affected are so numerous that it is impracticable to bring them all to
court; and 3) the parties bringing the class suit are sufficiently numerous or
representative of the class and can fully protect the interests of all concerned.
In Mathay v. The Consolidated Bank and Trust Company,3 the Court held that:
An action does not become a class suit merely because it is designated as
such in the pleadings. Whether the suit is or is not a class suit depends upon
the attending facts, and the complaint, or other pleading initiating the class
action should allege the existence of the necessary facts, to wit, the existence
of a subject matter of common interest, and the existence of a class and the
number of persons in the alleged class, in order that the court might be enabled
to determine whether the members of the class are so numerous as to make it
impracticable to bring them all before the court, to contrast the number
appearing on the record with the number in the class and to determine whether
claimants on record adequately represent the class and the subject matter of
general or common interest. (Emphases ours.)
Here, the petition failed to state the number of NPO employees who would be
affected by the assailed Executive Order and who were allegedly represented
by petitioners. It was the Solicitor General, as counsel for respondents, who
pointed out that there were about 549 employees in the NPO.4 The 67
petitioners undeniably comprised a small fraction of the NPO employees whom
they claimed to represent. Subsequently, 32 of the original petitioners executed
an Affidavit of Desistance, while one signed a letter denying ever signing the
petition,5 ostensibly reducing the number of petitioners to 34. We note that
counsel for the petitioners challenged the validity of the desistance or
withdrawal of some of the petitioners and insinuated that such desistance was
due to pressure from people "close to the seat of power."6 Still, even if we were
to disregard the affidavit of desistance filed by some of the petitioners, it is
highly doubtful that a sufficient, representative number of NPO employees have
instituted this purported class suit. A perusal of the petition itself would show
that of the 67 petitioners who signed the Verification/Certification of Non-Forum
Shopping, only 20 petitioners were in fact mentioned in the jurat as having duly
subscribed the petition before the notary public. In other words, only 20
petitioners effectively instituted the present case.
Indeed, in MVRS Publications, Inc. v. Islamic Da’wah Council of the Philippines,
Inc.,7 we observed that an element of a class suit or representative suit is the
adequacy of representation. In determining the question of fair and adequate
representation of members of a class, the court must consider (a) whether the
interest of the named party is coextensive with the interest of the other
members of the class; (b) the proportion of those made a party, as it so bears,
to the total membership of the class; and (c) any other factor bearing on the
ability of the named party to speak for the rest of the class.
Previously, we held in Ibañes v. Roman Catholic Church8 that where the
interests of the plaintiffs and the other members of the class they seek to
represent are diametrically opposed, the class suit will not prosper.
It is worth mentioning that a Manifestation of Desistance,9 to which the
previously mentioned Affidavit of Desistance10 was attached, was filed by the
President of the National Printing Office Workers Association (NAPOWA). The
said manifestation expressed NAPOWA’s opposition to the filing of the instant
petition in any court. Even if we take into account the contention of petitioners’
counsel that the NAPOWA President had no legal standing to file such
manifestation, the said pleading is a clear indication that there is a divergence
of opinions and views among the members of the class sought to be
represented, and not all are in favor of filing the present suit. There is here an
apparent conflict between petitioners’ interests and those of the persons whom
they claim to represent. Since it cannot be said that petitioners sufficiently
represent the interests of the entire class, the instant case cannot be properly
treated as a class suit.
As to the merits of the case, the petition raises two main grounds to assail the
constitutionality of Executive Order No. 378:
First, it is contended that President Arroyo cannot amend or repeal Executive
Order No. 285 by the mere issuance of another executive order (Executive
Order No. 378). Petitioners maintain that former President Aquino’s Executive
Order No. 285 is a legislative enactment, as the same was issued while
President Aquino still had legislative powers under the Freedom
Constitution;11 thus, only Congress through legislation can validly amend
Executive Order No. 285.
Second, petitioners maintain that the issuance of Executive Order No. 378
would lead to the eventual abolition of the NPO and would violate the security
of tenure of NPO employees.
Anent the first ground raised in the petition, we find the same patently without
merit.
It is a well-settled principle in jurisprudence that the President has the power to
reorganize the offices and agencies in the executive department in line with the
President’s constitutionally granted power of control over executive offices and
by virtue of previous delegation of the legislative power to reorganize executive
offices under existing statutes.
In Buklod ng Kawaning EIIB v. Zamora,12 the Court pointed out that Executive
Order No. 292 or the Administrative Code of 1987 gives the President
continuing authority to reorganize and redefine the functions of the Office of the
President. Section 31, Chapter 10, Title III, Book III of the said Code, is explicit:
Sec. 31. Continuing Authority of the President to Reorganize his Office. – The
President, subject to the policy in the Executive Office and in order to achieve
simplicity, economy and efficiency, shall have continuing authority to reorganize
the administrative structure of the Office of the President. For this purpose, he
may take any of the following actions:
(1) Restructure the internal organization of the Office of the President
Proper, including the immediate Offices, the President 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. (Emphases ours.)
Interpreting the foregoing provision, we held in Buklod ng Kawaning EIIB, 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 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 President’s
continuing authority to reorganize.13 (Emphasis ours.)
It is undisputed that the NPO, as an agency that is part of the Office of the
Press Secretary (which in various times has been an agency directly attached
to the Office of the Press Secretary or as an agency under the Philippine
Information Agency), is part of the Office of the President.14
Pertinent to the case at bar, Section 31 of the Administrative Code of 1987
quoted above authorizes the President (a) to restructure the internal
organization of the Office of the President Proper, including the immediate
Offices, the President 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, and (b) to transfer functions or
offices from the Office of the President to any other Department or Agency in
the Executive Branch, and vice versa.
Concomitant to such power to abolish, merge or consolidate offices in the
Office of the President Proper and to transfer functions/offices not only among
the offices in the Office of President Proper but also the rest of the Office of the
President and the Executive Branch, the President implicitly has the power to
effect less radical or less substantive changes to the functional and internal
structure of the Office of the President, including the modification of functions of
such executive agencies as the exigencies of the service may require.
In the case at bar, there was neither an abolition of the NPO nor a removal of
any of its functions to be transferred to another agency. Under the assailed
Executive Order No. 378, the NPO remains the main printing arm of the
government for all kinds of government forms and publications but in the
interest of greater economy and encouraging efficiency and profitability, it must
now compete with the private sector for certain government printing jobs, with
the exception of election paraphernalia which remains the exclusive
responsibility of the NPO, together with the Bangko Sentral ng Pilipinas, as the
Commission on Elections may determine. At most, there was a mere alteration
of the main function of the NPO by limiting the exclusivity of its printing
responsibility to election forms.15
There is a view that the reorganization actions that the President may take with
respect to agencies in the Office of the President are strictly limited to transfer
of functions and offices as seemingly provided in Section 31 of the
Administrative Code of 1987.
However, Section 20, Chapter 7, Title I, Book III of the same Code significantly
provides:
Sec. 20. Residual Powers. – Unless Congress provides otherwise, the
President shall exercise such other powers and functions vested in the
President which are provided for under the laws and which are not specifically
enumerated above, or which are not delegated by the President in accordance
with law. (Emphasis ours.)
Pursuant to Section 20, the power of the President to reorganize the Executive
Branch under Section 31 includes such powers and functions that may be
provided for under other laws. To be sure, an inclusive and broad interpretation
of the President’s power to reorganize executive offices has been consistently
supported by specific provisions in general appropriations laws.
In the oft-cited Larin v. Executive Secretary,16 the Court likewise adverted to
certain provisions of Republic Act No. 7645, the general appropriations law for
1993, as among the statutory bases for the President’s power to reorganize
executive agencies, to wit:
Section 48 of R.A. 7645 provides that:
"Sec. 48. Scaling Down and Phase Out of Activities of Agencies Within the
Executive Branch. — The heads of departments, bureaus and offices and
agencies are hereby directed to identify their respective activities which are no
longer essential in the delivery of public services and which may be scaled
down, phased out or abolished, subject to civil [service] rules and regulations. x
x x. Actual scaling down, phasing out or abolition of the activities shall be
effected pursuant to Circulars or Orders issued for the purpose by the Office of
the President."
Said provision clearly mentions the acts of "scaling down, phasing out and
abolition" of offices only and does not cover the creation of offices or transfer of
functions. Nevertheless, the act of creating and decentralizing is included in the
subsequent provision of Section 62, which provides that:
"Sec. 62. Unauthorized organizational changes. — Unless otherwise created by
law or directed by the President of the Philippines, no organizational unit or
changes in key positions in any department or agency shall be authorized in
their respective organization structures and be funded from appropriations by
this Act."
The foregoing provision evidently shows that the President is authorized to
effect organizational changes including the creation of offices in the department
or agency concerned.
The contention of petitioner that the two provisions are riders deserves scant
consideration. Well settled is the rule that every law has in its favor the
presumption of constitutionality. Unless and until a specific provision of the law
is declared invalid and unconstitutional, the same is valid and binding for all
intents and purposes.17 (Emphases ours)
Buklod ng Kawaning EIIB v. Zamora,18 where the Court upheld as valid then
President Joseph Estrada’s Executive Order No. 191 "deactivating" the
Economic Intelligence and Investigation Bureau (EIIB) of the Department of
Finance, hewed closely to the reasoning in Larin. The Court, among others,
also traced from the General Appropriations Act19 the President’s authority to
effect organizational changes in the department or agency under the executive
structure, thus:
We adhere to the precedent or ruling in Larin that this provision recognizes the
authority of the President to effect organizational changes in the department or
agency under the executive structure. Such a ruling further finds support in
Section 78 of Republic Act No. 8760. Under this law, the heads of departments,
bureaus, offices and agencies and other entities in the Executive Branch are
directed (a) to conduct a comprehensive review of their respective mandates,
missions, objectives, functions, programs, projects, activities and systems and
procedures; (b) identify activities which are no longer essential in the delivery of
public services and which may be scaled down, phased-out or abolished; and
(c) adopt measures that will result in the streamlined organization and improved
overall performance of their respective agencies. Section 78 ends up with the
mandate that the actual streamlining and productivity improvement in agency
organization and operation shall be effected pursuant to Circulars or Orders
issued for the purpose by the Office of the President. x x x.20 (Emphasis ours)
Notably, in the present case, the 2003 General Appropriations Act, which was
reenacted in 2004 (the year of the issuance of Executive Order No. 378),
likewise gave the President the authority to effect a wide variety of
organizational changes in any department or agency in the Executive Branch.
Sections 77 and 78 of said Act provides:
Section 77. Organized Changes. – Unless otherwise provided by law or
directed by the President of the Philippines, no changes in key positions or
organizational units in any department or agency shall be authorized in their
respective organizational structures and funded from appropriations provided
by this Act.
Section 78. Institutional Strengthening and Productivity Improvement in Agency
Organization and Operations and Implementation of
Organization/Reorganization Mandated by Law. The Government shall adopt
institutional strengthening and productivity improvement measures to improve
service delivery and enhance productivity in the government, as directed by the
President of the Philippines. The heads of departments, bureaus, offices,
agencies, and other entities of the Executive Branch shall accordingly conduct
a comprehensive review of their respective mandates, missions, objectives,
functions, programs, projects, activities and systems and procedures; identify
areas where improvements are necessary; and implement corresponding
structural, functional and operational adjustments that will result in streamlined
organization and operations and improved performance and productivity:
PROVIDED, That actual streamlining and productivity improvements in agency
organization and operations, as authorized by the President of the Philippines
for the purpose, including the utilization of savings generated from such
activities, shall be in accordance with the rules and regulations to be issued by
the DBM, upon consultation with the Presidential Committee on Effective
Governance: PROVIDED, FURTHER, That in the implementation of
organizations/reorganizations, or specific changes in agency structure,
functions and operations as a result of institutional strengthening or as
mandated by law, the appropriation, including the functions, projects, purposes
and activities of agencies concerned may be realigned as may be necessary:
PROVIDED, FINALLY, That any unexpended balances or savings in
appropriations may be made available for payment of retirement gratuities and
separation benefits to affected personnel, as authorized under existing laws.
(Emphases and underscoring ours.)
Implicitly, the aforequoted provisions in the appropriations law recognize the
power of the President to reorganize even executive offices already funded by
the said appropriations act, including the power to implement structural,
functional, and operational adjustments in the executive bureaucracy and, in so
doing, modify or realign appropriations of funds as may be necessary under
such reorganization. Thus, insofar as petitioners protest the limitation of the
NPO’s appropriations to its own income under Executive Order No. 378, the
same is statutorily authorized by the above provisions.
In the 2003 case of Bagaoisan v. National Tobacco Administration, 21 we upheld
the "streamlining" of the National Tobacco Administration through a reduction of
its personnel and deemed the same as included in the power of the President
to reorganize executive offices granted under the laws, notwithstanding that
such streamlining neither involved an abolition nor a transfer of functions of an
office. To quote the relevant portion of that decision:
In the recent case of Rosa Ligaya C. Domingo, et al. vs. Hon. Ronaldo D.
Zamora, in his capacity as the Executive Secretary, et al., this Court has had
occasion to also delve on the President’s power to reorganize the Office of the
President under Section 31(2) and (3) of Executive Order No. 292 and the
power to reorganize the Office of the President Proper. x x x
xxxx
The first sentence of the law is an express grant to the President of a
continuing authority to reorganize the administrative structure of the Office of
the President. The succeeding numbered paragraphs are not in the nature
of provisos that unduly limit the aim and scope of the grant to the President of
the power to reorganize but are to be viewed in consonance therewith. Section
31(1) of Executive Order No. 292 specifically refers to the President’s power to
restructure the internal organization of the Office of the President Proper, by
abolishing, consolidating or merging units hereof or transferring functions from
one unit to another, while Section 31(2) and (3) concern executive offices
outside the Office of the President Proper allowing the President to transfer any
function under the Office of the President to any other Department or Agency
and vice-versa, and the transfer of any agency under the Office of the President
to any other department or agency and vice-versa.
In the present instance, involving neither an abolition nor transfer of offices, the
assailed action is a mere reorganization under the general provisions of the law
consisting mainly of streamlining the NTA in the interest of simplicity, economy
and efficiency. It is an act well within the authority of the President motivated
and carried out, according to the findings of the appellate court, in good faith, a
factual assessment that this Court could only but accept.22 (Emphases and
underscoring supplied.)
In the more recent case of Tondo Medical Center Employees Association v.
Court of Appeals,23 which involved a structural and functional reorganization of
the Department of Health under an executive order, we reiterated the principle
that the power of the President to reorganize agencies under the executive
department by executive or administrative order is constitutionally and
statutorily recognized. We held in that case:
This Court has already ruled in a number of cases that the President may, by
executive or administrative order, direct the reorganization of government
entities under the Executive Department. This is also sanctioned under the
Constitution, as well as other statutes.
Section 17, Article VII of the 1987 Constitution, clearly states: "[T]he president
shall have control of all executive departments, bureaus and offices." Section
31, Book III, Chapter 10 of Executive Order No. 292, also known as the
Administrative Code of 1987 reads:
SEC. 31. Continuing Authority of the President to Reorganize his Office - The
President, subject to the policy in the Executive Office and in order to achieve
simplicity, economy and efficiency, shall have continuing authority to reorganize
the administrative structure of the Office of the President. For this purpose, he
may take any of the following actions:
xxxx
In Domingo v. Zamora [445 Phil. 7 (2003)], this Court explained the rationale
behind the President’s continuing authority under the Administrative Code to
reorganize the administrative structure of the Office of the President. The law
grants the President the power to reorganize the Office of the President in
recognition of the recurring need of every President to reorganize his or her
office "to achieve simplicity, economy and efficiency." To remain effective and
efficient, it must be capable of being shaped and reshaped by the President in
the manner the Chief Executive deems fit to carry out presidential directives
and policies.
The Administrative Code provides that the Office of the President consists of
the Office of the President Proper and the agencies under it. The agencies
under the Office of the President are identified in Section 23, Chapter 8, Title II
of the Administrative Code:
Sec. 23. The Agencies under the Office of the President.—The agencies under
the Office of the President refer to those offices placed under the chairmanship
of the President, those under the supervision and control of the President,
those under the administrative supervision of the Office of the President, those
attached to it for policy and program coordination, and those that are not placed
by law or order creating them under any specific department.
xxxx
The power of the President to reorganize the executive department is likewise
recognized in general appropriations laws. x x x.
xxxx
Clearly, Executive Order No. 102 is well within the constitutional power of the
President to issue. The President did not usurp any legislative prerogative in
issuing Executive Order No. 102. It is an exercise of the President’s
constitutional power of control over the executive department, supported by the
provisions of the Administrative Code, recognized by other statutes, and
consistently affirmed by this Court.24 (Emphases supplied.)
Subsequently, we ruled in Anak Mindanao Party-List Group v. Executive
Secretary25 that:
The Constitution’s express grant of the power of control in the President
justifies an executive action to carry out reorganization measures under a broad
authority of law.
In enacting a statute, the legislature is presumed to have deliberated with full
knowledge of all existing laws and jurisprudence on the subject. It is thus
reasonable to conclude that in passing a statute which places an agency under
the Office of the President, it was in accordance with existing laws and
jurisprudence on the President’s power to reorganize.
In establishing an executive department, bureau or office, the legislature
necessarily ordains an executive agency’s position in the scheme of
administrative structure. Such determination is primary, but subject to the
President’s continuing authority to reorganize the administrative structure. As
far as bureaus, agencies or offices in the executive department are concerned,
the power of control may justify the President to deactivate the functions of a
particular office. Or a law may expressly grant the President the broad authority
to carry out reorganization measures. The Administrative Code of 1987 is one
such law.26
The issuance of Executive Order No. 378 by President Arroyo is an exercise of
a delegated legislative power granted by the aforementioned Section 31,
Chapter 10, Title III, Book III of the Administrative Code of 1987, which provides
for the continuing authority of the President to reorganize the Office of the
President, "in order to achieve simplicity, economy and efficiency." This is a
matter already well-entrenched in jurisprudence. The reorganization of such an
office through executive or administrative order is also recognized in the
Administrative Code of 1987. Sections 2 and 3, Chapter 2, Title I, Book III of the
said Code provide:
Sec. 2. Executive Orders. - Acts of the President providing for rules of a general
or permanent character in implementation or execution of constitutional or
statutory powers shall be promulgated in executive orders.
Sec. 3. Administrative Orders. - Acts of the President which relate to particular
aspects of governmental operations in pursuance of his duties as administrative
head shall be promulgated in administrative orders. (Emphases supplied.)
To reiterate, we find nothing objectionable in the provision in Executive Order
No. 378 limiting the appropriation of the NPO to its own income. Beginning with
Larin and in subsequent cases, the Court has noted certain provisions in
the general appropriations laws as likewise reflecting the power of the
President to reorganize executive offices or agencies even to the extent of
modifying and realigning appropriations for that purpose.
Petitioners’ contention that the issuance of Executive Order No. 378 is an
invalid exercise of legislative power on the part of the President has no legal leg
to stand on.
In all, Executive Order No. 378, which purports to institute necessary reforms in
government in order to improve and upgrade efficiency in the delivery of public
services by redefining the functions of the NPO and limiting its funding to its
own income and to transform it into a self-reliant agency able to compete with
the private sector, is well within the prerogative of President Arroyo under her
continuing delegated legislative power to reorganize her own office. As pointed
out in the separate concurring opinion of our learned colleague, Associate
Justice Antonio T. Carpio, the objective behind Executive Order No. 378 is
wholly consistent with the state policy contained in Republic Act No. 9184 or
the Government Procurement Reform Act to encourage competitiveness by
extending equal opportunity to private contracting parties who are eligible and
qualified.271avvphi1
To be very clear, this delegated legislative power to reorganize pertains only to
the Office of the President and the departments, offices and agencies of the
executive branch and does not include the Judiciary, the Legislature or the
constitutionally-created or mandated bodies. Moreover, it must be stressed that
the exercise by the President of the power to reorganize the executive
department must be in accordance with the Constitution, relevant laws and
prevailing jurisprudence.
In this regard, we are mindful of the previous pronouncement of this Court in
Dario v. Mison28 that:
Reorganizations in this jurisdiction have been regarded as valid provided they
are pursued in good faith. As a general rule, a reorganization is carried out in
"good faith" if it is for the purpose of economy or to make bureaucracy more
efficient. In that event, no dismissal (in case of a dismissal) or separation
actually occurs because the position itself ceases to exist. And in that case,
security of tenure would not be a Chinese wall. Be that as it may, if the
"abolition," which is nothing else but a separation or removal, is done for
political reasons or purposely to defeat security of tenure, or otherwise not in
good faith, no valid "abolition" takes place and whatever "abolition" is done, is
void ab initio. There is an invalid "abolition" as where there is merely a change
of nomenclature of positions, or where claims of economy are belied by the
existence of ample funds. (Emphasis ours.)
Stated alternatively, the presidential power to reorganize agencies and offices
in the executive branch of government is subject to the condition that such
reorganization is carried out in good faith.
If the reorganization is done in good faith, the abolition of positions, which
results in loss of security of tenure of affected government employees, would
be valid. In Buklod ng Kawaning EIIB v. Zamora,29 we even observed that there
was no such thing as an absolute right to hold office. Except those who hold
constitutional offices, which provide for special immunity as regards salary and
tenure, no one can be said to have any vested right to an office or salary. 30
This brings us to the second ground raised in the petition – that Executive
Order No. 378, in allowing government agencies to secure their printing
requirements from the private sector and in limiting the budget of the NPO to its
income, will purportedly lead to the gradual abolition of the NPO and the loss of
security of tenure of its present employees. In other words, petitioners avow
that the reorganization of the NPO under Executive Order No. 378 is tainted
with bad faith. The basic evidentiary rule is that he who asserts a fact or the
affirmative of an issue has the burden of proving it.31
A careful review of the records will show that petitioners utterly failed to
substantiate their claim. They failed to allege, much less prove, sufficient facts
to show that the limitation of the NPO’s budget to its own income would indeed
lead to the abolition of the position, or removal from office, of any employee.
Neither did petitioners present any shred of proof of their assertion that the
changes in the functions of the NPO were for political considerations that had
nothing to do with improving the efficiency of, or encouraging operational
economy in, the said agency.
In sum, the Court finds that the petition failed to show any constitutional
infirmity or grave abuse of discretion amounting to lack or excess of jurisdiction
in President Arroyo’s issuance of Executive Order No. 378.
WHEREFORE, the petition is hereby DISMISSED and the prayer for a
Temporary Restraining Order and/or a Writ of Preliminary Injunction is hereby
DENIED. No costs.
SO ORDERED.
SECOND DIVISION
G.R. No. 158540 July 8, 2004
SOUTHERN CROSS CEMENT CORPORATION, petitioner,
vs.
THE PHILIPPINE CEMENT MANUFACTURERS CORP., THE SECRETARY
OF THE DEPARTMENT OF TRADE & INDUSTRY, THE SECRETARY OF
THE DEPARTMENT OF FINANCE, and THE COMMISSIONER OF THE
BUREAU OF CUSTOMS, respondents.
DECISION
TINGA, J.:
"Good fences make good neighbors," so observed Robert Frost, the archetype
of traditional New England detachment. The Frost ethos has been heeded by
nations adjusting to the effects of the liberalized global market. 1The Philippines,
for one, enacted Republic Act (Rep. Act) No. 8751 (on the imposition of
countervailing duties), Rep. Act No. 8752 (on the imposition of anti-dumping
duties) and, finally, Rep. Act No. 8800, also known as the Safeguard Measures
Act ("SMA")2 soon after it joined the General Agreement on Tariff and Trade
(GATT) and the World Trade Organization (WTO) Agreement.3
The SMA provides the structure and mechanics for the imposition of
emergency measures, including tariffs, to protect domestic industries and
producers from increased imports which inflict or could inflict serious injury on
them.4 The wisdom of the policies behind the SMA, however, is not put into
question by the petition at bar. The questions submitted to the Court relate to
the means and the procedures ordained in the law to ensure that the
determination of the imposition or non-imposition of a safeguard measure is
proper.
Antecedent Facts
Petitioner Southern Cross Cement Corporation ("Southern Cross") is a
domestic corporation engaged in the business of cement manufacturing,
production, importation and exportation. Its principal stockholders are Taiheiyo
Cement Corporation and Tokuyama Corporation, purportedly the largest
cement manufacturers in Japan.5
Private respondent Philippine Cement Manufacturers
Corporation6 ("Philcemcor") is an association of domestic cement
manufacturers. It has eighteen (18) members,7 per Record. While Philcemcor
heralds itself to be an association of domestic cement manufacturers, it
appears that considerable equity holdings, if not controlling interests in at least
twelve (12) of its member-corporations, were acquired by the three largest
cement manufacturers in the world, namely Financiere Lafarge S.A. of France,
Cemex S.A. de C.V. of Mexico, and Holcim Ltd. of Switzerland (formerly
Holderbank Financiere Glaris, Ltd., then Holderfin B.V.).8
On 22 May 2001, respondent Department of Trade and Industry ("DTI")
accepted an application from Philcemcor, alleging that the importation of gray
Portland cement9 in increased quantities has caused declines in domestic
production, capacity utilization, market share, sales and employment; as well as
caused depressed local prices. Accordingly, Philcemcor sought the imposition
at first of provisional, then later, definitive safeguard measures on the import of
cement pursuant to the SMA. Philcemcor filed the application in behalf of
twelve (12) of its member-companies.10
After preliminary investigation, the Bureau of Import Services of the DTI,
determined that critical circumstances existed justifying the imposition of
provisional measures.11 On 7 November 2001, the DTI issued
an Order, imposing a provisional measure equivalent to Twenty Pesos and
Sixty Centavos (P20.60) per forty (40) kilogram bag on all importations of gray
Portland cement for a period not exceeding two hundred (200) days from the
date of issuance by the Bureau of Customs (BOC) of the
implementing Customs Memorandum Order.12 The corresponding Customs
Memorandum Order was issued on 10 December 2001, to take effect that
same day and to remain in force for two hundred (200) days.13
In the meantime, the Tariff Commission, on 19 November 2001, received a
request from the DTI for a formal investigation to determine whether or not to
impose a definitive safeguard measure on imports of gray Portland cement,
pursuant to Section 9 of the SMA and its Implementing Rules and Regulations.
A notice of commencement of formal investigation was published in the
newspapers on 21 November 2001. Individual notices were likewise sent to
concerned parties, such as Philcemcor, various importers and exporters, the
Embassies of Indonesia, Japan and Taiwan, contractors/builders associations,
industry associations, cement workers' groups, consumer groups, non-
government organizations and concerned government agencies.14 A preliminary
conference was held on 27 November 2001, attended by several concerned
parties, including Southern Cross.15 Subsequently, the Tariff Commission
received several position papers both in support and against Philcemcor's
application.16 The Tariff Commission also visited the corporate offices and
manufacturing facilities of each of the applicant companies, as well as that of
Southern Cross and two other cement importers.17
On 13 March 2002, the Tariff Commission issued its Formal Investigation
Report ("Report"). Among the factors studied by the Tariff Commission in its
Report were the market share of the domestic industry, 18 production and
sales,19 capacity utilization,20 financial performance and profitability,21 and return
on sales.22 The Tariff Commission arrived at the following conclusions:
1. The circumstances provided in Article XIX of GATT 1994 need not
be demonstrated since the product under consideration (gray Portland
cement) is not the subject of any Philippine obligation or tariff
concession under the WTO Agreement. Nonetheless, such inquiry is
governed by the national legislation (R.A. 8800) and the terms and
conditions of the Agreement on Safeguards.
2. The collective output of the twelve (12) applicant companies
constitutes a major proportion of the total domestic production of gray
Portland cement and blended Portland cement.
3. Locally produced gray Portland cement and blended Portland
cement (Pozzolan) are "like" to imported gray Portland cement.
4. Gray Portland cement is being imported into the Philippines in
increased quantities, both in absolute terms and relative to domestic
production, starting in 2000. The increase in volume of imports is
recent, sudden, sharp and significant.
5. The industry has not suffered and is not suffering significant overall
impairment in its condition, i.e., serious injury.
6. There is no threat of serious injury that is imminent from imports of
gray Portland cement.
7. Causation has become moot and academic in view of the negative
determination of the elements of serious injury and imminent threat of
serious injury.23
Accordingly, the Tariff Commission made the following recommendation, to wit:
The elements of serious injury and imminent threat of serious injury not
having been established, it is hereby recommended that no definitive
general safeguard measure be imposed on the importation of gray
Portland cement.24
The DTI received the Report on 14 March 2002. After reviewing the report, then
DTI Secretary Manuel Roxas II ("DTI Secretary") disagreed with the conclusion
of the Tariff Commission that there was no serious injury to the local cement
industry caused by the surge of imports.25 In view of this disagreement, the DTI
requested an opinion from the Department of Justice ("DOJ") on the DTI
Secretary's scope of options in acting on the Commission's recommendations.
Subsequently, then DOJ Secretary Hernando Perez rendered an opinion
stating that Section 13 of the SMA precluded a review by the DTI Secretary of
the Tariff Commission's negative finding, or finding that a definitive safeguard
measure should not be imposed.26
On 5 April 2002, the DTI Secretary promulgated a Decision. After quoting the
conclusions of the Tariff Commission, the DTI Secretary noted the DTI's
disagreement with the conclusions. However, he also cited the DOJ Opinion
advising the DTI that it was bound by the negative finding of the Tariff
Commission. Thus, he ruled as follows:
The DTI has no alternative but to abide by the [Tariff] Commission's
recommendations.
IN VIEW OF THE FOREGOING, and in accordance with Section 13 of
RA 8800 which states:
 "In the event of a negative final determination; or if the
cash bond is in excess of the definitive safeguard duty
assessed, the Secretary shall immediately issue, through
the Secretary of Finance, a written instruction to the
Commissioner of Customs, authorizing the return of the
cash bond or the remainder thereof, as the case may be,
previously collected as provisional general safeguard
measure within ten (10) days from the date a final decision
has been made; Provided, that the government shall not
be liable for any interest on the amount to be returned. The
Secretary shall not accept for consideration another
petition from the same industry, with respect to the same
imports of the product under consideration within one (1)
year after the date of rendering such a decision."
The DTI hereby issues the following:
The application for safeguard measures against the importation of gray
Portland cement filed by PHILCEMCOR (Case No. 02-2001) is hereby
denied.27 (Emphasis in the original)
Philcemcor received a copy of the DTI Decision on 12 April 2002. Ten days
later, it filed with the Court of Appeals a Petition for Certiorari, Prohibition and
Mandamus28 seeking to set aside the DTI Decision, as well as the Tariff
Commission's Report. Philcemcor likewise applied for a Temporary Restraining
Order/Injunction to enjoin the DTI and the BOC from implementing the
questioned Decision and Report. It prayed that the Court of Appeals direct the
DTI Secretary to disregard the Report and to render judgment independently of
the Report. Philcemcor argued that the DTI Secretary, vested as he is under
the law with the power of review, is not bound to adopt the recommendations of
the Tariff Commission; and, that the Report is void, as it is predicated on a
flawed framework, inconsistent inferences and erroneous methodology. 29
On 10 June 2002, Southern Cross filed its Comment.30 It argued that the Court
of Appeals had no jurisdiction over Philcemcor's Petition, for it is on the Court of
Tax Appeals ("CTA") that the SMA conferred jurisdiction to review rulings of the
Secretary in connection with the imposition of a safeguard measure. It likewise
argued that Philcemcor's resort to the special civil action of certiorari is
improper, considering that what Philcemcor sought to rectify is an error of
judgment and not an error of jurisdiction or grave abuse of discretion, and that a
petition for review with the CTA was available as a plain, speedy and adequate
remedy. Finally, Southern Cross echoed the DOJ Opinion that Section 13 of the
SMA precludes a review by the DTI Secretary of a negative finding of the Tariff
Commission.
After conducting a hearing on 19 June 2002 on Philcemcor's application for
preliminary injunction, the Court of Appeals' Twelfth Division31 granted the writ
sought in its Resolution dated 21 June 2002.32 Seven days later, on 28 June
2002, the two-hundred (200)-day period for the imposition of the provisional
measure expired. Despite the lapse of the period, the BOC continued to impose
the provisional measure on all importations of Portland cement made by
Southern Cross. The uninterrupted assessment of the tariff, according to
Southern Cross, worked to its detriment to the point that the continued
imposition would eventually lead to its closure.33
Southern Cross timely filed a Motion for Reconsideration of the Resolution on 9
September 2002. Alleging that Philcemcor was not entitled to provisional relief,
Southern Cross likewise sought a clarificatory order as to whether the grant of
the writ of preliminary injunction could extend the earlier imposition of the
provisional measure beyond the two hundred (200)-day limit imposed by law.
The appeals' court failed to take immediate action on Southern Cross's motion
despite the four (4) motions for early resolution the latter filed between
September of 2002 and February of 2003. After six (6) months, on 19 February
2003, the Court of Appeals directed Philcemcor to comment on Southern
Cross's Motion for Reconsideration.34 After Philcemcor filed its Opposition35 on
13 March 2003, Southern Cross filed another set of four (4) motions for early
resolution.
Despite the efforts of Southern Cross, the Court of Appeals failed to directly
resolve the Motion for Reconsideration. Instead, on 5 June 2003, it rendered
a Decision,36 granting in part Philcemcor's petition. The appellate court ruled
that it had jurisdiction over the petition for certiorari since it alleged grave abuse
of discretion. It refused to annul the findings of the Tariff Commission, citing the
rule that factual findings of administrative agencies are binding upon the courts
and its corollary, that courts should not interfere in matters addressed to the
sound discretion and coming under the special technical knowledge and
training of such agencies.37 Nevertheless, it held that the DTI Secretary is not
bound by the factual findings of the Tariff Commission since such findings are
merely recommendatory and they fall within the ambit of the Secretary's
discretionary review. It determined that the legislative intent is to grant the DTI
Secretary the power to make a final decision on the Tariff Commission's
recommendation.38 The dispositive portion of the Decision reads:
WHEREFORE, based on the foregoing premises, petitioner's prayer to
set aside the findings of the Tariff Commission in its assailed Report
dated March 13, 2002 is DENIED. On the other hand, the assailed April
5, 2002 Decision of the Secretary of the Department of Trade and
Industry is hereby SET ASIDE. Consequently, the case
is REMANDED to the public respondent Secretary of Department of
Trade and Industry for a final decision in accordance with RA 8800 and
its Implementing Rules and Regulations.
SO ORDERED.39
On 23 June 2003, Southern Cross filed the present petition, assailing the
appellate court's Decision for departing from the accepted and usual course of
judicial proceedings, and not deciding the substantial questions in accordance
with law and jurisprudence. The petition argues in the main that the Court of
Appeals has no jurisdiction over Philcemcor's petition, the proper remedy being
a petition for review with the CTA conformably with the SMA, and; that the
factual findings of the Tariff Commission on the existence or non-existence
conditions warranting the imposition of general safeguard measures are binding
upon the DTI Secretary.
The timely filing of Southern Cross's petition before this Court necessarily
prevented the Court of Appeals Decisionfrom becoming final.40 Yet on 25 June
2003, the DTI Secretary issued a new Decision, ruling this time that that in light
of the appellate court's Decision there was no longer any legal impediment to
his deciding Philcemcor's application for definitive safeguard measures. 41 He
made a determination that, contrary to the findings of the Tariff Commission,
the local cement industry had suffered serious injury as a result of the import
surges.42 Accordingly, he imposed a definitive safeguard measure on the
importation of gray Portland cement, in the form of a definitive safeguard duty in
the amount of P20.60/40 kg. bag for three years on imported gray Portland
Cement.43
On 7 July 2003, Southern Cross filed with the Court a "Very Urgent Application
for a Temporary Restraining Order and/or A Writ of Preliminary Injunction"
("TRO Application"), seeking to enjoin the DTI Secretary from enforcing
his Decision of 25 June 2003 in view of the pending petition before this Court.
Philcemcor filed an opposition, claiming, among others, that it is not this Court
but the CTA that has jurisdiction over the application under the law.
On 1 August 2003, Southern Cross filed with the CTA a Petition for Review,
assailing the DTI Secretary's 25 June 2003 Decision which imposed the definite
safeguard measure. Prescinding from this action, Philcemcor filed with this
Court a Manifestation and Motion to Dismiss in regard to Southern Cross's
petition, alleging that it deliberately and willfully resorted to forum-shopping. It
points out that Southern Cross's TRO Application seeks to enjoin the DTI
Secretary's second decision, while its Petition before the CTA prays for the
annulment of the same decision.44
Reiterating its Comment on Southern Cross's Petition for Review, Philcemcor
also argues that the CTA, being a special court of limited jurisdiction, could only
review the ruling of the DTI Secretary when a safeguard measure is imposed,
and that the factual findings of the Tariff Commission are not binding on the DTI
Secretary.45
After giving due course to Southern Cross's Petition, the Court called the case
for oral argument on 18 February 2004.46 At the oral argument, attended by the
counsel for Philcemcor and Southern Cross and the Office of the Solicitor
General, the Court simplified the issues in this wise: (i) whether the Decision of
the DTI Secretary is appealable to the CTA or the Court of Appeals; (ii)
assuming that the Court of Appeals has jurisdiction, whether its Decision is in
accordance with law; and, (iii) whether a Temporary Restraining Order is
warranted.47
During the oral arguments, counsel for Southern Cross manifested that due to
the imposition of the general safeguard measures, Southern Cross was forced
to cease operations in the Philippines in November of 2003. 48
Propriety of the Temporary Restraining Order
Before the merits of the Petition, a brief comment on Southern Cross's
application for provisional relief. It sought to enjoin the DTI Secretary from
enforcing the definitive safeguard measure he imposed in his 25 June
2003 Decision. The Court did not grant the provisional relief for it would be
tantamount to enjoining the collection of taxes, a peremptory judicial act which
is traditionally frowned upon,49 unless there is a clear statutory basis for it.50 In
that regard, Section 218 of the Tax Reform Act of 1997 prohibits any court from
granting an injunction to restrain the collection of any national internal revenue
tax, fee or charge imposed by the internal revenue code.51 A similar philosophy
is expressed by Section 29 of the SMA, which states that the filing of a petition
for review before the CTA does not stop, suspend, or otherwise toll the
imposition or collection of the appropriate tariff duties or the adoption of other
appropriate safeguard measures.52 This evinces a clear legislative intent that
the imposition of safeguard measures, despite the availability of judicial review,
should not be enjoined notwithstanding any timely appeal of the imposition.
The Forum-Shopping Issue
In the same breath, we are not convinced that the allegation of forum-shopping
has been duly proven, or that sanction should befall upon Southern Cross and
its counsel. The standard by Section 5, Rule 7 of the 1997 Rules of Civil
Procedure in order that sanction may be had is that "the acts of the party or his
counsel clearly constitute willful and deliberate forum shopping."53 The standard
implies a malicious intent to subvert procedural rules, and such state of mind is
not evident in this case.
The Jurisdictional Issue
On to the merits of the present petition.
In its assailed Decision, the Court of Appeals, after asserting only in brief that it
had jurisdiction over Philcemcor's Petition, discussed the issue of whether or
not the DTI Secretary is bound to adopt the negative recommendation of the
Tariff Commission on the application for safeguard measure. The Court of
Appeals maintained that it had jurisdiction over the petition, as it alleged grave
abuse of discretion on the part of the DTI Secretary, thus:
A perusal of the instant petition reveals allegations of grave abuse of
discretion on the part of the DTI Secretary in rendering the assailed
April 5, 2002 Decision wherein it was ruled that he had no alternative
but to abide by the findings of the Commission on the matter of
safeguard measures for the local cement industry. Abuse of discretion
is admittedly within the ambit of certiorari.
Grave abuse of discretion implies such capricious and whimsical
exercise of judgment as is equivalent to lack of jurisdiction. It is alleged
that, in the assailed Decision, the DTI Secretary gravely abused his
discretion in wantonly evading to discharge his duty to render an
independent determination or decision in imposing a definitive
safeguard measure.54
We do not doubt that the Court of Appeals' certiorari powers extend to
correcting grave abuse of discretion on the part of an officer exercising judicial
or quasi-judicial functions.55 However, the special civil action of certiorari is
available only when there is no plain, speedy and adequate remedy in the
ordinary course of law.56 Southern Cross relies on this limitation, stressing that
Section 29 of the SMA is a plain, speedy and adequate remedy in the ordinary
course of law which Philcemcor did not avail of. The Section reads:
Section 29. Judicial Review. – Any interested party who is adversely
affected by the ruling of the Secretary in connection with the
imposition of a safeguard measure may file with the CTA, a petition
for review of such ruling within thirty (30) days from receipt thereof.
Provided, however, that the filing of such petition for review shall not in
any way stop, suspend or otherwise toll the imposition or collection of
the appropriate tariff duties or the adoption of other appropriate
safeguard measures, as the case may be.
The petition for review shall comply with the same requirements and
shall follow the same rules of procedure and shall be subject to the
same disposition as in appeals in connection with adverse rulings on
tax matters to the Court of Appeals.57 (Emphasis supplied)
It is not difficult to divine why the legislature singled out the CTA as the court
with jurisdiction to review the ruling of the DTI Secretary in connection with the
imposition of a safeguard measure. The Court has long recognized the
legislative determination to vest sole and exclusive jurisdiction on matters
involving internal revenue and customs duties to such a specialized court. 58 By
the very nature of its function, the CTA is dedicated exclusively to the study and
consideration of tax problems and has necessarily developed an expertise on
the subject.59
At the same time, since the CTA is a court of limited jurisdiction, its jurisdiction
to take cognizance of a case should be clearly conferred and should not be
deemed to exist on mere implication.60 Concededly, Rep. Act No. 1125, the
statute creating the CTA, does not extend to it the power to review decisions of
the DTI Secretary in connection with the imposition of safeguard measures.61 Of
course, at that time which was before the advent of trade liberalization the
notion of safeguard measures or safety nets was not yet in vogue.
Undeniably, however, the SMA expanded the jurisdiction of the CTA by
including review of the rulings of the DTI Secretary in connection with the
imposition of safeguard measures. However, Philcemcor and the public
respondents agree that the CTA has appellate jurisdiction over a decision of the
DTI Secretary imposing a safeguard measure, but not when his ruling is not to
impose such measure.
In a related development, Rep. Act No. 9282, enacted on 30 March 2004,
expressly vests unto the CTA jurisdiction over "[d]ecisions of the Secretary of
Trade and Industry, in case of nonagricultural product, commodity or article xxx
involving xxx safeguard measures under Republic Act No. 8800, where
either party may appeal the decision to impose or not to impose said
duties."62 Had Rep. Act No. 9282 already been in force at the beginning of the
incidents subject of this case, there would have been no need to make any
deeper inquiry as to the extent of the CTA's jurisdiction. But as Rep. Act No.
9282 cannot be applied retroactively to the present case, the question of
whether such jurisdiction extends to a decision not to impose a safeguard
measure will have to be settled principally on the basis of the SMA.
Under Section 29 of the SMA, there are three requisites to enable the CTA to
acquire jurisdiction over the petition for review contemplated therein: (i) there
must be a ruling by the DTI Secretary; (ii) the petition must be filed by an
interested party adversely affected by the ruling; and (iii) such ruling must be in
connection with the imposition of a safeguard measure. The first two requisites
are clearly present. The third requisite deserves closer scrutiny.
Contrary to the stance of the public respondents and Philcemcor, in this case
where the DTI Secretary decides not to impose a safeguard measure, it is the
CTA which has jurisdiction to review his decision. The reasons are as follows:
First. Split jurisdiction is abhorred.
Essentially, respondents' position is that judicial review of the DTI Secretary's
ruling is exercised by two different courts, depending on whether or not it
imposes a safeguard measure, and in either case the court exercising
jurisdiction does so to the exclusion of the other. Thus, if the DTI decision
involves the imposition of a safeguard measure it is the CTA which has
appellate jurisdiction; otherwise, it is the Court of Appeals. Such setup is as
novel and unusual as it is cumbersome and unwise. Essentially, respondents
advocate that Section 29 of the SMA has established split appellate jurisdiction
over rulings of the DTI Secretary on the imposition of safeguard measure.
This interpretation cannot be favored, as the Court has consistently refused to
sanction split jurisdiction.63 The power of the DTI Secretary to adopt or withhold
a safeguard measure emanates from the same statutory source, and it boggles
the mind why the appeal modality would be such that one appellate court is
qualified if what is to be reviewed is a positive determination, and it is not if
what is appealed is a negative determination. In deciding whether or not to
impose a safeguard measure, provisional or general, the DTI Secretary would
be evaluating only one body of facts and applying them to one set of laws. The
reviewing tribunal will be called upon to examine the same facts and the same
laws, whether or not the determination is positive or negative.
In short, if we were to rule for respondents we would be confirming the exercise
by two judicial bodies of jurisdiction over basically the same subject
matter¾precisely the split-jurisdiction situation which is anathema to the orderly
administration of justice.64 The Court cannot accept that such was the
legislative motive especially considering that the law expressly confers on the
CTA, the tribunal with the specialized competence over tax and tariff matters,
the role of judicial review without mention of any other court that may exercise
corollary or ancillary jurisdiction in relation to the SMA. The provision refers to
the Court of Appeals but only in regard to procedural rules and dispositions of
appeals from the CTA to the Court of Appeals.65
The principle enunciated in Tejada v. Homestead Property Corporation66 is
applicable to the case at bar:
The Court agrees with the observation of the [that] when an
administrative agency or body is conferred quasi-judicial functions, all
controversies relating to the subject matter pertaining to its
specialization are deemed to be included within the jurisdiction of
said administrative agency or body. Split jurisdiction is not
favored.67
Second. The interpretation of the provisions of the SMA favors vesting
untrammeled appellate jurisdiction on the CTA.
A plain reading of Section 29 of the SMA reveals that Congress did not
expressly bar the CTA from reviewing a negative determination by the DTI
Secretary nor conferred on the Court of Appeals such review authority.
Respondents note, on the other hand, that neither did the law expressly grant
to the CTA the power to review a negative determination. However, under the
clear text of the law, the CTA is vested with jurisdiction to review the ruling of
the DTI Secretary "in connection with the imposition of a safeguard measure."
Had the law been couched instead to incorporate the phrase "the ruling
imposing a safeguard measure," then respondent's claim would have
indisputable merit. Undoubtedly, the phrase "in connection with" not only
qualifies but clarifies the succeeding phrase "imposition of a safeguard
measure." As expounded later, the phrase also encompasses the opposite or
converse ruling which is the non-imposition of a safeguard measure.
In the American case of Shaw v. Delta Air Lines, Inc.,68 the United States
Supreme Court, in interpreting a key provision of the Employee Retirement
Security Act of 1974, construed the phrase "relates to" in its normal sense
which is the same as "if it has connection with or reference to."69 There is no
serious dispute that the phrase "in connection with" is synonymous to "relates
to" or "reference to," and that all three phrases are broadly expansive. This is
affirmed not just by jurisprudential fiat, but also the acquired connotative
meaning of "in connection with" in common parlance. Consequently, with the
use of the phrase "in connection with," Section 29 allows the CTA to review not
only the ruling imposing a safeguard measure, but all other rulings related or
have reference to the application for such measure.
Now, let us determine the maximum scope and reach of the phrase "in
connection with" as used in Section 29 of the SMA. A literalist reading or
linguistic survey may not satisfy. Even the US Supreme Court in New York
State Blue Cross Plans v. Travelers Ins.70 conceded that the phrases "relate to"
or "in connection with" may be extended to the farthest stretch of indeterminacy
for, universally, relations or connections are infinite and stop nowhere. 71 Thus,
in the case the US High Court, examining the same phrase of the same
provision of law involved in Shaw, resorted to looking at the statute and its
objectives as the alternative to an "uncritical literalism."72 A similar inquiry into
the other provisions of the SMA is in order to determine the scope of review
accorded therein to the CTA.73
The authority to decide on the safeguard measure is vested in the DTI
Secretary in the case of non-agricultural products, and in the Secretary of the
Department of Agriculture in the case of agricultural products.74 Section 29 is
likewise explicit that only the rulings of the DTI Secretary or the Agriculture
Secretary may be reviewed by the CTA.75 Thus, the acts of other bodies that
were granted some powers by the SMA, such as the Tariff Commission, are not
subject to direct review by the CTA.
Under the SMA, the Department Secretary concerned is authorized to decide
on several matters. Within thirty (30) days from receipt of a petition seeking the
imposition of a safeguard measure, or from the date he made motu
proprio initiation, the Secretary shall make a preliminary determination on
whether the increased imports of the product under consideration substantially
cause or threaten to cause serious injury to the domestic industry.76 Such ruling
is crucial since only upon the Secretary's positive preliminary determination that
a threat to the domestic industry exists shall the matter be referred to the Tariff
Commission for formal investigation, this time, to determine whether the
general safeguard measure should be imposed or not.77 Pursuant to a positive
preliminary determination, the Secretary may also decide that the imposition of
a provisional safeguard measure would be warranted under Section 8 of the
SMA.78 The Secretary is also authorized to decide, after receipt of the report of
the Tariff Commission, whether or not to impose the general safeguard
measure, and if in the affirmative, what general safeguard measures should be
applied.79 Even after the general safeguard measure is imposed, the Secretary
is empowered to extend the safeguard measure,80 or terminate, reduce or
modify his previous rulings on the general safeguard measure.81
With the explicit grant of certain powers involving safeguard measures by the
SMA on the DTI Secretary, it follows that he is empowered to rule on several
issues. These are the issues which arise in connection with, or in relation to,
the imposition of a safeguard measure. They may arise at different stages – the
preliminary investigation stage, the post-formal investigation stage, or the post-
safeguard measure stage – yet all these issues do become ripe for resolution
because an initiatory action has been taken seeking the imposition of a
safeguard measure. It is the initiatory action for the imposition of a safeguard
measure that sets the wheels in motion, allowing the Secretary to make
successive rulings, beginning with the preliminary determination.
Clearly, therefore, the scope and reach of the phrase "in connection with," as
intended by Congress, pertain to all rulings of the DTI Secretary or Agriculture
Secretary which arise from the time an application or motu proprioinitiation for
the imposition of a safeguard measure is taken. Indeed, the incidents which
require resolution come to the fore only because there is an initial application or
action seeking the imposition of a safeguard measure. From the legislative
standpoint, it was a matter of sense and practicality to lump up the questions
related to the initiatory application or action for safeguard measure and to
assign only one court and; that is the CTA to initially review all the rulings
related to such initiatory application or action. Both directions Congress put in
place by employing the phrase "in connection with" in the law.
Given the relative expanse of decisions subject to judicial review by the CTA
under Section 29, we do not doubt that a negative ruling refusing to impose a
safeguard measure falls within the scope of its jurisdiction. On a literal level,
such negative ruling is "a ruling of the Secretary in connection with the
imposition of a safeguard measure," as it is one of the possible outcomes that
may result from the initial application or action for a safeguard measure. On a
more critical level, the rulings of the DTI Secretary in connection with a
safeguard measure, however diverse the outcome may be, arise from the same
grant of jurisdiction on the DTI Secretary by the SMA.82 The refusal by the DTI
Secretary to grant a safeguard measure involves the same grant of authority,
the same statutory prescriptions, and the same degree of discretion as the
imposition by the DTI Secretary of a safeguard measure.
The position of the respondents is one of "uncritical literalism"83 incongruent
with the animus of the law. Moreover, a fundamentalist approach to Section 29
is not warranted, considering the absurdity of the consequences.
Third. Interpretatio Talis In Ambiguis Semper Fienda Est, Ut Evitur
Inconveniens Et Absurdum.84
Even assuming arguendo that Section 29 has not expressly granted the CTA
jurisdiction to review a negative ruling of the DTI Secretary, the Court is
precluded from favoring an interpretation that would cause inconvenience and
absurdity.85 Adopting the respondents' position favoring the CTA's minimal
jurisdiction would unnecessarily lead to illogical and onerous results.
Indeed, it is illiberal to assume that Congress had intended to provide appellate
relief to rulings imposing a safeguard measure but not to those declining to
impose the measure. Respondents might argue that the right to relief from a
negative ruling is not lost since the applicant could, as Philcemcor did, question
such ruling through a special civil action for certiorari under Rule 65 of the 1997
Rules of Civil Procedure, in lieu of an appeal to the CTA. Yet these two reliefs
are of differing natures and gravamen. While an appeal may be predicated on
errors of fact or errors of law, a special civil action for certiorari is grounded on
grave abuse of discretion or lack of or excess of jurisdiction on the part of the
decider. For a special civil action for certiorari to succeed, it is not enough that
the questioned act of the respondent is wrong. As the Court clarified in Sempio
v. Court of Appeals:
A tribunal, board or officer acts without jurisdiction if it/he does not have
the legal power to determine the case. There is excess of jurisdiction
where, being clothed with the power to determine the case, the tribunal,
board or officer oversteps its/his authority as determined by law. And
there is grave abuse of discretion where the tribunal, board or officer
acts in a capricious, whimsical, arbitrary or despotic manner in the
exercise of his judgment as to be said to be equivalent to lack of
jurisdiction. Certiorari is often resorted to in order to correct errors of
jurisdiction. Where the error is one of law or of fact, which is a mistake
of judgment, appeal is the remedy.86
It is very conceivable that the DTI Secretary, after deliberate thought and
careful evaluation of the evidence, may either make a negative preliminary
determination as he is so empowered under Section 7 of the SMA, or refuse to
adopt the definitive safeguard measure under Section 13 of the same law.
Adopting the respondents' theory, this negative ruling is susceptible to reversal
only through a special civil action for certiorari, thus depriving the affected party
the chance to elevate the ruling on appeal on the rudimentary grounds of errors
in fact or in law. Instead, and despite whatever indications that the DTI
Secretary acted with measure and within the bounds of his jurisdiction are, the
aggrieved party will be forced to resort to a gymnastic exercise, contorting the
straight and narrow in an effort to discombobulate the courts into believing that
what was within was actually beyond and what was studied and deliberate
actually whimsical and capricious. What then would be the remedy of the party
aggrieved by a negative ruling that simply erred in interpreting the facts or the
law? It certainly cannot be the special civil action for certiorari, for as the Court
held in Silverio v. Court of Appeals: "Certiorari is a remedy narrow in its scope
and inflexible in its character. It is not a general utility tool in the legal
workshop."87
Fortunately, this theoretical quandary need not come to pass. Section 29 of the
SMA is worded in such a way that it places under the CTA's judicial review all
rulings of the DTI Secretary, which are connected with the imposition of a
safeguard measure. This is sound and proper in light of the specialized
jurisdiction of the CTA over tax matters. In the same way that a question of
whether to tax or not to tax is properly a tax matter, so is the question of
whether to impose or not to impose a definitive safeguard measure.
On another note, the second paragraph of Section 29 similarly reveals the
legislative intent that rulings of the DTI Secretary over safeguard measures
should first be reviewed by the CTA and not the Court of Appeals. It reads:
The petition for review shall comply with the same requirements and
shall follow the same rules of procedure and shall be subject to the
same disposition as in appeals in connection with adverse rulings on
tax matters to the Court of Appeals.
This is the only passage in the SMA in which the Court of Appeals is
mentioned. The express wish of Congress is that the petition conform to the
requirements and procedure under Rule 43 of the Rules of Civil Procedure.
Since Congress mandated that the form and procedure adopted be analogous
to a review of a CTA ruling by the Court of Appeals, the legislative
contemplation could not have been that the appeal be directly taken to the
Court of Appeals.
Issue of Binding Effect of Tariff
Commission's Factual Determination
on DTI Secretary.
The next issue for resolution is whether the factual determination made by the
Tariff Commission under the SMA is binding on the DTI Secretary. Otherwise
stated, the question is whether the DTI Secretary may impose general
safeguard measures in the absence of a positive final determination by the
Tariff Commission.
The Court of Appeals relied upon Section 13 of the SMA in ruling that the
findings of the Tariff Commission do not necessarily constitute a final decision.
Section 13 details the procedure for the adoption of a safeguard measure, as
well as the steps to be taken in case there is a negative final determination. The
implication of the Court of Appeals' holding is that the DTI Secretary may adopt
a definitive safeguard measure, notwithstanding a negative determination made
by the Tariff Commission.
Undoubtedly, Section 13 prescribes certain limitations and restrictions before
general safeguard measures may be imposed. However, the most
fundamental restriction on the DTI Secretary's power in that respect is
contained in Section 5 of the SMA¾that there should first be a positive
final determination of the Tariff Commission¾which the Court of Appeals
curiously all but ignored. Section 5 reads:
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 [Tariff] 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. (emphasis supplied)
The plain meaning of Section 5 shows that it is the Tariff Commission that has
the power to make a "positive final determination." This power lodged in the
Tariff Commission, must be distinguished from the power to impose the general
safeguard measure which is properly vested on the DTI Secretary.88
All in all, there are two condition precedents that must be satisfied before the
DTI Secretary may impose a general safeguard measure on grey Portland
cement. First, there must be a positive final determination by the Tariff
Commission that a product is being imported into the country in increased
quantities (whether absolute or relative to domestic production), as to be a
substantial cause of serious injury or threat to the domestic industry. Second, in
the case of non-agricultural products the Secretary must establish that the
application of such safeguard measures is in the public interest.89 As Southern
Cross argues, Section 5 is quite clear-cut, and it is impossible to finagle a
different conclusion even through overarching methods of statutory
construction. There is no safer nor better settled canon of interpretation that
when language is clear and unambiguous it must be held to mean what it
plainly expresses:90 In the quotable words of an illustrious member of this Court,
thus:
 [I]f a statute is clear, plain and free from ambiguity, it must be given its
literal meaning and applied without attempted interpretation. The verba
legis or plain meaning rule rests on the valid presumption that the
words employed by the legislature in a statute correctly express its
intent or will and preclude the court from construing it differently. The
legislature is presumed to know the meaning of the words, to have
used words advisedly, and to have expressed its intent by the use of
such words as are found in the statute.91
Moreover, Rule 5 of the Implementing Rules and Regulations of the
SMA,92 which interprets Section 5 of the law, likewise requires a positive final
determination on the part of the Tariff Commission before the application of the
general safeguard measure.
The SMA establishes a distinct allocation of functions between the Tariff
Commission and the DTI Secretary. The plain meaning of Section 5 shows that
it is the Tariff Commission that has the power to make a "positive final
determination." This power, which belongs to the Tariff Commission, must be
distinguished from the power to impose general safeguard measure properly
vested on the DTI Secretary. The distinction is vital, as a "positive final
determination" clearly antecedes, as a condition precedent, the imposition of a
general safeguard measure. At the same time, a positive final determination
does not necessarily result in the imposition of a general safeguard measure.
Under Section 5, notwithstanding the positive final determination of the Tariff
Commission, the DTI Secretary is tasked to decide whether or not that the
application of the safeguard measures is in the public interest.
It is also clear from Section 5 of the SMA that the positive final determination to
be undertaken by the Tariff Commission does not entail a mere gathering of
statistical data. In order to arrive at such determination, it has to establish
causal linkages from the statistics that it compiles and evaluates: after finding
there is an importation in increased quantities of the product in question, that
such importation is a substantial cause of serious threat or injury to the
domestic industry.
The Court of Appeals relies heavily on the legislative record of a congressional
debate during deliberations on the SMA to assert a purported legislative intent
that the findings of the Tariff Commission do not bind the DTI Secretary.93 Yet
as explained earlier, the plain meaning of Section 5 emphasizes that only if the
Tariff Commission renders a positive determination could the DTI Secretary
impose a safeguard measure. Resort to the congressional records to ascertain
legislative intent is not warranted if a statute is clear, plain and free from
ambiguity. The legislature is presumed to know the meaning of the words, to
have used words advisedly, and to have expressed its intent by the use of such
words as are found in the statute.94
Indeed, the legislative record, if at all to be availed of, should be approached
with extreme caution, as legislative debates and proceedings are powerless to
vary the terms of the statute when the meaning is clear.95 Our holding in Civil
Liberties Union v. Executive Secretary96 on the resort to deliberations of the
constitutional convention to interpret the Constitution is likewise appropriate in
ascertaining statutory intent:
While it is permissible in this jurisdiction to consult the debates and
proceedings of the constitutional convention in order to arrive at the
reason and purpose of the resulting Constitution, resort thereto may be
had only when other guides fail as said proceedings are powerless to
vary the terms of the Constitution when the meaning is clear. Debates
in the constitutional convention "are of value as showing the views of
the individual members, and as indicating the reasons for their votes,
but they give us no light as to the views of the large majority who did
not talk xxx. We think it safer to construe the constitution from what
appears upon its face."97
Moreover, it is easy to selectively cite passages, sometimes out of their proper
context, in order to assert a misleading interpretation. The effect can be
dangerous. Minority or solitary views, anecdotal ruminations, or even the
occasional crude witticisms, may improperly acquire the mantle of legislative
intent by the sole virtue of their publication in the authoritative congressional
record. Hence, resort to legislative deliberations is allowable when the statute is
crafted in such a manner as to leave room for doubt on the real intent of the
legislature.
Section 5 plainly evinces legislative intent to restrict the DTI Secretary's power
to impose a general safeguard measure by preconditioning such imposition on
a positive determination by the Tariff Commission. Such legislative intent
should be given full force and effect, as the executive power to impose
definitive safeguard measures is but a delegated power¾the power of taxation,
by nature and by command of the fundamental law, being a preserve of the
legislature.98 Section 28(2), Article VI of the 1987 Constitution confirms the
delegation of legislative power, yet ensures that the prerogative of Congress to
impose limitations and restrictions on the executive exercise of this power:
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.99
The safeguard measures which the DTI Secretary may impose under the SMA
may take the following variations, to wit: (a) an increase in, or imposition of any
duty on the imported product; (b) a decrease in or the imposition of a tariff-rate
quota on the product; (c) a modification or imposition of any quantitative
restriction on the importation of the product into the Philippines; (d) one or more
appropriate adjustment measures, including the provision of trade adjustment
assistance; and (e) any combination of the above-described actions. Except for
the provision of trade adjustment assistance, the measures enumerated by the
SMA are essentially imposts, which precisely are the subject of delegation
under Section 28(2), Article VI of the 1987 Constitution.100
This delegation of the taxation power by the legislative to the executive is
authorized by the Constitution itself.101 At the same time, the Constitution also
grants the delegating authority (Congress) the right to impose restrictions and
limitations on the taxation power delegated to the President.102 The restrictions
and limitations imposed by Congress take on the mantle of a constitutional
command, which the executive branch is obliged to observe.
The SMA empowered the DTI Secretary, as alter ego of the President,103 to
impose definitive general safeguard measures, which basically are tariff
imposts of the type spoken of in the Constitution. However, the law did not
grant him full, uninhibited discretion to impose such measures. The DTI
Secretary authority is derived from the SMA; it does not flow from any inherent
executive power. Thus, the limitations imposed by Section 5 are absolute,
warranted as they are by a constitutional fiat.104
Philcemcor cites our 1912 ruling in Lamb v. Phipps105 to assert that the DTI
Secretary, having the final decision on the safeguard measure, has the power
to evaluate the findings of the Tariff Commission and make an independent
judgment thereon. Given the constitutional and statutory limitations governing
the present case, the citation is misplaced. Lamb pertained to the discretion of
the Insular Auditor of the Philippine Islands, whom, as the Court recognized,
"[t]he statutes of the United States require[d] xxx to exercise his judgment upon
the legality xxx [of] provisions of law and resolutions of Congress providing for
the payment of money, the means of procuring testimony upon which he may
act."106
Thus in Lamb, while the Court recognized the wide latitude of discretion that
may have been vested on the Insular Auditor, it also recognized that such
latitude flowed from, and is consequently limited by, statutory grant. However,
in this case, the provision of the Constitution in point expressly recognizes the
authority of Congress to prescribe limitations in the case of tariffs, export/import
quotas and other such safeguard measures. Thus, the broad discretion granted
to the Insular Auditor of the Philippine Islands cannot be analogous to the
discretion of the DTI Secretary which is circumscribed by Section 5 of the SMA.
For that matter, Cariño v. Commissioner on Human Rights,107 likewise cited by
Philcemcor, is also inapplicable owing to the different statutory regimes
prevailing over that case and the present petition. In Cariño, the Court ruled
that the constitutional power of the Commission on Human Rights (CHR) to
investigate human rights' violations did not extend to adjudicating claims on the
merits.108 Philcemcor claims that the functions of the Tariff Commission being
"only investigatory," it could neither decide nor adjudicate.109
The applicable law governing the issue in Cariño is Section 18, Article XIII of
the Constitution, which delineates the powers and functions of the CHR. The
provision does not vest on the CHR the power to adjudicate cases, but only to
investigate all forms of human rights violations.110 Yet, without modifying the
thorough disquisition of the Court in Cariño on the general limitations on the
investigatory power, the precedent is inapplicable because of the difference in
the involved statutory frameworks. The Constitution does not repose binding
effect on the results of the CHR's investigation.111 On the other hand, through
Section 5 of the SMA and under the authority of Section 28(2), Article VI of the
Constitution, Congress did intend to bind the DTI Secretary to the determination
made by the Tariff Commission.112 It is of no consequence that such
determination results from the exercise of investigatory powers by the Tariff
Commission since Congress is well within its constitutional mandate to limit the
authority of the DTI Secretary to impose safeguard measures in the manner
that it sees fit.
The Court of Appeals and Philcemcor also rely on Section 13 of the SMA and
Rule 13 of the SMA's Implementing Rules in support of the view that the DTI
Secretary may decide independently of the determination made by the Tariff
Commission. Admittedly, there are certain infelicities in the language of Section
13 and Rule 13. But reliance should not be placed on the textual imprecisions.
Rather, Section 13 and Rule 13 must be viewed in light of the fundamental
prescription imposed by Section 5. 113
Section 13 of the SMA lays down the procedure to be followed after the Tariff
Commission renders its report. The provision reads in full:
SEC. 13. Adoption of Definitive Measures. — Upon its positive
determination, the Commission shall recommend to the Secretary an
appropriate definitive measure, in the form of:
(a) An increase in, or imposition of, any duty on the imported product;
(b) A decrease in or the imposition of a tariff-rate quota (MAV) on the
product;
(c) A modification or imposition of any quantitative restriction on the
importation of the product into the Philippines;
(d) One or more appropriate adjustment measures, including the
provision of trade adjustment assistance;
(e) Any combination of actions described in subparagraphs (a) to (d).
The Commission may also recommend other actions, including the
initiation of international negotiations to address the underlying cause
of the increase of imports of the product, to alleviate the injury or threat
thereof to the domestic industry, and to facilitate positive adjustment to
import competition.
The general safeguard measure shall be limited to the extent of
redressing or preventing the injury and to facilitate adjustment by the
domestic industry from the adverse effects directly attributed to the
increased imports: Provided, however, That when quantitative import
restrictions are used, such measures shall not reduce the quantity of
imports below the average imports for the three (3) preceding
representative years, unless clear justification is given that a different
level is necessary to prevent or remedy a serious injury.
A general safeguard measure shall not be applied to a product
originating from a developing country if its share of total imports of the
product is less than three percent (3%): Provided, however, That
developing countries with less than three percent (3%) share
collectively account for not more than nine percent (9%) of the total
imports.
The decision imposing a general safeguard measure, the duration of
which is more than one (1) year, shall be reviewed at regular intervals
for purposes of liberalizing or reducing its intensity. The industry
benefiting from the application of a general safeguard measure shall be
required to show positive adjustment within the allowable period. A
general safeguard measure shall be terminated where the benefiting
industry fails to show any improvement, as may be determined by the
Secretary.
The Secretary shall issue a written instruction to the heads of the
concerned government agencies to implement the appropriate general
safeguard measure as determined by the Secretary within fifteen (15)
days from receipt of the report.
In the event of a negative final determination, or if the cash bond is in
excess of the definitive safeguard duty assessed, the Secretary shall
immediately issue, through the Secretary of Finance, a written
instruction to the Commissioner of Customs, authorizing the return of
the cash bond or the remainder thereof, as the case may be, previously
collected as provisional general safeguard measure within ten (10)
days from the date a final decision has been made: Provided, That the
government shall not be liable for any interest on the amount to be
returned. The Secretary shall not accept for consideration another
petition from the same industry, with respect to the same imports of the
product under consideration within one (1) year after the date of
rendering such a decision.
When the definitive safeguard measure is in the form of a tariff
increase, such increase shall not be subject or limited to the maximum
levels of tariff as set forth in Section 401(a) of the Tariff and Customs
Code of the Philippines.
To better comprehend Section 13, note must be taken of the distinction
between the investigatory and recommendatory functions of the Tariff
Commission under the SMA.
The word "determination," as used in the SMA, pertains to the factual findings
on whether there are increased imports into the country of the product under
consideration, and on whether such increased imports are a substantial cause
of serious injury or threaten to substantially cause serious injury to the domestic
industry.114 The SMA explicitly authorizes the DTI Secretary to make a
preliminary determination,115 and the Tariff Commission to make the final
determination.116 The distinction is fundamental, as these functions are not
interchangeable. The Tariff Commission makes its determination only after a
formal investigation process, with such investigation initiated only if there is a
positive preliminary determination by the DTI Secretary under Section 7 of the
SMA.117 On the other hand, the DTI Secretary may impose definitive safeguard
measure only if there is a positive final determination made by the Tariff
Commission.118
In contrast, a "recommendation" is a suggested remedial measure submitted by
the Tariff Commission under Section 13 after making a positive final
determination in accordance with Section 5. The Tariff Commission is not
empowered to make a recommendation absent a positive final determination on
its part.119 Under Section 13, the Tariff Commission is required to recommend to
the [DTI] Secretary an "appropriate definitive measure."120 The Tariff
Commission "may also recommend other actions, including the initiation of
international negotiations to address the underlying cause of the increase of
imports of the products, to alleviate the injury or threat thereof to the domestic
industry and to facilitate positive adjustment to import competition."121
The recommendations of the Tariff Commission, as rendered under Section 13,
are not obligatory on the DTI Secretary. Nothing in the SMA mandates the DTI
Secretary to adopt the recommendations made by the Tariff Commission. In
fact, the SMA requires that the DTI Secretary establish that the application of
such safeguard measures is in the public interest, notwithstanding the Tariff
Commission's recommendation on the appropriate safeguard measure based
on its positive final determination.122 The non-binding force of the Tariff
Commission's recommendations is congruent with the command of Section
28(2), Article VI of the 1987 Constitution that only the President may be
empowered by the Congress to impose appropriate tariff rates, import/export
quotas and other similar measures.123 It is the DTI Secretary, as alter ego of the
President, who under the SMA may impose such safeguard measures subject
to the limitations imposed therein. A contrary conclusion would in essence
unduly arrogate to the Tariff Commission the executive power to impose the
appropriate tariff measures. That is why the SMA empowers the DTI Secretary
to adopt safeguard measures other than those recommended by the Tariff
Commission.
Unlike the recommendations of the Tariff Commission, its determination has a
different effect on the DTI Secretary. Only on the basis of a positive final
determination made by the Tariff Commission under Section 5 can the DTI
Secretary impose a general safeguard measure. Clearly, then the DTI
Secretary is bound by the determinationmade by the Tariff Commission.
Some confusion may arise because the sixth paragraph of Section 13124 uses
the variant word "determined" in a different context, as it contemplates "the
appropriate general safeguard measure as determined by the Secretary within
fifteen (15) days from receipt of the report." Quite plainly, the word "determined"
in this context pertains to the DTI Secretary's power of choice of the appropriate
safeguard measure, as opposed to the Tariff Commission's power to determine
the existence of conditions necessary for the imposition of any safeguard
measure. In relation to Section 5, such choice also relates to the mandate of
the DTI Secretary to establish that the application of safeguard measures is in
the public interest, also within the fifteen (15) day period. Nothing in Section 13
contradicts the instruction in Section 5 that the DTI Secretary is allowed to
impose the general safeguard measures only if there is a positive determination
made by the Tariff Commission.
Unfortunately, Rule 13.2 of the Implementing Rules of the SMA is captioned
"Final Determination by the Secretary." The assailed Decision and Philcemcor
latch on this phraseology to imply that the factual determination rendered by the
Tariff Commission under Section 5 may be amended or reversed by the DTI
Secretary. Of course, implementing rules should conform, not clash, with the
law that they seek to implement, for a regulation which operates to create a rule
out of harmony with the statute is a nullity.125 Yet imperfect draftsmanship
aside, nothing in Rule 13.2 implies that the DTI Secretary can set aside the
determination made by the Tariff Commission under the aegis of Section 5.
This can be seen by examining the specific provisions of Rule 13.2, thus:
RULE 13.2. Final Determination by the Secretary
RULE 13.2.a. Within fifteen (15) calendar days from receipt of
the Report of the Commission, the Secretary shall make a
decision, taking into consideration the measures recommended
by the Commission.
RULE 13.2.b. If the determination is affirmative, the Secretary
shall issue, within two (2) calendar days after making his
decision, a written instruction to the heads of the concerned
government agencies to immediately implement the
appropriate general safeguard measure as determined by him.
Provided, however, that in the case of non-agricultural
products, the Secretary shall first establish that the imposition
of the safeguard measure will be in the public interest.
RULE 13.2.c. Within two (2) calendar days after making his
decision, the Secretary shall also order its publication in two (2)
newspapers of general circulation. He shall also furnish a copy
of his Order to the petitioner and other interested parties,
whether affirmative or negative. (Emphasis supplied.)
Moreover, the DTI Secretary does not have the power to review the findings of
the Tariff Commission for it is not subordinate to the Department of Trade and
Industry ("DTI"). It falls under the supervision, not of the DTI nor of the
Department of Finance (as mistakenly asserted by Southern Cross),126 but of
the National Economic Development Authority, an independent planning
agency of the government of co-equal rank as the DTI.127 As the supervision
and control of a Department Secretary is limited to the bureaus, offices, and
agencies under him,128 the DTI Secretary generally cannot exercise review
authority over actions of the Tariff Commission. Neither does the SMA
specifically authorize the DTI Secretary to alter, amend or modify in any way
the determination made by the Tariff Commission. The most that the DTI
Secretary could do to express displeasure over the Tariff Commission's actions
is to ignore its recommendation, but not its determination.
The word "determination" as used in Rule 13.2 of the Implementing Rules is
dissonant with the same word as employed in the SMA, which in the latter case
is undeviatingly in reference to the determination made by the Tariff
Commission. Beyond the resulting confusion, however, the divergent use in
Rule 13.2 is explicable as the Rule textually pertains to the power of the DTI
Secretary to review the recommendations of the Tariff Commission, not the
latter's determination. Indeed, an examination of the specific provisions show
that there is no real conflict to reconcile. Rule 13.2 respects the logical order
imposed by the SMA. The Rule does not remove the essential requirement
under Section 5 that a positive final determination be made by the Tariff
Commission before a definitive safeguard measure may be imposed by the DTI
Secretary.
The assailed Decision characterizes the findings of the Tariff Commission as
merely recommendatory and points to the DTI Secretary as the authority who
renders the final decision.129 At the same time, Philcemcor asserts that the
Tariff Commission's functions are merely investigatory, and as such do not
include the power to decide or adjudicate. These contentions, viewed in the
context of the fundamental requisite set forth by Section 5, are untenable. They
run counter to the statutory prescription that a positive final determination made
by the Tariff Commission should first be obtained before the definitive
safeguard measures may be laid down.
Was it anomalous for Congress to have provided for a system whereby the
Tariff Commission may preclude the DTI, an office of higher rank, from
imposing a safeguard measure? Of course, this Court does not inquire into the
wisdom of the legislature but only charts the boundaries of powers and
functions set in its enactments. But then, it is not difficult to see the internal
logic of this statutory framework.
For one, as earlier stated, the DTI cannot exercise review powers over the
Tariff Commission which is not its subordinate office.
Moreover, the mechanism established by Congress establishes a measure of
check and balance involving two different governmental agencies with
disparate specializations. The matter of safeguard measures is of such national
importance that a decision either to impose or not to impose then could have
ruinous effects on companies doing business in the Philippines. Thus, it is ideal
to put in place a system which affords all due deliberation and calls to fore
various governmental agencies exercising their particular specializations.
Finally, if this arrangement drawn up by Congress makes it difficult to obtain a
general safeguard measure, it is because such safeguard measure is the
exception, rather than the rule. The Philippines is obliged to observe its
obligations under the GATT, under whose framework trade liberalization, not
protectionism, is laid down. Verily, the GATT actually prescribes conditions
before a member-country may impose a safeguard measure. The pertinent
portion of the GATT Agreement on Safeguards reads:
2. A Member may only apply a safeguard measure to a product only if
that member has determined, pursuant to the provisions set out below,
that such product is being imported into its territory in such increased
quantities, absolute or relative to domestic production, and under such
conditions as to cause or threaten to cause serious injury to the
domestic industry that produces like or directly competitive products. 130
3. (a) A Member may apply a safeguard measure only following an
investigation by the competent authorities of that Member pursuant to
procedures previously established and made public in consonance with
Article X of the GATT 1994. This investigation shall include reasonable
public notice to all interested parties and public hearings or other
appropriate means in which importers, exporters and other interested
parties could present evidence and their views, including the
opportunity to respond to the presentations of other parties and to
submit their views, inter alia, as to whether or not the application of a
safeguard measure would be in the public interest. The competent
authorities shall publish a report setting forth their findings and
reasoned conclusions reached on all pertinent issues of fact and law. 131
The SMA was designed not to contradict the GATT, but to complement it. The
two requisites laid down in Section 5 for a positive final determination are the
same conditions provided under the GATT Agreement on Safeguards for the
application of safeguard measures by a member country. Moreover, the
investigatory procedure laid down by the SMA conforms to the procedure
required by the GATT Agreement on Safeguards. Congress has chosen the
Tariff Commission as the competent authority to conduct such investigation.
Southern Cross stresses that applying the provision of the GATT Agreement on
Safeguards, the Tariff Commission is clearly empowered to arrive at binding
conclusions.132 We agree: binding on the DTI Secretary is the Tariff
Commission's determinations on whether a product is imported in increased
quantities, absolute or relative to domestic production and whether any such
increase is a substantial cause of serious injury or threat thereof to the
domestic industry.133
Satisfied as we are with the proper statutory paradigm within which the SMA
should be analyzed, the flaws in the reasoning of the Court of Appeals and in
the arguments of the respondents become apparent. To better understand the
dynamics of the procedure set up by the law leading to the imposition of
definitive safeguard measures, a brief step-by-step recount thereof is in order.
1. After the initiation of an action involving a general safeguard measure, 134 the
DTI Secretary makes a preliminary determination whether the increased
imports of the product under consideration substantially cause or threaten to
substantially cause serious injury to the domestic industry,135 and whether the
imposition of a provisional measure is warranted under Section 8 of the
SMA.136 If the preliminary determination is negative, it is implied that no further
action will be taken on the application.
2. When his preliminary determination is positive, the Secretary immediately
transmits the records covering the application to the Tariff Commission for
immediate formal investigation.137
3. The Tariff Commission conducts its formal investigation, keyed towards
making a final determination. In the process, it holds public hearings, providing
interested parties the opportunity to present evidence or otherwise be
heard.138 To repeat, Section 5 enumerates what the Tariff Commission is
tasked to determine: (a) whether a product is being imported into the country in
increased quantities, irrespective of whether the product is absolute or relative
to the domestic production; and (b) whether the importation in increased
quantities is such that it causes serious injury or threat to the domestic
industry.139 The findings of the Tariff Commission as to these matters constitute
the final determination, which may be either positive or negative.
4. Under Section 13 of the SMA, if the Tariff Commission makes a positive
determination, the Tariff Commission "recommends to the [DTI] Secretary an
appropriate definitive measure." The Tariff Commission "may also recommend
other actions, including the initiation of international negotiations to address the
underlying cause of the increase of imports of the products, to alleviate the
injury or threat thereof to the domestic industry, and to facilitate positive
adjustment to import competition."140
5. If the Tariff Commission makes a positive final determination, the DTI
Secretary is then to decide, within fifteen (15) days from receipt of the report, as
to what appropriate safeguard measures should he impose.
6. However, if the Tariff Commission makes a negative final determination, the
DTI Secretary cannot impose any definitive safeguard measure. Under Section
13, he is instructed instead to return whatever cash bond was paid by the
applicant upon the initiation of the action for safeguard measure.
The Effect of the Court's Decision
The Court of Appeals erred in remanding the case back to the DTI Secretary,
with the instruction that the DTI Secretary may impose a general safeguard
measure even if there is no positive final determination from the Tariff
Commission. More crucially, the Court of Appeals could not have acquired
jurisdiction over Philcemcor's petition for certiorari in the first place, as Section
29 of the SMA properly vests jurisdiction on the CTA. Consequently, the
assailed Decision is an absolute nullity, and we declare it as such.
What is the effect of the nullity of the assailed Decision on the 5 June
2003 Decision of the DTI Secretary imposing the general safeguard measure?
We have recognized that any initial judicial review of a DTI ruling in connection
with the imposition of a safeguard measure belongs to the CTA. At the same
time, the Court also recognizes the fundamental principle that a null and void
judgment cannot produce any legal effect. There is sufficient cause to establish
that the 5 June 2003 Decision of the DTI Secretary resulted from the assailed
Court of Appeals Decision, even if the latter had not yet become final.
Conversely, it can be concluded that it was because of the putative imprimatur
of the Court of Appeals' Decision that the DTI Secretary issued his ruling
imposing the safeguard measure. Since the 5 June 2003 Decision derives its
legal effect from the void Decision of the Court of Appeals, this ruling of the DTI
Secretary is consequently void. The spring cannot rise higher than the source.
The DTI Secretary himself acknowledged that he drew stimulating force from
the appellate court's Decision for in his own 5 June 2003 Decision, he declared:
From the aforementioned ruling, the CA has remanded the case to the
DTI Secretary for a final decision. Thus, there is no legal impediment
for the Secretary to decide on the application. 141
The inescapable conclusion is that the DTI Secretary needed the
assailed Decision of the Court of Appeals to justify his rendering a
second Decision. He explicitly invoked the Court of Appeals' Decision as basis
for rendering his 5 June 2003 ruling, and implicitly recognized that without
such Decision he would not have the authority to revoke his previous ruling and
render a new, obverse ruling.
It is clear then that the 25 June 2003 Decision of the DTI Secretary is a product
of the void Decision, it being an attempt to carry out such null judgment. There
is therefore no choice but to declare it void as well, lest we sanction the
perverse existence of a fruit from a non-existent tree. It does not even matter
what the disposition of the 25 June 2003 Decision was, its nullity would be
warranted even if the DTI Secretary chose to uphold his earlier ruling denying
the application for safeguard measures.
It is also an unfortunate spectacle to behold the DTI Secretary, seeking to
enforce a judicial decision which is not yet final and actually pending review on
appeal. Had it been a judge who attempted to enforce a decision that is not yet
final and executory, he or she would have readily been subjected to sanction by
this Court. The DTI Secretary may be beyond the ambit of administrative review
by this Court, but we are capacitated to allocate the boundaries set by the law
of the land and to exact fealty to the legal order, especially from the
instrumentalities and officials of government.
WHEREFORE, the petition is GRANTED. The assailed Decision of the Court of
Appeals is DECLARED NULL AND VOID and SET ASIDE. The Decision of the
DTI Secretary dated 25 June 2003 is also DECLARED NULL AND VOID and
SET ASIDE. No Costs.
SO ORDERED.
EN BANC
G.R. No. 159110 December 10, 2013
VALENTINO L. LEGASPI, Petitioner,
vs.
CITY OF CEBU, T.C. (TITO) SAYSON AND RICARDO
HAPITAN, Respondents.
x---------------x
G.R. No. 159692
BIENVENIDO P. JABAN, SR., and BIENVENIDO DOUGLAS LUKE
BRADBURY JABAN, Petitioners,
vs.
COURT OF APPEALS, CITY OF CEBU, CITY MAYOR ALVIN GARCIA,
SANGUNIANG PANLUNSOD OF CITY OF CEBU, HON. RENATO V.
OSMEÑA, AS PRESIDING OFFICER OF THE SANGGUNIANG PANLUNSOD
and CITOM CHAIRMAN ALAN GAVIOLA, AS CITOM CHIEF, CITOM
TRAFFIC ENFORCER E. A. ROMERO, and LITO GILBUENA, Respondents.
DECISION
BERSAMIN, J.:
The goal of the decentralization of powers to the local government units (LGUs)
is to ensure the enjoyment by each of the territorial and political subdivisions of
the State of a genuine and meaningful local autonomy. To attain the goal, the
National Legislature has devolved the three great inherent powers of the State
to the LGUs. Each political subdivision is there by vested with such powers
subject to constitutional and statutory limitations.
In particular, the Local Government Code (LGC) has expressly empowered the
LGUs to enact and adopt ordinances to regulate vehicular traffic and to prohibit
illegal parking within their jurisdictions. Now challenged before the Court are the
constitutionality and validity of one such ordinance on the ground that the
ordinance constituted a contravention of the guaranty of due process under the
Constitution by authorizing the immobilization of offending vehicles through the
clamping of tires. The challenge originated in the Regional Trial Court (RTC) at
the instance of the petitioners – vehicle owners who had borne the brunt of the
implementation of the ordinance –with the RTC declaring the ordinance
unconstitutional, but it has now reached the Court as a consolidated appeal
taken in due course by the petitioners after the Court of Appeals (CA) reversed
the judgment of the RTC.
Antecedents
On January 27, 1997 the Sangguniang Panlungsod of the City of Cebu enacted
Ordinance No. 1664toauthorizethetraffic enforcers of Cebu City to immobilize
any motor vehicle violating the parking restrictions and prohibitions defined in
Ordinance No. 801 (Traffic Code of Cebu City).1 The pertinent provisions of
Ordinance No. 1664 read:
Section 1. POLICY–It is the policy of the government of the City of Cebu to
immobilize any motor vehicle violating any provision of any City Ordinance on
Parking Prohibitions or Restrictions, more particularly Ordinance No. 801,
otherwise known as the Traffic Code of Cebu City, as amended, in order to
have a smooth flow of vehicular traffic in all the streets in the City of Cebu at all
times.
Section 2. IMMOBILIZATION OF VEHICLES–Any vehicle found violating any
provision of any existing ordinance of the City of Cebu which prohibits,
regulates or restricts the parking of vehicles shall be immobilized by clamping
any tire of the said violating vehicle with the use of a denver boot vehicle
immobilizer or any other special gadget designed to immobilize motor vehicles.
For this particular purpose, any traffic enforcer of the City (regular PNP
Personnel or Cebu City Traffic Law Enforcement Personnel) is hereby
authorized to immobilize any violating vehicleas hereinabove provided.
Section 3. PENALTIES–Any motor vehicle, owner or driver violating any
ordinance on parking prohibitions, regulations and/or restrictions, as may be
providedunder Ordinance No. 801, as amended, or any other existing
ordinance, shall be penalized in accordance with the penalties imposed in the
ordinance so violated, provided that the vehicle immobilizer may not be
removed or released without its owner or driver paying first to the City
Treasurer of Cebu City through the Traffic Violations Bureau (TVB) all the
accumulated penalties for all prior traffic law violations that remain unpaid or
unsettled, plus the administrative penalty of Five Hundred Pesos (₱500.00) for
the immobilization of the said vehicle, and receipts of such payments presented
to the concerned personnel of the bureau responsible for the release of the
immobilized vehicle, unless otherwise ordered released by any of the following
officers:
a) Chairman, CITOM
b) Chairman, Committee on Police, Fire and Penology
c) Asst. City Fiscal Felipe Belciña
3.1 Any person who tampers or tries to release an immobilized
or clamped motor vehicle by destroying the denver boot vehicle
immobilizer or other such special gadgets, shall be liable for its
loss or destruction and shall be prosecuted for such loss or
destruction under pain or penalty under the Revised Penal
Code and any other existing ordinance of the City of Cebu for
the criminal act, in addition to his/her civil liabilities under the
 Civil Code of the Philippines; Provided that any such act may
not be compromised nor settled amicably extrajudicially.
3.2 Any immobilized vehicle which is unattended and constitute
an obstruction to the free flow of traffic or a hazard thereof shall
be towed to the city government impounding area for
safekeeping and may be released only after the provision of
Section 3 hereof shall have been fully complied with.
3.3 Any person who violates any provision of this ordinance
shall, upon conviction, be penalized with imprisonment of not
less than one (1)month nor more than six (6) months or of a
fine of not less than Two Thousand Pesos(₱2,000.00)nor more
than Five Thousand Pesos(₱5,000.00), or both such
imprisonment and fine at the discretion of the court.2
On July 29, 1997, Atty. Bienvenido Jaban (Jaban,Sr.) and his son Atty.
Bienvenido Douglas Luke Bradbury Jaban (Jaban,Jr.) brought suit in the RTC
in Cebu City against the City of Cebu, then represented by Hon. Alvin Garcia,
its City Mayor, the Sangguniang Panlungsod of Cebu City and its Presiding
Officer, Hon. Renato V. Osmeña, and the chairman and operatives or officers
of the City Traffic Operations Management (CITOM),seeking the declaration of
Ordinance No. 1644 as unconstitutional for being in violation of due process
and for being contrary to law, and damages.3 Their complaint alleged that on
June 23, 1997, Jaban Sr. had properly parked his car in a paying parking area
on Manalili Street, Cebu City to get certain records and documents fromhis
office;4that upon his return after less than 10 minutes, he had found his car
being immobilized by a steel clamp, and a notice being posted on the car to the
effect that it would be a criminal offense to break the clamp;5 that he had been
infuriated by the immobilization of his car because he had been thereby
rendered unable to meet an important client on that day; that his car was
impounded for three days, and was informed at the office of the CITOM that he
had first to pay₱4,200.00as a fine to the City Treasurer of Cebu City for the
release of his car;6that the fine was imposed without any court hearing and
without due process of law, for he was not even told why his car had been
immobilized; that he had undergone a similar incident of clamping of his car on
the early morning of November 20, 1997 while his car was parked properly in a
parking lot in front of the San Nicolas Pasil Market in Cebu City without violating
any traffic regulation or causing any obstruction; that he was compelled to pay
₱1,500.00(itemized as ₱500.00 for the clamping and₱1,000.00for the violation)
without any court hearing and final judgment; that on May 19, 1997, Jaban, Jr.
parked his car in a very secluded place where there was no sign prohibiting
parking; that his car was immobilized by CITOM operative Lito Gilbuena; and
that he was compelled to pay the total sum of ₱1,400.00for the release of his
car without a court hearing and a final judgment rendered by a court of justice. 7
On August 11, 1997, Valentino Legaspi (Legaspi) likewise sued in the RTC the
City of Cebu,T.C. Sayson, Ricardo Hapitan and John Does to demand the
delivery of personal property, declaration of nullity of the Traffic Code of Cebu
City, and damages.8 He averred that on the morning of July 29, 1997, he had
left his car occupying a portion of the sidewalk and the street outside the gate
of his house to make way for the vehicle of the anay exterminator who had
asked to be allowed to unload his materials and equipment from the front of the
residence inasmuch as his daughter’s car had been parked in the carport, with
the assurance that the unloading would not take too long;9 that while waiting for
the anay exterminator to finish unloading, the phone in his office inside the
house had rung, impelling him to go into the house to answer the call; that after
a short while, his son-in-law informed him that unknown persons had clamped
the front wheel of his car;10 that he rushed outside and found a traffic citation
stating that his car had been clamped by CITOM representatives with a warning
that the unauthorized removal of the clamp would subject the remover to
criminal charges;11 and that in the late afternoon a group headed by Ricardo
Hapitan towed the car even if it was not obstructing the flow of traffic.12
In separate answers for the City of Cebu and its co-defendants,13 the City
Attorney of Cebu presented similar defenses, essentially stating that the traffic
enforcers had only upheld the law by clamping the vehicles of the
plaintiffs;14 and that Ordinance No. 1664 enjoyed the presumption of
constitutionality and validity.15
The cases were consolidated before Branch 58 of the RTC, which, after trial,
rendered on January 22, 1999 its decision declaring Ordinance No. 1664 as
null and void upon the following ratiocination:
In clear and simple phrase, the essence of due process was expressed by
Daniel Webster as a "law which hears before it condemns". In another case[s],
"procedural due process is that which hears before it condemns, which
proceeds upon inquiry and renders judgment only after trial." It
contemplate(s)notice and opportunity to be heard before judgment is rendered
affecting ones (sic) person or property." In both procedural and substantive due
process, a hearing is always a pre-requisite, hence, the taking or deprivation of
one’s life, liberty or property must be done upon and with observance of the
"due process" clause of the Constitution and the non-observance or violation
thereof is, perforce, unconstitutional.
Under Ordinance No. 1664, when a vehicle is parked in a prohibited, restrycted
(sic) or regulated area in the street or along the street, the vehicle is
immobilized by clamping any tire of said vehicle with the use of a denver boot
vehicle immobilizer or any other special gadget which immobilized the motor
vehicle. The violating vehicle is immobilized, thus, depriving its owner of the
use thereof at the sole determination of any traffic enforcer or regular PNP
personnel or Cebu City Traffic Law Enforcement Personnel. The vehicle
immobilizer cannot be removed or released without the owner or driver paying
first to the City Treasurer of Cebu through the Traffic Violations Bureau all the
accumulated penalties of all unpaid or unsettled traffic law violations, plus the
administrative penalty of ₱500.00 and, further, the immobilized vehicle shall be
released only upon presentation of the receipt of said payments and upon
release order by the Chairman, CITOM, or Chairman, Committee on Police,
Fire and Penology, or Asst. City Fiscal Felipe Belcina. It should be stressed that
the owner of the immobilized vehicle shall have to undergo all these ordeals at
the mercy of the Traffic Law Enforcer who, as the Ordinance in question
mandates, is the arresting officer, prosecutor, Judge and collector. Otherwise
stated, the owner of the immobilized motor vehicle is deprived of his right to the
use of his/her vehicle and penalized without a hearing by a person who is not
legally or duly vested with such rights, power or authority. The Ordinance in
question is penal in nature, and it has been held;
xxxx
WHEREFORE, premised (sic) considered, judgment is hereby rendered
declaring Ordinance No.1664unconstitutional and directing the defendant City
of Cebu to pay the plaintiff Valentino Legaspi the sum of ₱110,000.00
representing the value of his car, and to all the plaintiffs, Valentino L. Legaspi,
Bienvenido P. Jaban and Bienvenido Douglas Luke Bradbury Jaban, the sum
of ₱100,000.00 each or ₱300,000.00 all as nominal damages and another
₱100,000.00 each or₱300,000.00 all as temperate or moderate damages. With
costs against defendant City of Cebu.
SO ORDERED.16 (citations omitted)
The City of Cebu and its co-defendants appealed to the CA, assigning the
following errors to the RTC, namely: (a) the RTC erred in declaring that
Ordinance No. 1664 was unconstitutional; (b) granting, arguendo, that
Ordinance No. 1664 was unconstitutional, the RTC gravely erred in holding that
any violation prior to its declaration as being unconstitutional was irrelevant; (c)
granting, arguendo, that Ordinance No. 1664 was unconstitutional, the RTC
gravely erred in awarding damages to the plaintiffs; (d) granting, arguendo, that
the plaintiffs were entitled to damages, the damages awarded were excessive
and contrary to law; and (e) the decision of the RTC was void, because the
Office of the Solicitor General (OSG) had not been notified of the proceedings.
On June 16, 2003, the CA promulgated its assailed decision,17overturning the
RTCand declaring Ordinance No. 1664 valid, to wit:
The principal thrust of this appeal is the constitutionality of Ordinance 1664.
Defendants-appellants contend that the passage of Ordinance 1664is in
accordance with the police powers exercised by the City of Cebu through the
Sangguniang Panlungsod and granted by RA 7160, otherwise known as the
Local Government Code. A thematic analysis of the law on municipal
corporations confirms this view. As in previous legislation, the Local
Government Code delegates police powers to the local governments in two
ways. Firstly, it enumerates the subjects on which the Sangguniang
Panlungsod may exercise these powers. Thus, with respect to the use of public
streets, Section 458 of the Code states:
Section 458 (a) The sangguniang panlungsod, as the legislative branch of the
city, x x x shall x x x
(5) (v) Regulate the use of streets, avenues, alleys, sidewalks, bridges, park
and other public places and approve the construction, improvement, repair and
maintenance of the same; establish bus and vehicle stops and terminals or
regulate the use of the same by privately owned vehicles which serve the
public; regulate garages and the operation of conveyances for hire; designate
stands to be occupied by public vehicles when not in use; regulate the putting
up of signs, signposts, awnings and awning posts on the streets; and provide
for the lighting, cleaning and sprinkling of streets and public places;
(vi) Regulate traffic on all streets and bridges; prohibit encroachments or
obstacles thereon and, when necessary in the interest of public welfare,
authorize the removal of encroachments and illegal constructions in public
places.It then makes a general grant of the police power. The scope of the
legislative authority of the local government is set out in Section 16, to wit:
Section 16. General Welfare. –Every local government unit shall exercise the
powers expressly granted, those necessarily implied therefrom, as well as
powers necessary, appropriate, or incidental for its efficient and effective
governance, and those which are essential to the promotion of the general
welfare.
This provision contains what is traditionally known as the general welfare
clause. As expounded in United States vs. Salaveria, 39 Phil 102, the general
welfare clause has two branches. One branch attaches itself to the main trunk
of municipal authority, and relates to such ordinances and regulations as may
be necessary to carry into effect and discharge the powers and duties
conferred upon the municipal council by law. The second branch of the clause
is much more independent of the specific functions of the council, and
authorizes such ordinances as shall seem necessary and proper to provide for
health, safety, prosperity and convenience of the municipality and its
inhabitants.
In a vital and critical way, the general welfare clause complements the more
specific powers granted a local government. It serves as a catch-all provision
that ensures that the local government will be equipped to meet any local
contingency that bears upon the welfare of its constituents but has not been
actually anticipated. So varied and protean are the activities that affect the
legitimate interests of the local inhabitants that it is well-nigh impossible to say
beforehand what may or may not be done specifically through law. To ensure
that a local government can react positively to the people’s needs and
expectations, the general welfare clause has been devised and interpreted to
allow the local legislative council to enact such measures as the occasion
requires.
Founded on clear authority and tradition, Ordinance 1664 may be deemed a
legitimate exercise of the police powers of the Sangguniang Panlungsod of the
City of Cebu. This local law authorizes traffic enforcers to immobilize and tow
for safekeeping vehicles on the streets that are illegally parked and to release
them upon payment of the announced penalties. As explained in the preamble,
it has become necessary to resort to these measures because of the traffic
congestion caused by illegal parking and the inability of existing penalties to
curb it. The ordinance is designed to improve traffic conditions in the City of
Cebu and thus shows a real and substantial relation to the welfare, comfort and
convenience of the people of Cebu. The only restrictions to an ordinance
passed under the general welfare clause, as declared in Salaveria, is that the
regulation must be reasonable, consonant with the general powers and
purposes of the corporation, consistent with national laws and policies, and not
unreasonable or discriminatory. The measure in question undoubtedly comes
within these parameters.
Upon the denial of their respective motions for reconsideration on August 4,
2003, the Jabans and Legaspi came to the Court via separate petitions for
review on certiorari. The appeals were consolidated.
Issues
Based on the submissions of the parties, the following issues are decisive of
the challenge, to wit:
1. Whether Ordinance No. 1664was enacted within the ambit of the
legislative powers of the City of Cebu; and
2. Whether Ordinance No. 1664complied with the requirements for
validity and constitutionality, particularly the limitations set by the
Constitution and the relevant statutes.
Ruling
The petitions for review have nomerit.
A.
Tests for a valid ordinance
In City of Manila v. Laguio, Jr.,18 the Court restatesthe tests of a valid ordinance
thusly:
The tests of a valid ordinance are well established. A long line of decisions has
held that for an ordinance to be valid, it must not only be within the corporate
powers of the local government unit to enact and must be passed according to
the procedure prescribed by law, it must also conform to the following
substantive requirements: (1) must not contravene the Constitution or any
statute; (2) must not be unfair or oppressive;(3) must not be partial or
discriminatory; (4) must not prohibit but may regulate trade; (5) must be general
and consistent with public policy; and (6) must not be unreasonable.19
As jurisprudence indicates, the tests are divided into the formal (i.e., whether
the ordinance was enacted within the corporate powers of the LGU, and
whether it was passed in accordance with the procedure prescribed by law),
and the substantive (i.e.,involving inherent merit, like the conformity of the
ordinance with the limitations under the Constitution and the statutes, as well as
with the requirements of fairness and reason, and its consistency with public
policy).
B.
Compliance of Ordinance No. 1664
with the formal requirements
Was the enactment of Ordinance No. 1664 within the corporate powers of the
LGU of the City of Cebu?
The answer is in the affirmative. Indeed, with no issues being hereby raised
against the formalities attendant to the enactment of Ordinance No. 1664, we
presume its full compliance with the test in that regard. Congress enacted the
LGC as the implementing law for the delegation to the various LGUs of the
State’s great powers, namely: the police power, the power of eminent domain,
and the power of taxation. The LGC was fashioned to delineate the specific
parameters and limitations to be complied with by each LGU in the exercise of
these delegated powers with the view of making each LGU a fully functioning
subdivision of the State subject to the constitutional and statutory limitations.
In particular, police power is regarded as "the most essential, insistent and the
least limitable of powers, extending as it does ‘to all the great public needs.’"20 It
is unquestionably "the power vested in the legislature by the constitution, to
make, ordain and establish all manner of wholesome and reasonable laws,
statutes and ordinances, either with penalties or without, not repugnant to the
constitution, as they shall judge to be for the good and welfare of the
commonwealth, and of the subject of the same."21 According to Cooley: "[The
police power] embraces the whole system of internal regulation by which the
state seeks not only to preserve the public order and to prevent offences
against itself, but also to establish for the intercourse of citizens with citizens,
those rules of good manners and good neighborhood which are calculated to
prevent the conflict of rights and to insure to each the uninterrupted enjoyment
of his own, so far as it is reasonably consistent with the right enjoyment of
rights by others."22
In point is the exercise by the LGU of the City of Cebu of delegated police
power. In Metropolitan Manila Development Authorityv. Bel-Air Village
Association,Inc.,23 the Court cogently observed:
It bears stressing that police power is lodged primarily in the National
Legislature. It cannot be exercised by any group or body of individuals not
possessing legislative power. The National Legislature, however, may delegate
this power to the President and administrative boards as well as the lawmaking
bodies of municipal corporations or local government units. Once delegated,
the agents can exercise only such legislative powers as are conferred on them
by the national lawmaking body. (emphasis supplied)
The CA opined, and correctly so, that vesting cities like the City of Cebu with
the legislative power to enact traffic rules and regulations was expressly done
through Section 458 of the LGC, and also generally by virtue of the General
Welfare Clause embodied in Section 16 of the LGC.24Section 458of the LGC
relevantly states: Section 458. Powers, Duties, Functions and Composition. –
(a) The sangguniang panlungsod, as the legislative body of the city, shall enact
ordinances, approve resolutions and appropriate funds for the general welfare
of the city and its inhabitants pursuant to Section 16 of this Code and in the
proper exercise of the corporate powers of the city as provided for under
Section 22 of this Code, and shall:
xxxx
(5) Approve ordinances which shall ensure the efficient and effective delivery of
the basic services and facilities as provided for under Section 17 of this Code,
and in addition to said services and facilities, shall:
xxxx
(v) Regulate the use of streets, avenues, alleys, sidewalks, bridges, parks and
other public places and approve the construction, improvement repair and
maintenance of the same; establish bus and vehicle stops and terminals or
regulate the use of the same by privately-owned vehicles which serve the
public; regulate garages and operation of conveyances for hire;designate
stands to be occupied by public vehicles when not in use; regulate the putting
up of signs, signposts, awnings and awning posts on the streets; and provide
for the lighting, cleaning and sprinkling of streets and public places;(vi)
Regulate traffic on all streets and bridges; prohibit encroachments or obstacles
thereon and, when necessary in the interest of public welfare, authorize the
removal of encroachments and illegal constructions in public places;(emphasis
supplied)The foregoing delegation reflected the desire of Congress to leave to
the cities themselves the task of confronting the problem of traffic congestions
associated with development and progress because they were directly familiar
with the situations in their respective jurisdictions. Indeed, the LGUs would be
in the best position to craft their traffic codes because of their familiarity with the
conditions peculiar to their communities. With the broad latitude in this regard
allowed to the LGUs of the cities ,their traffic regulations must be held valid and
effective unless they infringed the constitutional limitations and statutory
safeguards.
C.
Compliance of Ordinance No. 1664
with the substantive requirements
The first substantive requirement for a valid ordinance is the adherence to the
constitutional guaranty of due process of law. The guaranty is embedded in
Article III, Section 1 of the Constitution, which ordains:
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.4
The guaranty of due process of law is a constitutional safeguard against any
arbitrariness on the part of the Government, whether committed by the
Legislature, the Executive, or the Judiciary. It is a protection essential to every
inhabitant of the country, for, as a commentator on Constitutional Law has
vividly written:25
x x x. If the law itself unreasonably deprives a person of his life, liberty, or
property, he is denied the protection of due process. If the enjoyment of his
rights is conditioned on an unreasonable requirement, due process is likewise
violated. Whatsoever be the source of such rights, be it the Constitution itself or
merely a statute, its unjustified withholding would also be a violation of due
process. Any government act that militates against the ordinary norms of justice
or fair play is considered an infraction of the great guaranty of due process; and
this is true whether the denial involves violation merely of the procedure
prescribed by the law or affects the very validity of the law itself.
In City of Manila v. Laguio, Jr.,26 the Court expounded on the aspects of the
guaranty of due process of law as a limitation on the acts of government, viz:
This clause has been interpreted as imposing two separate limits on
government, usually called "procedural due process" and "substantive due
process."
Procedural due process, as the phrase implies, refers to the procedures that
the government must follow before it deprives a person of life, liberty, or
property. Classic procedural due process issues are concerned with that kind of
notice and what form of hearing the government must provide when it takes a
particular action.
Substantive due process, as that phrase connotes, asks whether the
government has an adequate reason for taking away a person’s life, liberty, or
property. In other words, substantive due process looks to whether there is
sufficient justification for the government’s action. Case law in the United States
(U.S.) tells us that whether there is such a justification depends very much on
the level of scrutiny used. For example, if a law is in an area where only rational
basis review is applied, substantive due process is met so long as the law is
rationally related to a legitimate government purpose. But if it is an area where
strict scrutiny is used, such as for protecting fundamental rights, then the
government will meet substantive due process only if it can prove that the law is
necessary to achieve a compelling government purpose.
The police power granted to local government units must always be exercised
with utmost observance of the rights of the people to due process and equal
protection of the law. Such power cannot be exercised whimsically, arbitrarily or
despotically as its exercise is subject to a qualification, limitation or restriction
demanded by the respect and regard due to the prescription of the fundamental
law, particularly those forming part of the Bill of Rights. Individual rights, it bears
emphasis, may be adversely affected only to the extent that may fairly be
required by the legitimate demands of public interest or public welfare. Due
process requires the intrinsic validity of the law in interfering with the rights of
the person to his life, liberty and property.27
The Jabans contend that Ordinance No. 1664, by leaving the confiscation and
immobilization of the motor vehicles to the traffic enforcers or the regular
personnel of the Philippine National Police (PNP) instead of to officials
exercising judicial authority, was violative of the constitutional guaranty of due
process; that such confiscation and immobilization should only be after a
hearing on the merits by courts of law; and that the immobilization and the
clamping of the cars and motor vehicles by the police or traffic enforcers could
be subject to abuse.
On his part, Legaspi likewise contends that Ordinance No. 1664 violated the
constitutional guaranty of due process for being arbitrary and oppressive; and
that its provisions conferring upon the traffic enforcers the absolute discretion to
be the enforcers, prosecutors, judges and collectors all at the same time were
vague and ambiguous.28He reminds that the grant of police powers for the
general welfare under the LGC was not unlimited but subject to constitutional
limitations;29and that these consolidated cases should not be resolved
differently from the resolution of a third case assailing the validity of Ordinance
No.1664 (Astillero case), in which the decision of the same RTC declaring
Ordinance No.1664 as unconstitutional had attained finality following the denial
of due course to the appeal of the City of Cebu and its co-defendants.
Judged according to the foregoing enunciation of the guaranty of due process
of law, the contentions of the petitioners cannot be sustained.1âwphi1 Even
under strict scrutiny review, Ordinance No. 1664 met the substantive tests of
validity and constitutionality by its conformity with the limitations under the
Constitution and the statutes, as well as with the requirements of fairness and
reason, and its consistency with public policy.
To us, the terms encroachment and obstacles used in Section 458 of the LGC,
supra, were broad enough to include illegally parked vehicles or whatever else
obstructed the streets, alleys and sidewalks, which were precisely the subject
of Ordinance No. 1664 in a vowedly aiming to ensure "a smooth flow of
vehicular traffic in all the streets in the City of Cebu at all times" (Section 1).
This aim was borne out by its Whereas Clauses, viz:
WHEREAS, the City of Cebu enacted the Traffic Code (Ordinance No. 801) as
amended, provided for Parking Restrictions and Parking Prohibitions in the
streets of Cebu City;
WHEREAS, despite the restrictions and prohibitions of parking on certain
streets of Cebu City, violations continued unabated due, among others, to the
very low penalties imposed under the Traffic Code of Cebu City;
WHEREAS, City Ordinance 1642 was enacted in order to address the traffic
congestions caused by illegal parkings in the streets of Cebu City;
WHEREAS, there is a need to amend City Ordinance No.1642 in order to fully
address and solve the problem of illegal parking and other violations of the
Traffic Code of Cebu City;30 (emphasis supplied)
Considering that traffic congestions were already retarding the growth and
progress in the population and economic centers of the country, the plain
objective of Ordinance No. 1664 was to serve the public interest and advance
the general welfare in the City of Cebu. Its adoption was, therefore, in order to
fulfill the compelling government purpose of immediately addressing the
burgeoning traffic congestions caused by illegally parked vehicles obstructing
the streets of the City of Cebu.
Legaspi’s attack against the provisions of Ordinance No. 1664 for being vague
and ambiguous cannot stand scrutiny.1âwphi1 As can be readily seen, its text
was for thright and unambiguous in all respects. There could be no confusion
on the meaning and coverage of the ordinance. But should there be any
vagueness and ambiguity in the provisions, which the OSG does not
concede,31 there was nothing that a proper application of the basic rules of
statutory construction could not justly rectify.
The petitioners further assert that drivers or vehicle owners affected by
Ordinance No. 1664 like themselves were not accorded the opportunity to
protest the clamping, towing, and impounding of the vehicles, or even to be
heard and to explain their side prior to the immobilization of their vehicles; and
that the ordinance was oppressive and arbitrary for that reason.
The adverse assertions against Ordinance No. 1664 are unwarranted.
Firstly, Ordinance No. 1664 was far from oppressive and arbitrary. Any driver or
vehicle owner whose vehicle was immobilized by clamping could protest such
action of a traffic enforcer or PNP personnel enforcing the ordinance. Section 3
of Ordinance No. 1664, supra, textually afforded an administrative escape in
the form of permitting the release of the immobilized vehicle upon a protest
directly made to the Chairman of CITOM; or to the Chairman of the Committee
on Police, Fire and Penology of the City of Cebu; or to Asst. City Prosecutor
Felipe Belciña–officials named in the ordinance itself. The release could be
ordered by any of such officials even without the payment of the stipulated fine.
That none of the petitioners, albeit lawyers all, resorted to such recourse did not
diminish the fairness and reasonableness of the escape clause written in the
ordinance. Secondly, the immobilization of a vehicle by clamping pursuant to
the ordinance was not necessary if the driver or vehicle owner was around at
the time of the apprehension for illegal parking or obstruction. In that situation,
the enforcer would simply either require the driver to move the vehicle or issue
a traffic citation should the latter persist in his violation. The clamping would
happen only to prevent the transgress or from using the vehicle itself to escape
the due sanctions. And, lastly, the towing away of the immobilized vehicle was
not equivalent to a summary impounding, but designed to prevent the
immobilized vehicle from obstructing traffic in the vicinity of the apprehension
and thereby ensure the smooth flow of traffic. The owner of the towed vehicle
would not be deprived of his property.
In fine, the circumstances set forth herein indicate that Ordinance No. 1664
complied with the elements of fairness and reasonableness.
Did Ordinance No. 1664 meet the requirements of procedural due process?
Notice and hearing are the essential requirements of procedural due process.
Yet, there are many instances under our laws in which the absence of one or
both of such requirements is not necessarily a denial or deprivation of due
process. Among the instances are the cancellation of the passport of a person
being sought for the commission of a crime, the preventive suspension of a civil
servant facing administrative charges, the distraint of properties to answer for
tax delinquencies, the padlocking of restaurants found to be unsanitary or of
theaters showing obscene movies, and the abatement of nuisance per
se.32 Add to them the arrest of a person in flagrante delicto.33
The clamping of the petitioners’ vehicles pursuant to Ordinance No. 1664 (and
of the vehicles of others similarly situated) was of the same character as the
aforecited established exceptions dispensing with notice and hearing. As
already said, the immobilization of illegally parked vehicles by clamping the
tires was necessary because the transgressors were not around at the time of
apprehension. Under such circumstance, notice and hearing would be
superfluous. Nor should the lack of a trial-type hearing prior to the clamping
constitute a breach of procedural due process, forgiving the transgressors the
chance to reverse the apprehensions through a timely protest could equally
satisfy the need for a hearing. In other words, the prior intervention of a court of
law was not indispensable to ensure a compliance with the guaranty of due
process.
To reiterate, the clamping of the illegally parked vehicles was a fair and
reasonable way to enforce the ordinance against its transgressors; otherwise,
the transgressors would evade liability by simply driving away.
Finally, Legaspi’s position, that the final decision of the RTC rendered in the
Astillero case declaring Ordinance No. 1664 unconstitutional bound the City of
Cebu, thereby precluding these consolidated appeals from being decided
differently, is utterly untenable. For one, Legaspi undeservedly extends too
much importance to an irrelevant decision of the RTC–irrelevant, because the
connection between that case to these cases was not at all shown. For another,
he ignores that it should be the RTC that had improperly acted for so deciding
the Astillero case despite the appeals in these cases being already pending in
the CA. Being the same court in the three cases, the RTC should have
anticipated that in the regular course of proceedings the outcome of the appeal
in these cases then pending before the CA would ultimately be elevated to and
determined by no less than the Court itself. Such anticipation should have
made it refrain from declaring Ordinance No. 1664 unconstitutional, for a lower
court like itself, appreciating its position in the "interrelation and operation of the
integrated judicial system of the nation," should have exercised a "becoming
modesty" on the issue of the constitutionality of the same ordinance that the
Constitution required the majority vote of the Members of the Court sitting en
bane to determine.34 Such "becoming modesty" also forewarned that any
declaration of unconstitutionality by an inferior court was binding only on the
parties, but that a declaration of unconstitutionality by the Court would be a
precedent binding on all. 35
WHEREFORE, the Court DENIES the pet1t10ns for review on certiorari for
their lack of merit; AFFIRMS the decision promulgated on June 16, 2003 by the
Court of Appeals; and ORDERS the petitioners to pay the costs of suit.
SO ORDERED.
 9054,5 enacted Muslim Mindanao Autonomy Act No. 201 (MMA Act 201)
creating the Province of Shariff Kabunsuan composed of the eight
municipalities in the first district of Maguindanao. MMA Act 201 provides:

EN BANC Section 1. The Municipalities of Barira, Buldon, Datu Odin Sinsuat, Kabuntalan,
Matanog, Parang, Sultan Kudarat, Sultan Mastura, and Upi are hereby
G.R. No. 177597 July 16, 2008 separated from the Province of Maguindanao and constituted into a distinct and
independent province, which is hereby created, to be known as the Province of
Shariff Kabunsuan.
BAI SANDRA S. A. SEMA, Petitioner,
vs.
COMMISSION ON ELECTIONS and DIDAGEN P. xxxx
DILANGALEN, Respondents.
Sec. 5. The corporate existence of this province shall commence upon the
appointment by the Regional Governor or election of the governor and majority
x - - - - - - - - - - - - - - - - - - - - - - -x
of the regular members of the Sangguniang Panlalawigan.
G.R. No. 178628
The incumbent elective provincial officials of the Province of Maguindanao shall
continue to serve their unexpired terms in the province that they will choose or
PERFECTO F. MARQUEZ, Petitioner, where they are residents: Provided, that where an elective position in both
vs. provinces becomes vacant as a consequence of the creation of the Province of
COMMISSION ON ELECTIONS, Respondent. Shariff Kabunsuan, all incumbent elective provincial officials shall have
preference for appointment to a higher elective vacant position and for the time
DECISION being be appointed by the Regional Governor, and shall hold office until their
successors shall have been elected and qualified in the next local elections;
CARPIO, J.: Provided, further, that they shall continue to receive the salaries they are
receiving at the time of the approval of this Act until the new readjustment of
The Case salaries in accordance with law. Provided, furthermore, that there shall be no
diminution in the number of the members of the Sangguniang Panlalawigan of
the mother province.
These consolidated petitions1 seek to annul Resolution No. 7902, dated 10 May
2007, of the Commission on Elections (COMELEC) treating Cotabato City as
part of the legislative district of the Province of Shariff Kabunsuan. 2 Except as may be provided by national law, the existing legislative district,
which includes Cotabato as a part thereof, shall remain.
The Facts
Later, three new municipalities6 were carved out of the original nine
municipalities constituting Shariff Kabunsuan, bringing its total number of
The Ordinance appended to the 1987 Constitution apportioned two legislative
municipalities to 11. Thus, what was left of Maguindanao were the
districts for the Province of Maguindanao. The first legislative district consists of
municipalities constituting its second legislative district. Cotabato City, although
Cotabato City and eight municipalities.3 Maguindanao forms part of the
part of Maguindanao’s first legislative district, is not part of the Province of
Autonomous Region in Muslim Mindanao (ARMM), created under its Organic
Maguindanao.
Act, Republic Act No. 6734 (RA 6734), as amended by Republic Act No. 9054
(RA 9054).4 Although under the Ordinance, Cotabato City forms part of
Maguindanao’s first legislative district, it is not part of the ARMM but of Region The voters of Maguindanao ratified Shariff Kabunsuan’s creation in a plebiscite
XII, having voted against its inclusion in the ARMM in the plebiscite held in held on 29 October 2006.
November 1989.
On 6 February 2007, the Sangguniang Panlungsod of Cotabato City passed
On 28 August 2006, the ARMM’s legislature, the ARMM Regional Assembly, Resolution No. 3999 requesting the COMELEC to "clarify the status of
exercising its power to create provinces under Section 19, Article VI of RA
Cotabato City in view of the conversion of the First District of Maguindanao into
a regular province" under MMA Act 201.
In answer to Cotabato City’s query, the COMELEC issued Resolution No. 07-
0407 on 6 March 2007 "maintaining the status quo with Cotabato City as part of
Shariff Kabunsuan in the First Legislative District of Maguindanao." Resolution
No. 07-0407, which adopted the recommendation of the COMELEC’s Law
Department under a Memorandum dated 27 February 2007,7 provides in
pertinent parts:
Considering the foregoing, the Commission RESOLVED, as it hereby resolves,
to adopt the recommendation of the Law Department that pending the
enactment of the appropriate law by Congress, to maintain the status quo
with Cotabato City as part of Shariff Kabunsuan in the First Legislative District
of Maguindanao. (Emphasis supplied)
However, in preparation for the 14 May 2007 elections, the COMELEC
promulgated on 29 March 2007 Resolution No. 7845 stating that
Maguindanao’s first legislative district is composed only of Cotabato City
because of the enactment of MMA Act 201.8
On 10 May 2007, the COMELEC issued Resolution No. 7902, subject of these
petitions, amending Resolution No. 07-0407 by renaming the legislative district
in question as "Shariff Kabunsuan Province with Cotabato City (formerly First
District of Maguindanao with Cotabato City)."91avvphi1
In G.R. No. 177597, Sema, who was a candidate in the 14 May 2007 elections
for Representative of "Shariff Kabunsuan with Cotabato City," prayed for the
nullification of COMELEC Resolution No. 7902 and the exclusion from
canvassing of the votes cast in Cotabato City for that office. Sema contended
that Shariff Kabunsuan is entitled to one representative in Congress under
Section 5 (3), Article VI of the Constitution10 and Section 3 of the Ordinance
appended to the Constitution.11 Thus, Sema asserted that the COMELEC acted
without or in excess of its jurisdiction in issuing Resolution No. 7902 which
maintained the status quo in Maguindanao’s first legislative district despite the
COMELEC’s earlier directive in Resolution No. 7845 designating Cotabato City
as the lone component of Maguindanao’s reapportioned first legislative
district.12 Sema further claimed that in issuing Resolution No. 7902, the
COMELEC usurped Congress’ power to create or reapportion legislative
districts.
In its Comment, the COMELEC, through the Office of the Solicitor General
(OSG), chose not to reach the merits of the case and merely contended that (1)
Sema wrongly availed of the writ of certiorari to nullify COMELEC Resolution
No. 7902 because the COMELEC issued the same in the exercise of its
administrative, not quasi-judicial, power and (2) Sema’s prayer for the writ of
prohibition in G.R. No. 177597 became moot with the proclamation of
respondent Didagen P. Dilangalen (respondent Dilangalen) on 1 June 2007 as
representative of the legislative district of Shariff Kabunsuan Province with
Cotabato City.
In his Comment, respondent Dilangalen countered that Sema is estopped from
questioning COMELEC Resolution No. 7902 because in her certificate of
candidacy filed on 29 March 2007, Sema indicated that she was seeking
election as representative of "Shariff Kabunsuan including Cotabato City."
Respondent Dilangalen added that COMELEC Resolution No. 7902 is
constitutional because it did not apportion a legislative district for Shariff
Kabunsuan or reapportion the legislative districts in Maguindanao but merely
renamed Maguindanao’s first legislative district. Respondent Dilangalen further
claimed that the COMELEC could not reapportion Maguindanao’s first
legislative district to make Cotabato City its sole component unit as the power
to reapportion legislative districts lies exclusively with Congress, not to mention
that Cotabato City does not meet the minimum population requirement under
Section 5 (3), Article VI of the Constitution for the creation of a legislative
district within a city.13
Sema filed a Consolidated Reply controverting the matters raised in
respondents’ Comments and reiterating her claim that the COMELEC
acted ultra vires in issuing Resolution No. 7902.
In the Resolution of 4 September 2007, the Court required the parties in G.R.
No. 177597 to comment on the issue of whether a province created by the
ARMM Regional Assembly under Section 19, Article VI of RA 9054 is entitled to
one representative in the House of Representatives without need of a national
law creating a legislative district for such new province. The parties submitted
their compliance as follows:
(1) Sema answered the issue in the affirmative on the following
grounds: (a) the Court in Felwa v. Salas14stated that "when a province
is created by statute, the corresponding representative district comes
into existence neither by authority of that statute — which cannot
provide otherwise — nor by apportionment, but by operation of the
Constitution, without a reapportionment"; (b) Section 462 of Republic
Act No. 7160 (RA 7160) "affirms" the apportionment of a legislative
district incident to the creation of a province; and (c) Section 5 (3),
Article VI of the Constitution and Section 3 of the Ordinance appended
to the Constitution mandate the apportionment of a legislative district in
newly created provinces.
(2) The COMELEC, again represented by the OSG, apparently
abandoned its earlier stance on the propriety of issuing Resolution Nos.
07-0407 and 7902 and joined causes with Sema, contending that
Section 5 (3), Article VI of the Constitution is "self-executing." Thus,
 every new province created by the ARMM Regional Assembly is ipso
facto entitled to one representative in the House of Representatives
even in the absence of a national law; and
(3) Respondent Dilangalen answered the issue in the negative on the
following grounds: (a) the "province" contemplated in Section 5 (3),
Article VI of the Constitution is one that is created by an act of
Congress taking into account the provisions in RA 7160 on the creation
of provinces; (b) Section 3, Article IV of RA 9054 withheld from the
ARMM Regional Assembly the power to enact measures relating to
national elections, which encompasses the apportionment of legislative
districts for members of the House of Representatives; (c) recognizing
a legislative district in every province the ARMM Regional Assembly
creates will lead to the disproportionate representation of the ARMM in
the House of Representatives as the Regional Assembly can create
provinces without regard to the requirements in Section 461 of RA
7160; and (d) Cotabato City, which has a population of less than
250,000, is not entitled to a representative in the House of
Representatives.
On 27 November 2007, the Court heard the parties in G.R. No. 177597 in oral
arguments on the following issues: (1) whether Section 19, Article VI of RA
9054, delegating to the ARMM Regional Assembly the power to create
provinces, is constitutional; and (2) if in the affirmative, whether a province
created under Section 19, Article VI of RA 9054 is entitled to one representative
in the House of Representatives without need of a national law creating a
legislative district for such new province.15
In compliance with the Resolution dated 27 November 2007, the parties in G.R.
No. 177597 filed their respective Memoranda on the issues raised in the oral
arguments.16 On the question of the constitutionality of Section 19, Article VI of
RA 9054, the parties in G.R. No. 177597 adopted the following positions:
(1) Sema contended that Section 19, Article VI of RA 9054 is
constitutional (a) as a valid delegation by Congress to the ARMM of the
power to create provinces under Section 20 (9), Article X of the
Constitution granting to the autonomous regions, through their organic
acts, legislative powers over "other matters as may be authorized by
law for the promotion of the general welfare of the people of the region"
and (b) as an amendment to Section 6 of RA 7160.17 However, Sema
concedes that, if taken literally, the grant in Section 19, Article VI of RA
9054 to the ARMM Regional Assembly of the power to "prescribe
standards lower than those mandated" in RA 7160 in the creation of
provinces contravenes Section 10, Article X of the Constitution. 18 Thus,
Sema proposed that Section 19 "should be construed as prohibiting the
Regional Assembly from prescribing standards x x x that do not comply
with the minimum criteria" under RA 7160.19
(2) Respondent Dilangalen contended that Section 19, Article VI of RA
9054 is unconstitutional on the following grounds: (a) the power to
create provinces was not among those granted to the autonomous
regions under Section 20, Article X of the Constitution and (b) the grant
under Section 19, Article VI of RA 9054 to the ARMM Regional
Assembly of the power to prescribe standards lower than those
mandated in Section 461 of RA 7160 on the creation of provinces
contravenes Section 10, Article X of the Constitution and the Equal
Protection Clause; and
(3) The COMELEC, through the OSG, joined causes with respondent
Dilangalen (thus effectively abandoning the position the COMELEC
adopted in its Compliance with the Resolution of 4 September 2007)
and contended that Section 19, Article VI of RA 9054 is unconstitutional
because (a) it contravenes Section 10 and Section 6,20 Article X of the
Constitution and (b) the power to create provinces was withheld from
the autonomous regions under Section 20, Article X of the Constitution.
On the question of whether a province created under Section 19, Article VI of
RA 9054 is entitled to one representative in the House of Representatives
without need of a national law creating a legislative district for such new
province, Sema and respondent Dilangalen reiterated in their Memoranda the
positions they adopted in their Compliance with the Resolution of 4 September
2007. The COMELEC deemed it unnecessary to submit its position on this
issue considering its stance that Section 19, Article VI of RA 9054 is
unconstitutional.
The pendency of the petition in G.R. No. 178628 was disclosed during the oral
arguments on 27 November 2007. Thus, in the Resolution of 19 February 2008,
the Court ordered G.R. No. 178628 consolidated with G.R. No. 177597. The
petition in G.R. No. 178628 echoed Sema's contention that the COMELEC
acted ultra vires in issuing Resolution No. 7902 depriving the voters of
Cotabato City of a representative in the House of Representatives. In its
Comment to the petition in G.R. No. 178628, the COMELEC, through the OSG,
maintained the validity of COMELEC Resolution No. 7902 as a temporary
measure pending the enactment by Congress of the "appropriate law."
The Issues
The petitions raise the following issues:
I. In G.R. No. 177597:
(A) Preliminarily –
 (1) whether the writs of Certiorari, Prohibition, and Mandamus
are proper to test the constitutionality of COMELEC Resolution
No. 7902; and
(2) whether the proclamation of respondent Dilangalen as
representative of Shariff Kabunsuan Province with Cotabato
City mooted the petition in G.R. No. 177597.
(B) On the merits –
(1) whether Section 19, Article VI of RA 9054, delegating to the
ARMM Regional Assembly the power to create provinces,
cities, municipalities and barangays, is constitutional; and
(2) if in the affirmative, whether a province created by the
ARMM Regional Assembly under MMA Act 201 pursuant to
Section 19, Article VI of RA 9054 is entitled to one
representative in the House of Representatives without need of
a national law creating a legislative district for such province.
II. In G.R No. 177597 and G.R No. 178628, whether COMELEC
Resolution No. 7902 is valid for maintaining the status quo in the first
legislative district of Maguindanao (as "Shariff Kabunsuan Province
with Cotabato City [formerly First District of Maguindanao with Cotabato
City]"), despite the creation of the Province of Shariff Kabunsuan out of
such district (excluding Cotabato City).
The Ruling of the Court
The petitions have no merit. We rule that (1) Section 19, Article VI of
RA 9054 is unconstitutional insofar as it grants to the ARMM Regional
Assembly the power to create provinces and cities; (2) MMA Act 201
creating the Province of Shariff Kabunsuan is void; and (3) COMELEC
Resolution No. 7902 is valid.
On the Preliminary Matters
The Writ of Prohibition is Appropriate
to Test the Constitutionality of
Election Laws, Rules and Regulations
The purpose of the writ of Certiorari is to correct grave abuse of discretion by
"any tribunal, board, or officer exercising judicial or quasi-judicial
functions."21 On the other hand, the writ of Mandamus will issue to compel a
tribunal, corporation, board, officer, or person to perform an act "which the law
specifically enjoins as a duty."22 True, the COMELEC did not issue Resolution
No. 7902 in the exercise of its judicial or quasi-judicial functions.23 Nor is there
a law which specifically enjoins the COMELEC to exclude from canvassing the
votes cast in Cotabato City for representative of "Shariff Kabunsuan Province
with Cotabato City." These, however, do not justify the outright dismissal of the
petition in G.R. No. 177597 because Sema also prayed for the issuance of the
writ of Prohibition and we have long recognized this writ as proper for testing
the constitutionality of election laws, rules, and regulations.24
Respondent Dilangalen’s Proclamation
Does Not Moot the Petition
There is also no merit in the claim that respondent Dilangalen’s proclamation as
winner in the 14 May 2007 elections for representative of "Shariff Kabunsuan
Province with Cotabato City" mooted this petition. This case does not concern
respondent Dilangalen’s election. Rather, it involves an inquiry into the validity
of COMELEC Resolution No. 7902, as well as the constitutionality of MMA Act
201 and Section 19, Article VI of RA 9054. Admittedly, the outcome of this
petition, one way or another, determines whether the votes cast in Cotabato
City for representative of the district of "Shariff Kabunsuan Province with
Cotabato City" will be included in the canvassing of ballots. However, this
incidental consequence is no reason for us not to proceed with the resolution of
the novel issues raised here. The Court’s ruling in these petitions affects not
only the recently concluded elections but also all the other succeeding elections
for the office in question, as well as the power of the ARMM Regional Assembly
to create in the future additional provinces.
On the Main Issues
Whether the ARMM Regional Assembly
Can Create the Province of Shariff Kabunsuan
The creation of local government units is governed by Section 10, Article X of
the Constitution, which provides:
Sec. 10. No province, city, municipality, or barangay may be created, divided,
merged, abolished or its boundary substantially altered except in accordance
with the criteria established in the local government code and subject to
approval by a majority of the votes cast in a plebiscite in the political units
directly affected.
Thus, the creation of any of the four local government units – province, city,
municipality or barangay – must comply with three conditions. First, the creation
of a local government unit must follow the criteria fixed in the Local Government
Code. Second, such creation must not conflict with any provision of the
Constitution. Third, there must be a plebiscite in the political units affected.
There is neither an express prohibition nor an express grant of authority in the
Constitution for Congress to delegate to regional or local legislative bodies the
power to create local government units. However, under its plenary legislative
powers, Congress can delegate to local legislative bodies the power to create
local government units, subject to reasonable standards and provided no
conflict arises with any provision of the Constitution. In fact, Congress has
delegated to provincial boards, and city and municipal councils, the power to
create barangays within their jurisdiction,25 subject to compliance with the
criteria established in the Local Government Code, and the plebiscite
requirement in Section 10, Article X of the Constitution. However, under the
Local Government Code, "only x x x an Act of Congress" can create provinces,
cities or municipalities.261avvphi1
Under Section 19, Article VI of RA 9054, Congress delegated to the ARMM
Regional Assembly the power to create provinces, cities, municipalities and
barangays within the ARMM. Congress made the delegation under its plenary
legislative powers because the power to create local government units is not
one of the express legislative powers granted by the Constitution to regional
legislative bodies.27 In the present case, the question arises whether the
delegation to the ARMM Regional Assembly of the power to create provinces,
cities, municipalities and barangays conflicts with any provision of the
Constitution.
There is no provision in the Constitution that conflicts with the delegation to
regional legislative bodies of the power to create municipalities and barangays,
provided Section 10, Article X of the Constitution is followed. However, the
creation of provinces and cities is another matter. Section 5 (3), Article VI of the
Constitution provides, "Each city with a population of at least two hundred fifty
thousand, or each province, shall have at least one representative" in the
House of Representatives. Similarly, Section 3 of the Ordinance appended to
the Constitution provides, "Any province that may hereafter be created, or any
city whose population may hereafter increase to more than two hundred fifty
thousand shall be entitled in the immediately following election to at least one
Member x x x."
Clearly, a province cannot be created without a legislative district because it will
violate Section 5 (3), Article VI of the Constitution as well as Section 3 of the
Ordinance appended to the Constitution. For the same reason, a city with a
population of 250,000 or more cannot also be created without a legislative
district. Thus, the power to create a province, or a city with a population of
250,000 or more, requires also the power to create a legislative district. Even
the creation of a city with a population of less than 250,000 involves the power
to create a legislative district because once the city’s population reaches
250,000, the city automatically becomes entitled to one representative under
Section 5 (3), Article VI of the Constitution and Section 3 of the Ordinance
appended to the Constitution. Thus, the power to create a province or city
inherently involves the power to create a legislative district.
For Congress to delegate validly the power to create a province or city, it must
also validly delegate at the same time the power to create a legislative district.
The threshold issue then is, can Congress validly delegate to the ARMM
Regional Assembly the power to create legislative districts for the House of
Representatives? The answer is in the negative.
Legislative Districts are Created or Reapportioned
Only by an Act of Congress
Under the present Constitution, as well as in past28 Constitutions, the power to
increase the allowable membership in the House of Representatives, and to
reapportion legislative districts, is vested exclusively in Congress. Section 5,
Article VI of the Constitution provides:
SECTION 5. (1) The House of Representatives shall be composed of not more
than two hundred and fifty members, unless otherwise fixed by law, who
shall be elected from legislative districts apportioned among the provinces,
cities, and the Metropolitan Manila area in accordance with the number of their
respective inhabitants, and on the basis of a uniform and progressive ratio, and
those who, as provided by law, shall be elected through a party-list system of
registered national, regional, and sectoral parties or organizations.
xxxx
(3) Each legislative district shall comprise, as far as practicable,
contiguous, compact, and adjacent territory. Each city with a population
of at least two hundred fifty thousand, or each province, shall have at
least one representative.
(4) Within three years following the return of every census, the
Congress shall make a reapportionment of legislative districts based
on the standards provided in this section. (Emphasis supplied)
Section 5 (1), Article VI of the Constitution vests in Congress the power to
increase, through a law, the allowable membership in the House of
Representatives. Section 5 (4) empowers Congress to reapportion legislative
districts. The power to reapportion legislative districts necessarily includes the
power to create legislative districts out of existing ones. Congress exercises
these powers through a law that Congress itself enacts, and not through a law
that regional or local legislative bodies enact. The allowable membership of the
House of Representatives can be increased, and new legislative districts of
Congress can be created, only through a national law passed by Congress.
In Montejo v. COMELEC,29 we held that the "power of redistricting x x x is
traditionally regarded as part of the power (of Congress) to make laws," and
thus is vested exclusively in Congress.
This textual commitment to Congress of the exclusive power to create or
reapportion legislative districts is logical. Congress is a national legislature and
any increase in its allowable membership or in its incumbent membership
through the creation of legislative districts must be embodied in a national law.
Only Congress can enact such a law. It would be anomalous for regional or
local legislative bodies to create or reapportion legislative districts for a national
legislature like Congress. An inferior legislative body, created by a superior
legislative body, cannot change the membership of the superior legislative
body.
The creation of the ARMM, and the grant of legislative powers to its Regional
Assembly under its organic act, did not divest Congress of its exclusive
authority to create legislative districts. This is clear from the Constitution and
the ARMM Organic Act, as amended. Thus, Section 20, Article X of the
Constitution provides:
SECTION 20. Within its territorial jurisdiction and subject to the provisions of
this Constitution and national laws, the organic act of autonomous regions shall
provide for legislative powers over:
(1) Administrative organization;
(2) Creation of sources of revenues;
(3) Ancestral domain and natural resources;
(4) Personal, family, and property relations;
(5) Regional urban and rural planning development;
(6) Economic, social, and tourism development;
(7) Educational policies;
(8) Preservation and development of the cultural heritage; and
(9) Such other matters as may be authorized by law for the promotion
of the general welfare of the people of the region.
Nothing in Section 20, Article X of the Constitution authorizes
autonomous regions, expressly or impliedly, to create or reapportion
legislative districts for Congress.
On the other hand, Section 3, Article IV of RA 9054 amending the ARMM
Organic Act, provides, "The Regional Assembly may exercise legislative
power x x x except on the following matters: x x x (k) National elections. x
x x." Since the ARMM Regional Assembly has no legislative power to enact
laws relating to national elections, it cannot create a legislative district whose
representative is elected in national elections. Whenever Congress enacts a
law creating a legislative district, the first representative is always elected in the
"next national elections" from the effectivity of the law.30
Indeed, the office of a legislative district representative to Congress is
a national office, and its occupant, a Member of the House of
Representatives, is a national official.31 It would be incongruous for a regional
legislative body like the ARMM Regional Assembly to create a national office
when its legislative powers extend only to its regional territory. The office of a
district representative is maintained by national funds and the salary of its
occupant is paid out of national funds. It is a self-evident inherent limitation on
the legislative powers of every local or regional legislative body that it can only
create local or regional offices, respectively, and it can never create a national
office.
To allow the ARMM Regional Assembly to create a national office is to allow its
legislative powers to operate outside the ARMM’s territorial jurisdiction. This
violates Section 20, Article X of the Constitution which expressly limits the
coverage of the Regional Assembly’s legislative powers "[w]ithin its territorial
jurisdiction x x x."
The ARMM Regional Assembly itself, in creating Shariff Kabunsuan,
recognized the exclusive nature of Congress’ power to create or reapportion
legislative districts by abstaining from creating a legislative district for Shariff
Kabunsuan. Section 5 of MMA Act 201 provides that:
Except as may be provided by national law, the existing legislative district,
which includes Cotabato City as a part thereof, shall remain. (Emphasis
supplied)
However, a province cannot legally be created without a legislative district
because the Constitution mandates that "each province shall have at least one
representative." Thus, the creation of the Province of Shariff Kabunsuan without
a legislative district is unconstitutional.
Sema, petitioner in G.R. No. 177597, contends that Section 5 (3), Article VI of
the Constitution, which provides:
Each legislative district shall comprise, as far as practicable, contiguous,
compact, and adjacent territory. Each city with a population of at least two
hundred fifty thousand, or each province, shall have at least one representative.
(Emphasis supplied)
and Section 3 of the Ordinance appended to the Constitution, which states:
Any province that may hereafter be created, or any city whose population
may hereafter increase to more than two hundred fifty thousand shall be
entitled in the immediately following election to at least one Member or
such number of Members as it may be entitled to on the basis of the
number of its inhabitants and according to the standards set forth in
paragraph (3), Section 5 of Article VI of the Constitution. The number of
Members apportioned to the province out of which such new province was
created or where the city, whose population has so increased, is geographically
located shall be correspondingly adjusted by the Commission on Elections but
such adjustment shall not be made within one hundred and twenty days before
the election. (Emphasis supplied)
serve as bases for the conclusion that the Province of Shariff Kabunsuan,
created on 29 October 2006, is automatically entitled to one member in the
House of Representatives in the 14 May 2007 elections. As further support for
her stance, petitioner invokes the statement in Felwa that "when a province is
created by statute, the corresponding representative district comes into
existence neither by authority of that statute — which cannot provide otherwise
— nor by apportionment, but by operation of the Constitution, without a
reapportionment."
The contention has no merit.
First. The issue in Felwa, among others, was whether Republic Act No. 4695
(RA 4695), creating the provinces of Benguet, Mountain Province, Ifugao, and
Kalinga-Apayao and providing for congressional representation in the old and
new provinces, was unconstitutional for "creati[ng] congressional districts
without the apportionment provided in the Constitution." The Court answered in
the negative, thus:
The Constitution ordains:
"The House of Representatives shall be composed of not more than one
hundred and twenty Members who shall be apportioned among the several
provinces as nearly as may be according to the number of their respective
inhabitants, but each province shall have at least one Member. The Congress
shall by law make an apportionment within three years after the return of every
enumeration, and not otherwise. Until such apportionment shall have been
made, the House of Representatives shall have the same number of Members
as that fixed by law for the National Assembly, who shall be elected by the
qualified electors from the present Assembly districts. Each representative
district shall comprise as far as practicable, contiguous and compact territory."
Pursuant to this Section, a representative district may come into
existence: (a) indirectly, through the creation of a province — for "each
province shall have at least one member" in the House of
Representatives; or (b) by direct creation of several representative
districts within a province. The requirements concerning the apportionment
of representative districts and the territory thereof refer only to the second
method of creation of representative districts, and do not apply to those
incidental to the creation of provinces, under the first method. This is deducible,
not only from the general tenor of the provision above quoted, but, also, from
the fact that the apportionment therein alluded to refers to that which is made
by an Act of Congress. Indeed, when a province is created by statute, the
corresponding representative district, comes into existence neither by authority
of that statute — which cannot provide otherwise — nor by apportionment, but
by operation of the Constitution, without a reapportionment.
There is no constitutional limitation as to the time when, territory of, or other
conditions under which a province may be created, except, perhaps, if the
consequence thereof were to exceed the maximum of 120 representative
districts prescribed in the Constitution, which is not the effect of the legislation
under consideration. As a matter of fact, provinces have been created or
subdivided into other provinces, with the consequent creation of additional
representative districts, without complying with the aforementioned
requirements.32 (Emphasis supplied)
Thus, the Court sustained the constitutionality of RA 4695 because (1) it validly
created legislative districts "indirectly" through a special law enacted by
Congress creating a province and (2) the creation of the legislative districts will
not result in breaching the maximum number of legislative districts provided
under the 1935 Constitution. Felwa does not apply to the present case because
in Felwa the new provinces were created by a national law enacted by
Congress itself. Here, the new province was created merely by a regional law
enacted by the ARMM Regional Assembly.
What Felwa teaches is that the creation of a legislative district by Congress
does not emanate alone from Congress’ power to reapportion legislative
districts, but also from Congress’ power to create provinces which cannot be
created without a legislative district. Thus, when a province is created, a
legislative district is created by operation of the Constitution because the
Constitution provides that "each province shall have at least one
representative" in the House of Representatives. This does not detract from the
constitutional principle that the power to create legislative districts belongs
exclusively to Congress. It merely prevents any other legislative body, except
Congress, from creating provinces because for a legislative body to create a
province such legislative body must have the power to create legislative
districts. In short, only an act of Congress can trigger the creation of a
legislative district by operation of the Constitution. Thus, only Congress has the
power to create, or trigger the creation of, a legislative district.
Moreover, if as Sema claims MMA Act 201 apportioned a legislative district to
Shariff Kabunsuan upon its creation, this will leave Cotabato City as the lone
component of the first legislative district of Maguindanao. However, Cotabato
City cannot constitute a legislative district by itself because as of the census
taken in 2000, it had a population of only 163,849. To constitute Cotabato City
alone as the surviving first legislative district of Maguindanao will violate
Section 5 (3), Article VI of the Constitution which requires that "[E]ach city with
a population of at least two hundred fifty thousand x x x, shall have at least one
representative."
Second. Sema’s theory also undermines the composition and independence of
the House of Representatives. Under Section 19,33 Article VI of RA 9054, the
ARMM Regional Assembly can create provinces and cities within the ARMM
with or without regard to the criteria fixed in Section 461 of RA 7160, namely:
minimum annual income of ₱20,000,000, and minimum contiguous territory of
2,000 square kilometers or minimum population of 250,000.34The following
scenarios thus become distinct possibilities:
(1) An inferior legislative body like the ARMM Regional Assembly can
create 100 or more provinces and thus increase the membership of a
superior legislative body, the House of Representatives, beyond the
maximum limit of 250 fixed in the Constitution (unless a national law
provides otherwise);
(2) The proportional representation in the House of Representatives
based on one representative for at least every 250,000 residents will be
negated because the ARMM Regional Assembly need not comply with
the requirement in Section 461(a)(ii) of RA 7160 that every province
created must have a population of at least 250,000; and
(3) Representatives from the ARMM provinces can become the
majority in the House of Representatives through the ARMM Regional
Assembly’s continuous creation of provinces or cities within the ARMM.
The following exchange during the oral arguments of the petition in G.R. No.
177597 highlights the absurdity of Sema’s position that the ARMM Regional
Assembly can create provinces:
Justice Carpio:
So, you mean to say [a] Local Government can create legislative district[s] and
pack Congress with their own representatives [?]
Atty. Vistan II:35
Yes, Your Honor, because the Constitution allows that.
Justice Carpio:
So, [the] Regional Assembly of [the] ARMM can create and create x x x
provinces x x x and, therefore, they can have thirty-five (35) new
representatives in the House of Representatives without Congress agreeing to
it, is that what you are saying? That can be done, under your theory[?]
Atty. Vistan II:
Yes, Your Honor, under the correct factual circumstances.
Justice Carpio:
Under your theory, the ARMM legislature can create thirty-five (35) new
provinces, there may be x x x [only] one hundred thousand (100,000)
[population], x x x, and they will each have one representative x x x to
Congress without any national law, is that what you are saying?
Atty. Vistan II:
Without law passed by Congress, yes, Your Honor, that is what we are saying.
xxxx
Justice Carpio:
So, they can also create one thousand (1000) new provinces, sen[d] one
thousand (1000) representatives to the House of Representatives without a
national law[,] that is legally possible, correct?
Atty. Vistan II:
Yes, Your Honor.36 (Emphasis supplied)
Neither the framers of the 1987 Constitution in adopting the provisions in Article
X on regional autonomy,37 nor Congress in enacting RA 9054, envisioned or
intended these disastrous consequences that certainly would wreck the tri-
branch system of government under our Constitution. Clearly, the power to
create or reapportion legislative districts cannot be delegated by Congress but
must be exercised by Congress itself. Even the ARMM Regional Assembly
recognizes this.
The Constitution empowered Congress to create or reapportion legislative
districts, not the regional assemblies. Section 3 of the Ordinance to the
Constitution which states, "[A]ny province that may hereafter be created x x x
shall be entitled in the immediately following election to at least one Member," Thus, we rule that MMA Act 201, enacted by the ARMM Regional Assembly
refers to a province created by Congress itself through a national law. The and creating the Province of Shariff Kabunsuan, is void.
reason is that the creation of a province increases the actual membership of the
House of Representatives, an increase that only Congress can decide. Resolution No. 7902 Complies with the Constitution
Incidentally, in the present 14th Congress, there are 21938 district
representatives out of the maximum 250 seats in the House of
Consequently, we hold that COMELEC Resolution No. 7902, preserving the
Representatives. Since party-list members shall constitute 20 percent of total geographic and legislative district of the First District of Maguindanao with
membership of the House, there should at least be 50 party-list seats available Cotabato City, is valid as it merely complies with Section 5 of Article VI and
in every election in case 50 party-list candidates are proclaimed winners. This
Section 20 of Article X of the Constitution, as well as Section 1 of the Ordinance
leaves only 200 seats for district representatives, much less than the 219
appended to the Constitution.
incumbent district representatives. Thus, there is a need now for Congress to
increase by law the allowable membership of the House, even before Congress
can create new provinces. WHEREFORE, we declare Section 19, Article VI of Republic Act No. 9054
UNCONSTITUTIONAL insofar as it grants to the Regional Assembly of the
Autonomous Region in Muslim Mindanao the power to create provinces and
It is axiomatic that organic acts of autonomous regions cannot prevail over the
cities. Thus, we declare VOID Muslim Mindanao Autonomy Act No. 201
Constitution. Section 20, Article X of the Constitution expressly provides that
creating the Province of Shariff Kabunsuan. Consequently, we rule that
the legislative powers of regional assemblies are limited "[w]ithin its territorial
COMELEC Resolution No. 7902 is VALID.
jurisdiction and subject to the provisions of the Constitution and national
laws, x x x." The Preamble of the ARMM Organic Act (RA 9054) itself states
that the ARMM Government is established "within the framework of the Let a copy of this ruling be served on the President of the Senate and the
Constitution." This follows Section 15, Article X of the Constitution which Speaker of the House of Representatives.
mandates that the ARMM "shall be created x x x within the framework of
this Constitution and the national sovereignty as well as territorial SO ORDERED.
integrity of the Republic of the Philippines."
ANTONIO T. CARPIO
The present case involves the creation of a local government unit that Associate Justice
necessarily involves also the creation of a legislative district. The Court will not
pass upon the constitutionality of the creation of municipalities and barangays
that does not comply with the criteria established in Section 461 of RA 7160, as
mandated in Section 10, Article X of the Constitution, because the creation of
such municipalities and barangays does not involve the creation of legislative
districts. We leave the resolution of this issue to an appropriate case.
EN BANC
In summary, we rule that Section 19, Article VI of RA 9054, insofar as it grants
to the ARMM Regional Assembly the power to create provinces and cities, is G.R. No. 203335 February 11, 2014
void for being contrary to Section 5 of Article VI and Section 20 of Article X of
the Constitution, as well as Section 3 of the Ordinance appended to the
JOSE JESUS M. DISINI, JR., ROWENA S. DISINI, LIANNE IVY P. MEDINA,
Constitution. Only Congress can create provinces and cities because the
JANETTE TORAL and ERNESTO SONIDO, JR., Petitioners,
creation of provinces and cities necessarily includes the creation of legislative
vs.
districts, a power only Congress can exercise under Section 5, Article VI of the
THE SECRETARY OF JUSTICE, THE SECRETARY OF THE DEPARTMENT
Constitution and Section 3 of the Ordinance appended to the Constitution. The
OF THE INTERIOR AND LOCAL GOVERNMENT, THE EXECUTIVE
ARMM Regional Assembly cannot create a province without a legislative district
DIRECTOR OF THE INFORMATION AND COMMUNICATIONS
because the Constitution mandates that every province shall have a legislative
TECHNOLOGY OFFICE, THE CHIEF OF THE PHILIPPINE NATIONAL
district. Moreover, the ARMM Regional Assembly cannot enact a law creating a
POLICE and THE DIRECTOR OF THE NATIONAL BUREAU OF
national office like the office of a district representative of Congress because
INVESTIGATION, Respondents.
the legislative powers of the ARMM Regional Assembly operate only within its
territorial jurisdiction as provided in Section 20, Article X of the Constitution.
x-----------------------x
G.R. No. 203299
LOUIS "BAROK" C. BIRAOGO, Petitioner,
vs.
NATIONAL BUREAU OF INVESTIGATION and PHILIPPINE NATIONAL
POLICE, Respondents.
x-----------------------x
G.R. No. 203306
ALAB NG MAMAMAHAYAG (ALAM), HUKUMAN NG MAMAMAYAN
MOVEMENT, INC., JERRY S. YAP, BERTENI "TOTO" CAUSING, HERNANI
Q. CUARE, PERCY LAPID, TRACY CABRERA, RONALDO E. RENTA,
CIRILO P. SABARRE, JR., DERVIN CASTRO, ET AL., Petitioners,
vs.
OFFICE OF THE PRESIDENT, represented by President Benigno Simeon
Aquino III, SENATE OF THE PHILIPPINES, and HOUSE OF
REPRESENTATIVES, Respondents.
x-----------------------x
G.R. No. 203359
SENATOR TEOFISTO DL GUINGONA III, Petitioner,
vs.
EXECUTIVE SECRETARY, THE SECRETARY OF JUSTICE, THE
SECRETARY OF THE DEPARTMENT OF INTERIOR AND LOCAL
GOVERNMENT, THE CHIEF OF THE PHILIPPINE NATIONAL POLICE, and
DIRECTOR OF THE NATIONAL BUREAU OF
INVESTIGATION, Respondents.
x-----------------------x
G.R. No. 203378
ALEXANDER ADONIS, ELLEN TORDESILLAS, MA. GISELA ORDENES-
CASCOLAN, H. HARRY L. ROQUE, JR., ROMEL R. BAGARES, and
GILBERT T. ANDRES, Petitioners,
vs.
THE EXECUTIVE SECRETARY, THE DEPARTMENT OF BUDGET AND
MANAGEMENT, THE DEPARTMENT OF JUSTICE, THE DEPARTMENT OF
THE INTERIOR AND LOCAL GOVERNMENT, THE NATIONAL BUREAU OF
INVESTIGATION, THE PHILIPPINE NATIONAL POLICE, AND THE
INFORMATION AND COMMUNICATIONS TECHNOLOGY OFFICE-
DEPARTMENT OF SCIENCE AND TECHNOLOGY, Respondents.
x-----------------------x
G.R. No. 203391
HON. RAYMOND V. PALATINO, HON. ANTONIO TINIO, VENCER MARI
CRISOSTOMO OF ANAKBAYAN, MA. KATHERINE ELONA OF THE
PHILIPPINE COLLEGIAN, ISABELLE THERESE BAGUISI OF THE
NATIONAL UNION OF STUDENTS OF THE PHILIPPINES, ET
AL., Petitioners,
vs.
PAQUITO N. OCHOA, JR., in his capacity as Executive Secretary and
alter-ego of President Benigno Simeon Aquino III, LEILA DE LIMA in her
capacity as Secretary of Justice, Respondents.
x-----------------------x
G.R. No. 203407
BAGONG ALYANSANG MAKABAYAN SECRETARY GENERAL RENATO
M. REYES, JR., National Artist BIENVENIDO L. LUMBERA, Chairperson of
Concerned Artists of the Philippines, ELMER C. LABOG, Chairperson of
Kilusang Mayo Uno, CRISTINA E. PALABAY, Secretary General of
Karapatan, FERDINAND R. GAITE, Chairperson of COURAGE, JOEL B.
MAGLUNSOD, Vice President of Anakpawis Party-List, LANA R.
LINABAN, Secretary General Gabriela Women's Party, ADOLFO ARES P.
GUTIERREZ, and JULIUS GARCIA MATIBAG, Petitioners,
vs.
BENIGNO SIMEON C. AQUINO III, President of the Republic of the
Philippines, PAQUITO N. OCHOA, JR., Executive Secretary, SENATE OF
THE PHILIPPINES, represented by SENATE PRESIDENT JUAN PONCE
ENRILE, HOUSE OF REPRESENTATIVES, represented by SPEAKER
FELICIANO BELMONTE, JR., LEILA DE LIMA, Secretary of the Department
of Justice, LOUIS NAPOLEON C. CASAMBRE, Executive Director of the
Information and Communications Technology Office, NONNATUS
CAESAR R. ROJAS, Director of the National Bureau of Investigation,
D/GEN. NICANOR A. BARTOLOME, Chief of the Philippine National Police,
MANUEL A. ROXAS II, Secretary of the Department of the Interior and
Local Government, Respondents.
x-----------------------x
G.R. No. 203440
MELENCIO S. STA. MARIA, SEDFREY M. CANDELARIA, AMPARITA STA.
MARIA, RAY PAOLO J. SANTIAGO, GILBERT V. SEMBRANO, and RYAN
JEREMIAH D. QUAN (all of the Ateneo Human Rights Center),Petitioners,
vs.
HONORABLE PAQUITO OCHOA in his capacity as Executive Secretary,
HONORABLE LEILA DE LIMA in her capacity as Secretary of Justice,
HONORABLE MANUEL ROXAS in his capacity as Secretary of the
Department of Interior and Local Government, The CHIEF of the
Philippine National Police, The DIRECTOR of the National Bureau of
Investigation (all of the Executive Department of
Government), Respondents.
x-----------------------x
G.R. No. 203453
NATIONAL UNION OF JOURNALISTS OF THE PHILIPPINES (NUJP),
PHILIPPINE PRESS INSTITUTE (PPI), CENTER FOR MEDIA FREEDOM
AND RESPONSIBILITY, ROWENA CARRANZA PARAAN, MELINDA
QUINTOS-DE JESUS, JOSEPH ALWYN ALBURO, ARIEL SEBELLINO AND
THE PETITIONERS IN THE e-PETITION http://www.nujp.org/no-to-
ra10175/, Petitioners,
vs.
THE EXECUTIVE SECRETARY, THE SECRETARY OF JUSTICE, THE
SECRETARY OF THE INTERIOR AND LOCAL GOVERNMENT, THE
SECRETARY OF BUDGET AND MANAGEMENT, THE DIRECTOR
GENERAL OF THE PHILIPPINE NATIONAL POLICE, THE DIRECTOR OF
THE NATIONAL BUREAU OF INVESTIGATION, THE CYBERCRIME
INVESTIGATION AND COORDINATING CENTER, AND ALL AGENCIES
AND INSTRUMENTALITIES OF GOVERNMENT AND ALL PERSONS
ACTING UNDER THEIR INSTRUCTIONS, ORDERS, DIRECTION IN
RELATION TO THE IMPLEMENTATION OF REPUBLIC ACT NO.
10175, Respondents.
x-----------------------x
G.R. No. 203454
PAUL CORNELIUS T. CASTILLO & RYAN D. ANDRES, Petitioners,
vs.
THE HON. SECRETARY OF JUSTICE THE HON. SECRETARY OF
INTERIOR AND LOCAL GOVERNMENT,Respondents.
x-----------------------x
G.R. No. 203469
ANTHONY IAN M. CRUZ; MARCELO R. LANDICHO; BENJAMIN NOEL A.
ESPINA; MARCK RONALD C. RIMORIN; JULIUS D. ROCAS; OLIVER
RICHARD V. ROBILLO; AARON ERICK A. LOZADA; GERARD ADRIAN P.
MAGNAYE; JOSE REGINALD A. RAMOS; MA. ROSARIO T. JUAN;
BRENDALYN P. RAMIREZ; MAUREEN A. HERMITANIO; KRISTINE JOY S.
REMENTILLA; MARICEL O. GRAY; JULIUS IVAN F. CABIGON; BENRALPH
S. YU; CEBU BLOGGERS SOCIETY, INC. PRESIDENT RUBEN B. LICERA,
JR; and PINOY EXPAT/OFW BLOG AWARDS, INC. COORDINATOR
PEDRO E. RAHON; Petitioners,
vs.
HIS EXCELLENCY BENIGNO S. AQUINO III, in his capacity as President of
the Republic of the Philippines; SENATE OF THE PHILIPPINES,
represented by HON. JUAN PONCE ENRILE, in his capacity as Senate
President; HOUSE OF REPRESENTATIVES, represented by FELICIANO R.
BELMONTE, JR., in his capacity as Speaker of the House of
Representatives; HON. PAQUITO N. OCHOA, JR., in his capacity as
Executive Secretary; HON. LEILA M. DE LIMA, in her capacity as
Secretary of Justice; HON. LOUIS NAPOLEON C. CASAMBRE, in his
capacity as Executive Director, Information and Communications
Technology Office; HON. NONNATUS CAESAR R. ROJAS, in his capacity
as Director, National Bureau of Investigation; and P/DGEN. NICANOR A.
BARTOLOME, in his capacity as Chief, Philippine National
Police, Respondents.
x-----------------------x
G.R. No. 203501
PHILIPPINE BAR ASSOCIATION, INC., Petitioner,
vs.
HIS EXCELLENCY BENIGNO S. AQUINO III, in his official capacity as
President of the Republic of the Philippines; HON. PAQUITO N. OCHOA,
JR., in his official capacity as Executive Secretary; HON. LEILA M. DE
LIMA, in her official capacity as Secretary of Justice; LOUIS NAPOLEON
C. CASAMBRE, in his official capacity as Executive Director, Information
and Communications Technology Office; NONNATUS CAESAR R. ROJAS,
in his official capacity as Director of the National Bureau of Investigation;
and DIRECTOR GENERAL NICANOR A. BARTOLOME, in his official
capacity as Chief of the Philippine National Police,Respondents.
x-----------------------x
G.R. No. 203509
BAYAN MUNA REPRESENTATIVE NERI J. COLMENARES, Petitioner,
vs.
THE EXECUTIVE SECRETARY PAQUITO OCHOA, JR., Respondent.
x-----------------------x
G.R. No. 203515
NATIONAL PRESS CLUB OF THE PHILIPPINES, INC. represented by
BENNY D. ANTIPORDA in his capacity as President and in his personal
capacity, Petitioner,
vs.
OFFICE OF THE PRESIDENT, PRES. BENIGNO SIMEON AQUINO III,
DEPARTMENT OF JUSTICE, DEPARTMENT OF INTERIOR AND LOCAL
GOVERNMENT, PHILIPPINE NATIONAL POLICE, NATIONAL BUREAU OF
INVESTIGATION, DEPARTMENT OF BUDGET AND MANAGEMENT AND
ALL OTHER GOVERNMENT INSTRUMENTALITIES WHO HAVE HANDS IN
THE PASSAGE AND/OR IMPLEMENTATION OF REPUBLIC ACT
10175, Respondents.
x-----------------------x
G.R. No. 203518
PHILIPPINE INTERNET FREEDOM ALLIANCE, composed of DAKILA-
PHILIPPINE COLLECTIVE FOR MODERN HEROISM, represented by Leni
Velasco, PARTIDO LAKAS NG MASA, represented by Cesar S. Melencio,
FRANCIS EUSTON R. ACERO, MARLON ANTHONY ROMASANTA
TONSON, TEODORO A. CASIÑO, NOEMI LARDIZABAL-DADO, IMELDA
ORALES, JAMES MATTHEW B. MIRAFLOR, JUAN G.M. RAGRAGIO,
MARIA FATIMA A. VILLENA, MEDARDO M. MANRIQUE, JR., LAUREN
DADO, MARCO VITTORIA TOBIAS SUMAYAO, IRENE CHIA, ERASTUS
NOEL T. DELIZO, CRISTINA SARAH E. OSORIO, ROMEO FACTOLERIN,
NAOMI L. TUPAS, KENNETH KENG, ANA ALEXANDRA C.
CASTRO, Petitioners,
vs.
THE EXECUTIVE SECRETARY, THE SECRETARY OF JUSTICE, THE
SECRETARY OF INTERIOR AND LOCAL GOVERNMENT, THE
SECRETARY OF SCIENCE AND TECHNOLOGY, THE EXECUTIVE
DIRECTOR OF THE INFORMATION TECHNOLOGY OFFICE, THE
DIRECTOR OF THE NATIONAL BUREAU OF INVESTIGATION, THE CHIEF,
PHILIPPINE NATIONAL POLICE, THE HEAD OF THE DOJ OFFICE OF
CYBERCRIME, and THE OTHER MEMBERS OF THE CYBERCRIME
INVESTIGATION AND COORDINATING CENTER, Respondents.
DECISION
ABAD, J.:
These consolidated petitions seek to declare several provisions of Republic Act
(R.A.) 10175, the Cybercrime Prevention Act of 2012, unconstitutional and void.
The Facts and the Case
The cybercrime law aims to regulate access to and use of the cyberspace.
Using his laptop or computer, a person can connect to the internet, a system
that links him to other computers and enable him, among other things, to:
1. Access virtual libraries and encyclopedias for all kinds of information
that he needs for research, study, amusement, upliftment, or pure
curiosity;
2. Post billboard-like notices or messages, including pictures and
videos, for the general public or for special audiences like associates,
classmates, or friends and read postings from them;
3. Advertise and promote goods or services and make purchases and
payments;
4. Inquire and do business with institutional entities like government
agencies, banks, stock exchanges, trade houses, credit card
companies, public utilities, hospitals, and schools; and
5. Communicate in writing or by voice with any person through his e-
mail address or telephone.
This is cyberspace, a system that accommodates millions and billions of
simultaneous and ongoing individual accesses to and uses of the internet. The
cyberspace is a boon to the need of the current generation for greater
information and facility of communication. But all is not well with the system
since it could not filter out a number of persons of ill will who would want to use
cyberspace technology for mischiefs and crimes. One of them can, for instance,
avail himself of the system to unjustly ruin the reputation of another or bully the
latter by posting defamatory statements against him that people can read.
And because linking with the internet opens up a user to communications from
others, the ill-motivated can use the cyberspace for committing theft by hacking
into or surreptitiously accessing his bank account or credit card or defrauding
him through false representations. The wicked can use the cyberspace, too, for
illicit trafficking in sex or for exposing to pornography guileless children who
have access to the internet. For this reason, the government has a legitimate
right to regulate the use of cyberspace and contain and punish wrongdoings.
Notably, there are also those who would want, like vandals, to wreak or cause i. Section 5 on Aiding or Abetting and Attempt in the Commission of
havoc to the computer systems and networks of indispensable or highly useful Cybercrimes;
institutions as well as to the laptop or computer programs and memories of
innocent individuals. They accomplish this by sending electronic viruses or j. Section 6 on the Penalty of One Degree Higher;
virtual dynamites that destroy those computer systems, networks, programs,
and memories. The government certainly has the duty and the right to prevent
k. Section 7 on the Prosecution under both the Revised Penal Code
these tomfooleries from happening and punish their perpetrators, hence the
(RPC) and R.A. 10175;
Cybercrime Prevention Act.
l. Section 8 on Penalties;
But petitioners claim that the means adopted by the cybercrime law for
regulating undesirable cyberspace activities violate certain of their constitutional
rights. The government of course asserts that the law merely seeks to m. Section 12 on Real-Time Collection of Traffic Data;
reasonably put order into cyberspace activities, punish wrongdoings, and
prevent hurtful attacks on the system. n. Section 13 on Preservation of Computer Data;

Pending hearing and adjudication of the issues presented in these cases, on o. Section 14 on Disclosure of Computer Data;
February 5, 2013 the Court extended the original 120-day temporary restraining
order (TRO) that it earlier issued on October 9, 2012, enjoining respondent p. Section 15 on Search, Seizure and Examination of Computer Data;
government agencies from implementing the cybercrime law until further
orders. q. Section 17 on Destruction of Computer Data;

The Issues Presented r. Section 19 on Restricting or Blocking Access to Computer Data;

Petitioners challenge the constitutionality of the following provisions of the s. Section 20 on Obstruction of Justice;
cybercrime law that regard certain acts as crimes and impose penalties for their
commission as well as provisions that would enable the government to track
t. Section 24 on Cybercrime Investigation and Coordinating Center
down and penalize violators. These provisions are:
(CICC); and
a. Section 4(a)(1) on Illegal Access;
u. Section 26(a) on CICC’s Powers and Functions.
b. Section 4(a)(3) on Data Interference;
Some petitioners also raise the constitutionality of related Articles 353, 354,
361, and 362 of the RPC on the crime of libel.
c. Section 4(a)(6) on Cyber-squatting;
The Rulings of the Court
d. Section 4(b)(3) on Identity Theft;
Section 4(a)(1)
e. Section 4(c)(1) on Cybersex;
Section 4(a)(1) provides:
f. Section 4(c)(2) on Child Pornography;
Section 4. Cybercrime Offenses. – The following acts constitute the offense of
g. Section 4(c)(3) on Unsolicited Commercial Communications; cybercrime punishable under this Act:

h. Section 4(c)(4) on Libel; (a) Offenses against the confidentiality, integrity and availability of computer
data and systems:
(1) Illegal Access. – The access to the whole or any part of a computer system
without right.
Petitioners contend that Section 4(a)(1) fails to meet the strict scrutiny standard
required of laws that interfere with the fundamental rights of the people and
should thus be struck down.
The Court has in a way found the strict scrutiny standard, an American
constitutional construct,1 useful in determining the constitutionality of laws that
tend to target a class of things or persons. According to this standard, a
legislative classification that impermissibly interferes with the exercise of
fundamental right or operates to the peculiar class disadvantage of a suspect
class is presumed unconstitutional. The burden is on the government to prove
that the classification is necessary to achieve a compelling state interest and
that it is the least restrictive means to protect such interest.2 Later, the strict
scrutiny standard was used to assess the validity of laws dealing with the
regulation of speech, gender, or race as well as other fundamental rights, as
expansion from its earlier applications to equal protection.3
In the cases before it, the Court finds nothing in Section 4(a)(1) that calls for the
application of the strict scrutiny standard since no fundamental freedom, like
speech, is involved in punishing what is essentially a condemnable act –
accessing the computer system of another without right. It is a universally
condemned conduct.4
Petitioners of course fear that this section will jeopardize the work of ethical
hackers, professionals who employ tools and techniques used by criminal
hackers but would neither damage the target systems nor steal information.
Ethical hackers evaluate the target system’s security and report back to the
owners the vulnerabilities they found in it and give instructions for how these
can be remedied. Ethical hackers are the equivalent of independent auditors
who come into an organization to verify its bookkeeping records.5
Besides, a client’s engagement of an ethical hacker requires an agreement
between them as to the extent of the search, the methods to be used, and the
systems to be tested. This is referred to as the "get out of jail free card." 6Since
the ethical hacker does his job with prior permission from the client, such
permission would insulate him from the coverage of Section 4(a)(1).
Section 4(a)(3) of the Cybercrime Law
Section 4(a)(3) provides:
Section 4. Cybercrime Offenses. – The following acts constitute the offense of
cybercrime punishable under this Act:
(a) Offenses against the confidentiality, integrity and availability of computer
data and systems:
xxxx
(3) Data Interference. – The intentional or reckless alteration, damaging,
deletion or deterioration of computer data, electronic document, or electronic
data message, without right, including the introduction or transmission of
viruses.
Petitioners claim that Section 4(a)(3) suffers from overbreadth in that, while it
seeks to discourage data interference, it intrudes into the area of protected
speech and expression, creating a chilling and deterrent effect on these
guaranteed freedoms.
Under the overbreadth doctrine, a proper governmental purpose,
constitutionally subject to state regulation, may not be achieved by means that
unnecessarily sweep its subject broadly, thereby invading the area of protected
freedoms.7 But Section 4(a)(3) does not encroach on these freedoms at all. It
simply punishes what essentially is a form of vandalism,8 the act of willfully
destroying without right the things that belong to others, in this case their
computer data, electronic document, or electronic data message. Such act has
no connection to guaranteed freedoms. There is no freedom to destroy other
people’s computer systems and private documents.
All penal laws, like the cybercrime law, have of course an inherent chilling
effect, an in terrorem effect9 or the fear of possible prosecution that hangs on
the heads of citizens who are minded to step beyond the boundaries of what is
proper. But to prevent the State from legislating criminal laws because they
instill such kind of fear is to render the state powerless in addressing and
penalizing socially harmful conduct.10 Here, the chilling effect that results in
paralysis is an illusion since Section 4(a)(3) clearly describes the evil that it
seeks to punish and creates no tendency to intimidate the free exercise of
one’s constitutional rights.
Besides, the overbreadth challenge places on petitioners the heavy burden of
proving that under no set of circumstances will Section 4(a)(3) be
valid.11 Petitioner has failed to discharge this burden.
Section 4(a)(6) of the Cybercrime Law
Section 4(a)(6) provides:
Section 4. Cybercrime Offenses. – The following acts constitute the offense of
cybercrime punishable under this Act:
(a) Offenses against the confidentiality, integrity and availability of computer
data and systems:
xxxx
(6) Cyber-squatting. – The acquisition of domain name over the internet in bad
faith to profit, mislead, destroy the reputation, and deprive others from
registering the same, if such a domain name is:
(i) Similar, identical, or confusingly similar to an existing trademark
registered with the appropriate government agency at the time of the
domain name registration;
(ii) Identical or in any way similar with the name of a person other than
the registrant, in case of a personal name; and
(iii) Acquired without right or with intellectual property interests in it.
Petitioners claim that Section 4(a)(6) or cyber-squatting violates the equal
protection clause12 in that, not being narrowly tailored, it will cause a user using
his real name to suffer the same fate as those who use aliases or take the
name of another in satire, parody, or any other literary device. For example,
supposing there exists a well known billionaire-philanthropist named "Julio
Gandolfo," the law would punish for cyber-squatting both the person who
registers such name because he claims it to be his pseudo-name and another
who registers the name because it happens to be his real name. Petitioners
claim that, considering the substantial distinction between the two, the law
should recognize the difference.
But there is no real difference whether he uses "Julio Gandolfo" which happens
to be his real name or use it as a pseudo-name for it is the evil purpose for
which he uses the name that the law condemns. The law is reasonable in
penalizing him for acquiring the domain name in bad faith to profit, mislead,
destroy reputation, or deprive others who are not ill-motivated of the rightful
opportunity of registering the same. The challenge to the constitutionality of
Section 4(a)(6) on ground of denial of equal protection is baseless.
Section 4(b)(3) of the Cybercrime Law
Section 4(b)(3) provides:
Section 4. Cybercrime Offenses. – The following acts constitute the offense of
cybercrime punishable under this Act:
xxxx
b) Computer-related Offenses:
xxxx
(3) Computer-related Identity Theft. – The intentional acquisition, use, misuse,
transfer, possession, alteration, or deletion of identifying information belonging
to another, whether natural or juridical, without right: Provided: that if no
damage has yet been caused, the penalty imposable shall be one (1) degree
lower.
Petitioners claim that Section 4(b)(3) violates the constitutional rights to due
process and to privacy and correspondence, and transgresses the freedom of
the press.
The right to privacy, or the right to be let alone, was institutionalized in the 1987
Constitution as a facet of the right protected by the guarantee against
unreasonable searches and seizures.13 But the Court acknowledged its
existence as early as 1968 in Morfe v. Mutuc,14 it ruled that the right to privacy
exists independently of its identification with liberty; it is in itself fully deserving
of constitutional protection.
Relevant to any discussion of the right to privacy is the concept known as the
"Zones of Privacy." The Court explained in "In the Matter of the Petition for
Issuance of Writ of Habeas Corpus of Sabio v. Senator Gordon" 15 the relevance
of these zones to the right to privacy:
Zones of privacy are recognized and protected in our laws. Within these zones,
any form of intrusion is impermissible unless excused by law and in accordance
with customary legal process. The meticulous regard we accord to these zones
arises not only from our conviction that the right to privacy is a "constitutional
right" and "the right most valued by civilized men," but also from our adherence
to the Universal Declaration of Human Rights which mandates that, "no one
shall be subjected to arbitrary interference with his privacy" and "everyone has
the right to the protection of the law against such interference or attacks."
Two constitutional guarantees create these zones of privacy: (a) the right
against unreasonable searches16 and seizures, which is the basis of the right to
be let alone, and (b) the right to privacy of communication and
correspondence.17 In assessing the challenge that the State has impermissibly
intruded into these zones of privacy, a court must determine whether a person
has exhibited a reasonable expectation of privacy and, if so, whether that
expectation has been violated by unreasonable government intrusion. 18
The usual identifying information regarding a person includes his name, his
citizenship, his residence address, his contact number, his place and date of
birth, the name of his spouse if any, his occupation, and similar data.19 The law
punishes those who acquire or use such identifying information without right,
implicitly to cause damage. Petitioners simply fail to show how government
effort to curb computer-related identity theft violates the right to privacy and
correspondence as well as the right to due process of law.
Also, the charge of invalidity of this section based on the overbreadth doctrine
will not hold water since the specific conducts proscribed do not intrude into
guaranteed freedoms like speech. Clearly, what this section regulates are
specific actions: the acquisition, use, misuse or deletion of personal identifying
data of another. There is no fundamental right to acquire another’s personal
data.
Further, petitioners fear that Section 4(b)(3) violates the freedom of the press in
that journalists would be hindered from accessing the unrestricted user account
of a person in the news to secure information about him that could be
published. But this is not the essence of identity theft that the law seeks to
prohibit and punish. Evidently, the theft of identity information must be intended
for an illegitimate purpose. Moreover, acquiring and disseminating information
made public by the user himself cannot be regarded as a form of theft.
The Court has defined intent to gain as an internal act which can be established
through the overt acts of the offender, and it may be presumed from the furtive
taking of useful property pertaining to another, unless special circumstances
reveal a different intent on the part of the perpetrator.20 As such, the press,
whether in quest of news reporting or social investigation, has nothing to fear
since a special circumstance is present to negate intent to gain which is
required by this Section.
Section 4(c)(1) of the Cybercrime Law
Section 4(c)(1) provides:
Sec. 4. Cybercrime Offenses.– The following acts constitute the offense of
cybercrime punishable under this Act:
xxxx
(c) Content-related Offenses:
(1) Cybersex.– The willful engagement, maintenance, control, or operation,
directly or indirectly, of any lascivious exhibition of sexual organs or sexual
activity, with the aid of a computer system, for favor or consideration.
Petitioners claim that the above violates the freedom of expression clause of
the Constitution.21 They express fear that private communications of sexual
character between husband and wife or consenting adults, which are not
regarded as crimes under the penal code, would now be regarded as crimes
when done "for favor" in cyberspace. In common usage, the term "favor"
includes "gracious kindness," "a special privilege or right granted or conceded,"
or "a token of love (as a ribbon) usually worn conspicuously."22 This meaning
given to the term "favor" embraces socially tolerated trysts. The law as written
would invite law enforcement agencies into the bedrooms of married couples or
consenting individuals.
But the deliberations of the Bicameral Committee of Congress on this section of
the Cybercrime Prevention Act give a proper perspective on the issue. These
deliberations show a lack of intent to penalize a "private showing x x x between
and among two private persons x x x although that may be a form of obscenity
to some."23 The understanding of those who drew up the cybercrime law is that
the element of "engaging in a business" is necessary to constitute the illegal
cybersex.24 The Act actually seeks to punish cyber prostitution, white slave
trade, and pornography for favor and consideration. This includes interactive
prostitution and pornography, i.e., by webcam.25
The subject of Section 4(c)(1)—lascivious exhibition of sexual organs or sexual
activity—is not novel. Article 201 of the RPC punishes "obscene publications
and exhibitions and indecent shows." The Anti-Trafficking in Persons Act of
2003 penalizes those who "maintain or hire a person to engage in prostitution
or pornography."26 The law defines prostitution as any act, transaction, scheme,
or design involving the use of a person by another, for sexual intercourse or
lascivious conduct in exchange for money, profit, or any other consideration.27
The case of Nogales v. People28 shows the extent to which the State can
regulate materials that serve no other purpose than satisfy the market for
violence, lust, or pornography.29 The Court weighed the property rights of
individuals against the public welfare. Private property, if containing
pornographic materials, may be forfeited and destroyed. Likewise, engaging in
sexual acts privately through internet connection, perceived by some as a right,
has to be balanced with the mandate of the State to eradicate white slavery and
the exploitation of women.
In any event, consenting adults are protected by the wealth of jurisprudence
delineating the bounds of obscenity.30The Court will not declare Section 4(c)(1)
unconstitutional where it stands a construction that makes it apply only to
persons engaged in the business of maintaining, controlling, or operating,
directly or indirectly, the lascivious exhibition of sexual organs or sexual activity
with the aid of a computer system as Congress has intended.
Section 4(c)(2) of the Cybercrime Law
Section 4(c)(2) provides:
Sec. 4. Cybercrime Offenses. – The following acts constitute the offense of
cybercrime punishable under this Act:
xxxx
(c) Content-related Offenses:
xxxx
(2) Child Pornography. — The unlawful or prohibited acts defined and
punishable by Republic Act No. 9775 or the Anti-Child Pornography Act of
2009, committed through a computer system: Provided, That the penalty to be
imposed shall be (1) one degree higher than that provided for in Republic Act
No. 9775.
It seems that the above merely expands the scope of the Anti-Child
Pornography Act of 200931 (ACPA) to cover identical activities in cyberspace. In
theory, nothing prevents the government from invoking the ACPA when
prosecuting persons who commit child pornography using a computer system.
Actually, ACPA’s definition of child pornography already embraces the use of
"electronic, mechanical, digital, optical, magnetic or any other means." Notably,
no one has questioned this ACPA provision.
Of course, the law makes the penalty higher by one degree when the crime is
committed in cyberspace. But no one can complain since the intensity or
duration of penalty is a legislative prerogative and there is rational basis for
such higher penalty.32 The potential for uncontrolled proliferation of a particular
piece of child pornography when uploaded in the cyberspace is incalculable.
Petitioners point out that the provision of ACPA that makes it unlawful for any
person to "produce, direct, manufacture or create any form of child
pornography"33 clearly relates to the prosecution of persons who aid and abet
the core offenses that ACPA seeks to punish.34 Petitioners are wary that a
person who merely doodles on paper and imagines a sexual abuse of a 16-
year-old is not criminally liable for producing child pornography but one who
formulates the idea on his laptop would be. Further, if the author bounces off
his ideas on Twitter, anyone who replies to the tweet could be considered
aiding and abetting a cybercrime.
The question of aiding and abetting the offense by simply commenting on it will
be discussed elsewhere below. For now the Court must hold that the
constitutionality of Section 4(c)(2) is not successfully challenged.
Section 4(c)(3) of the Cybercrime Law
Section 4(c)(3) provides:
Sec. 4. Cybercrime Offenses. – The following acts constitute the offense of
cybercrime punishable under this Act:
xxxx
(c) Content-related Offenses:
xxxx
(3) Unsolicited Commercial Communications. – The transmission of commercial
electronic communication with the use of computer system which seeks to
advertise, sell, or offer for sale products and services are prohibited unless:
(i) There is prior affirmative consent from the recipient; or
(ii) The primary intent of the communication is for service and/or
administrative announcements from the sender to its existing users,
subscribers or customers; or
(iii) The following conditions are present:
(aa) The commercial electronic communication contains a
simple, valid, and reliable way for the recipient to reject receipt
of further commercial electronic messages (opt-out) from the
same source;
(bb) The commercial electronic communication does not
purposely disguise the source of the electronic message; and
(cc) The commercial electronic communication does not
purposely include misleading information in any part of the
message in order to induce the recipients to read the message.
The above penalizes the transmission of unsolicited commercial
communications, also known as "spam." The term "spam" surfaced in early
internet chat rooms and interactive fantasy games. One who repeats the same
sentence or comment was said to be making a "spam." The term referred to a
Monty Python’s Flying Circus scene in which actors would keep saying "Spam,
Spam, Spam, and Spam" when reading options from a menu.35
The Government, represented by the Solicitor General, points out that
unsolicited commercial communications or spams are a nuisance that wastes
the storage and network capacities of internet service providers, reduces the
efficiency of commerce and technology, and interferes with the owner’s
peaceful enjoyment of his property. Transmitting spams amounts to trespass to
one’s privacy since the person sending out spams enters the recipient’s domain
without prior permission. The OSG contends that commercial speech enjoys
less protection in law.
But, firstly, the government presents no basis for holding that unsolicited
electronic ads reduce the "efficiency of computers." Secondly, people, before
the arrival of the age of computers, have already been receiving such
unsolicited ads by mail. These have never been outlawed as nuisance since
people might have interest in such ads. What matters is that the recipient has
the option of not opening or reading these mail ads. That is true with spams.
Their recipients always have the option to delete or not to read them.
To prohibit the transmission of unsolicited ads would deny a person the right to
read his emails, even unsolicited commercial ads addressed to him.
Commercial speech is a separate category of speech which is not accorded the
same level of protection as that given to other constitutionally guaranteed forms
of expression but is nonetheless entitled to protection.36 The State cannot rob
him of this right without violating the constitutionally guaranteed freedom of
expression. Unsolicited advertisements are legitimate forms of expression.
Articles 353, 354, and 355 of the Penal Code
Section 4(c)(4) of the Cyber Crime Law
Petitioners dispute the constitutionality of both the penal code provisions on
libel as well as Section 4(c)(4) of the Cybercrime Prevention Act on cyberlibel.
The RPC provisions on libel read:
Art. 353. Definition of libel. — A libel is public and malicious imputation of a
crime, or of a vice or defect, real or imaginary, or any act, omission, condition,
status, or circumstance tending to cause the dishonor, discredit, or contempt of
a natural or juridical person, or to blacken the memory of one who is dead.
Art. 354. Requirement for publicity. — Every defamatory imputation is
presumed to be malicious, even if it be true, if no good intention and justifiable
motive for making it is shown, except in the following cases:
1. A private communication made by any person to another in the
performance of any legal, moral or social duty; and
2. A fair and true report, made in good faith, without any comments or
remarks, of any judicial, legislative or other official proceedings which
are not of confidential nature, or of any statement, report or speech
delivered in said proceedings, or of any other act performed by public
officers in the exercise of their functions.
Art. 355. Libel means by writings or similar means. — A libel committed by
means of writing, printing, lithography, engraving, radio, phonograph, painting,
theatrical exhibition, cinematographic exhibition, or any similar means, shall be
punished by prision correccional in its minimum and medium periods or a fine
ranging from 200 to 6,000 pesos, or both, in addition to the civil action which
may be brought by the offended party.
The libel provision of the cybercrime law, on the other hand, merely
incorporates to form part of it the provisions of the RPC on libel. Thus Section
4(c)(4) reads:
Sec. 4. Cybercrime Offenses. — The following acts constitute the offense of
cybercrime punishable under this Act:
xxxx
(c) Content-related Offenses:
xxxx
(4) Libel. — The unlawful or prohibited acts of libel as defined in Article 355 of
the Revised Penal Code, as amended, committed through a computer system
or any other similar means which may be devised in the future.
Petitioners lament that libel provisions of the penal code37 and, in effect, the
libel provisions of the cybercrime law carry with them the requirement of
"presumed malice" even when the latest jurisprudence already replaces it with
the higher standard of "actual malice" as a basis for conviction.38 Petitioners
argue that inferring "presumed malice" from the accused’s defamatory
statement by virtue of Article 354 of the penal code infringes on his
constitutionally guaranteed freedom of expression.
Petitioners would go further. They contend that the laws on libel should be
stricken down as unconstitutional for otherwise good jurisprudence requiring
"actual malice" could easily be overturned as the Court has done in Fermin v.
People39 even where the offended parties happened to be public figures.
The elements of libel are: (a) the allegation of a discreditable act or condition
concerning another; (b) publication of the charge; (c) identity of the person
defamed; and (d) existence of malice.40
There is "actual malice" or malice in fact41 when the offender makes the
defamatory statement with the knowledge that it is false or with reckless
disregard of whether it was false or not. 42 The reckless disregard standard used
here requires a high degree of awareness of probable falsity. There must be
sufficient evidence to permit the conclusion that the accused in fact entertained
serious doubts as to the truth of the statement he published. Gross or even
extreme negligence is not sufficient to establish actual malice.43
The prosecution bears the burden of proving the presence of actual malice in
instances where such element is required to establish guilt. The defense of
absence of actual malice, even when the statement turns out to be false, is
available where the offended party is a public official or a public figure, as in the
cases of Vasquez (a barangay official) and Borjal (the Executive Director, First
National Conference on Land Transportation). Since the penal code and
implicitly, the cybercrime law, mainly target libel against private persons, the
Court recognizes that these laws imply a stricter standard of "malice" to convict
the author of a defamatory statement where the offended party is a public
figure. Society’s interest and the maintenance of good government demand a
full discussion of public affairs.44
Parenthetically, the Court cannot accept the proposition that its ruling in Fermin
disregarded the higher standard of actual malice or malice in fact when it found
Cristinelli Fermin guilty of committing libel against complainants who were
public figures. Actually, the Court found the presence of malice in fact in that
case. Thus:
It can be gleaned from her testimony that petitioner had the motive to make
defamatory imputations against complainants. Thus, petitioner cannot, by
simply making a general denial, convince us that there was no malice on her
part. Verily, not only was there malice in law, the article being malicious in itself,
but there was also malice in fact, as there was motive to talk ill against
complainants during the electoral campaign. (Emphasis ours)
Indeed, the Court took into account the relatively wide leeway given to
utterances against public figures in the above case, cinema and television
personalities, when it modified the penalty of imprisonment to just a fine of
₱6,000.00.
But, where the offended party is a private individual, the prosecution need not
prove the presence of malice. The law explicitly presumes its existence (malice
in law) from the defamatory character of the assailed statement.45 For his
defense, the accused must show that he has a justifiable reason for the
defamatory statement even if it was in fact true.46
Petitioners peddle the view that both the penal code and the Cybercrime
Prevention Act violate the country’s obligations under the International
Covenant of Civil and Political Rights (ICCPR). They point out that in Adonis v.
Republic of the Philippines,47 the United Nations Human Rights Committee
(UNHRC) cited its General Comment 34 to the effect that penal defamation
laws should include the defense of truth.
But General Comment 34 does not say that the truth of the defamatory
statement should constitute an all-encompassing defense. As it happens,
Article 361 recognizes truth as a defense but under the condition that the
accused has been prompted in making the statement by good motives and for
justifiable ends. Thus:
Art. 361. Proof of the truth. — In every criminal prosecution for libel, the truth
may be given in evidence to the court and if it appears that the matter charged
as libelous is true, and, moreover, that it was published with good motives and
for justifiable ends, the defendants shall be acquitted.
Proof of the truth of an imputation of an act or omission not constituting a crime
shall not be admitted, unless the imputation shall have been made against
Government employees with respect to facts related to the discharge of their
official duties.
In such cases if the defendant proves the truth of the imputation made by him,
he shall be acquitted.
Besides, the UNHRC did not actually enjoin the Philippines, as petitioners urge,
to decriminalize libel. It simply suggested that defamation laws be crafted with
care to ensure that they do not stifle freedom of expression.48Indeed, the
ICCPR states that although everyone should enjoy freedom of expression, its
exercise carries with it special duties and responsibilities. Free speech is not
absolute. It is subject to certain restrictions, as may be necessary and as may
be provided by law.49
The Court agrees with the Solicitor General that libel is not a constitutionally
protected speech and that the government has an obligation to protect private
individuals from defamation. Indeed, cyberlibel is actually not a new crime since
Article 353, in relation to Article 355 of the penal code, already punishes it. In
effect, Section 4(c)(4) above merely affirms that online defamation constitutes
"similar means" for committing libel.
But the Court’s acquiescence goes only insofar as the cybercrime law
penalizes the author of the libelous statement or article. Cyberlibel brings with it
certain intricacies, unheard of when the penal code provisions on libel were
enacted. The culture associated with internet media is distinct from that of print.
The internet is characterized as encouraging a freewheeling, anything-goes
writing style.50 In a sense, they are a world apart in terms of quickness of the
reader’s reaction to defamatory statements posted in cyberspace, facilitated by
one-click reply options offered by the networking site as well as by the speed
with which such reactions are disseminated down the line to other internet
users. Whether these reactions to defamatory statement posted on the internet
constitute aiding and abetting libel, acts that Section 5 of the cybercrime law
punishes, is another matter that the Court will deal with next in relation to
Section 5 of the law.
Section 5 of the Cybercrime Law
Section 5 provides:
Sec. 5. Other Offenses. — The following acts shall also constitute an offense:
(a) Aiding or Abetting in the Commission of Cybercrime. – Any person
who willfully abets or aids in the commission of any of the offenses
enumerated in this Act shall be held liable.
(b) Attempt in the Commission of Cybercrime. — Any person who
willfully attempts to commit any of the offenses enumerated in this Act
shall be held liable.
Petitioners assail the constitutionality of Section 5 that renders criminally liable
any person who willfully abets or aids in the commission or attempts to commit
any of the offenses enumerated as cybercrimes. It suffers from overbreadth,
creating a chilling and deterrent effect on protected expression.
The Solicitor General contends, however, that the current body of jurisprudence
and laws on aiding and abetting sufficiently protects the freedom of expression
of "netizens," the multitude that avail themselves of the services of the internet.
He points out that existing laws and jurisprudence sufficiently delineate the
meaning of "aiding or abetting" a crime as to protect the innocent. The Solicitor
General argues that plain, ordinary, and common usage is at times sufficient to
guide law enforcement agencies in enforcing the law.51 The legislature is not
required to define every single word contained in the laws they craft.
Aiding or abetting has of course well-defined meaning and application in
existing laws. When a person aids or abets another in destroying a
forest,52 smuggling merchandise into the country,53 or interfering in the peaceful
picketing of laborers,54 his action is essentially physical and so is susceptible to
easy assessment as criminal in character. These forms of aiding or abetting
lend themselves to the tests of common sense and human experience.
But, when it comes to certain cybercrimes, the waters are muddier and the line
of sight is somewhat blurred. The idea of "aiding or abetting" wrongdoings
online threatens the heretofore popular and unchallenged dogmas of
cyberspace use.
According to the 2011 Southeast Asia Digital Consumer Report, 33% of
Filipinos have accessed the internet within a year, translating to about 31
million users.55 Based on a recent survey, the Philippines ranks 6th in the top
10 most engaged countries for social networking.56 Social networking sites
build social relations among people who, for example, share interests,
activities, backgrounds, or real-life connections.57
Two of the most popular of these sites are Facebook and Twitter. As of late
2012, 1.2 billion people with shared interests use Facebook to get in
touch.58 Users register at this site, create a personal profile or an open book of
who they are, add other users as friends, and exchange messages, including
automatic notifications when they update their profile.59 A user can post a
statement, a photo, or a video on Facebook, which can be made visible to
anyone, depending on the user’s privacy settings.
If the post is made available to the public, meaning to everyone and not only to
his friends, anyone on Facebook can react to the posting, clicking any of
several buttons of preferences on the program’s screen such as "Like,"
"Comment," or "Share." "Like" signifies that the reader likes the posting while
"Comment" enables him to post online his feelings or views about the same,
such as "This is great!" When a Facebook user "Shares" a posting, the original
"posting" will appear on his own Facebook profile, consequently making it
visible to his down-line Facebook Friends.
Twitter, on the other hand, is an internet social networking and microblogging
service that enables its users to send and read short text-based messages of
up to 140 characters. These are known as "Tweets." Microblogging is the
practice of posting small pieces of digital content—which could be in the form of
text, pictures, links, short videos, or other media—on the internet. Instead of
friends, a Twitter user has "Followers," those who subscribe to this particular
user’s posts, enabling them to read the same, and "Following," those whom this
particular user is subscribed to, enabling him to read their posts. Like
Facebook, a Twitter user can make his tweets available only to his Followers,
or to the general public. If a post is available to the public, any Twitter user can
"Retweet" a given posting. Retweeting is just reposting or republishing another
person’s tweet without the need of copying and pasting it.
In the cyberworld, there are many actors: a) the blogger who originates the
assailed statement; b) the blog service provider like Yahoo; c) the internet
service provider like PLDT, Smart, Globe, or Sun; d) the internet café that may
have provided the computer used for posting the blog; e) the person who
makes a favorable comment on the blog; and f) the person who posts a link to
the blog site.60 Now, suppose Maria (a blogger) maintains a blog on
WordPress.com (blog service provider). She needs the internet to access her
blog so she subscribes to Sun Broadband (Internet Service Provider).
One day, Maria posts on her internet account the statement that a certain
married public official has an illicit affair with a movie star. Linda, one of Maria’s
friends who sees this post, comments online, "Yes, this is so true! They are so
immoral." Maria’s original post is then multiplied by her friends and the latter’s
friends, and down the line to friends of friends almost ad infinitum. Nena, who is
a stranger to both Maria and Linda, comes across this blog, finds it interesting
and so shares the link to this apparently defamatory blog on her Twitter
account. Nena’s "Followers" then "Retweet" the link to that blog site.
Pamela, a Twitter user, stumbles upon a random person’s "Retweet" of Nena’s
original tweet and posts this on her Facebook account. Immediately, Pamela’s
Facebook Friends start Liking and making Comments on the assailed posting.
A lot of them even press the Share button, resulting in the further spread of the
original posting into tens, hundreds, thousands, and greater postings.
The question is: are online postings such as "Liking" an openly defamatory
statement, "Commenting" on it, or "Sharing" it with others, to be regarded as
"aiding or abetting?" In libel in the physical world, if Nestor places on the office
bulletin board a small poster that says, "Armand is a thief!," he could certainly
be charged with libel. If Roger, seeing the poster, writes on it, "I like this!," that
could not be libel since he did not author the poster. If Arthur, passing by and
noticing the poster, writes on it, "Correct!," would that be libel? No, for he
merely expresses agreement with the statement on the poster. He still is not its
author. Besides, it is not clear if aiding or abetting libel in the physical world is a
crime.
But suppose Nestor posts the blog, "Armand is a thief!" on a social networking
site. Would a reader and his Friends or Followers, availing themselves of any of
the "Like," "Comment," and "Share" reactions, be guilty of aiding or abetting
libel? And, in the complex world of cyberspace expressions of thoughts, when
will one be liable for aiding or abetting cybercrimes? Where is the venue of the
crime?
Except for the original author of the assailed statement, the rest (those who
pressed Like, Comment and Share) are essentially knee-jerk sentiments of
readers who may think little or haphazardly of their response to the original
posting. Will they be liable for aiding or abetting? And, considering the inherent
impossibility of joining hundreds or thousands of responding "Friends" or
"Followers" in the criminal charge to be filed in court, who will make a choice as
to who should go to jail for the outbreak of the challenged posting?
The old parameters for enforcing the traditional form of libel would be a square
peg in a round hole when applied to cyberspace libel. Unless the legislature
crafts a cyber libel law that takes into account its unique circumstances and
culture, such law will tend to create a chilling effect on the millions that use this
new medium of communication in violation of their constitutionally-guaranteed
right to freedom of expression.
The United States Supreme Court faced the same issue in Reno v. American
Civil Liberties Union,61 a case involving the constitutionality of the
Communications Decency Act of 1996. The law prohibited (1) the knowing
transmission, by means of a telecommunications device, of
"obscene or indecent" communications to any recipient under 18 years of age;
and (2) the knowing use of an interactive computer service to send to a specific
person or persons under 18 years of age or to display in a manner available to
a person under 18 years of age communications that, in context, depict or
describe, in terms "patently offensive" as measured by contemporary
community standards, sexual or excretory activities or organs.
Those who challenged the Act claim that the law violated the First
Amendment’s guarantee of freedom of speech for being overbroad. The U.S.
Supreme Court agreed and ruled:
The vagueness of the Communications Decency Act of 1996 (CDA), 47
U.S.C.S. §223, is a matter of special concern for two reasons. First, the CDA is
a content-based regulation of speech. The vagueness of such a regulation
raises special U.S. Const. amend. I concerns because of its obvious chilling
effect on free speech. Second, the CDA is a criminal statute. In addition to the
opprobrium and stigma of a criminal conviction, the CDA threatens violators
with penalties including up to two years in prison for each act of violation. The
severity of criminal sanctions may well cause speakers to remain silent rather
than communicate even arguably unlawful words, ideas, and images. As a
practical matter, this increased deterrent effect, coupled with the risk of
discriminatory enforcement of vague regulations, poses greater U.S. Const.
amend. I concerns than those implicated by certain civil regulations.
xxxx
The Communications Decency Act of 1996 (CDA), 47 U.S.C.S. § 223, presents
a great threat of censoring speech that, in fact, falls outside the statute's scope.
Given the vague contours of the coverage of the statute, it unquestionably
silences some speakers whose messages would be entitled to constitutional
protection. That danger provides further reason for insisting that the statute not
be overly broad. The CDA’s burden on protected speech cannot be justified if it
could be avoided by a more carefully drafted statute. (Emphasis ours)
Libel in the cyberspace can of course stain a person’s image with just one click
of the mouse. Scurrilous statements can spread and travel fast across the
globe like bad news. Moreover, cyberlibel often goes hand in hand with
cyberbullying that oppresses the victim, his relatives, and friends, evoking from
mild to disastrous reactions. Still, a governmental purpose, which seeks to
regulate the use of this cyberspace communication technology to protect a
person’s reputation and peace of mind, cannot adopt means that will
unnecessarily and broadly sweep, invading the area of protected freedoms. 62
If such means are adopted, self-inhibition borne of fear of what sinister
predicaments await internet users will suppress otherwise robust discussion of
public issues. Democracy will be threatened and with it, all liberties. Penal laws
should provide reasonably clear guidelines for law enforcement officials and
triers of facts to prevent arbitrary and discriminatory enforcement.63 The terms
"aiding or abetting" constitute broad sweep that generates chilling effect on
those who express themselves through cyberspace posts, comments, and
other messages.64 Hence, Section 5 of the cybercrime law that punishes "aiding
or abetting" libel on the cyberspace is a nullity.
When a penal statute encroaches upon the freedom of speech, a facial
challenge grounded on the void-for-vagueness doctrine is acceptable. The
inapplicability of the doctrine must be carefully delineated. As Justice Antonio T.
Carpio explained in his dissent in Romualdez v. Commission on
Elections,65 "we must view these statements of the Court on the inapplicability
of the overbreadth and vagueness doctrines to penal statutes as appropriate
only insofar as these doctrines are used to mount ‘facial’ challenges to penal
statutes not involving free speech."
In an "as applied" challenge, the petitioner who claims a violation of his
constitutional right can raise any constitutional ground – absence of due
process, lack of fair notice, lack of ascertainable standards, overbreadth, or
vagueness. Here, one can challenge the constitutionality of a statute only if he
asserts a violation of his own rights. It prohibits one from assailing the
constitutionality of the statute based solely on the violation of the rights of third
persons not before the court. This rule is also known as the prohibition against
third-party standing.66
But this rule admits of exceptions. A petitioner may for instance mount a "facial"
challenge to the constitutionality of a statute even if he claims no violation of his
own rights under the assailed statute where it involves free speech on grounds
of overbreadth or vagueness of the statute.
The rationale for this exception is to counter the "chilling effect" on protected
speech that comes from statutes violating free speech. A person who does not
know whether his speech constitutes a crime under an overbroad or vague law
may simply restrain himself from speaking in order to avoid being charged of a
crime. The overbroad or vague law thus chills him into silence.67
As already stated, the cyberspace is an incomparable, pervasive medium of
communication. It is inevitable that any government threat of punishment
regarding certain uses of the medium creates a chilling effect on the
constitutionally-protected freedom of expression of the great masses that use it.
In this case, the particularly complex web of interaction on social media
websites would give law enforcers such latitude that they could arbitrarily or
selectively enforce the law.
Who is to decide when to prosecute persons who boost the visibility of a
posting on the internet by liking it? Netizens are not given "fair notice" or
warning as to what is criminal conduct and what is lawful conduct. When a case
is filed, how will the court ascertain whether or not one netizen’s comment
aided and abetted a cybercrime while another comment did not?
Of course, if the "Comment" does not merely react to the original posting but
creates an altogether new defamatory story against Armand like "He beats his
wife and children," then that should be considered an original posting published
on the internet. Both the penal code and the cybercrime law clearly punish
authors of defamatory publications. Make no mistake, libel destroys reputations
that society values. Allowed to cascade in the internet, it will destroy
relationships and, under certain circumstances, will generate enmity and
tension between social or economic groups, races, or religions, exacerbating
existing tension in their relationships.
In regard to the crime that targets child pornography, when "Google procures,
stores, and indexes child pornography and facilitates the completion of
transactions involving the dissemination of child pornography," does this make
Google and its users aiders and abettors in the commission of child
pornography crimes?68 Byars highlights a feature in the American law on child
pornography that the Cybercrimes law lacks—the exemption of a provider or
notably a plain user of interactive computer service from civil liability for child
pornography as follows:
No provider or user of an interactive computer service shall be treated as the
publisher or speaker of any information provided by another information content
provider and cannot be held civilly liable for any action voluntarily taken in good
faith to restrict access to or availability of material that the provider or user
considers to be obscene...whether or not such material is constitutionally
protected.69
When a person replies to a Tweet containing child pornography, he effectively
republishes it whether wittingly or unwittingly. Does this make him a willing
accomplice to the distribution of child pornography? When a user downloads
the Facebook mobile application, the user may give consent to Facebook to
access his contact details. In this way, certain information is forwarded to third
parties and unsolicited commercial communication could be disseminated on
the basis of this information.70 As the source of this information, is the user
aiding the distribution of this communication? The legislature needs to address
this clearly to relieve users of annoying fear of possible criminal prosecution.
Section 5 with respect to Section 4(c)(4) is unconstitutional. Its vagueness
raises apprehension on the part of internet users because of its obvious chilling
effect on the freedom of expression, especially since the crime of aiding or
abetting ensnares all the actors in the cyberspace front in a fuzzy way. What is
more, as the petitioners point out, formal crimes such as libel are not
punishable unless consummated.71 In the absence of legislation tracing the
interaction of netizens and their level of responsibility such as in other
countries, Section 5, in relation to Section 4(c)(4) on Libel, Section 4(c)(3) on
Unsolicited Commercial Communications, and Section 4(c)(2) on Child
Pornography, cannot stand scrutiny.
But the crime of aiding or abetting the commission of cybercrimes under
Section 5 should be permitted to apply to Section 4(a)(1) on Illegal Access,
Section 4(a)(2) on Illegal Interception, Section 4(a)(3) on Data Interference,
Section 4(a)(4) on System Interference, Section 4(a)(5) on Misuse of Devices,
Section 4(a)(6) on Cyber-squatting, Section 4(b)(1) on Computer-related
Forgery, Section 4(b)(2) on Computer-related Fraud, Section 4(b)(3) on
Computer-related Identity Theft, and Section 4(c)(1) on Cybersex. None of
these offenses borders on the exercise of the freedom of expression.
The crime of willfully attempting to commit any of these offenses is for the same
reason not objectionable. A hacker may for instance have done all that is
necessary to illegally access another party’s computer system but the security
employed by the system’s lawful owner could frustrate his effort. Another
hacker may have gained access to usernames and passwords of others but fail
to use these because the system supervisor is alerted. 72 If Section 5 that
punishes any person who willfully attempts to commit this specific offense is not
upheld, the owner of the username and password could not file a complaint
against him for attempted hacking. But this is not right. The hacker should not
be freed from liability simply because of the vigilance of a lawful owner or his
supervisor.
Petitioners of course claim that Section 5 lacks positive limits and could cover
the innocent.73 While this may be true with respect to cybercrimes that tend to
sneak past the area of free expression, any attempt to commit the other acts
specified in Section 4(a)(1), Section 4(a)(2), Section 4(a)(3), Section 4(a)(4),
Section 4(a)(5), Section 4(a)(6), Section 4(b)(1), Section 4(b)(2), Section
4(b)(3), and Section 4(c)(1) as well as the actors aiding and abetting the
commission of such acts can be identified with some reasonable certainty
through adroit tracking of their works. Absent concrete proof of the same, the
innocent will of course be spared.
Section 6 of the Cybercrime Law
Section 6 provides:
Sec. 6. All crimes defined and penalized by the Revised Penal Code, as
amended, and special laws, if committed by, through and with the use of
information and communications technologies shall be covered by the relevant
provisions of this Act: Provided, That the penalty to be imposed shall be one (1)
degree higher than that provided for by the Revised Penal Code, as amended,
and special laws, as the case may be.
Section 6 merely makes commission of existing crimes through the internet a
qualifying circumstance. As the Solicitor General points out, there exists a
substantial distinction between crimes committed through the use of information
and communications technology and similar crimes committed using other
means. In using the technology in question, the offender often evades
identification and is able to reach far more victims or cause greater harm. The
distinction, therefore, creates a basis for higher penalties for cybercrimes.
Section 7 of the Cybercrime Law
Section 7 provides:
Sec. 7. Liability under Other Laws. — A prosecution under this Act shall be
without prejudice to any liability for violation of any provision of the Revised
Penal Code, as amended, or special laws.
The Solicitor General points out that Section 7 merely expresses the settled
doctrine that a single set of acts may be prosecuted and penalized
simultaneously under two laws, a special law and the Revised Penal Code.
When two different laws define two crimes, prior jeopardy as to one does not
bar prosecution of the other although both offenses arise from the same fact, if
each crime involves some important act which is not an essential element of
the other.74 With the exception of the crimes of online libel and online child
pornography, the Court would rather leave the determination of the correct
application of Section 7 to actual cases.
Online libel is different. There should be no question that if the published
material on print, said to be libelous, is again posted online or vice versa, that
identical material cannot be the subject of two separate libels. The two
offenses, one a violation of Article 353 of the Revised Penal Code and the other
a violation of Section 4(c)(4) of R.A. 10175 involve essentially the same
elements and are in fact one and the same offense. Indeed, the OSG itself
claims that online libel under Section 4(c)(4) is not a new crime but is one
already punished under Article 353. Section 4(c)(4) merely establishes the
computer system as another means of publication.75 Charging the offender
under both laws would be a blatant violation of the proscription against double
jeopardy.76
The same is true with child pornography committed online. Section 4(c)(2)
merely expands the ACPA’s scope so as to include identical activities in
cyberspace. As previously discussed, ACPA’s definition of child pornography in
fact already covers the use of "electronic, mechanical, digital, optical, magnetic
or any other means." Thus, charging the offender under both Section 4(c)(2)
and ACPA would likewise be tantamount to a violation of the constitutional
prohibition against double jeopardy.
Section 8 of the Cybercrime Law
Section 8 provides:
Sec. 8. Penalties. — Any person found guilty of any of the punishable acts
enumerated in Sections 4(a) and 4(b) of this Act shall be punished with
imprisonment of prision mayor or a fine of at least Two hundred thousand
pesos (Ph₱200,000.00) up to a maximum amount commensurate to the
damage incurred or both.
Any person found guilty of the punishable act under Section 4(a)(5) shall be
punished with imprisonment of prision mayor or a fine of not more than Five
hundred thousand pesos (Ph₱500,000.00) or both.
If punishable acts in Section 4(a) are committed against critical infrastructure,
the penalty of reclusion temporal or a fine of at least Five hundred thousand
pesos (Ph₱500,000.00) up to maximum amount commensurate to the damage
incurred or both, shall be imposed.
Any person found guilty of any of the punishable acts enumerated in Section
4(c)(1) of this Act shall be punished with imprisonment of prision mayor or a
fine of at least Two hundred thousand pesos (Ph₱200,000.00) but not
exceeding One million pesos (Ph₱1,000,000.00) or both.
Any person found guilty of any of the punishable acts enumerated in Section
4(c)(2) of this Act shall be punished with the penalties as enumerated in
Republic Act No. 9775 or the "Anti-Child Pornography Act of 2009:" Provided,
That the penalty to be imposed shall be one (1) degree higher than that
provided for in Republic Act No. 9775, if committed through a computer system.
Any person found guilty of any of the punishable acts enumerated in Section
4(c)(3) shall be punished with imprisonment of arresto mayor or a fine of at
least Fifty thousand pesos (Ph₱50,000.00) but not exceeding Two hundred fifty
thousand pesos (Ph₱250,000.00) or both.
Any person found guilty of any of the punishable acts enumerated in Section 5
shall be punished with imprisonment one (1) degree lower than that of the
prescribed penalty for the offense or a fine of at least One hundred thousand
pesos (Ph₱100,000.00) but not exceeding Five hundred thousand pesos
(Ph₱500,000.00) or both.
Section 8 provides for the penalties for the following crimes: Sections 4(a) on
Offenses Against the Confidentiality, Integrity and Availability of Computer Data
and Systems; 4(b) on Computer-related Offenses; 4(a)(5) on Misuse of
Devices; when the crime punishable under 4(a) is committed against critical
infrastructure; 4(c)(1) on Cybersex; 4(c)(2) on Child Pornography; 4(c)(3) on
Unsolicited Commercial Communications; and Section 5 on Aiding or Abetting,
and Attempt in the Commission of Cybercrime.
The matter of fixing penalties for the commission of crimes is as a rule a
legislative prerogative. Here the legislature prescribed a measure of severe
penalties for what it regards as deleterious cybercrimes. They appear
proportionate to the evil sought to be punished. The power to determine
penalties for offenses is not diluted or improperly wielded simply because at
some prior time the act or omission was but an element of another offense or
might just have been connected with another crime.77 Judges and magistrates
can only interpret and apply them and have no authority to modify or revise
their range as determined by the legislative department.
The courts should not encroach on this prerogative of the lawmaking body. 78
Section 12 of the Cybercrime Law
Section 12 provides:
Sec. 12. Real-Time Collection of Traffic Data. — Law enforcement authorities,
with due cause, shall be authorized to collect or record by technical or
electronic means traffic data in real-time associated with specified
communications transmitted by means of a computer system.
Traffic data refer only to the communication’s origin, destination, route, time,
date, size, duration, or type of underlying service, but not content, nor identities.
All other data to be collected or seized or disclosed will require a court warrant.
Service providers are required to cooperate and assist law enforcement
authorities in the collection or recording of the above-stated information.
The court warrant required under this section shall only be issued or granted
upon written application and the examination under oath or affirmation of the
applicant and the witnesses he may produce and the showing: (1) that there
are reasonable grounds to believe that any of the crimes enumerated
hereinabove has been committed, or is being committed, or is about to be
committed; (2) that there are reasonable grounds to believe that evidence that
will be obtained is essential to the conviction of any person for, or to the
solution of, or to the prevention of, any such crimes; and (3) that there are no
other means readily available for obtaining such evidence.
Petitioners assail the grant to law enforcement agencies of the power to collect
or record traffic data in real time as tending to curtail civil liberties or provide
opportunities for official abuse. They claim that data showing where digital
messages come from, what kind they are, and where they are destined need
not be incriminating to their senders or recipients before they are to be
protected. Petitioners invoke the right of every individual to privacy and to be
protected from government snooping into the messages or information that they
send to one another.
The first question is whether or not Section 12 has a proper governmental
purpose since a law may require the disclosure of matters normally considered
private but then only upon showing that such requirement has a rational relation
to the purpose of the law,79 that there is a compelling State interest behind the
law, and that the provision itself is narrowly drawn.80 In assessing regulations
affecting privacy rights, courts should balance the legitimate concerns of the
State against constitutional guarantees.81
Undoubtedly, the State has a compelling interest in enacting the cybercrime law
for there is a need to put order to the tremendous activities in cyberspace for
public good.82 To do this, it is within the realm of reason that the government
should be able to monitor traffic data to enhance its ability to combat all sorts of
cybercrimes.
Chapter IV of the cybercrime law, of which the collection or recording of traffic
data is a part, aims to provide law enforcement authorities with the power they
need for spotting, preventing, and investigating crimes committed in
cyberspace. Crime-fighting is a state business. Indeed, as Chief Justice Sereno
points out, the Budapest Convention on Cybercrimes requires signatory
countries to adopt legislative measures to empower state authorities to collect
or record "traffic data, in real time, associated with specified
communications."83 And this is precisely what Section 12 does. It empowers
law enforcement agencies in this country to collect or record such data.
But is not evidence of yesterday’s traffic data, like the scene of the crime after it
has been committed, adequate for fighting cybercrimes and, therefore, real-
time data is superfluous for that purpose? Evidently, it is not. Those who
commit the crimes of accessing a computer system without right,84 transmitting
viruses,85 lasciviously exhibiting sexual organs or sexual activity for favor or
consideration;86 and producing child pornography87 could easily evade
detection and prosecution by simply moving the physical location of their
computers or laptops from day to day. In this digital age, the wicked can commit
cybercrimes from virtually anywhere: from internet cafés, from kindred places
that provide free internet services, and from unregistered mobile internet
connectors. Criminals using cellphones under pre-paid arrangements and with
unregistered SIM cards do not have listed addresses and can neither be
located nor identified. There are many ways the cyber criminals can quickly
erase their tracks. Those who peddle child pornography could use relays of
computers to mislead law enforcement authorities regarding their places of
operations. Evidently, it is only real-time traffic data collection or recording and
a subsequent recourse to court-issued search and seizure warrant that can
succeed in ferreting them out.
Petitioners of course point out that the provisions of Section 12 are too broad
and do not provide ample safeguards against crossing legal boundaries and
invading the people’s right to privacy. The concern is understandable. Indeed,
the Court recognizes in Morfe v. Mutuc88 that certain constitutional guarantees
work together to create zones of privacy wherein governmental powers may not
intrude, and that there exists an independent constitutional right of privacy.
Such right to be left alone has been regarded as the beginning of all
freedoms.89
But that right is not unqualified. In Whalen v. Roe,90 the United States Supreme
Court classified privacy into two categories: decisional privacy and
informational privacy. Decisional privacy involves the right to independence in
making certain important decisions, while informational privacy refers to the
interest in avoiding disclosure of personal matters. It is the latter right—the right
to informational privacy—that those who oppose government collection or
recording of traffic data in real-time seek to protect.
Informational privacy has two aspects: the right not to have private information
disclosed, and the right to live freely without surveillance and intrusion. 91 In
determining whether or not a matter is entitled to the right to privacy, this Court
has laid down a two-fold test. The first is a subjective test, where one claiming
the right must have an actual or legitimate expectation of privacy over a certain
matter. The second is an objective test, where his or her expectation of privacy
must be one society is prepared to accept as objectively reasonable. 92
Since the validity of the cybercrime law is being challenged, not in relation to its
application to a particular person or group, petitioners’ challenge to Section 12
applies to all information and communications technology (ICT) users, meaning
the large segment of the population who use all sorts of electronic devices to
communicate with one another. Consequently, the expectation of privacy is to
be measured from the general public’s point of view. Without reasonable
expectation of privacy, the right to it would have no basis in fact.
As the Solicitor General points out, an ordinary ICT user who courses his
communication through a service provider, must of necessity disclose to the
latter, a third person, the traffic data needed for connecting him to the recipient
ICT user. For example, an ICT user who writes a text message intended for
another ICT user must furnish his service provider with his cellphone number
and the cellphone number of his recipient, accompanying the message sent. It
is this information that creates the traffic data. Transmitting communications is
akin to putting a letter in an envelope properly addressed, sealing it closed, and
sending it through the postal service. Those who post letters have no
expectations that no one will read the information appearing outside the
envelope.
Computer data—messages of all kinds—travel across the internet in packets
and in a way that may be likened to parcels of letters or things that are sent
through the posts. When data is sent from any one source, the content is
broken up into packets and around each of these packets is a wrapper or
header. This header contains the traffic data: information that tells computers
where the packet originated, what kind of data is in the packet (SMS, voice call,
video, internet chat messages, email, online browsing data, etc.), where the
packet is going, and how the packet fits together with other packets. 93 The
difference is that traffic data sent through the internet at times across the ocean
do not disclose the actual names and addresses (residential or office) of the
sender and the recipient, only their coded internet protocol (IP) addresses. The
packets travel from one computer system to another where their contents are
pieced back together.
Section 12 does not permit law enforcement authorities to look into the contents
of the messages and uncover the identities of the sender and the recipient.
For example, when one calls to speak to another through his cellphone, the
service provider’s communication’s system will put his voice message into
packets and send them to the other person’s cellphone where they are refitted
together and heard. The latter’s spoken reply is sent to the caller in the same
way. To be connected by the service provider, the sender reveals his cellphone
number to the service provider when he puts his call through. He also reveals
the cellphone number to the person he calls. The other ways of communicating
electronically follow the same basic pattern.
In Smith v. Maryland,94 cited by the Solicitor General, the United States
Supreme Court reasoned that telephone users in the ‘70s must realize that they
necessarily convey phone numbers to the telephone company in order to
complete a call. That Court ruled that even if there is an expectation that phone
numbers one dials should remain private, such expectation is not one that
society is prepared to recognize as reasonable.
In much the same way, ICT users must know that they cannot communicate or
exchange data with one another over cyberspace except through some service
providers to whom they must submit certain traffic data that are needed for a
successful cyberspace communication. The conveyance of this data takes
them out of the private sphere, making the expectation to privacy in regard to
them an expectation that society is not prepared to recognize as reasonable.
The Court, however, agrees with Justices Carpio and Brion that when
seemingly random bits of traffic data are gathered in bulk, pooled together, and
analyzed, they reveal patterns of activities which can then be used to create
profiles of the persons under surveillance. With enough traffic data, analysts
may be able to determine a person’s close associations, religious views,
political affiliations, even sexual preferences. Such information is likely beyond
what the public may expect to be disclosed, and clearly falls within matters
protected by the right to privacy. But has the procedure that Section 12 of the
law provides been drawn narrowly enough to protect individual rights?
Section 12 empowers law enforcement authorities, "with due cause," to collect
or record by technical or electronic means traffic data in real-time. Petitioners
point out that the phrase "due cause" has no precedent in law or jurisprudence
and that whether there is due cause or not is left to the discretion of the police.
Replying to this, the Solicitor General asserts that Congress is not required to
define the meaning of every word it uses in drafting the law.
Indeed, courts are able to save vague provisions of law through statutory
construction. But the cybercrime law, dealing with a novel situation, fails to hint
at the meaning it intends for the phrase "due cause." The Solicitor General
suggests that "due cause" should mean "just reason or motive" and "adherence
to a lawful procedure." But the Court cannot draw this meaning since Section
12 does not even bother to relate the collection of data to the probable
commission of a particular crime. It just says, "with due cause," thus justifying a
general gathering of data. It is akin to the use of a general search warrant that
the Constitution prohibits.
Due cause is also not descriptive of the purpose for which data collection will
be used. Will the law enforcement agencies use the traffic data to identify the
perpetrator of a cyber attack? Or will it be used to build up a case against an
identified suspect? Can the data be used to prevent cybercrimes from
happening?
The authority that Section 12 gives law enforcement agencies is too sweeping
and lacks restraint. While it says that traffic data collection should not disclose
identities or content data, such restraint is but an illusion. Admittedly, nothing
can prevent law enforcement agencies holding these data in their hands from
looking into the identity of their sender or receiver and what the data contains.
This will unnecessarily expose the citizenry to leaked information or, worse, to
extortion from certain bad elements in these agencies.
Section 12, of course, limits the collection of traffic data to those "associated
with specified communications." But this supposed limitation is no limitation at
all since, evidently, it is the law enforcement agencies that would specify the
target communications. The power is virtually limitless, enabling law
enforcement authorities to engage in "fishing expedition," choosing whatever
specified communication they want. This evidently threatens the right of
individuals to privacy.
The Solicitor General points out that Section 12 needs to authorize collection of
traffic data "in real time" because it is not possible to get a court warrant that
would authorize the search of what is akin to a "moving vehicle." But
warrantless search is associated with a police officer’s determination of
probable cause that a crime has been committed, that there is no opportunity
for getting a warrant, and that unless the search is immediately carried out, the
thing to be searched stands to be removed. These preconditions are not
provided in Section 12.
The Solicitor General is honest enough to admit that Section 12 provides
minimal protection to internet users and that the procedure envisioned by the
law could be better served by providing for more robust safeguards. His bare
assurance that law enforcement authorities will not abuse the provisions of
Section 12 is of course not enough. The grant of the power to track cyberspace
communications in real time and determine their sources and destinations must
be narrowly drawn to preclude abuses.95
Petitioners also ask that the Court strike down Section 12 for being violative of
the void-for-vagueness doctrine and the overbreadth doctrine. These doctrines
however, have been consistently held by this Court to apply only to free speech
cases. But Section 12 on its own neither regulates nor punishes any type of
speech. Therefore, such analysis is unnecessary.
This Court is mindful that advances in technology allow the government and
kindred institutions to monitor individuals and place them under surveillance in
ways that have previously been impractical or even impossible. "All the forces
of a technological age x x x operate to narrow the area of privacy and facilitate
intrusions into it. In modern terms, the capacity to maintain and support this
enclave of private life marks the difference between a democratic and a
totalitarian society."96 The Court must ensure that laws seeking to take
advantage of these technologies be written with specificity and definiteness as
to ensure respect for the rights that the Constitution guarantees.
Section 13 of the Cybercrime Law
Section 13 provides:
Sec. 13. Preservation of Computer Data. — The integrity of traffic data and
subscriber information relating to communication services provided by a service
provider shall be preserved for a minimum period of six (6) months from the
date of the transaction. Content data shall be similarly preserved for six (6)
months from the date of receipt of the order from law enforcement authorities
requiring its preservation.
Law enforcement authorities may order a one-time extension for another six (6)
months: Provided, That once computer data preserved, transmitted or stored by
a service provider is used as evidence in a case, the mere furnishing to such
service provider of the transmittal document to the Office of the Prosecutor
shall be deemed a notification to preserve the computer data until the
termination of the case.
The service provider ordered to preserve computer data shall keep confidential
the order and its compliance.
Petitioners in G.R. 20339197 claim that Section 13 constitutes an undue
deprivation of the right to property. They liken the data preservation order that
law enforcement authorities are to issue as a form of garnishment of personal
property in civil forfeiture proceedings. Such order prevents internet users from
accessing and disposing of traffic data that essentially belong to them.
No doubt, the contents of materials sent or received through the internet belong
to their authors or recipients and are to be considered private communications.
But it is not clear that a service provider has an obligation to indefinitely keep a
copy of the same as they pass its system for the benefit of users. By virtue of
Section 13, however, the law now requires service providers to keep traffic data
and subscriber information relating to communication services for at least six
months from the date of the transaction and those relating to content data for at
least six months from receipt of the order for their preservation.
Actually, the user ought to have kept a copy of that data when it crossed his
computer if he was so minded. The service provider has never assumed
responsibility for their loss or deletion while in its keep.
At any rate, as the Solicitor General correctly points out, the data that service
providers preserve on orders of law enforcement authorities are not made
inaccessible to users by reason of the issuance of such orders. The process of
preserving data will not unduly hamper the normal transmission or use of the
same.
Section 14 of the Cybercrime Law
Section 14 provides:
Sec. 14. Disclosure of Computer Data. — Law enforcement authorities, upon
securing a court warrant, shall issue an order requiring any person or service
provider to disclose or submit subscriber’s information, traffic data or relevant
data in his/its possession or control within seventy-two (72) hours from receipt
of the order in relation to a valid complaint officially docketed and assigned for
investigation and the disclosure is necessary and relevant for the purpose of
investigation.
The process envisioned in Section 14 is being likened to the issuance of a
subpoena. Petitioners’ objection is that the issuance of subpoenas is a judicial
function. But it is well-settled that the power to issue subpoenas is not
exclusively a judicial function. Executive agencies have the power to issue
subpoena as an adjunct of their investigatory powers.98
Besides, what Section 14 envisions is merely the enforcement of a duly issued
court warrant, a function usually lodged in the hands of law enforcers to enable
them to carry out their executive functions. The prescribed procedure for
disclosure would not constitute an unlawful search or seizure nor would it
violate the privacy of communications and correspondence. Disclosure can be
made only after judicial intervention.
Section 15 of the Cybercrime Law
Section 15 provides:
Sec. 15. Search, Seizure and Examination of Computer Data. — Where a
search and seizure warrant is properly issued, the law enforcement authorities
shall likewise have the following powers and duties.
Within the time period specified in the warrant, to conduct interception, as
defined in this Act, and:
(a) To secure a computer system or a computer data storage medium;
(b) To make and retain a copy of those computer data secured;
(c) To maintain the integrity of the relevant stored computer data;
(d) To conduct forensic analysis or examination of the computer data
storage medium; and
(e) To render inaccessible or remove those computer data in the
accessed computer or computer and communications network.
Pursuant thereof, the law enforcement authorities may order any person who
has knowledge about the functioning of the computer system and the measures
to protect and preserve the computer data therein to provide, as is reasonable,
the necessary information, to enable the undertaking of the search, seizure and
examination.
Law enforcement authorities may request for an extension of time to complete
the examination of the computer data storage medium and to make a return
thereon but in no case for a period longer than thirty (30) days from date of
approval by the court.
Petitioners challenge Section 15 on the assumption that it will supplant
established search and seizure procedures. On its face, however, Section 15
merely enumerates the duties of law enforcement authorities that would ensure
the proper collection, preservation, and use of computer system or data that
have been seized by virtue of a court warrant. The exercise of these duties do
not pose any threat on the rights of the person from whom they were taken.
Section 15 does not appear to supersede existing search and seizure rules but
merely supplements them.
Section 17 of the Cybercrime Law
Section 17 provides:
Sec. 17. Destruction of Computer Data. — Upon expiration of the periods as
provided in Sections 13 and 15, service providers and law enforcement
authorities, as the case may be, shall immediately and completely destroy the
computer data subject of a preservation and examination.
Section 17 would have the computer data, previous subject of preservation or
examination, destroyed or deleted upon the lapse of the prescribed period. The
Solicitor General justifies this as necessary to clear up the service provider’s
storage systems and prevent overload. It would also ensure that investigations
are quickly concluded.
Petitioners claim that such destruction of computer data subject of previous
preservation or examination violates the user’s right against deprivation of
property without due process of law. But, as already stated, it is unclear that the
user has a demandable right to require the service provider to have that copy of
the data saved indefinitely for him in its storage system. If he wanted them
preserved, he should have saved them in his computer when he generated the
data or received it. He could also request the service provider for a copy before
it is deleted.
Section 19 of the Cybercrime Law
Section 19 empowers the Department of Justice to restrict or block access to
computer data:
Sec. 19. Restricting or Blocking Access to Computer Data.— When a computer
data is prima facie found to be in violation of the provisions of this Act, the DOJ
shall issue an order to restrict or block access to such computer data.
Petitioners contest Section 19 in that it stifles freedom of expression and
violates the right against unreasonable searches and seizures. The Solicitor
General concedes that this provision may be unconstitutional. But since laws
enjoy a presumption of constitutionality, the Court must satisfy itself that
Section 19 indeed violates the freedom and right mentioned.
Computer data99 may refer to entire programs or lines of code, including
malware, as well as files that contain texts, images, audio, or video recordings.
Without having to go into a lengthy discussion of property rights in the digital
space, it is indisputable that computer data, produced or created by their writers
or authors may constitute personal property. Consequently, they are protected
from unreasonable searches and seizures, whether while stored in their
personal computers or in the service provider’s systems.
Section 2, Article III of the 1987 Constitution provides that the right to be secure
in one’s papers and effects against unreasonable searches and seizures of
whatever nature and for any purpose shall be inviolable. Further, it states that
no search warrant shall issue except upon probable cause to be determined
personally by the judge. Here, the Government, in effect, seizes and places the
computer data under its control and disposition without a warrant. The
Department of Justice order cannot substitute for judicial search warrant.
The content of the computer data can also constitute speech. In such a case,
Section 19 operates as a restriction on the freedom of expression over
cyberspace. Certainly not all forms of speech are protected. Legislature may,
within constitutional bounds, declare certain kinds of expression as illegal. But
for an executive officer to seize content alleged to be unprotected without any
judicial warrant, it is not enough for him to be of the opinion that such content
violates some law, for to do so would make him judge, jury, and executioner all
rolled into one.100
Not only does Section 19 preclude any judicial intervention, but it also
disregards jurisprudential guidelines established to determine the validity of
restrictions on speech. Restraints on free speech are generally evaluated on
one of or a combination of three tests: the dangerous tendency doctrine, the
balancing of interest test, and the clear and present danger rule.101 Section 19,
however, merely requires that the data to be blocked be found prima facie in
violation of any provision of the cybercrime law. Taking Section 6 into
consideration, this can actually be made to apply in relation to any penal
provision. It does not take into consideration any of the three tests mentioned
above.
The Court is therefore compelled to strike down Section 19 for being violative of
the constitutional guarantees to freedom of expression and against
unreasonable searches and seizures.
Section 20 of the Cybercrime Law
Section 20 provides:
Sec. 20. Noncompliance. — Failure to comply with the provisions of Chapter IV
hereof specifically the orders from law enforcement authorities shall be
punished as a violation of Presidential Decree No. 1829 with imprisonment of
prision correctional in its maximum period or a fine of One hundred thousand
pesos (Php100,000.00) or both, for each and every noncompliance with an
order issued by law enforcement authorities.
Petitioners challenge Section 20, alleging that it is a bill of attainder. The
argument is that the mere failure to comply constitutes a legislative finding of
guilt, without regard to situations where non-compliance would be reasonable
or valid.
But since the non-compliance would be punished as a violation of Presidential
Decree (P.D.) 1829,102 Section 20 necessarily incorporates elements of the
offense which are defined therein. If Congress had intended for Section 20 to
constitute an offense in and of itself, it would not have had to make reference to
any other statue or provision.
P.D. 1829 states:
Section 1. The penalty of prision correccional in its maximum period, or a fine
ranging from 1,000 to 6,000 pesos, or both, shall be imposed upon any person
who knowingly or willfully obstructs, impedes, frustrates or delays the
apprehension of suspects and the investigation and prosecution of criminal
cases by committing any of the following acts:
x x x.
Thus, the act of non-compliance, for it to be punishable, must still be done
"knowingly or willfully." There must still be a judicial determination of guilt,
during which, as the Solicitor General assumes, defense and justifications for
non-compliance may be raised. Thus, Section 20 is valid insofar as it applies to
the provisions of Chapter IV which are not struck down by the Court.
Sections 24 and 26(a) of the Cybercrime Law
Sections 24 and 26(a) provide:
Sec. 24. Cybercrime Investigation and Coordinating Center.– There is hereby
created, within thirty (30) days from the effectivity of this Act, an inter-agency
body to be known as the Cybercrime Investigation and Coordinating Center
(CICC), under the administrative supervision of the Office of the President, for
policy coordination among concerned agencies and for the formulation and
enforcement of the national cybersecurity plan.
Sec. 26. Powers and Functions.– The CICC shall have the following powers
and functions:
(a) To formulate a national cybersecurity plan and extend immediate assistance
of real time commission of cybercrime offenses through a computer emergency
response team (CERT); x x x.
Petitioners mainly contend that Congress invalidly delegated its power when it
gave the Cybercrime Investigation and Coordinating Center (CICC) the power
to formulate a national cybersecurity plan without any sufficient standards or
parameters for it to follow.
In order to determine whether there is undue delegation of legislative power,
the Court has adopted two tests: the completeness test and the sufficient
standard test. Under the first test, the law must be complete in all its terms and
conditions when it leaves the legislature such that when it reaches the
delegate, the only thing he will have to do is to enforce it.1avvphi1 The second
test mandates adequate guidelines or limitations in the law to determine the
boundaries of the delegate’s authority and prevent the delegation from running
riot.103
Here, the cybercrime law is complete in itself when it directed the CICC to
formulate and implement a national cybersecurity plan. Also, contrary to the
position of the petitioners, the law gave sufficient standards for the CICC to
follow when it provided a definition of cybersecurity.
Cybersecurity refers to the collection of tools, policies, risk management
approaches, actions, training, best practices, assurance and technologies that
can be used to protect cyber environment and organization and user’s
assets.104 This definition serves as the parameters within which CICC should
work in formulating the cybersecurity plan.
Further, the formulation of the cybersecurity plan is consistent with the policy of
the law to "prevent and combat such [cyber] offenses by facilitating their
detection, investigation, and prosecution at both the domestic and international
levels, and by providing arrangements for fast and reliable international
cooperation."105 This policy is clearly adopted in the interest of law and order,
which has been considered as sufficient standard.106 Hence, Sections 24 and
26(a) are likewise valid.
WHEREFORE, the Court DECLARES:
1. VOID for being UNCONSTITUTIONAL:
a. Section 4(c)(3) of Republic Act 10175 that penalizes posting
of unsolicited commercial communications;
b. Section 12 that authorizes the collection or recording of
traffic data in real-time; and
c. Section 19 of the same Act that authorizes the Department
of Justice to restrict or block access to suspected Computer
Data.
2. VALID and CONSTITUTIONAL:
a. Section 4(a)(1) that penalizes accessing a computer system
without right;
b. Section 4(a)(3) that penalizes data interference, including
transmission of viruses;
c. Section 4(a)(6) that penalizes cyber-squatting or acquiring
domain name over the internet in bad faith to the prejudice of
others;
d. Section 4(b)(3) that penalizes identity theft or the use or
misuse of identifying information belonging to another;
e. Section 4(c)(1) that penalizes cybersex or the lascivious
exhibition of sexual organs or sexual activity for favor or
consideration;
f. Section 4(c)(2) that penalizes the production of child
pornography;
g. Section 6 that imposes penalties one degree higher when
crimes defined under the Revised Penal Code are committed
with the use of information and communications technologies;
h. Section 8 that prescribes the penalties for cybercrimes;
i. Section 13 that permits law enforcement authorities to require
service providers to preserve traffic data and subscriber
information as well as specified content data for six months;
 j. Section 14 that authorizes the disclosure of computer data the Revised Penal Code and Republic Act 10175 to actual cases, WITH THE
under a court-issued warrant; EXCEPTION of the crimes of:

k. Section 15 that authorizes the search, seizure, and
examination of computer data under a court-issued warrant;
l. Section 17 that authorizes the destruction of previously
preserved computer data after the expiration of the prescribed
holding periods;
m. Section 20 that penalizes obstruction of justice in relation to
cybercrime investigations;
n. Section 24 that establishes a Cybercrime Investigation and
Coordinating Center (CICC);
1. Online libel as to which, charging the offender under both Section
4(c)(4) of Republic Act 10175 and Article 353 of the Revised Penal
Code constitutes a violation of the proscription against double jeopardy;
as well as
2. Child pornography committed online as to which, charging the
offender under both Section 4(c)(2) of Republic Act 10175 and
Republic Act 9775 or the Anti-Child Pornography Act of 2009 also
constitutes a violation of the same proscription, and, in respect to
these, is VOID and UNCONSTITUTIONAL.
SO ORDERED.

o. Section 26(a) that defines the CICC’s Powers and Functions; ROBERTO A. ABAD
and

p. Articles 353, 354, 361, and 362 of the Revised Penal Code
that penalizes libel.

Further, the Court DECLARES:

1. Section 4(c)(4) that penalizes online libel as VALID and

CONSTITUTIONAL with respect to the original author of the post; but
VOID and UNCONSTITUTIONAL with respect to others who simply
receive the post and react to it; and

2. Section 5 that penalizes aiding or abetting and attempt in the

commission of cybercrimes as VA L I D and CONSTITUTIONAL only in
relation to Section 4(a)(1) on Illegal Access, Section 4(a)(2) on Illegal
Interception, Section 4(a)(3) on Data Interference, Section 4(a)(4) on
System

Interference, Section 4(a)(5) on Misuse of Devices, Section 4(a)(6) on Cyber-

squatting, Section 4(b)(1) on Computer-related Forgery, Section 4(b)(2) on
Computer-related Fraud, Section 4(b)(3) on Computer-related Identity Theft,
and Section 4(c)(1) on Cybersex; but VOID and UNCONSTITUTIONAL with
respect to Sections 4(c)(2) on Child Pornography, 4(c)(3) on Unsolicited
Commercial Communications, and 4(c)(4) on online Libel.1âwphi1

Lastly, the Court RESOLVES to LEAVE THE DETERMINATION of the correct

application of Section 7 that authorizes prosecution of the offender under both